10-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2013

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 incorporation or organization)	(I.R.S. Employer Identification No.)

711 Main Street, Box 810, Jasper, Indiana	47546
(Address of Principal Executive Offices)	(Zip Code)

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

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

Title of Each Class	Name of each exchange on which registered
Common Shares, no par value	The NASDAQ Stock Market LLC

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.	¨  Yes	þ No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.	¨  Yes	þ No
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.	þ  Yes	¨ No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).	þ  Yes	¨ No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K: 

¨

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

Large accelerated filer ¨ Accelerated filer þ Non-accelerated filer ¨ Smaller reporting company ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    £ Yes þ No

The aggregate market value of the registrant’s common shares held by non-affiliates as of June 30, 2013 was approximately $260,154,858. This calculation does not reflect a determination that persons are (or are not) affiliates for any other purpose.

As of March 1, 2014, there were outstanding 13,173,793 common shares, no par value, of the registrant.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Proxy Statement of German American Bancorp, Inc., for the Annual Meeting of its Shareholders to be held May 15, 2014, to the extent stated herein, are incorporated by reference into Part III.

GERMAN AMERICAN BANCORP, INC.

ANNUAL REPORT ON FORM 10-K

For Fiscal Year Ended December 31, 2013

Table of Contents

PART I
Item 1.	Business	3-12
Item 1A.	Risk Factors	12-16
Item 1B.	Unresolved Staff Comments	16
Item 2.	Properties	16
Item 3.	Legal Proceedings	16
Item 4.	Mine Safety Disclosures	16
PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	17-18
Item 6.	Selected Financial Data	19
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20-38
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	38
Item 8.	Financial Statements and Supplementary Data	39-89
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	90
Item 9A.	Controls and Procedures	90
Item 9B.	Other Information	90
PART III
Item 10.	Directors, Executive Officers, and Corporate Governance	91
Item 11.	Executive Compensation	91
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	91-92
Item 13.	Certain Relationships and Related Transactions, and Director Independence	92
Item 14.	Principal Accounting Fees and Services	92
PART IV
Item 15.	Exhibits, Financial Statement Schedules	93
SIGNATURES		94
INDEX OF EXHIBITS		95-98

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Information included in or incorporated by reference in this Annual Report on Form 10-K, our other filings with the Securities and Exchange Commission and our press releases or other public statements, contain or may contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Please refer to a discussion of our forward- looking statements and associated risks in Item 1, “Business – Forward-Looking Statements and Associated Risks” and our discussion of risk factors in Item 1A, “Risk Factors” in this Annual Report on Form 10-K.

PART I

Item 1. Business.

General

German American Bancorp, Inc., is a NASDAQ-traded (symbol: GABC) financial services holding company based in Jasper, Indiana. German American, through its banking subsidiary German American Bancorp, operates 37 retail and commercial banking offices in 13 southern Indiana counties. The Company also owns a trust, brokerage, and financial planning subsidiary (German American Financial Advisors & Trust Company) and a full line property and casualty insurance agency (German American Insurance, Inc.).

Throughout this report, when we use the term “Company”, we will usually be referring to the business and affairs (financial and otherwise) of German American Bancorp, Inc. and its consolidated subsidiaries as a whole. Occasionally, we will refer to the term “parent company” or “holding company” when we mean to refer to only German American Bancorp, Inc. and the term “Bank” when we mean to refer only to the Company’s bank subsidiary.

The Company’s lines of business include retail and commercial banking, comprehensive financial planning, full service brokerage and trust administration, and a full range of personal and corporate insurance products. Financial and other information by segment is included in Note 15 – Segment Information of the Notes to the Consolidated Financial Statements included in Item 8 of this Report and is incorporated into this Item 1 by reference. Substantially all of the Company’s revenues are derived from customers located in, and substantially all of its assets are located in, the United States.

Subsidiaries

The Company’s principal operating subsidiaries are described in the following table:

Name	Type of Business	Principal Office Location
German American Bancorp	Commercial Bank	Jasper, IN
German American Insurance, Inc.	Multi-Line Insurance Agency	Jasper, IN
German American Financial Advisors & Trust Company	Trust, Brokerage, Financial Planning	Jasper, IN

Business Development

The Company opened a loan production office in Columbus, Indiana, during the second quarter of 2012 as an entry point into the Columbus market. During the fourth quarter of 2013, the Company’s opened a full service retail and commercial branch location in Columbus and vacated the loan production office. The Company continues its focus on growing its base of operations in the Columbus, Indiana, market.

The Company acquired by merger (effective October 1, 2013) United Commerce Bancorp and its subsidiary, United Commerce Bank. United Commerce Bank provided a full range of commercial and consumer banking services in the Bloomington, Indiana, market, from two banking offices. During the fourth quarter of 2013, one of those branch locations was consolidated into an existing branch banking location of German American Bancorp. United Commerce had consolidated assets and deposits (unaudited) as of October 1, 2013 that totaled $119.7 million and $106.6 million, respectively. The Company continues its focus on growing its base of operations in the Bloomington, Indiana, market.

The Company expects to continue to evaluate opportunities to expand its business through opening of new banking, insurance or trust, brokerage and financial planning offices, and through acquisitions of other banks, bank branches, portfolios of loans or other assets, and other financial-service-related businesses and assets in the future.

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Office Locations

The Indiana map below illustrates the locations of the Company’s 39 retail and commercial banking, insurance and investment offices as of March 1, 2014.

Competition

The industries in which the Company operates are highly competitive. The Bank competes for commercial and retail banking business within its core banking segment not only with financial institutions that have offices in the same counties but also with financial institutions that compete from other locations in Southern Indiana and elsewhere. Further, the Bank competes for loans and deposits not only with commercial banks but also with savings and loan associations, savings banks, credit unions, production credit associations, federal land banks, finance companies, credit card companies, personal loan companies, investment brokerage firms, insurance agencies, insurance companies, lease finance companies, money market funds, mortgage companies, and other non-depository financial intermediaries. There are numerous alternative providers (including national providers that advertise extensively via television and the Internet and that provide their services through direct mail, telephone and the Internet) for the insurance products and services offered by German American Insurance, Inc., and the trust, brokerage and financial planning products and services offered by German American Financial Advisors & Trust Company. Many of these competitors have substantially greater resources than the Company.

Employees

At March 1, 2014 the Company and its subsidiaries employed approximately 480 full-time equivalent employees. There are no collective bargaining agreements, and employee relations are considered to be good.

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Regulation and Supervision

Overview

The Company is subject to regulation and supervision by the Board of Governors of the Federal Reserve System (“FRB”) under the Bank Holding Company Act of 1956, as amended (“BHC Act”), and is required to file with the FRB annual reports and such additional information as the FRB may require. The FRB may also make examinations or inspections of the Company. The Bank is under the supervision of and subject to examination by the Indiana Department of Financial Institutions (“DFI”), and the Federal Deposit Insurance Corporation (“FDIC”). Regulation and examination by banking regulatory agencies are primarily for the benefit of depositors rather than shareholders.

Under FRB policy and the Dodd-Frank Wall Street Reform and Consumer Protection Act, a complex and wide-ranging statute that was enacted by Congress and signed into law during July 2010 (the “Dodd-Frank Act”), the Company is required to act as a source of financial and managerial strength to the Bank, and to commit resources to support the Bank, even in circumstances where the Company might not do so absent such a requirement. Under current federal law, the FRB may require a bank holding company to make capital injections into a troubled subsidiary bank. It may charge the bank holding company with engaging in unsafe and unsound practices if the bank holding company fails to commit resources to such a subsidiary bank or if it undertakes actions that the FRB believes might jeopardize the bank holding company’s ability to commit resources to such subsidiary bank.

With certain exceptions, the BHC Act prohibits a bank holding company from engaging in (or acquiring direct or indirect control of more than 5 percent of the voting shares of any company engaged in) nonbanking activities. One of the principal exceptions to this prohibition is for activities deemed by the FRB to be “closely related to banking.” Under current regulations, bank holding companies and their subsidiaries are permitted to engage in such banking-related business ventures as consumer finance; equipment leasing; credit life insurance; computer service bureau and software operations; mortgage banking; and securities brokerage.

Under the BHC Act, certain well-managed and well-capitalized bank holding companies may elect to be treated as a “financial holding company” and, as a result, be permitted to engage in a broader range of activities that are “financial in nature” and in activities that are determined to be incidental or complementary to activities that are financial in nature. These activities include underwriting and dealing in and making a market in securities (subject to certain limits and compliance procedures required by the so-called Volcker Rule provisions added by the Dodd-Frank Act, described below under “Other Aspects of the Dodd-Frank Act”); insurance underwriting, and merchant banking. Banks may also engage through financial subsidiaries in certain of the activities permitted for financial holding companies, subject to certain conditions. The Company has not elected to become a financial holding company and its subsidiary bank has not elected to form financial subsidiaries.

The Bank and the subsidiaries of the Bank may generally engage in activities that are permissible activities for state chartered banks under Indiana banking law, without regard to the limitations that might apply to such activities under the BHC Act if the Company were to engage directly in such activities at the parent company level or through parent company subsidiaries that were not also bank subsidiaries.

Indiana law and the BHC Act restrict certain types of expansion by the Company and its bank subsidiary. The Company and its subsidiaries may be required to apply for prior approval from (or give prior notice and an opportunity for review to) the FRB, the DFI, and/or other bank regulatory or other regulatory agencies, as a condition to the acquisition or establishment of new offices, or the acquisition (by merger or consolidation, purchase or otherwise) of the stock, business or properties of other banks or other companies.

The earnings of commercial banks and their holding companies are affected not only by general economic conditions but also by the policies of various governmental regulatory authorities. In particular, the FRB regulates money and credit conditions and interest rates in order to influence general economic conditions, primarily through open-market operations in U.S. Government securities, varying the discount rate on bank borrowings, and setting reserve requirements against bank deposits. These policies have a significant influence on overall growth and distribution of bank loans, investments and deposits, and affect interest rates charged on loans and earned on investments or paid for time and savings deposits. FRB monetary policies have had a significant effect on the operating results of commercial banks in the past and this is expected to continue in the future. The general effect, if any, of such policies upon the future business and earnings of the Company cannot accurately be predicted.

Capital Requirements Generally

The FRB has issued risk-based capital ratio and leverage ratio guidelines for bank holding companies. Under the guidelines and related policies, bank holding companies must maintain capital sufficient to meet both a risk-based asset ratio test and a leverage ratio test on a consolidated basis. The risk-based ratio is determined by allocating assets and specified off-balance sheet commitments into four weighted categories, with higher weighting assigned to categories perceived as representing greater risk. The risk-based ratio represents total capital divided by total risk-weighted assets. The leverage ratio is core capital divided by total assets adjusted as specified in the guidelines. Our bank subsidiary is subject to substantially similar capital requirements under regulations and policies adopted by the FDIC and the Indiana Department of Financial Institutions. The FRB and FDIC during 2013 issued final rules (or interim final rules) to comprehensively revise the regulatory capital framework for US banking institutions and their affiliates, as discussed below.

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Current Capital Requirements

Current guidelines that continue to apply throughout 2014 (prior to the phase-in of the new rules effective January 1, 2015) require all bank holding companies and federally regulated banks to maintain a minimum risk-based total capital ratio equal to 8%, of which at least 4% of risk-weighted assets must be Tier I Capital. Tier I Capital, which includes common shareholders’ equity, noncumulative perpetual preferred stock, and a limited amount of cumulative perpetual preferred stock and certain trust preferred securities, less certain goodwill items and other intangible assets, is required to equal at least 4% of risk-weighted assets. The remainder (“Tier II Capital”) may consist of (i) an allowance for loan losses of up to 1.25% of risk-weighted assets, (ii) excess of qualifying perpetual preferred stock, (iii) hybrid capital instruments, (iv) perpetual debt, (v) mandatory convertible securities, and (vi) subordinated debt and intermediate-term preferred stock up to 50% of Tier I Capital. Total capital is the sum of Tier I and Tier II Capital less reciprocal holdings of other banking organizations’ capital instruments, investments in unconsolidated subsidiaries and any other deductions as determined by the appropriate regulator (determined on a case by case basis or as a matter of policy after formal rule making).

In computing total risk-weighted assets, bank holding company assets are given risk-weights of 0%, 20%, 50% and 100%. In addition, certain off-balance sheet items are given similar credit conversion factors to convert them to asset equivalent amounts to which an appropriate risk-weight will apply. Most loans will be assigned to the 100% risk category, except for performing first mortgage loans fully secured by 1- to 4-family and certain multi-family residential property, which carry a 50% risk rating. Most investment securities (including, primarily, general obligation claims on states or other political subdivisions of the United States) will be assigned to the 20% category, except for municipal or state revenue bonds, which have a 50% risk-weight, and direct obligations of the U.S. Treasury or obligations backed by the full faith and credit of the U.S. Government, which have a 0% risk-weight. In covering off-balance sheet items, direct credit substitutes, including general guarantees and standby letters of credit backing financial obligations, are given a 100% conversion factor. Transaction-related contingencies such as bid bonds, standby letters of credit backing non-financial obligations, and undrawn commitments (including commercial credit lines with an initial maturity of more than one year) have a 50% conversion factor. Short-term commercial letters of credit are converted at 20% and certain short-term unconditionally cancelable commitments have a 0% factor.

The federal bank regulatory authorities have also adopted regulations that supplement the risk-based guidelines. These regulations generally require banks and financial holding companies to maintain a minimum level of Tier I Capital to total assets less goodwill of either 3% or 4%, depending upon factors such as the regulatory ratings, earnings and financial condition of the institution (the “leverage ratio”). Banking organizations experiencing or anticipating significant growth will be required to maintain higher minimum leverage ratios and may be required to commit to achieve or maintain higher minimum ratios (including “tangible Tier I leverage ratios”) in order to secure regulatory approvals needed for such organizations to acquire other banks or other businesses or engage in new activities. The tangible Tier I leverage ratio is the ratio of a banking organization’s Tier I Capital, less deductions for intangibles otherwise includable in Tier I Capital, to total tangible assets.

New Capital Requirements Applicable to Us in the Future

In July 2013, the federal banking agencies released final rules that will implement in the United States certain regulatory capital reforms based upon international banking supervision principles adopted by the Basel Committee on Banking Supervision and certain changes required by the Dodd-Frank Act. Generally, under these final rules, (a) minimum requirements will increase for both the quality and quantity of capital held by banking organizations, (b) new and stricter criteria for determining the eligibility for inclusion in regulatory capital of capital instruments (other than common equity) will be applied, and (c) the methodology for calculating risk-weighted assets will change. The rules include, among other requirements:

• a new minimum ratio of “Common Equity Tier 1 Capital” to risk-weighted assets of 4.5%

• a new conservation buffer of Common Equity Tier 1 Capital equal to (when fully phased in) an additional 2.5% of risk-weighted assets

• a minimum ratio of Tier 1 Capital to risk-weighted assets (raised from 4% to 6%) plus (when fully phased in) the conservation buffer of an additional 2.5%, resulting in a minimum required total Tier 1 Capital to risk-weighted assets ratio of 8.5%

• a minimum ratio of Total Capital (that is, Tier 1 Capital plus Tier 2 Capital) to risk-weighted assets of at least 8.0%, plus (when fully phased in) the capital conservation buffer (which is added to the 8.0% Total Capital ratio as that buffer is phased-in, effectively resulting in a minimum Total Capital ratio of 10.5% upon full implementation)

• a minimum leverage ratio of 4% (calculated as the ratio of Tier 1 Capital to adjusted average consolidated assets)

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The new capital measure “Common Equity Tier 1” (“CET1”) Capital consists of common stock instruments that meet the eligibility criteria in the final rules, retained earnings, accumulated other comprehensive income (“AOCI”) and common equity Tier 1 minority interest. Tier 1 Capital will consist of CET1 and “additional Tier 1 capital” instruments meeting specified requirements, plus, in the case of smaller holding companies like ours, trust preferred securities in accordance with prior requirements for their inclusion in Tier I Capital. A number of deductions from and adjustments to CET1 will apply. Changes will apply to the calculation of Tier 2 Capital and to the types of capital elements that will be eligible for inclusion as Tier 2 capital.

Under current capital standards, the effects of AOCI items included in capital are excluded for the purposes of determining regulatory capital ratios; under the new rules, we and our bank subsidiary will have a one-time election (the “Opt-out Election”) to filter certain AOCI components, comparable to their treatment under the current general risk-based capital rule. The AOCI Opt-out Election must be made in connection with the regulatory financial reports that we and our bank subsidiary will file with banking agencies for our fiscal quarter ended March 31, 2015.

Banking institutions with a ratio of CET1 to risk-weighted assets above the minimum but below the conservation buffer will technically comply with minimum capital requirements, but will face limitations on the payment of dividends, common stock repurchases and discretionary cash payments to executive officers based on the amount of the shortfall.

As applied to us, these rules will generally become effective January 1, 2015; the new Common Equity Tier 1 Capital conservation buffer, however, will be phased in from 2016 through 2019.

Capital Classifications

Federal law and regulations establish a capital-based regulatory framework designed to promote early intervention for troubled banks and require the FDIC to choose the least expensive resolution of bank failures. The capital-based regulatory framework contains five categories of compliance with regulatory capital requirements, including “well capitalized,” “adequately capitalized,” “undercapitalized,” “significantly undercapitalized,” and “critically undercapitalized.” To qualify as a “well-capitalized” institution, a bank under current guidelines must have a leverage ratio of no less than 5%, a Tier I Capital ratio of no less than 6%, and a total risk-based capital ratio of no less than 10%, and the bank must not be under any order or directive from the appropriate regulatory agency to meet and maintain a specific capital level. Generally, a financial institution must be “well capitalized” before the Federal Reserve will approve an application by a bank holding company to acquire or merge with a bank or bank holding company.

Under the regulations, the applicable agency can treat an institution as if it were in the next lower category if the agency determines (after notice and an opportunity for hearing) that the institution is in an unsafe or unsound condition or is engaging in an unsafe or unsound practice. The degree of regulatory scrutiny of a financial institution will increase, and the permissible activities of the institution will decrease, as it moves downward through the capital categories. Institutions that fall into one of the three undercapitalized categories may be required to (i) submit a capital restoration plan; (ii) raise additional capital; (iii) restrict their growth, deposit interest rates, and other activities; (iv) improve their management; (v) eliminate management fees; or (vi) divest themselves of all or a part of their operations. Bank holding companies can be called upon to boost the capital of the financial institutions that they control, and to partially guarantee the institutions’ performance under their capital restoration plans.

The minimum ratios referred to above are merely guidelines and the bank regulators possess the discretionary authority to require higher capital ratios.

As of December 31, 2013, we exceeded the requirements contained in the applicable regulations, policies and directives pertaining to capital adequacy to be classified as “well capitalized”, and are unaware of any material violation or alleged violation of these regulations, policies or directives.

Failure to meet applicable capital guidelines could subject the financial institution to a variety of enforcement remedies available to the federal regulatory authorities. These include limitations on the ability to pay dividends, the issuance by the regulatory authority of a directive to increase capital, and the termination of deposit insurance by the FDIC. In addition, the financial institution could be subject to the measures described below under a regulatory program known as Prompt Corrective Action as applicable to Under-capitalized institutions.

The risk-based capital standards of the FRB and the FDIC specify that evaluations by the banking agencies of a bank’s capital adequacy will include an assessment of the exposure to declines in the economic value of a bank’s capital due to changes in interest rates. These banking agencies issued a joint policy statement on interest rate risk describing prudent methods for monitoring such risk that rely principally on internal measures of exposure and active oversight of risk management activities by senior management.

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The Federal Deposit Insurance Corporation Improvements Act (enacted in 1991) (FDICIA) requires federal banking regulatory authorities to take regulatory enforcement actions known as Prompt Corrective Action with respect to depository institutions that do not meet minimum capital requirements. For these purposes, FDICIA establishes five capital tiers: Well-capitalized, Adequately-capitalized, Under-capitalized, Significantly under-capitalized, and Critically under-capitalized.

Throughout 2013, the Company’s consolidated regulatory capital ratios and those of the Bank were in excess of the levels established for Well-capitalized institutions for purposes of the Prompt Corrective Action provisions under FDICIA. An institution is deemed to be Well-capitalized under the current FDICIA tiers if it has a total risk-based capital ratio of 10% or greater, a Tier 1 risk-based capital ratio of 6% or greater, and a Tier 1 leverage ratio of 5% or greater and is not subject to a regulatory order, agreement, or directive to meet and maintain a specific capital level for any capital measure. For a tabular presentation of our regulatory capital ratios and those of the Bank as of December 31, 2013, see Note 8 to the Company’s consolidated financial statements that are presented in Item 8 of this Report, which Note 8 is incorporated herein by reference.

FDICIA generally prohibits a depository institution from making any capital distribution, including payment of a cash dividend or paying any management fee to its holding company, if the depository institution would become Under-capitalized after such payment. Under-capitalized institutions are also subject to growth limitations and are required by the appropriate federal banking agency to submit a capital restoration plan. If any depository institution subsidiary of a holding company is required to submit a capital restoration plan, the holding company would be required to provide a limited guarantee regarding compliance with the plan as a condition of approval of such plan.

Depending upon the severity of the under capitalization, the Under-capitalized institutions may be subject to a number of requirements and restrictions, including orders to sell sufficient voting stock to become Adequately-capitalized, requirements to reduce total assets, cessation of receipt of deposits from correspondent banks, and restrictions on making any payment of principal or interest on their subordinated debt. Critically under-capitalized institutions are subject to appointment of a receiver or conservator within 90 days of becoming so classified.

Under FDICIA, a depository institution that is not Well-capitalized is generally prohibited from accepting brokered deposits and offering interest rates on deposits higher than the prevailing rate in its market. Since the Bank is Well-capitalized, the FDICIA brokered deposit rule did not adversely affect its ability to accept brokered deposits. The Bank had no such brokered deposits at December 31, 2013. Further, a depository institution or its holding company that is not Well-capitalized will generally not be successful in seeking regulatory approvals that may be necessary in connection with any plan or agreement to expand its business, such as through the acquisition (by merger or consolidation, purchase or otherwise) of the stock, business or properties of other banks or other companies.

The new Basel capital rules revised the “Prompt Corrective Action” requirements applicable to our bank subsidiary effective January 1, 2015, by (i) introducing a CET1 ratio requirement at each level (other than critically undercapitalized), with the required CET1 ratio being 6.5% for well-capitalized status; (ii) increasing the minimum Tier 1 capital ratio requirement for each category, with the minimum Tier 1 risk-based capital ratio for well-capitalized status being 8.0% (as compared to the current 6.0%); (iii) creating a minimum leverage ratio requirement of 5% for well-capitalized status; and (iv) eliminating the current provision that provides that a bank with a composite supervisory rating of 1 may have a 3.0% leverage ratio and still be well-capitalized.

Future rulemaking and regulatory changes on capital requirements may impact the Company as it continues to grow and evaluate potential mergers and acquisitions.

Restrictions on Bank Dividends or Loans to, or other Transactions with, the Parent Company, and on Parent Company Dividends

German American Bancorp, Inc., which is the publicly-held parent of the Bank (German American Bancorp), is a corporation that is separate and distinct from the Bank and its other subsidiaries. Most of the parent company’s revenues historically have been comprised of dividends, fees, and interest paid to it by the Bank, and this is expected to continue in the future. There are, however, statutory limits under Indiana law on the amount of dividends that the Bank can pay to its parent company without regulatory approval. The Bank may not, without the approval of the DFI, pay a dividend in an amount greater than its undivided profits. In addition, the prior approval of the DFI is required for the payment of a dividend by an Indiana state-chartered bank if the total of all dividends declared in a calendar year would exceed the total of its net income for the year combined with its retained net income for the two preceding years, unless such a payment qualifies under certain exemptive criteria that exempt certain dividend payments by certain qualified banks from the prior approval requirement. At December 31, 2013, the Bank was eligible for payment of dividends under the exemptive criteria established by DFI policy for this purpose, and could have declared and paid to the holding company $39,000,000 of its undivided profits without approval by the DFI in accordance with such criteria. See Note 8 of the Notes to Consolidated Financial Statements included in Item 8 of this Report for further discussion.

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In addition, the FRB and other bank regulatory agencies have issued policy statements or advisories that provide that insured banks and bank holding companies should generally only pay dividends out of current operating earnings.

In addition to these statutory restrictions, if, in the opinion of the applicable regulatory authority, a bank under its jurisdiction is engaged in, or is about to engage in, an unsafe or unsound practice, such authority may require, after notice and hearing, that such bank cease and desist from such practice. Accordingly, if the Bank were to experience financial difficulties, it is possible that the applicable regulatory authority could determine that the Bank would be engaged in an unsafe or unsound practice if the Bank were to pay dividends and could prohibit the Bank from doing so, even if availability existed for dividends under the statutory formulae.

Further, the Bank is subject to affiliate transaction restrictions under federal laws, which limit certain transactions generally involving the transfer of funds by a subsidiary bank or its subsidiaries to its parent corporation or any nonbank subsidiary of its parent corporation, whether in the form of loans, extensions of credit, investments, or asset purchases, or otherwise undertaking certain obligations on behalf of such affiliates. Furthermore, covered transactions that are loans and extensions of credit must be secured within specified amounts. In addition, all covered transactions and other affiliate transactions must be conducted on terms and under circumstances that are substantially the same as such transactions with unaffiliated entities.

Other Aspects of the Dodd-Frank Act

The Dodd-Frank Act (in addition to the regulatory changes discussed elsewhere in this “Regulation and Supervision” discussion and below under “Federal Deposit Insurance Premiums and Assessments”) made a variety of changes that will affect the business and affairs of the Company and the Bank in other ways. For instance, the Dodd-Frank Act (or agency regulations adopted and implemented (or to be adopted and implemented) under the Dodd-Frank Act) altered the authority and duties of the federal banking and securities regulatory agencies, implemented certain corporate governance requirements for all public companies including financial institutions with regard to executive compensation, proxy access by shareholders, and certain whistleblower provisions; restricted certain proprietary trading and hedge fund and private equity activities of banks and their affiliates; eliminated the former statutory prohibition against the payment of interest on business checking accounts; limited interchange fees on debit card transactions by certain large processors; and established the Consumer Financial Protection Bureau (“CFPB”).

The CFPB was granted broad rulemaking, supervisory and enforcement powers under various federal consumer financial protection laws, including the Equal Credit Opportunity Act, Truth in Lending Act, Real Estate Settlement Procedures Act, Fair Credit Reporting Act, Fair Debt Collection Act, the Consumer Financial Privacy provisions of the Gramm-Leach-Bliley Act and certain other statutes. The CFPB has examination and primary enforcement authority with respect to depository institutions with $10 billion or more in assets. Smaller institutions are subject to rules promulgated by the CFPB but continue to be examined and supervised by federal banking regulators for consumer compliance purposes. The CFPB has authority to prevent unfair, deceptive or abusive practices in connection with the offering of consumer financial products. The Dodd-Frank Act authorized the CFPB to establish certain minimum standards for the origination of residential mortgages including a determination of the borrower’s ability to repay. In addition, Dodd-Frank allows borrowers to raise certain defenses to foreclosure if they receive any loan other than a “qualified mortgage” as defined by the CFPB. The Dodd-Frank Act permits states to adopt consumer protection laws and standards that are more stringent than those adopted at the federal level and, in certain circumstances, permits state attorneys general to enforce compliance with both the state and federal laws and regulations.

The CFPB issued a rule, effective as of January 14, 2014, designed to clarify for lenders how they can avoid monetary damages under the Dodd-Frank Act, which would hold lenders accountable for ensuring a borrower’s ability to repay a mortgage. Loans that satisfy this “qualified mortgage” safe-harbor will be presumed to have complied with the new ability-to-repay standard. Under the Consumer Financial Protection Bureau’s rule, a “qualified mortgage” loan must not contain certain specified features, and the borrower’s total monthly debt-to-income ratio may not exceed a specified percentage. Lenders must also verify and document the income and financial resources relied upon to qualify the borrower for the loan and underwrite the loan based on a fully amortizing payment schedule and maximum interest rate during the first five years, taking into account all applicable taxes, insurance and assessments.

On December 10, 2013, five financial regulatory agencies, including the FRB and FDIC, adopted final rules implementing the so-called Volcker Rule added to banking law by Section 619 of the Dodd-Frank Act. These final rules prohibit banking entities from, among other things, (1) engaging in short-term proprietary trading for their own accounts, and (2) having certain ownership interests in and relationships with hedge funds or private equity funds (“covered funds”). Community banks like us have been afforded some relief under these final rules from onerous compliance obligations created by the rules; if banks are engaged only in exempted proprietary trading, such as trading in U.S. government, agency, state and municipal obligations, they are exempt entirely from compliance program requirements. Moreover, even if a community bank engages in proprietary trading or covered fund activities under the rule, they need only incorporate references to the Volcker Rule into their existing policies and procedures. The Final Rules are effective April 1, 2014, but the conformance period has been extended from its statutory end date of July 21, 2014 until July 21, 2015. We are currently evaluating the Final Rules, which are lengthy and detailed.

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Certain Other Laws and Regulations

In November 2009, the FRB amended its Regulation E under the Electronic Fund Transfer Act to prohibit banks from charging overdraft fees for ATM or point-of-sale debit card transactions that overdrew the account unless the customer opt-in to the discretionary overdraft service and to require banks to explain the terms of their overdraft services and their fees for the services. Compliance with this Regulation E amendment was required by July 1, 2010.

The Community Reinvestment Act of 1977, or the CRA, requires depository institutions to assist in meeting the credit needs of their market areas consistent with safe and sound banking practice. Under the CRA, each depository institution is required to help meet the credit needs of its market areas by, among other things, providing credit to low- and moderate-income individuals and communities. These factors are also considered in evaluating mergers, acquisitions and applications to open a branch or facility. The applicable federal regulators regularly conduct CRA examinations to assess the performance of financial institutions and assign one of four ratings to the institution’s records of meeting the credit needs of its community. During its last examination, a rating of “satisfactory” was received by the Bank.

In accordance with the Gramm-Leach-Bliley Financial Modernization Act of 1999, or the GLB Act, federal banking regulators adopted rules that limit the ability of banks and other financial institutions to disclose non-public information about consumers to nonaffiliated third parties. These limitations require disclosure of privacy policies to consumers and, in some circumstances, allow consumers to prevent disclosure of certain personal information to a nonaffiliated third party. The privacy provisions of the GLB Act affect how consumer information is transmitted through diversified financial companies and conveyed to outside vendors.

A major focus of governmental policy on financial institutions over the past decade has been combating money laundering and terrorist financing. The USA PATRIOT Act of 2001, or the USA Patriot Act, substantially broadened the scope of United States anti-money laundering laws and regulations by imposing significant new compliance and due diligence obligations, creating new crimes and penalties and expanding the extra-territorial jurisdiction of the United States. The U.S. Treasury Department has issued a number of regulations that apply various requirements of the USA Patriot Act to financial institutions such as the Bank. These regulations impose obligations on financial institutions to maintain appropriate policies, procedures and controls to detect, prevent and report money laundering and terrorist financing and to verify the identity of their customers. Failure of a financial institution to maintain and implement adequate programs to combat money laundering and terrorist financing, or to comply with all of the relevant laws or regulations, could have serious legal and reputational consequences for the institution.

The United States has imposed economic sanctions that affect transactions with designated foreign countries, nationals and others. These are typically known as the “OFAC” rules based on their administration by the U.S. Treasury Department Office of Foreign Assets Control (“OFAC”). The OFAC-administered sanctions targeting countries take many different forms. Generally, however, they contain one or more of the following elements: (i) restrictions on trade with or investment in a sanctioned country, including prohibitions against direct or indirect imports from and exports to a sanctioned country and prohibitions on “U.S. persons” engaging in financial transactions relating to making investments in, or providing investment-related advice or assistance to, a sanctioned country; and (ii) a blocking of assets in which the government or specially designated nationals of the sanctioned country have an interest, by prohibiting transfers of property subject to U.S. jurisdiction (including property in the possession or control of U.S. persons). Blocked assets (e.g., property and bank deposits) cannot be paid out, withdrawn, set off or transferred in any manner without a license from OFAC. Failure to comply with these sanctions could have serious legal and reputational consequences.

Federal Deposit Insurance Premiums and Assessments

Our bank subsidiary’s deposit accounts are currently insured by the Deposit Insurance Fund, or the DIF, of the FDIC. The insurance benefit generally covers up to a maximum of $250,000 per separately insured depositor. As an FDIC-insured bank, our bank subsidiary is subject to deposit insurance premiums and assessments to maintain the DIF. The Bank’s deposit insurance premium assessment rate depends on the capital category and supervisory category to which it is assigned. The FDIC has authority to raise or lower assessment rates on insured banks in order to achieve statutorily required reserve ratios in the DIF and to impose special additional assessments.

Under the current assessment system, the FDIC assigns a banking institution to one of four risk categories designed to measure risk. Total base assessment rates currently range from 0.025% of deposits for an institution in the highest rated sub-category of the highest rated category to 0.45% of deposits for an institution in the lowest rated category. The FDIC may increase or decrease its rates by 2.0 basis points without further rulemaking. In an emergency, the FDIC may also impose a special assessment.

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In addition, all FDIC insured institutions are required to pay assessments to the FDIC at an annual rate of approximately six tenths of a basis point of insured deposits to fund interest payments on bonds issued by the Financing Corporation, an agency of the federal government established to recapitalize the predecessor to the Savings Association Insurance Fund. These assessments will continue until the Financing Corporation bonds mature in 2017 through 2019.

Internet Address; Internet Availability of SEC Reports

The Company’s Internet address is www.germanamerican.com.

The Company makes available, free of charge through the Investor Relations – Financial Information section of its Internet website, the Company’s annual report on Form 10-K, its quarterly reports on Form 10-Q, its current reports on Form 8-K and any amendments to those reports filed or furnished pursuant to Section 13(a) of the Securities Exchange Act of 1934, as amended, as soon as reasonably practicable after those reports are filed with or furnished to the SEC.

Forward-Looking Statements and Associated Risks

The Company from time to time in its oral and written communications makes statements relating to its expectations regarding the future. These types of statements are considered “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements can include statements about the Company’s net interest income or net interest margin; adequacy of allowance for loan losses, and the quality of the Company’s loans, investment securities and other assets; simulations of changes in interest rates; litigation results; dividend policy; acquisitions or mergers; estimated cost savings, plans and objectives for future operations; and expectations about the Company’s financial and business performance and other business matters as well as economic and market conditions and trends. All statements other than statements of historical fact included in this report, including statements regarding our financial position, business strategy and the plans and objectives of our management for future operations, are forward-looking statements. When used in this report, words such as “anticipate”, “believe”, “estimate”, “expect”, “intend”, and similar expressions, as they relate to us or our management, identify forward-looking statements.

Such forward-looking statements are based on the beliefs of our management, as well as assumptions made by and information currently available to our management, and are subject to risks, uncertainties, and other factors.

Actual results may differ materially and adversely from the expectations of the Company that are expressed or implied by any forward-looking statement. The discussions in Item 1A, “Risk Factors,” and in Item 7 of this Form 10-K, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” list some of the factors that could cause the Company’s actual results to vary materially from those expressed or implied by any forward-looking statements. Other risks, uncertainties, and factors that could cause the Company’s actual results to vary materially from those expressed or implied by any forward-looking statement include but not limited to:

· the unknown future direction of interest rates and the timing and magnitude of any changes in interest rates;

· changes in competitive conditions;

· the introduction, withdrawal, success and timing of asset/liability management strategies or of mergers and acquisitions and other business initiatives and strategies;

· changes in customer borrowing, repayment, investment and deposit practices;

· changes in fiscal, monetary and tax policies;

· changes in financial and capital markets;

· continued deterioration in general economic conditions, either nationally or locally, resulting in, among other things, credit quality deterioration;

· capital management activities, including possible future sales of new securities, or possible repurchases or redemptions by the Company of outstanding debt or equity securities;

· risks of expansion through acquisitions and mergers, such as unexpected credit quality problems of the acquired loans or other assets, unexpected attrition of the customer base of the acquired institution or branches, and difficulties in integration of the acquired operations;

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· factors driving impairment charges on investments;

· the impact, extent and timing of technological changes;

· litigation liabilities, including related costs, expenses, settlements and judgments, or the outcome of matters before regulatory agencies, whether pending or commencing in the future;

· actions of the FRB;

· changes in accounting principles and interpretations;

· potential increases of federal deposit insurance premium expense, and possible future special assessments of FDIC premiums, either industry wide or specific to the Company’s banking subsidiary;

· actions of the regulatory authorities under the Dodd-Frank Act and the Federal Deposit Insurance Act and other possible legislative and regulatory actions and reforms; and

· the continued availability of earnings and excess capital sufficient for the lawful and prudent declaration and payment of cash dividends.

Such statements reflect our views with respect to future events and are subject to these and other risks, uncertainties and assumptions relating to the operations, results of operations, growth strategy and liquidity of the Company. Readers are cautioned not to place undue reliance on these forward-looking statements. It is intended that these forward-looking statements speak only as of the date they are made. We do not undertake any obligation to release publicly any revisions to these forward-looking statements to reflect future events or circumstances or to reflect the occurrence of unanticipated events.

Item 1A. Risk Factors.

While we have a history of profitability and operate with capital that exceeds the requirements of bank regulatory agencies, the financial services industry in which we operate was adversely affected by the severe recession that commenced in 2008, and our industry is continuing to be affected by continuing weak economic conditions throughout the United States. The following describes some of the principal risks and uncertainties to which our industry in general, and we and our assets and businesses specifically, are subject; other risks are briefly identified in our cautionary statement that is included under the heading “Forward-Looking Statements and Associated Risks” in Part I, Item 1, “Business.” Although we seek ways to manage these risks and uncertainties and to develop programs to control those that we can, we ultimately cannot predict the future. Future results may differ materially from past results, and from our expectations and plans.

Risks Related to the Financial Services Industry

We operate in a highly regulated environment and changes in laws and regulations to which we are subject may adversely affect our results of operations.

The banking industry in which we operate is subject to extensive regulation and supervision under federal and state laws and regulations. The restrictions imposed by such laws and regulations limit the manner in which we conduct our business, undertake new investments and activities and obtain financing. These regulations are designed primarily for the protection of the deposit insurance funds and consumers and not to benefit our shareholders. Financial institution regulation has been the subject of significant legislation in recent years and may be the subject of further significant legislation, none of which is in our control. Significant new laws or changes in, or repeals of, existing laws (including changes in federal or state laws affecting corporate taxpayers generally or financial institutions specifically) could have a material adverse effect on our business, financial condition, results of operations or liquidity. Further, federal monetary policy, particularly as implemented through the Federal Reserve System, significantly affects credit conditions, and any unfavorable change in these conditions could have a material adverse effect on our business, financial condition, results of operations or liquidity.

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The Dodd-Frank Act and regulations adopted under that law could materially and adversely affect us by increasing compliance costs and heightening our risk of noncompliance with applicable regulations.

The Dodd-Frank Act (discussed in Item 1 – Business – Regulation and Supervision) has resulted in sweeping changes in the regulation of financial institutions. The Dodd-Frank Act contains numerous provisions that affect all banks and bank holding companies. Many of these provisions remain subject to regulatory rule-making and implementation, the effects of which are not yet known. Accordingly, we cannot predict the specific impact and long-term effects that the Dodd-Frank Act and the regulations promulgated thereunder will have on us and our prospects, our target markets and the financial industry more generally. However, the Dodd-Frank Act and the regulations promulgated thereunder have imposed (and are likely to result in the imposition of) additional administrative and regulatory burdens that will obligate us to incur additional expenses (which adversely affect our margins and profitability) and increase the risk that we might not comply in all respects with the new requirements. Further, the Consumer Financial Protection Bureau’s newly-adopted rule on qualified mortgages could limit our ability or desire to make certain types of loans or loans to certain borrowers, or could make it more expensive and/or time consuming to make these loans, which could adversely impact our growth or profitability.

The new Basel Capital Standards may have an adverse effect on us.

We must begin transitioning to new capital rules, adopted by the federal banking agencies but based on the international Basel guidelines, effective January 1, 2015. See Item 1- Business – Regulation and Supervision. The impact of the new capital rules may require us to maintain higher levels of capital, which could lower our return on equity.

Our FDIC insurance premiums may increase, and special assessments could be made, which might negatively impact our results of operations.

High levels of insured institution failures, as a result of the recent recession, as well as the continuing weak economic conditions in the United States, significantly increased losses to the Deposit Insurance Fund of the FDIC. Further, the Dodd-Frank Act, and the Dodd-Frank Act mandates the FDIC to increase the level of its reserves for future losses in its Deposit Insurance Fund. Since the Deposit Insurance Fund is funded by premiums and assessments paid by insured banks, our FDIC insurance premium could increase in future years depending upon the FDIC’s actual loss experience, changes in our Bank’s financial condition or capital strength, and future conditions in the banking industry.

Risks Related to Our Operations and Business and Financial Strategies

Continuing economic weakness could negatively affect us.

Our performance could be negatively affected to the extent that continuing weaknesses in business and economic conditions have direct or indirect material adverse impacts on us, or on our customers or on the financial institutions with whom we deal as counterparties to financial transactions. These conditions could result in one or more of the following:

· a decrease in the demand for loans and other products and services offered by us;

· a decrease in customer savings generally and in the demand for savings and investment products offered by us; and

· an increase in the number of customers and counterparties who become delinquent, file for protection under bankruptcy laws, or default on their loans or other obligations to us.

Continued weakness or future deterioration in the economy, real estate markets or unemployment rates, particularly in the Southern Indiana markets in which we operate, might place downward pressure on the credit worthiness of our Bank’s customers and their inclinations to borrow. A continued or worsening disruption and volatility could negatively impact customers’ ability to obtain new loans or to repay existing loans, diminish the values of any collateral securing such loans and could cause increases in the number of the Company’s customers experiencing financial distress and in the levels of the Company’s delinquencies, non-performing loans and other problem assets, charge-offs and provision for credit losses, all of which could materially adversely affect our financial condition and results of operations. The underwriting and credit monitoring policies and procedures that we have adopted cannot eliminate the risk that we might incur losses on account of factors relating to the economy like those identified above, and those losses could have a material adverse effect on our business, financial condition, results of operations and cash flows.

If our actual loan losses exceed our estimates, our earnings and financial condition will be impacted.

A significant source of risk for any bank or other enterprise that lends money arises from the possibility that losses will be sustained because borrowers, guarantors and related parties may fail (because of financial difficulties or other reasons) to perform in accordance with the terms of their loan agreements. In our case, we originate many loans that are secured, but some loans are unsecured depending on the nature of the loan. With respect to secured loans, the collateral securing the repayment of these loans includes a wide variety of real and personal property that may be insufficient to cover the obligations owed under such loans, due to adverse changes in collateral values caused by changes in prevailing economic, environmental and other conditions, including declines in the value of real estate and other external events.

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We could be adversely affected by changes in interest rates.

Our earnings and cash flows are largely dependent upon our net interest income. Interest rates are highly sensitive to many factors that are beyond our control, including general economic conditions, demand for loans, securities and deposits, and policies of various governmental and regulatory agencies and, in particular, the monetary policies of the FRB. If the interest rates paid on deposits and other borrowings increase at a faster rate than the interest rates received on loans and other investments, our net interest income, and therefore earnings, could be adversely affected. Earnings could also be adversely affected if the interest rates received on loans and other investments fall more quickly than the interest rates paid on deposits and other borrowings. Any substantial, unexpected, prolonged change in market interest rates could have a material adverse effect on our financial condition, results of operations, and cash flows.

Our success is tied to the economic vitality of our Southern Indiana markets.

We conduct business from offices that are exclusively located in 13 Southern Indiana counties, from which substantially all of our customer base is drawn. Because of the geographic concentration of our operations and customer base, our results depend largely upon economic conditions in this area. If current levels of market disruption and volatility worsen in our primary service areas, the quality of our loan portfolio, and the demand for our products and services, could be adversely affected, and this could have a material adverse effect on our business, financial condition, results of operations or liquidity.

We face substantial competition.

The banking and financial services business in our markets is highly competitive. We compete with much larger regional, national, and international competitors, including competitors that have no (or only a limited number of) offices physically located within our markets, many of which compete with us via Internet and other electronic product and service offerings. In addition, banking and other financial services competitors (including newly organized companies) that are not currently represented by physical locations within our geographic markets could establish office facilities within our markets, including through their acquisition of existing competitors.  Developments increasing the nature or level of our competition, or decreasing the effectiveness by which we compete, could have a material adverse effect on our business, financial condition, results of operations or liquidity.  See also Part I, Item 1, of this Report, “Business – Competition,” and “Business – Regulation and Supervision.”

The manner in which we report our financial condition and results of operations may be affected by accounting changes.

Our financial condition and results of operations that are presented in our consolidated financial statements, accompanying notes to the consolidated financial statements, and selected financial data appearing in this report, are, to a large degree, dependent upon our accounting policies. The selection of and application of these policies involve estimates, judgments and uncertainties that are subject to change, and the effect of any change in estimates or judgments that might be caused by future developments or resolution of uncertainties could be materially adverse to our reported financial condition and results of operations. In addition, authorities that prescribe accounting principles and standards for public companies from time to time change those principles or standards or adopt formal or informal interpretations of existing principles or standards. Such changes or interpretations (to the extent applicable to us) could result in changes that would be materially adverse to our reported financial condition and results of operations.

Liquidity risk could impair our ability to fund operations and jeopardize our financial condition.

Liquidity is essential to our business. An inability to raise funds through deposits, borrowings, the sale of securities or loans and other sources could have a substantial negative effect on our liquidity. Our access to funding sources in amounts adequate to finance our activities or the terms of which are acceptable to us could be impaired by factors that affect us specifically or the financial services industry or economy in general. Although we have historically been able to replace maturing deposits and borrowings as necessary, we might not be able to replace such funds in the future if, among other things, our results of operations or financial condition or the results of operations or financial condition of our lenders or market conditions were to change.

The value of securities in our investment securities portfolio may be negatively affected by disruptions in securities markets.

Prices and volumes of transactions in the nation’s securities markets can be affected suddenly by economic crises, such as that experienced in the United States and internationally in 2008, or by other national or international crises, such as national disasters, acts of war or terrorism, changes in commodities markets, or instability in foreign governments. Disruptions in securities markets may detrimentally affect the value of securities that we hold in our investment portfolio, such as through reduced valuations due to the perception of heightened credit and liquidity risks. There can be no assurance that declines in market value associated with these disruptions will not result in other than temporary impairments of these assets, which would lead to accounting charges that could have a material adverse effect on our net income and capital levels.

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The soundness of other financial institutions could adversely affect us.

Our ability to engage in routine funding transactions could be adversely affected by the actions and commercial soundness of other financial institutions. Financial services companies are interrelated as a result of trading, clearing, counterparty, or other relationships. We have exposure to many different industries and counterparties, and we routinely execute transactions with counterparties in the financial services industry, including brokers and dealers, commercial banks, investment banks, mutual and hedge funds, and other institutional clients. As a result, defaults by, or even rumors or questions about, one or more financial services companies, or the financial services industry generally, have led to market-wide liquidity problems and could lead to losses or defaults by us or by other institutions. Many of these transactions expose us to credit risk in the event of default of our counterparty or client. In addition, our credit risk may be exacerbated when the collateral held by us cannot be realized or is liquidated at prices not sufficient to recover the full amount due us.

We are dependent on key personnel and the loss of one or more of those key personnel could harm our business.

Competition for qualified employees and personnel in the financial services industry (including banking personnel, trust and investments personnel, and insurance personnel) is intense and there are a limited number of qualified persons with knowledge of and experience in our local Southern Indiana markets. Our success depends to a significant degree upon our ability to attract and retain qualified loan origination executives, sales executives for our trust and investment products and services, and sales executives for our insurance products and services. We also depend upon the continued contributions of our management personnel, and in particular upon the abilities of our senior executive management, and the loss of the services of one or more of them could harm our business.

Our controls and procedures may fail or be circumvented.

Management regularly reviews and updates our internal controls, disclosure controls and procedures, and corporate governance policies and procedures. Any system of controls, however well designed and operated, is based in part on certain assumptions and can provide only reasonable, not absolute, assurances that the objectives of the system are met. Any failure or circumvention of our controls and procedures or failure to comply with regulations related to controls and procedures could have a material adverse effect on our business, results of operations, cash flows and financial condition.

We are subject to security and operational risks relating to our use of technology, both internally and with our customers, that could damage our reputation and our business.

We rely heavily on communications and information systems to conduct our business; any failure, interruption or breach in security of these systems could result in failures or disruptions in our customer relationship management, general ledger, deposit, loan and other systems. Further, we increasingly offer our customers the ability to bank online with us. Although we believe that our online systems are secure in accordance with best industry standards, our online banking networks or those of our customers could be vulnerable to unauthorized access, computer viruses, phishing schemes and other security problems. We may be required to spend significant capital and other resources to protect against the threat of security breaches and computer viruses, or to alleviate problems caused by security breaches or viruses. In addition, security breaches and viruses could expose us to claims, litigation and other possible liabilities. Any inability to prevent security breaches or computer viruses could also cause existing customers to lose confidence in our systems and could adversely affect our reputation and our ability to generate deposits.

We are exposed to risk of environmental liabilities with respect to properties to which we take title.

In the course of our business, we may own or foreclose and take title to real estate, and could be subject to environmental liabilities with respect to these properties (including liabilities for property damage, personal injury, investigation and clean-up costs incurred by these parties in connection with environmental contamination), or may be required to investigate or clean up hazardous or toxic substances, or chemical releases at a property.

Any acquisitions of banks, bank branches, or loans or other financial service assets pose risks to us.

We may buy banks, bank branches and other financial-service-related businesses and assets in the future. Acquiring other banks, businesses, or branches involves various risks commonly associated with acquisitions, including, among other things:

· potential exposure to unknown or contingent liabilities of the acquired assets, operations or company;

· exposure to potential asset quality issues of the acquired assets, operations or company;

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· environmental liability with acquired real estate collateral or other real estate;

· difficulty and expense of integrating the operations, systems and personnel of the acquired assets, operations or company;

· potential disruption to our ongoing business, including diversion of our management’s time and attention;

· the possible loss of key employees and customers of the acquired operations or company;

· difficulty in estimating the value of the acquired assets, operations or company; and

· potential changes in banking or tax laws or regulations that may affect the acquired assets, operations or company.

We may not be successful in overcoming these risks or any other problems encountered in connection with mergers or acquisitions.

Acquisitions typically involve the payment of a premium over book and market values, and, therefore, some dilution of the Company’s tangible book value per common share or net income per common share (or both) may occur in connection with any future transaction.

We may incur substantial costs to expand by acquisition, and such acquisitions may not result in the levels of profits we seek. Integration efforts for any future acquisitions may not be successful and following any future acquisition, after giving it effect, we may not achieve financial results comparable to or better than our historical experience.

We may participate in FDIC-assisted acquisitions, which could present additional risks to our financial condition.

We may make opportunistic whole or partial acquisitions of troubled financial institutions in transactions facilitated by the FDIC. In addition to the risks frequently associated with acquisitions, an acquisition of a troubled financial institution may involve a greater risk that the acquired assets underperform compared to our expectations. Because these acquisitions are structured in a manner that would not allow us the time normally associated with preparing for and evaluating an acquisition, including preparing for integration of an acquired institution, we may face additional risks including, among other things, the loss of customers, strain on management resources related to collection and management of problem loans and problems related to integration of personnel and operating systems. Additionally, while the FDIC may agree to assume certain losses in transactions that it facilitates, there can be no assurances that we would not be required to raise additional capital as a condition to, or as a result of, participation in an FDIC-assisted transaction. Any such transactions and related issuances of stock may have dilutive effect on earnings per share and share ownership.

Item 1B. Unresolved Staff Comments. None.

Item 2. Properties.

The Company’s executive offices are located in the main office building of the Bank at 711 Main Street, Jasper, Indiana. The main office building, which is owned by the Bank and also serves as the main office of the Company’s other subsidiaries, contains approximately 23,600 square feet of office space. The Bank and the Company’s other subsidiaries also conduct their operations from 41 other locations in Southern Indiana of which 32 are owned by the Company and nine are leased from third parties.

Item 3. Legal Proceedings.

There are no material pending legal proceedings, other than routine litigation incidental to the business of the Company’s subsidiaries, to which the Company or any of its subsidiaries is a party or of which any of their property is the subject.

Item 4. Mine Safety Disclosures.

Not applicable.

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PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Market and Dividend Information

German American Bancorp, Inc.’s stock is traded on NASDAQ’s Global Select Market under the symbol GABC. The quarterly high and low closing prices for the Company’s common stock as reported by NASDAQ and quarterly cash dividends declared and paid are set forth in the table below.

	2013						2012
					Cash						Cash
	High		Low		Dividend		High		Low		Dividend
Fourth Quarter	$	30.15	$	23.51	$	0.15	$	24.10	$	19.98	$	0.14
Third Quarter	$	28.15	$	22.86	$	0.15	$	24.89	$	19.76	$	0.14
Second Quarter	$	22.69	$	19.96	$	0.15	$	20.50	$	17.94	$	0.14
First Quarter	$	23.63	$	21.54	$	0.15	$	21.74	$	18.43	$	0.14
					$	0.60					$	0.56

The Common Stock was held of record by approximately 3,429 shareholders at March 1, 2014.

Cash dividends paid to the Company’s shareholders are primarily funded from dividends received by the parent company from its bank subsidiary. The declaration and payment of future dividends will depend upon the earnings and financial condition of the Company and its subsidiaries, general economic conditions, compliance with regulatory requirements affecting the ability of the bank subsidiary and the Company to declare dividends, (for further discussion of such requirements, see Item 1, “Business - Regulation and Supervision - Restrictions on Bank Dividends or Loans to, or other Transactions with, the Parent Company and Parent Company Dividends”), and other factors.

Transfer Agent:	Computershare	Shareholder	Terri A. Eckerle
	Priority Processing	Information and	German American Bancorp, Inc.
	250 Royall St	Corporate Office:	P. O. Box 810
	Canton, MA  02021		Jasper, Indiana  47547-0810
	Contact: Shareholder Relations		(812) 482-1314
	(800) 884-4225		(800) 482-1314

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Stock Performance Graph

The following graph compares the Company’s five-year cumulative total returns with those of the Russell 2000 Stock Index, Russell Microcap Stock Index, and the Indiana Bank Peer Group. The Indiana Bank Peer Group (which is a custom peer group identified by Company management) includes all Indiana-based commercial bank holding companies (excluding companies owning thrift institutions that are not regulated as bank holding companies) that have been in existence as commercial bank holding companies throughout the five-year period ended December 31, 2013, the stocks of which have been traded on an established securities market (NYSE, AMEX, NASDAQ) throughout that five-year period. The companies comprising the Indiana Bank Peer Group for purposes of the December 2013 comparison were: 1st Source Corp., Community Bank Shares of IN, First Financial Corp., First Merchants Corp., Lakeland Financial Corp., MainSource Financial Group, Old National Bancorp, Horizon Bancorp, and Tower Financial Corp. The returns of each company in the Indiana Bank Peer Group have been weighted to reflect the company’s market capitalization. The Russell 2000 Stock Index, which is designed to measure the performance of the small-cap segment of the U.S. equity universe, is a subset of the Russell 3000 Index (which measures the performance of the largest 3,000 U.S. companies) that includes approximately 2,000 of the smallest securities in that index based on a combination of their market cap and current index membership, and is annually reconstituted at the end of each June. The Russell Microcap Stock Index is an index representing the smallest 1,000 securities in the small-cap Russell 2000 Index plus the next 1,000 securities, which is also annually reconstituted at the end of each June. The Company’s stock is currently included in the Russell 2000 Index and Russell Microcap Index.

Stock Repurchase Program Information

The following table sets forth information regarding the Company’s purchases of its common shares during each of the three months ended December 31, 2013.

	Total						Maximum Number
	Number				Total Number of Shares		(or Approximate Dollar
	of Shares		Average Price		(or Units) Purchased as Part		Value) of Shares (or Units)
	(or Units)		Paid Per Share		of Publicly Announced Plans		that May Yet Be Purchased
Period	Purchased		(or Unit)		or Programs		Under the Plans or Programs (1)
October 2013		—		—		—		272,789
November 2013		—		—		—		272,789
December 2013		—		—		—		272,789

⁽¹⁾ On April 26, 2001, the Company announced that its Board of Directors had approved a stock repurchase program for up to 607,754 of its outstanding common shares, of which the Company had purchased 334,965 common shares through December 31, 2013 (both such numbers adjusted for subsequent stock dividends). The Board of Directors established no expiration date for this program. The Company purchased no shares under this program during the quarter ended December 31, 2013.

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Item 6. Selected Financial Data.

The following selected data should be read in conjunction with the consolidated financial statements and related notes that are included in Item 8 of this Report, and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” which is included in Item 7 of this Report (dollars in thousands, except per share data). Year-to-year financial information comparability is affected by the acquisition accounting treatment for mergers and acquisitions, including but not limited to the Company’s acquisitions of two branches of another bank in May 2010, the Company’s acquisition of American Community Bancorp, Inc., effective January 1, 2011 and the Company’s acquisition of United Commerce Bancorp, effective October 1, 2013.

	2013			2012			2011			2010			2009
Summary of Operations:
Interest Income	$	75,672		$	77,160		$	80,161		$	64,193		$	63,736
Interest Expense		7,155			10,912			16,180			15,522			19,223
Net Interest Income		68,517			66,248			63,981			48,671			44,513
Provision for Loan Losses		350			2,412			6,800			5,225			3,750
Net Interest Income after Provision
For Loan Losses		68,167			63,836			57,181			43,446			40,763
Non-interest Income		23,615			21,811			21,576			16,943			15,859
Non-interest Expense		54,905			50,923			50,782			41,361			40,391
Income before Income Taxes		36,877			34,724			27,975			19,028			16,231
Income Tax Expense		11,464			10,669			7,726			5,623			4,013
Net Income	$	25,413		$	24,055		$	20,249		$	13,405		$	12,218
Year-end Balances:
Total Assets	$	2,163,827		$	2,006,300		$	1,873,767		$	1,375,888		$	1,242,965
Total Loans, Net of Unearned Income		1,382,382			1,204,866			1,120,993			917,236			877,822
Total Deposits		1,812,156			1,640,931			1,556,198			1,087,286			969,643
Total Long-term Debt		87,237			89,472			90,974			81,016			113,320
Total Shareholders’ Equity		200,097			185,026			167,610			121,534			113,549
Average Balances:
Total Assets	$	2,037,236		$	1,934,123		$	1,823,703		$	1,330,540		$	1,230,596
Total Loans, Net of Unearned Income		1,272,055			1,147,891			1,114,181			906,127			891,322
Total Deposits		1,695,796			1,618,712			1,521,204			1,046,295			963,928
Total Shareholders’ Equity		189,689			177,207			159,765			119,867			109,887
Per Share Data:
Net Income (1)	$	1.98		$	1.90		$	1.61		$	1.21		$	1.10
Cash Dividends		0.60			0.56			0.56			0.56			0.56
Book Value at Year-end		15.19			14.64			13.31			10.94			10.25
Other Data at Year-end:
Number of Shareholders		3,444			3,105			3,221			3,194			3,364
Number of Employees		478			439			417			359			332
Weighted Average Number of Shares (1)		12,807,678			12,637,743			12,587,748			11,104,887			11,068,988
Selected Performance Ratios:
Return on Assets		1.25	%		1.24	%		1.11	%		1.01	%		0.99	%
Return on Equity		13.40	%		13.57	%		12.67	%		11.18	%		11.12	%
Equity to Assets		9.25	%		9.22	%		8.95	%		8.83	%		9.14	%
Dividend Payout		30.18	%		29.38	%		34.80	%		46.36	%		50.71	%
Net Charge-offs to Average Loans		0.10	%		0.19	%		0.43	%		0.32	%		0.25	%
Allowance for Loan Losses to Loans		1.05	%		1.29	%		1.37	%		1.45	%		1.25	%
Net Interest Margin		3.67	%		3.74	%		3.84	%		3.98	%		3.95	%

⁽¹⁾ Share and Per Share Data includes the dilutive effect of stock options.

19

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

INTRODUCTION

German American Bancorp, Inc., is a NASDAQ-traded (symbol: GABC) financial services holding company based in Jasper, Indiana. German American, through its banking subsidiary German American Bancorp, operates 37 commercial and retail banking offices in 13 southern Indiana counties. The Company also owns a trust, brokerage, and financial planning subsidiary (German American Financial Advisors & Trust Company) and a full line property and casualty insurance agency (German American Insurance, Inc.).

Throughout this Management’s Discussion and Analysis, as elsewhere in this report, when we use the term “Company”, we will usually be referring to the business and affairs (financial and otherwise) of the Company and its subsidiaries and affiliates as a whole. Occasionally, we will refer to the term “parent company” or “holding company” when we mean to refer to only German American Bancorp, Inc., and the term “Bank” when we mean to refer to only the Company’s bank subsidiary.

This Management’s Discussion and Analysis includes an analysis of the major components of the Company’s operations for the years 2011 through 2013 and its financial condition as of December 31, 2013 and 2012. This information should be read in conjunction with the accompanying consolidated financial statements and footnotes contained elsewhere in this report and with the description of business included in Item 1 of this Report (including the cautionary disclosure regarding “Forward Looking Statements and Associated Risks”). Financial and other information by segment is included in Note 15 to the Company’s consolidated financial statements included in Item 8 of this Report and is incorporated into this Item 7 by reference.

The statements of management’s expectations and goals concerning the Company’s future operations and performance that are set forth in the following Management Overview and in other sections of this Item 7 are forward-looking statements, and readers are cautioned that these forward-looking statements are based on assumptions and are subject to risks, uncertainties, and other factors. Actual results may differ materially from the expectations of the Company that is expressed or implied by any forward-looking statement. This Item 7, as well as the discussions in Item 1 (“Business”) entitled “Forward-Looking Statements and Associated Risks” and in Item 1A (“Risk Factors”) (which discussions are incorporated in this Item 7 by reference) list some of the factors that could cause the Company’s actual results to vary materially from those expressed or implied by any such forward-looking statements.

MANAGEMENT OVERVIEW

The Company’s 2013 net income totaled $25,413,000, or $1.98 per diluted share, which was a record level of earnings for the Company and represented a 4% increase on a per share basis over the Company’s 2012 net income of $24,055,000, or $1.90 per diluted share. The Company’s return on average equity for 2013 was 13.4%, representing the ninth consecutive year the Company has achieved a double-digit return on equity.

The record earnings performance during 2013 was attributable to both an increased level of net interest income, driven by a higher level of earning assets and more specifically the Company’s loan portfolio, increased levels of non-interest income, and a reduced level of provision for loan loss, as the Company’s asset quality remained strong while showing continued improvement. These positive impacts were partially mitigated by an increased level of non-interest expenses.

Net interest income improved by $2,269,000, or approximately 3%, during 2013 compared with 2012. Provision for loan loss declined $2,062,000, or 85%, during 2013 compared with 2012. The Company’s 2013 earnings were positively impacted by a $1,804,000, or 8%, increase in the level of non-interest income. The key drivers in the increased level of non-interest income was higher trust and investment product fees, increased insurance revenues, and higher levels of gains related to sales of securities. Non-interest expenses increased $3,982,000, or 8%, during 2013 compared with 2012 largely driven by an increased level of salaries and employees benefits.

The Company completed the acquisition of United Commerce Bancorp and its subsidiary, United Commerce Bank effective October 1, 2013. United Commerce Bank provided a full range of commercial and consumer banking services in the Bloomington, Indiana, market, from two banking offices. United Commerce had total loans and deposits (unaudited) as of October 1, 2013 that totaled $79.6 million and $106.6 million, respectively. The impact of the acquisition on the Company’s overall financial performance during 2013 was not significant given that only a single quarter of performance was included in operating results of the Company.

20

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The financial condition and results of operations for German American Bancorp, Inc. presented in the Consolidated Financial Statements, accompanying Notes to the Consolidated Financial Statements, and selected financial data appearing elsewhere within this Report, are, to a large degree, dependent upon the Company’s accounting policies. The selection of and application of these policies involve estimates, judgments, and uncertainties that are subject to change. The critical accounting policies and estimates that the Company has determined to be the most susceptible to change in the near term relate to the determination of the allowance for loan losses, the valuation of securities available for sale, and the valuation allowance on deferred tax assets.

Allowance for Loan Losses

The Company maintains an allowance for loan losses to cover probable incurred credit losses at the balance sheet date. Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance. Allocations of the allowance may be made for specific loans, but the entire allowance is available for any loan that, in management’s judgment, should be charged-off. A provision for loan losses is charged to operations based on management’s periodic evaluation of the necessary allowance balance. Evaluations are conducted at least quarterly and more often if deemed necessary. The ultimate recovery of all loans is susceptible to future market factors beyond the Company’s control.

The Company has an established process to determine the adequacy of the allowance for loan losses. The determination of the allowance is inherently subjective, as it requires significant estimates, including the amounts and timing of expected future cash flows on impaired loans, estimated losses on other classified loans and pools of homogeneous loans, and consideration of past loan loss experience, the nature and volume of the portfolio, information about specific borrower situations and estimated collateral values, economic conditions, and other factors, all of which may be susceptible to significant change. The allowance consists of two components of allocations, specific and general. These two components represent the total allowance for loan losses deemed adequate to cover losses inherent in the loan portfolio.

Commercial and agricultural loans are subject to a standardized grading process administered by an internal loan review function. The need for specific reserves is considered for credits when graded substandard or when: (a) the customer’s cash flow or net worth appears insufficient to repay the loan; (b) the loan has been criticized in a regulatory examination; (c) the loan is on non-accrual; or, (d) other reasons where the ultimate collectibility of the loan is in question, or the loan characteristics require special monitoring. Specific allowances are established in cases where management has identified significant conditions or circumstances related to an individual credit that we believe indicates the loan is impaired. Specific allocations on impaired loans are determined by comparing the loan balance to the present value of expected cash flows or expected collateral proceeds. Allocations are also applied to categories of loans not considered individually impaired but for which the rate of loss is expected to be greater than historical averages, including those graded substandard and non-performing consumer or residential real estate loans. Such allocations are based on past loss experience and information about specific borrower situations and estimated collateral values.

General allocations are made for other pools of loans, including non-classified loans, homogeneous portfolios of consumer and residential real estate loans, and loans within certain industry categories believed to present unique risk of loss. General allocations of the allowance are primarily made based on a three-year historical average for loan losses for these portfolios, judgmentally adjusted for economic factors and portfolio trends.

Due to the imprecise nature of estimating the allowance for loan losses, the Company’s allowance for loan losses includes a minor unallocated component. The unallocated component of the allowance for loan losses incorporates the Company’s judgmental determination of inherent losses that may not be fully reflected in other allocations, including factors such as economic uncertainties, lending staff quality, industry trends impacting specific portfolio segments, and broad portfolio quality trends. Therefore, the ratio of allocated to unallocated components within the total allowance may fluctuate from period to period.

Securities Valuation

Securities available-for-sale are carried at fair value, with unrealized holding gains and losses reported separately in accumulated other comprehensive income (loss), net of tax. The Company obtains market values from a third party on a monthly basis in order to adjust the securities to fair value. Equity securities that do not have readily determinable fair values are carried at cost. Additionally, when securities are deemed to be other than temporarily impaired, a charge will be recorded through earnings; therefore, future changes in the fair value of securities could have a significant impact on the Company’s operating results. In determining whether a market value decline is other than temporary, management considers the reason for the decline, the extent of the decline, the duration of the decline and whether the Company intends to sell or believes it will be required to sell the securities prior to recovery. As of December 31, 2013, gross unrealized losses on the securities available-for-sale portfolio totaled approximately $13,938,000 and gross unrealized gains totaled approximately $5,885,000. As of December 31, 2013, held-to-maturity securities had a gross unrecognized gain of approximately $3,000.

21

Income Tax Expense

Income tax expense involves estimates related to the valuation allowance on deferred tax assets and loss contingencies related to exposure from tax examinations.

A valuation allowance reduces deferred tax assets to the amount management believes is more likely than not to be realized. In evaluating the realization of deferred tax assets, management considers the likelihood that sufficient taxable income of appropriate character will be generated within carryback and carryforward periods, including consideration of available tax planning strategies. Tax related loss contingencies, including assessments arising from tax examinations and tax strategies, are recorded as liabilities when the likelihood of loss is probable and an amount or range of loss can be reasonably estimated. In considering the likelihood of loss, management considers the nature of the contingency, the progress of any examination or related protest or appeal, the views of legal counsel and other advisors, experience of the Company or other enterprises in similar matters, if any, and management’s intended response to any assessment.

RESULTS OF OPERATIONS

NET INCOME

Net income for the year ended December 31, 2013 totaled $25,413,000 or $1.98 per diluted share, an increase of $1,358,000 or approximately 4% on a per share basis, from the year ended December 31, 2012 net income of $24,055,000 or $1.90 per diluted share. For 2013, the improvement in earnings was attributable to an increased level of net interest income, improved non-interest income, and a reduced level of provision for loan loss partially offset by a higher level of non-interest expense.

Net income for the year ended December 31, 2012 totaled $24,055,000 or $1.90 per diluted share, an increase of $3,806,000 or approximately 18% on a per share basis, from the year ended December 31, 2011 net income of $20,249,000 or $1.61 per diluted share. For 2012, the improvement in earnings was attributable to both an increased level of net interest income, driven by a higher level of earning assets within both the Company’s loan portfolio and securities portfolio, and a reduced level of provision for loan loss.

NET INTEREST INCOME

Net interest income is the Company’s single largest source of earnings, and represents the difference between interest and fees realized on earning assets, less interest paid on deposits and borrowed funds. Several factors contribute to the determination of net interest income and net interest margin, including the volume and mix of earning assets, interest rates, and income taxes. Many factors affecting net interest income are subject to control by management policies and actions. Factors beyond the control of management include the general level of credit and deposit demand, Federal Reserve Board monetary policy, and changes in tax laws.

Net interest income increased $2,269,000 or 3% (an increase of $2,500,000 or 4% on a tax-equivalent basis) during the year ended December 31, 2013 compared with 2012. The increased net interest income during 2013 compared with 2012 was largely driven by an increased level of earning assets primarily attributable to average loan growth and an overall decline in the Company’s cost of funds partially mitigated by a decline in the accretion of loan discounts on acquired loans and a lower net interest margin (expressed as a percentage of average earning assets).

The tax equivalent net interest margin was 3.67% for 2013 compared to 3.74% during 2012. The yield on earning assets totaled 4.04% during 2013 compared to 4.34% in 2012 while the cost of funds (expressed as a percentage of average earning assets) totaled 0.37% during 2013 compared to 0.60% in 2012.

The decline in the net interest margin in 2013 compared with 2012 was largely attributable to the continued downward pressure on earning asset yields being driven by a historically low market interest rate environment and a competitive marketplace for lending opportunities. Also contributing to the lower net interest margin was a decline in the accretion of loan discounts on certain acquired loans. Accretion contributed approximately 8 basis points on an annualized basis to the net interest margin during 2013 compared to approximately 12 basis points during 2012. The decline in the Company’s cost of funds by approximately 23 basis points during 2013 compared to 2012 was largely driven by a continued decline in deposit rates and also attributable to the repayment of $19.3 million of subordinated debentures with an interest rate of 8% that occurred in the second quarter of 2013.

22

Average earning assets increased by approximately $103.7 million, or 6%, during 2013 compared with 2012. Average loans outstanding increased $124.2 million, or 11%, during 2013 compared with 2012. Average federal funds sold and other short-term investments decreased by $29.5 million, or 66%, during 2013 compared with 2012. The average securities portfolio remained relatively stable increasing approximately $9.0 million, or 1%, in 2013 compared to 2012. The funding for the increased level of earning assets was largely driven through an increase level of average core deposits (core deposits defined as demand deposits - both interest and non-interest bearing, savings, money market and time deposits in denominations of less than $100,000). The increase in average core deposits totaled $62.3 million, or approximately 4%, during 2013 compared with 2012.

Net interest income increased $2,267,000 or 4% (an increase of $2,617,000 or 4% on a tax-equivalent basis) during the year ended December 31, 2012 compared with 2011. The increased net interest income during 2012 compared with 2011 was driven by a higher level of earning assets including both average loan growth and growth in the securities portfolio which resulted from growth of the Company’s deposit base.

The tax equivalent net interest margin was 3.74% for the year ended December 31, 2012 compared to 3.84% in 2011. The yield on earning assets totaled 4.34% in 2012 compared to 4.79% in 2011 while the cost of funds (expressed as a percentage of average earning assets) totaled 0.60% during 2012 compared to 0.95% in 2011.

The decline in the net interest margin in 2012 compared with 2011 was largely attributable to the continued downward pressure on earning asset yields. Accretion of loan discounts on certain acquired loans contributed approximately 12 basis points to the net interest margin in 2012 compared with 13 basis points in 2011. The decline in the Company’s cost of funds by 35 basis points during 2012 compared to 2011 was driven by a continued decline in deposit rates.

23

The following table summarizes net interest income (on a tax-equivalent basis) for each of the past three years. For tax-equivalent adjustments, an effective tax rate of 35% was used for all years presented ⁽¹⁾.

Average Balance Sheet

(Tax-equivalent basis, dollars in thousands)

	Twelve Months Ended								Twelve Months Ended								Twelve Months Ended
	December 31, 2013								December 31, 2012								December 31, 2011
	Principal			Income /		Yield /			Principal			Income /		Yield /			Principal			Income /		Yield /
	Balance			Expense		Rate			Balance			Expense		Rate			Balance			Expense		Rate
ASSETS
Federal Funds Sold and Other Short-term Investments	$	15,507		$	30		0.19	%	$	44,999		$	91		0.20	%	$	85,217		$	216		0.25	%
Securities:
Taxable		541,478			11,091		2.05	%		547,949			12,946		2.36	%		450,099			13,677		3.04	%
Non-taxable		87,471			4,491		5.13	%		71,961			3,743		5.20	%		49,260			2,805		5.69	%
Total Loans and Leases (2)		1,272,055			61,862		4.86	%		1,147,891			61,951		5.40	%		1,114,181			64,684		5.81	%
TOTAL INTEREST EARNING ASSETS		1,916,511			77,474		4.04	%		1,812,800			78,731		4.34	%		1,698,757			81,382		4.79	%
Other Assets		136,170								137,594								139,658
Less: Allowance for Loan Losses		(15,445	)							(16,271	)							(14,712	)
TOTAL ASSETS	$	2,037,236							$	1,934,123							$	1,823,703
LIABILITIES AND SHAREHOLDERS’ EQUITY
Interest-bearing Demand Deposits	$	534,095		$	856		0.16	%	$	512,232		$	972		0.19	%	$	478,486		$	2,374		0.50	%
Savings Deposits		466,391			717		0.15	%		435,475			792		0.18	%		392,166			1,940		0.49	%
Time Deposits		339,469			3,124		0.92	%		357,193			5,194		1.45	%		394,008			7,672		1.95	%
FHLB Advances and Other Borrowings		136,569			2,458		1.80	%		118,201			3,954		3.35	%		126,922			4,194		3.30	%
TOTAL INTEREST-BEARING LIABILITIES		1,476,524			7,155		0.48	%		1,423,101			10,912		0.77	%		1,391,582			16,180		1.16	%
Demand Deposit Accounts		355,841								313,812								256,544
Other Liabilities		15,182								20,003								15,812
TOTAL LIABILITIES		1,847,547								1,756,916								1,663,938
Shareholders’ Equity		189,689								177,207								159,765
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	2,037,236							$	1,934,123							$	1,823,703
COST OF FUNDS							0.37	%							0.60	%							0.95	%
NET INTEREST INCOME				$	70,319							$	67,819							$	65,202
NET INTEREST MARGIN							3.67	%							3.74	%							3.84	%

⁽¹⁾ Effective tax rates were determined as though interest earned on the Company’s investments in municipal bonds and loans was fully taxable.

⁽²⁾ Loans held-for-sale and non-accruing loans have been included in average loans. Interest income on loans includes loan fees of $2,055, $3,164 and $3,335 for 2013, 2012 and 2011, respectively.

24

The following table sets forth for the periods indicated a summary of the changes in interest income and interest expense resulting from changes in volume and changes in rates:

Net Interest Income – Rate / Volume Analysis

(Tax-Equivalent basis, dollars in thousands)

	2013 compared to 2012									2012 compared to 2011
	Increase / (Decrease) Due to (1)									Increase / (Decrease) Due to (1)
	Volume			Rate			Net			Volume			Rate			Net
Interest Income:
Federal Funds Sold and Other
Short-term Investments	$	(57	)	$	(4	)	$	(61	)	$	(88	)	$	(37	)	$	(125	)
Taxable Securities		(151	)		(1,704	)		(1,855	)		2,646			(3,377	)		(731	)
Non-taxable Securities		797			(49	)		748			1,199			(261	)		938
Loans and Leases		6,354			(6,443	)		(89	)		1,916			(4,649	)		(2,733	)
Total Interest Income		6,943			(8,200	)		(1,257	)		5,673			(8,324	)		(2,651	)
Interest Expense:
Savings and Interest-bearing Demand		94			(285	)		(191	)		352			(2,903	)		(2,551	)
Time Deposits		(247	)		(1,823	)		(2,070	)		(667	)		(1,810	)		(2,477	)
FHLB Advances and Other Borrowings		543			(2,039	)		(1,496	)		(291	)		51			(240	)
Total Interest Expense		390			(4,147	)		(3,757	)		(606	)		(4,662	)		(5,268	)
Net Interest Income	$	6,553		$	(4,053	)	$	2,500		$	6,279		$	(3,662	)	$	2,617

⁽¹⁾ The change in interest due to both rate and volume has been allocated to volume and rate changes in proportion to the relationship of the absolute dollar amounts of the change in each.

See the Company’s Average Balance Sheet and the discussions headed USES OF FUNDS, SOURCES OF FUNDS, and “RISK MANAGEMENT – Liquidity and Interest Rate Risk Management” for further information on the Company’s net interest income, net interest margin, and interest rate sensitivity position.

PROVISION FOR LOAN LOSSES

The Company provides for loan losses through regular provisions to the allowance for loan losses. The provision is affected by net charge-offs on loans and changes in specific and general allocations required on the allowance for loan losses. Provisions for loan losses totaled $350,000, $2,412,000, and $6,800,000 in 2013, 2012, and 2011, respectively.

The provision for loan loss declined $2,062,000, or 85%, during 2013 compared to 2012. The decline in the provision for loan losses during 2013 compared with 2012 was attributable to a reduced level of net charge-offs, lower levels of non-performing loans, and a lower level of adversely classified loans. During 2013, the provision for loan loss represented approximately 3 basis points of average outstanding loans while net charge-offs represented approximately 10 basis points of average outstanding loans.

The Company’s allowance for loan losses represented 1.05% of total loans at year-end 2013 compared with 1.29% at year-end 2012. The decline in the allowance compared with total loans at year-end 2013 compared with year-end 2012 was in part attributable to the improvement in the Company’s asset quality and also in part attributable to the acquisition of United Commerce Bank. Under acquisition accounting, loans are recorded at fair value which includes a credit risk component, and therefore the allowance on loans acquired is not carried over from the seller.

The provision for loan loss declined $4,388,000, or 65%, during 2012 compared to 2011. During 2012, the provision for loan loss represented approximately 21 basis points of average outstanding loans while net charge-offs represented approximately 19 basis points of average outstanding loans. The significant decline in the Company’s provision for loan loss during 2012 compared with 2011 was largely attributable to a lower level of net charge-offs and overall improvement in the level of adversely classified and non-performing loans.The Company’s allowance for loan losses represented 1.29% of total loans at year-end 2012 compared with 1.37% at year-end 2011.

Provisions for loan losses in all periods were made at a level deemed necessary by management to absorb estimated, probable incurred losses in the loan portfolio. A detailed evaluation of the adequacy of the allowance for loan losses is completed quarterly by management, the results of which are used to determine provisions for loan losses. Management estimates the allowance balance required using past loan loss experience, the nature and volume of the portfolio, information about specific borrower situations and estimated collateral values, economic conditions, and other qualitative factors. Refer also to the sections entitled CRITICAL ACCOUNTING POLICIES AND ESTIMATES and “RISK MANAGEMENT – Lending and Loan Administration” for further discussion of the provision and allowance for loan losses.

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NON-INTEREST INCOME

During 2013, non-interest income increased $1,804,000 or 8% compared with 2012 and during 2012 increased $235,000 or 1% compared with 2011. 

							% Change From
Non-interest Income (dollars in thousands)	Years Ended December 31,						Prior Year
	2013		2012		2011		2013			2012
Trust and Investment Product Fees	$	3,358	$	2,657	$	2,145		26	%		24	%
Service Charges on Deposit Accounts		4,144		4,076		4,154		2			(2	)
Insurance Revenues		6,217		5,524		5,819		13			(5	)
Company Owned Life Insurance		965		974		1,100		(1	)		(11	)
Interchange Fee Income		1,854		1,724		1,501		8			15
Other Operating Income		2,003		1,955		1,452		2			35
Subtotal		18,541		16,910		16,171		10			5
Net Gains on Sales of Loans		2,645		3,234		2,381		(18	)		36
Net Gain on Securities		2,429		1,667		3,024		46			(45	)
TOTAL NON-INTEREST INCOME	$	23,615	$	21,811	$	21,576		8			1

Trust and investment product fees increased $701,000, or 26%, during 2013 compared with 2012 following an increase of $512,000, or 24%, during 2012 compared with 2011. The increase during 2013 compared to 2012 was attributable to a 35% increase in trust revenues and a 19% increase in brokerage revenues. The increase during 2012 compared to 2011 was primarily attributable to a 50% increase in trust revenues supplemented by a 7% increase in retail brokerage revenues.

Insurance revenues increased $693,000, or 13%, during 2013 as compared to 2012 primarily as a result of increased commercial insurance revenue and to a lesser extent increased contingency revenue. Contingency revenue totaled $246,000 during 2013 compared to $88,000 in 2012. Insurance revenues decreased approximately $295,000 or 5% during 2012 as compared to 2011 as a result of lower contingency revenue. Contingency revenue totaled $88,000 during 2012 compared to $872,000 in 2011. The decline in contingency revenue was partially offset by an increased level of commercial insurance revenues during 2012 compared with 2011.

Net gain on sales of residential loans decreased $589,000, or 18%, during 2013 compared with 2012. During 2012, the net gain on sales of residential loans increased $853,000, or 36%, compared with 2011. Loan sales for 2013, 2012, and 2011 totaled $166.6 million, $186.8 million, and $134.2 million, respectively.

During 2013, the Company realized net gains on the sale of securities of $2,429,000 related to the sale of $90.5 million of securities. Included in the gain during 2013 was a $343,000 gain the Company realized related to the acquisition accounting treatment of the existing equity ownership position the Company held in United Commerce at the time of acquisition. During 2012, the Company realized net gains on the sale of securities of $1,667,000 related to the sale of approximately $94.3 million of securities. During 2011, the Company realized net gains on securities of $3,024,000 related to the sale of approximately $59.3 million of securities. Included in the gain during 2011 was a $1,045,000 gain related to the acquisition accounting treatment of the existing equity ownership position the Company held in American Community Bancorp, Inc. at the time of acquisition of American Community.

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NON-INTEREST EXPENSE

During 2013, non-interest expense increased $3,982,000, or 8%, compared with 2012. During 2012, non-interest expense remained very stable compared with 2011, increasing by less than 1%.

							% Change From
Non-interest Expense (dollars in thousands)	Years Ended December 31,						Prior Year
	2013		2012		2011		2013			2012
Salaries and Employee Benefits	$	31,482	$	29,086	$	27,992		8	%		4	%
Occupancy, Furniture and Equipment Expense		7,741		7,064		7,198		10			(2	)
FDIC Premiums		1,050		1,116		1,473		(6	)		(24	)
Data Processing Fees		1,765		1,071		2,092		65			(49	)
Professional Fees		2,577		2,247		2,056		15			9
Advertising and Promotion		1,863		1,714		1,525		9			12
Intangible Amortization		1,416		1,655		1,956		(14	)		(15	)
Other Operating Expenses		7,011		6,970		6,490		1			7
TOTAL NON-INTEREST EXPENSE	$	54,905	$	50,923	$	50,782		8			n/m	(1)

⁽¹⁾ n/m = not meaningful

Salaries and employee benefits increased $2,396,000, or 8%, during 2013 compared with 2012. The increase was primarily the result of an increased number of full-time equivalent employees due in part to an increased number of banking locations including the acquisition of United Commerce, increased costs related to the Company’s health insurance plan, and the termination of a frozen defined benefit pension plan. Also contributing to the increase was approximately $287,000 of merger-related salary and benefit costs related to the acquisition of United Commerce. Salaries and employee benefits increased $1,094,000 or 4% during 2012 compared with 2011. The increase in salaries and benefits during 2012 compared with 2011 was primarily the result of an increased number of full-time equivalent employees, increased costs related to the Company’s partially self-insured health insurance plan and increased commission payout related to higher levels of mortgage loan sales revenues in the secondary market and increased insurance revenues.

Occupancy, furniture and equipment expense increased $677, or approximately 10%, during 2013 compared with 2012 following a 2% decrease in 2012 compared with 2011. The increase during 2013 was largely attributable to service contracts related to equipment and software, additional branch banking locations, and the acquisition of United Commerce Bancorp. The costs associated with United Commerce totaled $127,000 during 2013.

Data processing fees increased $694,000, or 65%, during 2013 compared with 2012. The increase was largely related to the resolution of a contractual dispute during 2012 related to the acquisition of American Community Bancorp. An expense for the cancellation of a data processing contract was recorded in the first half of 2011, and upon resolution of the contractual dispute, a portion of that accrued expense was reversed during 2012. Also contributing to the increase was $261,000 in data processing charges for United Commerce Bancorp. Data processing fees declined $1,021,000, or 49%, during 2012 compared with 2011. This decline was largely related to running the Bank of Evansville’s separate core processing system during the first four months of 2011 and aforementioned contractual issues.

Professional fees increased $330,000, or 15%, during 2013 compared with 2012 following an increase of $191,000, or 9%, during 2012 compared with 2011. The increase during 2013 compared with 2012 was largely related to professional fees associated with the acquisition of United Commerce Bancorp and related to fees associated with the Company’s review of its overall operating effectiveness and efficiency. The increase during 2012 compared with 2011 was attributable to increased professional fees related to strategic customer service and leadership development initiatives and increased legal fees.

Advertising and promotion increased $149,000, or 9%, during 2013 compared with 2012 following an increase of $189,000, or 12%, during 2012 compared with 2011. The increase during 2013 compared with 2012 was attributable to increased level of contributions and general advertising expenditures. The increase during 2012 was related to an increased level of contributions to community based organizations in the Company’s primary market areas.

Intangible amortization declined $239,000, or 14%, during 2013 compared with 2012 following a decline of $301,000, or 15%, in 2012 compared with 2011. The decline during 2013 compared with 2012 was related to a lower level of core deposit intangible amortization and a lower level of customer list intangible related to the Company’s property and casualty insurance operations. The decline during 2012 compared with 2011 was related to a lower level of core deposit intangible amortization.

27

PROVISION FOR INCOME TAXES

The Company records a provision for current income taxes payable, along with a provision for deferred taxes payable in the future. Deferred taxes arise from temporary differences, which are items recorded for financial statement purposes in a different period than for income tax returns. The Company’s effective tax rate was 31.1%, 30.7%, and 27.6%, respectively, in 2013, 2012, and 2011. The effective tax rate in all periods is lower than the blended statutory rate. The lower effective rate in all periods primarily resulted from the Company’s tax-exempt investment income on securities, loans, and company owned life insurance, income tax credits generated by investments in affordable housing projects and investments in new market tax credit projects, and income generated by subsidiaries domiciled in a state with no state or local income tax. See Note 10 to the Company’s consolidated financial statements included in Item 8 of this Report for additional details relative to the Company’s income tax provision.

CAPITAL RESOURCES

The Company and its affiliate bank are subject to regulatory capital requirements administered by federal banking agencies. Capital adequacy guidelines and prompt corrective action regulations involve quantitative measures of assets, liabilities, and certain off-balance sheet items calculated under regulatory accounting practices. The prompt corrective action regulations provide five classifications, including well-capitalized, adequately capitalized, under-capitalized, significantly under-capitalized and critically under-capitalized, although these terms are not used to represent overall financial condition. The Company and its affiliate bank at year-end 2013 were categorized as well-capitalized as that term is defined by applicable regulations. See Note 8 to the Company’s consolidated financial statements included in Item 8 of this Report for actual and required capital ratios and for additional information regarding capital adequacy.

In July 2013, the two federal banking regulatory agencies that have authority to regulate the Company’s capital resources and capital structure (the Board of Governors of the Federal Reserve System (FRB) and Federal Deposit Insurance Corporation (FDIC)) took action to finalize the application to the United States banking industry of new regulatory capital requirements that are established by the international banking framework commonly referred to as “Basel III” and to implement certain other changes required by the Dodd-Frank Wall Street Reform and Consumer Protection Act. These rules make significant changes to the U.S. bank regulatory capital framework, and generally increase capital requirements for banking organizations. Although the Company believes that these new rules, as they are phased in over a multi-year period commencing January 1, 2015, will in general increase the amount of capital that the Company and the Bank may be required to maintain, the Company does not presently expect that any materially burdensome compliance efforts with these final capital rules will be required of the Company prior to January 1, 2015. For additional information, also see the discussion in Item 1 of this Report.

As of December 31, 2013, shareholders’ equity increased by $15.1 million to $200.1 million compared with $185.0 million at year-end 2012. The increase in shareholders’ equity was primarily attributable to an increase of $17.7 million in retained earnings and an increase of $12.9 million in common stock and additional paid in capital. The increase in common stock and paid in capital was primarily the result of shares issued in conjunction with the acquisition of United Commerce Bancorp. These increases were partially offset by a decline of $15.6 million in accumulated other comprehensive income primarily related to a decrease in the fair value of the Company’s available-for-sale securities portfolio. Shareholders’ equity represented 9.3% of total assets at December 31, 2013 and 9.2% of total assets at December 31, 2012. Shareholders’ equity included $23.9 million of goodwill and other intangible assets at year-end 2013 compared to $21.6 million of goodwill and other intangible assets at December 31, 2012.

USES OF FUNDS

LOANS

December 31, 2013 loans outstanding increased approximately $177.3 million, or 15% from year-end 2012. The loans acquired from United Commerce Bancorp totaled approximately $76.9 million at year-end 2013. Commercial and industrial loans increased $15.6 million or 5%, commercial real estate loans increased $93.6 million or 19%, agricultural loans increased $13.0 million or 7%, consumer loans increased $15.1 million or 13%, and residential mortgage loans increased $40.1 million or 45% during 2013.

December 31, 2012 loans outstanding increased $84.4 million, or 8% from year-end 2011. The increase in loans during 2012 was broad based including commercial and industrial loans, commercial real estate loans and agricultural loans and with growth occurring across virtually the entire market area of the Company. Commercial and industrial loans increased $42.2 million, or 14%, commercial real estate loans increased $36.4 million, or 8%, agricultural loans increased $12.2 million, or 7%, and residential mortgage loans increased $2.5 million, or 3%, while consumer loans decreased $8.9 million or 7%.

28

The composition of the loan portfolio has remained relatively stable over the past several years including 2013. The portfolio is most heavily concentrated in commercial real estate loans at 42% of the portfolio. The Company’s exposure to non-owner occupied commercial real estate was limited to 21% of the total loan portfolio at year-end 2013. The Company’s commercial lending is extended to various industries, including hotel, agribusiness and manufacturing, as well as health care, wholesale, and retail services. The Company has only limited exposure in construction and development lending with this segment representing approximately 3% of the total loan portfolio.

Loan Portfolio	December 31,
(dollars in thousands)	2013			2012			2011			2010			2009
Commercial and Industrial Loans and Leases	$	350,955		$	335,373		$	293,172		$	218,443		$	188,962
Commercial Real Estate Loans		582,066			488,496			452,071			339,555			334,255
Agricultural Loans		192,880			179,906			167,693			165,166			156,845
Consumer Loans		130,628			115,540			124,479			118,244			114,736
Residential Mortgage Loans		128,683			88,586			86,134			77,310			84,677
Total Loans		1,385,212			1,207,901			1,123,549			918,718			879,475
Less: Unearned Income		(2,830	)		(3,035	)		(2,556	)		(1,482	)		(1,653	)
Subtotal		1,382,382			1,204,866			1,120,993			917,236			877,822
Less: Allowance for Loan Losses		(14,584	)		(15,520	)		(15,312	)		(13,317	)		(11,016	)
Loans, Net	$	1,367,798		$	1,189,346		$	1,105,681		$	903,919		$	866,806
Ratio of Loans to Total Loans
Commercial and Industrial Loans and Leases		25	%		28	%		26	%		24	%		21	%
Commercial Real Estate Loans		42	%		40	%		40	%		37	%		38	%
Agricultural Loans		14	%		15	%		15	%		18	%		18	%
Consumer Loans		10	%		10	%		11	%		13	%		13	%
Residential Mortgage Loans		9	%		7	%		8	%		8	%		10	%
Total Loans		100	%		100	%		100	%		100	%		100	%

The Company’s policy is generally to extend credit to consumer and commercial borrowers in its primary geographic market area in Southern Indiana. Commercial extensions of credit outside this market area are generally concentrated in real estate loans within a 120 mile radius of the Company’s primary market and are granted on a selective basis. These out-of-market credits include participations that the Company may purchase from time to time in loans that are originated by banks in which the Company owns (or previously owned) non-controlling common stock investments.

The following table indicates the amounts of loans (excluding residential mortgages on 1-4 family residences and consumer loans) outstanding as of December 31, 2013, which, based on remaining scheduled repayments of principal, are due in the periods indicated (dollars in thousands).

	Within		One to Five		After
	One Year		Years		Five Years		Total
Commercial and Agricultural	$	521,705	$	514,308	$	89,888	$	1,125,901

	Interest Sensitivity
	Fixed Rate		Variable Rate
Loans Maturing After One Year	$	160,412	$	443,784

29

INVESTMENTS

The investment portfolio is a principal source for funding the Company’s loan growth and other liquidity needs of its subsidiaries. The Company’s securities portfolio primarily consists of money market securities, uncollateralized federal agency securities, municipal obligations of state and political subdivisions, and mortgage-backed securities issued by U.S. government agencies. Money market securities include federal funds sold, interest-bearing balances with banks, and other short-term investments. The composition of the year-end balances in the investment portfolio is presented in Note 2 to the Company’s consolidated financial statements included in Item 8 of this Report and in the table below:

Investment Portfolio, at Amortized Cost	December 31,
(dollars in thousands)	2013		%			2012		%			2011		%
Federal Funds Sold and Other Short-term Investments	$	22,762		3	%	$	7,463		1	%	$	32,737		6	%
U.S. Treasury and Agency Securities		20,000		3			23,570		4			6,340		1
Corporate Securities		—		—			—		—			1,003		n/m	(1)
Obligations of State and Political Subdivisions		112,276		18			71,698		13			61,296		12
Mortgage-backed Securities - Residential		481,724		76			475,452		82			431,495		81
Equity Securities		353		n/m	(1)		684		n/m	(1)		684		n/m	(1)
Total Securities Portfolio	$	637,115		100	%	$	578,867		100	%	$	533,555		100	%

⁽¹⁾ n/m = not meaningful

The amortized cost of investment securities, including federal funds sold and short-term investments, increased $58.2 million at year-end 2013 compared with year-end 2012 and increased $45.3 million at year-end 2012 compared with year-end 2011. The largest concentration in the investment portfolio continues to be in mortgage related securities representing 76% of the total securities portfolio at December 31, 2013. The Company’s level of obligations of state and political subdivisions increased to $112.3 million or 18% of the portfolio at December 31, 2013.

The Company’s equity securities portfolio at year-end 2013 and 2012 consisted of non-controlling common stock investments in unaffiliated banking companies. The decline in 2013 compared with year-end 2012 in the equity securities portfolio was primarily the result of the acquisition of United Commerce Bancorp effective October 1, 2013 in which the Company had a non-controlling common stock investment prior to the acquisition.

Investment Securities, at Carrying Value

(dollars in thousands)

	December 31,
Securities Held-to-Maturity	2013		2012		2011
Obligations of State and Political Subdivisions	$	268	$	346	$	690
Securities Available-for-Sale
U.S. Treasury and Agency Securities	$	18,952	$	23,472	$	6,422
Corporate Securities		—		—		1,005
Obligations of State and Political Subdivisions		113,497		76,485		64,799
Mortgage-backed Securities - Residential		473,230		486,912		443,934
Equity Securities		353		733		684
Subtotal of Securities Available-for-Sale		606,032		587,602		516,844
Total Securities	$	606,300	$	587,948	$	517,534

The Company’s $606.0 million available-for-sale portion of the investment portfolio provides an additional funding source for the liquidity needs of the Company’s subsidiaries and for asset/liability management requirements. Although management has the ability to sell these securities if the need arises, their designation as available-for-sale should not necessarily be interpreted as an indication that management anticipates such sales.

The amortized cost of both available for sale and held to maturity debt securities at December 31, 2013 are shown in the following table by expected maturity. Mortgage-backed securities are based on estimated average lives. Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations. Equity securities do not have contractual maturities, and are excluded from the table below.

30

Maturities and Average Yields of Securities at December 31, 2013

(dollars in thousands)

	Within					After One But					After Five But					After Ten
	One Year					Within Five Years					Within Ten Years					Years
	Amount		Yield			Amount		Yield			Amount		Yield			Amount		Yield
U.S. Treasury and Agency Securities	$	—		N/A		$	—		N/A		$	20,000		1.30	%	$	—		N/A
Obligations of State and Political Subdivisions		2,935		4.91	%		10,158		3.50	%		49,906		5.16	%		49,277		5.53	%
Mortgage-backed Securities - Residential		12,682		3.70	%		314,260		2.30	%		154,782		2.03	%		—		N/A
Total Securities	$	15,617		3.93	%	$	324,418		2.34	%	$	224,688		2.66	%	$	49,277		5.53	%

A tax-equivalent adjustment using a tax rate of 35 percent was used in the above table.

In addition to the other uses of funds discussed previously, the Company had certain long-term contractual obligations as of December 31, 2013. These contractual obligations primarily consisted of long-term borrowings with the Federal Home Loan Bank (“FHLB”), parent company term debt, and junior subordinated debentures assumed as a part of the American Community Bancorp, Inc. acquisition which was completed in 2011, time deposits, and lease commitments for certain office facilities. Scheduled principal payments on long-term borrowings, time deposits, and future minimum lease payments are outlined in the table below.

Contractual Obligations	Payments Due By Period
(dollars in thousands)	Total		Less Than 1 Year		1-3 Years		3-5 Years		More Than 5 Years
Long-term Borrowings	$	83,507	$	43,039	$	24,087	$	10,776	$	5,605
Time Deposits		349,034		174,109		142,338		32,408		179
Capital Lease Obligation		8,658		495		990		960		6,213
Operating Lease Commitments		3,486		608		957		413		1,508
Total Contractual Obligations	$	444,685	$	218,251	$	168,372	$	44,557	$	13,505

SOURCES OF FUNDS

The Company’s primary source of funding is its base of core customer deposits. Core deposits consist of demand deposits, savings, interest-bearing checking, money market accounts, and certificates of deposit of less than $100,000. Other sources of funds are certificates of deposit of $100,000 or more, brokered deposits, overnight borrowings from other financial institutions and securities sold under agreement to repurchase. The membership of the Company’s affiliate bank in the Federal Home Loan Bank System provides a significant additional source for both long and short-term collateralized borrowings. In addition, the Company, as a separate and distinct corporation from its bank and other subsidiaries, also has the ability to borrow funds from other financial institutions and to raise debt or equity capital from the capital markets and other sources. The following pages contain a discussion of changes in these areas.

31

The table below illustrates changes between years in the average balances of all funding sources:

Funding Sources - Average Balances (dollars in thousands)	December 31,						% Change From Prior Year
	2013		2012		2011		2013			2012
Demand Deposits
Non-interest-bearing	$	355,841	$	313,812	$	256,544		13	%		22	%
Interest-bearing		534,095		512,232		478,486		4			7
Savings Deposits		134,283		116,515		95,748		15			22
Money Market Accounts		332,108		318,960		296,418		4			8
Other Time Deposits		223,239		255,722		285,564		(13	)		(10	)
Total Core Deposits		1,579,566		1,517,241		1,412,760		4			7
Certificates of Deposits of $100,000 or more and Brokered Deposits		116,230		101,471		108,444		15			(6	)
FHLB Advances and Other Borrowings		136,569		118,201		126,922		16			(7	)
Total Funding Sources	$	1,832,365	$	1,736,913	$	1,648,126		5			5

Maturities of certificates of deposit of $100,000 or more and brokered deposits are summarized as follows:

(dollars in thousands) 

	3 Months		3 Thru		6 Thru		Over
	Or Less		6 Months		12 Months		12 Months		Total
December 31, 2013	$	44,574	$	21,219	$	20,443	$	38,437	$	124,673

CORE DEPOSITS

The Company’s overall level of average core deposits increased approximately $62.3 million, or 4%, during 2013 following a $104.5 million, or 7%, increase during 2012. During both 2013 and 2012, the increase in average core deposits came from across the Company’s branch network and market areas. The acquisition of United Community Bancorp, which occurred in the fourth quarter of 2013, had a relatively minor impact on the average core deposit balances.

The Company’s ability to attract core deposits continues to be influenced by competition and the interest rate environment, as well as the availability of alternative investment products. Core deposits continue to represent a significant funding source for the Company’s operations and represented 86% of average total funding sources during 2013 compared with 87% during 2012 and 86% during 2011.

Demand, savings, and money market deposits have provided a growing source of funding for the Company in each of the periods reported. Average demand, savings, and money market deposits increased 8% during 2013 following 12% growth during 2012. Average demand, savings, and money market deposits totaled $1.356 billion or 86% of core deposits (74% of total funding sources) in 2013 compared with $1.262 billion or 83% of core deposits (73% of total funding sources) in 2012 and $1.127 billion or 80% of core deposits (68% of total funding sources) in 2011.

Other time deposits consist of certificates of deposits in denominations of less than $100,000. These deposits declined by 13% during 2013 following a decrease of 10% in 2012. Other time deposits comprised 14% of core deposits in 2013, 17% in 2012 and 20% in 2011.

OTHER FUNDING SOURCES

Federal Home Loan Bank advances and other borrowings represent the Company’s most significant source of other funding. Average borrowed funds increased $18.4 million, or 16%, during 2013 following a decline of $8.7 million, or 7% in 2012. Borrowings comprised approximately 7% of average total funding sources in 2013 and 2012 and 8% in 2011.

Certificates of deposits in denominations of $100,000 or more and brokered deposits are an additional source of other funding for the Company’s bank subsidiary. Large denomination certificates and brokered deposits increased $14.8 million, or 15% during 2013 following a decrease of $7.0 million, or 6% during 2012. Large certificates and brokered deposits comprised approximately 6% of average total funding sources in 2013 and 2012 and 7% in 2011. This type of funding is used as both long-term and short-term funding sources.

32

The bank subsidiary of the Company also utilizes short-term funding sources from time to time. These sources consist of overnight federal funds purchased from other financial institutions, secured repurchase agreements that generally mature within one day of the transaction date, and secured overnight variable rate borrowings from the FHLB. These borrowings represent an important source of short-term liquidity for the Company’s bank subsidiary. Long-term debt at the Company’s bank subsidiary is in the form of FHLB advances, which are secured by the pledge of certain investment securities, residential and housing-related mortgage loans, and certain other commercial real estate loans. See Note 7 to the Company’s consolidated financial statements included in Item 8 of this Report for further information regarding borrowed funds.

PARENT COMPANY FUNDING SOURCES

The parent company is a corporation separate and distinct from its bank and other subsidiaries. For information regarding the financial condition, result of operations, and cash flows of the Company, presented on a parent-company-only basis, see Note 16 to the Company’s consolidated financial statements included in Item 8 of this Report.

The Company uses funds at the parent company level to pay dividends to its shareholders, to acquire or make other investments in other businesses or their securities or assets, to repurchase its stock from time to time, and for other general corporate purposes. The parent company does not have access at the parent-company level to the deposits and certain other sources of funds that are available to its bank subsidiary to support its operations. Instead, the parent company has historically derived most of its revenues from dividends paid to the parent company by its bank subsidiary. The Company’s banking subsidiary is subject to statutory restrictions on its ability to pay dividends to the parent company. See Note 8, Shareholders’ Equity, of the Notes to the Consolidated Financial Statements included in Item 8 of this Report, which is incorporated herein by reference. The parent company has in recent years supplemented the dividends received from its subsidiaries with borrowings, which are discussed in detail below.

At year-end 2013, the Company had an outstanding credit facility pursuant to which the parent company was obligated for a term loan made to the parent company in January 2013 in the original principal amount of $10 million, of which $7 million was outstanding as of year-end 2013. Of the remaining $7 million principal amount of the term loan (which may be prepaid at any time without premium or penalty), $3 million is payable on or before December 31, 2014 and the remaining $4 million of principal is due on or before the maturity of the Term Note on December 30, 2015. Interest is payable quarterly at a floating rate based upon 90-day LIBOR plus a margin.

The Company also has a $10 million revolving line of credit with the same lender that will mature on December 31, 2014. Borrowings are available for general working capital purposes from time to time; no borrowings have yet been made under the revolving line of credit. Quarterly interest payments calculated at the same floating rate as then in effect for the Term Note will be payable in respect of any principal amounts advanced under the revolving line of credit. There was no outstanding balance as of December 31, 2013.

Effective January 1, 2011, and as a result of the acquisition of American Community Bancorp, Inc., the Company assumed long-term debt obligations of American Community in the form of two junior subordinated debentures issued by American Community in the aggregate unpaid principal amount of approximately $8.3 million. The junior subordinated debentures were issued to certain statutory trusts established by American Community (in support of related issuances of trust preferred securities issued by those trusts) and both mature in single installments of principal payable in 2035, and bear interest payable on a quarterly basis at a floating rate, adjustable quarterly based on the 90-day LIBOR plus a specified percentage. These debentures are of a type that are eligible (under current regulatory capital requirements) to qualify as Tier 1 capital (with certain limitations) for regulatory purposes and as of December 31, 2013 approximately $4.9 million of the junior subordinated debentures were treated as Tier 1 capital for regulatory capital purposes.

See Note 7 to the Company’s consolidated financial statements included in Item 8 of this Report for further information regarding the parent company borrowed funds and other indebtedness.

33

RISK MANAGEMENT

The Company is exposed to various types of business risk on an on-going basis. These risks include credit risk, liquidity risk and interest rate risk. Various procedures are employed at the Company’s subsidiary bank to monitor and mitigate risk in the loan and investment portfolios, as well as risks associated with changes in interest rates. Following is a discussion of the Company’s philosophies and procedures to address these risks.

LENDING AND LOAN ADMINISTRATION

Primary responsibility and accountability for day-to-day lending activities rests with the Company’s subsidiary bank. Loan personnel at the subsidiary bank have the authority to extend credit under guidelines approved by the bank’s board of directors. The executive loan committee serves as a vehicle for communication and for the pooling of knowledge, judgment and experience of its members. The committee provides valuable input to lending personnel, acts as an approval body, and monitors the overall quality of the bank’s loan portfolio. The Corporate Credit Risk Management Committee comprised of members of the Company’s and its subsidiary bank’s executive officers and board of directors, strives to ensure a consistent application of the Company’s lending policies. The Company also maintains a comprehensive risk-grading and loan review program, which includes quarterly reviews of problem loans, delinquencies and charge-offs. The purpose of this program is to evaluate loan administration, credit quality, loan documentation and the adequacy of the allowance for loan losses.

The Company maintains an allowance for loan losses to cover probable, incurred credit losses identified during its loan review process. Management estimates the required level of allowance for loan losses using past loan loss experience, the nature and volume of the portfolio, information about specific borrower situations and estimated collateral values, economic conditions, and other factors. Allocations of the allowance may be made for specific loans, but the entire allowance is available for any loan that, in management’s judgment, should be charged-off. Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed.

The allowance for loan losses is comprised of: (a) specific reserves on individual credits; (b) general reserves for certain loan categories and industries, and overall historical loss experience; and (c) unallocated reserves based on performance trends in the loan portfolios, current economic conditions, and other factors that influence the level of estimated probable losses. The need for specific reserves are considered for credits when: (a) the customer’s cash flow or net worth appears insufficient to repay the loan; (b) the loan has been criticized in a regulatory examination; (c) the loan is on non-accrual; or, (d) other reasons where the ultimate collectability of the loan is in question, or the loan characteristics require special monitoring.

34

Allowance for Loan Losses (dollars in thousands)	Years Ended December 31,
	2013			2012			2011			2010			2009
Balance of Allowance for Possible Losses at Beginning of Period	$	15,520		$	15,312		$	13,317		$	11,016		$	9,522
Loans Charged-off:
Commercial and Industrial Loans		503			162			1,513			345			941
Commercial Real Estate Loans		538			1,789			2,604			2,842			1,248
Agricultural Loans		—			—			—			44			—
Consumer Loans		607			380			575			465			640
Residential Mortgage Loans		24			199			497			518			345
Total Loans Charged-off		1,672			2,530			5,189			4,214			3,174
Recoveries of Previously Charged-off Loans:
Commercial and Industrial Loans		128			74			98			24			—
Commercial Real Estate Loans		102			97			139			1,089			588
Agricultural Loans		—			—			—			—			17
Consumer Loans		148			125			131			171			192
Residential Mortgage Loans		8			30			16			6			121
Total Recoveries		386			326			384			1,290			918
Net Loans Recovered (Charged-off)		(1,286	)		(2,204	)		(4,805	)		(2,924	)		(2,256	)
Additions to Allowance Charged to Expense		350			2,412			6,800			5,225			3,750
Balance at End of Period	$	14,584		$	15,520		$	15,312		$	13,317		$	11,016
Net Charge-offs to Average Loans Outstanding		0.10	%		0.19	%		0.43	%		0.32	%		0.25	%
Provision for Loan Losses to Average Loans Outstanding		0.03	%		0.21	%		0.61	%		0.58	%		0.42	%
Allowance for Loan Losses to Total Loans at Year-end		1.05	%		1.29	%		1.37	%		1.45	%		1.25	%

The following table indicates the breakdown of the allowance for loan losses for the periods indicated (dollars in thousands):

Commercial and Industrial Loans	$	3,983	$	4,555	$	3,493	$	3,713	$	2,146
Commercial Real Estate Loans		8,335		8,931		9,297		7,497		6,477
Agricultural Loans		946		989		926		750		872
Consumer Loans		427		355		448		582		520
Residential Mortgage Loans		281		186		402		543		545
Unallocated		612		504		746		232		456
Total Allowance for Loan Losses	$	14,584	$	15,520	$	15,312	$	13,317	$	11,016

The Company’s allowance for loan losses totaled $14.6 million at December 31, 2013 representing a decrease of $936,000 or 6% compared with year-end 2012. The significant contributing factors that led to the decrease of the allowance for loan losses included positive trends in the level of non-performing and adversely classified loans as well as a decline in the level of net-charge-offs in 2013 compared with 2012.

The allowance for loan losses represented 1.05% of period end loans at December 31, 2013 compared with 1.29% at December 31, 2012. Under acquisition accounting treatment, loans acquired are recorded at fair value which includes a credit risk component, and therefore the allowance on loans acquired is not carried over from the seller. The Company held a discount on acquired loans of $5.9 million (including $3.9 million attributable to the United Commerce acquisition) as of December 31, 2013 and $3.5 million at year-end 2012.

The allowance for loan loss at year-end 2013 represented 174% of non-performing loans compared to 150% at year-end 2012. Net charge-offs totaled $1.3 million or 0.10% of average loans during 2013 compared with net charge-offs of $2.2 million or 0.19% of average loans outstanding during 2012.

Please see “RESULTS OF OPERATIONS – Provision for Loan Losses” and “CRITICAL ACCOUNTING POLICIES AND ESTIMATES – Allowance for Loan Losses” for additional information regarding the allowance.

35

NON-PERFORMING ASSETS

Non-performing assets consist of: (a) non-accrual loans; (b) loans which have been renegotiated to provide for a reduction or deferral of interest or principal because of deterioration in the financial condition of the borrower; (c) loans past due 90 days or more as to principal or interest; and, (d) other real estate owned. Loans are placed on non-accrual status when scheduled principal or interest payments are past due for 90 days or more or when the borrower’s ability to repay becomes doubtful. Uncollected accrued interest is reversed against income at the time a loan is placed on non-accrual. Loans are typically charged-off at 180 days past due, or earlier if deemed uncollectible. Exceptions to the non-accrual and charge-off policies are made when the loan is well secured and in the process of collection. The following table presents an analysis of the Company’s non-performing assets.

Non-performing Assets	December 31,
(dollars in thousands)	2013			2012			2011			2010			2009
Non-accrual Loans	$	8,378		$	10,357		$	17,857		$	10,150		$	8,374
Past Due Loans (90 days or more)		8			—			—			671			113
Total Non-performing Loans		8,386			10,357			17,857			10,821			8,487
Other Real Estate		1,029			1,645			2,343			2,095			2,363
Total Non-performing Assets	$	9,415		$	12,002		$	20,200		$	12,916		$	10,850
Restructured Loans	$	2,418		$	362		$	409		$	396		$	306
Non-performing Loans to Total Loans		0.61	%		0.86	%		1.59	%		1.18	%		0.97	%
Allowance for Loan Losses to Non-performing Loans		173.91	%		149.85	%		85.75	%		123.07	%		129.80	%

Non-performing assets totaled $9.4 million or 0.44% of total assets at December 31, 2013 compared to $12.0 million or 0.60% of total assets at December 31, 2012. Non-performing loans totaled $8.4 million or 0.61% of total loans at December 31, 2013 representing a $2.0 million, or 19%, decline in non-performing loans compared to the $10.4 million of non-performing loans at December 31, 2012.

The improvement in non-performing loans was largely the result of the placement of a commercial and industrial loan to a mechanical contractor back into accrual status based on the performance of the loan and company over an extended period of time. This loan was restructured and placed into non-accrual status in a prior period. After upgrading, because the loan was previously restructured, the Company continues to carry this credit as a restructured loan at December 31, 2013. This resulted in the increase in restructured loans to $2.4 million at December 31, 2013 compared to $0.4 million at December 31, 2012.

Non-accrual commercial real estate loans totaled $6.7 million at December 31, 2013 representing a decline of $0.6 million, or 8%, from the $7.3 million of non-accrual commercial real estate loans at year-end 2012. Non-accrual commercial real estate loans represented 79% of the total non-performing loans at December 31, 2013 compared to 70% of total non-performing loans at year-end 2012. Non-accrual commercial and industrial loans totaled $0.03 million at December 31, 2013 representing a decrease of $2.4 million, or 99%, from the $2.5 million of non-accrual commercial and industrial loans at December 31, 2012. Non-accrual commercial and industrial loans represented less than 1% of the total non-performing loans at December 31, 2013 compared with 24% of total non-performing loans at year-end 2012. Non-accrual residential mortgage loans totaled $1.3 million at December 31, 2013 representing an increase of $1.1 million from the $0.2 million at year-end 2012. Non-accrual residential mortgage loans represented 16% of the total non-performing loans at December 31, 2013 compared to 2% of total non-performing loans at year-end 2012.

At December 31, 2013, two commercial loan relationships represented approximately 47% of the total non-performing loans of the Company and represented the only loan relationships greater than $1.0 million included in non-performing loans. The first relationship was a $2.1 million commercial real estate loan secured by various commercial real estate properties. This loan was in non-performing status as of December 31, 2012. The borrower has made all contractual payments due during 2013 and the principal balance of the loan was reduced by approximately $0.6 million during 2013. The second relationship was a $1.9 million commercial real estate loan secured by a commercial warehouse facility. This loan was in non-performing status as of year-end 2012. The borrower has made all contractual payments due during 2013 and the principal balance of this relationship was reduced by $0.09 million during 2013.

The Company purchases individual loans and groups of loans. Purchased loans that show evidence of credit deterioration since origination are recorded at the amount paid (or allocated fair value in a purchase business combination), such that there is no carryover of the seller’s allowance for loan losses. After acquisition, incurred losses are recognized by an increase in the allowance for loan losses.

36

Purchased loans that indicated evidence of credit deterioration since origination at the time of acquisition by the Company did not have a material adverse impact on the Company’s key credit metrics during 2013 or 2012. The key credit metrics the Company measures generally include non-performing loans, past due loans, and adversely classified loans.

Non-performing purchased loans with evidence of credit deterioration since origination totaled $1,705,000 at December 31, 2013 compared with $148,000 at December 31, 2012. The non-performing purchased loans with evidence of credit deterioration since origination represented approximately 20% of total non-performing loans at December 31, 2013 compared with approximately 1% of total non-performing loans at December 31, 2012.

Past due purchased loans with evidence of credit deterioration since origination totaled $1,250,000 at December 31, 2013 and $118,000 at year-end 2012. Past due purchased loans with evidence of credit deterioration since origination represented approximately 16% of total past due loans at December 31, 2013 and approximately 1% of total past due loans at year-end 2012.

Adversely classified purchased loans with evidence of credit deterioration since origination totaled $9.0 million at December 31, 2013 compared with $7.3 million at December 31, 2012. Adversely classified purchased loans with evidence of credit deterioration since origination represented approximately 25% of total adversely classified loans at December 31, 2013 compared with approximately 19% of total adversely classified loans at year-end 2012.

Loan impairment is reported when full repayment under the terms of the loan is not expected. If a loan is impaired, a portion of the allowance is allocated so that the loan is reported net, at the present value of estimated future cash flows using the loan’s existing rate, or at the fair value of collateral if repayment is expected solely from the collateral. Commercial and industrial loans, commercial real estate loans, and agricultural loans are evaluated individually for impairment. Smaller balance homogeneous loans are evaluated for impairment in total. Such loans include real estate loans secured by one-to-four family residences and loans to individuals for household, family and other personal expenditures. Individually evaluated loans on non-accrual are generally considered impaired. Impaired loans, or portions thereof, are charged off when deemed uncollectible. The amount of loans individually evaluated for impairment including purchase credit impaired loans totaled $8.9 million at December 31, 2013. For additional detail on impaired loans, see Note 4 to the Company’s consolidated financial statements included in Item 8 of this Report.

Interest income recognized on non-accrual loans for 2013 was $172,000. The gross interest income that would have been recognized in 2013 on non-performing loans if the loans had been current in accordance with their original terms was $675,000. Loans are typically placed on non-accrual status when scheduled principal or interest payments are past due for 90 days or more, unless the loan is well secured and in the process of collection.

LIQUIDITY AND INTEREST RATE RISK MANAGEMENT

Liquidity is a measure of the ability of the Company’s subsidiary bank to fund new loan demand, existing loan commitments and deposit withdrawals. The purpose of liquidity management is to match sources of funds with anticipated customer borrowings and withdrawals and other obligations to ensure a dependable funding base, without unduly penalizing earnings. Failure to properly manage liquidity requirements can result in the need to satisfy customer withdrawals and other obligations on less than desirable terms. The liquidity of the parent company is dependent upon the receipt of dividends from its bank subsidiary, which are subject to certain regulatory limitations explained in Note 8 to the Company’s consolidated financial statements included in Item 8 of this Report, as enhanced by its ability to draw upon term financing arrangements and a line of credit established by the parent company with a correspondent bank lender as described under “SOURCES OF FUNDS – Parent Company Funding Sources”, above. The subsidiary bank’s source of funding is predominately core deposits, time deposits in excess of $100,000 and brokered certificates of deposit, maturities of securities, repayments of loan principal and interest, federal funds purchased, securities sold under agreements to repurchase and borrowings from the Federal Home Loan Bank and Federal Reserve Bank.

Interest rate risk is the exposure of the Company’s financial condition to adverse changes in market interest rates. In an effort to estimate the impact of sustained interest rate movements to the Company’s earnings, the Company monitors interest rate risk through computer-assisted simulation modeling of its net interest income. The Company’s simulation modeling monitors the potential impact to net interest income under various interest rate scenarios. The Company’s objective is to actively manage its asset/liability position within a one-year interval and to limit the risk in any of the interest rate scenarios to a reasonable level of tax-equivalent net interest income within that interval. The Company’s Asset/Liability Committee monitors compliance within established guidelines of the Funds Management Policy. See Item 7A. Quantitative and Qualitative Disclosures About Market Risk section for further discussion regarding interest rate risk.

37

OFF-BALANCE SHEET ARRANGEMENTS

The Company has no off-balance sheet arrangements other than stand-by letters of credit as disclosed in Note 13 to the Company’s consolidated financial statements included in Item 8 of this Report.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

The Company’s exposure to market risk is reviewed on a regular basis by the Asset/Liability Committee and Board of Directors. Primary market risks, which impact the Company’s operations, are liquidity risk and interest rate risk, as discussed above.

As discussed previously, the Company monitors interest rate risk by the use of computer simulation modeling to estimate the potential impact on its net interest income under various interest rate scenarios. Another method by which the Company’s interest rate risk position can be estimated is by computing estimated changes in its net portfolio value (“NPV”). This method estimates interest rate risk exposure from movements in interest rates by using interest rate sensitivity analysis to determine the change in the NPV of discounted cash flows from assets and liabilities. NPV represents the market value of portfolio equity and is equal to the estimated market value of assets minus the estimated market value of liabilities. Computations are based on a number of assumptions, including the relative levels of market interest rates and prepayments in mortgage loans and certain types of investments. These computations do not contemplate any actions management may undertake in response to changes in interest rates, and should not be relied upon as indicative of actual results. In addition, certain shortcomings are inherent in the method of computing NPV. Should interest rates remain or decrease below current levels, the proportion of adjustable rate loans could decrease in future periods due to refinancing activity. In the event of an interest rate change, prepayment levels would likely be different from those assumed in the table. Lastly, the ability of many borrowers to repay their adjustable rate debt may decline during a rising interest rate environment.

The following table provides an assessment of the risk to NPV in the event of sudden and sustained 1% and 2% increases and decreases in prevailing interest rates. The table indicates that as of December 31, 2013 the Company’s estimated NPV might be expected to decrease under either an increase or decrease of 2% in prevailing interest rates (dollars in thousands).

Interest Rate Sensitivity as of December 31, 2013 

						Net Portfolio Value
	Net Portfolio					as a % of Present Value
	Value					of Assets
Changes
in Rates	Amount		% Change			NPV Ratio			Change
+2%	$	191,689		(17.09	)%		9.28	%		(139	) b.p.
+1%		211,987		(8.31	)%		10.02	%		(65	) b.p.
Base		231,209		—			10.67	%		—
-1%		219,248		(5.17	)%		9.98	%		(69	) b.p.
-2%		207,280		(10.35	)%		9.36	%		(131	) b.p.

The above discussion, and the portions of MANAGEMENT’S DISCUSSION AND ANALYSIS in Item 7 of this Report that are referenced in the above discussion contain statements relating to future results of the Company that are considered “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements relate to, among other things, simulation of the impact on net interest income from changes in interest rates. Actual results may differ materially from those expressed or implied therein as a result of certain risks and uncertainties, including those risks and uncertainties expressed above, those that are described in MANAGEMENT’S DISCUSSION AND ANALYSIS in Item 7 of this Report, and those that are described in Item 1 of this Report, “Business,” under the caption “Forward-Looking Statements and Associated Risks,” which discussions are incorporated herein by reference.

38

Item 8. Financial Statements and Supplementary Data.

Report of Independent Registered Public Accounting Firm

Board of Directors and Shareholders

German American Bancorp, Inc.

Jasper, Indiana

We have audited the accompanying consolidated balance sheets of German American Bancorp, Inc. (the Company) as of December 31, 2013 and 2012 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, 2013. We also have audited German American Bancorp, Inc.’s internal control over financial reporting as of December 31, 2013, based on criteria established in the 1992 Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). German American Bancorp, Inc.’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on these financial statements and an opinion on the Company’s internal control over financial reporting based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of German American Bancorp, Inc. as of December 31, 2013 and 2012, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2013, in conformity with accounting principles generally accepted in the United States of America. Also in our opinion German American Bancorp, Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2013, based on criteria established in the 1992 Internal Control – Integrated Framework issued by the COSO.

/s/ Crowe Horwath LLP

Crowe Horwath LLP

Indianapolis, Indiana

March 13, 2014

39

Consolidated Balance Sheets

Dollars in thousands, except per share data

	December 31,
	2013			2012
ASSETS
Cash and Due from Banks	$	37,370		$	41,624
Federal Funds Sold and Other Short-term Investments		22,762			7,463
Cash and Cash Equivalents		60,132			49,087
Interest-bearing Time Deposits with Banks		100			2,707
Securities Available-for-Sale, at Fair Value		606,032			587,602
Securities Held-to-Maturity, at Cost (Fair value of $271 and $351 on
December 31, 2013 and 2012, respectively)		268			346
Loans Held-for-Sale, at Fair Value		9,265			16,641
Loans		1,385,212			1,207,901
Less:   Unearned Income		(2,830	)		(3,035	)
Allowance for Loan Losses		(14,584	)		(15,520	)
Loans, Net		1,367,798			1,189,346
Stock in FHLB of Indianapolis and Other Restricted Stock, at Cost		9,004			8,340
Premises, Furniture and Equipment, Net		40,430			36,554
Other Real Estate		1,029			1,645
Goodwill		20,536			18,865
Intangible Assets		3,328			2,692
Company Owned Life Insurance		31,178			30,223
Accrued Interest Receivable and Other Assets		14,727			62,252
TOTAL ASSETS	$	2,163,827		$	2,006,300
LIABILITIES
Non-interest-bearing Demand Deposits	$	400,024		$	349,174
Interest-bearing Demand, Savings, and Money Market Accounts		1,063,098			962,574
Time Deposits		349,034			329,183
Total Deposits		1,812,156			1,640,931
FHLB Advances and Other Borrowings		140,770			161,006
Accrued Interest Payable and Other Liabilities		10,804			19,337
TOTAL LIABILITIES		1,963,730			1,821,274
Commitments and Contingencies (Note 13)
SHAREHOLDERS’ EQUITY
Preferred Stock, no par value; 500,000 shares authorized, no shares issued		—			—
Common Stock, no par value, $1 stated value; 30,000,000 shares authorized		13,174			12,637
Additional Paid-in Capital		108,022			95,617
Retained Earnings		84,164			66,421
Accumulated Other Comprehensive Income (Loss)		(5,263	)		10,351
TOTAL SHAREHOLDERS’ EQUITY		200,097			185,026
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	2,163,827		$	2,006,300
End of period shares issued and outstanding		13,173,793			12,636,656

See accompanying notes to consolidated financial statements.

40

Consolidated Statements of Income

Dollars in thousands, except per share data

	Years Ended December 31,
	2013		2012		2011
INTEREST INCOME
Interest and Fees on Loans	$	61,632	$	61,691	$	64,445
Interest on Federal Funds Sold and Other Short-term Investments		30		91		216
Interest and Dividends on Securities:
Taxable		11,091		12,946		13,677
Non-taxable		2,919		2,432		1,823
TOTAL INTEREST INCOME		75,672		77,160		80,161
INTEREST EXPENSE
Interest on Deposits		4,697		6,958		11,986
Interest on FHLB Advances and Other Borrowings		2,458		3,954		4,194
TOTAL INTEREST EXPENSE		7,155		10,912		16,180
NET INTEREST INCOME		68,517		66,248		63,981
Provision for Loan Losses		350		2,412		6,800
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES		68,167		63,836		57,181
NON-INTEREST INCOME
Trust and Investment Product Fees		3,358		2,657		2,145
Service Charges on Deposit Accounts		4,144		4,076		4,154
Insurance Revenues		6,217		5,524		5,819
Company Owned Life Insurance		965		974		1,100
Interchange Fee Income		1,854		1,724		1,501
Other Operating Income		2,003		1,955		1,452
Net Gains on Sales of Loans		2,645		3,234		2,381
Net Gain on Securities		2,429		1,667		3,024
TOTAL NON-INTEREST INCOME		23,615		21,811		21,576
NON-INTEREST EXPENSE
Salaries and Employee Benefits		31,482		29,086		27,992
Occupancy Expense		4,545		4,277		4,264
Furniture and Equipment Expense		3,196		2,787		2,934
FDIC Premiums		1,050		1,116		1,473
Data Processing Fees		1,765		1,071		2,092
Professional Fees		2,577		2,247		2,056
Advertising and Promotion		1,863		1,714		1,525
Intangible Amortization		1,416		1,655		1,956
Other Operating Expenses		7,011		6,970		6,490
TOTAL NON-INTEREST EXPENSE		54,905		50,923		50,782
Income before Income Taxes		36,877		34,724		27,975
Income Tax Expense		11,464		10,669		7,726
NET INCOME	$	25,413	$	24,055	$	20,249
Basic Earnings per Share	$	1.99	$	1.91	$	1.61
Diluted Earnings per Share	$	1.98	$	1.90	$	1.61

See accompanying notes to consolidated financial statements

41

Consolidated Statements of Comprehensive Income

Dollars in thousands, except per share data

	Years Ended December 31,
	2013			2012			2011
NET INCOME	$	25,413		$	24,055		$	20,249
Other Comprehensive Income (Loss):
Unrealized Gains (Losses) on Securities
Unrealized Holding Gain (Loss) Arising During the Period		(22,169	)		1,495			11,830
Reclassification Adjustment for Losses (Gains) Included in Net Income		(2,429	)		(1,667	)		(3,024	)
Tax Effect		8,724			48			(3,129	)
Net of Tax		(15,874	)		(124	)		5,677
Defined Benefit Pension Plans
Net (Loss) Gain Arising During the Period		749			(155	)		14
Reclassification Adjustment for Amortization of Prior Service Cost and Net
(Gain) Loss Included in Net Periodic Pension Cost		(373	)		78			(7	)
Tax Effect		(145	)		30			(3	)
Net of Tax		231			(47	)		4
Postretirement Benefit Obligation
Net (Loss) Gain Arising During the Period		80			(79	)		(122	)
Reclassification Adjustment for Amortization of Prior Service Cost and Net
(Gain) Loss Included in Net Periodic Pension Cost		(37	)		42			57
Tax Effect		(14	)		16			27
Net of Tax		29			(21	)		(38	)
Total Other Comprehensive Income (Loss)		(15,614	)		(192	)		5,643
COMPREHENSIVE INCOME	$	9,799		$	23,863		$	25,892

See accompanying notes to consolidated financial statements.

42

Consolidated Statements of Changes in Shareholders’ Equity

Dollars in thousands, except per share data

											Accumulated
					Additional						Other			Total
	Common Stock				Paid-in			Retained			Comprehensive			Shareholders’
	Shares		Amount		Capital			Earnings			Income (Loss)			Equity
Balances, January 1, 2011		11,105,583	$	11,105	$	69,297		$	36,232		$	4,900		$	121,534
Net Income									20,249						20,249
Other Comprehensive Income (Loss)												5,643			5,643
Cash Dividends ($.56 per share)									(7,047	)					(7,047	)
Issuance of Common Stock for:
Exercise of Stock Options		1,652		2		10									12
Acquisition of American Community Bancorp, Inc.		1,448,520		1,449		25,123									26,572
Restricted Share Grants		38,503		38		597									635
Employee Stock Purchase Plan						(25	)								(25	)
Income Tax Benefit From Restricted Share Grant						37									37
Balances, December 31, 2011		12,594,258		12,594		95,039			49,434			10,543			167,610
Net Income									24,055						24,055
Other Comprehensive Income (Loss)												(192	)		(192	)
Cash Dividends ($.56 per share)									(7,068	)					(7,068	)
Issuance of Common Stock for:
Exercise of Stock Options		7,278		8		29									37
Restricted Share Grants		35,120		35		593									628
Employee Stock Purchase Plan						(67	)								(67	)
Income Tax Benefit From Restricted Share Grant						23									23
Balances, December 31, 2012		12,636,656		12,637		95,617			66,421			10,351			185,026
Net Income									25,413						25,413
Other Comprehensive Income (Loss)												(15,614	)		(15,614	)
Cash Dividends ($.60 per share)									(7,670	)					(7,670	)
Issuance of Common Stock for:
Exercise of Stock Options		1,999		2		18									20
Acquisition of United Commerce Bancorp		502,560		503		12,071									12,574
Restricted Share Grants		32,578		32		297									329
Employee Stock Purchase Plan						(9	)								(9	)
Income Tax Benefit From Restricted Share Grant						28									28
Balances, December 31, 2013		13,173,793	$	13,174	$	108,022		$	84,164		$	(5,263	)	$	200,097

See accompanying notes to consolidated financial statements.

43

Consolidated Statements of Cash Flows

Dollars in thousands

	Years Ended December 31,
CASH FLOWS FROM OPERATING ACTIVITIES	2013			2012			2011
Net Income	$	25,413		$	24,055		$	20,249
Adjustments to Reconcile Net Income to Net Cash from Operating Activities:
Net Amortization on Securities		2,875			4,567			2,509
Depreciation and Amortization		4,461			4,688			5,139
Loans Originated for Sale		(158,845	)		(181,993	)		(143,738	)
Proceeds from Sales of Loans Held-for-Sale		169,242			189,984			136,364
Loss in Investment in Limited Partnership		—			—			20
Provision for Loan Losses		350			2,412			6,800
Gain on Sale of Loans, net		(2,645	)		(3,234	)		(2,381	)
Gain on Securities, net		(2,429	)		(1,667	)		(3,024	)
Loss (Gain) on Sales of Other Real Estate and Repossessed Assets		291			(221	)		165
Loss (Gain) on Disposition and Impairment of Premises and Equipment		(70	)		(1	)		28
Post Retirement Medical Benefit		17			31			—
Other-than-temporary Impairment on Securities		—			—			110
Increase in Cash Surrender Value of Company Owned Life Insurance		(955	)		(960	)		(1,107	)
Equity Based Compensation		329			628			635
Excess Tax Benefit from Restricted Share Grant		(28	)		(23	)		(37	)
Change in Assets and Liabilities:
Interest Receivable and Other Assets		6,016			3,433			5,020
Interest Payable and Other Liabilities		(2,376	)		298			(136	)
Net Cash from Operating Activities		41,646			41,997			26,616
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from Maturity of Other Short-term Investments		2,690			3,236			6,223
Proceeds from Maturities, Calls, Redemptions of Securities Available-for-Sale		136,173			143,253			99,272
Redemption of Federal Reserve Bank Stock		—			—			694
Proceeds from Sales of Securities Available-for-Sale		162,344			92,344			20,061
Purchase of Securities Available-for-Sale		(271,218	)		(312,063	)		(296,547	)
Proceeds from Maturities of Securities Held-to-Maturity		78			344			915
Proceeds from Redemption of Federal Home Loan Bank Stock		—			—			1,523
Purchase of Loans		(744	)		—			—
Proceeds from Sales of Loans		3,250			9,560			3,364
Loans Made to Customers, net of Payments Received		(102,722	)		(98,620	)		3,498
Proceeds from Sales of Other Real Estate		2,081			3,899			4,231
Property and Equipment Expenditures		(3,659	)		(3,617	)		(3,965	)
Proceeds from Sales of Property and Equipment		88			1			12
Acquire Capitalized Lease		(1,455	)		—			(7	)
Acquisition of United Commerce Bank		5,858			—			—
Acquisition of American Community Bancorp, Inc.		—			—			55,780
Net Cash from Investing Activities		(67,236	)		(161,663	)		(104,946	)
CASH FLOWS FROM FINANCING ACTIVITIES
Change in Deposits		64,645			84,779			166,416
Change in Short-term Borrowings		(18,000	)		31,515			(32,682	)
Advances in Long-term Debt		47,000			20,000			—
Repayments of Long-term Debt		(49,379	)		(21,569	)		(6,549	)
Issuance of Common Stock		20			37			12
Income Tax Benefit from Restricted Share Grant		28			23			37
Employee Stock Purchase Plan		(9	)		(67	)		(25	)
Dividends Paid		(7,670	)		(7,068	)		(7,047	)
Net Cash from Financing Activities		36,635			107,650			120,162
Net Change in Cash and Cash Equivalents		11,045			(12,016	)		41,832
Cash and Cash Equivalents at Beginning of Year		49,087			61,103			19,271
Cash and Cash Equivalents at End of Year	$	60,132		$	49,087		$	61,103
Cash Paid During the Year for
Interest	$	7,653		$	11,521		$	16,577
Income Taxes		10,268			8,990			6,693
Supplemental Non Cash Disclosures (See Note 17 for Business Combinations)
Loans Transferred to Other Real Estate	$	851		$	2,980		$	3,492
Securities Transferred to Accounts Receivable		—			45,803			43,167
Accounts Receivable Transferred to Securities		(45,803	)		(43,167	)		—

See accompanying notes to consolidated financial statements.

44

Notes to the Consolidated Financial Statements

Dollars in thousands, except per share data

NOTE 1 – Summary of Significant Accounting Policies

Description of Business and Basis of Presentation

German American Bancorp, Inc. operations are primarily comprised of three business segments: core banking, trust and investment advisory services, and insurance operations. The accounting and reporting policies of German American Bancorp, Inc. and its subsidiaries conform to U.S. generally accepted accounting principles. The more significant policies are described below. The consolidated financial statements include the accounts of the Company and its subsidiaries after elimination of all material intercompany accounts and transactions. Certain prior year amounts have been reclassified to conform with current classifications. The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts and disclosures. Actual results could differ from those estimates. Estimates susceptible to change in the near term include the allowance for loan losses, fair value of financial instruments, other-than-temporary impairment of securities, the valuation allowance on deferred tax assets, and loss contingencies.

Securities

Securities classified as available-for-sale are securities that the Company intends to hold for an indefinite period of time, but not necessarily until maturity. These include securities that management may use as part of its asset/liability strategy, or that may be sold in response to changes in interest rates, changes in prepayment risk, or similar reasons. Equity securities with readily determinable fair values are classified as available-for-sale. Equity securities that do not have readily determinable fair values are carried at historical cost and evaluated for impairment on a periodic basis. Securities classified as available-for-sale are reported at fair value with unrealized gains or losses included as a separate component of equity, net of tax. Securities classified as held-to-maturity are securities that the Company has both the ability and positive intent to hold to maturity. Securities held-to-maturity are carried at amortized cost.

Premium amortization is deducted from, and discount accretion is added to, interest income using the level yield method without anticipating prepayments, except for mortgage-backed securities where prepayments are anticipated. Gains and losses on sales are recorded on trade date and are computed on the identified securities method.

Management evaluates securities for other-than-temporary impairment (“OTTI”) on at least a quarterly basis, and more frequently when economic or market conditions warrant such an evaluation.  For securities in an unrealized loss position, management considers the extent and duration of the unrealized loss, and the financial condition and near-term prospects of the issuer. Management also assesses whether it intends to sell, or it is more likely than not that it will be required to sell, a security in an unrealized loss position before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the entire difference between amortized cost and fair value is recognized as impairment through earnings.  For debt securities that do not meet the aforementioned criteria, the amount of impairment is split into two components as follows: 1) OTTI related to credit loss, which must be recognized in the income statement and 2) OTTI related to other factors, which is recognized in other comprehensive income.  The credit loss is defined as the difference between the present value of the cash flows expected to be collected and the amortized cost basis. For equity securities, the entire amount of impairment is recognized through earnings.

Loans Held for Sale

Mortgage loans originated and intended for sale in the secondary market are carried at fair value. Fair value is determined based on collateral value and prevailing market prices for loans with similar characteristics. Net unrealized gains or losses are recorded through earnings.

Mortgage loans held for sale are generally sold on a servicing released basis. Gains and losses on sales of mortgage loans are based on the difference between the selling price and the carrying value of the related loan sold.

Loans

Loans that management has the intent and ability to hold for the foreseeable future or until maturity or pay-off are reported at the principal balance outstanding, net of unearned interest, deferred loan fees and costs, and an allowance for loan losses. Interest income is accrued on unpaid principal balance and includes amortization of net deferred loan fees and costs over the loan term without anticipating prepayments.

45

Notes to the Consolidated Financial Statements

Dollars in thousands, except per share data

NOTE 1 – Summary of Significant Accounting Policies (continued)

All classes of loans are generally placed on non-accrual status when scheduled principal or interest payments are past due for 90 days or more or when the borrower’s ability to repay becomes doubtful. Uncollected accrued interest for each class of loans is reversed against income at the time a loan is placed on non-accrual. Interest received on such loans is accounted for on the cash-basis or cost-recovery method, until qualifying for return to accrual. All classes of loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured. Loans are typically charged-off at 180 days past due, or earlier if deemed uncollectible. Exceptions to the non-accrual and charge-off policies are made when the loan is well secured and in the process of collection.

Certain Purchased Loans

The Company purchases individual loans and groups of loans. Purchased loans that show evidence of credit deterioration since origination are recorded at the amount paid (or allocated fair value in a purchase business combination), such that there is no carryover of the seller’s allowance for loan losses. After acquisition, incurred losses are recognized by an increase in the allowance for loan losses.

Such purchased loans are accounted for individually. The Company estimates the amount and timing of expected cash flows for each purchased loan or pool, and the expected cash flows in excess of amount paid is recorded as interest income over the remaining life of the loan or pool (accretable yield). The excess of the loan’s or pool’s contractual principal and interest over expected cash flows is not recorded (nonaccretable difference).

Over the life of the loan, expected cash flows continue to be estimated. If the present value of expected cash flows is less than the carrying amount, a loss is recorded. If the present value of expected cash flows is greater than the carrying amount, it is recognized as part of future interest income.

Allowance for Loan Losses

The allowance for loan losses is a valuation allowance for probable incurred credit losses. Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance. Management estimates the allowance balance required using past loan loss experience, the nature and volume of the portfolio, information about specific borrower situations and estimated collateral values, economic conditions, and other factors. Allocations of the allowance may be made for specific loans, but the entire allowance is available for any loan that, in management’s judgment, should be charged-off. The allowance consists of specific and general components. The specific component relates to loans that are individually classified as impaired or loans otherwise classified as substandard or special mention. The general component covers non-classified loans and is based on historical loss experience adjusted for current factors. For 2012 and 2011, the Company utilized a 4 quarter rolling historical loan loss average. Beginning in 2013, management deemed a rolling 12 quarter historical loan loss average to be more indicative of the inherent losses in the Company’s loan portfolio in the current economic environment than the 4 quarter average. As the Company continues to monitor the current portfolio, the methodology could change in the future.

Loan impairment is reported when full repayment under the terms of the loan is not expected. If a loan is impaired, a portion of the allowance is allocated so that the loan is reported net, at the present value of estimated future cash flows using the loan’s existing rate, or at the fair value of collateral if repayment is expected solely from the collateral. Commercial and industrial loans, commercial real estate loans, and agricultural loans are evaluated individually for impairment. Smaller balance homogeneous loans are evaluated for impairment in total. Such loans include real estate loans secured by one-to-four family residences and loans to individuals for household, family and other personal expenditures. Individually evaluated loans on non-accrual are generally considered impaired. Impaired loans, or portions thereof, are charged off when deemed uncollectible.

Troubled debt restructurings are separately identified for impairment disclosures and are measured at the present value of estimated future cash flows using the loan’s effective rate at inception. If a troubled debt restructuring is considered to be a collateral dependent loan, the loan is reported, net, at the fair value of the collateral. For troubled debt restructurings that subsequently default, the Company determines the amount of reserve in accordance with the accounting policy for the allowance for loan losses.

46

Notes to the Consolidated Financial Statements

Dollars in thousands, except per share data

NOTE 1 – Summary of Significant Accounting Policies (continued)

The general component covers non-impaired loans and is based on historical loss experience adjusted for current factors. The historical loss experience is determined by portfolio segment and risk classifications and is based on the actual loss history experienced by the Company over the most recent twelve quarters. This actual loss experience is supplemented with other economic factors based on the risks present for each portfolio segment. These economic factors include consideration of the following: levels of and trends in delinquencies and impaired loans; levels of and trends in charge-offs and recoveries; trends in volume and terms of loans; effects of any changes in risk selection and underwriting standards; other changes in lending policies, procedures, and practices; experience, ability, and depth of lending management and other relevant staff; national and local economic trends and conditions; industry conditions; and effects of changes in credit concentrations. The following portfolio segments have been identified: Commercial Loans and Retail Loans. Commercial Loans have been classified according to the following risk characteristics: Commercial and Industrial Loans and Leases, Commercial Real Estate, and Agricultural Loans. Commercial and Industrial loans are primarily based on the cash flows of the business operations and secured by assets being financed and other assets such as accounts receivable and inventory. Commercial Real Estate Loans and Agricultural Loans are primarily based on cash flow of the borrower and their business and further secured by real estate. All types of commercial and agricultural (real estate secured and non-real estate) may also come with personal guarantees of the borrowers and business owners. Retail Loans have been classified according to the following risk characteristics: Home Equity Loans, Consumer Loans and Residential Mortgage Loans. Retail loans are generally dependent on personal income of the customer, and repayment is dependent on borrower’s personal cash flow and employment status which can be affected by general economic conditions. Additionally, collateral values may fluctuate based on the impact of economic conditions on residential real estate values and other consumer type assets such as automobiles.

Loans or portions of loans shall be charged off when there is a distinct probability of loss identified. A distinct probability of loss exists when it has been determined that any remaining sources of repayment are insufficient to cover all outstanding principal. The probable loss is immediately calculated based on the value of the remaining sources of repayment and charged to the allowance for loan loss.

Federal Home Loan Bank (FHLB) Stock

The Bank is a member of the FHLB of Indianapolis. Members are required to own a certain amount of stock based on the level of borrowings and other factors, and may invest in additional amounts. FHLB stock is carried at cost, classified as a restricted security, and periodically evaluated for impairment based on ultimate recovery of par value. Both cash and stock dividends are reported as income.

Premises, Furniture and Equipment

Land is carried at cost. Premises, furniture, and equipment are stated at cost less accumulated depreciation. Buildings and related components are depreciated using the straight-line method with useful lives ranging generally from 10 to 40 years. Furniture, fixtures, and equipment are depreciated using the straight-line method with useful lives ranging generally from 3 to 10 years.

Other Real Estate

Assets acquired through or instead of loan foreclosure are initially recorded at fair value less costs to sell when acquired, establishing a new cost basis. If fair value declines subsequent to foreclosure, a valuation allowance is recorded through expense. Operating costs after acquisition are expensed.

Goodwill and Other Intangible Assets

Goodwill resulting from business combinations prior to January 1, 2009 represents the excess of the purchase price over the fair value of the net assets of businesses acquired. Goodwill resulting from business combinations after January 1, 2009, is generally determined as the excess of the fair value of the consideration transferred, plus the fair value of any noncontrolling interests in the acquiree, over the fair value of the net assets acquired and liabilities assumed as of the acquisition date. Goodwill and intangible assets acquired in a purchase business combination and determined to have an indefinite useful life are not amortized, but tested for impairment at least annually. The Company has selected December 31 as the date to perform the annual impairment test. Intangible assets with definite useful lives are amortized over their estimated useful lives to their estimated residual values. Goodwill is the only intangible asset with an indefinite life on the Company’s balance sheet.

Other intangible assets consist of core deposit and acquired customer relationship intangible assets. They are initially measured at fair value and then are amortized over their estimated useful lives, which range from 6 to 10 years.

47

Notes to the Consolidated Financial Statements

Dollars in thousands, except per share data

NOTE 1 – Summary of Significant Accounting Policies (continued)

Company Owned Life Insurance

The Company has purchased life insurance policies on certain directors and executives. This life insurance is recorded at its cash surrender value or the amount that can be realized, which considers any adjustments or changes that are probable at settlement.

Loss Contingencies

Loss contingencies, including claims and legal actions arising in the ordinary course of business, are recorded as liabilities when the likelihood of loss is probable and an amount or range of loss can be reasonably estimated. Management does not believe currently that there are any such matters that will have a material impact on the financial statements.

Loan Commitments and Related Financial Instruments

Financial instruments include off-balance sheet credit instruments, such as commitments to make loans and commercial letters of credit issued to meet customer financing needs. The face amount for these items represents the exposure to loss, before considering customer collateral or ability to repay. Such financial instruments are recorded when they are funded.

Restrictions on Cash

At December 31, 2013 and 2012, respectively, the Company was required to have $7,431 and $10,752 on deposit with the Federal Reserve, or as cash on hand.

Long-term Assets

Premises and equipment, core deposit and other intangible assets, and other long-term assets are reviewed for impairment when events indicate their carrying amount may not be recoverable from future undiscounted cash flows. If impaired, the assets are recorded at fair value.

Stock Based Compensation

Compensation cost is recognized for stock options and restricted stock awards issued to employees and directors, based on the fair value of these awards at the date of grant. A Black-Scholes model is utilized to estimate the fair value of stock options, while the market price of the Corporation’s common stock at the date of grant is used for restricted stock awards. Compensation cost is recognized over the required service period, generally defined as the vesting period.

Comprehensive Income

Comprehensive income consists of net income and other comprehensive income (loss). Other comprehensive income (loss) includes unrealized gains and losses on securities available for sale and changes in unrecognized amounts in pension and other postretirement benefits, which are also recognized as a separate component of equity.

Income Taxes

Deferred tax liabilities and assets are determined at each balance sheet date and are the result of differences in the financial statement and tax bases of assets and liabilities. Income tax expense is the amount due on the current year tax returns plus or minus the change in deferred taxes. A valuation allowance, if needed, reduces deferred tax assets to the amount expected to be realized.

A tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded.

Retirement Plans

Pension expense under the suspended defined benefit plan is the net of interest cost, return on plan assets and amortization of gains and losses not immediately recognized. Employee 401(k) and profit sharing plan expense is the amount of matching contributions. Deferred compensation and supplemental retirement plan expense allocates the benefits over years of service.

Earnings Per Share

Earnings per share are based on net income divided by the weighted average number of shares outstanding during the period. Diluted earnings per share show the potential dilutive effect of additional common shares issuable under the Company’s stock based compensation plans. Earnings per share are retroactively restated for stock dividends.

48

Notes to the Consolidated Financial Statements

Dollars in thousands, except per share data

NOTE 1 – Summary of Significant Accounting Policies (continued)

Cash Flow Reporting

The Company reports net cash flows for customer loan transactions, deposit transactions, deposits made with other financial institutions and short-term borrowings. Cash and cash equivalents are defined to include cash on hand, demand deposits in other institutions and Federal Funds Sold.

Fair Values of Financial Instruments

Fair values of financial instruments are estimated using relevant market information and other assumptions, as more fully disclosed in Note 14. Fair value estimates involve uncertainties and matters of significant judgment regarding interest rates, credit risk, prepayments, and other factors, especially in the absence of broad markets for particular items. Changes in assumptions or in market conditions could significantly affect the estimates.

New Accounting Pronouncements 

In February 2013, the FASB issued an update (ASU No. 2013-02, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income) impacting FASB ASC 220, Comprehensive Income.  This update requires an entity to provide information about the amounts reclassified out of accumulated other comprehensive income.  An entity is required to present, either on the face of the statement where net income is presented or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income but only if the amount reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period.  For other amounts not required under U.S. GAAP to be reclassified in their entirety to net income, an entity is required to cross-reference to other disclosures required under U.S. GAAP that provide additional detail about these amounts.  This update became effective for the Company for interim and annual periods beginning after December 15, 2012 and did not have a material impact on the consolidated financial statements.

NOTE 2 – Securities

The amortized cost, unrealized gross gains and losses recognized in accumulated other comprehensive income (loss), and fair value of Securities Available-for-Sale were as follows:

			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
Securities Available-for-Sale:	Cost		Gains		Losses			Value
2013
U.S. Treasury and Agency Securities	$	20,000	$	—	$	(1,048	)	$	18,952
Obligations of State and Political Subdivisions		112,008		2,388		(899	)		113,497
Mortgage-backed Securities – Residential		481,724		3,497		(11,991	)		473,230
Equity Securities		353		—		—			353
Total	$	614,085	$	5,885	$	(13,938	)	$	606,032
2012
U.S. Treasury and Agency Securities	$	23,570	$	40	$	(138	)	$	23,472
Obligations of State and Political Subdivisions		71,352		5,145		(12	)		76,485
Mortgage-backed Securities - Residential		475,452		11,505		(45	)		486,912
Equity Securities		684		49		—			733
Total	$	571,058	$	16,739	$	(195	)	$	587,602

The carrying amount, unrecognized gains and losses and fair value of Securities Held-to-Maturity were as follows:

			Gross		Gross
	Carrying		Unrecognized		Unrecognized		Fair
Securities Held-to-Maturity:	Amount		Gains		Losses		Value
2013
Obligations of State and Political Subdivisions	$	268	$	3	$	—	$	271
2012
Obligations of State and Political Subdivisions	$	346	$	5	$	—	$	351

49

Notes to the Consolidated Financial Statements

Dollars in thousands, except per share data

NOTE 2 – Securities (continued)

The amortized cost and fair value of Securities at December 31, 2013 by contractual maturity are shown below. Expected maturities may differ from contractual maturities because some issuers have the right to call or prepay certain obligations with or without call or prepayment penalties. Mortgage-backed and Equity Securities are not due at a single maturity date and are shown separately.

	Amortized		Fair
	Cost		Value
Securities Available-for-Sale:
Due in one year or less	$	2,935	$	2,996
Due after one year through five years		9,890		10,038
Due after five years through ten years		69,906		69,802
Due after ten years		49,277		49,613
Mortgage-backed Securities - Residential		481,724		473,230
Equity Securities		353		353
Total	$	614,085	$	606,032

	Carrying		Fair
	Amount		Value
Securities Held-to-Maturity:
Due in one year or less	$	—	$	—
Due after one year through five years		268		271
Due after five years through ten years		—		—
Due after ten years		—		—
Total	$	268	$	271

Proceeds from the Sales of Securities are summarized below: 

	2013		2012		2011
	Available-		Available-		Available-
	for-Sale		for-Sale		for-Sale
Proceeds from Sales	$	162,344	$	92,344	$	20,061
Gross Gains on Sales		2,086		1,667		2,089
Income Taxes on Gross Gains		730		583		721

The Company held a minority interest in United Commerce Bancorp prior to the acquisition on October 1, 2013. For the year ended December 31, 2013, the Company recognized a gain of $343 on the stock held of United Commerce Bancorp as a result of the acquisition.

The Company held a minority interest in American Community Bancorp, Inc. prior to the acquisition on January 1, 2011. For the year ended December 31, 2011, the Company recognized a gain of $1.045 million on the stock held of American Community Bancorp, Inc. as a result of the acquisition.

The carrying value of securities pledged to secure repurchase agreements, public and trust deposits, and for other purposes as required by law was $141,240 and $61,744 as of December 31, 2013 and 2012, respectively.

50

Notes to the Consolidated Financial Statements

Dollars in thousands, except per share data

NOTE 2 – Securities (continued)

Below is a summary of securities with unrealized losses as of year-end 2013 and 2012, presented by length of time the securities have been in a continuous unrealized loss position:

	Less than 12 Months					12 Months or More					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	Value		Loss			Value		Loss			Value		Loss
At December 31, 2013
U.S. Treasury and Agency Securities	$	18,952	$	(1,048	)	$	—	$	—		$	18,952	$	(1,048	)
Obligations of State and Political Subdivisions		38,878		(899	)		—		—			38,878		(899	)
Mortgage-backed Securities - Residential		346,028		(11,903	)		1,735		(88	)		347,763		(11,991	)
Equity Securities		—		—			—		—			—		—
Total	$	403,858	$	(13,850	)	$	1,735	$	(88	)	$	405,593	$	(13,938	)

	Less than 12 Months					12 Months or More				Total
	Fair		Unrealized			Fair		Unrealized		Fair		Unrealized
	Value		Loss			Value		Loss		Value		Loss
At December 31, 2012
U.S. Treasury and Agency Securities	$	19,862	$	(138	)	$	—	$	—	$	19,862	$	(138	)
Obligations of State and Political Subdivisions		1,042		(12	)		—		—		1,042		(12	)
Mortgage-backed Securities - Residential		18,323		(45	)		—		—		18,323		(45	)
Equity Securities		—		—			—		—		—		—
Total	$	39,227	$	(195	)	$	—	$	—	$	39,227	$	(195	)

Securities are written down to fair value when a decline in fair value is not considered temporary. In estimating other-than-temporary losses, management considers many factors, including: (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, (3) whether the market decline was affected by macroeconomic conditions, and (4) whether the Company has the intent to sell the debt security or more likely than not will be required to sell the debt security before its anticipated recovery. The Company doesn’t intend to sell or expect to be required to sell these securities, and the decline in fair value is largely due to changes in market interest rates, therefore, the Company does not consider these securities to be other-than-temporarily impaired. All mortgage-backed securities in the Company’s portfolio are guaranteed by government sponsored entities, are investment grade, and are performing as expected.

The Company’s equity securities consist of non-controlling investments in other banking organizations. When a decline in fair value below cost is deemed to be other-than-temporary, the unrealized loss must be recognized as a charge to earnings. At December 31, 2013 and 2012, none of the Company’s equity securities had an unrealized loss.

NOTE 3 – Derivatives

The Company executes interest rate swaps with commercial banking customers to facilitate their respective risk management strategies. The notional amounts of these interest rate swaps and the offsetting counterparty derivative instruments were $17.9 million and $6.1 million at December 31, 2013 and 2012, respectively. These interest rate swaps are simultaneously hedged by offsetting interest rate swaps that the Company executes with a third party, such that the Company minimizes its net risk exposure resulting from such transactions with approved, reputable, independent counterparties with substantially matching terms. The agreements are considered stand alone derivatives and changes in the fair value of derivatives are reported in earnings as non-interest income.

Credit risk arises from the possible inability of counterparties to meet the terms of their contracts. The Company’s exposure is limited to the replacement value of the contracts rather than the notional, principal or contract amounts. There are provisions in the agreements with the counterparties that allow for certain unsecured credit exposure up to an agreed threshold. Exposures in excess of the agreed thresholds are collateralized. In addition, the Company minimizes credit risk through credit approvals, limits, and monitoring procedures.

51

Notes to the Consolidated Financial Statements

Dollars in thousands, except per share data

NOTE 3 – Derivatives (continued)

The following table reflects the fair value hedges included in the Consolidated Balance Sheets as of December 31:

	2013				2012
	Notional				Notional
	Amount		Fair Value		Amount		Fair Value
Included in Other Assets:
Interest Rate Swaps	$	17,853	$	866	$	6,051	$	187
Included in Other Liabilities:
Interest Rate Swaps	$	17,853	$	737	$	6,051	$	178

The following tables present the effect of derivative instruments on the Consolidated Statement of Income for the years ended December 31, 2013, 2012 and 2011 are as follows: 

	2013		2012		2011
Interest Rate Swaps:
Included in Interest Income / (Expense)	$	—	$	—	$	—
Included in Other Income / (Expense)		528		163		—

NOTE 4 – Loans

Loans were comprised of the following classifications at December 31: 

	2013			2012
Commercial:
Commercial and Industrial Loans and Leases	$	350,955		$	335,373
Commercial Real Estate Loans		582,066			488,496
Agricultural Loans		192,880			179,906
Retail:
Home Equity Loans		81,504			74,437
Consumer Loans		49,124			41,103
Residential Mortgage Loans		128,683			88,586
Subtotal		1,385,212			1,207,901
Less: Unearned Income		(2,830	)		(3,035	)
Allowance for Loan Losses		(14,584	)		(15,520	)
Loans, net	$	1,367,798		$	1,189,346

52

Notes to the Consolidated Financial Statements

Dollars in thousands, except per share data

NOTE 4 – Loans (continued)

The following tables present the activity in the allowance for loan losses by portfolio class for the years ended December 31, 2013, 2012 and 2011:

	Commercial
	and
	Industrial			Commercial						Home						Residential
	Loans and			Real Estate			Agricultural			Equity			Consumer			Mortgage
	Leases			Loans			Loans			Loans			Loans			Loans			Unallocated		Total
December 31, 2013
Beginning Balance	$	4,555		$	8,931		$	989		$	141		$	214		$	186		$	504	$	15,520
Provision for Loan Losses		(197	)		(160	)		(43	)		419			112			111			108		350
Recoveries		128			102			—			—			148			8			—		386
Loans Charged-off		(503	)		(538	)		—			(321	)		(286	)		(24	)		—		(1,672	)
Ending Balance	$	3,983		$	8,335		$	946		$	239		$	188		$	281		$	612	$	14,584

	Commercial
	and
	Industrial			Commercial					Home						Residential
	Loans and			Real Estate			Agricultural		Equity			Consumer			Mortgage
	Leases			Loans			Loans		Loans			Loans			Loans			Unallocated			Total
December 31, 2012
Beginning Balance	$	3,493		$	9,297		$	926	$	258		$	190		$	402		$	746		$	15,312
Provision for Loan Losses		1,150			1,326			63		(32	)		194			(47	)		(242	)		2,412
Recoveries		74			97			—		2			123			30			—			326
Loans Charged-off		(162	)		(1,789	)		—		(87	)		(293	)		(199	)		—			(2,530	)
Ending Balance	$	4,555		$	8,931		$	989	$	141		$	214		$	186		$	504		$	15,520

	Commercial
	and
	Industrial			Commercial					Home						Residential
	Loans and			Real Estate			Agricultural		Equity			Consumer			Mortgage
	Leases			Loans			Loans		Loans			Loans			Loans			Unallocated		Total
December 31, 2011
Beginning Balance	$	3,713		$	7,497		$	750	$	220		$	362		$	543		$	232	$	13,317
Provision for Loan Losses		1,195			4,265			176		287			23			340			514		6,800
Recoveries		98			139			—		6			125			16			—		384
Loans Charged-off		(1,513	)		(2,604	)		—		(255	)		(320	)		(497	)		—		(5,189	)
Ending Balance	$	3,493		$	9,297		$	926	$	258		$	190		$	402		$	746	$	15,312

In determining the adequacy of the allowance for loan loss, general allocations are made for pools of loans, including non-classified loans, homogeneous portfolios of consumer and residential real estate loans, and loans within certain industry categories believed to present unique risk of loss. General allocations of the allowance are primarily made based on a three-year historical average for loan losses for these portfolios, judgmentally adjusted for current economic factors and portfolio trends. For 2012 and 2011, the Company utilized a 4 quarter rolling historical loan loss average. Beginning in 2013, management deemed a rolling 12 quarter historical loan loss average to be more indicative of the inherent losses in the Company’s loan portfolio in the current economic environment than the 4 quarter average. This change in methodology resulted in an increase to the required loan loss allowance of approximately $280 in 2013.

53

Notes to the Consolidated Financial Statements

Dollars in thousands, except per share data

NOTE 4 – Loans (continued)

Loan impairment is reported when full repayment under the terms of the loan is not expected. This methodology is used for all loans, including loans acquired with deteriorated credit quality. For purchased loans, the assessment is made at the time of acquisition as well as over the life of loan. If a loan is impaired, a portion of the allowance is allocated so that the loan is reported net, at the present value of estimated future cash flows using the loan’s existing rate, or at the fair value of collateral if repayment is expected solely from the collateral. Commercial and industrial loans, commercial real estate loans, and agricultural loans are evaluated individually for impairment. Smaller balance homogeneous loans are evaluated for impairment in total. Such loans include real estate loans secured by one-to-four family residences and loans to individuals for household, family and other personal expenditures. Individually evaluated loans on non-accrual are generally considered impaired. Impaired loans, or portions thereof, are charged off when deemed uncollectible.

The following tables present the balance in the allowance for loan losses and the recorded investment in loans by portfolio class and based on impairment method as of December 31, 2013 and 2012:

			Commercial
			and
			Industrial		Commercial				Home				Residential
			Loans and		Real Estate		Agricultural		Equity		Consumer		Mortgage
December 31, 2013	Total		Leases		Loans		Loans		Loans		Loans		Loans		Unallocated
Allowance for Loan Losses:
Ending Allowance Balance Attributable to Loans:
Individually Evaluated for Impairment	$	3,095	$	45	$	3,050	$	—	$	—	$	—	$	—	$	—
Collectively Evaluated for Impairment		11,481		3,938		5,277		946		239		188		281		612
Acquired with Deteriorated Credit Quality		8		—		8		—		—		—		—		—
Total Ending Allowance Balance	$	14,584	$	3,983	$	8,335	$	946	$	239	$	188	$	281	$	612
Loans:
Loans Individually Evaluated for Impairment	$	8,458	$	2,114	$	6,344	$	—	$	—	$	—	$	—	$	—
Loans Collectively Evaluated for Impairment		1,367,591		347,808		566,389		195,171		81,812		49,131		127,280		—
Loans Acquired with Deteriorated Credit Quality		14,753		1,981		10,871		—		—		134		1,767		—
Total Ending Loans Balance (1)	$	1,390,802	$	351,903	$	583,604	$	195,171	$	81,812	$	49,265	$	129,047	$	—

⁽¹⁾ Total recorded investment in loans includes $5,590 in accrued interest.

54

Notes to the Consolidated Financial Statements

Dollars in thousands, except per share data

NOTE 4 – Loans (continued)

			Commercial
			and
			Industrial		Commercial				Home				Residential
			Loans and		Real Estate		Agricultural		Equity		Consumer		Mortgage
December 31, 2012	Total		Leases		Loans		Loans		Loans		Loans		Loans		Unallocated
Allowance for Loan Losses:
Ending Allowance Balance Attributable to Loans:
Individually Evaluated  for Impairment	$	5,323	$	1,279	$	3,894	$	150	$	—	$	—	$	—	$	—
Collectively Evaluated for Impairment		10,109		3,208		5,017		839		141		214		186		504
Acquired with Deteriorated Credit Quality		88		68		20		—		—		—		—		—
Total Ending Allowance Balance	$	15,520	$	4,555	$	8,931	$	989	$	141	$	214	$	186	$	504
Loans:
Loans Individually Evaluated for Impairment	$	12,520	$	2,547	$	7,550	$	2,423	$	—	$	—	$	—	$	—
Loans Collectively Evaluated for Impairment		1,189,729		331,920		473,209		180,152		74,699		41,083		88,666		—
Loans Acquired with Deteriorated Credit Quality		11,174		1,840		9,037		—		—		148		149		—
Total Ending Loans Balance (1)	$	1,213,423	$	336,307	$	489,796	$	182,575	$	74,699	$	41,231	$	88,815	$	—

⁽¹⁾ Total recorded investment in loans includes $5,522 in accrued interest.

The following table presents loans individually evaluated for impairment by class of loans as of December 31, 2013 and 2012:

	Unpaid				Allowance for
	Principal		Recorded		Loan Losses
	Balance(1)		Investment		Allocated
December 31, 2013
With No Related Allowance Recorded:
Commercial and Industrial Loans and Leases	$	2,163	$	2,072	$	—
Commercial Real Estate Loans		4,710		2,383		—
Agricultural Loans		—		—		—
Subtotal		6,873		4,455		—
With An Allowance Recorded:
Commercial and Industrial Loans and Leases		45		45		45
Commercial Real Estate Loans		4,428		4,417		3,058
Agricultural Loans		—		—		—
Subtotal		4,473		4,462		3,103
Total	$	11,346	$	8,917	$	3,103
Loans Acquired With Deteriorated Credit Quality With No Related Allowance Recorded (Included in the Total Above)	$	987	$	451	$	—
Loans Acquired With Deteriorated Credit Quality With An Additional Allowance Recorded (Included in the Total Above)	$	33	$	8	$	8

⁽¹⁾ Unpaid Principal Balance is the remaining contractual payments inclusive of partial charge-offs.

55

Notes to the Consolidated Financial Statements

Dollars in thousands, except per share data

NOTE 4 – Loans (continued)

	Unpaid				Allowance for
	Principal		Recorded		Loan Losses
	Balance(1)		Investment		Allocated
December 31, 2012
With No Related Allowance Recorded:
Commercial and Industrial Loans and Leases	$	108	$	87	$	—
Commercial Real Estate Loans		4,312		2,154		—
Agricultural Loans		2,126		2,137		—
Subtotal		6,546		4,378		—
With An Allowance Recorded:
Commercial and Industrial Loans and Leases		2,642		2,581		1,347
Commercial Real Estate Loans		5,579		5,418		3,914
Agricultural Loans		285		286		150
Subtotal		8,506		8,285		5,411
Total	$	15,052	$	12,663	$	5,411
Loans Acquired With Deteriorated Credit Quality With No Related Allowance Recorded (Included in the Total Above)	$	45	$	25	$	—
Loans Acquired With Deteriorated Credit Quality With An Additional Allowance Recorded (Included in the Total Above)	$	155	$	118	$	88

⁽¹⁾ Unpaid Principal Balance is the remaining contractual payments inclusive of partial charge-offs.

The following table presents loans individually evaluated for impairment by class of loans for the years ended December 31, 2013 and 2012:

	Average		Interest		Cash
	Recorded		Income		Basis
	Investment		Recognized		Recognized
December 31, 2013
With No Related Allowance Recorded:
Commercial and Industrial Loans and Leases	$	1,192	$	65	$	65
Commercial Real Estate Loans		2,251		5		7
Agricultural Loans		1,420		209		225
Subtotal		4,863		279		297
With An Allowance Recorded:
Commercial and Industrial Loans and Leases		1,360		3		3
Commercial Real Estate Loans		5,424		22		18
Agricultural Loans		—		—		—
Subtotal		6,784		25		21
Total	$	11,647	$	304	$	318
Loans Acquired With Deteriorated Credit Quality With No Related Allowance Recorded (Included in the Total Above)	$	30	$	3	$	3
Loans Acquired With Deteriorated Credit Quality With An Additional Allowance Recorded (Included in the Total Above)	$	142	$	2	$	2

56

Notes to the Consolidated Financial Statements

Dollars in thousands, except per share data

NOTE 4 – Loans (continued)

	Average		Interest		Cash
	Recorded		Income		Basis
	Investment		Recognized		Recognized
December 31, 2012
With No Related Allowance Recorded:
Commercial and Industrial Loans and Leases	$	252	$	3	$	3
Commercial Real Estate Loans		4,506		18		18
Agricultural Loans		535		2		2
Subtotal		5,293		23		23
With An Allowance Recorded:
Commercial and Industrial Loans and Leases		2,726		9		8
Commercial Real Estate Loans		6,660		23		19
Agricultural Loans		74		—		—
Subtotal		9,460		32		27
Total	$	14,753	$	55	$	50
Loans Acquired With Deteriorated Credit Quality With No Related Allowance Recorded (Included in the Total Above)	$	26	$	2	$	2
Loans Acquired With Deteriorated Credit Quality With An Additional Allowance Recorded (Included in the Total Above)	$	154	$	6	$	4

	Average		Interest		Cash
	Recorded		Income		Basis
	Investment		Recognized		Recognized
December 31, 2011
With No Related Allowance Recorded:
Commercial and Industrial Loans and Leases	$	1,107	$	9	$	9
Commercial Real Estate Loans		4,438		75		75
Agricultural Loans		19		6		6
Subtotal		5,564		90		90
With An Allowance Recorded:
Commercial and Industrial Loans and Leases		3,642		11		11
Commercial Real Estate Loans		9,390		37		34
Agricultural Loans		—		—		—
Subtotal		13,032		48		45
Total	$	18,596	$	138	$	135
Loans Acquired With Deteriorated Credit Quality With No Related Allowance Recorded (Included in the Total Above)	$	28	$	4	$	4
Loans Acquired With Deteriorated Credit Quality With An Additional Allowance Recorded (Included in the Total Above)	$	77	$	1	$	1

All classes of loans, including loans acquired with deteriorated credit quality, are generally placed on non-accrual status when scheduled principal or interest payments are past due for 90 days or more or when the borrower’s ability to repay becomes doubtful. For purchased loans, the determination is made at the time of acquisition as well as over the life of the loan. Uncollected accrued interest for each class of loans is reversed against income at the time a loan is placed on non-accrual. Interest received on such loans is accounted for on the cash-basis or cost-recovery method, until qualifying for return to accrual. All classes of loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured. Loans are typically charged-off at 180 days past due, or earlier if deemed uncollectible. Exceptions to the non-accrual and charge-off policies are made when the loan is well secured and in the process of collection.

57

Notes to the Consolidated Financial Statements

Dollars in thousands, except per share data

NOTE 4 – Loans (continued)

The following table presents the recorded investment in non-accrual loans and loans past due 90 days or more still on accrual by class of loans as of December 31, 2013 and 2012:

					Loans Past Due
					90 Days or More
	Non-Accrual				& Still Accruing
	2013		2012		2013		2012
Commercial and Industrial Loans and Leases	$	31	$	2,480	$	—	$	—
Commercial Real Estate Loans		6,658		7,275		8		—
Agricultural Loans		—		—		—		—
Home Equity Loans		114		178		—		—
Consumer Loans		236		167		—		—
Residential Mortgage Loans		1,339		257		—		—
Total	$	8,378	$	10,357	$	8	$	—
Loans Acquired With Deteriorated Credit Quality (Included in the Total Above)	$	1,705	$	148	$	—	$	—

The following table presents the aging of the recorded investment in past due loans by class of loans as of December 31, 2013 and 2012:

							90 Days
			30-59 Days		60-89 Days		or More		Total		Loans Not
	Total		Past Due		Past Due		Past Due		Past Due		Past Due
December 31, 2013
Commercial and Industrial Loans and Leases	$	351,903	$	256	$	78	$	—	$	334	$	351,569
Commercial Real Estate Loans		583,604		613		62		2,234		2,909		580,695
Agricultural Loans		195,171		62		—		—		62		195,109
Home Equity Loans		81,812		303		33		114		450		81,362
Consumer Loans		49,265		149		66		102		317		48,948
Residential Mortgage Loans		129,047		2,206		192		1,115		3,513		125,534
Total (1)	$	1,390,802	$	3,589	$	431	$	3,565	$	7,585	$	1,383,217
Loans Acquired With Deteriorated Credit Quality (Included in the Total Above)	$	14,753	$	148	$	—	$	1,103	$	1,251	$	13,502

⁽¹⁾ Total recorded investment in loans includes $5,590 in accrued interest.

							90 Days
			30-59 Days		60-89 Days		or More		Total		Loans Not
	Total		Past Due		Past Due		Past Due		Past Due		Past Due
December 31, 2012
Commercial and Industrial Loans and Leases	$	336,307	$	436	$	133	$	448	$	1,017	$	335,290
Commercial Real Estate Loans		489,796		1,352		—		2,063		3,415		486,381
Agricultural Loans		182,575		42		14		—		56		182,519
Home Equity Loans		74,699		177		48		178		403		74,296
Consumer Loans		41,231		431		23		18		472		40,759
Residential Mortgage Loans		88,815		2,070		495		257		2,822		85,993
Total (1)	$	1,213,423	$	4,508	$	713	$	2,964	$	8,185	$	1,205,238
Loans Acquired With Deteriorated Credit Quality (Included in the Total Above)	$	11,174	$	—	$	120	$	—	$	120	$	11,054

⁽¹⁾ Total recorded investment in loans includes $5,522 in accrued interest.

Troubled Debt Restructurings:

In certain instances, the Company may choose to restructure the contractual terms of loans. A troubled debt restructuring occurs when the Bank grants a concession to the borrower that it would not otherwise consider due to a borrower’s financial difficulty. In order to determine whether a borrower is experiencing financial difficulty, an evaluation is performed of the probability that the borrower will be in payment default on any of its debt in the foreseeable future without modification. This evaluation is performed under the Company’s internal underwriting policy. The Company uses the same methodology for loans acquired with deteriorated credit quality as for all other loans when determining whether the loan is a troubled debt restructuring.

58

Notes to the Consolidated Financial Statements

Dollars in thousands, except per share data

NOTE 4 – Loans (continued)

During the years ended December 31, 2013 and 2012, the terms of certain loans were modified as troubled debt restructurings. The modification of the terms of such loans included one or a combination of the following: a reduction of the stated interest rate of the loan; an extension of the maturity date at a stated rate of interest lower than the current market rate for new debt with similar risk; or a permanent reduction of the recorded investment in the loan. There were no troubled debt restructurings for the years ended December 31, 2013 and 2012 for loans acquired with deteriorated credit quality at the time of acquisition.

The following table presents the recorded investment of troubled debt restructurings by class of loans as of December 31, 2013 and 2012:

	Total		Performing		Non-Accrual(1)
December 31, 2013
Commercial and Industrial Loans and Leases	$	2,092	$	2,086	$	6
Commercial Real Estate Loans		4,325		364		3,961
Total	$	6,417	$	2,450	$	3,967

	Total		Performing		Non-Accrual(1)
December 31, 2012
Commercial and Industrial Loans and Leases	$	2,461	$	66	$	2,395
Commercial Real Estate Loans		6,031		304		5,727
Total	$	8,492	$	370	$	8,122

⁽¹⁾ The non-accrual troubled debt restructurings are included in the Non-Accrual Loan table presented on previous page.

The Company has committed to lending an additional amount of $40 as of December 31, 2013 to customers with outstanding loans that are classified as troubled debt restructurings. The Company had not committed to lending any additional amounts as of December 31, 2012 to customers with outstanding loans that are classified as troubled debt restructurings.

The following table presents loans by class modified as troubled debt restructurings that occurred during the year ending December 31, 2013, 2012 and 2011:

			Pre-Modification		Post-Modification
	Number of		Outstanding Recorded		Outstanding Recorded
December 31, 2013	Loans		Investment		Investment
Commercial and Industrial Loans and Leases		1	$	224	$	230
Commercial Real Estate Loans		1		81		118
Total		2	$	305	$	348

The troubled debt restructurings described above decreased the allowance for loan losses by $210 and resulted in charge-offs of $0 during the year ending December 31, 2013.

			Pre-Modification		Post-Modification
	Number of		Outstanding Recorded		Outstanding Recorded
December 31, 2012	Loans		Investment		Investment
Commercial and Industrial Loans and Leases		2	$	9	$	9
Commercial Real Estate Loans		—		—		—
Total		2	$	9	$	9

The troubled debt restructurings described above increased the allowance for loan losses by $0 and resulted in charge-offs of $0 during the year ending December 31, 2012.

			Pre-Modification		Post-Modification
	Number of		Outstanding Recorded		Outstanding Recorded
December 31, 2011	Loans		Investment		Investment
Commercial and Industrial Loans and Leases		4	$	4,541	$	4,499
Commercial Real Estate Loans		6		7,099		6,850
Total		10	$	11,640	$	11,349

The troubled debt restructurings described above increased the allowance for loan losses by $1,945 and resulted in charge-offs of $834 during the year ending December 31, 2011.

59

Notes to the Consolidated Financial Statements

Dollars in thousands, except per share data

NOTE 4 – Loans (continued)

The following tables present loans by class modified as troubled debt restructurings for which there was a payment default within twelve months following the modification during the years ending December 31, 2013, 2012 and 2011:

Troubled Debt Restructurings That Subsequently Defaulted:	Number of Loans		Recorded Investment
December 31, 2013
Commercial and Industrial Loans and Leases		—	$	—
Commercial Real Estate Loans		—		—
Total		—	$	—

The troubled debt restructurings that subsequently defaulted described above resulted in no change to the allowance for loan losses and no charge-offs during the year ending December 31, 2013.

Troubled Debt Restructurings That Subsequently Defaulted:	Number of Loans		Recorded Investment
December 31, 2012
Commercial and Industrial Loans and Leases		1	$	565
Commercial Real Estate Loans		3		1,377
Total		4	$	1,942

The troubled debt restructurings that subsequently defaulted described above increased the allowance for loan losses by $12 and resulted in charge-offs of $306 during the year ending December 31, 2012.

Troubled Debt Restructurings That Subsequently Defaulted:	Number of Loans		Recorded Investment
December 31, 2011
Commercial and Industrial Loans and Leases		1	$	527
Commercial Real Estate Loans		—		—
Total		1	$	527

The troubled debt restructurings that subsequently defaulted described above decreased the allowance for loan losses by $500 and resulted in charge-offs of $500 during the year ending December 31, 2011.

A loan is considered to be in payment default once it is 30 days contractually past due under the modified terms.

Credit Quality Indicators:

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Company classifies loans as to credit risk by individually analyzing loans. This analysis includes commercial and industrial loans, commercial real estate loans, and agricultural loans with an outstanding balance greater than $100. This analysis is typically performed on at least an annual basis. The Company uses the following definitions for risk ratings:

Special Mention. Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date.

Substandard. Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

Doubtful. Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

60

Notes to the Consolidated Financial Statements

Dollars in thousands, except per share data

NOTE 4 – Loans (continued)

Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be pass rated loans. Based on the most recent analysis performed, the risk category of loans by class of loans is as follows:

			Special
	Pass		Mention		Substandard		Doubtful		Total
December 31, 2013
Commercial and Industrial Loans and Leases	$	324,685	$	15,485	$	11,733	$	—	$	351,903
Commercial Real Estate Loans		539,533		20,168		23,903		—		583,604
Agricultural Loans		192,609		2,357		205		—		195,171
Total	$	1,056,827	$	38,010	$	35,841	$	—	$	1,130,678
Loans Acquired with Deteriorated Credit Quality (Included in the Total Above)	$	3,121	$	661	$	9,070	$	—	$	12,852

			Special
	Pass		Mention		Substandard		Doubtful		Total
December 31, 2012
Commercial and Industrial Loans and Leases	$	307,997	$	14,441	$	13,869	$	—	$	336,307
Commercial Real Estate Loans		446,639		21,338		21,819		—		489,796
Agricultural Loans		176,730		2,855		2,990		—		182,575
Total	$	931,366	$	38,634	$	38,678	$	—	$	1,008,678
Loans Acquired with Deteriorated Credit Quality (Included in the Total Above)	$	319	$	3,220	$	7,338	$	—	$	10,877

The Company considers the performance of the loan portfolio and its impact on the allowance for loan losses. For home equity, consumer and residential mortgage loan classes, the Company also evaluates credit quality based on the aging status of the loan, which was previously presented, and by payment activity. The following table presents the recorded investment in home equity, consumer and residential mortgage loans based on payment activity as of December 31, 2013 and 2012:

	Home Equity		Consumer		Residential
	Loans		Loans		Mortgage Loans
December 31, 2013
Performing	$	81,698	$	49,029	$	127,708
Nonperforming		114		236		1,339
Total	$	81,812	$	49,265	$	129,047
Loans Acquired with Deteriorated Credit Quality (Included in the Total Above)	$	—	$	134	$	1,767

	Home Equity		Consumer		Residential
	Loans		Loans		Mortgage Loans
December 31, 2012
Performing	$	74,521	$	41,064	$	88,558
Nonperforming		178		167		257
Total	$	74,699	$	41,231	$	88,815
Loans Acquired with Deteriorated Credit Quality (Included in the Total Above)	$	—	$	148	$	149

The following table presents financing receivables purchased during the year ended December 31, 2013 by portfolio class (for further discussion, see Note 17 Business Combinations, Goodwill and Intangible Assets):

	Commercial
	and
	Industrial		Commercial				Home				Residential
	Loans and		Real Estate		Agricultural		Equity		Consumer		Mortgage
	Leases		Loans		Loans		Loans		Loans		Loans		Total
Purchases	$	6,399	$	47,021	$	769	$	4,536	$	1,666	$	19,184	$	79,575

61

Notes to the Consolidated Financial Statements

Dollars in thousands, except per share data

NOTE 4 – Loans (continued)

The Company has purchased loans, for which there was, at acquisition, evidence of deterioration of credit quality since origination and it was probable, at acquisition, that all contractually required payments would not be collected. The recorded investment of those loans at December 31, is as follows:

	2013		2012		2011
Commercial and Industrial Loans	$	1,981	$	1,840	$	2,596
Commercial Real Estate Loans		10,871		9,037		13,209
Home Equity Loans		—		—		—
Consumer Loans		134		148		164
Residential Mortgage Loans		1,767		149		152
Total	$	14,753	$	11,174	$	16,121
Carrying Amount, Net of Allowance	$	14,745	$	11,086	$	16,044

Accretable yield, or income expected to be collected, is as follows:

	2013			2012			2011
Balance at January 1	$	170		$	967		$	—
New Loans Purchased		2,885			—			2,042
Accretion of Income		(265	)		(1,265	)		(1,130	)
Reclassifications from Non-accretable Difference		—			468			129
Charge-off of Accretable Yield		—			—			(74	)
Balance at December 31	$	2,790		$	170		$	967

For those purchased loans disclosed above, the Company increased the allowance for loan losses by $0, $88 and $77 for the years ended December 31, 2013, 2012 and 2011. No allowances for loan losses were reversed during the same period.

Contractually required payments receivable of loans purchased during the years ended December 31:

	2013		2012		2011
Commercial and Industrial Loans	$	401	$	—	$	4,542
Commercial Real Estate Loans		6,640		—		19,260
Home Equity Loans		—		—		28
Consumer Loans		—		—		217
Residential Mortgage Loans		3,684		—		458
Total	$	10,725	$	—	$	24,505
Cash Flows Expected to be Collected at Acquisition	$	7,642	$	—	$	19,695
Fair Value of Acquired Loans at Acquisition		6,252		—		17,653

Certain directors, executive officers, and principal shareholders of the Company, including their immediate families and companies in which they are principal owners, were loan customers of the Company during 2013. A summary of the activity of these loans follows:

Balance				Changes							Balance
January 1,				in Persons		Deductions					December 31,
2013		Additions		Included		Collected			Charged-off		2013
$	9,002	$	5,426	$	1,290	$	(5,387	)	$	—	$	10,331

62

Notes to the Consolidated Financial Statements

Dollars in thousands, except per share data

NOTE 5 – Premises, Furniture, and Equipment

Premises, furniture, and equipment was comprised of the following classifications at December 31:

	2013			2012
Land	$	8,366		$	7,948
Buildings and Improvements		47,677			43,706
Furniture and Equipment		21,544			19,584
Total Premises, Furniture and Equipment		77,587			71,238
Less:  Accumulated Depreciation		(37,157	)		(34,684	)
Total	$	40,430		$	36,554

Depreciation expense was $2,910, $2,941 and $3,261 for 2013, 2012 and 2011, respectively.

The Company leases three of its branch buildings under a capital lease. These lease arrangements require monthly payments through 2033. The Company has included the leases in buildings and improvements as follows:

	2013			2012
Capital Leases	$	3,896		$	2,442
Less: Accumulated Depreciation		(483	)		(344	)
Total	$	3,413		$	2,098

The following is a schedule of future minimum lease payments under the capitalized leases, together with the present value of net minimum lease payments at year end 2013:

2014	$	495
2015		495
2016		495
2017		495
2018		465
Thereafter		6,216
Total minimum lease payments		8,661
Less: Amount representing interest		(4,931	)
Present Value of Net Minimum Lease Payments	$	3,730

NOTE 6 – Deposits

At year end 2013, stated maturities of time deposits were as follows:

2014	$	174,109
2015		66,131
2016		76,207
2017		17,943
2018		14,465
Thereafter		179
Total	$	349,034

Time deposits of $100 or more and brokered deposits at December 31, 2013 and 2012 were $124,673 and $95,761, respectively.

Time deposits originated from outside the geographic area, generally through brokers, totaled $1,648 and $0 at December 31, 2013 and 2012, respectively.

63

Notes to the Consolidated Financial Statements

Dollars in thousands, except per share data

NOTE 7 – FHLB Advances and Other Borrowings

The Company’s funding sources include Federal Home Loan Bank advances, borrowings from other third party correspondent financial institutions, issuance and sale of subordinated debt and other capital securities, and repurchase agreements. Information regarding each of these types of borrowings or other indebtedness is as follows:

	December 31,
	2013		2012
Long-term Advances from Federal Home Loan Bank collateralized by qualifying mortgages, investment securities, and mortgage-backed securities	$	71,483	$	51,526
Term Loans		7,000		1,500
Junior Subordinated Debentures assumed from American Community Bancorp, Inc.		5,024		4,874
Subordinated Debentures		—		29,250
Capital Lease Obligation		3,730		2,322
Long-term Borrowings		87,237		89,472
Overnight Variable Rate Advances from Federal Home Loan Bank collateralized by qualifying mortgages, investment securities, and mortgage-backed securities	$	38,000	$	48,500
Federal Funds Purchased		—		5,400
Repurchase Agreements		15,533		17,634
Short-term Borrowings		53,533		71,534
Total Borrowings	$	140,770	$	161,006

Repurchase agreements, which are classified as secured borrowings, generally mature within one day of the transaction date. Repurchase agreements are reflected at the amount of cash received in connection with the transaction. The Company may be required to provide additional collateral based on the value of the underlying securities.

	2013			2012
Average Daily Balance During the Year	$	14,772		$	19,813
Average Interest Rate During the Year		0.20	%		0.23	%
Maximum Month-end Balance During the Year	$	17,722		$	24,220
Weighted Average Interest Rate at Year-end		0.20	%		0.20	%

At December 31, 2013 interest rates on the fixed rate long-term FHLB advances ranged from 0.35% to 7.22% with a weighted average rate of 0.95%. At December 31, 2013, the Company had no advances containing options whereby the FHLB may convert a fixed rate advance to an adjustable rate advance.

At December 31, 2012 interest rates on the fixed rate long-term FHLB advances ranged from 0.39% to 7.22% with a weighted average rate of 2.07%. Of the $51.5 million, $30.0 million or 58% of the advances contained options whereby the FHLB may convert the fixed rate advance to an adjustable rate advance, at which time the Company may prepay the advance without penalty. The options on these advances are subject to a variety of terms including LIBOR based strike rates.

At December 31, 2013, the Company had an outstanding term loan with the balance of $7 million of which the original principal amount was $10 million and borrowed by the parent company in January 2013. At December 31, 2013 interest on the term loan is based upon 90-day LIBOR plus 2.875%. This term loan matures December 31, 2015. At December 31, 2013, the parent company had a $10 million line of credit with no outstanding balance. The line of credit matures December 30, 2014. Interest on the line of credit is based upon 90-day LIBOR plus 2.875% and includes an unused commitment fee of 0.25%.

As of December 31, 2012 long-term borrowings included a $1.5 million outstanding balance on a term loan of which was paid off in January 2013 by the parent company. At December 31, 2012 interest on the term loan was based upon 90-day LIBOR plus 3.00%.

64

Notes to the Consolidated Financial Statements

Dollars in thousands, except per share data

NOTE 7 – FHLB Advances and Other Borrowings (continued)

At December 31, 2012, the long-term borrowings shown above included an aggregate of $29.3 million of indebtedness represented by subordinated debentures issued by the Company’s parent company in two separate transactions. A $10 million subordinated debenture issued by the parent company to another bank bore interest based upon 90-day LIBOR plus 1.35%. 20% of the subordinated debenture was treated as Tier 2 capital for regulatory capital purposes as of December 31, 2012. This subordinated debenture was paid off in January 2013. The parent company issued $19.3 million principal amount of 8% redeemable subordinated debentures to the Company’s shareholders in April 2009. The entire principal amount of these debentures was treated as Tier 2 capital for regulatory capital purposes as of December 31, 2012. These debentures were redeemed on April 1, 2013.

At December 31, 2013, scheduled principal payments on long-term borrowings, excluding the capitalized lease obligation and acquired subordinated debentures (which are discussed below) are as follows:

2014	$	43,039
2015		24,042
2016		45
2017		749
2018		10,027
Thereafter		581
Total	$	78,483

The Company assumed the obligations of junior subordinated debentures through the acquisition of American Community Bancorp, Inc. The junior subordinated debentures were issued to ACB Capital Trust I and Capital Trust II. The trusts are wholly owned by the Company. In accordance with accounting guidelines, the trusts are not consolidated with the Company’s financials, but rather the subordinated debentures are shown as borrowings. The Company guarantees payment of distributions on the trust preferred securities issued by ACB Trust I and ACB Trust II. Interest is payable on a quarterly basis. These securities qualify as Tier 1 capital (with certain limitations) for regulatory purposes. $4,871 of the junior subordinated debentures were treated as Tier 1 capital for regulatory capital purposes as of December 31, 2013. $4,725 of the junior subordinated debentures were treated as Tier 1 capital for regulatory capital purposes as of December 31, 2012. As a result of the acquisition of American Community these liabilities were recorded at fair value at the acquisition date with the discount amortizing into interest expense over the life of the liability, ultimately accreting to the issuance amount disclosed below.

The following table summarizes the terms of each issuance:

					Carrying
	Date of		Issuance		Amount at		Rate as of	Rate as of	Maturity
	Issuance		Amount		December 31, 2013	Variable Rate	December 31, 2013	December 31, 2012	Date
ACB Trust I	5/6/2005	$	5,155	$	3,186	90 day LIBOR + 2.15%	2.40%	2.46%	May 2035
ACB Trust II	7/15/2005		3,093		1,838	90 day LIBOR + 1.85%	2.09%	2.16%	July 2035

See also Note 5 regarding the capital lease obligation.

65

Notes to the Consolidated Financial Statements

Dollars in thousands, except per share data

NOTE 8 – Shareholders’ Equity

The Company and affiliate bank are subject to regulatory capital requirements administered by federal banking agencies. Capital adequacy guidelines and prompt corrective action regulations involve quantitative measures of assets, liabilities, and certain off-balance sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by regulators about components, risk weightings, and other factors, and the regulators can lower classifications in certain cases. Failure to meet various capital requirements can initiate regulatory action that could have a direct material effect on the financial statements. Management believes as of December 31, 2013, the Company and Bank meet all capital adequacy requirements to which they are subject.

The prompt corrective action regulations provide five classifications, including well-capitalized, adequately capitalized, under-capitalized, significantly under-capitalized, and critically under-capitalized, although these terms are not used to represent overall financial condition. If only adequately capitalized, regulatory approval is required to accept brokered deposits. If under-capitalized, capital distributions are limited, as is asset growth and expansion, and plans for capital restoration are required.

At December 31, 2013, consolidated and affiliate bank actual capital and minimum required levels are presented below:

												Minimum Required
												To Be Well-
						Minimum Required						Capitalized Under
						For Capital						Prompt Corrective
	Actual					Adequacy Purposes:						Action Regulations:
	Amount		Ratio			Amount		Ratio				Amount	Ratio
Total Capital (to Risk Weighted Assets)
Consolidated	$	201,233		13.07	%	$	123,189		8.00	%		N/A		N/A
Bank		191,714		12.46			123,099		8.00		$	153,874		10.00	%
Tier 1 Capital (to Risk Weighted Assets)
Consolidated	$	186,649		12.12	%	$	61,594		4.00	%		N/A		N/A
Bank		177,130		11.51			61,550		4.00		$	92,324		6.00	%
Tier 1 Capital (to Average Assets)
Consolidated	$	186,649		8.78	%	$	85,005		4.00	%		N/A		N/A
Bank		177,130		8.37			84,686		4.00		$	105,857		5.00	%

At December 31, 2012, consolidated and affiliate bank actual capital and minimum required levels are presented below:

												Minimum Required
												To Be Well-
						Minimum Required						Capitalized Under
						For Capital						Prompt Corrective
	Actual					Adequacy Purposes:						Action Regulations:
	Amount		Ratio			Amount		Ratio				Amount	Ratio
Total Capital (to Risk Weighted Assets)
Consolidated	$	194,990		13.70	%	$	113,859		8.00	%		N/A		N/A
Bank		167,904		11.83			113,523		8.00		$	141,904		10.00	%
Tier 1 Capital (to Risk Weighted Assets)
Consolidated	$	158,198		11.12	%	$	56,930		4.00	%		N/A		N/A
Bank		152,384		10.74			56,762		4.00		$	85,142		6.00	%
Tier 1 Capital (to Average Assets)
Consolidated	$	158,198		8.18	%	$	77,317		4.00	%		N/A		N/A
Bank		152,384		7.91			77,025		4.00		$	96,281		5.00	%

66

Notes to the Consolidated Financial Statements

Dollars in thousands, except per share data

NOTE 8 – Shareholders’ Equity (continued)

The Company and the affiliate bank at year end 2013 and 2012 were categorized as well-capitalized. There have been no conditions or events that management believes have changed the classification of the Company or affiliate bank under the prompt corrective action regulations since the last notification from regulators. Regulations require the maintenance of certain capital levels at the affiliate bank, and may limit the dividends payable by the affiliate to the holding company, or by the holding company to its shareholders. At December 31, 2013, the affiliate bank had $39,000 in retained earnings available for payment of dividends to the parent company without prior regulatory approval.

Equity Plans and Equity Based Compensation

The Company maintains three equity incentive plans under which stock options, restricted stock, and other equity incentive awards can be granted. At December 31, 2013, the Company has reserved 438,813 shares of Common Stock (as adjusted for subsequent stock dividends and subject to further customary anti-dilution adjustments) for the purpose of issuance pursuant to outstanding and future grants of options, restricted stock, and other equity awards to officers, directors and other employees of the Company.

Stock Options

Options may be designated as “incentive stock options” under the Internal Revenue Code of 1986, or as nonqualified options. While the date after which options are first exercisable is determined by the appropriate committee of the Board of Directors of the Company or, in the case of options granted to directors, by the Board of Directors, no stock option may be exercised after ten years from the date of grant (twenty years in the case of nonqualified stock options). The exercise price of stock options granted pursuant to the plans must be no less than the fair market value of the Common Stock on the date of the grant.

The plans authorize an optionee to pay the exercise price of options in cash or in common shares of the Company or in some combination of cash and common shares. An optionee may tender already-owned common shares to the Company in exercise of an option. Certain of these plans authorize an optionee to surrender the value of an unexercised option in payment of an equivalent amount of the exercise price of the option. The Company typically issues authorized but unissued common shares upon the exercise of options.

The following table presents activity for stock options under the Company’s equity incentive plan for 2013:

	Year Ended December 31, 2013
				Weighted		Weighted Average		Aggregate
	Number of			Average Price		Life of Options		Intrinsic
	Options			of Options		(in years)		Value
Outstanding at Beginning of Period		79,917		$	16.73
Granted		—			—
Exercised		(8,300	)		17.35
Forfeited		—			—
Expired		(2,100	)		18.19
Outstanding and Exercisable at End of Period		69,517		$	16.61		3.43	$	821

The following table presents information related to stock options under the Company’s equity incentive plan during the years ended 2013, 2012 and 2011:

	2013		2012		2011
Intrinsic Value of Options Exercised	$	49	$	203	$	28
Cash Received from Option Exercises	$	—	$	—	$	—
Tax Benefit of Option Exercises	$	20	$	78	$	12
Weighted Average Fair Value of Options Granted	$	—	$	—	$	—

The intrinsic value for stock options is calculated based on the exercise price of the underlying awards and the market price of common stock as of the reporting date.

67

Notes to the Consolidated Financial Statements

Dollars in thousands, except per share data

NOTE 8 – Shareholders’ Equity (continued)

During 2013, 2012 and 2011, the Company granted no options, and accordingly, recorded no stock compensation expense related to option grants. The Company recorded no other stock compensation expense applicable to options during the years ended December 31, 2013, 2012 and 2011 because all outstanding options were fully vested prior to 2007. As of December 31, 2013 and 2012, there was no unrecognized option expense as all outstanding options were fully vested.

Restricted Stock

During the periods presented, awards of long-term incentives were granted in the form of restricted stock. Awards that were granted to management under a management incentive plan were granted in tandem with cash credit entitlements (typically in the form of 50% restricted stock grants and 50% cash credit entitlements). The management restricted stock grants and tandem cash credit entitlements awarded in 2013 will vest in three equal installments of 33.3% with the first annual vesting on December 5^th of the year of the grant and on December 5^th of the next two succeeding years. The management restricted stock grants and tandem cash credit entitlements awarded in 2012 were subject to forfeiture in the event that the recipient of the grant did not continue employment with the Company through December 5th of the year of grant, at which time they generally vest 100 percent. Awards that were granted to directors as additional retainer for their services in December 2012 do not include any cash credit entitlement. These director restricted stock grants are subject to forfeiture in the event that the recipient of the grant does not continue in service as a director of the Company through December 5th of the year after grant or do not satisfy certain meeting attendance requirements, at which time they generally vest 100 percent. For measuring compensation costs, restricted stock awards are valued based upon the market value of the common shares on the date of grant.

The following table presents expense recorded for restricted stock and cash entitlements as well as the related tax effect for the years ended 2013, 2012 and 2011:

	2013			2012			2011
Restricted Stock Expense	$	329		$	628		$	636
Cash Entitlement Expense		217			588			564
Tax Effect		(221	)		(493	)		(475	)
Net of Tax	$	325		$	723		$	725

Unrecognized expense associated with the restricted stock grants and cash entitlements totaled $942 and $101 as of December 31, 2013 and 2012. There was no unrecognized expense associated with the restricted stock grants as of December 31, 2011.

The following table presents information on restricted stock grants outstanding for the period shown:

	Year Ended
	December 31, 2013
				Weighted
	Restricted			Average Market
	Shares			Price at Grant
Outstanding at Beginning of Period		4,983		$	22.07
Granted		33,031			23.41
Issued and Vested		(14,620	)		22.57
Forfeited		(453	)		22.07
Outstanding at End of Period		22,941			23.68

68

Notes to the Consolidated Financial Statements

Dollars in thousands, except per share data

NOTE 8 – Shareholders’ Equity (continued)

Employee Stock Purchase Plan

The Company maintains an Employee Stock Purchase Plan whereby eligible employees have the option to purchase the Company’s common stock at a discount. The purchase price of the shares under this Plan has been set at 95% of the fair market value of the Company’s common stock as of the last day of the plan year. The plan provided for the purchase of up to 500,000 shares of common stock, which the Company may obtain by purchases on the open market or from private sources, or by issuing authorized but unissued common shares. Funding for the purchase of common stock is from employee and Company contributions.

The Employee Stock Purchase Plan is not considered compensatory. There was no expense recorded for the employee stock purchase plan in 2013, 2012, and 2011 nor was there any unrecognized compensation expense as of December 31, 2013 and 2012 for the Employee Stock Purchase Plan.

Stock Repurchase Plan

On April 26, 2001, the Company announced that its Board of Directors approved a stock repurchase program for up to 607,754 of the outstanding Common Shares of the Company. Shares may be purchased from time to time in the open market and in large block privately negotiated transactions. The Company is not obligated to purchase any shares under the program, and the program may be discontinued at any time before the maximum number of shares specified by the program are purchased. The Board of Directors established no expiration date for this program. As of December 31, 2013, the Company had purchased 334,965 shares under the program. No shares were purchased under the program during the years ended December 31, 2013 and 2012.

NOTE 9 – Employee Benefit Plans

The Company provides a contributory trusteed 401(k) deferred compensation and profit sharing plan, which covers substantially all employees. The Company agrees to match certain employee contributions under the 401(k) portion of the plan, while profit sharing contributions are discretionary and are subject to determination by the Board of Directors. Company contributions were $882, $777, and $717 for 2013, 2012, and 2011, respectively.

The Company self-insures employee health benefits. Stop loss insurance covers annual losses exceeding $125 per covered family. Management’s policy is to establish a reserve for claims not submitted by a charge to earnings based on prior experience. Charges to earnings were $2,599, $1,799, and $1,620 for 2013, 2012, and 2011, respectively.

The Company maintains deferred compensation plans for the benefit of certain directors and officers. Under the plans, the Company agrees in return for the directors and officers deferring the receipt of a portion of their current compensation, to pay a retirement benefit computed as the amount of the compensation deferred plus accrued interest at a variable rate. Accrued benefits payable totaled $1,857 and $2,003 at December 31, 2013 and 2012. Deferred compensation expense was $173, $170, and $183 for 2013, 2012, and 2011, respectively. In conjunction with the plans, the Company purchased life insurance on certain directors and officers.

The Company entered into early retirement agreements with certain officers of the Company during 2008, 2009, 2010, and 2013. Accrued benefits payable as a result of the agreements totaled $337 and $298 at December 31, 2013 and 2012, respectively. Expense associated with these agreements totaled $166, $0, and $72 during 2013, 2012, and 2011, respectively. The benefits under the agreements will be paid through 2017.

The Company acquired through previous bank mergers a noncontributory defined benefit pension plan with benefits based on years of service and compensation prior to retirement. The benefits under the plan were suspended in 1998. This defined benefit plan was terminated in 2013 with all benefits of the plan distributed to the plan’s participants prior to December 31, 2013. The costs to terminate the defined benefit plan totaled $378 in 2013.

69

Notes to the Consolidated Financial Statements

Dollars in thousands, except per share data

NOTE 9 – Employee Benefit Plans (continued)

Accumulated plan benefit information for the Company’s plan as of December 31, 2013 and 2012 was as follows:

Changes in Benefit Obligation:	2013			2012
Obligation at Beginning of Year	$	837		$	734
Interest Cost		25			27
Benefits Paid		(33	)		(33	)
Lump Sum Benefits Paid		(809	)		—
Actuarial (Gain) Loss		(62	)		109
Effect of Settlement/Curtailment		42			—
Obligation at End of Year	$	—		$	837
Changes in Plan Assets:
Fair Value at Beginning of Year		399			353
Actual Return on Plan Assets		—			1
Employer Contributions		443			78
Periodic Benefits Paid		(33	)		(33	)
Lump Sum Benefits Paid		(809	)		—
Fair Value at End of Year	$	—		$	399
Funded Status:
Funded Status at End of Year	$	—		$	(438	)
Amounts recognized in accumulated other comprehensive income at December 31 consist of:
		2013			2012
Net Loss (Gain)	$	—		$	360
Prior Service Cost		—			13
	$	—		$	373

The accumulated benefit obligation was $0 and $837 at year-end 2013 and 2012, respectively.

Components of Net Periodic Benefit Cost and Other Amounts Recognized in Other Comprehensive Income

	2013			2012			2011
Interest Cost	$	25		$	27		$	32
Expected Return on Assets		(1	)		(1	)		(2	)
Amortization of Prior Service Cost		1			1			1
Recognition of Net Loss		46			30			31
Net Periodic Benefit Cost	$	71		$	57		$	62
Net Loss (Gain) During the Period		(19	)		110			24
Amortization of Unrecognized Loss		(341	)		(30	)		(30	)
Amortization of Prior Service Cost		(13	)		(1	)		(1	)
Total Recognized in Other Comprehensive Income (Loss)		(373	)		79			(7	)
Total Recognized in Net Periodic Benefit Cost and Other Comprehensive Income (Loss)	$	(302	)	$	136		$	55

70

Notes to the Consolidated Financial Statements

Dollars in thousands, except per share data

NOTE 9 – Employee Benefit Plans (continued)

The estimated net loss, prior service costs, and net transition obligation (asset) for the defined benefit pension plan that will be amortized from accumulated other comprehensive income into net periodic benefit cost over the next fiscal year will be $0 as the defined benefit pension plan terminated in the current year.

Assumptions

Weighted-average assumptions used to determine benefit obligations at year-end:

	2013		2012			2011
Discount Rate		N/A		3.25	%		3.75	%
Rate of Compensation Increase (1)		N/A		N/A			N/A

Weighted-average assumptions used to determine net periodic pension cost:

	2013			2012			2011
Discount Rate		3.25	%		3.75	%		4.60	%
Expected Return on Plan Assets		0.25	%		0.25	%		0.50	%
Rate of Compensation Increase (1)		N/A			N/A			N/A

⁽¹⁾ Benefits under the plan were suspended in 1998; therefore, the weighted-average rate of increase in future compensation levels was not applicable for all years presented.

The expected return on plan assets was determined based upon rates that are expected to be available for future reinvestment of earnings and maturing investments along with consideration given to the current mix of plan assets.

Postretirement Medical and Life Benefit Plan

The Company has an unfunded postretirement benefit plan covering substantially all of its employees. The medical plan is contributory with the participants’ contributions adjusted annually; the life insurance plans are noncontributory.

Changes in Accumulated Postretirement Benefit Obligations:	2013			2012
Obligation at the Beginning of Year	$	691		$	624
Unrecognized Loss (Gain)		(33	)		43
Components of Net Periodic Postretirement Benefit Cost
Service Cost		40			35
Interest Cost		23			24
Net Expected Benefit Payments		(50	)		(35	)
Obligation at End of Year	$	671		$	691
Components of Postretirement Benefit Expense	2013			2012			2011
Service Cost	$	40		$	35		$	28
Interest Cost		23			24			25
Amortization of Unrecognized Net (Gain) Loss		4			—			—
Net Postretirement Benefit Expense		67			59			53
Net Gain (Loss) During Period Recognized in Other Comprehensive Income		(37	)		42			57
Total Recognized in Net Postretirement Benefit Expense and Other Comprehensive Income	$	30		$	101		$	110

71

Notes to the Consolidated Financial Statements

Dollars in thousands, except per share data

NOTE 9 – Employee Benefit Plans (continued)

Assumptions Used to Determine Net Periodic Cost and Benefit Obligations:	2013			2012			2011
Discount Rate		4.31	%		3.41	%		3.98	%

Assumed Health Care Cost Trend Rates at Year-end:	2013			2012
Health Care Cost Trend Rate Assumed for Next Year		8.00	%		8.00	%
Rate that the Cost Trend Rate Gradually Declines to		5.00	%		4.50	%
Year that the Rate Reaches the Rate it is Assumed to Remain at		2019			2019

Assumed health care cost trend rates have a significant effect on the amounts reported for the health care plans. A one-percentage-point change in assumed health care cost trend rates would have the following effects as of December 31, 2013:

	One-Percentage-Point		One-Percentage-Point
	Increase		Decrease
Effect on Total of Service and Interest Cost	$	6	$	(5	)
Effect on Postretirement Benefit Obligation	$	41	$	(37	)

Contributions

The Company expects to contribute $39 to its postretirement medical and life insurance plan in 2014.

Estimated Future Benefits

The following postretirement benefit payments, which reflect expected future service, are expected to be paid:

2014	$	39
2015		49
2016		49
2017		60
2018		63
2019-2023		383

72

Notes to the Consolidated Financial Statements

Dollars in thousands, except per share data

NOTE 10 – Income Taxes

The provision for income taxes consists of the following:	2013		2012		2011
Current Federal	$	9,103	$	9,649	$	3,333
Current State		648		568		184
Deferred Federal		1,090		260		4,241
Deferred State		623		192		(32	)
Total	$	11,464	$	10,669	$	7,726

Income tax expense is reconciled to the 35% statutory rate applied to the pre-tax income for the years presented in the table below:

	2013			2012			2011
Statutory Rate Times Pre-tax Income	$	12,907		$	12,153		$	9,791
Add (Subtract) the Tax Effect of:
Income from Tax-exempt Loans and Investments		(1,157	)		(1,007	)		(780	)
State Income Tax, Net of Federal Tax Effect		826			494			99
General Business Tax Credits		(556	)		(547	)		(370	)
Company Owned Life Insurance		(338	)		(341	)		(385	)
Gain on United Commerce Bancorp Stock		(120	)		—			—
Gain on American Community Bancorp, Inc. Stock		—			—			(366	)
Other Differences		(98	)		(83	)		(263	)
Total Income Taxes	$	11,464		$	10,669		$	7,726

The net deferred tax liability at December 31 consists of the following:

	2013			2012
Deferred Tax Assets:
Allowance for Loan Losses	$	4,871		$	5,845
Unrealized Loss on Securities		2,809			—
Deferred Compensation and Employee Benefits		1,136			1,282
Other-than-temporary Impairment		388			443
Accrued Expenses		601			646
Business Combination Fair Value Adjustments		847			—
Pension and Postretirement Plans		35			195
Other Real Estate Owned		288			140
Non-Accrual Loan Interest Income		269			254
Net Operating Loss Carryforward		224			—
Other		313			279
Total Deferred Tax Assets		11,781			9,084
Deferred Tax Liabilities:
Depreciation		(1,465	)		(1,419	)
Leasing Activities, Net		(7,797	)		(7,753	)
Unrealized Gain on Securities		—			(5,915	)
FHLB Stock Dividends		(343	)		(336	)
Prepaid Expenses		(492	)		(516	)
Intangibles		(804	)		(359	)
Deferred Loan Fees		(460	)		(394	)
Business Combination Fair Value Adjustments		—			(333	)
General Business Tax Credits		(23	)		(7	)
Other		(330	)		(255	)
Total Deferred Tax Liabilities		(11,714	)		(17,287	)
Valuation Allowance		—			(45	)
Net Deferred Tax Asset (Liability)	$	67		$	(8,248	)

73

Notes to the Consolidated Financial Statements

Dollars in thousands, except per share data

NOTE 10 – Income Taxes (continued)

The Company held a valuation allowance at December 31, 2012 of $45. During 2013, the Company reversed the valuation allowance as the statute of limitations expired on this item. The Company has federal and state net operating loss carryforwards (acquired in the United Commerce Bancorp acquisition – See Note 17 for further discussion) of $609 (federal) and $1,420 (state). These carryforwards expire in 2032 and 2026 for federal and state purposes, respectively. The use of these federal and state carryforwards are each limited under IRC Section 382 to $538 annually.

Under the Internal Revenue Code, through 1996 two acquired banking companies, which are now a part of the Company’s single banking subsidiary, were allowed a special bad debt deduction related to additions to tax bad debt reserves established for the purpose of absorbing losses. The acquired banks were formerly known as Peoples Community Bank (acquired in October 2005) and First American Bank (acquired in January 1999). Subject to certain limitations, these Banks were permitted to deduct from taxable income an allowance for bad debts based on a percentage of taxable income before such deductions or actual loss experience. The Banks generally computed its annual addition to its bad debt reserves using the percentage of taxable income method; however, due to certain limitations in 1996, the Banks were only allowed a deduction based on actual loss experience.

Retained earnings at December 31, 2013, include approximately $2,995 for which no provision for federal income taxes has been made. This amount represents allocations of income for allowable bad debt deductions. Reduction of amounts so allocated for purposes other than tax bad debt losses will create taxable income, which will be subject to the then current corporate income tax rate. It is not contemplated that amounts allocated to bad debt deductions will be used in any manner to create taxable income. The unrecorded deferred income tax liability on the above amount at December 31, 2013 was approximately $1,048.

Unrecognized Tax Benefits

The Company had no unrecognized tax benefits as of December 31, 2013, 2012, and 2011, and did not recognize any increase in unrecognized benefits during 2013 relative to any tax positions taken in 2013. Should the accrual of any interest or penalties relative to unrecognized tax benefits be necessary, it is the Company’s policy to record such accruals in its income tax expense accounts; no such accruals existed as of December 31, 2013, 2012, and 2011. The Company and its corporate subsidiaries file a consolidated U.S. Federal income tax return, which is subject to examination for all years after 2009. The Company and its corporate subsidiaries doing business in Indiana file a combined Indiana unitary return, which is subject to examination for all years after 2009.

NOTE 11 – Per Share Data

The computation of Basic Earnings per Share and Diluted Earnings per Share are provided below:

	2013		2012		2011
Basic Earnings per Share:
Net Income	$	25,413	$	24,055	$	20,249
Weighted Average Shares Outstanding		12,786,065		12,622,049		12,581,646
Basic Earnings per Share	$	1.99	$	1.91	$	1.61
Diluted Earnings per Share:
Net Income	$	25,413	$	24,055	$	20,249
Weighted Average Shares Outstanding		12,786,065		12,622,049		12,581,646
Stock Options, Net		21,613		15,694		6,102
Diluted Weighted Average Shares Outstanding		12,807,678		12,637,743		12,587,748
Diluted Earnings per Share	$	1.98	$	1.90	$	1.61

Stock options for 89,276 shares of common stock were not considered in computing diluted earnings per common share for 2011 because they were anti-dilutive. There were no anti-dilutive shares at December 31, 2013 and 2012.

74

Notes to the Consolidated Financial Statements

Dollars in thousands, except per share data

NOTE 12 – Lease Commitments

The total rental expense for all operating leases for the years ended December 31, 2013, 2012 and 2011 was $558, $486 and $413, respectively, including amounts paid under short-term cancelable leases.

The following is a schedule of future minimum lease payments for premises and equipment at year end 2013:

2014	$	608
2015		511
2016		446
2017		259
2018		154
Thereafter		1,508
Total	$	3,486

NOTE 13 – Commitments and Off-balance Sheet Items

In the normal course of business, there are various commitments and contingent liabilities, such as commitments to extend credit and commitments to sell loans, which are not reflected in the accompanying consolidated financial statements. The Company’s exposure to credit loss in the event of nonperformance by the other party to the financial instruments for commitments to make loans and standby letters of credit is represented by the contractual amount of those instruments. The Company uses the same credit policy to make commitments as it uses for on-balance sheet items.

The Company’s exposure to credit risk for commitments to sell loans is dependent upon the ability of the counter-party to purchase the loans. This is generally assured by the use of government sponsored entity counterparts. These commitments are subject to market risk resulting from fluctuations in interest rates. Commitments to sell loans are not mandatory (i.e., do not require net settlement with the counter-party to cancel the commitment).

Commitments and contingent liabilities are summarized as follows, at December 31:

	2013				2012
	Fixed		Variable		Fixed		Variable
	Rate		Rate		Rate		Rate
Commitments to Fund Loans:
Consumer Lines	$	8,940	$	145,064	$	6,013	$	137,668
Commercial Operating Lines		23,717		199,231		13,444		187,829
Residential Mortgages		11,249		930		33,004		676
Total Commitments to Fund Loans	$	43,906	$	345,225	$	52,461	$	326,173
Commitments to Sell Loans	$	20,672	$	—	$	52,511	$	—
Standby Letters of Credit	$	1,515	$	5,262	$	1,408	$	4,279

The fixed rate commitments to fund loans have interest rates ranging from 2.15% to 18.00% and maturities ranging from less than 1 year to 32 years. Since many commitments to make loans expire without being used, these amounts do not necessarily represent future cash commitments. Collateral obtained upon exercise of the commitment is determined using management’s credit evaluation of the borrower, and may include accounts receivable, inventory, property, land, and other items.

75

Notes to the Consolidated Financial Statements

Dollars in thousands, except per share data

NOTE 14 – Fair Value

Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. There are three levels of inputs that may be used to measure fair values:

Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3: Significant unobservable inputs that reflect a reporting entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

The Company used the following methods and significant assumptions to estimate the fair value of each type of financial instrument:

Investment Securities: The fair values for investment securities are determined by quoted market prices, if available (Level 1). For securities where quoted prices are not available, fair values are calculated based on market prices of similar securities (Level 2). For securities where quoted prices or market prices of similar securities are not available, fair values are calculated using discounted cash flows or other market indicators (Level 3). Level 3 pricing is obtained from a third-party based upon similar trades that are not traded frequently without adjustment by the Company. At December 31, 2013, the Company held $11.2 million in Level 3 securities which consist of $10.8 million of non-rated Obligations of State and Political Subdivisions and $353 thousand of equity securities that are not actively traded. Absent the credit rating, significant assumptions must be made such that the credit risk input becomes an unobservable input and thus these securities are reported by the Company in a Level 3 classification.

Derivatives: The fair values of derivatives are based on valuation models using observable market data as of the measurement date (Level 2).

Impaired Loans: Fair values for impaired collateral dependent loans are generally based on appraisals obtained from licensed real estate appraisers and in certain circumstances consideration of offers obtained to purchase properties prior to foreclosure. Appraisals for commercial real estate generally use three methods to derive value: cost, sales or market comparison and income approach. The cost method bases value in the cost to replace the current property. Value of market comparison approach evaluates the sales price of similar properties in the same market area. The income approach considers net operating income generated by the property and an investors required return. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available. Comparable sales adjustments are based on known sales prices of similar type and similar use properties and duration of time that the property has been on the market to sell. Such adjustments made in the appraisal process are typically significant and result in a Level 3 classification of the inputs for determining fair value.

Appraisals for both collateral-dependent impaired loans and other real estate owned are performed by certified general appraisers (for commercial properties) or certified residential appraisers (for residential properties) whose qualifications and licenses have been reviewed and verified by the Company. Once received, a member of the Company’s Risk Management Area reviews the assumptions and approaches utilized in the appraisal. In determining the value of impaired collateral dependent loans and other real estate owned, significant unobservable inputs may be used which include: physical condition of comparable properties sold, net operating income generated by the property and investor rates of return.

Other Real Estate: Nonrecurring adjustments to certain commercial and residential real estate properties classified as other real estate (ORE) are measured at the lower of carrying amount or fair value, less costs to sell. Fair values are generally based on third party appraisals of the property utilizing similar techniques as discussed above for Impaired Loans, resulting in a Level 3 classification. In cases where the carrying amount exceeds the fair value, less costs to sell, impairment loss is recognized.

76

Notes to the Consolidated Financial Statements

Dollars in thousands, except per share data

NOTE 14 – Fair Value (continued)

Loans Held-for-Sale: The fair values of loans held for sale are determined by using quoted prices for similar assets, adjusted for specific attributes of that loan resulting in a Level 2 classification.

Assets and Liabilities Measured on a Recurring Basis

Assets and liabilities measured at fair value on a recurring basis, including financial assets and liabilities for which the Company has elected the fair value option, are summarized below:

	Fair Value Measurements at December 31, 2013 Using
	Quoted Prices in
	Active Markets for		Significant Other		Significant
	Identical Assets		Observable Inputs		Unobservable Inputs
	(Level 1)		(Level 2)		(Level 3)		Total
Assets:
U.S. Treasury and Agency Securities	$	—	$	18,952	$	—	$	18,952
Corporate Securities		—		—		—		—
Obligations of State and Political Subdivisions		—		102,665		10,832		113,497
Mortgage-backed Securities-Residential		—		473,230		—		473,230
Equity Securities		—		—		353		353
Total Securities	$	—	$	594,847	$	11,185	$	606,032
Loans Held-for-Sale	$	—	$	9,265	$	—	$	9,265
Derivative Assets	$	—	$	866	$	—	$	866
Derivative Liabilities	$	—	$	737	$	—	$	737

	Fair Value Measurements at December 31, 2012 Using
	Quoted Prices in
	Active Markets for		Significant Other		Significant
	Identical Assets		Observable Inputs		Unobservable Inputs
	(Level 1)		(Level 2)		(Level 3)		Total
Assets:
U.S. Treasury and Agency Securities	$	—	$	23,472	$	—	$	23,472
Corporate Securities		—		—		—		—
Obligations of State and Political Subdivisions		—		64,316		12,169		76,485
Mortgage-backed Securities-Residential		—		486,912		—		486,912
Equity Securities		380		—		353		733
Total Securities	$	380	$	574,700	$	12,522	$	587,602
Loans Held-for-Sale	$	—	$	16,641	$	—	$	16,641
Derivative Assets	$	—	$	187	$	—	$	187
Derivative Liabilities	$	—	$	178	$	—	$	178

There were no transfers between Level 1 and Level 2 for the periods ended December 31, 2013 and 2012.

At December 31, 2013, the aggregate fair value of the Loans Held-for-Sale was $9,265, aggregate contractual principal balance was $9,129 with a difference of $136. At December 31, 2012, the aggregate fair value of the Loans Held-for-Sale was $16,641, aggregate contractual principle balance was $16,413 with a difference of $228.

77

Notes to the Consolidated Financial Statements

Dollars in thousands, except per share data

NOTE 14 – Fair Value (continued)

The table below presents a reconciliation of all assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the year ended December 31, 2013 and 2012:

	Obligations of State
	and Political
	Subdivisions					Equity Securities				Corporate Securities
	2013			2012		2013		2012		2013		2012
Beginning Balance of Recurring Level 3 Assets at January 1	$	12,169		$	4,075	$	353	$	353	$	—	$	1,005
Total Gains or Losses (realized/unrealized) Included in earnings		(332	)		156		—		—		—		—
Maturities / Calls		(1,005	)		—		—		—		—		(1,005	)
Purchases		—			7,938		—		—		—		—
Ending Balance of Recurring Level 3 Assets at December 31	$	10,832		$	12,169	$	353	$	353	$	—	$	—

Of the total gain/loss included in earnings for the year ended December 31, 2013, $0 was attributable to interest income on securities and ($332) was attributable to other changes in fair value. Of the total gain/loss included in earnings for the year ended December 31, 2012, $1 was attributable to interest income on securities and $155 was attributable to other changes in fair value.

Assets and Liabilities Measured on a Non-Recurring Basis

Assets and liabilities measured at fair value on a non-recurring basis are summarized below:

	Fair Value Measurements at December 31, 2013 Using
	Quoted Prices in
	Active Markets for		Significant Other		Significant
	Identical Assets		Observable Inputs		Unobservable Inputs
	(Level 1)		(Level 2)		(Level 3)		Total
Assets:
Impaired Loans with Specific Allocations
Commercial and Industrial Loans	$	—	$	—	$	—	$	—
Commercial Real Estate Loans		—		—		1,346		1,346
Agricultural Loans		—		—		—		—
Other Real Estate
Commercial Real Estate		—		—		20		20

	Fair Value Measurements at December 31, 2012 Using
	Quoted Prices in
	Active Markets for		Significant Other		Significant
	Identical Assets		Observable Inputs		Unobservable Inputs
	(Level 1)		(Level 2)		(Level 3)		Total
Assets:
Impaired Loans with Specific Allocations
Commercial and Industrial Loans	$	—	$	—	$	1,231	$	1,231
Commercial Real Estate Loans		—		—		1,497		1,497
Agricultural Loans		—		—		135		135
Other Real Estate
Commercial Real Estate		—		—		150		150

Impaired loans, which are measured for impairment using the fair value of the collateral for collateral dependent loans, had a carrying amount of $4,449 with a valuation allowance of $3,103, resulting in an additional provision for loan losses of $1,024 for the year ended December 31, 2013. Impaired loans, which are measured for impairment using the fair value of the collateral for collateral dependent loans, had a carrying amount of $8,274 with a valuation allowance of $5,411, resulting in an additional provision for loan losses of $2,230 for the year ended December 31, 2012.

78

Notes to the Consolidated Financial Statements

Dollars in thousands, except per share data

NOTE 14 – Fair Value (continued)

Other Real Estate which is measured at the lower of carrying or fair value less costs to sell had a carrying value of $20 at December 31, 2013. A charge to earnings through Other Operating Income of $321 was included in the year ended December 31, 2013. Other Real Estate which is measured at the lower of carrying or fair value less costs to sell had a carrying value of $150 at December 31, 2012. A charge to earnings through Other Operating Income of $100 was included in the year ended December 31, 2012.

The following table presents quantitative information about Level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis at December 31, 2013 and 2012:

					Range
			Valuation		(Weighted
December 31, 2013	Fair Value		Technique(s)	Unobservable Input(s)	Average)
Impaired Loans - Commercial Real Estate Loans	$	1,346	Sales comparison approach Income approach Cost approach	Adjustment for physical condition of comparable properties sold Adjustment for net operating income generated by the property Adjustment for investor rates of return	12%-80% (53%)
Other Real Estate - Commercial Real Estate Loans	$	20	Sales comparison approach Income approach Cost approach	Adjustment for physical condition of comparable properties sold Adjustment for net operating income generated by the property Adjustment for investor rates of return	50% (50%)

					Range
			Valuation		(Weighted
December 31, 2012	Fair Value		Technique(s)	Unobservable Input(s)	Average)
Impaired Loans - Commercial and Industrial Loans	$	1,231	Sales comparison approach	Adjustment for differences between the comparable sales	4%-68% (8%)
Impaired Loans - Commercial Real Estate Loans	$	1,497	Sales comparison approach Income approach Cost approach	Adjustment for physical condition of comparable properties sold Adjustment for net operating income generated by the property Adjustment for investor rates of return	15%-78% (48%)
Impaired Loans – Agricultural Loans	$	135	Sales comparison approach Income approach	Adjustment for physical condition of comparable properties sold Adjustment for net operating income generated by the property	76% (76%)
Other Real Estate - Commercial Real Estate Loans	$	150	Sales comparison approach Income approach Cost approach	Adjustment for physical condition of comparable properties sold Adjustment for net operating income generated by the property Adjustment for investor rates of return	70% (70%)

79

Notes to the Consolidated Financial Statements

Dollars in thousands, except per share data

NOTE 14 – Fair Value (continued)

The carrying amounts and estimated fair values of the Company’s financial instruments not previously presented are provided in the table below for the periods ending December 31, 2013 and 2012. Not all of the Company’s assets and liabilities are considered financial instruments, and therefore are not included in the table. Because no active market exists for a significant portion of the Company’s financial instruments, fair value estimates were based on subjective judgments, and therefore cannot be determined with precision.

				Fair Value Measurements at
				December 31, 2013 Using
	Carrying Value			Level 1			Level 2			Level 3			Total
Financial Assets:
Cash and Short-term Investments	$	60,232		$	37,370		$	22,862		$	—		$	60,232
Securities Held-to-Maturity		268			—			271			—			271
FHLB Stock and Other Restricted Stock		9,004			N/A			N/A			N/A			N/A
Loans, Net		1,366,452			—			—			1,370,339			1,370,339
Accrued Interest Receivable		7,470			—			1,918			5,552			7,470
Financial Liabilities:
Demand, Savings, and Money Market Deposits		(1,463,122	)		(1,463,122	)		—			—			(1,463,122	)
Time Deposits		(349,034	)		—			(351,707	)		—			(351,707	)
Short-term Borrowings		(53,533	)		—			(53,533	)		—			(53,533	)
Long-term Debt		(87,237	)		—			(83,329	)		(5,311	)		(88,640	)
Accrued Interest Payable		(777	)		—			(732	)		(45	)		(777	)
Unrecognized Financial Instruments:
Commitments to Extend Credit		—			—			—			—			—
Standby Letters of Credit		—			—			—			—			—
Commitments to Sell Loans		—			—			—			—			—

				Fair Value Measurements at
				December 31, 2012 Using
	Carrying Value			Level 1			Level 2			Level 3			Total
Financial Assets:
Cash and Short-term Investments	$	51,794		$	41,624		$	10,170		$	—		$	51,794
Securities Held-to-Maturity		346			—			351			—			351
FHLB Stock and Other Restricted Stock		8,340			N/A			N/A			N/A			N/A
Loans, Net		1,186,483			—			—			1,199,566			1,199,566
Accrued Interest Receivable		7,419			—			1,893			5,526			7,419
Financial Liabilities:
Demand, Savings, and Money Market Deposits		(1,311,748	)		(1,311,748	)		—			—			(1,311,748	)
Time Deposits		(329,183	)		—			(333,170	)		—			(333,170	)
Short-term Borrowings		(71,534	)		—			(71,534	)		—			(71,534	)
Long-term Debt		(89,472	)		—			(66,892	)		(28,872	)		(95,764	)
Accrued Interest Payable		(1,275	)		—			(829	)		(446	)		(1,275	)
Unrecognized Financial Instruments:
Commitments to Extend Credit		—			—			—			—			—
Standby Letters of Credit		—			—			—			—			—
Commitments to Sell Loans		—			—			—			—			—

Cash and Short-Term Investments:

The carrying amount of cash and short-term investments approximate fair values and are classified as Level 1 or Level 2.

Securities Held-to-Maturity:

The fair values for investment securities are determined by quoted market prices, if available (Level 1). For securities where quoted prices are not available, fair values are calculated based on market prices of similar securities (Level 2).

80

Notes to the Consolidated Financial Statements

Dollars in thousands, except per share data

NOTE 14 – Fair Value (continued)

FHLB Stock and Other Restricted Stock:

It is not practical to determine the fair values of FHLB stock and other restricted stock due to restrictions placed on their transferability.

Loans:

Fair values of loans, excluding loans held for sale and collateral dependent impaired loans having a specific allowance allocation, are estimated as follows: For variable rate loans that reprice frequently and with no significant change in credit risk, fair values are based on carrying values resulting in a Level 3 classification. Fair values for other loans are estimated using discounted cash flow analyses, using interest rates currently being offered for loans with similar terms to borrowers of similar credit quality resulting in a Level 3 classification. Impaired loans are valued as described previously. The methods utilized to estimate fair value of loans do not necessarily represent an exit price.

Accrued Interest Receivable:

The carrying amount of accrued interest approximates fair value resulting in a Level 2 or Level 3 classification consistent with the asset they are associated with.

Deposits:

The fair values disclosed for demand deposits (e.g., interest and non-interest checking, savings and certain types of money market accounts) are, by definition, equal to the amount payable on demand at the reporting date (i.e., their carrying amount) resulting in a Level 1 classification. Fair values for fixed rate time deposits are estimated using a discounted cash flows calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits resulting in a Level 2 classification.

Short-term Borrowings:

The carrying amounts of federal funds purchased, borrowings under repurchase agreements, and other short-term borrowings, generally maturing within ninety days, approximate their fair values resulting in a Level 2 classification.

Long-Term Debt:

The fair values of the Company’s long-term borrowings are estimated using discounted cash flow analyses based on the current borrowing rates for similar types of borrowing arrangements resulting in a Level 2 classification.

The fair values of the Company’s subordinated debentures are estimated using discounted cash flow analyses based on the current borrowing rates for similar types of borrowing arrangements resulting in a Level 3 classification.

Accrued Interest Payable:

The carrying amount of accrued interest approximates fair value resulting in a Level 2 or Level 3 classification consistent with the liability they are associated with.

Off-balance Sheet Instruments:

Commitments to extend credit and standby letters of credit are generally short-term or variable rate with minimal fees charged. These instruments have no carrying value, and the fair value is not material. The fair value of commitments to sell loans is the cost or benefit of settling the commitments with the counter-party at the reporting date. At December 31, 2013 and 2012, none of the Company’s commitments to sell loans were mandatory, and there is no cost or benefit to settle these commitments.

NOTE 15 – Segment Information

The Company’s operations include three primary segments: core banking, trust and investment advisory services, and insurance operations. The core banking segment involves attracting deposits from the general public and using such funds to originate consumer, commercial and agricultural, commercial and agricultural real estate, and residential mortgage loans, primarily in the Company’s local markets. The core banking segment also involves the sale of residential mortgage loans in the secondary market. The trust and investment advisory services segment involves providing trust, investment advisory, and brokerage services to customers. The insurance segment offers a full range of personal and corporate property and casualty insurance products, primarily in the Company’s banking subsidiary’s local markets.

81

Notes to the Consolidated Financial Statements

Dollars in thousands, except per share data

NOTE 15 – Segment Information (continued)

The core banking segment is comprised by the Company’s banking subsidiary, German American Bancorp, which operated through 36 banking offices at December 31, 2013. Net interest income from loans and investments funded by deposits and borrowings is the primary revenue for the core-banking segment. The trust and investment advisory services segment’s revenues are comprised primarily of fees generated by German American Financial Advisors & Trust Company. These fees are derived by providing trust, investment advisory, and brokerage services to its customers. The insurance segment primarily consists of German American Insurance, Inc., which provides a full line of personal and corporate insurance products. Commissions derived from the sale of insurance products are the primary source of revenue for the insurance segment.

The following segment financial information has been derived from the internal financial statements of German American Bancorp, Inc., which are used by management to monitor and manage the financial performance of the Company. The accounting policies of the three segments are the same as those of the Company. The evaluation process for segments does not include holding company income and expense. Holding company amounts are the primary differences between segment amounts and consolidated totals, and are reflected in the column labeled “Other” below, along with amounts to eliminate transactions between segments.

			Trust and
			Investment
	Core		Advisory								Consolidated
	Banking		Services			Insurance		Other			Totals
Year Ended December 31, 2013
Net Interest Income	$	69,634	$	21		$	17	$	(1,155	)	$	68,517
Net Gains on Sales of Loans		2,645		—			—		—			2,645
Net Gains on Securities		2,065		—			—		364			2,429
Trust and Investment Product Fees		6		3,355			—		(3	)		3,358
Insurance Revenues		39		31			6,147		—			6,217
Noncash Items:
Provision for Loan Losses		350		—			—		—			350
Depreciation and Amortization		3,944		28			339		150			4,461
Income Tax Expense (Benefit)		12,387		(32	)		320		(1,211	)		11,464
Segment Profit (Loss)		25,389		(70	)		425		(331	)		25,413
Segment Assets at December 31, 2013		2,171,837		11,663			5,636		(25,309	)		2,163,827

			Trust and
			Investment
	Core		Advisory								Consolidated
	Banking		Services			Insurance		Other			Totals
Year Ended December 31, 2012
Net Interest Income	$	68,311	$	21		$	34	$	(2,118	)	$	66,248
Net Gains on Sales of Loans		3,234		—			—		—			3,234
Net Gains on Securities		1,667		—			—		—			1,667
Trust and Investment Product Fees		5		2,657			—		(5	)		2,657
Insurance Revenues		23		36			5,465		—			5,524
Noncash Items:
Provision for Loan Losses		2,412		—			—		—			2,412
Depreciation and Amortization		4,099		24			415		150			4,688
Income Tax Expense (Benefit)		11,999		(187	)		181		(1,324	)		10,669
Segment Profit (Loss)		25,118		(298	)		250		(1,015	)		24,055
Segment Assets at December 31, 2012		2,006,992		11,551			8,333		(20,576	)		2,006,300

82

Notes to the Consolidated Financial Statements

Dollars in thousands, except per share data

NOTE 15 – Segment Information (continued)

			Trust and
			Investment
	Core		Advisory								Consolidated
	Banking		Services			Insurance		Other			Totals
Year Ended December 31, 2011
Net Interest Income	$	66,099	$	16		$	22	$	(2,156	)	$	63,981
Net Gains on Sales of Loans		2,381		—			—		—			2,381
Net Gains on Securities		2,089		—			—		935			3,024
Trust and Investment Product Fees		3		2,147			—		(5	)		2,145
Insurance Revenues		67		13			5,755		(16	)		5,819
Noncash Items:
Provision for Loan Losses		6,800		—			—		—			6,800
Depreciation and Amortization		4,481		26			482		150			5,139
Income Tax Expense (Benefit)		9,171		(353	)		272		(1,364	)		7,726
Segment Profit (Loss)		20,855		(545	)		352		(413	)		20,249
Segment Assets at December 31, 2011		1,875,417		11,801			7,948		(21,399	)		1,873,767

NOTE 16 – Parent Company Financial Statements

The condensed financial statements of German American Bancorp, Inc. are presented below:

CONDENSED BALANCE SHEETS

	December 31,
	2013			2012
ASSETS
Cash	$	9,721		$	29,499
Securities Available-for-Sale, at Fair Value		353			733
Investment in Subsidiary Bank		195,480			184,093
Investment in Non-banking Subsidiaries		3,650			4,064
Other Assets		6,271			6,245
Total Assets	$	215,475		$	224,634
LIABILITIES
Borrowings	$	12,024		$	35,624
Other Liabilities		3,354			3,984
Total Liabilities		15,378			39,608
SHAREHOLDERS’ EQUITY
Common Stock		13,174			12,637
Additional Paid-in Capital		108,022			95,617
Retained Earnings		84,164			66,421
Accumulated Other Comprehensive Income (Loss)		(5,263	)		10,351
Total Shareholders’ Equity		200,097			185,026
Total Liabilities and Shareholders’ Equity	$	215,475		$	224,634

83

Notes to the Consolidated Financial Statements

Dollars in thousands, except per share data

NOTE 16 – Parent Company Financial Statements (continued)

CONDENSED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

	Years Ended December 31,
	2013			2012			2011
INCOME
Dividends from Subsidiaries
Bank	$	14,000		$	17,500		$	22,500
Non-bank		1,500			—			1,350
Interest Income		31			50			38
Net Gain on Securities		343			—			935
Other Income		75			70			71
Total Income		15,949			17,620			24,894
EXPENSES
Salaries and Employee Benefits		824			458			444
Professional Fees		485			352			379
Occupancy and Equipment Expense		7			7			8
Interest Expense		1,246			2,221			2,239
Other Expenses		615			359			357
Total Expenses		3,177			3,397			3,427
INCOME BEFORE INCOME TAXES AND EQUITY IN UNDISTRIBUTED INCOME OF SUBSIDIARIES		12,772			14,223			21,467
Income Tax Benefit		1,235			1,338			1,364
INCOME BEFORE EQUITY IN UNDISTRIBUTED INCOME OF SUBSIDIARIES		14,007			15,561			22,831
Equity in Undistributed (Excess Distributed) Income of Subsidiaries		11,406			8,494			(2,582	)
NET INCOME		25,413			24,055			20,249
Other Comprehensive Income:
Changes in Unrealized Gain (Loss) on Securities, Available-for-Sale		(15,874	)		(124	)		5,677
Changes in Unrecognized Amounts in Pension, Net		231			(47	)		4
Changes in Unrecognized Loss on Postretirement Benefit Obligation, Net		29			(21	)		(38	)
TOTAL COMPREHENSIVE INCOME	$	9,799		$	23,863		$	25,892

84

Notes to the Consolidated Financial Statements

Dollars in thousands, except per share data

NOTE 16 – Parent Company Financial Statements (continued)

CONDENSED STATEMENTS OF CASH FLOWS

	Years Ended December 31,
	2013			2012			2011
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income	$	25,413		$	24,055		$	20,249
Adjustments to Reconcile Net Income to Net Cash from Operations
Loss (Gain) on Securities, Net		(343	)		—			(935	)
Change in Other Assets		283			33			3,656
Change in Other Liabilities		(510	)		203			(2,191	)
Equity Based Compensation		329			628			635
Excess Tax Benefit from Restricted Share Grant		(28	)		(23	)		(37	)
Equity in Excess Distributed (Undistributed) Income of Subsidiaries		(11,406	)		(8,494	)		2,582
Net Cash from Operating Activities		13,738			16,402			23,959
CASH FLOWS FROM INVESTING ACTIVITIES
Capital Contribution to Subsidiaries		—			(150	)		—
Acquire Banking Entities		(2,135	)		—			(1,995	)
Net Cash from Investing Activities		(2,135	)		(150	)		(1,995	)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from Issuance of Long-term Debt		10,000			—			—
Repayment of Long-term Debt		(33,750	)		(1,500	)		(1,500	)
Issuance of Common Stock		20			37			12
Income Tax Benefit from Restricted Share Grant		28			23			37
Employee Stock Purchase Plan		(9	)		(67	)		(25	)
Dividends Paid		(7,670	)		(7,068	)		(7,047	)
Net Cash from Financing Activities		(31,381	)		(8,575	)		(8,523	)
Net Change in Cash and Cash Equivalents		(19,778	)		7,677			13,441
Cash and Cash Equivalents at Beginning of Year		29,499			21,822			8,381
Cash and Cash Equivalents at End of Year	$	9,721		$	29,499		$	21,822

NOTE 17 – Business Combinations, Goodwill and Intangible Assets

Business Combinations

Effective October 1, 2013, the Company acquired United Commerce Bancorp and its subsidiary, United Commerce Bank. The acquisition was accomplished by the merger of United Commerce Bancorp into the German American Bancorp, Inc., immediately followed by the merger of United Commerce Bank into German American Bancorp, Inc.’s bank subsidiary (German American Bancorp). The United Commerce Bank operated two banking offices in Bloomington, Indiana. United Commerce’s consolidated assets and equity (unaudited) as of October 1, 2013 totaled $119.7 million and $13.7 million, respectively. The Company accounted for the transaction under the acquisition method of accounting which means that the acquired assets and liabilities were recorded at fair value at the date of acquisition. See Note 4 for additional information related to the fair value of loans acquired. The Company determined the fair value of core deposit intangibles, securities and deposits with the assistance of third party valuations. The estimated fair values over loans are subject to refinement as additional information relative to the closing date fair values becomes available through the measurement period.

In accordance with ASC 805, the Company has expensed approximately $251 of direct acquisition costs and recorded $1.7 million of goodwill and $2.1 million of intangible assets. The intangible assets are related to core deposits and are being amortized on an accelerated basis over 8 years. For tax purposes, goodwill totaling $1.7 million is non-deductible. The following table summarizes the fair value of the total consideration transferred as a part of the United Commerce acquisition as well as the fair value of identifiable assets acquired and liabilities assumed as of the effective date of the transaction.

85

Notes to the Consolidated Financial Statements

Dollars in thousands, except per share data

NOTE 17 – Business Combinations, Goodwill and Intangible Assets (continued)

October 1, 2013

Consideration
Cash for Options and Fractional Shares	$	643
Cash Consideration		1,391
Equity Instruments		13,348
Fair Value of Total Consideration Transferred	$	15,382

Recognized Amounts of Identifiable Assets Acquired and Liabilities Assumed:

Cash and Due From Banks	$	430
Federal Funds Sold, Other Short-term Investments		7,362
Interest-bearing Time Deposits with Banks		100
Securities		25,644
Loans		79,575
Premises, Furniture & Equipment		1,718
Core Deposit Intangible		2,052
Accrued Interest Receivable & Other Assets		3,638
Deposits		(106,633	)
Accrued Interest Payable and Other Liabilities		(175	)
Total Identifiable Net Assets	$	13,711
Goodwill	$	1,671

Under the terms of the merger agreement, the Company issued approximately 503,000 shares of its common stock to the former shareholders of United Commerce. Each United Commerce common shareholder of record at the effective time of the merger became entitled to receive 0.5456 shares of common stock of the Company for each of their former shares of United Commerce common stock.

The Company at the effective time of the merger owned 44,100 shares of United Commerce’s outstanding common stock (approximately 4.6% of United Commerce’s common shares then outstanding). All of these shares were cancelled at the effective time of the merger and were not exchanged for shares of the Company in the merger.

In connection with the closing of the merger, the Company paid to United Commerce’s shareholders of record at the close of business on September 30, 2013, cash consideration of $1.51 per United Commerce share (an aggregate of $1,391 to shareholders other than the Company) and the Company paid approximately $643 to persons who held options to purchase United Commerce common stock (all of which rights were cancelled at the effective time of the merger and were not assumed by the Company).

This acquisition was consistent with the Company’s strategy to build a regional presence in Southern Indiana. 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.

Goodwill

The changes in the carrying amount of goodwill for the periods ended December 31, 2013, 2012 and 2011 were classified as follows:

	2013		2012		2011
Beginning of Year	$	18,865	$	18,865	$	9,835
Acquired Goodwill		1,671		—		9,030
Impairment		—		—		—
End of Year	$	20,536	$	18,865	$	18,865

86

Notes to the Consolidated Financial Statements

Dollars in thousands, except per share data

NOTE 17 – Business Combinations, Goodwill and Intangible Assets (continued)

Of the $20,536 carrying amount of goodwill, $19,204 is allocated to the core banking segment and $1,332 is allocated to the insurance segment for the period ended December 31, 2013. Of the $18,865 carrying amount of goodwill, $17,533 is allocated to the core banking segment and $1,332 is allocated to the insurance segment for the periods ended December 31, 2012 and 2011.

Impairment exists when a reporting unit’s carrying value of goodwill exceeds its fair value. At December 31, 2013, 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.

Acquired Intangible Assets

Acquired intangible assets were as follows as of year end:	2013
	Gross		Accumulated
	Amount		Amortization
Core Banking
Core Deposit Intangible	$	9,004	$	5,815
Unidentified Branch Acquisition Intangible		257		257
Insurance
Customer List		5,199		5,060
Total	$	14,460	$	11,132
Acquired intangible assets were as follows as of year end:	2012
		Gross		Accumulated
		Amount		Amortization
Core Banking
Core Deposit Intangible	$	6,952	$	4,665
Unidentified Branch Acquisition Intangible		257		257
Insurance
Customer List		5,199		4,794
Total	$	12,408	$	9,716

Amortization Expense was $1,416, $1,655 and $1,956, for 2013, 2012 and 2011.

Estimated amortization expense for each of the next five years is as follows:

2014	$	1,254
2015		790
2016		493
2017		323
2018		235

87

Notes to the Consolidated Financial Statements

Dollars in thousands, except per share data

NOTE 18 – Other Comprehensive Income (Loss)

The table below summarizes the changes in accumulated other comprehensive income (loss) by component for the year ending December 31, 2013, net of tax:

	Unrealized
	Gains and			Defined
	Losses on			Benefit
	Available-for-			Pension			Postretirement
	Sale Securities			Items			Benefit Items			Total
Beginning Balance	$	10,643		$	(231	)	$	(61	)	$	10,351
Other Comprehensive Income (Loss) Before
Reclassification		(14,295	)		453			51			(13,791	)
Amounts Reclassified from Accumulated
Other Comprehensive Income		(1,579	)		(222	)		(22	)		(1,823	)
Net Current Period Other
Comprehensive Income (Loss)		(15,874	)		231			29			(15,614	)
Ending Balance	$	(5,231	)	$	—		$	(32	)	$	(5,263	)

The table below summarizes the classifications out of accumulated other comprehensive income (loss) by component for the year ending December 31, 2013:

	Amount Reclassified From
Details about Accumulated Other	Accumulated Other			Affected Line Item in the Statement
Comprehensive Income (Loss) Components	Comprehensive Income (Loss)			Where Net Income is Presented
Unrealized Gains and Losses on
Available-for-Sale Securities	$	(2,429	)	Net (Gain) Loss on Securities
		850		Income Tax Expense
		(1,579	)	Net of Tax
Amortization of Defined Benefit Pension Items
Prior Service Costs	$	(13	)	Salaries and Employee Benefits
Actuarial Gains (Losses)		(360	)	Salaries and Employee Benefits
		151		Income Tax Expense
		(222	)	Net of Tax
Amortization of Post Retirement Plan Items
Actuarial Gains (Losses)	$	(37	)	Salaries and Employee Benefits
		15		Income Tax Expense
		(22	)	Net of Tax
Total Reclassifications for the Period	$	(1,823	)

88

Notes to the Consolidated Financial Statements

Dollars in thousands, except per share data

NOTE 19 – Quarterly Financial Data (Unaudited)

The following table represents selected quarterly financial data for the Company:

	Interest		Net Interest		Net		Earnings per Share
	Income		Income		Income		Basic		Diluted
2013
First Quarter	$	18,370	$	16,225	$	5,809	$	0.46	$	0.46
Second Quarter		18,458		16,712		6,532		0.52		0.52
Third Quarter		18,812		17,192		6,483		0.51		0.51
Fourth Quarter		20,032		18,388		6,589		0.50		0.50
2012
First Quarter	$	19,727	$	16,612	$	5,602	$	0.44	$	0.44
Second Quarter		19,563		16,649		5,967		0.47		0.47
Third Quarter		18,953		16,393		6,292		0.50		0.50
Fourth Quarter		18,917		16,594		6,194		0.49		0.49

89

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

Not Applicable.

Item 9A. Controls and Procedures.

Disclosure Controls and Procedures

As of December 31, 2013, the Company carried out an evaluation, under the supervision and with the participation of its principal executive officer and principal financial officer, of the effectiveness of the design and operation of its disclosure controls and procedures. Based on this evaluation, the Company’s principal executive officer and principal financial officer concluded that the Company’s disclosure controls and procedures are effective in timely alerting them to material information required to be included in the Company’s periodic reports filed with the Securities and Exchange Commission. There are inherent limitations to the effectiveness of systems of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective systems of disclosure controls and procedures can provide only reasonable assurances of achieving their control objectives.

Changes in Internal Control Over Financial Reporting in Most Recent Fiscal Quarter

There was no change in the Company’s internal control over financial reporting that occurred during the Company’s fourth fiscal quarter of 2013 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

Management’s Report on Internal Control Over Financial Reporting

The management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles. The Company’s internal control over financial reporting includes those policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2013. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in the 1992 Internal Control-Integrated Framework. Based on our assessment and those criteria, management concluded that the Company maintained effective internal control over financial reporting as of December 31, 2013.

The Company’s independent registered public accounting firm has issued their report on the Company’s internal control over financial reporting. That report is included in Item 8. Financial Statements and Supplementary Data of this Report under the heading, Report of Independent Registered Public Accounting Firm.

Item 9B. Other Information.

Not applicable.

90

PART III

Item 10. Directors, Executive Officers, and Corporate Governance.

Information relating to directors and executive officers of the Company will be included under the captions “Election of Directors” and “Our Executive Officers” in the Company’s Proxy Statement for the Annual Meeting of Shareholders to be held in May 2014, which will be filed within 120 days of the end of the fiscal year covered by this Report (the “2014 Proxy Statement”), which sections are incorporated herein in partial response to this Item’s informational requirements.

Section 16(a) Compliance. Information relating to Section 16(a) compliance will be included in the 2014 Proxy Statement under the caption of “Section 16(a): Beneficial Ownership Reporting Compliance” and is incorporated herein by reference.

Code of Business Conduct. The Company’s Board of Directors has adopted a Code of Business Conduct, which constitutes a “code of ethics” as that term is defined by SEC rules adopted under the Sarbanes-Oxley Act of 2002 (“SOA”). The Company has posted a copy of the Code of Business Conduct on its Internet website (www.germanamerican.com). The Company intends to satisfy its disclosure requirements under Item 5.05 of Form 8-K regarding certain amendments to, or waivers of, the Code of Business Conduct, by posting such information on its Internet website, except that waivers that must under NASDAQ rules be filed with the SEC on Form 8-K will be so filed.

Audit Committee Identification. The Board of Directors of the Company has a separately-designated standing audit committee established in accordance with Section 3(a) (58) (A) of the Securities Exchange Act of 1934. The description of the Audit Committee of the Board of Directors, and the identification of its members, will be set forth in the 2014 Proxy Statement under the caption “ELECTION OF DIRECTORS”, which section is incorporated herein by reference.

Audit Committee Financial Expert. The Board of Directors has determined that M. Darren Root, a director who serves on the Audit Committee of the Board of Directors and who is an independent director as defined by NASDAQ listing standards, is an “audit committee financial expert” as that term is defined by SEC rules adopted under SOA.

Lack of Changes in Nominating/Governance Committee Procedures re Shareholder Recommendations of Nominees. There has been no material change in the procedures by which the Company’s shareholders may recommend nominees for election to the Board of Directors of the Company that have been implemented since the last disclosure of such procedures in the Company’s Proxy Statement for the Annual Meeting of Shareholders that was held in May 2013.

Item 11. Executive Compensation.

Information relating to compensation of the Company’s executive officers and directors (including the required disclosures under the subheadings “Compensation Committee Interlocks and Insider Participation” and “Compensation Committee Report”) will be included under the caption “Executive and Director Compensation” in the 2014 Proxy Statement of the Company, which section is incorporated herein by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

Information relating to security ownership of certain beneficial owners and the directors and executive officers of the Company will be included under the captions “Ownership of Our Common Shares by Our Directors and Executive Officers” and “Principal Owners of Common Shares” of the 2014 Proxy Statement of the Company, which sections are incorporated herein by reference.

Equity Compensation Plan Information

The Company maintains four plans under which it has authorized the issuance of its Common Shares to employees and non-employee directors as compensation: its 1992 Stock Option Plan (under which no new grants may be made), its 1999 Long-Term Equity Incentive Plan (under which no new grants may be made), its 2009 Long-Term Equity Incentive Plan, and its 2009 Employee Stock Purchase Plan. Each of these four plans was approved by the requisite vote of the Company’s common shareholders in the year of adoption by the Board of Directors. The Company is not a party to any individual compensation arrangement involving the authorization for issuance of its equity securities to any single person, other than option agreements and restricted stock award agreements that have been granted under the terms of one of the four plans identified above. The following table sets forth information regarding these plans as of December 31, 2013:

91

						Number of Securities
						Remaining Available for
						Future Issuance under
	Number of Securities			Weighted Average		Equity Compensation
	to be Issued upon Exercise			Exercise Price of		Plans (Excluding
	of Outstanding Options,			Outstanding Options,		Securities Reflected in
Plan Category	Warrants or Rights			Warrants and Rights		First Column)
Equity compensation plans approved by security holders		69,517	(a)	$	16.61		800,747	(b)
Equity compensation plans not approved by security holders		—			—		—
Total		69,517		$	16.61		800,747

^(a) Does not include any shares that employees may have the right to purchase under the Employee Stock Purchase Plan in August 2014 in respect of employee payroll deductions of participating employees that had accumulated as of December 31, 2013 during the plan year that commenced in August 2013. Although these employees have the right under this Plan to have their accumulated payroll deductions applied to the purchase of Common Shares at a discounted price in August 2014, the price at which such shares may be purchased and the number of shares that may be purchased under that Plan at that time is not presently determinable.

^(b) Represents 431,451 shares that the Company may in the future issue to employees under the Employee Stock Purchase Plan (although the Company typically purchases the shares needed for sale to participating employees on the open market rather than issuing new issue shares to such employees) and 369,296 shares that were available for grant or issuance at December 31, 2013 under the 2009 Long-Term Equity Incentive Plan. Under the Long-Term Equity Incentive Plan, the aggregate number of Common Shares available for the grant of awards (subject to customary anti-dilution adjustment provisions) cumulatively following the adoption of the Plan in 2009 through the expiration of the Plan in 2019 may not exceed the sum of the following: (a) 500,000 shares, plus (b) any shares exchanged by a participant as full or partial payment to the Company of the exercise price of an option granted to the participant under the Plan; plus (c) at the beginning of each calendar year, an additional number of shares (if any) equal to the number of shares that would result in the number of shares available for awards as of such date being equal to one percent (1%) of the total number of the Company’s shares outstanding as of the immediately preceding December 31, on a fully-diluted basis.

For additional information regarding the Company’s equity incentive plans and employee stock purchase plan, see Note 8 to the consolidated financial statements in Item 8 of this Report.

Item 13. Certain Relationships and Related Transactions, and Director Independence.

Information responsive to this Item 13 will be included under the captions “Election of Directors” and “Transactions with Related Persons” of the 2014 Proxy Statement of the Company, which sections are incorporated herein by reference.

Item 14. Principal Accounting Fees and Services.

Information responsive to this Item 14 will be included in the 2014 Proxy Statement under the caption “Principal Accountant Fees and Services”, which section is incorporated herein by reference.

92

PART IV

Item 15. Exhibits, Financial Statement Schedules.

(a)(1) Financial Statements

The following items are included in Item 8 of this Report:

German American Bancorp, Inc. and Subsidiaries:	Page #
Report of Independent Registered Public Accounting Firm	39
Consolidated Balance Sheets at December 31, 2013 and 2012	40
Consolidated Statements of Income, years ended December 31, 2013, 2012 and 2011	41
Consolidated Statements of Comprehensive Income, years ended December 31, 2013, 2012 and 2011	42
Consolidated Statements of Changes in Shareholders’ Equity, years ended December 31, 2013, 2012 and 2011	43
Consolidated Statements of Cash Flows, years ended December 31, 2013, 2012 and 2011	44
Notes to the Consolidated Financial Statements	45-89

(a)(2) Financial Statement Schedules

None.

(a)(3) Exhibits

The Exhibit Index, which index follows the signature page to this report and is hereby incorporated herein by reference, sets forth a list of those exhibits filed herewith, and includes and identifies management contracts or compensatory plans or arrangements required to be filed as exhibits to this Form 10-K by Item 601 (b)(10)(iii) of Regulation S-K.

In reviewing any agreements included as exhibits to this report, please remember that they are included to provide you with information regarding their terms and are not intended to provide any other factual or disclosure information about us or the other parties to the agreements. The agreements may contain representations and warranties by the parties to the agreements, including us. These representations and warranties have been made solely for the benefit of the other parties to the applicable agreement and:

· should not in all instances be treated as categorical statements of fact, but rather as a way of allocating the risk to one of the parties if those statements prove to be inaccurate;

· may have been qualified by disclosures that were made to the other party in connection with the negotiation of the applicable agreement, which disclosures are not necessarily reflected in the agreement;

· may apply standards of materiality in a way that is different from what may be viewed as material to you or other investors; and

· were made only as of the date of the applicable agreement or such other date or dates as may be specified in the agreement and are subject to more recent developments.

Accordingly, these representations and warranties may not describe the actual state of affairs as of the date they were made or at any other time.

93

Pursuant to the requirements of Section 13 of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

		GERMAN AMERICAN BANCORP, INC.
		(Registrant)
Date:	March 12, 2014	By/s/Mark A. Schroeder
		Mark A. Schroeder, Chairman and
		Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

Date:	March 12, 2014	By/s/Mark A. Schroeder
		Mark A. Schroeder, Chairman and
		Chief Executive Officer
Date:	March 12, 2014	By/s/Douglas A. Bawel
		Douglas A. Bawel, Director
Date:	March 12, 2014	By/s/Christina M. Ernst
		Christina M. Ernst, Director
Date:	March 12, 2014	By/s/Marc D. Fine
		Marc D. Fine, Director
Date:	March 12, 2014	By/s/U. Butch Klem
		U. Butch Klem, Director
Date:	March 12, 2014	By/s/J. David Lett
		J. David Lett, Director
Date:	March 12, 2014	By/s/Gene C. Mehne
		Gene C. Mehne, Director
Date:	March 12, 2014	By/s/Chris A. Ramsey
		Chris A. Ramsey, Director
Date:	March 12, 2014	By/s/M. Darren Root
		M. Darren Root, Director
Date:	March 12, 2014	By/s/Thomas W. Seger
		Thomas W. Seger, Director
Date:	March 12, 2014	By/s/Raymond W. Snowden
		Raymond W. Snowden, Director
Date:	March 12, 2014	By/s/Michael J. Voyles
		Michael J. Voyles, Director
Date:	March 12, 2014	By/s/Bradley M. Rust
		Bradley M. Rust, Executive Vice President and
		Chief Financial Officer (principal accounting officer
		and principal financial officer)

94

INDEX OF EXHIBITS

Exhibit No.	Description
2.1	Agreement and Plan of Reorganization among German American Bancorp, Inc., United Commerce Bancorp, German American Bancorp, and United Commerce Bank, dated July 23, 2013.  The copy of this exhibit filed as Exhibit 2.1 to Registrant’s Current Report on Form 8-K filed July 24, 2013 is incorporated herein by reference. Schedules identified in the list of Schedules to this Agreement are not filed as part of this Exhibit, but the Registrant agrees to furnish to the Commission supplementally any omitted schedule upon request.
3.1	Restatement of the Articles of Incorporation of the Registrant is incorporated by reference from Exhibit 3.1 to the Registrant’s Current  Report on 8-K filed July 1, 2011.
3.2	Restated Bylaws of German American Bancorp, Inc., as amended and restated July 27, 2009.  The copy of this exhibit filed as Exhibit 3 to the current report on Form 8-K of the Registrant filed July 31, 2009 is incorporated herein by reference.
4.1	No long-term debt instrument issued by the Registrant exceeds 10% of consolidated total assets or is registered.  In accordance with paragraph 4 (iii) of Item 601(b) of Regulation S-K, the Registrant will furnish the Securities and Exchange Commission copies of long-term debt instruments and related agreements upon request.
4.2	Terms of Common Shares and Preferred Shares of the Registrant (included in Restatement of Articles of Incorporation) are incorporated by reference from Exhibit 3.1 to the Registrant’s Current  Report on 8-K filed July 1, 2011.
4.3	Specimen stock certificate for Common Shares of the Registrant is incorporated by reference from Exhibit 99.1 to the Registrant’s Current Report on Form 8-K filed October 21, 2010.
10.1*	The Registrant’s 1992 Stock Option Plan, as amended, is incorporated by reference from Exhibit 10.1 to the Registrant’s Registration Statement on Form S-4 filed October 14, 1998.
10.2*	Amendment to 1992 Stock Option Plan effective April 1, 2012, is incorporated by reference from Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2012.
10.3*	Form of Director Deferred Compensation Agreement between The German American Bank and certain of its Directors is incorporated herein by reference from Exhibit 10.4 to the Registrant’s Registration Statement on Form S-4 filed January 21, 1993 (the Agreement entered into by former director George W. Astrike, a copy of which was filed as Exhibit 10.4 to the Registrant’s Registration Statement on Form S-4 filed January 21, 1993, is substantially identical to the Agreements entered into by the other Directors, some of whom remain directors of the Registrant). The schedule following such Exhibit 10.4 lists the Agreements with the other Directors and sets forth the material detail in which such Agreements differ from the Agreement filed as such Exhibit 10.4.
10.4*+	The Registrant’s 1999 Long-Term Equity Incentive Plan, as amended through February 22, 2008.
10.5*	Basic Plan Document for the Registrant’s Nonqualified Savings Plan is incorporated by reference from Exhibit 10.5 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2010.

95

10.6*	Adoption Agreement for the Registrant’s Nonqualified Savings Plan dated August 17, 2004, is incorporated by reference from Exhibit 10.6 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2010.
10.7*	First Amendment to the Registrant’s Nonqualified Savings Plan dated August 17, 2004, is incorporated by reference from Exhibit 10.7 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2010.
10.8*	Form of Non-Employee Director Stock Option Agreement (new grant, ten year expiration, no vesting) that in prior periods was typically issued to non-employee members of the Board of Directors as part of annual director fee retainer (not Incentive Stock Option for tax purposes), is incorporated by reference from Exhibit 10.10 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2010.
10.9*	Form of Employee Director Stock Option Agreement (new grant, ten year expiration, no vesting) that in prior periods was typically issued to employee members of the Board of Directors as part of annual director fee retainer (intended to be Incentive Stock Option for tax purposes), is incorporated by reference from Exhibit 10.11 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2010.
10.10*	Description of Director Compensation Arrangements for the 12 month period ending at 2012 Annual Reorganization Meeting of the Board of Directors is incorporated by reference from the description included in Exhibit 10.1 to the Registrant’s Quarterly Report for the quarter ended June 30, 2011.
10.11*	Descriptions of Director Compensation Arrangements for the 12 month period ending at 2013 Annual Reorganization Meeting of the Board of Directors are incorporated by reference from the descriptions included in Item 5.02 of the Registrant’s Current Report on Form 8-K filed June 29, 2012, and in Item 5.02 of the Registrant’s Current Report on Form 8-K filed December 21, 2012.
10.12*	Description of Director Compensation Arrangements for the 12 month period ending at the 2014 Annual Reorganizational Meeting of the Board of Directors is incorporated by reference from the description included in Item 5.02 of the Registrant’s Current Report on Form 8-K filed June 27, 2013, and in Item 5.02 of the Registrant’s Current Report on Form 8-K filed December 18, 2013.
10.13*	Description of Executive Management Incentive Plan for 2011 (awards payable in 2012) is incorporated by reference from the description contained in Item 5.02 of the Registrant’s Current Report on Form 8-K filed March 5, 2011.
10.14*	Description of Executive Management Incentive Plan for 2012 (awards payable in 2013) is incorporated by reference from the description included in Item 5.02 of the Registrant’s Current Report on Form 8-K filed May 4, 2012.
10.15*	Description of Executive Management Incentive Plan for 2013 (awards payable in 2014) adopted by the Board of Directors on March 25, 2013, is incorporated by reference from the description included in Item 5.02 of the Registrant’s Current Report on Form 8-K filed March 29, 2013.
10.16*	Executive Supplemental Retirement Income Agreement dated October 1, 1996, between First Federal Bank, F.S.B. and Bradley M. Rust, as amended by a First Amendment between Bradley M. Rust and the Registrant dated December 30, 2008, is incorporated by reference to Exhibit 10.18 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2009.

96

10.17*	Form of Restricted Stock Award Agreement that evidences the terms of awards of restricted stock grants and related cash entitlements granted under the 2009 Long-Term Equity Incentive Plan prior to 2013, is incorporated by reference from Exhibit 10.18 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2011.
10.18*	Form of Restricted Stock Award Agreement that evidences the terms of awards of restricted stock grants granted under the 2009 Long-Term Equity Incentive Plan to certain Directors in December 2012 is incorporated by reference from Exhibit 10.20 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2012.
10.19*+	Form of Restricted Stock Award Agreement that evidences the terms of awards of restricted stock grants granted under the 2009 Long-Term Equity Incentive Plan to certain Directors in December 2013.
10.20*	Resolutions of Stock Option Committee of Board of Directors of the Registrant amending outstanding stock options by accelerating in full all vesting periods and exercise date restrictions and terminating replacement stock option privileges in connection with future option exercises, adopted by written consent effective December 29, 2005, is incorporated by reference to Exhibit 10.19 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2011.
10.21	Loan Agreement between Stock Yards Bank & Trust Company and German American Bancorp, Inc. dated January 25, 2013.  The copy of this exhibit filed as Exhibit 99.1 to the Company’s Current Report on Form 8-K filed January 29, 2013, is incorporated herein by reference.
10.22	Promissory Note (Term Note) made by German American Bancorp, Inc., to Stock Yards Bank & Trust Company dated January 25, 2013. The copy of this exhibit filed as Exhibit 99.2 to the Company’s Current Report on Form 8-K filed January 29, 2013, is incorporated herein by reference.
10.23	Promissory Note (Revolving Note) made by German American Bancorp, Inc., to Stock Yards Bank & Trust Company dated January 25, 2013.  The copy of this exhibit filed as Exhibit 99.3 to the Company’s Current Report on Form 8-K filed January 29, 2013, is incorporated herein by reference.
10.24	Stock Pledge Agreement between Stock Yards Bank & Trust Company and German American Bancorp, Inc. dated January 25, 2013. The copy of this exhibit filed as Exhibit 99.4 to the Company’s Current Report on Form 8-K filed January 29, 2013, is incorporated herein by reference.
10.25+	Omnibus Amendment to Loan Documents between Stock Yards Bank & Trust Company and German American Bancorp, Inc. dated as of December 31, 2013.
10.26*	German American Bancorp, Inc., 2009 Long Term Equity Incentive Plan. This exhibit is incorporated by reference from Exhibit 99.1 to the Registrant’s Registration Statement on Form S-8 (No. 333-160749) filed July 23, 2009.
10.27*	German American Bancorp, Inc., 2009 Employee Stock Purchase Plan. This exhibit is incorporated by reference from Exhibit 99.2 to the Registrant’s Registration Statement on Form S-8 (No. 333-160749) filed July 23, 2009.
10.28	Agreement and Plan of Reorganization among German American Bancorp, Inc., United Commerce Bancorp, German American Bancorp, and United Commerce Bank, dated July 23, 2013.  The copy of this exhibit filed as Exhibit 2.1 to Registrant’s Current Report on Form 8-K filed July 24, 2013 is incorporated herein by reference.

97

10.29*	Form of LTI Restricted Stock Award Agreement that evidences the terms of awards of restricted stock grants and related cash entitlements that were granted to executive officers during March 2013 pursuant to the Management Long-Term Incentive Plan component of the 2012 Executive Management Incentive Plan with respect to the performance period ended December 31, 2012. This exhibit is incorporated by reference from Exhibit 10.6 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2013.
21+	Subsidiaries of the Registrant
23+	Consent of Crowe Horwath LLP
31.1+	Sarbanes-Oxley Act of 2002, Section 302 Certification for Chairman and Chief Executive Officer.
31.2+	Sarbanes-Oxley Act of 2002, Section 302 Certification for Executive Vice President (Principal Financial Officer).
32.1+	Sarbanes-Oxley Act of 2002, Section 906 Certification for Chairman and Chief Executive Officer.
32.2+	Sarbanes-Oxley Act of 2002, Section 906 Certification for Executive Vice President (Principal Financial Officer).
101++	The following materials from German American Bancorp, Inc.’s Form 10-K Report for the annual period ended December 31, 2013, formatted in XBRL: (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Income, (iii) the Consolidated Statements of Comprehensive Income, (iv) the Consolidated Statements of Cash Flows, (v) the Consolidated Statements of Changes in Shareholders’ Equity and (vi) the Notes to the Consolidated Financial Statements.

* Exhibits that describe or evidence all management contracts or compensatory plans or arrangements required to be filed as exhibits to this Report are indicated by an asterisk.

+ Exhibits that are filed with this Report (other than through incorporation by reference to other disclosures or exhibits) are indicated by a plus sign.

++ Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files on Exhibit 101 hereto are furnished and not deemed filed or part of a registration statement or prospectus for purposes of Sections 11 and 12 of the Securities Act of 1933, as amended, and are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.

GERMAN AMERICAN BANCORP, INC. WILL FURNISH TO ANY SHAREHOLDER AS OF MARCH 1, 2014 A COPY OF ANY OF THE ABOVE-LISTED EXHIBITS UPON THE PAYMENT OF A CHARGE OF $.50 PER PAGE IN ORDER TO DEFRAY ITS EXPENSES IN PROVIDING SUCH EXHIBIT. SUCH REQUEST SHOULD BE ADDRESSED TO GERMAN AMERICAN BANCORP, INC., ATTN: TERRI A. ECKERLE, SHAREHOLDER RELATIONS, P.O. BOX 810, JASPER, INDIANA, 47546.

98

EX-10.4

EXHIBIT 10.4

GERMAN AMERICAN BANCORP

1999 LONG-TERM EQUITY INCENTIVE PLAN

ARTICLE I

ESTABLISHMENT AND PURPOSE

Section 1.01. Establishment and Term of Plan. German American Bancorp, an Indiana corporation (the "Company"), hereby establishes the German American Bancorp 1999 Long-Term Equity Incentive Plan (the "Plan"), effective as of April 22, 1999, subject to the approval of the Plan at the Company's 1999 Annual Meeting of Shareholders.

Section 1.02. Purpose. The Plan is designed to promote the interests of the Company, its subsidiaries, and its shareholders by providing stock-based incentives to selected Employees and Non-Employee Directors of the Company and its subsidiaries who are expected to contribute materially to the success of the Company and its subsidiaries. The purpose of the Plan is to provide a means of rewarding performance and to provide an opportunity to increase the personal ownership interest of Employees and Non-Employee Directors in the continued success of the Company. The Company believes that the Plan will assist its efforts to attract and retain quality Employees and Non-Employee Directors.

ARTICLE II

ADMINISTRATION

Section 2.01. Administrative Committee. The Plan shall be administered by the Committee, which shall serve at the pleasure of the Board of Directors, except that, for the purpose of awards made to Non-Employee Directors, the full Board of Directors shall serve as the Committee. The Committee shall have full authority to administer the Plan, including authority to interpret and construe any provision of the Plan and to adopt such rules and regulations for administering the Plan as it may deem necessary to comply with the requirements of the Plan or any applicable law.

Section 2.02. Powers of the Committee. The Committee shall, subject to the terms of this Plan, have the authority to: (i) select the eligible Employees and Directors who shall receive Awards, (ii) grant Awards, (iii) determine the types and sizes of Awards to be granted to Employees and Directors under the Plan, (iv) determine the terms, conditions, vesting periods, and restrictions applicable to Awards, (v) adopt, alter, and repeal administrative rules and practices governing this Plan, (vi) interpret the terms and provisions of this Plan and any Awards granted this Plan, (vii) prescribe the forms of any Award Agreements or other instruments relating to Awards, and (viii) otherwise supervise the administration of this Plan. The Committee may delegate any of its authority to any other person or persons that it deems appropriate with respect to Awards granted to Employees who are not officers of the Company.

Section 2.03. Actions of the Committee. All actions taken and all interpretations and determinations made in good faith by the Committee, or made by any other person or persons to whom the Committee has delegated authority, shall be final and binding upon all Participants, the Company, and all other interested persons. All decisions by the Committee (including decisions made by the Board of Directors when serving as the Committee) shall be made with the approval of not less than a majority of its members. Members of the Committee who are eligible for Awards may vote on any matters affecting the administration of the Plan or the grant of any Awards pursuant to the Plan, except that no such member shall act upon the granting of an Award to himself or herself; but any such member may be counted in determining the existence of a quorum of the Committee.

ARTICLE III

ELIGIBILITY

Any Employee or Director of the Company or any of its Subsidiaries who is selected by the Committee to be a Participant under the Plan shall be eligible for the grant of Awards, except that only employees will be eligible to receive Incentive Stock Options. The selection of the Employees and Directors to receive Awards shall be within the discretion of the Committee. More than one Award may be granted to the same Employee or Director.

ARTICLE IV

SHARES SUBJECT TO AWARDS

Section 4.01. Number of Common Shares. The shares subject to the Awards and other provisions of the Plan shall be the Company's authorized but unissued, or reacquired Common Shares. The aggregate number of Common Shares that may be subject to Awards granted under this Plan in any fiscal year shall be equal to the sum of (i) one percent (1%) of the number of Common Shares Outstanding as of the last day of the Company's prior fiscal year, plus (ii) the number of Common Shares that were available for the grant of Awards, but not granted, under this Plan in any previous fiscal year; provided that in no event will the number of Common Shares available for the grant of Awards in any fiscal year exceed one-and-one-half percent (1 1/2%) of the Common Shares Outstanding as of the last day of the prior fiscal year. The aggregate number of Common Shares that may be issued under the Plan upon the exercise of Incentive Stock Options is 425,000, as adjusted pursuant to Section 4.02. No fractional shares shall be issued under this Plan; if necessary, the Committee shall determine the manner in which the value of fractional shares will be treated.

The assumption of awards granted by an organization acquired by the Company, or the grant of Awards under this Plan in substitution for any such awards, shall not reduce the number of Common Shares available for the grant of Awards under this Plan. Common Shares subject to an Award that is forfeited, terminated or canceled without having been exercised shall again be available for grant under this Plan, subject to the limitations noted in the foregoing paragraph of this Section 4.01.

Section 4.02. Adjustment. In the event of any change in the Common Shares by reason of a merger, consolidation, reorganization, recapitalization or similar transaction, or in the event of a stock split, stock dividend or distribution to shareholders (other than normal cash dividends), spin-off or any other change in the corporate structure of the Company, the Committee may adjust the number and class of shares that may be issued under this Plan, the aggregate number of Common Shares that may be issued under the Plan upon the exercise of Incentive Stock Options, the number and class of shares subject to outstanding Awards, the exercise price applicable to outstanding Awards, and the Fair Market Value of the Common Shares and other value determinations applicable to outstanding Awards, if and to the extent deemed appropriate. All determinations made by the Committee with respect to adjustments under this Section 4.02 shall be conclusive and binding for all purposes of the Plan.

ARTICLE V

AWARDS

Section 5.01. Grant of Awards. Awards authorized under this Article V may be granted pursuant to another incentive program which incorporates by reference the terms and conditions of this Plan. Awards may be granted singly or in combination or tandem with other Awards. Awards may also be granted in replacement of, or in substitution for, other awards granted by the Company whether or not such other awards were granted under this Plan; without limiting the foregoing, if a Participant pays all or part of the exercise price or taxes associated with an Award by the transfer of Common Shares or the surrender of all or part of an Award (including the Award being exercised), the Committee may, in its discretion, grant a new Award to replace the Common Shares that were transferred or the Award that was surrendered. The Company may assume awards granted by an organization acquired by the Company or may grant Awards in replacement of, or in substitution for, any such awards.

Section 5.02. Types of Awards. Awards may include, but are not limited to, the following:

(a) Stock Award. A Stock Award is a grant of Common Shares or a right to receive Common Shares (or their cash equivalent or a combination of both). All or part of any Stock Award may be subject to conditions, restrictions and risks of forfeiture, as and to the extent established by the Committee. Stock Awards may be based on the Fair Market Value of the Common Shares, or on other specified values or methods of valuation, as determined by the Committee.

(b) Stock Option. A right to purchase a specified number of Common Shares, during a specified period and at a specified exercise price, all as determined by the Committee. A Stock Option may be an Incentive Stock Option or a Non-Qualified Stock Option. Incentive Stock Options may only be issued to Employees. In addition to the terms, conditions, vesting periods, and restrictions established by the Committee in the Award Agreement, Incentive Stock Options must comply with the requirements of Section 422 of the Code, Section 5.03(f), and this Article V.

(c) Stock Appreciation Right. A right to receive a payment, in cash or Common Shares, equal to the excess of (i) the Fair Market Value or other specified valuation, of a specified number of Common Shares on the date the right is exercised over (ii) the Fair Market Value, or other specified valuation, on the date the right is granted, all as determined by the Committee. The right may be conditioned upon the occurrence of certain events, such as a Change In Control, or may be unconditional, as determined by the Committee.

Section 5.03. Terms and Conditions of Awards; Agreements. Awards granted under the Plan shall be evidenced by an Award Agreement executed by the Company and the Participant, which shall contain such terms and be in such form as the Committee may from time to time approve, subject to the following limitations and conditions:

(a) Number of Shares. The Award Agreement shall state, as appropriate, the type and total number of shares granted under a Stock Award, and/or the type and total number of shares with respect to which Stock Options and Stock Appreciation Rights are granted.

(b) Award Prices. The Award Agreement shall state, as applicable, the exercise price per share or other operative value of the Common Shares covered by each Award. The price or other value shall be determined by the Committee. For Incentive Stock Options, the exercise price shall satisfy all of the requirements of the Code and of Section 5.03(f) of this Plan.

(c) Payment of Exercise Price; Deferral. The exercise price of a Stock Option (other than an Incentive Stock Option), and any Stock Award for which the Committee has established an exercise price, may be paid in cash, by the transfer of Common Shares, by the surrender of all or part of an Award (including the Award being exercised), or by a combination of these methods, as and to the extent permitted by the Committee. The exercise price of an Incentive Stock Option may be paid in cash, by the transfer of Common Shares, or by a combination of these methods, as and to the extent permitted by the Committee at the time of grant, but may not be paid by the surrender of all or part of an Award. The Committee may prescribe any other method of paying the exercise price that it determines to be consistent with applicable law and the purpose of this Plan.

With the approval of the Committee, the delivery of the Common Shares, cash, or any combination thereof subject to an Award may be deferred, either in the form of installments or a single future delivery. The Committee may also permit selected Participants to defer the payment of some or all of their Awards, as well as other compensation, in accordance with procedures established by the Committee to assure that the recognition of taxable income is deferred under the Code. The Committee may also establish rules and procedures for the crediting of interest on deferred cash payments and dividend equivalents on Awards.

(d) Issuance of Shares and Compliance with Securities Laws. The Company may postpone the issuance and delivery of certificates representing shares until (a) the admission of such shares to listing on any stock exchange on which shares of the Company of the same class are then listed, and (b) the completion of such registration or other qualification of such shares under any state or federal law, rule or regulation as the Company shall determine to be necessary or advisable, which registration or other qualification the Company shall use it best efforts to complete; provided, however, a person purchasing shares pursuant to the Plan has no right to require the Company to register the Common Shares under federal or state securities laws at any time. Any person purchasing shares pursuant to the Plan may be required to make such representations and furnish such information as may, in the opinion of counsel for the Company, be appropriate to permit the Company, in light of the existence or non-existence with respect to such shares of an effective registration under the Securities Act of 1933, as amended, or any similar state statute, to issue the shares in compliance with the provisions of those or any comparable acts.

(e) Rights as a Shareholder. A Participant shall have no rights as a shareholder with respect to shares covered by an Award, including voting rights or rights to dividends, unless and until such shares are validly issued to such Participant pursuant to the terms of the Award.

(f) Incentive Stock Options. To the extent any Award granted pursuant to this Plan contains an Incentive Stock Option, the following limitations and conditions shall apply to such Incentive Stock Option and the Award Agreement relating thereto in addition to the terms and conditions provided herein:

(1) Price. The price of an Incentive Stock Option shall be an amount per share not less than the Fair Market Value per share of the Common Shares on the date of granting of the option. In the case of Incentive Stock Options granted to an Employee of the Company who is a ten percent (10%) shareholder, the option price shall be an amount per share not less than one hundred ten percent (110%) of the Fair Market Value per share of the Common Shares on the date of the granting of the Incentive Stock Option.

(2) Exercise Period. Unless terminated earlier pursuant to other terms and provisions of the Award Agreement, the term of each Incentive Stock Option shall expire within the period prescribed in the Agreement relating thereto, which shall not be more than five (5) years from the date the Incentive Stock Option is granted if the Participant is a ten percent (10%) shareholder, and not more than ten (10) years from the date the Incentive Stock Option is granted if the Participant is not a ten percent (10%) shareholder.

(3) Limitation on Grants. No Incentive Stock Option shall be granted under this Plan after April 21, 2009.

(4) Limitation on Transferability. No Incentive Stock Option shall be assignable or transferable except by will or under the laws of descent and distribution. During the lifetime of a Participant, the Incentive Stock Option shall be exercisable only by the Participant and may not be transferred or assigned pursuant to a qualified domestic relations order.

(5) Maximum Exercise Rule. The aggregate Fair Market Value (determined at the time the option is granted) of the shares with respect to which Incentive Stock Options are exercisable for the first time by an Employee during any calendar year under all such plans of the Company and any parent or Subsidiary of the Company shall not exceed One Hundred Thousand Dollars ($100,000).

(g) Termination of Awards Under Certain Conditions. The Committee may cancel any unexpired, unpaid or deferred Awards at any time, if the Participant is not in compliance with all applicable provisions of this Plan or with any Award Agreement, or if the Participant, whether or not he or she is currently employed by the Company, engages in any of the following activities without the prior written consent of the Company:

(1) Directly or indirectly renders services to or for an organization, or engages in a business that is, in the judgment of the Committee, in competition with the Company.

(2) Discloses to anyone outside of the Company, or uses for any purpose other than the Company's business, any confidential or proprietary information or material relating to the Company, whether acquired by the Participant during or after employment with the Company.

The Committee may, in its discretion and as a condition to the exercise of an Award, require a Participant to acknowledge in writing that he or she is in compliance with all applicable provisions of this Plan and of any Award Agreement and has not engaged in any activities referred to in clauses (1) and (2) above.

(h) Nontransferability. Unless otherwise determined by the Committee and provided in the Award Agreement, (i) no Award granted under this Plan may be transferred or assigned by the Participant to whom it is granted other than by will, pursuant to the laws of descent and distribution, or pursuant to a qualified domestic relations order, and (ii) an Award granted under this Plan may be exercised, during the Participant's lifetime, only by the Participant or by the Participant's guardian or legal representative.

Section 5.04. Election to Defer Grant or Receipt of Award. Notwithstanding any provision herein to the contrary, the Committee may provide, in any Award Agreement or in any program granting Awards under this Plan, that the Participant may elect to defer receipt of the Award as provided in the Award Agreement or program.

ARTICLE VI

TAX WITHHOLDING OBLIGATIONS

Prior to the payment of an Award, the Company may withhold, or require a Participant to remit to the Company, an amount sufficient to pay any federal, state and local withholding taxes associated with the Award. The Committee may, in its discretion and subject to such rules as the Committee may adopt, permit a Participant to pay any or all withholding taxes associated with the Award in cash, by the transfer of Common Shares, by the surrender of all or part of an Award (including the Award being exercised), or by a combination of these methods.

ARTICLE VII

TERMINATION OF EMPLOYMENT OR TERMINATION OF SERVICE

Section 7.01. Termination of Employment. Unless the Committee provides otherwise in the Award Agreement, if a Participant's employment or service with the Company or a Subsidiary terminates for any reason other than Retirement, Disability or death of the Participant, he or she may, but only within the thirty (30) day period immediately following such termination of employment or service, and in no event later than the expiration date specified in the Award Agreement, exercise his or her Award to the extent that he or she was entitled to exercise it at the date of such termination; provided, however, if a Participant's employment or service is terminated for deliberate, willful or gross misconduct, as determined by the Board of Directors, all rights under the Award shall expire upon receipt of the notice of such termination. The transfer of an Employee from the employ of the Company to a Subsidiary, or vice versa, or from one Subsidiary to another Subsidiary, shall not be deemed a termination of employment for purposes of the plan.

Section 7.02. Retirement or Disability. Unless the Committee provides otherwise in the Award Agreement, if a Participant's employment with the Company or any Subsidiary, or his or her service as a Non-Employee Director terminates due to Retirement or Disability, the Participant (or if he or she becomes incapacitated, the Participant's legal representative) may, but only within the five (5)-year period immediately following such termination of employment or termination of service, and in no event later than the expiration date specified in the Award Agreement, exercise his or her Award to the extent that he or she was entitled to exercise it at the date of such termination; provided, however, if the Award being exercised under this paragraph is an Incentive Stock Option, it may be exercised as such only during the three (3)-month period immediately following such Retirement or Disability, and in no event later than the expiration date specified in the Award Agreement. During the remainder of the five (5)-year period (or, if shorter, the exercise period specified in the Award Agreement), the option may be exercised as a Non-Qualified Stock Option.

Section 7.03. Death. Unless the Committee provides otherwise in the Award Agreement, if a Participant dies (whether prior to or after termination of employment or termination of service as a Non-Employee Director) while he or she is entitled to exercise an Award, it may be exercised within the one (1) year period immediately following the Participant's death, but in no event later than the expiration date specified in the Award Agreement, by the person or persons to whom his or her rights to it shall pass by his or her will or by the applicable laws of descent and distribution; provided, however, if the Award being exercised under this paragraph is an Incentive Stock Option, it may be exercised as such only during the three (3)-month period immediately following the Participant's death and in no event later than the expiration date specified in the Award Agreement. During the remainder of such one (1) year period (or, if shorter, the exercise period specified in the Award Agreement), the option may be exercised as a Non-Qualified Stock Option.

ARTICLE VIII

CHANGE OF CONTROL

Unless and to the extent the terms and conditions of a Change of Control agreement between the Company and a Participant provide otherwise and unless and to the extent otherwise determined by the Board of Directors, in the event of a Change of Control of the Company, (i) all Stock Appreciation Rights, Stock Options and other stock purchase rights then outstanding will become fully exercisable as of the date of the Change of Control, and (ii) all restrictions and conditions applicable to Restricted Stock and other Stock Awards will be deemed to have been satisfied as of the date of the Change of Control. Any such determination by the Board of Directors that is made after the occurrence of a Change of Control will not be effective unless a majority of the Directors then in office were in office at the beginning of a period of twenty-four (24) consecutive months and the determination is approved by a majority of such Directors.

ARTICLE IX

AMENDMENT OF PLAN OR AWARDS

Section 9.01. Amendment, Suspension or Termination of Plan. The Board of Directors may, from time to time, amend, suspend or terminate this Plan at any time, and, in accordance with such amendments, may thereupon change terms and conditions of any Awards not theretofore issued. Shareholder approval for any such amendment will be required only to the extent necessary to satisfy the rules of Nasdaq or any national exchange on which the Common Shares are listed, or to satisfy any applicable federal or state law or regulation.

Section 9.02. Amendment of Outstanding Awards. The Committee may, in its discretion, amend the terms of any Award, prospectively or retroactively, but no such amendment may impair the rights of any Participant without his or her consent. Shareholder approval for any such amendment will be required only to the extent necessary to satisfy the rules of Nasdaq or any national exchange on which the Common Shares are listed, or to satisfy any applicable federal or state law or regulation. The Committee may, in whole or in part, waive any restrictions or conditions applicable to, or accelerate the vesting of, any Award.

ARTICLE X

MISCELLANEOUS

Section 10.01. Governing Law. The interpretation, validity and enforcement of this Plan will, to the extent not otherwise governed by the Code or the securities laws of the United States, be governed by the laws of the State of Indiana.

Section 10.02. Rights of Employees. Nothing in this Plan will confer upon any Participant the right to continued employment by the Company or limit in any way the Company's right to terminate any Participant's employment at will.

ARTICLE XI

DEFINITIONS

Section 11.01. Definitions. When capitalized in this Plan, unless the context otherwise requires:

(a) "Award" means a grant made to a Participant pursuant to Article V of this Plan.

(b) "Award Agreement" means a written instrument between the Company and a Participant evidencing an Award and prescribing the terms, conditions, and restrictions applicable to the Award.

(c) "Board of Directors" means the Board of Directors of the Company, as constituted at any time.

(d) "Change of Control" means the first to occur of the following events:

(1) any "person," as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") other than the Company, is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing twenty-five percent (25%) or more of the combined voting power of the Company's then-outstanding securities;

(2) those persons who constitute a majority of the Board of Directors of the Company are persons who were not directors of the Company for at least the twenty-four (24) months preceding months;

(3) the shareholders of the Company approve a merger or consolidation of the Company with any other company, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of another entity) more than fifty percent (50%) of the combined voting power of the voting securities of the Company or such other entity outstanding immediately after such merger or consolidation; or

(4) the shareholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company's assets.

(e) "Code" means the Internal Revenue Code of 1986, as amended.

(f) "Committee" means the Human Resources Committee of the Board of Directors, consisting of two or more "Non-Employee Directors" as such term is defined by paragraph (b)(3) of Rule 16b-3, except that the term Committee shall mean the entire Board of Directors with respect to awards made to Non-Employee Directors of the Company or any Subsidiary.

(g) "Common Share" means a share of common stock of German American Bancorp.

(h) "Common Shares Outstanding" means the total number of Common Shares outstanding as reflected in the Company's financial statements as of the most recent fiscal year-end.

(i) "Company" means German American Bancorp.

(j) "Director" means a director of the Company or any Subsidiary.

(k) "Disabled" or "Disability" means a permanent disability as defined in the applicable long-term disability plan of the Company; except that "Disabled" or "Disability" with respect to Awards made to Directors shall mean total and permanent disability as defined in Section 22(e)(3) of the Code.

(l) "Employee" means any individual employed by the Company or any of its Subsidiaries, including officers and Employees who are members of the Board of Directors of the Company or any of its Subsidiaries.

(m) "Fair Market Value" of a Common Share means the value of the share on a particular date, determined as follows:

(1) if the stock is not listed on such date on any national securities exchange but is authorized to be quoted by Nasdaq or an other established "over-the-counter" market, the average between the highest "bid" and lowest "asked" quotations of a share at the close of trading on the day immediately preceding such date (or, if none, on the most recent date on which there were closing bid and asked quotations of a share), as reported by Nasdaq, or other similar service selected by the Committee;

(2) if the stock is listed on such date on one (1) or more national securities exchanges, the last reported sale price of a share on the last trading day preceding such date as recorded on the composite tape system, or, if such system does not cover the stock, the last reported sale price of a share on such date on the principal national securities exchange on which the stock is listed, or, if no sale of the stock took place on such date, the last reported sale price of a share on the most recent day on which a sale of a share took place as recorded by such system or on such exchange, as the case may be; or

(3) if the stock is neither listed on such date on a national securities exchange nor traded in the over-the-counter market, the fair market value of a share on such date as determined in good faith by the Committee, on a basis consistent with regulations under the Code.

(n) "Incentive Stock Options" means stock options issued to Employees which qualify under and meet the requirements of Section 422 of the Code.

(o) "Non-Employee Director" means any Director of the Company or any of its Subsidiaries who is not an Employee of the Company or any of its Subsidiaries.

(p) "Non-Qualified Stock Options" means stock options which do not qualify under or meet the requirements of Section 422 of the Code.

(q) "Participant" means any person to whom an Award has been granted under this Plan.

(r) "Plan" means this German American Bancorp 1999 Long-Term Equity Incentive Plan authorized by the Board of Directors at its meeting held on March 26, 1999, as such Plan from time to time may be amended as herein provided.

(s) "Restricted Stock" means an Award of Common Shares that are nontransferable and are subject to a substantial risk of forfeiture.

(t) "Retirement", in the case of an Employee, means the termination of all employment with the Company and its Subsidiaries for any reason other than death or Disability after the day on which the Employee has attained age 55, and in the case of a Non-Employee Director means withdrawal after obtaining the age of 55.

(u) "Rule 16b-3" means Rule 16b-3 of the Securities and Exchange Commission, under the Securities Exchange Age of 1934, as amended.

(v) "Stock Appreciation Rights" means the Stock Appreciation Rights issued pursuant to the Plan.

(w) "Stock Options" means the Incentive Stock Options and the Non-Qualified Stock Options issued pursuant to the Plan.

(x) "Subsidiary" means a corporation or other form of business association of which shares (or other ownership interests) having fifty percent (50%) or more of the voting power are, or in the future become, owned or controlled, directly or indirectly, by the Company.

EX-10.19

Exhibit 10.19

GERMAN AMERICAN BANCORP, INC.

Restricted Stock Award Agreement (2013/2014 Additional Retainer)

for ____________________ (“Director”)

December 16, 2013

German American Bancorp, Inc. (the "Company") is pleased to grant to you an award pursuant to the resolution of the Company’s Board of Directors adopted as of the date of this document consisting of certain shares of Common Stock of the Company (the "Common Stock") subject to certain restrictions under the Company's 2009 Long Term Equity Incentive Plan (the "Plan") and this Agreement ("Agreement"). This Agreement and the shares granted hereby are subject to the terms and conditions of the Plan, the terms of which are incorporated herein. Any capitalized term that is not defined in this Agreement has the meaning described by the Plan. Please see the Plan document for more information regarding your rights and obligations under this Agreement.

Please execute this Agreement by signing both copies. Return one copy within sixty (60) days of its date to Terri Eckerle, Shareholder Relations, German American Bancorp, Inc., 711 Main Street, Box 810, Jasper, Indiana 47546. Retain one copy of the Agreement for yourself along with the enclosed Plan.

1.          Grant of the Award. The Company hereby grants you, as of the date specified above (the "Grant Date") an Award consisting of Three Hundred Fifty One (351) shares of Common Stock, with an aggregate value as of the Grant Date of approximately Ten Thousand Dollars ($10,000). We sometimes refer in this Agreement to the shares of Common Stock that are part of the Award (including any other securities distributed in respect of the shares of Common Stock, or in substitution for those shares, by reason of an adjustment provided for in Section 8) as the "Restricted Stock." This Award is granted to you subject to the terms and conditions specified in this Agreement and the Plan.

2.          Vesting of the Award. Subject to earlier forfeiture and cancellation pursuant to the Plan and this Agreement and possible acceleration as provided by Article VIII of the Plan, your rights to retain the Award (including the Restricted Stock) will vest as of 12:01 A.M. Jasper time on the morning of December 5, 2014 ("Vesting Date"). The period prior to the Vesting Date is referred to in this Agreement as the Restricted Period. The Board of Directors, by the vote (or written consent in lieu thereof) of not fewer than a majority of the members of the Board of Directors then in office (other than you) who are independent directors for purposes of NASDAQ independence rules and who are “non-employee directors” as defined for purposes of the rules of the Securities and Exchange Commission under Section 16 of the Securities Exchange Act of 1934, as amended (the “Section 16 Non-Employee Directors”), shall have the authority, in its sole judgment (which shall be conclusive and binding), to determine whether the conditions to vesting specified by this Agreement and the Plan have been satisfied as of the Vesting Date or any other date. The Board of Directors by action of the Section 16 Non-Employee Directors may also waive the provisions of Section 5 or otherwise shorten the Restricted Period as to any or all of the Award, and in connection with such actions may cause the Award to vest at an earlier date, whenever the Board of Directors by the above-described vote may determine that such action is appropriate by reason of changes in applicable tax or other laws or accounting principles or interpretations, or by reason of other changes in circumstances occurring after the Grant Date.

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3.          Your Rights in Award before Vesting. Except as otherwise provided in this Agreement, you shall have all the rights of a holder of Common Stock in respect of each of your shares of Restricted Stock that are included in the Award during the Restricted Period, including, but not limited to, the right to receive all cash dividends paid on the Restricted Stock that are declared with a record date on or after the Grant Date and the right to vote the Restricted Stock on all matters to come for a vote by the holders of the Common Stock with a record date on or after the Grant Date.

4.          Non-Certificated Nature of Restricted Stock during the Restricted Period. The Company has directed its registrar and transfer agent (the "Transfer Agent") to issue the shares of Restricted Stock in your name as of the Grant Date, and to evidence the issuance of such shares of Restricted Stock to you by crediting the number of such shares of Restricted Stock to an account that has been established in your name on the Transfer Agent's books (your "Restricted Stock Account"). During the Restricted Period, the Company shall have no obligation to cause a certificate evidencing any of the shares of Restricted Stock to be prepared or delivered. Any cash dividends payable in respect of the Restricted Stock during the Restricted Period pursuant to Section 3 shall be paid to you in cash, unless you otherwise direct, in which event such dividends will be paid to such account as you direct.

5.          Forfeiture and Cancellation of the Award; Conversion of Award in Certain Cases

(a) Continuing Board Service and Meeting Attendance Conditions. If you should (x) not continue in service to the Company and its subsidiaries or affiliates as a director through December 5, 2014, for any reason other than your death or disability, or (y) for any reason other than disability, fail to attend in person at least seventy-five percent (75%) of the aggregate number of meetings of the Company’s Board of Directors and the other corporate or subsidiary or affiliate boards and committees on which you may be (from time to time) a member during the period commencing on January 1, 2014 through December 5, 2014, or (z) fail to attend (other than by reason of disability or illness or bona fide emergency as determined in the sole discretion of the Company’s lead independent director) the Company's annual meeting of shareholders held in 2014 (each, a “Disqualifying Circumstance”), your Award (including your Restricted Stock and all associated property and rights) shall be forfeited and cancelled in its entirety effective as of the date of the last fact that establishes the existence of the Disqualifying Circumstance (the “Disqualification Date”) (regardless of whether the date on which the Board of Directors makes the determination to that effect after the Disqualification Date). In the event of any forfeiture or cancellation of your Restricted Stock pursuant to this Section 5, your shares of Restricted Stock shall be deemed to have been reacquired by the Company and cancelled effective as of the Disqualification Date, and you therefore shall not have the right to receive any cash dividends or other distributions with respect to the Restricted Stock that are declared with a record date after the Disqualification Date. The existence or non-existence of a Disqualifying Circumstance (and the date of the associated Disqualification Date) shall, in the event of any uncertainty or dispute, be determined for all purposes under the Plan and this Agreement by the Board of Directors (by vote or consent as provided by Section 2), whose judgment on such matters shall be conclusive and binding.

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(b) Immediate Vesting Caused by an Extraordinary Event. If an Extraordinary Event (as defined by Section 6.06(d) of the Plan) occurs during the Restricted Period, and prior to the date of any forfeiture and cancellation of your Award, then the Vesting Date of your Award shall be deemed to have been accelerated to the date of the Extraordinary Event, and your Award (including the Restricted Stock and the LTI Cash Right) shall be deemed fully non-restricted and non-forfeitable as of such date.

6.          Non-Transferability. Prior to expiration of the Restricted Period, you may not sell, assign, transfer, pledge or otherwise encumber any of your rights under the Award, including the Restricted Stock.

7.          Disclaimer of Contract. Nothing contained in this Agreement shall be construed as an obligation of the Company or any of its Subsidiaries or any other person to retain you as a member of the Board of Directors, or in any other capacity.

8.          Adjustments for Changes in Capitalization of the Company. In the event of any change in the outstanding shares of Common Stock during the Restricted Period by reason of any reorganization, recapitalization, stock split, stock dividend, combination or exchange of shares, merger, consolidation, or any change in the corporate structure of the Company or in the shares of Common Stock, the number and class of the shares of your Restricted Stock covered by your Award shall be appropriately adjusted by the Board of Directors, whose determination shall be conclusive. Any shares of Common Stock or other securities distributed during the Restricted Period in respect of your Restricted Stock as a result of any of the foregoing to which you may be determined to be entitled shall be held without interest by the Transfer Agent for your account until the expiration of the Restricted Period, and shall be subject to the forfeiture and other provisions of this Agreement to the same extent and in the same manner as the previously issued shares of Restricted Stock in respect of which they were distributed.

9.          Securities Laws. The Company's obligation to issue to you, or to deliver to you any stock certificates evidencing, shares of Common Stock hereunder shall, if the Board of Directors so requests, be conditioned upon the Company's receipt of a representation by you as to your investment intention, in such form as the Board of Directors shall determine to be necessary or advisable to comply with the provisions of the Securities Act of 1933, as amended, or any other federal, state or local securities legislation. The Company shall not be required to deliver any certificates for shares under this Agreement or to issue any shares hereunder prior to (i) the admission of such shares to listing on any stock exchange on which the shares of Common Stock may then be listed, and (ii) the completion of such registration or other qualification of such shares under any state or federal law, rule or regulation, as the Board of Directors shall determine to be necessary or advisable.

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10.         Tax and Other Withholding Obligations. The Company’s obligation to pay or deliver to you the Restricted Stock that constitutes the Award shall be subject to the Company’s compliance with applicable tax withholding and other required withholding or deductions, if any, with respect to the compensation realized by you as a result of having received the Award (including the non-cash compensation income that you may be deemed to realize for income tax purposes upon the lapsing of the restrictions upon the Award) including any deductions that may be required under the Company's employee benefit plans (collectively, the “Withholding”). The Company may satisfy any such Withholding or other obligation by withholding from the Restricted Stock otherwise deliverable to you such number of shares as would have at such time a fair market value equal to the amount of such obligation.

11.         Agreement. By signing this Agreement below, you acknowledge that you have received a copy of the Plan, and that you are familiar with the terms and provisions of the Plan and the Agreement, and that you accept their terms. You also acknowledge your agreement (on behalf of yourself and your estate, including your personal representatives, guardians, executors and heirs) to accept as binding, conclusive, and final all decisions and interpretations of the Company’s Board of Directors (by the vote or consent of such members thereof as is determined in accordance with Section 2 of this Agreement) upon any question arising under the Plan or this Agreement.

	GERMAN AMERICAN BANCORP, INC.
	By:
Director’s Name		Mark A Schroeder, Chairman and CEO

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EX-10.25

EXHIBIT 10.25

OMNIBUS AMENDMENT TO LOAN DOCUMENTS

THIS OMNIBUS AMENDMENT TO LOAN DOCUMENTS (the “Amendment”) is made and entered into effective as of December 31, 2013, by and between [i] STOCK YARDS BANK & TRUST COMPANY, a Kentucky banking corporation having an address of 1040 East Main Street, Louisville, Kentucky 40206 (“Lender”), and [ii] GERMAN AMERICAN BANCORP, INC., an Indiana corporation with an address at 711 Main Street, Jasper, Indiana 47546 (the “Borrower”).

WHEREAS, Borrower and Lender are parties to a certain Loan Agreement dated as of January 25, 2013 (the “Loan Agreement”; certain capitalized terms used in this Amendment have the meanings set forth for them in the Loan Agreement unless expressly otherwise defined in this Amendment) pursuant to which Lender agreed to make the Loan to Borrower (as the term is defined in the Loan Agreement, the “Loan”) in the face principal amount of $10,000,000.00, as evidenced by that certain Promissory note (Revolving Note) dated as of January 25, 2013 with an original maturity date of December 31, 2013 (the “Revolving Note”), subject to and in accordance with the provisions of the Loan Agreement and the other Loan Documents; and

WHEREAS, Lender and Borrower desire to amend certain provisions of the Loan Agreement to extend the maturity date of the Revolving Note, and to make such other modifications to the Loan Documents as are set forth herein.

NOW, THEREFORE, in consideration of the premises and for other valuable consideration, the receipt and legal sufficiency of which are hereby acknowledged, and intending to be legally bound, it is hereby agreed as follows:

ARTICLE 1

AMENDMENT TO LOAN AGREEMENT

1.1           Effective as of the date hereof, Section 1.34 of the Loan Agreement is hereby amended and restated to read as follows:

1.34.         “Revolving Loan Expiration Date” means December 30, 2014, or such later date or dates, if applicable, as to which Borrower and Lender (each in their sole and absolute discretion, which may be exercised arbitrarily) may agree in writing.

1.2           Effective as of the date hereof, Section [A][ii] of Schedule 1 to the Loan Agreement is hereby amended and restated to read as follows:

[ii]     Promissory Note dated as of January 25, 2013, made by GERMAN AMERICAN BANCORP, INC., an Indiana corporation (the "Borrower"), to the order of STOCK YARDS BANK & TRUST COMPANY, a Kentucky banking corporation ("Lender"), in the face principal amount of $10,000,000.00, as amended by that certain Omnibus Amendment to Loan Documents effective as of December 31, 2013 (collectively, the "Revolving Note") and maturing on December 30, 2014.

1.3           Effective as of the date hereof, the Revolving Note Exhibit is hereby amended as follows:

A.           Each reference to the Final Maturity Date is hereby amended to mean December 30, 2014.

1.4           Effective as of the date hereof, each reference to the Loan Agreement contained in any of the Loan Documents shall be deemed to refer to the Loan Agreement as the same has been amended pursuant to this Amendment.

ARTICLE 2

AMENDMENT TO STOCK PLEDGE AGREEMENT

2.1           Effective as of the date hereof, each reference contained in that certain Stock Pledge Agreement dated as of January 25, 2013 to the Revolving Note, the Loan Agreement, or the final maturity date of the Revolving Note shall hereby be deemed to refer to the same as amended by this Amendment.

ARTICLE 3

AMENDMENT TO REVOLVING NOTE

3.1           Effective as of the date hereof, the Revolving Note is hereby amended as follows:

A.           Each reference to the Final Maturity Date is hereby amended to mean December 30, 2014.

3.2           This Amendment is not intended to, and shall not, affect a novation of the obligations expressed in the Revolving Note or the Loan Documents. Except as expressly provided herein, the Revolving Note shall continue to be in full force and effect from and after the date of this Amendment as it was prior to the date hereof.

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ARTICLE 4

AMENDMENT TO LOAN DOCUMENTS

4.1           Effective as of the date hereof, each reference to the Loan Agreement or any of the Loan Documents (as the term is defined in the Loan Agreement) shall mean and be deemed to refer to each of the same as modified by this Amendment.

ARTICLE 5

CONDITIONS TO EFFECTIVENESS

5.1           This Amendment shall become effective when, and only when, [i] Lender has received this Amendment duly executed by Borrower together with any extension fees, unused loan fees, and required payments of principal or interest due under the Loan Documents as of the date hereof, and [ii] Lender has received such other documents, instruments and certificates as Lender may reasonably request to insure the binding effect in accordance with the terms hereof and of the Loan Documents and to establish the security for the benefit of Lender contemplated thereby.

ARTICLE 6

MISCELLANEOUS PROVISIONS

6.1           Except as modified by this Amendment, all of the provisions of the Loan Documents shall continue in full force and effect in the same form as they existed immediately prior to the effectiveness of this Amendment. This Amendment is not intended to, and shall not, affect a novation of the obligations expressed in the Loan Documents, nor are any of the Loan Documents intended to be released, altered or changed in any manner except as expressly provided herein, and the lien of such documents shall continue to be in full force and effect from and after the date of this Amendment as it was prior to the date hereof.

6.2           By executing this Amendment, the Borrower hereby represents and warrants that the parties signing this Amendment and any other documents related thereto on behalf of the Borrower each have the full power and authority to execute the same, and that the above mentioned documents are binding and enforceable against the Borrower in accordance with their respective terms.

6.3           The Borrower hereby acknowledges and agrees that neither it nor any other party has any defenses or offsets to the payment of any amount due to Lender under any of the Loan Documents, and that neither it nor any other party has any defenses to the performance of any of the obligations arising under or in connection with any of the other Loan Documents.

6.4           This Amendment contains the final, complete and exclusive understanding of the parties to it with regard to its subject matter, may not be modified except pursuant to a writing signed by the party charged with the modification, shall be binding upon and inure to the benefit of the respective successors and assigns of each of the parties to it and shall be governed in all respects by the laws of the Commonwealth of Kentucky. Borrower agrees to pay all costs and expenses incurred by Lender, including reasonable attorneys’ fees, in connection with the preparation of this Amendment and the documents delivered pursuant to it.

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Borrower hereby restates and confirms each of the representations and warranties contained in the Loan Agreement and the other Loan Documents to which it is a party, respectively, as modified by this Amendment, and represents and warrants to, and agrees with, Lender that it has no offsets, defenses, claims or counterclaims to, or in connection with, any of its obligations pursuant thereto.

This Amendment may be executed in multiple counterparts, each of which shall constitute an original, but all of which taken together shall constitute one and the same agreement.

(the remainder of this page has been intentionally left blank)

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IN TESTIMONY WHEREOF, witness the signatures of each of the parties to this Amendment effective as of the date first set forth above.

“Borrower”

GERMAN AMERICAN BANCORP, INC., an Indiana corporation
By:	/s/ Bradley M. Rust
Print Name:	Bradley M. Rust
Title:	EVP/CFO

STATE OF Indiana	)
	)	ss:
COUNTY OF Dubois	)

On this, the 20^th day of December, 2013, before me, a Notary Public, the undersigned officer, personally appeared Bradley M. Rust, who acknowledged himself to be the EVP/CFO of GERMAN AMERICAN BANCORP, INC., an Indiana corporation, and that he, in such capacity, being authorized to do so, executed the foregoing instrument for the purposes therein contained by signing on behalf of said corporation.

IN WITNESS WHEREOF, I hereunto set my hand and official seal.

Melissa L. Hafele

Notary Public

My commission expires: March 20, 2015

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“Lender”

STOCK YARDS BANK & TRUST COMPANY, a Kentucky banking corporation
By	/s/ James T. McKenzie
Print Name:	James T. McKenzie
Title:	Senior Vice President

STATE OF KENTUCKY	)
	)	ss:
COUNTY OF  Jefferson	)

On this, the 23 day of December, 2013, before me, a Notary Public, the undersigned officer, personally appeared James T. McKenzie, who acknowledged himself/herself to be the Senior Vice President of STOCK YARDS BANK & TRUST COMPANY, a Kentucky banking corporation, and that he/she, in such capacity, being authorized to do so, executed the foregoing instrument for the purposes therein contained by signing on behalf of said corporation.

IN WITNESS WHEREOF, I hereunto set my hand and official seal.

Tammy Kraft

Notary Public

My commission expires: November 3, 2014

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EX-21

SUBSIDIARIES OF THE REGISTRANT

(AS OF MARCH 9, 2014)

Name of Subsidiary	State/Jurisdiction of Incorporation/Organization	Other Names under which Subsidiary Does Business
German American Bancorp	Indiana
GAB Investment Company, Inc.	Nevada
GAB Investment Center, Inc.	Nevada
GAB Investments, LLC	Nevada
GAB Capital Funding Corp.	Nevada
GAB Funding Corp.	Maryland
First Title Insurance Company	Indiana
GABC Leasing, Inc.	Indiana
GABC Holdings, Inc.	Indiana
GABC Development Corporation German American Financial Advisors & Trust Company	Indiana Indiana	German American Financial Advisors
German American Insurance, Inc.	Indiana
Allied Premium Finance Company	Indiana
GABC Risk Management, Inc.	Nevada
German American Reinsurance Company, Ltd.	Turks and Caicos Islands
Financial Services of Southern Indiana, Inc. ACB Capital Trust I ACB Capital Trust II	Indiana Delaware Delaware

Exhibit 21

EX-23

Consent of Independent Registered Public Accounting Firm

We consent to the incorporation by reference in the Registration Statements of German American Bancorp, Inc. on Forms S-3 and S-8 (333-160749, 333-131034, 333-175920, 333-80605 and 333-157277) of our report dated March 13, 2014 with respect to the consolidated financial statements of German American Bancorp, Inc. and the effectiveness of internal control over financial reporting, which appears in this Annual Report on Form 10-K of German American Bancorp, Inc. for the year ended December 31, 2013.

Crowe Horwath LLP

Indianapolis, Indiana

March 13, 2014

Exhibit 23

EX-31.1

Exhibit 31.1

Sarbanes-Oxley Act of 2002, Section 302 Certification for Chairman and Chief Executive Officer

I, Mark A. Schroeder, Chairman and Chief Executive Officer of German American Bancorp, Inc., certify that:

1. I have reviewed this Annual Report on Form 10-K of German American Bancorp, Inc. (the “registrant”):

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

March 12, 2014

Date

/s/ Mark A. Schroeder

Mark A. Schroeder

Chairman and

Chief Executive Officer

EX-31.2

Exhibit 31.2

Sarbanes-Oxley Act of 2002, Section 302 Certification for Executive Vice President and Chief Financial Officer

I, Bradley M. Rust, Executive Vice President and Chief Financial Officer of German American Bancorp, Inc. certify that:

1. I have reviewed this Annual Report on Form 10-K of German American Bancorp, Inc., (the “registrant”):

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

March 12, 2014

Date

/s/ Bradley M. Rust

Bradley M. Rust

Executive Vice President and Chief Financial Officer

(principal accounting officer and principal financial officer)

EX-32.1

Exhibit 32.1

Sarbanes-Oxley Act of 2002, Section 906 Certification for Chairman and Chief Executive Officer

I, Mark A. Schroeder, Chairman and Chief Executive Officer of German American Bancorp, Inc. certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350), that:

(1) the Annual Report on Form 10-K for the year ended December 31, 2013, (the “Periodic Report”) which this statement accompanies fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78m); and

(2) information contained in the Periodic Report fairly presents, in all material respects, the financial condition and results of operations of German American Bancorp, Inc.

This certificate is being furnished solely for purposes of Section 906 and is not being filed as part of the Periodic Report.

March 12, 2014

Date

/s/ Mark A. Schroeder

Mark A. Schroeder

Chairman and

Chief Executive Officer

EX-32.2

Exhibit 32.2

Sarbanes-Oxley Act of 2002, Section 906 Certification for Executive Vice President and Chief Financial Officer

I, Bradley M. Rust, Executive Vice President and Chief Financial Officer of German American Bancorp, Inc. certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350), that:

(1) the Annual Report on Form 10-K for the year ended December 31, 2013, (the “Periodic Report”) which this statement accompanies fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78m); and

(2) information contained in the Periodic Report fairly presents, in all material respects, the financial condition and results of operations of German American Bancorp, Inc.

This certificate is being furnished solely for purposes of Section 906 and is not being filed as part of the Periodic Report.

March 12, 2014

Date

/s/ Bradley M. Rust

Bradley M. Rust

Executive Vice President and Chief Financial Officer

(principal accounting officer and principal financial officer)

XML

Lease Commitments (Tables)

12 Months Ended

Dec. 31, 2013

Lease Commitments [Abstract]

Schedule of Future Minimum Lease Payments for Premises and Equipment

The following is a schedule of future minimum lease payments for premises and equipment at year end 2013:

2014	$	608
2015		511
2016		446
2017		259
2018		154
Thereafter		1,508
Total	$	3,486

XML

Fair Value (Schedule of Assets and Liabilities Measured at Fair Value on Non-Recurring Basis) (Details) (Fair Value, Measurements, Nonrecurring [Member], USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012
Commercial and Industrial Loans and Leases [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value Assets		$ 1,231
Commercial Real Estate Loans [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value Assets	1,346	1,497
Commercial Real Estate [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value Assets	20	150
Agricultural Loans [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value Assets		135
Significant Unobservable Inputs (Level 3) [Member] | Commercial and Industrial Loans and Leases [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value Assets		1,231
Significant Unobservable Inputs (Level 3) [Member] | Commercial Real Estate Loans [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value Assets	1,346	1,497
Significant Unobservable Inputs (Level 3) [Member] | Commercial Real Estate [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value Assets	20	150
Significant Unobservable Inputs (Level 3) [Member] | Agricultural Loans [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value Assets		135
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Commercial and Industrial Loans and Leases [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value Assets
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Commercial Real Estate Loans [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value Assets
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Commercial Real Estate [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value Assets
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Agricultural Loans [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value Assets
Significant Other Observable Inputs (Level 2) [Member] | Commercial and Industrial Loans and Leases [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value Assets
Significant Other Observable Inputs (Level 2) [Member] | Commercial Real Estate Loans [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value Assets
Significant Other Observable Inputs (Level 2) [Member] | Commercial Real Estate [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value Assets
Significant Other Observable Inputs (Level 2) [Member] | Agricultural Loans [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value Assets

XML

Derivatives (Narrative) (Details) (Interest Rate Swap [Member], USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012
Interest Rate Swap [Member]
Derivative [Line Items]
Notional amount of derivatives	$ 17,853	$ 6,051

XML

Securities (Schedule of Securities Available-for-Sale) (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	$ 614,085	$ 571,058
Gross Unrealized Gains	5,885	16,739
Gross Unrealized Losses	(13,938)	(195)
Securities Available-for-Sale, at Fair Value	606,032	587,602
U.S. Treasury and Agency Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	20,000	23,570
Gross Unrealized Gains		40
Gross Unrealized Losses	(1,048)	(138)
Securities Available-for-Sale, at Fair Value	18,952	23,472
Obligations of State and Political Subdivisions [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	112,008	71,352
Gross Unrealized Gains	2,388	5,145
Gross Unrealized Losses	(899)	(12)
Securities Available-for-Sale, at Fair Value	113,497	76,485
Mortgage-backed Securities - Residential [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	481,724	475,452
Gross Unrealized Gains	3,497	11,505
Gross Unrealized Losses	(11,991)	(45)
Securities Available-for-Sale, at Fair Value	473,230	486,912
Equity Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	353	684
Gross Unrealized Gains		49
Gross Unrealized Losses
Securities Available-for-Sale, at Fair Value	$ 353	$ 733

XML

Business Combinations, Goodwill and Intangible Assets (Schedule of Recognized Amounts of Identifiable Assets Acquired and Liabilities Assumed) (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010	Oct. 03, 2013 United Commerce Bancorp [Member]
Business Acquisition [Line Items]
Cash and Due From Banks					$ 430
Federal Funds Sold, Other Short-term Investments					7,362
Interest-bearing Time Deposits with Banks					100
Securities					25,644
Loans	79,575				79,575
Premises, Furniture & Equipment					1,718
Core Deposit Intangible					2,052
Accrued Interest Receivable & Other Assets					3,638
Deposits					(106,633)
Accrued Interest Payable and Other Liabilities					(175)
Total Identifiable Net Assets					13,711
Goodwill	$ 20,536	$ 18,865	$ 18,865	$ 9,835	$ 1,671

XML

Loans (Schedule of Financing Receivables Acquired) (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013
Accounts Notes and Loans Receivable [Line Items]
Purchases	$ 79,575
Commercial and Industrial Loans and Leases [Member]
Accounts Notes and Loans Receivable [Line Items]
Purchases	6,399
Commercial Real Estate Loans [Member]
Accounts Notes and Loans Receivable [Line Items]
Purchases	47,021
Agricultural Loans [Member]
Accounts Notes and Loans Receivable [Line Items]
Purchases	769
Home Equity Loans [Member]
Accounts Notes and Loans Receivable [Line Items]
Purchases	4,536
Consumer Loans [Member]
Accounts Notes and Loans Receivable [Line Items]
Purchases	1,666
Residential Mortgage Loans [Member]
Accounts Notes and Loans Receivable [Line Items]
Purchases	$ 19,184

XML

Business Combinations, Goodwill and Intangible Assets (Schedule of Estimated Amortization Expense) (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013
Estimated amortization expense for each of the next five years is as follows:
2014	$ 1,254
2015	790
2016	493
2017	323
2018	$ 235

XML

Derivatives (Schedule of Hedging Activities) (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012
Included in Other Assets:
Interest Rate Swaps, Fair Value	$ 866	$ 187
Included in Other Liabilities:
Interest Rate Swaps, Fair Value	737	178
Interest Rate Swap [Member]
Included in Other Assets:
Interest Rate Swaps, Notional Amount	17,853	6,051
Interest Rate Swaps, Fair Value	866	187
Included in Other Liabilities:
Interest Rate Swaps, Notional Amount	17,853	6,051
Interest Rate Swaps, Fair Value	$ 737	$ 178

XML

Premises, Furniture, and Equipment (Schedule of Future Minimum Lease Payments under Capitalized Leases) (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013
Premises, Furniture, and Equipment [Abstract]
2014	$ 495
2015	495
2016	495
2017	495
2018	465
Thereafter	6,216
Total minimum lease payments	8,661
Less: Amount representing interest	(4,931)
Present Value of Net Minimum Lease Payments	$ 3,730

XML

Income Taxes (Narrative) (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Operating Loss Carryforwards [Line Items]
Cost for income tax purposes	$ 2,995
Unrecorded deferred income tax liability	1,048
Federal and state carryforwards, limitations on use	538
Tax credit carryforward valuation allowance		45
State [Member]
Operating Loss Carryforwards [Line Items]
Net operating loss carryforwards, expiration	Dec. 31, 2026
Net operating loss carryforwards	1,420
Federal [Member]
Operating Loss Carryforwards [Line Items]
Net operating loss carryforwards, expiration	Dec. 31, 2032
Net operating loss carryforwards	$ 609

XML

Quarterly Financial Data (Unaudited) (Tables)

12 Months Ended

Dec. 31, 2013

Quarterly Financial Data (Unaudited) [Abstract]

Schedule of Quarterly Financial Information

The following table represents selected quarterly financial data for the Company:

	Interest		Net Interest		Net		Earnings per Share
	Income		Income		Income		Basic		Diluted
2013
First Quarter	$	18,370	$	16,225	$	5,809	$	0.46	$	0.46
Second Quarter		18,458		16,712		6,532		0.52		0.52
Third Quarter		18,812		17,192		6,483		0.51		0.51
Fourth Quarter		20,032		18,388		6,589		0.50		0.50
2012
First Quarter	$	19,727	$	16,612	$	5,602	$	0.44	$	0.44
Second Quarter		19,563		16,649		5,967		0.47		0.47
Third Quarter		18,953		16,393		6,292		0.50		0.50
Fourth Quarter		18,917		16,594		6,194		0.49		0.49

XML

Deposits (Tables)

12 Months Ended

Dec. 31, 2013

Deposits [Abstract]

Schedule of Deposits Maturities

At year end 2013, stated maturities of time deposits were as follows:

2014	$	174,109
2015		66,131
2016		76,207
2017		17,943
2018		14,465
Thereafter		179
Total	$	349,034

XML

Deposits (Details) (USD $)	Dec. 31, 2013	Dec. 31, 2012
Deposits [Abstract]
2014	$ 174,109,000
2015	66,131,000
2016	76,207,000
2017	17,943,000
2018	14,465,000
Thereafter	179,000
Total	349,034,000	329,183,000
Time Deposits, $100 or More	124,673,000	95,761,000
Time deposits originated from outside the geographic area	$ 1,648,000	$ 0

XML

Parent Company Financial Statements (Condensed Statements of Income and Comprehensive Income) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended								12 Months Ended
	Dec. 31, 2013	Sep. 30, 2013	Jun. 30, 2013	Mar. 31, 2013	Dec. 31, 2012	Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
INCOME
Net Gain on Securities									$ 2,429	$ 1,667	$ 3,024
EXPENSE
Salaries and Employee Benefits									31,482	29,086	27,992
Professional Fees									2,577	2,247	2,056
Interest Expense									7,155	10,912	16,180
INCOME BEFORE INCOME TAXES AND EQUITY IN UNDISTRIBUTED INCOME OF SUBSIDIARIES									36,877	34,724	27,975
Income Tax Expense (Benefit)									11,464	10,669	7,726
NET INCOME	6,589	6,483	6,532	5,809	6,194	6,292	5,967	5,602	25,413	24,055	20,249
Other Comprehensive Income (Loss):
Comprehensive Loss									9,799	23,863	25,892
Parent Company [Member]
INCOME
Interest Income									31	50	38
Net Gain on Securities									343		935
Other Income									75	70	71
TOTAL INTEREST INCOME									15,949	17,620	24,894
EXPENSE
Salaries and Employee Benefits									824	458	444
Professional Fees									485	352	379
Occupancy and Equipment Expense									7	7	8
Interest Expense									1,246	2,221	2,239
Other Expenses									615	359	357
Total Expenses									3,177	3,397	3,427
INCOME BEFORE INCOME TAXES AND EQUITY IN UNDISTRIBUTED INCOME OF SUBSIDIARIES									12,772	14,223	21,467
Income Tax Expense (Benefit)									1,235	1,338	1,364
INCOME BEFORE EQUITY IN UNDISTRIBUTED INCOME OF SUBSIDIARIES									14,007	15,561	22,831
Equity in Undistributed (Excess Distributed) Income of Subsidiaries									11,406	8,494	(2,582)
NET INCOME									25,413	24,055	20,249
Other Comprehensive Income (Loss):
Changes in Unrealized Gain (Loss) on Securities, Available-for-Sale									(15,874)	(124)	5,677
Changes in Unrecognized Amounts in Pension, Net									231	(47)	4
Changes in Unrecognized Loss on Postretirement Benefit Obligation, Net									29	(21)	(38)
Comprehensive Loss									9,799	23,863	25,892
Parent Company [Member] | Bank [Member]
INCOME
Dividends from Subsidiaries									14,000	17,500	22,500
Parent Company [Member] | Non Bank [Member]
INCOME
Dividends from Subsidiaries									$ 1,500		$ 1,350

XML

Other Comprehensive Income (Loss) (Schedule of Accumulated Other Comprehensive Income) (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Income Tax Expense	$ 11,464	$ 10,669	$ 7,726
Salaries and Employee Benefits	31,482	29,086	27,992
Reclassified, Net of Tax	(1,823)
Unrealized Gains and Losses on Available-for-Sale Securities [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Net (Gain) Loss on Securities	(2,429)
Income Tax Expense	850
Reclassified, Net of Tax	(1,579)
Amortization of Defined Benefit Pension Items [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Income Tax Expense	151
Reclassified, Net of Tax	(222)
Amortization of Defined Benefit Pension Items [Member] | Prior Service Cost [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Salaries and Employee Benefits	(13)
Amortization of Defined Benefit Pension Items [Member] | Actuarial Gains (Losses) [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Salaries and Employee Benefits	(360)
Amortization of Post Retirement Plan Items [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Income Tax Expense	15
Reclassified, Net of Tax	(22)
Amortization of Post Retirement Plan Items [Member] | Actuarial Gains (Losses) [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Salaries and Employee Benefits	$ (37)

XML

Loans (Schedule of Contractually Required Payments Receivable of Purchased Loans with Deterioration of Credit Quality) (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Financing Receivable, Recorded Investment [Line Items]
Contractually required payments	$ 10,725		$ 24,505
Cash Flows Expected to be Collected at Acquisition	7,642		19,695
Fair Value of Acquired Loans at Acquisition	6,252		17,653
Commercial and Industrial Loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Contractually required payments	401		4,542
Commercial Real Estate Loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Contractually required payments	6,640		19,260
Home Equity Loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Contractually required payments			28
Consumer Loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Contractually required payments			217
Residential Mortgage Loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Contractually required payments	$ 3,684		$ 458

XML

Shareholders' Equity (Schedule of Restricted Stock Grants Outstanding) (Details) (Restricted Stock [Member], USD $)	12 Months Ended
	Dec. 31, 2013
Restricted Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of Shares Outstanding at Beginning of Period	4,983
Number of Shares Granted	33,031
Number of Shares Issued and Vested	(14,620)
Number of Shares Forfeited	(453)
Number of Shares Outstanding at End of Period	22,941
Weighted Average Market Price at Grant Outstanding at Beginning of Period	$ 22.07
Weighted Average Market Price at Grant Granted	$ 23.41
Weighted Average Market Price at Grant Issued and Vested	$ 22.57
Weighted Average Market Price at Grant Forfeited	$ 22.07
Weighted Average Market Price at Grant Outstanding at End of Period	$ 23.68

XML

Loans (Components of Loans) (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Accounts, Notes, Loans and Financing Receivable [Line Items]
Subtotal	$ 1,385,212	$ 1,207,901
Unearned Income	(2,830)	(3,035)
Allowance for Loan Losses	(14,584)	(15,520)	(15,312)	(13,317)
Loans, Net	1,367,798	1,189,346
Commercial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Commercial and Industrial Loans and Leases	350,955	335,373
Commercial Real Estate Loans	582,066	488,496
Agricultural Loans	192,880	179,906
Retail [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Home Equity Loans	81,504	74,437
Consumer Loans	49,124	41,103
Residential Mortgage Loans	$ 128,683	$ 88,586

XML

Commitments and Off-balance Sheet Items (Narrative) (Details)	12 Months Ended
	Dec. 31, 2013
Minimum [Member]
Commitments and Contingent Liabilities [Line Items]
Loans and Leases Receivable Fixed Commitment Interest Rates	2.15%
Loans and Leases Receivable Fixed Commitment Maturity	1 year
Maximum [Member]
Commitments and Contingent Liabilities [Line Items]
Loans and Leases Receivable Fixed Commitment Interest Rates	18.00%
Loans and Leases Receivable Fixed Commitment Maturity	32 years

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Premises, Furniture, and Equipment (Schedule of Premises, Furniture and Equipment) (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Property, Plant and Equipment [Line Items]
Total Premises, Furniture and Equipment	$ 77,587	$ 71,238
Less: Accumulated Depreciation	(37,157)	(34,684)
Total	40,430	36,554
Depreciation expense	2,910	2,941	3,261
Land [Member]
Property, Plant and Equipment [Line Items]
Total Premises, Furniture and Equipment	8,366	7,948
Buildings and Improvements [Member]
Property, Plant and Equipment [Line Items]
Total Premises, Furniture and Equipment	47,677	43,706
Furniture and Equipment [Member]
Property, Plant and Equipment [Line Items]
Total Premises, Furniture and Equipment	$ 21,544	$ 19,584

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Shareholders' Equity (Summary of Stock Option Activity) (Details) (USD $) In Thousands, except Share data, unless otherwise specified	12 Months Ended
	Dec. 31, 2013
Shareholders' Equity [Abstract]
Number of Options Outstanding at Beginning of Period	79,917
Number of Options Granted
Number of Options Exercised	(8,300)
Number of Options Forfeited
Number of Options Expired	(2,100)
Number of Options Outstanding and Exercisable at End of Period	69,517
Weighted Average Price of Options Outstanding at Beginning of Period	$ 16.73
Weighted Average Price of Options Granted
Weighted Average Price of Options Exercised	$ 17.35
Weighted Average Price of Options Forfeited
Weighted Average Price of Options Expired	$ 18.19
Weighted Average Price of Options Outstanding and Exercisable at End of Period	$ 16.61
Weighted Average Life of Options (in years) Outstanding and Exercisable at End of Period	3 years 5 months 5 days
Share-Based Compensation Arrangement By Share-Based Payment Award, Options, Outstanding, Intrinsic Value	$ 821

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FHLB Advances and Other Borrowings (Schedule of Additional Collateral) (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
FHLB Advances and Other Borrowings [Abstract]
Average Daily Balance During the Year	$ 14,772	$ 19,813
Average Interest Rate During the Year	0.20%	0.23%
Maximum Month-end Balance During the Year	$ 17,722	$ 24,220
Weighted Average Interest Rate at Year-end	0.20%	0.20%

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Shareholders' Equity (Schedule of Stock Option Activity under Equity Incentive Plan) (Details) (USD $) In Thousands, except Per Share data, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Shareholders' Equity [Abstract]
Intrinsic Value of Options Exercised	$ 49	$ 203	$ 28
Weighted Average Fair Value of Options Granted
Tax Benefit of Options Exercises	$ 20	$ 78	$ 12
Cash Received from Option Exercises

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Premises, Furniture, and Equipment (Schedule of Capital Leased Assets) (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Capital Leased Assets [Line Items]
Capital Leases	$ 3,896	$ 2,442
Less: Accumulated Depreciation	(483)	(344)
Total	$ 3,413	$ 2,098
Lease expiration date	Dec. 31, 2033

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Loans (Schedule of Carrying Amount of Loans with Deterioration of Credit Quality) (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Financing Receivable, Recorded Investment [Line Items]
Loans Acquired with Deteriorated Credit Quality	$ 14,753	$ 11,174	$ 16,121
Carrying amount, Net of Allowance	14,745	11,086	16,044
Commercial and Industrial Loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans Acquired with Deteriorated Credit Quality	1,981	1,840	2,596
Commercial Real Estate Loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans Acquired with Deteriorated Credit Quality	10,871	9,037	13,209
Consumer Loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans Acquired with Deteriorated Credit Quality	134	148	164
Residential Mortgage Loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans Acquired with Deteriorated Credit Quality	1,767	149	152
Home Equity Loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans Acquired with Deteriorated Credit Quality

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Business Combinations, Goodwill and Intangible Assets

12 Months Ended

Dec. 31, 2013

Business Combinations, Goodwill and Intangible Assets [Abstract]

Business Combinations, Goodwill and Intangible Assets

NOTE 17 - Business Combinations, Goodwill and Intangible Assets

Business Combinations

Effective October 1, 2013, the Company acquired United Commerce Bancorp and its subsidiary, United Commerce Bank. The acquisition was accomplished by the merger of United Commerce Bancorp into the German American Bancorp, Inc., immediately followed by the merger of United Commerce Bank into German American Bancorp, Inc.'s bank subsidiary (German American Bancorp). The United Commerce Bank operated two banking offices in Bloomington, Indiana. United Commerce's consolidated assets and equity (unaudited) as of October 1, 2013 totaled $119.7 million and $13.7 million, respectively. The Company accounted for the transaction under the acquisition method of accounting which means that the acquired assets and liabilities were recorded at fair value at the date of acquisition. See Note 4 for additional information related to the fair value of loans acquired. The Company determined the fair value of core deposit intangibles, securities and deposits with the assistance of third party valuations. The estimated fair values over loans are subject to refinement as additional information relative to the closing date fair values becomes available through the measurement period.

In accordance with ASC 805, the Company has expensed approximately $251 of direct acquisition costs and recorded $1.7 million of goodwill and $2.1 million of intangible assets. The intangible assets are related to core deposits and are being amortized on an accelerated basis over 8 years. For tax purposes, goodwill totaling $1.7 million is non-deductible. The following table summarizes the fair value of the total consideration transferred as a part of the United Commerce acquisition as well as the fair value of identifiable assets acquired and liabilities assumed as of the effective date of the transaction.

October 1, 2013

Consideration
Cash for Options and Fractional Shares	$	643
Cash Consideration		1,391
Equity Instruments		13,348
Fair Value of Total Consideration Transferred	$	15,382

Recognized Amounts of Identifiable Assets Acquired and Liabilities Assumed:

Cash and Due From Banks	$	430
Federal Funds Sold, Other Short-term Investments		7,362
Interest-bearing Time Deposits with Banks		100
Securities		25,644
Loans		79,575
Premises, Furniture & Equipment		1,718
Core Deposit Intangible		2,052
Accrued Interest Receivable & Other Assets		3,638
Deposits		(106,633	)
Accrued Interest Payable and Other Liabilities		(175	)
Total Identifiable Net Assets	$	13,711
Goodwill	$	1,671

Under the terms of the merger agreement, the Company issued approximately 503,000 shares of its common stock to the former shareholders of United Commerce. Each United Commerce common shareholder of record at the effective time of the merger became entitled to receive 0.5456 shares of common stock of the Company for each of their former shares of United Commerce common stock.

The Company at the effective time of the merger owned 44,100 shares of United Commerce's outstanding common stock (approximately 4.6% of United Commerce's common shares then outstanding). All of these shares were cancelled at the effective time of the merger and were not exchanged for shares of the Company in the merger.

In connection with the closing of the merger, the Company paid to United Commerce's shareholders of record at the close of business on September 30, 2013, cash consideration of $1.51 per United Commerce share (an aggregate of $1,391 to shareholders other than the Company) and the Company paid approximately $643 to persons who held options to purchase United Commerce common stock (all of which rights were cancelled at the effective time of the merger and were not assumed by the Company).

This acquisition was consistent with the Company's strategy to build a regional presence in Southern Indiana. 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.

Goodwill

The changes in the carrying amount of goodwill for the periods ended December 31, 2013, 2012, and 2011 were classified as follows:

	2013		2012		2011
Beginning of Year	$	18,865	$	18,865	$	9,835
Acquired Goodwill		1,671		-		9,030
Impairment		-		-		-
End of Year	$	20,536	$	18,865	$	18,865

Of the $20,536 carrying amount of goodwill, $19,204 is allocated to the core banking segment and $1,332 is allocated to the insurance segment for the period ended December 31, 2013. Of the $18,865 carrying amount of goodwill, $17,533 is allocated to the core banking segment and $1,332 is allocated to the insurance segment for the periods ended December 31, 2012 and 2011.

Impairment exists when a reporting unit's carrying value of goodwill exceeds its fair value. At December 31, 2013, 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.

Acquired Intangible Assets

Acquired intangible assets were as follows as of year end:	2013
	Gross		Accumulated
	Amount		Amortization
Core Banking
Core Deposit Intangible	$	9,004	$	5,815
Unidentified Branch Acquisition Intangible		257		257
Insurance
Customer List		5,199		5,060
Total	$	14,460	$	11,132
Acquired intangible assets were as follows as of year end:	2012
		Gross		Accumulated
		Amount		Amortization
Core Banking
Core Deposit Intangible	$	6,952	$	4,665
Unidentified Branch Acquisition Intangible		257		257
Insurance
Customer List		5,199		4,794
Total	$	12,408	$	9,716

Amortization Expense was $1,416, $1,655, and $1,956, for 2013, 2012, and 2011.

Estimated amortization expense for each of the next five years is as follows:

2014	1,254
2015	790
2016	493
2017	323
2018	235

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Securities (Schedule of Securities by Contractual Maturity) (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012
Securities Available-for-Sale: Amortized cost
Due in one year or less	$ 2,935
Due after one year through five years	9,890
Due after five years through ten years	69,906
Due after ten years	49,277
Total	614,085	571,058
Securities Available-for-Sale: Fair Value
Due in one year or less	2,996
Due after one year through five years	10,038
Due after five years through ten years	69,802
Due after ten years	49,613
Total	606,032	587,602
Securities Held-to-Maturity: Carrying Amount
Due in one year or less
Due after one year through five years	268
Due after five years through ten years
Due after ten years
Total	268	346
Securities Held-to-Maturity: Fair Value
Due in one year or less
Due after one year through five years	271
Due after five years through ten years
Due after ten years
Total	271	351
Mortgage-backed Securities - Residential [Member]
Securities Available-for-Sale: Amortized cost
Available-for-Sale, amortized cost	481,724
Total	481,724	475,452
Securities Available-for-Sale: Fair Value
Available-for-Sale, Fair Value	473,230
Total	473,230	486,912
Equity Securities [Member]
Securities Available-for-Sale: Amortized cost
Available-for-Sale, amortized cost	353
Total	353	684
Securities Available-for-Sale: Fair Value
Available-for-Sale, Fair Value	353
Total	$ 353	$ 733

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Segment Information (Tables)

12 Months Ended

Dec. 31, 2013

Segment Information [Abstract]

Segment Financial Information

			Trust and
			Investment
	Core		Advisory								Consolidated
	Banking		Services			Insurance		Other			Totals
Year Ended December 31, 2013
Net Interest Income	$	69,634	$	21		$	17	$	(1,155	)	$	68,517
Net Gains on Sales of Loans		2,645		-			-		-			2,645
Net Gains on Securities		2,065		-			-		364			2,429
Trust and Investment Product Fees		6		3,355			-		(3	)		3,358
Insurance Revenues		39		31			6,147		-			6,217
Noncash Items:
Provision for Loan Losses		350		-			-		-			350
Depreciation and Amortization		3,944		28			339		150			4,461
Income Tax Expense (Benefit)		12,387		(32	)		320		(1,211	)		11,464
Segment Profit (Loss)		25,389		(70	)		425		(331	)		25,413
Segment Assets at December 31, 2013		2,171,837		11,663			5,636		(25,309	)		2,163,827

			Trust and
			Investment
	Core		Advisory								Consolidated
	Banking		Services			Insurance		Other			Totals
Year Ended December 31, 2012
Net Interest Income	$	68,311	$	21		$	34	$	(2,118	)	$	66,248
Net Gains on Sales of Loans		3,234		-			-		-			3,234
Net Gains on Securities		1,667		-			-		-			1,667
Trust and Investment Product Fees		5		2,657			-		(5	)		2,657
Insurance Revenues		23		36			5,465		-			5,524
Noncash Items:
Provision for Loan Losses		2,412		-			-		-			2,412
Depreciation and Amortization		4,099		24			415		150			4,688
Income Tax Expense (Benefit)		11,999		(187	)		181		(1,324	)		10,669
Segment Profit (Loss)		25,118		(298	)		250		(1,015	)		24,055
Segment Assets at December 31, 2012		2,006,992		11,551			8,333		(20,576	)		2,006,300

			Trust and
			Investment
	Core		Advisory								Consolidated
	Banking		Services			Insurance		Other			Totals
Year Ended December 31, 2011
Net Interest Income	$	66,099	$	16		$	22	$	(2,156	)	$	63,981
Net Gains on Sales of Loans		2,381		-			-		-			2,381
Net Gains on Securities		2,089		-			-		935			3,024
Trust and Investment Product Fees		3		2,147			-		(5	)		2,145
Insurance Revenues		67		13			5,755		(16	)		5,819
Noncash Items:
Provision for Loan Losses		6,800		-			-		-			6,800
Depreciation and Amortization		4,481		26			482		150			5,139
Income Tax Expense (Benefit)		9,171		(353	)		272		(1,364	)		7,726
Segment Profit (Loss)		20,855		(545	)		352		(413	)		20,249
Segment Assets at December 31, 2011		1,875,417		11,801			7,948		(21,399	)		1,873,767

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Loans (Narrative) (Details) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Accounts, Notes, Loans and Financing Receivable [Line Items]
Increase in allowance for loan losses	$ 280,000
Loans Acquired With Deteriorated Credit Quality [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Number of loans restructured
Increase in allowance for loan losses	0	88,000	77,000
Troubled Debt Restructuring [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Increase in allowance for loan losses	(210,000)	0	1,945,000
Charge-offs due to troubled debt restructurings	0	0	834,000
Additional lending amount committed for customer loans	40,000
Subsequently Defaulted [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Charge-offs due to troubled debt restructurings		$ 306,000	$ (500,000)

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Employee Benefit Plans (Schedule fo Assumption of Health Care Cost Trend Rates) (Details)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Employee Benefit Plans [Abstract]
Health Care Cost Trend Rate Assumed for Next Year	8.00%	8.00%
Rate that the Cost Trend Rate Gradually Declines to	5.00%	4.50%
Year that the Rate Reaches the Rate it is Assumed to Remain at	2019	2019

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Income Taxes (Tables)

12 Months Ended

Dec. 31, 2013

Income Taxes [Abstract]

Provision for Income Taxes

The provision for income taxes consists of the following:	2013		2012		2011
Current Federal	$	9,103	$	9,649	$	3,333
Current State		648		568		184
Deferred Federal		1,090		260		4,241
Deferred State		623		192		(32	)
Total	$	11,464	$	10,669	$	7,726

Schedule of Effective Income Tax Rate Reconciliation

Income tax expense is reconciled to the 35% statutory rate applied to the pre-tax income for the years presented in the table below:

	2013			2012			2011
Statutory Rate Times Pre-tax Income	$	12,907		$	12,153		$	9,791
Add (Subtract) the Tax Effect of:
Income from Tax-exempt Loans and Investments		(1,157	)		(1,007	)		(780	)
State Income Tax, Net of Federal Tax Effect		826			494			99
General Business Tax Credits		(556	)		(547	)		(370	)
Company Owned Life Insurance		(338	)		(341	)		(385	)
Gain on United Commerce Bancorp Stock		(120	)		-			-
Gain on American Community Bancorp, Inc. Stock		-			-			(366	)
Other Differences		(98	)		(83	)		(263	)
Total Income Taxes	$	11,464		$	10,669		$	7,726

Schedule of Net Deferred Tax Liability

The net deferred tax liability at December 31 consists of the following:

	2013			2012
Deferred Tax Assets:
Allowance for Loan Losses	$	4,871		$	5,845
Unrealized Loss on Securities		2,809			-
Deferred Compensation and Employee Benefits		1,136			1,282
Other-than-temporary Impairment		388			443
Accrued Expenses		601			646
Business Combination Fair Value Adjustments		847			-
Pension and Postretirement Plans		35			195
Other Real Estate Owned		288			140
Non-Accrual Loan Interest Income		269			254
Net Operating Loss Carryforward		224			-
Other		313			279
Total Deferred Tax Assets		11,781			9,084
Deferred Tax Liabilities:
Depreciation		(1,465	)		(1,419	)
Leasing Activities, Net		(7,797	)		(7,753	)
Unrealized Gain on Securities		-			(5,915	)
FHLB Stock Dividends		(343	)		(336	)
Prepaid Expenses		(492	)		(516	)
Intangibles		(804	)		(359	)
Deferred Loan Fees		(460	)		(394	)
Business Combination Fair Value Adjustments		-			(333	)
General Business Tax Credits		(23	)		(7	)
Other		(330	)		(255	)
Total Deferred Tax Liabilities		(11,714	)		(17,287	)
Valuation Allowance		-			(45	)
Net Deferred Tax Asset (Liability)	$	67		$	(8,248	)

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Securities (Schedule of Securities with Unrealized Losses) (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012
Less than 12 Months
Fair Value	$ 403,858	$ 39,227
Unrealized Loss	(13,850)	(195)
12 Months or More
Fair Value	1,735
Unrealized Loss	(88)
Total
Fair Value	405,593	39,227
Unrealized Loss	(13,938)	(195)
U.S. Treasury and Agency Securities [Member]
Less than 12 Months
Fair Value	18,952	19,862
Unrealized Loss	(1,048)	(138)
12 Months or More
Fair Value
Unrealized Loss
Total
Fair Value	18,952	19,862
Unrealized Loss	(1,048)	(138)
Obligations of State and Political Subdivisions [Member]
Less than 12 Months
Fair Value	38,878	1,042
Unrealized Loss	(899)	(12)
12 Months or More
Fair Value
Unrealized Loss
Total
Fair Value	38,878	1,042
Unrealized Loss	(899)	(12)
Mortgage-backed Securities - Residential [Member]
Less than 12 Months
Fair Value	346,028	18,323
Unrealized Loss	(11,903)	(45)
12 Months or More
Fair Value	1,735
Unrealized Loss	(88)
Total
Fair Value	347,763	18,323
Unrealized Loss	(11,991)	(45)
Equity Securities [Member]
Less than 12 Months
Fair Value
Unrealized Loss
12 Months or More
Fair Value
Unrealized Loss
Total
Fair Value
Unrealized Loss

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Loans (Schedule of Troubled Debt Restructurings, Subsequently Defaulted) (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Financing Receivable, Modifications [Line Items]
Number of Loans		4	1
Recorded Investment		$ 1,942	$ 527
Commercial and Industrial Loans and Leases [Member]
Financing Receivable, Modifications [Line Items]
Number of Loans		1	1
Recorded Investment		565	527
Commercial Real Estate Loans [Member]
Financing Receivable, Modifications [Line Items]
Number of Loans		3
Recorded Investment		$ 1,377

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Fair Value (Reconciliation of all Assets Measured at Fair Value on a Recurring Basis) (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Obligations of State and Political Subdivisions [Member]
Fair Value Assets Measured On Recurring Basis Unobservable Input Reconciliation [Line Items]
Beginning Balance of Recurring Level 3 Assets at January 1	$ 12,169	$ 4,075
Total Gains or Losses (realized/unrealized)Included in earnings	(332)	156
Maturities / Calls	(1,005)
Purchases		7,938
Ending Balance of Recurring Level 3 Assets at December 31	10,832	12,169
Equity Securities [Member]
Fair Value Assets Measured On Recurring Basis Unobservable Input Reconciliation [Line Items]
Beginning Balance of Recurring Level 3 Assets at January 1	353	353
Total Gains or Losses (realized/unrealized)Included in earnings
Maturities / Calls
Purchases
Ending Balance of Recurring Level 3 Assets at December 31	353	353
Corporate Securities [Member]
Fair Value Assets Measured On Recurring Basis Unobservable Input Reconciliation [Line Items]
Beginning Balance of Recurring Level 3 Assets at January 1		1,005
Total Gains or Losses (realized/unrealized)Included in earnings
Maturities / Calls		(1,005)
Purchases
Ending Balance of Recurring Level 3 Assets at December 31

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Loans (Schedule of Loans Individually Evaluated for Impairment) (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013		Dec. 31, 2012		Dec. 31, 2011
With No Related Allowance Recorded:
Unpaid Principal Balance	$ 6,873	[1]	$ 6,546	[1]
Recorded Investment	4,455		4,378
Average Recorded Investment	4,863		5,293
Interest Income Recognized	279		23
Cash Basis Recognized	297		23
With An Allowance Recorded:
Unpaid Principal Balance	4,473	[1]	8,506	[1]
Recorded Investment	4,462		8,285
Allowance for Loan Losses Allocated	3,103		5,411
Average Recorded Investment	6,784		9,460
Interest Income Recognized	25		32
Cash Basis Recognized	21		27
Unpaid Principal Balance	11,346	[1]	15,052	[1]
Recorded Investment	8,917		12,663
Average Recorded Investment	11,647		14,753		18,596
Interest Income Recognized	304		55		138
Cash Basis Recognized	318		50		135
Commercial and Industrial Loans and Leases [Member]
With No Related Allowance Recorded:
Unpaid Principal Balance	2,163	[1]	108	[1]
Recorded Investment	2,072		87
Average Recorded Investment	1,192		252		1,107
Interest Income Recognized	65		3		9
Cash Basis Recognized	65		3		9
With An Allowance Recorded:
Unpaid Principal Balance	45	[1]	2,642	[1]
Recorded Investment	45		2,581
Allowance for Loan Losses Allocated	45		1,347
Average Recorded Investment	1,360		2,726		3,642
Interest Income Recognized	3		9		11
Cash Basis Recognized	3		8		11
Commercial Real Estate Loans [Member]
With No Related Allowance Recorded:
Unpaid Principal Balance	4,710	[1]	4,312	[1]
Recorded Investment	2,383		2,154
Average Recorded Investment	2,251		4,506		4,438
Interest Income Recognized	5		18		75
Cash Basis Recognized	7		18		75
With An Allowance Recorded:
Unpaid Principal Balance	4,428	[1]	5,579	[1]
Recorded Investment	4,417		5,418
Allowance for Loan Losses Allocated	3,058		3,914
Average Recorded Investment	5,424		6,660		9,390
Interest Income Recognized	22		23		37
Cash Basis Recognized	18		19		34
Agricultural Loans [Member]
With No Related Allowance Recorded:
Unpaid Principal Balance		[1]	2,126	[1]
Recorded Investment			2,137
Average Recorded Investment	1,420		535		19
Interest Income Recognized	209		2		6
Cash Basis Recognized	225		2		6
With An Allowance Recorded:
Unpaid Principal Balance		[1]	285	[1]
Recorded Investment			286
Allowance for Loan Losses Allocated			150
Average Recorded Investment			74
Interest Income Recognized
Cash Basis Recognized
Loans Acquired With Deteriorated Credit Quality [Member]
With No Related Allowance Recorded:
Unpaid Principal Balance	987	[1]	45	[1]
Recorded Investment	451		25
Average Recorded Investment	30		26		28
Interest Income Recognized	3		2		4
Cash Basis Recognized	3		2		4
With An Allowance Recorded:
Unpaid Principal Balance	33	[1]	155	[1]
Recorded Investment	8		118
Allowance for Loan Losses Allocated	8		88
Average Recorded Investment	142		154		77
Interest Income Recognized	2		6		1
Cash Basis Recognized	$ 2		$ 4		$ 1

[1] Unpaid Principal Balance is the remaining contractual payments inclusive of partial charge-offs.

XML

Summary of Significant Accounting Policies (Details) (USD $) In Thousands, unless otherwise specified			12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2013 Minimum [Member]	Dec. 31, 2013 Maximum [Member]	Dec. 31, 2013 Building [Member] Minimum [Member]	Dec. 31, 2013 Building [Member] Maximum [Member]	Dec. 31, 2013 Furniture and Fixtures [Member] Minimum [Member]	Dec. 31, 2013 Furniture and Fixtures [Member] Maximum [Member]
Premises, furniture, and equipment, useful life					10 years	40 years	3 years	10 years
Finite-lived intangible asset, useful life			6 years	10 years
Cash reserve deposit	$ 7,431	$ 10,752

XML

Summary of Significant Accounting Policies

12 Months Ended

Dec. 31, 2013

Summary of Significant Accounting Policies [Abstract]

Summary of Significant Accounting Policies

NOTE 1 - Summary of Significant Accounting Policies

Description of Business and Basis of Presentation

German American Bancorp, Inc. operations are primarily comprised of three business segments: core banking, trust and investment advisory services, and insurance operations. The accounting and reporting policies of German American Bancorp, Inc. and its subsidiaries conform to U.S. generally accepted accounting principles. The more significant policies are described below. The consolidated financial statements include the accounts of the Company and its subsidiaries after elimination of all material intercompany accounts and transactions. Certain prior year amounts have been reclassified to conform with current classifications. The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts and disclosures. Actual results could differ from those estimates. Estimates susceptible to change in the near term include the allowance for loan losses, fair value of financial instruments, other-than-temporary impairment of securities, the valuation allowance on deferred tax assets, and loss contingencies.

Securities

Securities classified as available-for-sale are securities that the Company intends to hold for an indefinite period of time, but not necessarily until maturity. These include securities that management may use as part of its asset/liability strategy, or that may be sold in response to changes in interest rates, changes in prepayment risk, or similar reasons. Equity securities with readily determinable fair values are classified as available-for-sale. Equity securities that do not have readily determinable fair values are carried at historical cost and evaluated for impairment on a periodic basis. Securities classified as available-for-sale are reported at fair value with unrealized gains or losses included as a separate component of equity, net of tax. Securities classified as held-to-maturity are securities that the Company has both the ability and positive intent to hold to maturity. Securities held-to-maturity are carried at amortized cost.

Premium amortization is deducted from, and discount accretion is added to, interest income using the level yield method without anticipating prepayments, except for mortgage-backed securities where prepayments are anticipated. Gains and losses on sales are recorded on trade date and are computed on the identified securities method.

Management evaluates securities for other-than-temporary impairment ("OTTI") on at least a quarterly basis, and more frequently when economic or market conditions warrant such an evaluation.  For securities in an unrealized loss position, management considers the extent and duration of the unrealized loss, and the financial condition and near-term prospects of the issuer. Management also assesses whether it intends to sell, or it is more likely than not that it will be required to sell, a security in an unrealized loss position before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the entire difference between amortized cost and fair value is recognized as impairment through earnings.  For debt securities that do not meet the aforementioned criteria, the amount of impairment is split into two components as follows: 1) OTTI related to credit loss, which must be recognized in the income statement and 2) OTTI related to other factors, which is recognized in other comprehensive income.  The credit loss is defined as the difference between the present value of the cash flows expected to be collected and the amortized cost basis. For equity securities, the entire amount of impairment is recognized through earnings.

Loans Held for Sale

Mortgage loans originated and intended for sale in the secondary market are carried at fair value. Fair value is determined based on collateral value and prevailing market prices for loans with similar characteristics. Net unrealized gains or losses are recorded through earnings.

Mortgage loans held for sale are generally sold on a servicing released basis. Gains and losses on sales of mortgage loans are based on the difference between the selling price and the carrying value of the related loan sold.

Loans

Loans that management has the intent and ability to hold for the foreseeable future or until maturity or pay-off are reported at the principal balance outstanding, net of unearned interest, deferred loan fees and costs, and an allowance for loan losses. Interest income is accrued on unpaid principal balance and includes amortization of net deferred loan fees and costs over the loan term without anticipating prepayments.

All classes of loans are generally placed on non-accrual status when scheduled principal or interest payments are past due for 90 days or more or when the borrower's ability to repay becomes doubtful. Uncollected accrued interest for each class of loans is reversed against income at the time a loan is placed on non-accrual. Interest received on such loans is accounted for on the cash-basis or cost-recovery method, until qualifying for return to accrual. All classes of loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured. Loans are typically charged-off at 180 days past due, or earlier if deemed uncollectible. Exceptions to the non-accrual and charge-off policies are made when the loan is well secured and in the process of collection.

Certain Purchased Loans

The Company purchases individual loans and groups of loans. Purchased loans that show evidence of credit deterioration since origination are recorded at the amount paid (or allocated fair value in a purchase business combination), such that there is no carryover of the seller's allowance for loan losses. After acquisition, incurred losses are recognized by an increase in the allowance for loan losses.

Such purchased loans are accounted for individually. The Company estimates the amount and timing of expected cash flows for each purchased loan or pool, and the expected cash flows in excess of amount paid is recorded as interest income over the remaining life of the loan or pool (accretable yield). The excess of the loan's or pool's contractual principal and interest over expected cash flows is not recorded (nonaccretable difference).

Over the life of the loan, expected cash flows continue to be estimated. If the present value of expected cash flows is less than the carrying amount, a loss is recorded. If the present value of expected cash flows is greater than the carrying amount, it is recognized as part of future interest income.

Allowance for Loan Losses

The allowance for loan losses is a valuation allowance for probable incurred credit losses. Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance. Management estimates the allowance balance required using past loan loss experience, the nature and volume of the portfolio, information about specific borrower situations and estimated collateral values, economic conditions, and other factors. Allocations of the allowance may be made for specific loans, but the entire allowance is available for any loan that, in management's judgment, should be charged-off. The allowance consists of specific and general components. The specific component relates to loans that are individually classified as impaired or loans otherwise classified as substandard or special mention. The general component covers non-classified loans and is based on historical loss experience adjusted for current factors. For 2012 and 2011, the Company utilized a 4 quarter rolling historical loan loss average. Beginning in 2013, management deemed a rolling 12 quarter historical loan loss average to be more indicative of the inherent losses in the Company's loan portfolio in the current economic environment than the 4 quarter average. As the Company continues to monitor the current portfolio, the methodology could change in the future.

Loan impairment is reported when full repayment under the terms of the loan is not expected. If a loan is impaired, a portion of the allowance is allocated so that the loan is reported net, at the present value of estimated future cash flows using the loan's existing rate, or at the fair value of collateral if repayment is expected solely from the collateral. Commercial and industrial loans, commercial real estate loans, and agricultural loans are evaluated individually for impairment. Smaller balance homogeneous loans are evaluated for impairment in total. Such loans include real estate loans secured by one-to-four family residences and loans to individuals for household, family and other personal expenditures. Individually evaluated loans on non-accrual are generally considered impaired. Impaired loans, or portions thereof, are charged off when deemed uncollectible.

Troubled debt restructurings are separately identified for impairment disclosures and are measured at the present value of estimated future cash flows using the loan's effective rate at inception. If a troubled debt restructuring is considered to be a collateral dependent loan, the loan is reported, net, at the fair value of the collateral. For troubled debt restructurings that subsequently default, the Company determines the amount of reserve in accordance with the accounting policy for the allowance for loan losses.

The general component covers non-impaired loans and is based on historical loss experience adjusted for current factors. The historical loss experience is determined by portfolio segment and risk classifications and is based on the actual loss history experienced by the Company over the most recent twelve quarters. This actual loss experience is supplemented with other economic factors based on the risks present for each portfolio segment. These economic factors include consideration of the following: levels of and trends in delinquencies and impaired loans; levels of and trends in charge-offs and recoveries; trends in volume and terms of loans; effects of any changes in risk selection and underwriting standards; other changes in lending policies, procedures, and practices; experience, ability, and depth of lending management and other relevant staff; national and local economic trends and conditions; industry conditions; and effects of changes in credit concentrations. The following portfolio segments have been identified: Commercial Loans and Retail Loans. Commercial Loans have been classified according to the following risk characteristics: Commercial and Industrial Loans and Leases, Commercial Real Estate, and Agricultural Loans. Commercial and Industrial loans are primarily based on the cash flows of the business operations and secured by assets being financed and other assets such as accounts receivable and inventory. Commercial Real Estate Loans and Agricultural Loans are primarily based on cash flow of the borrower and their business and further secured by real estate. All types of commercial and agricultural (real estate secured and non-real estate) may also come with personal guarantees of the borrowers and business owners. Retail Loans have been classified according to the following risk characteristics: Home Equity Loans, Consumer Loans and Residential Mortgage Loans. Retail loans are generally dependent on personal income of the customer, and repayment is dependent on borrower's personal cash flow and employment status which can be affected by general economic conditions. Additionally, collateral values may fluctuate based on the impact of economic conditions on residential real estate values and other consumer type assets such as automobiles.

Loans or portions of loans shall be charged off when there is a distinct probability of loss identified. A distinct probability of loss exists when it has been determined that any remaining sources of repayment are insufficient to cover all outstanding principal. The probable loss is immediately calculated based on the value of the remaining sources of repayment and charged to the allowance for loan loss.

Federal Home Loan Bank (FHLB) Stock

The Bank is a member of the FHLB of Indianapolis. Members are required to own a certain amount of stock based on the level of borrowings and other factors, and may invest in additional amounts. FHLB stock is carried at cost, classified as a restricted security, and periodically evaluated for impairment based on ultimate recovery of par value. Both cash and stock dividends are reported as income.

Premises, Furniture and Equipment

Land is carried at cost. Premises, furniture, and equipment are stated at cost less accumulated depreciation. Buildings and related components are depreciated using the straight-line method with useful lives ranging generally from 10 to 40 years. Furniture, fixtures, and equipment are depreciated using the straight-line method with useful lives ranging generally from 3 to 10 years.

Other Real Estate

Assets acquired through or instead of loan foreclosure are initially recorded at fair value less costs to sell when acquired, establishing a new cost basis. If fair value declines subsequent to foreclosure, a valuation allowance is recorded through expense. Operating costs after acquisition are expensed.

Goodwill and Other Intangible Assets

Goodwill resulting from business combinations prior to January 1, 2009 represents the excess of the purchase price over the fair value of the net assets of businesses acquired. Goodwill resulting from business combinations after January 1, 2009, is generally determined as the excess of the fair value of the consideration transferred, plus the fair value of any noncontrolling interests in the acquiree, over the fair value of the net assets acquired and liabilities assumed as of the acquisition date. Goodwill and intangible assets acquired in a purchase business combination and determined to have an indefinite useful life are not amortized, but tested for impairment at least annually. The Company has selected December 31 as the date to perform the annual impairment test. Intangible assets with definite useful lives are amortized over their estimated useful lives to their estimated residual values. Goodwill is the only intangible asset with an indefinite life on the Company's balance sheet.

Other intangible assets consist of core deposit and acquired customer relationship intangible assets. They are initially measured at fair value and then are amortized over their estimated useful lives, which range from 6 to 10 years.

Company Owned Life Insurance

The Company has purchased life insurance policies on certain directors and executives. This life insurance is recorded at its cash surrender value or the amount that can be realized, which considers any adjustments or changes that are probable at settlement.

Loss Contingencies

Loss contingencies, including claims and legal actions arising in the ordinary course of business, are recorded as liabilities when the likelihood of loss is probable and an amount or range of loss can be reasonably estimated. Management does not believe currently that there are any such matters that will have a material impact on the financial statements.

Loan Commitments and Related Financial Instruments

Financial instruments include off-balance sheet credit instruments, such as commitments to make loans and commercial letters of credit issued to meet customer financing needs. The face amount for these items represents the exposure to loss, before considering customer collateral or ability to repay. Such financial instruments are recorded when they are funded.

Restrictions on Cash

At December 31, 2013 and 2012, respectively, the Company was required to have $7,431 and $10,752 on deposit with the Federal Reserve, or as cash on hand.

Long-term Assets

Premises and equipment, core deposit and other intangible assets, and other long-term assets are reviewed for impairment when events indicate their carrying amount may not be recoverable from future undiscounted cash flows. If impaired, the assets are recorded at fair value.

Stock Based Compensation

Compensation cost is recognized for stock options and restricted stock awards issued to employees and directors, based on the fair value of these awards at the date of grant. A Black-Scholes model is utilized to estimate the fair value of stock options, while the market price of the Corporation's common stock at the date of grant is used for restricted stock awards. Compensation cost is recognized over the required service period, generally defined as the vesting period.

Comprehensive Income

Comprehensive income consists of net income and other comprehensive income (loss). Other comprehensive income (loss) includes unrealized gains and losses on securities available for sale and changes in unrecognized amounts in pension and other postretirement benefits, which are also recognized as a separate component of equity.

Income Taxes

Deferred tax liabilities and assets are determined at each balance sheet date and are the result of differences in the financial statement and tax bases of assets and liabilities. Income tax expense is the amount due on the current year tax returns plus or minus the change in deferred taxes. A valuation allowance, if needed, reduces deferred tax assets to the amount expected to be realized.

A tax position is recognized as a benefit only if it is "more likely than not" that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the "more likely than not" test, no tax benefit is recorded.

Retirement Plans

Pension expense under the suspended defined benefit plan is the net of interest cost, return on plan assets and amortization of gains and losses not immediately recognized. Employee 401(k) and profit sharing plan expense is the amount of matching contributions. Deferred compensation and supplemental retirement plan expense allocates the benefits over years of service.

Earnings Per Share

Earnings per share are based on net income divided by the weighted average number of shares outstanding during the period. Diluted earnings per share show the potential dilutive effect of additional common shares issuable under the Company's stock based compensation plans. Earnings per share are retroactively restated for stock dividends.

Cash Flow Reporting

The Company reports net cash flows for customer loan transactions, deposit transactions, deposits made with other financial institutions and short-term borrowings. Cash and cash equivalents are defined to include cash on hand, demand deposits in other institutions and Federal Funds Sold.

Fair Values of Financial Instruments

Fair values of financial instruments are estimated using relevant market information and other assumptions, as more fully disclosed in Note 14. Fair value estimates involve uncertainties and matters of significant judgment regarding interest rates, credit risk, prepayments, and other factors, especially in the absence of broad markets for particular items. Changes in assumptions or in market conditions could significantly affect the estimates.

New Accounting Pronouncements

In February 2013, the FASB issued an update (ASU No. 2013-02, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income) impacting FASB ASC 220, Comprehensive Income.  This update requires an entity to provide information about the amounts reclassified out of accumulated other comprehensive income.  An entity is required to present, either on the face of the statement where net income is presented or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income but only if the amount reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period.  For other amounts not required under U.S. GAAP to be reclassified in their entirety to net income, an entity is required to cross-reference to other disclosures required under U.S. GAAP that provide additional detail about these amounts.  This update became effective for the Company for interim and annual periods beginning after December 15, 2012 and did not have a material impact on the consolidated financial statements.

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Segment Information (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended								12 Months Ended
	Dec. 31, 2013	Sep. 30, 2013	Jun. 30, 2013	Mar. 31, 2013	Dec. 31, 2012	Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Segment Reporting Information [Line Items]
Net Interest Income	$ 18,388	$ 17,192	$ 16,712	$ 16,225	$ 16,594	$ 16,393	$ 16,649	$ 16,612	$ 68,517	$ 66,248	$ 63,981
Net Gains on Sales of Loans									2,645	3,234	2,381
Net Gains on Securities									2,429	1,667	3,024
Trust and Investment Product Fees									3,358	2,657	2,145
Insurance Revenues									6,217	5,524	5,819
Noncash Items:
Provision for Loan Losses									350	2,412	6,800
Depreciation and Amortization									4,461	4,688	5,139
Income Tax Expense (Benefit)									11,464	10,669	7,726
Segment Profit (Loss)	6,589	6,483	6,532	5,809	6,194	6,292	5,967	5,602	25,413	24,055	20,249
Segment Assets	2,163,827				2,006,300				2,163,827	2,006,300	1,873,767
Number of operating segments									3
Core Banking [Member]
Segment Reporting Information [Line Items]
Net Interest Income									69,634	68,311	66,099
Net Gains on Sales of Loans									2,645	3,234	2,381
Net Gains on Securities									2,065	1,667	2,089
Trust and Investment Product Fees									6	5	3
Insurance Revenues									39	23	67
Noncash Items:
Provision for Loan Losses									350	2,412	6,800
Depreciation and Amortization									3,944	4,099	4,481
Income Tax Expense (Benefit)									12,387	11,999	9,171
Segment Profit (Loss)									25,389	25,118	20,855
Segment Assets	2,171,837				2,006,992				2,171,837	2,006,992	1,875,417
Number of offices	36								36
Trust and Investment Advisory Services [Member]
Segment Reporting Information [Line Items]
Net Interest Income									21	21	16
Net Gains on Sales of Loans
Net Gains on Securities
Trust and Investment Product Fees									3,355	2,657	2,147
Insurance Revenues									31	36	13
Noncash Items:
Provision for Loan Losses
Depreciation and Amortization									28	24	26
Income Tax Expense (Benefit)									(32)	(187)	(353)
Segment Profit (Loss)									(70)	(298)	(545)
Segment Assets	11,663				11,551				11,663	11,551	11,801
Insurance [Member]
Segment Reporting Information [Line Items]
Net Interest Income									17	34	22
Net Gains on Sales of Loans
Net Gains on Securities
Trust and Investment Product Fees
Insurance Revenues									6,147	5,465	5,755
Noncash Items:
Provision for Loan Losses
Depreciation and Amortization									339	415	482
Income Tax Expense (Benefit)									320	181	272
Segment Profit (Loss)									425	250	352
Segment Assets	5,636				8,333				5,636	8,333	7,948
Other [Member]
Segment Reporting Information [Line Items]
Net Interest Income									(1,155)	(2,118)	(2,156)
Net Gains on Sales of Loans
Net Gains on Securities									364		935
Trust and Investment Product Fees									(3)	(5)	(5)
Insurance Revenues											(16)
Noncash Items:
Provision for Loan Losses
Depreciation and Amortization									150	150	150
Income Tax Expense (Benefit)									(1,211)	(1,324)	(1,364)
Segment Profit (Loss)									(331)	(1,015)	(413)
Segment Assets	$ (25,309)				$ (20,576)				$ (25,309)	$ (20,576)	$ (21,399)

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Loans (Schedule of Recorded Investment in Nonaccrual Loans) (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012
Financing Receivable, Recorded Investment, Past Due [Line Items]
Non-Accrual	$ 8,378	$ 10,357
Loans Past Due 90 Days or More & Still Accruing	8
Commercial and Industrial Loans and Leases [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Non-Accrual	31	2,480
Loans Past Due 90 Days or More & Still Accruing
Commercial Real Estate Loans [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Non-Accrual	6,658	7,275
Loans Past Due 90 Days or More & Still Accruing	8
Agricultural Loans [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Non-Accrual
Loans Past Due 90 Days or More & Still Accruing
Home Equity Loans [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Non-Accrual	114	178
Loans Past Due 90 Days or More & Still Accruing
Consumer Loans [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Non-Accrual	236	167
Loans Past Due 90 Days or More & Still Accruing
Residential Mortgage Loans [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Non-Accrual	1,339	257
Loans Past Due 90 Days or More & Still Accruing
Loans Acquired With Deteriorated Credit Quality [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Non-Accrual	1,705	148
Loans Past Due 90 Days or More & Still Accruing

XML

Quarterly Financial Data (Unaudited) (Details) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended								12 Months Ended
	Dec. 31, 2013	Sep. 30, 2013	Jun. 30, 2013	Mar. 31, 2013	Dec. 31, 2012	Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Quarterly Financial Data (Unaudited) [Abstract]
Interest Income	$ 20,032	$ 18,812	$ 18,458	$ 18,370	$ 18,917	$ 18,953	$ 19,563	$ 19,727	$ 75,672	$ 77,160	$ 80,161
Net Interest Income	18,388	17,192	16,712	16,225	16,594	16,393	16,649	16,612	68,517	66,248	63,981
Net Income	$ 6,589	$ 6,483	$ 6,532	$ 5,809	$ 6,194	$ 6,292	$ 5,967	$ 5,602	$ 25,413	$ 24,055	$ 20,249
Basic Earnings per Share	$ 0.50	$ 0.51	$ 0.52	$ 0.46	$ 0.49	$ 0.50	$ 0.47	$ 0.44	$ 1.99	$ 1.91	$ 1.61
Diluted Earnings per Share	$ 0.50	$ 0.51	$ 0.52	$ 0.46	$ 0.49	$ 0.50	$ 0.47	$ 0.44	$ 1.98	$ 1.90	$ 1.61

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Parent Company Financial Statements (Tables)

12 Months Ended

Dec. 31, 2013

Parent Company Financial Statements [Abstract]

Condensed Balance Sheets

CONDENSED BALANCE SHEETS

	December 31,
	2013			2012
ASSETS
Cash	$	9,721		$	29,499
Securities Available-for-Sale, at Fair Value		353			733
Investment in Subsidiary Bank		195,480			184,093
Investment in Non-banking Subsidiaries		3,650			4,064
Other Assets		6,271			6,245
Total Assets	$	215,475		$	224,634
LIABILITIES
Borrowings	$	12,024		$	35,624
Other Liabilities		3,354			3,984
Total Liabilities		15,378			39,608
SHAREHOLDERS' EQUITY
Common Stock		13,174			12,637
Additional Paid-in Capital		108,022			95,617
Retained Earnings		84,164			66,421
Accumulated Other Comprehensive Income (Loss)		(5,263	)		10,351
Total Shareholders' Equity		200,097			185,026
Total Liabilities and Shareholders' Equity	$	215,475		$	224,634

Condensed Statements of Income and Comprehensive Income

CONDENSED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

	Years Ended December 31,
	2013			2012			2011
INCOME
Dividends from Subsidiaries
Bank	$	14,000		$	17,500		$	22,500
Non-bank		1,500			-			1,350
Interest Income		31			50			38
Net Gain on Securities		343			-			935
Other Income		75			70			71
Total Income		15,949			17,620			24,894
EXPENSES
Salaries and Employee Benefits		824			458			444
Professional Fees		485			352			379
Occupancy and Equipment Expense		7			7			8
Interest Expense		1,246			2,221			2,239
Other Expenses		615			359			357
Total Expenses		3,177			3,397			3,427
INCOME BEFORE INCOME TAXES AND EQUITY IN UNDISTRIBUTED INCOME OF SUBSIDIARIES		12,772			14,223			21,467
Income Tax Benefit		1,235			1,338			1,364
INCOME BEFORE EQUITY IN UNDISTRIBUTED INCOME OF SUBSIDIARIES		14,007			15,561			22,831
Equity in Undistributed (Excess Distributed) Income of Subsidiaries		11,406			8,494			(2,582	)
NET INCOME		25,413			24,055			20,249
Other Comprehensive Income:
Changes in Unrealized Gain (Loss) on Securities, Available-for-Sale		(15,874	)		(124	)		5,677
Changes in Unrecognized Amounts in Pension, Net		231			(47	)		4
Changes in Unrecognized Loss on Postretirement Benefit Obligation, Net		29			(21	)		(38	)
TOTAL COMPREHENSIVE INCOME	$	9,799		$	23,863		$	25,892

Condensed Statements of Cash Flows

CONDENSED STATEMENTS OF CASH FLOWS

	Years Ended December 31,
	2013			2012			2011
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income	$	25,413		$	24,055		$	20,249
Adjustments to Reconcile Net Income to Net Cash from Operations
Loss (Gain) on Securities, Net		(343	)		-			(935	)
Change in Other Assets		283			33			3,656
Change in Other Liabilities		(510	)		203			(2,191	)
Equity Based Compensation		329			628			635
Excess Tax Benefit from Restricted Share Grant		(28	)		(23	)		(37	)
Equity in Excess Distributed (Undistributed) Income of Subsidiaries		(11,406	)		(8,494	)		2,582
Net Cash from Operating Activities		13,738			16,402			23,959
CASH FLOWS FROM INVESTING ACTIVITIES
Capital Contribution to Subsidiaries		-			(150	)		-
Acquire Banking Entities		(2,135	)		-			(1,995	)
Net Cash from Investing Activities		(2,135	)		(150	)		(1,995	)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from Issuance of Long-term Debt		10,000			-			-
Repayment of Long-term Debt		(33,750	)		(1,500	)		(1,500	)
Issuance of Common Stock		20			37			12
Income Tax Benefit from Restricted Share Grant		28			23			37
Employee Stock Purchase Plan		(9	)		(67	)		(25	)
Dividends Paid		(7,670	)		(7,068	)		(7,047	)
Net Cash from Financing Activities		(31,381	)		(8,575	)		(8,523	)
Net Change in Cash and Cash Equivalents		(19,778	)		7,677			13,441
Cash and Cash Equivalents at Beginning of Year		29,499			21,822			8,381
Cash and Cash Equivalents at End of Year	$	9,721		$	29,499		$	21,822

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Securities (Tables)

12 Months Ended

Dec. 31, 2013

Securities [Abstract]

Schedule of Securities Available-for-Sale

The amortized cost, unrealized gross gains and losses recognized in accumulated other comprehensive income (loss), and fair value of Securities Available-for-Sale were as follows:

			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
Securities Available-for-Sale:	Cost		Gains		Losses			Value
2013
U.S. Treasury and Agency Securities	$	20,000	$	-	$	(1,048	)	$	18,952
Obligations of State and Political Subdivisions		112,008		2,388		(899	)		113,497
Mortgage-backed Securities - Residential		481,724		3,497		(11,991	)		473,230
Equity Securities		353		-		-			353
Total	$	614,085	$	5,885	$	(13,938	)	$	606,032
2012
U.S. Treasury and Agency Securities	$	23,570	$	40	$	(138	)	$	23,472
Obligations of State and Political Subdivisions		71,352		5,145		(12	)		76,485
Mortgage-backed Securities - Residential		475,452		11,505		(45	)		486,912
Equity Securities		684		49		-			733
Total	$	571,058	$	16,739	$	(195	)	$	587,602

Schedule of Securities Held-to-Maturity

The carrying amount, unrecognized gains and losses and fair value of Securities Held-to-Maturity were as follows:

			Gross		Gross
	Carrying		Unrecognized		Unrecognized		Fair
Securities Held-to-Maturity:	Amount		Gains		Losses		Value
2013
Obligations of State and Political Subdivisions	$	268	$	3	$	-	$	271
2012
Obligations of State and Political Subdivisions	$	346	$	5	$	-	$	351

Schedule of Securities by Contractual Maturity

	Amortized		Fair
	Cost		Value
Securities Available-for-Sale:
Due in one year or less	$	2,935	$	2,996
Due after one year through five years		9,890		10,038
Due after five years through ten years		69,906		69,802
Due after ten years		49,277		49,613
Mortgage-backed Securities - Residential		481,724		473,230
Equity Securities		353		353
Total	$	614,085	$	606,032

	Carrying		Fair
	Amount		Value
Securities Held-to-Maturity:
Due in one year or less	$	-	$	-
Due after one year through five years		268		271
Due after five years through ten years		-		-
Due after ten years		-		-
Total	$	268	$	271

Schedule of Proceeds from the Sales of Securities

Proceeds from the Sales of Securities are summarized below:

	2013		2012		2011
	Available-		Available-		Available-
	for-Sale		for-Sale		for-Sale
Proceeds from Sales	$	162,344	$	92,344	$	20,061
Gross Gains on Sales		2,086		1,667		2,089
Income Taxes on Gross Gains		730		583		721

Schedule of Securities with Unrealized Losses

Below is a summary of securities with unrealized losses as of year-end 2013 and 2012, presented by length of time the securities have been in a continuous unrealized loss position:

	Less than 12 Months					12 Months or More					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	Value		Loss			Value		Loss			Value		Loss
At December 31, 2013
U.S. Treasury and Agency Securities	$	18,952	$	(1,048	)	$	-	$	-		$	18,952	$	(1,048	)
Obligations of State and Political Subdivisions		38,878		(899	)		-		-			38,878		(899	)
Mortgage-backed Securities - Residential		346,028		(11,903	)		1,735		(88	)		347,763		(11,991	)
Equity Securities		-		-			-		-			-		-
Total	$	403,858	$	(13,850	)	$	1,735	$	(88	)	$	405,593	$	(13,938	)

	Less than 12 Months					12 Months or More				Total
	Fair		Unrealized			Fair		Unrealized		Fair		Unrealized
	Value		Loss			Value		Loss		Value		Loss
At December 31, 2012
U.S. Treasury and Agency Securities	$	19,862	$	(138	)	$	-	$	-	$	19,862	$	(138	)
Obligations of State and Political Subdivisions		1,042		(12	)		-		-		1,042		(12	)
Mortgage-backed Securities - Residential		18,323		(45	)		-		-		18,323		(45	)
Equity Securities		-		-			-		-		-		-
Total	$	39,227	$	(195	)	$	-	$	-	$	39,227	$	(195	)

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Summary of Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2013

Summary of Significant Accounting Policies [Abstract]

Description of Business and Basis of Presentation

Description of Business and Basis of Presentation

German American Bancorp, Inc. operations are primarily comprised of three business segments: core banking, trust and investment advisory services, and insurance operations. The accounting and reporting policies of German American Bancorp, Inc. and its subsidiaries conform to U.S. generally accepted accounting principles. The more significant policies are described below. The consolidated financial statements include the accounts of the Company and its subsidiaries after elimination of all material intercompany accounts and transactions. Certain prior year amounts have been reclassified to conform with current classifications. The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts and disclosures. Actual results could differ from those estimates. Estimates susceptible to change in the near term include the allowance for loan losses, fair value of financial instruments, other-than-temporary impairment of securities, the valuation allowance on deferred tax assets, and loss contingencies.

Securities

Securities

Securities classified as available-for-sale are securities that the Company intends to hold for an indefinite period of time, but not necessarily until maturity. These include securities that management may use as part of its asset/liability strategy, or that may be sold in response to changes in interest rates, changes in prepayment risk, or similar reasons. Equity securities with readily determinable fair values are classified as available-for-sale. Equity securities that do not have readily determinable fair values are carried at historical cost and evaluated for impairment on a periodic basis. Securities classified as available-for-sale are reported at fair value with unrealized gains or losses included as a separate component of equity, net of tax. Securities classified as held-to-maturity are securities that the Company has both the ability and positive intent to hold to maturity. Securities held-to-maturity are carried at amortized cost.

Premium amortization is deducted from, and discount accretion is added to, interest income using the level yield method without anticipating prepayments, except for mortgage-backed securities where prepayments are anticipated. Gains and losses on sales are recorded on trade date and are computed on the identified securities method.

Management evaluates securities for other-than-temporary impairment ("OTTI") on at least a quarterly basis, and more frequently when economic or market conditions warrant such an evaluation.  For securities in an unrealized loss position, management considers the extent and duration of the unrealized loss, and the financial condition and near-term prospects of the issuer. Management also assesses whether it intends to sell, or it is more likely than not that it will be required to sell, a security in an unrealized loss position before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the entire difference between amortized cost and fair value is recognized as impairment through earnings.  For debt securities that do not meet the aforementioned criteria, the amount of impairment is split into two components as follows: 1) OTTI related to credit loss, which must be recognized in the income statement and 2) OTTI related to other factors, which is recognized in other comprehensive income.  The credit loss is defined as the difference between the present value of the cash flows expected to be collected and the amortized cost basis. For equity securities, the entire amount of impairment is recognized through earnings.

Loans Held for Sale

Loans Held for Sale

Mortgage loans originated and intended for sale in the secondary market are carried at fair value. Fair value is determined based on collateral value and prevailing market prices for loans with similar characteristics. Net unrealized gains or losses are recorded through earnings.

Mortgage loans held for sale are generally sold on a servicing released basis. Gains and losses on sales of mortgage loans are based on the difference between the selling price and the carrying value of the related loan sold.

Loans

Loans

Loans that management has the intent and ability to hold for the foreseeable future or until maturity or pay-off are reported at the principal balance outstanding, net of unearned interest, deferred loan fees and costs, and an allowance for loan losses. Interest income is accrued on unpaid principal balance and includes amortization of net deferred loan fees and costs over the loan term without anticipating prepayments.

All classes of loans are generally placed on non-accrual status when scheduled principal or interest payments are past due for 90 days or more or when the borrower's ability to repay becomes doubtful. Uncollected accrued interest for each class of loans is reversed against income at the time a loan is placed on non-accrual. Interest received on such loans is accounted for on the cash-basis or cost-recovery method, until qualifying for return to accrual. All classes of loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured. Loans are typically charged-off at 180 days past due, or earlier if deemed uncollectible. Exceptions to the non-accrual and charge-off policies are made when the loan is well secured and in the process of collection.

Certain Purchased Loans

Certain Purchased Loans

The Company purchases individual loans and groups of loans. Purchased loans that show evidence of credit deterioration since origination are recorded at the amount paid (or allocated fair value in a purchase business combination), such that there is no carryover of the seller's allowance for loan losses. After acquisition, incurred losses are recognized by an increase in the allowance for loan losses.

Such purchased loans are accounted for individually. The Company estimates the amount and timing of expected cash flows for each purchased loan or pool, and the expected cash flows in excess of amount paid is recorded as interest income over the remaining life of the loan or pool (accretable yield). The excess of the loan's or pool's contractual principal and interest over expected cash flows is not recorded (nonaccretable difference).

Over the life of the loan, expected cash flows continue to be estimated. If the present value of expected cash flows is less than the carrying amount, a loss is recorded. If the present value of expected cash flows is greater than the carrying amount, it is recognized as part of future interest income.

Allowance for Loan Losses

Allowance for Loan Losses

The allowance for loan losses is a valuation allowance for probable incurred credit losses. Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance. Management estimates the allowance balance required using past loan loss experience, the nature and volume of the portfolio, information about specific borrower situations and estimated collateral values, economic conditions, and other factors. Allocations of the allowance may be made for specific loans, but the entire allowance is available for any loan that, in management's judgment, should be charged-off. The allowance consists of specific and general components. The specific component relates to loans that are individually classified as impaired or loans otherwise classified as substandard or special mention. The general component covers non-classified loans and is based on historical loss experience adjusted for current factors. For 2012 and 2011, the Company utilized a 4 quarter rolling historical loan loss average. Beginning in 2013, management deemed a rolling 12 quarter historical loan loss average to be more indicative of the inherent losses in the Company's loan portfolio in the current economic environment than the 4 quarter average. As the Company continues to monitor the current portfolio, the methodology could change in the future.

Loan impairment is reported when full repayment under the terms of the loan is not expected. If a loan is impaired, a portion of the allowance is allocated so that the loan is reported net, at the present value of estimated future cash flows using the loan's existing rate, or at the fair value of collateral if repayment is expected solely from the collateral. Commercial and industrial loans, commercial real estate loans, and agricultural loans are evaluated individually for impairment. Smaller balance homogeneous loans are evaluated for impairment in total. Such loans include real estate loans secured by one-to-four family residences and loans to individuals for household, family and other personal expenditures. Individually evaluated loans on non-accrual are generally considered impaired. Impaired loans, or portions thereof, are charged off when deemed uncollectible.

Troubled debt restructurings are separately identified for impairment disclosures and are measured at the present value of estimated future cash flows using the loan's effective rate at inception. If a troubled debt restructuring is considered to be a collateral dependent loan, the loan is reported, net, at the fair value of the collateral. For troubled debt restructurings that subsequently default, the Company determines the amount of reserve in accordance with the accounting policy for the allowance for loan losses.

The general component covers non-impaired loans and is based on historical loss experience adjusted for current factors. The historical loss experience is determined by portfolio segment and risk classifications and is based on the actual loss history experienced by the Company over the most recent twelve quarters. This actual loss experience is supplemented with other economic factors based on the risks present for each portfolio segment. These economic factors include consideration of the following: levels of and trends in delinquencies and impaired loans; levels of and trends in charge-offs and recoveries; trends in volume and terms of loans; effects of any changes in risk selection and underwriting standards; other changes in lending policies, procedures, and practices; experience, ability, and depth of lending management and other relevant staff; national and local economic trends and conditions; industry conditions; and effects of changes in credit concentrations. The following portfolio segments have been identified: Commercial Loans and Retail Loans. Commercial Loans have been classified according to the following risk characteristics: Commercial and Industrial Loans and Leases, Commercial Real Estate, and Agricultural Loans. Commercial and Industrial loans are primarily based on the cash flows of the business operations and secured by assets being financed and other assets such as accounts receivable and inventory. Commercial Real Estate Loans and Agricultural Loans are primarily based on cash flow of the borrower and their business and further secured by real estate. All types of commercial and agricultural (real estate secured and non-real estate) may also come with personal guarantees of the borrowers and business owners. Retail Loans have been classified according to the following risk characteristics: Home Equity Loans, Consumer Loans and Residential Mortgage Loans. Retail loans are generally dependent on personal income of the customer, and repayment is dependent on borrower's personal cash flow and employment status which can be affected by general economic conditions. Additionally, collateral values may fluctuate based on the impact of economic conditions on residential real estate values and other consumer type assets such as automobiles.

Loans or portions of loans shall be charged off when there is a distinct probability of loss identified. A distinct probability of loss exists when it has been determined that any remaining sources of repayment are insufficient to cover all outstanding principal. The probable loss is immediately calculated based on the value of the remaining sources of repayment and charged to the allowance for loan loss.

Federal Home Loan Bank (FHLB) Stock

Federal Home Loan Bank (FHLB) Stock

The Bank is a member of the FHLB of Indianapolis. Members are required to own a certain amount of stock based on the level of borrowings and other factors, and may invest in additional amounts. FHLB stock is carried at cost, classified as a restricted security, and periodically evaluated for impairment based on ultimate recovery of par value. Both cash and stock dividends are reported as income.

Premises, Furniture and Equipment

Premises, Furniture and Equipment

Land is carried at cost. Premises, furniture, and equipment are stated at cost less accumulated depreciation. Buildings and related components are depreciated using the straight-line method with useful lives ranging generally from 10 to 40 years. Furniture, fixtures, and equipment are depreciated using the straight-line method with useful lives ranging generally from 3 to 10 years.

Other Real Estate

Other Real Estate

Assets acquired through or instead of loan foreclosure are initially recorded at fair value less costs to sell when acquired, establishing a new cost basis. If fair value declines subsequent to foreclosure, a valuation allowance is recorded through expense. Operating costs after acquisition are expensed.

Goodwill and Other Intangible Assets

Goodwill and Other Intangible Assets

Goodwill resulting from business combinations prior to January 1, 2009 represents the excess of the purchase price over the fair value of the net assets of businesses acquired. Goodwill resulting from business combinations after January 1, 2009, is generally determined as the excess of the fair value of the consideration transferred, plus the fair value of any noncontrolling interests in the acquiree, over the fair value of the net assets acquired and liabilities assumed as of the acquisition date. Goodwill and intangible assets acquired in a purchase business combination and determined to have an indefinite useful life are not amortized, but tested for impairment at least annually. The Company has selected December 31 as the date to perform the annual impairment test. Intangible assets with definite useful lives are amortized over their estimated useful lives to their estimated residual values. Goodwill is the only intangible asset with an indefinite life on the Company's balance sheet.

Other intangible assets consist of core deposit and acquired customer relationship intangible assets. They are initially measured at fair value and then are amortized over their estimated useful lives, which range from 6 to 10 years.

Company Owned Life Insurance

Company Owned Life Insurance

The Company has purchased life insurance policies on certain directors and executives. This life insurance is recorded at its cash surrender value or the amount that can be realized, which considers any adjustments or changes that are probable at settlement.

Loss Contingencies

Loss Contingencies

Loss contingencies, including claims and legal actions arising in the ordinary course of business, are recorded as liabilities when the likelihood of loss is probable and an amount or range of loss can be reasonably estimated. Management does not believe currently that there are any such matters that will have a material impact on the financial statements.

Loan Commitments and Related Financial Instruments

Loan Commitments and Related Financial Instruments

Financial instruments include off-balance sheet credit instruments, such as commitments to make loans and commercial letters of credit issued to meet customer financing needs. The face amount for these items represents the exposure to loss, before considering customer collateral or ability to repay. Such financial instruments are recorded when they are funded.

Restrictions on Cash

Restrictions on Cash

At December 31, 2013 and 2012, respectively, the Company was required to have $7,431 and $10,752 on deposit with the Federal Reserve, or as cash on hand.

Long-term Assets

Long-term Assets

Premises and equipment, core deposit and other intangible assets, and other long-term assets are reviewed for impairment when events indicate their carrying amount may not be recoverable from future undiscounted cash flows. If impaired, the assets are recorded at fair value.

Stock Based Compensation

Stock Based Compensation

Compensation cost is recognized for stock options and restricted stock awards issued to employees and directors, based on the fair value of these awards at the date of grant. A Black-Scholes model is utilized to estimate the fair value of stock options, while the market price of the Corporation's common stock at the date of grant is used for restricted stock awards. Compensation cost is recognized over the required service period, generally defined as the vesting period.

Comprehensive Income

Comprehensive Income

Comprehensive income consists of net income and other comprehensive income (loss). Other comprehensive income (loss) includes unrealized gains and losses on securities available for sale and changes in unrecognized amounts in pension and other postretirement benefits, which are also recognized as a separate component of equity.

Income Taxes

Income Taxes

Deferred tax liabilities and assets are determined at each balance sheet date and are the result of differences in the financial statement and tax bases of assets and liabilities. Income tax expense is the amount due on the current year tax returns plus or minus the change in deferred taxes. A valuation allowance, if needed, reduces deferred tax assets to the amount expected to be realized.

A tax position is recognized as a benefit only if it is "more likely than not" that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the "more likely than not" test, no tax benefit is recorded.

Retirement Plans

Retirement Plans

Pension expense under the suspended defined benefit plan is the net of interest cost, return on plan assets and amortization of gains and losses not immediately recognized. Employee 401(k) and profit sharing plan expense is the amount of matching contributions. Deferred compensation and supplemental retirement plan expense allocates the benefits over years of service.

Earnings Per Share

Earnings Per Share

Earnings per share are based on net income divided by the weighted average number of shares outstanding during the period. Diluted earnings per share show the potential dilutive effect of additional common shares issuable under the Company's stock based compensation plans. Earnings per share are retroactively restated for stock dividends.

Cash Flow Reporting

Cash Flow Reporting

The Company reports net cash flows for customer loan transactions, deposit transactions, deposits made with other financial institutions and short-term borrowings. Cash and cash equivalents are defined to include cash on hand, demand deposits in other institutions and Federal Funds Sold.

Fair Values of Financial Instruments

Fair Values of Financial Instruments

Fair values of financial instruments are estimated using relevant market information and other assumptions, as more fully disclosed in Note 14. Fair value estimates involve uncertainties and matters of significant judgment regarding interest rates, credit risk, prepayments, and other factors, especially in the absence of broad markets for particular items. Changes in assumptions or in market conditions could significantly affect the estimates.

New Accounting Pronouncements

New Accounting Pronouncements

In February 2013, the FASB issued an update (ASU No. 2013-02, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income) impacting FASB ASC 220, Comprehensive Income.  This update requires an entity to provide information about the amounts reclassified out of accumulated other comprehensive income.  An entity is required to present, either on the face of the statement where net income is presented or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income but only if the amount reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period.  For other amounts not required under U.S. GAAP to be reclassified in their entirety to net income, an entity is required to cross-reference to other disclosures required under U.S. GAAP that provide additional detail about these amounts.  This update became effective for the Company for interim and annual periods beginning after December 15, 2012 and did not have a material impact on the consolidated financial statements.

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Employee Benefit Plans (Narrative) (Details) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Defined Benefit Plan Disclosure [Line Items]
401(k) deferred compensation and profit sharing plan, company contributions	$ 882,000	$ 777,000	$ 717,000
Annual Losses Per Individual	125,000
Charges to earnings for self-insurance reserve	2,599,000	1,799,000	1,620,000
Defined benefit plan termination costs	378,000
Certain Directors and Officers [Member]
Defined Benefit Plan Disclosure [Line Items]
Accrued benefits payable	1,857,000	2,003,000
Deferred compensation expense	173,000	170,000	183,000
Certain Officers [Member]
Defined Benefit Plan Disclosure [Line Items]
Accrued benefits payable	337,000	298,000
Deferred compensation expense	$ 166,000	$ 0	$ 72,000

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Derivatives (Effect of Derivative Instruments) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended								12 Months Ended
	Dec. 31, 2013	Sep. 30, 2013	Jun. 30, 2013	Mar. 31, 2013	Dec. 31, 2012	Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Derivative [Line Items]
Interest Income / (Expense)	$ 18,388	$ 17,192	$ 16,712	$ 16,225	$ 16,594	$ 16,393	$ 16,649	$ 16,612	$ 68,517	$ 66,248	$ 63,981
Interest Rate Swap [Member]
Derivative [Line Items]
Interest Income / (Expense)
Other Income / (Expense)									$ 528	$ 163

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Business Combinations, Goodwill and Intangible Assets (Tables)

12 Months Ended

Dec. 31, 2013

Business Combinations, Goodwill and Intangible Assets [Abstract]

Schedule of Business Combination Consideration

October 1, 2013

Consideration
Cash for Options and Fractional Shares	$	643
Cash Consideration		1,391
Equity Instruments		13,348
Fair Value of Total Consideration Transferred	$	15,382

Schedule of Assets Acquired and Liabilities Assumed

Recognized Amounts of Identifiable Assets Acquired and Liabilities Assumed:

Cash and Due From Banks	$	430
Federal Funds Sold, Other Short-term Investments		7,362
Interest-bearing Time Deposits with Banks		100
Securities		25,644
Loans		79,575
Premises, Furniture & Equipment		1,718
Core Deposit Intangible		2,052
Accrued Interest Receivable & Other Assets		3,638
Deposits		(106,633	)
Accrued Interest Payable and Other Liabilities		(175	)
Total Identifiable Net Assets	$	13,711
Goodwill	$	1,671

Changes in Carrying Amount of Goodwill

The changes in the carrying amount of goodwill for the periods ended December 31, 2013, 2012, and 2011 were classified as follows:

	2013		2012		2011
Beginning of Year	$	18,865	$	18,865	$	9,835
Acquired Goodwill		1,671		-		9,030
Impairment		-		-		-
End of Year	$	20,536	$	18,865	$	18,865

Schedule of Acquired Intangible Assets

Acquired intangible assets were as follows as of year end:	2013
	Gross		Accumulated
	Amount		Amortization
Core Banking
Core Deposit Intangible	$	9,004	$	5,815
Unidentified Branch Acquisition Intangible		257		257
Insurance
Customer List		5,199		5,060
Total	$	14,460	$	11,132
Acquired intangible assets were as follows as of year end:	2012
		Gross		Accumulated
		Amount		Amortization
Core Banking
Core Deposit Intangible	$	6,952	$	4,665
Unidentified Branch Acquisition Intangible		257		257
Insurance
Customer List		5,199		4,794
Total	$	12,408	$	9,716

Schedule of Estimated Amortization Expense

Estimated amortization expense for each of the next five years is as follows:

2014	1,254
2015	790
2016	493
2017	323
2018	235

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Derivatives (Tables)

12 Months Ended

Dec. 31, 2013

Derivatives [Abstract]

Schedule of Hedging Activities

The following table reflects the fair value hedges included in the Consolidated Balance Sheets as of December 31:

	2013				2012
	Notional				Notional
	Amount		Fair Value		Amount		Fair Value
Included in Other Assets:
Interest Rate Swaps	$	17,853	$	866	$	6,051	$	187
Included in Other Liabilities:
Interest Rate Swaps	$	17,853	$	737	$	6,051	$	178

Schedule of Effect of Derivative Instruments

The following tables present the effect of derivative instruments on the Consolidated Statement of Income for the years ended December 31, 2013, 2012 and 2011 are as follows:

	2013		2012		2011
Interest Rate Swaps:
Included in Interest Income / (Expense)	$	-	$	-	$	-
Included in Other Income / (Expense)		528		163		-

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Loans (Tables)

12 Months Ended

Dec. 31, 2013

Loans [Abstract]

Components of Loans

Loans were comprised of the following classifications at December 31:

	2013			2012
Commercial:
Commercial and Industrial Loans and Leases	$	350,955		$	335,373
Commercial Real Estate Loans		582,066			488,496
Agricultural Loans		192,880			179,906
Retail:
Home Equity Loans		81,504			74,437
Consumer Loans		49,124			41,103
Residential Mortgage Loans		128,683			88,586
Subtotal		1,385,212			1,207,901
Less: Unearned Income		(2,830	)		(3,035	)
Allowance for Loan Losses		(14,584	)		(15,520	)
Loans, net	$	1,367,798		$	1,189,346

Schedule of Allowance for Loan Losses

The following tables present the activity in the allowance for loan losses by portfolio class for the years ended December 31, 2013, 2012 and 2011:

	Commercial
	and
	Industrial			Commercial						Home						Residential
	Loans and			Real Estate			Agricultural			Equity			Consumer			Mortgage
	Leases			Loans			Loans			Loans			Loans			Loans			Unallocated		Total
December 31, 2013
Beginning Balance	$	4,555		$	8,931		$	989		$	141		$	214		$	186		$	504	$	15,520
Provision for Loan Losses		(197	)		(160	)		(43	)		419			112			111			108		350
Recoveries		128			102			-			-			148			8			-		386
Loans Charged-off		(503	)		(538	)		-			(321	)		(286	)		(24	)		-		(1,672	)
Ending Balance	$	3,983		$	8,335		$	946		$	239		$	188		$	281		$	612	$	14,584

	Commercial
	and
	Industrial			Commercial					Home						Residential
	Loans and			Real Estate			Agricultural		Equity			Consumer			Mortgage
	Leases			Loans			Loans		Loans			Loans			Loans			Unallocated			Total
December 31, 2012
Beginning Balance	$	3,493		$	9,297		$	926	$	258		$	190		$	402		$	746		$	15,312
Provision for Loan Losses		1,150			1,326			63		(32	)		194			(47	)		(242	)		2,412
Recoveries		74			97			-		2			123			30			-			326
Loans Charged-off		(162	)		(1,789	)		-		(87	)		(293	)		(199	)		-			(2,530	)
Ending Balance	$	4,555		$	8,931		$	989	$	141		$	214		$	186		$	504		$	15,520

	Commercial
	and
	Industrial			Commercial					Home						Residential
	Loans and			Real Estate			Agricultural		Equity			Consumer			Mortgage
	Leases			Loans			Loans		Loans			Loans			Loans			Unallocated		Total
December 31, 2011
Beginning Balance	$	3,713		$	7,497		$	750	$	220		$	362		$	543		$	232	$	13,317
Provision for Loan Losses		1,195			4,265			176		287			23			340			514		6,800
Recoveries		98			139			-		6			125			16			-		384
Loans Charged-off		(1,513	)		(2,604	)		-		(255	)		(320	)		(497	)		-		(5,189	)
Ending Balance	$	3,493		$	9,297		$	926	$	258		$	190		$	402		$	746	$	15,312

Schedule of Allowance for Loan Losses and Recorded Investment in Loans

The following tables present the balance in the allowance for loan losses and the recorded investment in loans by portfolio class and based on impairment method as of December 31, 2013 and 2012:

			Commercial
			and
			Industrial		Commercial				Home				Residential
			Loans and		Real Estate		Agricultural		Equity		Consumer		Mortgage
December 31, 2013	Total		Leases		Loans		Loans		Loans		Loans		Loans		Unallocated
Allowance for Loan Losses:
Ending Allowance Balance Attributable to Loans:
Individually Evaluated for Impairment	$	3,095	$	45	$	3,050	$	-	$	-	$	-	$	-	$	-
Collectively Evaluated for Impairment		11,481		3,938		5,277		946		239		188		281		612
Acquired with Deteriorated Credit Quality		8		-		8		-		-		-		-		-
Total Ending Allowance Balance	$	14,584	$	3,983	$	8,335	$	946	$	239	$	188	$	281	$	612
Loans:
Loans Individually Evaluated for Impairment	$	8,458	$	2,114	$	6,344	$	-	$	-	$	-	$	-	$	-
Loans Collectively Evaluated for Impairment		1,367,591		347,808		566,389		195,171		81,812		49,131		127,280		-
Loans Acquired with Deteriorated Credit Quality		14,753		1,981		10,871		-		-		134		1,767		-
Total Ending Loans Balance (1)	$	1,390,802	$	351,903	$	583,604	$	195,171	$	81,812	$	49,265	$	129,047	$	-

⁽¹⁾ Total recorded investment in loans includes $5,590 in accrued interest.

			Commercial
			and
			Industrial		Commercial				Home				Residential
			Loans and		Real Estate		Agricultural		Equity		Consumer		Mortgage
December 31, 2012	Total		Leases		Loans		Loans		Loans		Loans		Loans		Unallocated
Allowance for Loan Losses:
Ending Allowance Balance Attributable to Loans:
Individually Evaluated  for Impairment	$	5,323	$	1,279	$	3,894	$	150	$	-	$	-	$	-	$	-
Collectively Evaluated for Impairment		10,109		3,208		5,017		839		141		214		186		504
Acquired with Deteriorated Credit Quality		88		68		20		-		-		-		-		-
Total Ending Allowance Balance	$	15,520	$	4,555	$	8,931	$	989	$	141	$	214	$	186	$	504
Loans:
Loans Individually Evaluated for Impairment	$	12,520	$	2,547	$	7,550	$	2,423	$	-	$	-	$	-	$	-
Loans Collectively Evaluated for Impairment		1,189,729		331,920		473,209		180,152		74,699		41,083		88,666		-
Loans Acquired with Deteriorated Credit Quality		11,174		1,840		9,037		-		-		148		149		-
Total Ending Loans Balance (1)	$	1,213,423	$	336,307	$	489,796	$	182,575	$	74,699	$	41,231	$	88,815	$	-

⁽¹⁾ Total recorded investment in loans includes $5,522 in accrued interest.

Schedule of Loans Individually Evaluated for Impairment

The following table presents loans individually evaluated for impairment by class of loans as of December 31, 2013 and 2012:

	Unpaid				Allowance for
	Principal		Recorded		Loan Losses
	Balance(1)		Investment		Allocated
December 31, 2013
With No Related Allowance Recorded:
Commercial and Industrial Loans and Leases	$	2,163	$	2,072	$	-
Commercial Real Estate Loans		4,710		2,383		-
Agricultural Loans		-		-		-
Subtotal		6,873		4,455		-
With An Allowance Recorded:
Commercial and Industrial Loans and Leases		45		45		45
Commercial Real Estate Loans		4,428		4,417		3,058
Agricultural Loans		-		-		-
Subtotal		4,473		4,462		3,103
Total	$	11,346	$	8,917	$	3,103
Loans Acquired With Deteriorated Credit Quality With No Related Allowance Recorded (Included in the Total Above)	$	987	$	451	$	-
Loans Acquired With Deteriorated Credit Quality With An Additional Allowance Recorded (Included in the Total Above)	$	33	$	8	$	8

⁽¹⁾ Unpaid Principal Balance is the remaining contractual payments inclusive of partial charge-offs.

	Unpaid				Allowance for
	Principal		Recorded		Loan Losses
	Balance(1)		Investment		Allocated
December 31, 2012
With No Related Allowance Recorded:
Commercial and Industrial Loans and Leases	$	108	$	87	$	-
Commercial Real Estate Loans		4,312		2,154		-
Agricultural Loans		2,126		2,137		-
Subtotal		6,546		4,378		-
With An Allowance Recorded:
Commercial and Industrial Loans and Leases		2,642		2,581		1,347
Commercial Real Estate Loans		5,579		5,418		3,914
Agricultural Loans		285		286		150
Subtotal		8,506		8,285		5,411
Total	$	15,052	$	12,663	$	5,411
Loans Acquired With Deteriorated Credit Quality With No Related Allowance Recorded (Included in the Total Above)	$	45	$	25	$	-
Loans Acquired With Deteriorated Credit Quality With An Additional Allowance Recorded (Included in the Total Above)	$	155	$	118	$	88

⁽¹⁾ Unpaid Principal Balance is the remaining contractual payments inclusive of partial charge-offs.

The following table presents loans individually evaluated for impairment by class of loans for the years ended December 31, 2013 and 2012:

	Average		Interest		Cash
	Recorded		Income		Basis
	Investment		Recognized		Recognized
December 31, 2013
With No Related Allowance Recorded:
Commercial and Industrial Loans and Leases	$	1,192	$	65	$	65
Commercial Real Estate Loans		2,251		5		7
Agricultural Loans		1,420		209		225
Subtotal		4,863		279		297
With An Allowance Recorded:
Commercial and Industrial Loans and Leases		1,360		3		3
Commercial Real Estate Loans		5,424		22		18
Agricultural Loans		-		-		-
Subtotal		6,784		25		21
Total	$	11,647	$	304	$	318
Loans Acquired With Deteriorated Credit Quality With No Related Allowance Recorded (Included in the Total Above)	$	30	$	3	$	3
Loans Acquired With Deteriorated Credit Quality With An Additional Allowance Recorded (Included in the Total Above)	$	142	$	2	$	2

	Average		Interest		Cash
	Recorded		Income		Basis
	Investment		Recognized		Recognized
December 31, 2012
With No Related Allowance Recorded:
Commercial and Industrial Loans and Leases	$	252	$	3	$	3
Commercial Real Estate Loans		4,506		18		18
Agricultural Loans		535		2		2
Subtotal		5,293		23		23
With An Allowance Recorded:
Commercial and Industrial Loans and Leases		2,726		9		8
Commercial Real Estate Loans		6,660		23		19
Agricultural Loans		74		-		-
Subtotal		9,460		32		27
Total	$	14,753	$	55	$	50
Loans Acquired With Deteriorated Credit Quality With No Related Allowance Recorded (Included in the Total Above)	$	26	$	2	$	2
Loans Acquired With Deteriorated Credit Quality With An Additional Allowance Recorded (Included in the Total Above)	$	154	$	6	$	4

	Average		Interest		Cash
	Recorded		Income		Basis
	Investment		Recognized		Recognized
December 31, 2011
With No Related Allowance Recorded:
Commercial and Industrial Loans and Leases	$	1,107	$	9	$	9
Commercial Real Estate Loans		4,438		75		75
Agricultural Loans		19		6		6
Subtotal		5,564		90		90
With An Allowance Recorded:
Commercial and Industrial Loans and Leases		3,642		11		11
Commercial Real Estate Loans		9,390		37		34
Agricultural Loans		-		-		-
Subtotal		13,032		48		45
Total	$	18,596	$	138	$	135
Loans Acquired With Deteriorated Credit Quality With No Related Allowance Recorded (Included in the Total Above)	$	28	$	4	$	4
Loans Acquired With Deteriorated Credit Quality With An Additional Allowance Recorded (Included in the Total Above)	$	77	$	1	$	1

Schedule of Recorded Investment in Nonaccrual Loans

The following table presents the recorded investment in non-accrual loans and loans past due 90 days or more still on accrual by class of loans as of December 31, 2013 and 2012:

					Loans Past Due
					90 Days or More
	Non-Accrual				& Still Accruing
	2013		2012		2013		2012
Commercial and Industrial Loans and Leases	$	31	$	2,480	$	-	$	-
Commercial Real Estate Loans		6,658		7,275		8		-
Agricultural Loans		-		-		-		-
Home Equity Loans		114		178		-		-
Consumer Loans		236		167		-		-
Residential Mortgage Loans		1,339		257		-		-
Total	$	8,378	$	10,357	$	8	$	-
Loans Acquired With Deteriorated Credit Quality (Included in the Total Above)	$	1,705	$	148	$	-	$	-

Schedule of Aging of Recorded Investment in Loans

The following table presents the aging of the recorded investment in past due loans by class of loans as of December 31, 2013 and 2012:

							90 Days
			30-59 Days		60-89 Days		or More		Total		Loans Not
	Total		Past Due		Past Due		Past Due		Past Due		Past Due
December 31, 2013
Commercial and Industrial Loans and Leases	$	351,903	$	256	$	78	$	-	$	334	$	351,569
Commercial Real Estate Loans		583,604		613		62		2,234		2,909		580,695
Agricultural Loans		195,171		62		-		-		62		195,109
Home Equity Loans		81,812		303		33		114		450		81,362
Consumer Loans		49,265		149		66		102		317		48,948
Residential Mortgage Loans		129,047		2,206		192		1,115		3,513		125,534
Total (1)	$	1,390,802	$	3,589	$	431	$	3,565	$	7,585	$	1,383,217
Loans Acquired With Deteriorated Credit Quality (Included in the Total Above)	$	14,753	$	148	$	-	$	1,103	$	1,251	$	13,502

⁽¹⁾ Total recorded investment in loans includes $5,590 in accrued interest.

							90 Days
			30-59 Days		60-89 Days		or More		Total		Loans Not
	Total		Past Due		Past Due		Past Due		Past Due		Past Due
December 31, 2012
Commercial and Industrial Loans and Leases	$	336,307	$	436	$	133	$	448	$	1,017	$	335,290
Commercial Real Estate Loans		489,796		1,352		-		2,063		3,415		486,381
Agricultural Loans		182,575		42		14		-		56		182,519
Home Equity Loans		74,699		177		48		178		403		74,296
Consumer Loans		41,231		431		23		18		472		40,759
Residential Mortgage Loans		88,815		2,070		495		257		2,822		85,993
Total (1)	$	1,213,423	$	4,508	$	713	$	2,964	$	8,185	$	1,205,238
Loans Acquired With Deteriorated Credit Quality (Included in the Total Above)	$	11,174	$	-	$	120	$	-	$	120	$	11,054

⁽¹⁾ Total recorded investment in loans includes $5,522 in accrued interest.

Schedule of Recorded Investment of Troubled Debt Restructurings

The following table presents the recorded investment of troubled debt restructurings by class of loans as of December 31, 2013 and 2012:

	Total		Performing		Non-Accrual(1)
December 31, 2013
Commercial and Industrial Loans and Leases	$	2,092	$	2,086	$	6
Commercial Real Estate Loans		4,325		364		3,961
Total	$	6,417	$	2,450	$	3,967

	Total		Performing		Non-Accrual(1)
December 31, 2012
Commercial and Industrial Loans and Leases	$	2,461	$	66	$	2,395
Commercial Real Estate Loans		6,031		304		5,727
Total	$	8,492	$	370	$	8,122

⁽¹⁾ The non-accrual troubled debt restructurings are included in the Non-Accrual Loan table presented on previous page.

Schedule of Loans Modified as Troubled Debt Restructuring

The following table presents loans by class modified as troubled debt restructurings that occurred during the year ending December 31, 2013, 2012 and 2011:

			Pre-Modification		Post-Modification
	Number of		Outstanding Recorded		Outstanding Recorded
December 31, 2013	Loans		Investment		Investment
Commercial and Industrial Loans and Leases		1	$	224	$	230
Commercial Real Estate Loans		1		81		118
Total		2	$	305	$	348

The troubled debt restructurings described above decreased the allowance for loan losses by $210 and resulted in charge-offs of $0 during the year ending December 31, 2013.

			Pre-Modification		Post-Modification
	Number of		Outstanding Recorded		Outstanding Recorded
December 31, 2012	Loans		Investment		Investment
Commercial and Industrial Loans and Leases		2	$	9	$	9
Commercial Real Estate Loans		-		-		-
Total		2	$	9	$	9

The troubled debt restructurings described above increased the allowance for loan losses by $0 and resulted in charge-offs of $0 during the year ending December 31, 2012.

			Pre-Modification		Post-Modification
	Number of		Outstanding Recorded		Outstanding Recorded
December 31, 2011	Loans		Investment		Investment
Commercial and Industrial Loans and Leases		4	$	4,541	$	4,499
Commercial Real Estate Loans		6		7,099		6,850
Total		10	$	11,640	$	11,349

Schedule of Troubled Debt Restructuring, Subsequently Defaulted

The following table presents loans by class modified as troubled debt restructurings for which there was a payment default within twelve months following the modification during the years ending December 31, 2013, 2012 and 2011:

Troubled Debt Restructurings That Subsequently Defaulted:	Number of Loans		Recorded Investment
December 31, 2013
Commercial and Industrial Loans and Leases		-	$	-
Commercial Real Estate Loans		-		-
Total		-	$	-

The troubled debt restructurings that subsequently defaulted described above resulted in no change to the allowance for loan losses and no charge-offs during the year ending December 31, 2013.

Troubled Debt Restructurings That Subsequently Defaulted:	Number of Loans		Recorded Investment
December 31, 2012
Commercial and Industrial Loans and Leases		1	$	565
Commercial Real Estate Loans		3		1,377
Total		4	$	1,942

The troubled debt restructurings that subsequently defaulted described above increased the allowance for loan losses by $12 and resulted in charge-offs of $306 during the year ending December 31, 2012.

Troubled Debt Restructurings That Subsequently Defaulted:	Number of Loans		Recorded Investment
December 31, 2011
Commercial and Industrial Loans and Leases		1	$	527
Commercial Real Estate Loans		-		-
Total		1	$	527

Schedule of Risk Category of Loans

Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be pass rated loans. Based on the most recent analysis performed, the risk category of loans by class of loans is as follows:

			Special
	Pass		Mention		Substandard		Doubtful		Total
December 31, 2013
Commercial and Industrial Loans and Leases	$	324,685	$	15,485	$	11,733	$	-	$	351,903
Commercial Real Estate Loans		539,533		20,168		23,903		-		583,604
Agricultural Loans		192,609		2,357		205		-		195,171
Total	$	1,056,827	$	38,010	$	35,841	$	-	$	1,130,678
Loans Acquired with Deteriorated Credit Quality (Included in the Total Above)	$	3,121	$	661	$	9,070	$	-	$	12,852

			Special
	Pass		Mention		Substandard		Doubtful		Total
December 31, 2012
Commercial and Industrial Loans and Leases	$	307,997	$	14,441	$	13,869	$	-	$	336,307
Commercial Real Estate Loans		446,639		21,338		21,819		-		489,796
Agricultural Loans		176,730		2,855		2,990		-		182,575
Total	$	931,366	$	38,634	$	38,678	$	-	$	1,008,678
Loans Acquired with Deteriorated Credit Quality (Included in the Total Above)	$	319	$	3,220	$	7,338	$	-	$	10,877

Schedule of Recorded Investment in Home Equity, Consumer and Residential Mortgage Loans

The following table presents the recorded investment in home equity, consumer and residential mortgage loans based on payment activity as of December 31, 2013 and 2012:

	Home Equity		Consumer		Residential
	Loans		Loans		Mortgage Loans
December 31, 2013
Performing	$	81,698	$	49,029	$	127,708
Nonperforming		114		236		1,339
Total	$	81,812	$	49,265	$	129,047
Loans Acquired with Deteriorated Credit Quality (Included in the Total Above)	$	-	$	134	$	1,767

	Home Equity		Consumer		Residential
	Loans		Loans		Mortgage Loans
December 31, 2012
Performing	$	74,521	$	41,064	$	88,558
Nonperforming		178		167		257
Total	$	74,699	$	41,231	$	88,815
Loans Acquired with Deteriorated Credit Quality (Included in the Total Above)	$	-	$	148	$	149

Schedule of Financing Receivables Acquired

	Commercial
	and
	Industrial		Commercial				Home				Residential
	Loans and		Real Estate		Agricultural		Equity		Consumer		Mortgage
	Leases		Loans		Loans		Loans		Loans		Loans		Total
Purchases	$	6,399	$	47,021	$	769	$	4,536	$	1,666	$	19,184	$	79,575

Schedule of Carrying Amount of Loans with Deterioration of Credit Quality

The recorded investment of those loans at December 31, is as follows:

	2013		2012		2011
Commercial and Industrial Loans	$	1,981	$	1,840	$	2,596
Commercial Real Estate Loans		10,871		9,037		13,209
Home Equity Loans		-		-		-
Consumer Loans		134		148		164
Residential Mortgage Loans		1,767		149		152
Total	$	14,753	$	11,174	$	16,121
Carrying Amount, Net of Allowance	$	14,745	$	11,086	$	16,044

Schedule of Accretable Yield, or Income Expected to be Collected

Accretable yield, or income expected to be collected, is as follows:

	2013			2012			2011
Balance at January 1	$	170		$	967		$	-
New Loans Purchased		2,885			-			2,042
Accretion of Income		(265	)		(1,265	)		(1,130	)
Reclassifications from Non-accretable Difference		-			468			129
Charge-off of Accretable Yield		-			-			(74	)
Balance at December 31	$	2,790		$	170		$	967

Schedule of Contractually Required Payments Receivable of Purchased Loans with Deterioration of Credit Quality

Contractually required payments receivable of loans purchased during the years ended December 31:

	2013		2012		2011
Commercial and Industrial Loans	$	401	$	-	$	4,542
Commercial Real Estate Loans		6,640		-		19,260
Home Equity Loans		-		-		28
Consumer Loans		-		-		217
Residential Mortgage Loans		3,684		-		458
Total	$	10,725	$	-	$	24,505
Cash Flows Expected to be Collected at Acquisition	$	7,642	$	-	$	19,695
Fair Value of Acquired Loans at Acquisition		6,252		-		17,653

Schedule of Loans to Shareholders Activity

A summary of the activity of these loans follows:

Balance				Changes							Balance
January 1,				in Persons		Deductions					December 31,
2013		Additions		Included		Collected			Charged-off		2013
$	9,002	$	5,426	$	1,290	$	(5,387	)	$	-	$	10,331

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Consolidated Statements of Cash Flows (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income	$ 25,413	$ 24,055	$ 20,249
Adjustments to Reconcile Net Income to Net Cash from Operating Activities:
Net Amortization on Securities	2,875	4,567	2,509
Depreciation and Amortization	4,461	4,688	5,139
Loans Originated for Sale	(158,845)	(181,993)	(143,738)
Proceeds from Sales of Loans Held-for-Sale	169,242	189,984	136,364
Loss in Investment in Limited Partnership			20
Provision for Loan Losses	350	2,412	6,800
Gain on Sale of Loans, net	(2,645)	(3,234)	(2,381)
Gain on Securities, net	(2,429)	(1,667)	(3,024)
Loss (Gain) on Sales of Other Real Estate and Repossessed Assets	291	(221)	165
Loss (Gain) on Disposition and Impairment of Premises and Equipment	(70)	(1)	28
Post Retirement Medical Benefit	17	31
Other-than-temporary Impairment on Securities			110
Increase in Cash Surrender Value of Company Owned Life Insurance	(955)	(960)	(1,107)
Equity Based Compensation	329	628	635
Excess Tax Benefit from Restricted Share Grant	(28)	(23)	(37)
Change in Assets and Liabilities:
Interest Receivable and Other Assets	6,016	3,433	5,020
Interest Payable and Other Liabilities	(2,376)	298	(136)
Net Cash from Operating Activities	41,646	41,997	26,616
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from Maturity of Other Short-term Investments	2,690	3,236	6,223
Proceeds from Maturities, Calls, Redemptions of Securities Available-for-Sale	136,173	143,253	99,272
Redemption of Federal Reserve Bank Stock			694
Proceeds from Sales of Securities Available-for-Sale	162,344	92,344	20,061
Purchase of Securities Available-for-Sale	(271,218)	(312,063)	(296,547)
Proceeds from Maturities of Securities Held-to-Maturity	78	344	915
Proceeds from Redemption of Federal Home Loan Bank Stock			1,523
Purchase of Loans	(744)
Proceeds from Sales of Loans	3,250	9,560	3,364
Loans Made to Customers, net of Payments Received	(102,722)	(98,620)	3,498
Proceeds from Sales of Other Real Estate	2,081	3,899	4,231
Property and Equipment Expenditures	(3,659)	(3,617)	(3,965)
Proceeds from Sales of Property and Equipment	88	1	12
Acquire Capitalized Lease	(1,455)		(7)
Acquisition of United Commerce Bank	5,858
Acquisition of American Community Bancorp, Inc.			55,780
Net Cash from Investing Activities	(67,236)	(161,663)	(104,946)
CASH FLOWS FROM FINANCING ACTIVITIES
Change in Deposits	64,645	84,779	166,416
Change in Short-term Borrowings	(18,000)	31,515	(32,682)
Advances in Long-term Debt	47,000	20,000
Repayments of Long-term Debt	(49,379)	(21,569)	(6,549)
Issuance of Common Stock	20	37	12
Income Tax Benefit from Restricted Share Grant	28	23	37
Employee Stock Purchase Plan	(9)	(67)	(25)
Dividends Paid	(7,670)	(7,068)	(7,047)
Net Cash from Financing Activities	36,635	107,650	120,162
Net Change in Cash and Cash Equivalents	11,045	(12,016)	41,832
Cash and Cash Equivalents at Beginning of Year	49,087	61,103	19,271
Cash and Cash Equivalents at End of Year	60,132	49,087	61,103
Cash Paid During the Year for
Interest	7,653	11,521	16,577
Income Taxes	10,268	8,990	6,693
Supplemental Non Cash Disclosures
Loans Transferred to Other Real Estate	851	2,980	3,492
Securities Transferred to Accounts Receivable		45,803	43,167
Accounts Receivable Transferred to Securities	$ (45,803)	$ (43,167)

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Premises, Furniture, and Equipment (Tables)

12 Months Ended

Dec. 31, 2013

Premises, Furniture, and Equipment [Abstract]

Schedule of Premises, Furniture and Equipment

Premises, furniture, and equipment was comprised of the following classifications at December 31:

	2013			2012
Land	$	8,366		$	7,948
Buildings and Improvements		47,677			43,706
Furniture and Equipment		21,544			19,584
Total Premises, Furniture and Equipment		77,587			71,238
Less:  Accumulated Depreciation		(37,157	)		(34,684	)
Total	$	40,430		$	36,554

Schedule of Capital Leased Assets

The Company has included the leases in buildings and improvements as follows:

	2013			2012
Capital Leases	$	3,896		$	2,442
Less: Accumulated Depreciation		(483	)		(344	)
Total	$	3,413		$	2,098

Schedule of Future Minimum Lease Payments under Capitalized Leases

The following is a schedule of future minimum lease payments under the capitalized leases, together with the present value of net minimum lease payments at year end 2013:

2014	$	495
2015		495
2016		495
2017		495
2018		465
Thereafter		6,216
Total minimum lease payments		8,661
Less: Amount representing interest		(4,931	)
Present Value of Net Minimum Lease Payments	$	3,730

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FHLB Advances and Other Borrowings (Schedule of Issuance of Subordinated Debentures) (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
ACB Trust I [Member]
Debt Instrument [Line Items]
Date of Issuance	May 06, 2005
Issuance Amount	$ 5,155
Carrying Amount at December 31	3,186
Variable Rate	90 day LIBOR + 2.15%
Rate as of December 31	2.40%	2.46%
Maturity Date	May 31, 2035
ACB Trust II [Member]
Debt Instrument [Line Items]
Date of Issuance	Jul. 15, 2005
Issuance Amount	3,093
Carrying Amount at December 31	$ 1,838
Variable Rate	90 day LIBOR + 1.85%
Rate as of December 31	2.09%	2.16%
Maturity Date	Jul. 31, 2035

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Fair Value (Schedule of Carrying Amounts and Estimated Fair Values of Company's Financial Instruments) (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012
Financial Assets:
Securities Held-to-Maturity	$ 268	$ 346
FHLB Stock and Other Restricted Stock	9,004	8,340
Loans, Net	1,367,798	1,189,346
Accrued interest	5,590	5,522
Financial Liabilities:
Time Deposits	(349,034)	(329,183)
Short-term Borrowings	(53,533)	(71,534)
Long-term Debt	(87,237)	(89,472)
Commitments to Extend Credit [Member]
Unrecognized Financial Instruments:
Financial Instruments with Off-Balance Sheet Risk, carrying value
Financial Instruments with Off-Balance Sheet Risk, fair value
Commitments to Extend Credit [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]
Unrecognized Financial Instruments:
Financial Instruments with Off-Balance Sheet Risk, fair value
Commitments to Extend Credit [Member] | Significant Other Observable Inputs (Level 2) [Member]
Unrecognized Financial Instruments:
Financial Instruments with Off-Balance Sheet Risk, fair value
Commitments to Extend Credit [Member] | Significant Unobservable Inputs (Level 3) [Member]
Unrecognized Financial Instruments:
Financial Instruments with Off-Balance Sheet Risk, fair value
Standby Letters of Credit [Member]
Unrecognized Financial Instruments:
Financial Instruments with Off-Balance Sheet Risk, carrying value
Financial Instruments with Off-Balance Sheet Risk, fair value
Standby Letters of Credit [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]
Unrecognized Financial Instruments:
Financial Instruments with Off-Balance Sheet Risk, fair value
Standby Letters of Credit [Member] | Significant Other Observable Inputs (Level 2) [Member]
Unrecognized Financial Instruments:
Financial Instruments with Off-Balance Sheet Risk, fair value
Standby Letters of Credit [Member] | Significant Unobservable Inputs (Level 3) [Member]
Unrecognized Financial Instruments:
Financial Instruments with Off-Balance Sheet Risk, fair value
Commitments to Sell Loans [Member]
Unrecognized Financial Instruments:
Financial Instruments with Off-Balance Sheet Risk, carrying value
Financial Instruments with Off-Balance Sheet Risk, fair value
Commitments to Sell Loans [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]
Unrecognized Financial Instruments:
Financial Instruments with Off-Balance Sheet Risk, fair value
Commitments to Sell Loans [Member] | Significant Other Observable Inputs (Level 2) [Member]
Unrecognized Financial Instruments:
Financial Instruments with Off-Balance Sheet Risk, fair value
Commitments to Sell Loans [Member] | Significant Unobservable Inputs (Level 3) [Member]
Unrecognized Financial Instruments:
Financial Instruments with Off-Balance Sheet Risk, fair value
Carrying Value [Member]
Financial Assets:
Cash and Short-term Investments	60,232	51,794
Securities Held-to-Maturity	268	346
FHLB Stock and Other Restricted Stock	9,004	8,340
Loans, Net	1,366,452	1,186,483
Accrued interest	7,470	7,419
Financial Liabilities:
Demand, Savings, and Money Market Deposits	(1,463,122)	(1,311,748)
Time Deposits	(349,034)	(329,183)
Short-term Borrowings	(53,533)	(71,534)
Long-term Debt	(87,237)	(89,472)
Accrued Interest Payable	(777)	(1,275)
Carrying Value [Member] | Commitments to Extend Credit [Member]
Unrecognized Financial Instruments:
Financial Instruments with Off-Balance Sheet Risk, carrying value
Carrying Value [Member] | Standby Letters of Credit [Member]
Unrecognized Financial Instruments:
Financial Instruments with Off-Balance Sheet Risk, carrying value
Carrying Value [Member] | Commitments to Sell Loans [Member]
Unrecognized Financial Instruments:
Financial Instruments with Off-Balance Sheet Risk, carrying value
Fair Value [Member]
Financial Assets:
Cash and Short-term Investments	60,232	51,794
Securities Held-to-Maturity	271	351
FHLB Stock and Other Restricted Stock
Loans, Net	1,370,339	1,199,566
Accrued interest	7,470	7,419
Financial Liabilities:
Demand, Savings, and Money Market Deposits	(1,463,122)	(1,311,748)
Time Deposits	(351,707)	(333,170)
Short-term Borrowings	(53,533)	(71,534)
Long-term Debt	(88,640)	(95,764)
Accrued Interest Payable	(777)	(1,275)
Fair Value [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]
Financial Assets:
Cash and Short-term Investments	37,370	41,624
Securities Held-to-Maturity
FHLB Stock and Other Restricted Stock
Loans, Net
Accrued interest
Financial Liabilities:
Demand, Savings, and Money Market Deposits	(1,463,122)	(1,311,748)
Time Deposits
Short-term Borrowings
Long-term Debt
Accrued Interest Payable
Fair Value [Member] | Significant Other Observable Inputs (Level 2) [Member]
Financial Assets:
Cash and Short-term Investments	22,862	10,170
Securities Held-to-Maturity	271	351
FHLB Stock and Other Restricted Stock
Loans, Net
Accrued interest	1,918	1,893
Financial Liabilities:
Demand, Savings, and Money Market Deposits
Time Deposits	(351,707)	(333,170)
Short-term Borrowings	(53,533)	(71,534)
Long-term Debt	(83,329)	(66,892)
Accrued Interest Payable	(732)	(829)
Fair Value [Member] | Significant Unobservable Inputs (Level 3) [Member]
Financial Assets:
Cash and Short-term Investments
Securities Held-to-Maturity
FHLB Stock and Other Restricted Stock
Loans, Net	1,370,339	1,199,566
Accrued interest	5,552	5,526
Financial Liabilities:
Demand, Savings, and Money Market Deposits
Time Deposits
Short-term Borrowings
Long-term Debt	(5,311)	(28,872)
Accrued Interest Payable	(45)	(446)
Fair Value [Member] | Commitments to Extend Credit [Member]
Unrecognized Financial Instruments:
Financial Instruments with Off-Balance Sheet Risk, fair value
Fair Value [Member] | Standby Letters of Credit [Member]
Unrecognized Financial Instruments:
Financial Instruments with Off-Balance Sheet Risk, fair value
Fair Value [Member] | Commitments to Sell Loans [Member]
Unrecognized Financial Instruments:
Financial Instruments with Off-Balance Sheet Risk, fair value

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Commitments and Off-balance Sheet Items (Tables)

12 Months Ended

Dec. 31, 2013

Commitments and Off-balance Sheet Items [Abstract]

Schedule of Commitments and Off Balance Sheet Items

Commitments and contingent liabilities are summarized as follows, at December 31:

	2013				2012
	Fixed		Variable		Fixed		Variable
	Rate		Rate		Rate		Rate
Commitments to Fund Loans:
Consumer Lines	$	8,940	$	145,064	$	6,013	$	137,668
Commercial Operating Lines		23,717		199,231		13,444		187,829
Residential Mortgages		11,249		930		33,004		676
Total Commitments to Fund Loans	$	43,906	$	345,225	$	52,461	$	326,173
Commitments to Sell Loans	$	20,672		$-	$	52,511		$-
Standby Letters of Credit	$	1,515	$	5,262	$	1,408	$	4,279

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Securities (Narrative) (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2011	Dec. 31, 2012
Securities [Abstract]
Business acquisition, effective date of acquisition of American Community Bancorp, Inc.	Jan. 01, 2011
Gain recognized on stock held as a result of acquisition	$ 343	$ 1,045
Carrying Value Of Securities Pledged To Secure Repurchase Agreements	$ 141,240		$ 61,744

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Loans (Schedule of Accretable Yield, or Income Expected to be Collected) (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Accounts, Notes, Loans and Financing Receivable [Line Items]
Balance at January 1	$ 170	$ 967
New Loans Purchased	2,885		2,042
Accretion of Income	(265)	(1,265)	(1,130)
Reclassifications from Non-accretable Difference		468	129
Charge-off of Accretable Yield			(74)
Balance at December 31	$ 2,790	$ 170	$ 967

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Consolidated Balance Sheets (USD $) In Thousands, except Share data, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012
ASSETS
Cash and Due from Banks	$ 37,370	$ 41,624
Federal Funds Sold and Other Short-term Investments	22,762	7,463
Cash and Cash Equivalents	60,132	49,087
Interest-bearing Time Deposits with Banks	100	2,707
Securities Available-for-Sale, at Fair Value	606,032	587,602
Securities Held-to-Maturity, at Cost (Fair value of $271 and $351 on December 31, 2013 and 2012, respectively)	268	346
Loans Held-for-Sale, at Fair Value	9,265	16,641
Loans	1,385,212	1,207,901
Less:
Unearned Income	(2,830)	(3,035)
Allowance for Loan Losses	(14,584)	(15,520)
Loans, Net	1,367,798	1,189,346
Stock in FHLB of Indianapolis and Other Restricted Stock, at Cost	9,004	8,340
Premises, Furniture and Equipment, Net	40,430	36,554
Other Real Estate	1,029	1,645
Goodwill	20,536	18,865
Intangible Assets	3,328	2,692
Company Owned Life Insurance	31,178	30,223
Accrued Interest Receivable and Other Assets	14,727	62,252
TOTAL ASSETS	2,163,827	2,006,300
LIABILITIES
Non-interest-bearing Demand Deposits	400,024	349,174
Interest-bearing Demand, Savings, and Money Market Accounts	1,063,098	962,574
Time Deposits	349,034	329,183
Total Deposits	1,812,156	1,640,931
FHLB Advances and Other Borrowings	140,770	161,006
Accrued Interest Payable and Other Liabilities	10,804	19,337
TOTAL LIABILITIES	1,963,730	1,821,274
Commitments and Contingencies (Note 13)
SHAREHOLDERS' EQUITY
Preferred Stock, no par value; 500,000 shares authorized, no shares issued
Common Stock, no par value, $1 stated value; 30,000,000 shares authorized	13,174	12,637
Additional Paid-in Capital	108,022	95,617
Retained Earnings	84,164	66,421
Accumulated Other Comprehensive Income (Loss)	(5,263)	10,351
TOTAL SHAREHOLDERS' EQUITY	200,097	185,026
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$ 2,163,827	$ 2,006,300
End of period shares issued and outstanding	13,173,793	12,636,656

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Other Comprehensive Income (Loss) (Tables)

12 Months Ended

Dec. 31, 2013

Other Comprehensive Income (Loss) [Abstract]

Schedule of Accumulated Other Comprehensive Income

The table below summarizes the changes in accumulated other comprehensive income (loss) by component for the year ending December 31, 2013, net of tax:

	Unrealized
	Gains and			Defined
	Losses on			Benefit
	Available-for-			Pension			Postretirement
	Sale Securities			Items			Benefit Items			Total
Beginning Balance	$	10,643		$	(231	)	$	(61	)	$	10,351
Other Comprehensive Income (Loss) Before
Reclassification		(14,295	)		453			51			(13,791	)
Amounts Reclassified from Accumulated
Other Comprehensive Income		(1,579	)		(222	)		(22	)		(1,823	)
Net Current Period Other
Comprehensive Income (Loss)		(15,874	)		231			29			(15,614	)
Ending Balance	$	(5,231	)	$	-		$	(32	)	$	(5,263	)

Summary of Classifications Out of Accumulated Other Comprehensive Income (Loss) by Component

The table below summarizes the classifications out of accumulated other comprehensive income (loss) by component for the year ending December 31, 2013:

	Amount Reclassified From
Details about Accumulated Other	Accumulated Other			Affected Line Item in the Statement
Comprehensive Income (Loss) Components	Comprehensive Income (Loss)			Where Net Income is Presented
Unrealized Gains and Losses on
Available-for-Sale Securities	$	(2,429	)	Net (Gain) Loss on Securities
		850		Income Tax Expense
		(1,579	)	Net of Tax
Amortization of Defined Benefit Pension Items
Prior Service Costs	$	(13	)	Salaries and Employee Benefits
Actuarial Gains (Losses)		(360	)	Salaries and Employee Benefits
		151		Income Tax Expense
		(222	)	Net of Tax
Amortization of Post Retirement Plan Items
Actuarial Gains (Losses)	$	(37	)	Salaries and Employee Benefits
		15		Income Tax Expense
		(22	)	Net of Tax
Total Reclassifications for the Period	$	(1,823	)

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Employee Benefit Plans (Schedule of Assumptions used to Determine Net Periodic Cost and Benefit Obligations) (Details) (Other Postretirement Benefit Plan, Defined Benefit [Member])	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Other Postretirement Benefit Plan, Defined Benefit [Member]
Defined Benefit Plan Disclosure [Line Items]
Discount Rate	4.31%	3.41%	3.98%

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Fair Value (Quantitative Information of Fair Value Measurements) (Details) (USD $)
In Thousands, unless otherwise specified

12 Months Ended

Dec. 31, 2013

Dec. 31, 2012

Significant Unobservable Inputs (Level 3) [Member] | Commercial Real Estate Loans [Member]

Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]

Fair Value

$ 20

$ 150

Valuation Technique(s)

Sales comparison approach

Income approach Cost approach

Sales comparison approach

Income approach Cost approach

Unobservable Input(s)

Adjustment for physical condition of comparable properties sold

Adjustment for net operating income generated by the property

Adjustment for investor rates of return

Adjustment for physical condition of comparable properties sold

Adjustment for net operating income generated by the property

Adjustment for investor rates of return

(Weighted Average)

50.00%

70.00%

Impaired Loans with Specific Allocations [Member] | Commercial and Industrial Loans and Leases [Member] | Minimum [Member]

Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]

(Weighted Average)

4.00%

Impaired Loans with Specific Allocations [Member] | Commercial and Industrial Loans and Leases [Member] | Maximum [Member]

Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]

(Weighted Average)

68.00%

Impaired Loans with Specific Allocations [Member] | Commercial and Industrial Loans and Leases [Member] | Weighted Average [Member]

Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]

(Weighted Average)

8.00%

Impaired Loans with Specific Allocations [Member] | Commercial Real Estate Loans [Member] | Minimum [Member]

Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]

(Weighted Average)

12.00%

15.00%

Impaired Loans with Specific Allocations [Member] | Commercial Real Estate Loans [Member] | Maximum [Member]

Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]

(Weighted Average)

80.00%

78.00%

Impaired Loans with Specific Allocations [Member] | Commercial Real Estate Loans [Member] | Weighted Average [Member]

Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]

(Weighted Average)

53.00%

48.00%

Impaired Loans with Specific Allocations [Member] | Significant Unobservable Inputs (Level 3) [Member] | Commercial and Industrial Loans and Leases [Member]

Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]

Fair Value

1,231

Valuation Technique(s)

Sales comparison approach

Unobservable Input(s)

Adjustment for differences between the comparable sales

Impaired Loans with Specific Allocations [Member] | Significant Unobservable Inputs (Level 3) [Member] | Commercial Real Estate Loans [Member]

Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]

Fair Value

1,346

1,497

Valuation Technique(s)

Sales comparison approach

Income approach Cost approach

Sales comparison approach

Income approach Cost approach

Unobservable Input(s)

Adjustment for physical condition of comparable properties sold

Adjustment for net operating income generated by the property

Adjustment for investor rates of return

Adjustment for physical condition of comparable properties sold

Adjustment for net operating income generated by the property

Adjustment for investor rates of return

Impaired Loans with Specific Allocations [Member] | Significant Unobservable Inputs (Level 3) [Member] | Agricultural Loans [Member]

Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]

Fair Value

$ 135

Valuation Technique(s)

Sales comparison approach

Income approach

Unobservable Input(s)

Adjustment for physical condition of comparable properties sold

Adjustment for net operating income generated by the property

(Weighted Average)

76.00%

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Consolidated Statements of Changes in Shareholders' Equity (USD $) In Thousands, except Share data, unless otherwise specified	Total	Common Stock [Member]	Additional Paid-In Capital [Member]	Retained Earnings [Member]	Accumulated Other Comprehensive Income [Member]
Balances at Dec. 31, 2010	$ 121,534	$ 11,105	$ 69,297	$ 36,232	$ 4,900
Balances (in shares) at Dec. 31, 2010		11,105,583
Net Income	20,249			20,249
Net Current Period Other Comprehensive Income (Loss)	5,643				5,643
Cash Dividends	(7,047)			(7,047)
Issuance of Common Stock for:
Exercise of Stock Options	12	2	10
Exercise of Stock Options (in shares)		1,652
Acquisition of American Community Bancorp, Inc	26,572	1,449	25,123
Acquisition of American Community Bancorp, Inc (in shares)		1,448,520
Employee Stock Purchase Plan	(25)		(25)
Restricted Share Grants	635	38	597
Restricted Share Grants (in shares)		38,503
Income Tax Benefit from Restricted Share Grant	37		37
Balances at Dec. 31, 2011	167,610	12,594	95,039	49,434	10,543
Balances (in shares) at Dec. 31, 2011		12,594,258
Net Income	24,055			24,055
Net Current Period Other Comprehensive Income (Loss)	(192)				(192)
Cash Dividends	(7,068)			(7,068)
Issuance of Common Stock for:
Exercise of Stock Options	37	8	29
Exercise of Stock Options (in shares)		7,278
Employee Stock Purchase Plan	(67)		(67)
Restricted Share Grants	628	35	593
Restricted Share Grants (in shares)		35,120
Income Tax Benefit from Restricted Share Grant	23		23
Balances at Dec. 31, 2012	185,026	12,637	95,617	66,421	10,351
Balances (in shares) at Dec. 31, 2012		12,636,656
Net Income	25,413			25,413
Net Current Period Other Comprehensive Income (Loss)	(15,614)				(15,614)
Cash Dividends	(7,670)			(7,670)
Issuance of Common Stock for:
Exercise of Stock Options	20	2	18
Exercise of Stock Options (in shares)	8,300	1,999
Acquisition of American Community Bancorp, Inc	12,574	503	12,071
Acquisition of American Community Bancorp, Inc (in shares)		502,560
Employee Stock Purchase Plan	(9)		(9)
Restricted Share Grants	329	32	297
Restricted Share Grants (in shares)		32,578
Income Tax Benefit from Restricted Share Grant	28		28
Balances at Dec. 31, 2013	$ 200,097	$ 13,174	$ 108,022	$ 84,164	$ (5,263)
Balances (in shares) at Dec. 31, 2013		13,173,793

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Employee Benefit Plans (Schedule of Asset Allocation of Retirement Plan) (Details) (Postretirement Medical and Life Benefit Plan [Member], USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Postretirement Medical and Life Benefit Plan [Member]
Defined Benefit Plan Disclosure [Line Items]
Obligation at Beginning of Year	$ 691	$ 624
Unrecognized Loss (Gain)	(33)	43
Components of Net Periodic Postretirement Benefit Cost
Service Cost	40	35	28
Interest Cost	23	24	25
Net Expected Benefit Payments	(50)	(35)
Obligation at End of Year	$ 671	$ 691	$ 624

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Loans (Schedule of Allowance for Loan Losses and Recorded Investment in Loans) (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013		Dec. 31, 2012		Dec. 31, 2011	Dec. 31, 2010
Allowance for Loan Losses:
Individually Evaluated for Impairment	$ 3,095		$ 5,323
Collectively Evaluated for Impairment	11,481		10,109
Acquired with Deteriorated Credit Quality	8		88
Total Ending Allowance Balance	14,584		15,520		15,312	13,317
Loans:
Loans Individually Evaluated for Impairment	8,458		12,520
Loans Collectively Evaluated for Impairment	1,367,591		1,189,729
Loans Acquired with Deteriorated Credit Quality	14,753		11,174		16,121
Total Ending Loans Balance	1,390,802	[1]	1,213,423	[2]
Commercial and Industrial Loans and Leases [Member]
Allowance for Loan Losses:
Individually Evaluated for Impairment	45		1,279
Collectively Evaluated for Impairment	3,938		3,208
Acquired with Deteriorated Credit Quality			68
Total Ending Allowance Balance	3,983		4,555		3,493	3,713
Loans:
Loans Individually Evaluated for Impairment	2,114		2,547
Loans Collectively Evaluated for Impairment	347,808		331,920
Loans Acquired with Deteriorated Credit Quality	1,981		1,840		2,596
Total Ending Loans Balance	351,903	[1]	336,307	[2]
Commercial Real Estate Loans [Member]
Allowance for Loan Losses:
Individually Evaluated for Impairment	3,050		3,894
Collectively Evaluated for Impairment	5,277		5,017
Acquired with Deteriorated Credit Quality	8		20
Total Ending Allowance Balance	8,335		8,931		9,297	7,497
Loans:
Loans Individually Evaluated for Impairment	6,344		7,550
Loans Collectively Evaluated for Impairment	566,389		473,209
Loans Acquired with Deteriorated Credit Quality	10,871		9,037		13,209
Total Ending Loans Balance	583,604	[1]	489,796	[2]
Agricultural Loans [Member]
Allowance for Loan Losses:
Individually Evaluated for Impairment			150
Collectively Evaluated for Impairment	946		839
Acquired with Deteriorated Credit Quality
Total Ending Allowance Balance	946		989		926	750
Loans:
Loans Individually Evaluated for Impairment			2,423
Loans Collectively Evaluated for Impairment	195,171		180,152
Loans Acquired with Deteriorated Credit Quality
Total Ending Loans Balance	195,171	[1]	182,575	[2]
Home Equity Loans [Member]
Allowance for Loan Losses:
Individually Evaluated for Impairment
Collectively Evaluated for Impairment	239		141
Acquired with Deteriorated Credit Quality
Total Ending Allowance Balance	239		141		258	220
Loans:
Loans Individually Evaluated for Impairment
Loans Collectively Evaluated for Impairment	81,812		74,699
Loans Acquired with Deteriorated Credit Quality
Total Ending Loans Balance	81,812	[1]	74,699	[2]
Consumer Loans [Member]
Allowance for Loan Losses:
Individually Evaluated for Impairment
Collectively Evaluated for Impairment	188		214
Acquired with Deteriorated Credit Quality
Total Ending Allowance Balance	188		214		190	362
Loans:
Loans Individually Evaluated for Impairment
Loans Collectively Evaluated for Impairment	49,131		41,083
Loans Acquired with Deteriorated Credit Quality	134		148		164
Total Ending Loans Balance	49,265	[1]	41,231	[2]
Residential Mortgage Loans [Member]
Allowance for Loan Losses:
Individually Evaluated for Impairment
Collectively Evaluated for Impairment	281		186
Acquired with Deteriorated Credit Quality
Total Ending Allowance Balance	281		186		402	543
Loans:
Loans Individually Evaluated for Impairment
Loans Collectively Evaluated for Impairment	127,280		88,666
Loans Acquired with Deteriorated Credit Quality	1,767		149		152
Total Ending Loans Balance	129,047	[1]	88,815	[2]
Unallocated [Member]
Allowance for Loan Losses:
Individually Evaluated for Impairment
Collectively Evaluated for Impairment	612		504
Acquired with Deteriorated Credit Quality
Total Ending Allowance Balance	612		504		746	232
Loans:
Loans Individually Evaluated for Impairment
Loans Collectively Evaluated for Impairment
Loans Acquired with Deteriorated Credit Quality
Total Ending Loans Balance		[1]		[2]

[1] Total recorded investment in loans includes $5,590 in accrued interest.

[2] Total recorded investment in loans includes $5,522 in accrued interest.

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Employee Benefit Plans (Schedule of Expected Benefit Payments) (Details) (Postretirement Medical and Life Benefit Plan [Member], USD $) In Thousands, unless otherwise specified	Dec. 31, 2013
Postretirement Medical and Life Benefit Plan [Member]
Defined Benefit Plan Disclosure [Line Items]
2014	$ 39
2015	49
2016	49
2017	60
2018	63
2019-2023	$ 383

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Shareholders' Equity (Tables)

12 Months Ended

Dec. 31, 2013

Shareholders' Equity [Abstract]

Schedule of Consolidated and Affiliate Bank Actual Capital and Minimum Required Levels

At December 31, 2013, consolidated and affiliate bank actual capital and minimum required levels are presented below:

												Minimum Required
												To Be Well-
						Minimum Required						Capitalized Under
						For Capital						Prompt Corrective
	Actual					Adequacy Purposes:						Action Regulations:
	Amount		Ratio			Amount		Ratio				Amount	Ratio
Total Capital (to Risk Weighted Assets)
Consolidated	$	201,233		13.07	%	$	123,189		8.00	%		N/A		N/A
Bank		191,714		12.46			123,099		8.00		$	153,874		10.00	%
Tier 1 Capital (to Risk Weighted Assets)
Consolidated	$	186,649		12.12	%	$	61,594		4.00	%		N/A		N/A
Bank		177,130		11.51			61,550		4.00		$	92,324		6.00	%
Tier 1 Capital (to Average Assets)
Consolidated	$	186,649		8.78	%	$	85,005		4.00	%		N/A		N/A
Bank		177,130		8.37			84,686		4.00		$	105,857		5.00	%

At December 31, 2012, consolidated and affiliate bank actual capital and minimum required levels are presented below:

												Minimum Required
												To Be Well-
						Minimum Required						Capitalized Under
						For Capital						Prompt Corrective
	Actual					Adequacy Purposes:						Action Regulations:
	Amount		Ratio			Amount		Ratio				Amount	Ratio
Total Capital (to Risk Weighted Assets)
Consolidated	$	194,990		13.70	%	$	113,859		8.00	%		N/A		N/A
Bank		167,904		11.83			113,523		8.00		$	141,904		10.00	%
Tier 1 Capital (to Risk Weighted Assets)
Consolidated	$	158,198		11.12	%	$	56,930		4.00	%		N/A		N/A
Bank		152,384		10.74			56,762		4.00		$	85,142		6.00	%
Tier 1 Capital (to Average Assets)
Consolidated	$	158,198		8.18	%	$	77,317		4.00	%		N/A		N/A
Bank		152,384		7.91			77,025		4.00		$	96,281		5.00	%

Summary of Stock Option Activity

The following table presents activity for stock options under the Company's equity incentive plan for 2013:

	Year Ended December 31, 2013
				Weighted		Weighted Average		Aggregate
	Number of			Average Price		Life of Options		Intrinsic
	Options			of Options		(in years)		Value
Outstanding at Beginning of Period		79,917		$	16.73
Granted		-			-
Exercised		(8,300	)		17.35
Forfeited		-			-
Expired		(2,100	)		18.19
Outstanding and Exercisable at End of Period		69,517		$	16.61		3.43	$	821

Schedule of Stock Option Activity under Equity Incentive Plan

The following table presents information related to stock options under the Company's equity incentive plan during the years ended 2013, 2012 and 2011:

	2013		2012		2011
Intrinsic Value of Options Exercised	$	49	$	203	$	28
Cash Received from Option Exercises	$	-	$	-	$	-
Tax Benefit of Option Exercises	$	20	$	78	$	12
Weighted Average Fair Value of Options Granted	$	-	$	-	$	-

Schedule of Restricted Stock and Cash Entitlements Expense

The following table presents expense recorded for restricted stock and cash entitlements as well as the related tax effect for the years ended 2013, 2012 and 2011:

	2013			2012			2011
Restricted Stock Expense	$	329		$	628		$	636
Cash Entitlement Expense		217			588			564
Tax Effect		(221	)		(493	)		(475	)
Net of Tax	$	325		$	723		$	725

Schedule of Restricted Stock Grants Outstanding

The following table presents information on restricted stock grants outstanding for the period shown:

	Year Ended
	December 31, 2013
				Weighted
	Restricted			Average Market
	Shares			Price at Grant
Outstanding at Beginning of Period		4,983		$	22.07
Granted		33,031			23.41
Issued and Vested		(14,620	)		22.57
Forfeited		(453	)		22.07
Outstanding at End of Period		22,941			23.68

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Loans (Schedule of Recorded Investment of Troubled Debt Restructurings) (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013		Dec. 31, 2012
Financing Receivable, Modifications [Line Items]
Total	$ 6,417		$ 8,492
Commercial and Industrial Loans and Leases [Member]
Financing Receivable, Modifications [Line Items]
Total	2,092		2,461
Commercial Real Estate Loans [Member]
Financing Receivable, Modifications [Line Items]
Total	4,325		6,031
Performing [Member]
Financing Receivable, Modifications [Line Items]
Total	2,450		370
Performing [Member] | Commercial and Industrial Loans and Leases [Member]
Financing Receivable, Modifications [Line Items]
Total	2,086		66
Performing [Member] | Commercial Real Estate Loans [Member]
Financing Receivable, Modifications [Line Items]
Total	364		304
Non-Accrual [Member]
Financing Receivable, Modifications [Line Items]
Total	3,967	[1]	8,122	[1]
Non-Accrual [Member] | Commercial and Industrial Loans and Leases [Member]
Financing Receivable, Modifications [Line Items]
Total	6	[1]	2,395	[1]
Non-Accrual [Member] | Commercial Real Estate Loans [Member]
Financing Receivable, Modifications [Line Items]
Total	$ 3,961	[1]	$ 5,727	[1]

[1] The non-accrual troubled debt restructurings are included in the Non-Accrual Loan table presented on previous page.

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Fair Value

12 Months Ended

Dec. 31, 2013

Fair Value [Abstract]

Fair Value

NOTE 14 - Fair Value

Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. There are three levels of inputs that may be used to measure fair values:

Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3: Significant unobservable inputs that reflect a reporting entity's own assumptions about the assumptions that market participants would use in pricing an asset or liability.

The Company used the following methods and significant assumptions to estimate the fair value of each type of financial instrument:

Investment Securities: The fair values for investment securities are determined by quoted market prices, if available (Level 1). For securities where quoted prices are not available, fair values are calculated based on market prices of similar securities (Level 2). For securities where quoted prices or market prices of similar securities are not available, fair values are calculated using discounted cash flows or other market indicators (Level 3). Level 3 pricing is obtained from a third-party based upon similar trades that are not traded frequently without adjustment by the Company. At December 31, 2013, the Company held $11.2 million in Level 3 securities which consist of $10.8 million of non-rated Obligations of State and Political Subdivisions and $353 thousand of equity securities that are not actively traded. Absent the credit rating, significant assumptions must be made such that the credit risk input becomes an unobservable input and thus these securities are reported by the Company in a Level 3 classification.

Derivatives: The fair values of derivatives are based on valuation models using observable market data as of the measurement date (Level 2).

Impaired Loans: Fair values for impaired collateral dependent loans are generally based on appraisals obtained from licensed real estate appraisers and in certain circumstances consideration of offers obtained to purchase properties prior to foreclosure. Appraisals for commercial real estate generally use three methods to derive value: cost, sales or market comparison and income approach. The cost method bases value in the cost to replace the current property. Value of market comparison approach evaluates the sales price of similar properties in the same market area. The income approach considers net operating income generated by the property and an investors required return. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available. Comparable sales adjustments are based on known sales prices of similar type and similar use properties and duration of time that the property has been on the market to sell. Such adjustments made in the appraisal process are typically significant and result in a Level 3 classification of the inputs for determining fair value.

Appraisals for both collateral-dependent impaired loans and other real estate owned are performed by certified general appraisers (for commercial properties) or certified residential appraisers (for residential properties) whose qualifications and licenses have been reviewed and verified by the Company. Once received, a member of the Company's Risk Management Area reviews the assumptions and approaches utilized in the appraisal. In determining the value of impaired collateral dependent loans and other real estate owned, significant unobservable inputs may be used which include: physical condition of comparable properties sold, net operating income generated by the property and investor rates of return.

Other Real Estate: Nonrecurring adjustments to certain commercial and residential real estate properties classified as other real estate (ORE) are measured at the lower of carrying amount or fair value, less costs to sell. Fair values are generally based on third party appraisals of the property utilizing similar techniques as discussed above for Impaired Loans, resulting in a Level 3 classification. In cases where the carrying amount exceeds the fair value, less costs to sell, impairment loss is recognized.

Loans Held-for-Sale: The fair values of loans held for sale are determined by using quoted prices for similar assets, adjusted for specific attributes of that loan resulting in a Level 2 classification.

Assets and Liabilities Measured on a Recurring Basis

Assets and liabilities measured at fair value on a recurring basis, including financial assets and liabilities for which the Company has elected the fair value option, are summarized below:

	Fair Value Measurements at December 31, 2013 Using
	Quoted Prices in
	Active Markets for		Significant Other		Significant
	Identical Assets		Observable Inputs		Unobservable Inputs
	(Level 1)		(Level 2)		(Level 3)		Total
Assets:
U.S. Treasury and Agency Securities	$	-	$	18,952	$	-	$	18,952
Corporate Securities		-		-		-		-
Obligations of State and Political Subdivisions		-		102,665		10,832		113,497
Mortgage-backed Securities-Residential		-		473,230		-		473,230
Equity Securities		-		-		353		353
Total Securities	$	-	$	594,847	$	11,185	$	606,032
Loans Held-for-Sale	$	-	$	9,265	$	-	$	9,265
Derivative Assets	$	-	$	866	$	-	$	866
Derivative Liabilities	$	-	$	737	$	-	$	737

	Fair Value Measurements at December 31, 2012 Using
	Quoted Prices in
	Active Markets for		Significant Other		Significant
	Identical Assets		Observable Inputs		Unobservable Inputs
	(Level 1)		(Level 2)		(Level 3)		Total
Assets:
U.S. Treasury and Agency Securities	$	-	$	23,472	$	-	$	23,472
Corporate Securities		-		-		-		-
Obligations of State and Political Subdivisions		-		64,316		12,169		76,485
Mortgage-backed Securities-Residential		-		486,912		-		486,912
Equity Securities		380		-		353		733
Total Securities	$	380	$	574,700	$	12,522	$	587,602
Loans Held-for-Sale	$	-	$	16,641	$	-	$	16,641
Derivative Assets	$	-	$	187	$	-	$	187
Derivative Liabilities	$	-	$	178	$	-	$	178

There were no transfers between Level 1 and Level 2 for the periods ended December 31, 2013 and 2012.

At December 31, 2013, the aggregate fair value of the Loans Held-for-Sale was $9,265, aggregate contractual principal balance was $9,129 with a difference of $136. At December 31, 2012, the aggregate fair value of the Loans Held-for-Sale was $16,641, aggregate contractual principle balance was $16,413 with a difference of $228.

The table below presents a reconciliation of all assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the year ended December 31, 2013 and 2012:

	Obligations of State
	and Political
	Subdivisions					Equity Securities				Corporate Securities
	2013			2012		2013		2012		2013		2012
Beginning Balance of Recurring Level 3 Assets at January 1	$	12,169		$	4,075	$	353	$	353	$	-	$	1,005
Total Gains or Losses (realized/unrealized) Included in earnings		(332	)		156		-		-		-		-
Maturities / Calls		(1,005	)		-		-		-		-		(1,005	)
Purchases		-			7,938		-		-		-		-
Ending Balance of Recurring Level 3 Assets at December 31	$	10,832		$	12,169	$	353	$	353	$	-	$	-

Of the total gain/loss included in earnings for the year ended December 31, 2013, $0 was attributable to interest income on securities and ($332) was attributable to other changes in fair value. Of the total gain/loss included in earnings for the year ended December 31, 2012, $1 was attributable to interest income on securities and $155 was attributable to other changes in fair value.

Assets and Liabilities Measured on a Non-Recurring Basis

Assets and liabilities measured at fair value on a non-recurring basis are summarized below:

	Fair Value Measurements at December 31, 2013 Using
	Quoted Prices in
	Active Markets for		Significant Other		Significant
	Identical Assets		Observable Inputs		Unobservable Inputs
	(Level 1)		(Level 2)		(Level 3)		Total
Assets:
Impaired Loans with Specific Allocations
Commercial and Industrial Loans	$	-	$	-	$	-	$	-
Commercial Real Estate Loans		-		-		1,346		1,346
Agricultural Loans		-		-		-		-
Other Real Estate
Commercial Real Estate		-		-		20		20

	Fair Value Measurements at December 31, 2012 Using
	Quoted Prices in
	Active Markets for		Significant Other		Significant
	Identical Assets		Observable Inputs		Unobservable Inputs
	(Level 1)		(Level 2)		(Level 3)		Total
Assets:
Impaired Loans with Specific Allocations
Commercial and Industrial Loans	$	-	$	-	$	1,231	$	1,231
Commercial Real Estate Loans		-		-		1,497		1,497
Agricultural Loans		-		-		135		135
Other Real Estate
Commercial Real Estate		-		-		150		150

Impaired loans, which are measured for impairment using the fair value of the collateral for collateral dependent loans, had a carrying amount of $4,449 with a valuation allowance of $3,103, resulting in an additional provision for loan losses of $1,024 for the year ended December 31, 2013. Impaired loans, which are measured for impairment using the fair value of the collateral for collateral dependent loans, had a carrying amount of $8,274 with a valuation allowance of $5,411, resulting in an additional provision for loan losses of $2,230 for the year ended December 31, 2012.

Other Real Estate which is measured at the lower of carrying or fair value less costs to sell had a carrying value of $20 at December 31, 2013. A charge to earnings through Other Operating Income of $321 was included in the year ended December 31, 2013. Other Real Estate which is measured at the lower of carrying or fair value less costs to sell had a carrying value of $150 at December 31, 2012. A charge to earnings through Other Operating Income of $100 was included in the year ended December 31, 2012.

The following table presents quantitative information about Level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis at December 31, 2013 and 2012:

					Range
			Valuation		(Weighted
December 31, 2013	Fair Value		Technique(s)	Unobservable Input(s)	Average)
Impaired Loans - Commercial Real Estate Loans	$	1,346	Sales comparison approach Income approach Cost approach	Adjustment for physical condition of comparable properties sold Adjustment for net operating income generated by the property Adjustment for investor rates of return	12%-80% (53%)
Other Real Estate - Commercial Real Estate Loans	$	20	Sales comparison approach Income approach Cost approach	Adjustment for physical condition of comparable properties sold Adjustment for net operating income generated by the property Adjustment for investor rates of return	50% (50%)

					Range
			Valuation		(Weighted
December 31, 2012	Fair Value		Technique(s)	Unobservable Input(s)	Average)
Impaired Loans - Commercial and Industrial Loans	$	1,231	Sales comparison approach	Adjustment for differences between the comparable sales	4%-68% (8%)
Impaired Loans - Commercial Real Estate Loans	$	1,497	Sales comparison approach Income approach Cost approach	Adjustment for physical condition of comparable properties sold Adjustment for net operating income generated by the property Adjustment for investor rates of return	15%-78% (48%)
Impaired Loans - Agricultural Loans	$	135	Sales comparison approach Income approach	Adjustment for physical condition of comparable properties sold Adjustment for net operating income generated by the property	76% (76%)
Other Real Estate - Commercial Real Estate Loans	$	150	Sales comparison approach Income approach Cost approach	Adjustment for physical condition of comparable properties sold Adjustment for net operating income generated by the property Adjustment for investor rates of return	70% (70%)

The carrying amounts and estimated fair values of the Company's financial instruments not previously presented are provided in the table below for the periods ending December 31, 2013 and 2012. Not all of the Company's assets and liabilities are considered financial instruments, and therefore are not included in the table. Because no active market exists for a significant portion of the Company's financial instruments, fair value estimates were based on subjective judgments, and therefore cannot be determined with precision.

				Fair Value Measurements at
				December 31, 2013 Using
	Carrying Value			Level 1			Level 2			Level 3			Total
Financial Assets:
Cash and Short-term Investments	$	60,232		$	37,370		$	22,862		$	-		$	60,232
Securities Held-to-Maturity		268			-			271			-			271
FHLB Stock and Other Restricted Stock		9,004			N/A			N/A			N/A			N/A
Loans, Net		1,366,452			-			-			1,370,339			1,370,339
Accrued Interest Receivable		7,470			-			1,918			5,552			7,470
Financial Liabilities:
Demand, Savings, and Money Market Deposits		(1,463,122	)		(1,463,122	)		-			-			(1,463,122	)
Time Deposits		(349,034	)		-			(351,707	)		-			(351,707	)
Short-term Borrowings		(53,533	)		-			(53,533	)		-			(53,533	)
Long-term Debt		(87,237	)		-			(83,329	)		(5,311	)		(88,640	)
Accrued Interest Payable		(777	)		-			(732	)		(45	)		(777	)
Unrecognized Financial Instruments:
Commitments to Extend Credit		-			-			-			-			-
Standby Letters of Credit		-			-			-			-			-
Commitments to Sell Loans		-			-			-			-			-

				Fair Value Measurements at
				December 31, 2012 Using
	Carrying Value			Level 1			Level 2			Level 3			Total
Financial Assets:
Cash and Short-term Investments	$	51,794		$	41,624		$	10,170		$	-		$	51,794
Securities Held-to-Maturity		346			-			351			-			351
FHLB Stock and Other Restricted Stock		8,340			N/A			N/A			N/A			N/A
Loans, Net		1,186,483			-			-			1,199,566			1,199,566
Accrued Interest Receivable		7,419			-			1,893			5,526			7,419
Financial Liabilities:
Demand, Savings, and Money Market Deposits		(1,311,748	)		(1,311,748	)		-			-			(1,311,748	)
Time Deposits		(329,183	)		-			(333,170	)		-			(333,170	)
Short-term Borrowings		(71,534	)		-			(71,534	)		-			(71,534	)
Long-term Debt		(89,472	)		-			(66,892	)		(28,872	)		(95,764	)
Accrued Interest Payable		(1,275	)		-			(829	)		(446	)		(1,275	)
Unrecognized Financial Instruments:
Commitments to Extend Credit		-			-			-			-			-
Standby Letters of Credit		-			-			-			-			-
Commitments to Sell Loans		-			-			-			-			-

Cash and Short-Term Investments:

The carrying amount of cash and short-term investments approximate fair values and are classified as Level 1 or Level 2.

Securities Held-to-Maturity:

The fair values for investment securities are determined by quoted market prices, if available (Level 1). For securities where quoted prices are not available, fair values are calculated based on market prices of similar securities (Level 2).

FHLB Stock and Other Restricted Stock:

It is not practical to determine the fair values of FHLB stock and other restricted stock due to restrictions placed on their transferability.

Loans:

Fair values of loans, excluding loans held for sale and collateral dependent impaired loans having a specific allowance allocation, are estimated as follows: For variable rate loans that reprice frequently and with no significant change in credit risk, fair values are based on carrying values resulting in a Level 3 classification. Fair values for other loans are estimated using discounted cash flow analyses, using interest rates currently being offered for loans with similar terms to borrowers of similar credit quality resulting in a Level 3 classification. Impaired loans are valued as described previously. The methods utilized to estimate fair value of loans do not necessarily represent an exit price.

Accrued Interest Receivable:

The carrying amount of accrued interest approximates fair value resulting in a Level 2 or Level 3 classification consistent with the asset they are associated with.

Deposits:

The fair values disclosed for demand deposits (e.g., interest and non-interest checking, savings and certain types of money market accounts) are, by definition, equal to the amount payable on demand at the reporting date (i.e., their carrying amount) resulting in a Level 1 classification. Fair values for fixed rate time deposits are estimated using a discounted cash flows calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits resulting in a Level 2 classification.

Short-term Borrowings:

The carrying amounts of federal funds purchased, borrowings under repurchase agreements, and other short-term borrowings, generally maturing within ninety days, approximate their fair values resulting in a Level 2 classification.

Long-Term Debt:

The fair values of the Company's long-term borrowings are estimated using discounted cash flow analyses based on the current borrowing rates for similar types of borrowing arrangements resulting in a Level 2 classification.

The fair values of the Company's subordinated debentures are estimated using discounted cash flow analyses based on the current borrowing rates for similar types of borrowing arrangements resulting in a Level 3 classification.

Accrued Interest Payable:

The carrying amount of accrued interest approximates fair value resulting in a Level 2 or Level 3 classification consistent with the liability they are associated with.

Off-balance Sheet Instruments:

Commitments to extend credit and standby letters of credit are generally short-term or variable rate with minimal fees charged. These instruments have no carrying value, and the fair value is not material. The fair value of commitments to sell loans is the cost or benefit of settling the commitments with the counter-party at the reporting date. At December 31, 2013 and 2012, none of the Company's commitments to sell loans were mandatory, and there is no cost or benefit to settle these commitments.

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Employee Benefit Plans (Tables)

12 Months Ended

Dec. 31, 2013

Employee Benefit Plans [Abstract]

Schedule of Accumulated Plan Benefit Information

Accumulated plan benefit information for the Company's plan as of December 31, 2013 and 2012 was as follows:

Changes in Benefit Obligation:	2013			2012
Obligation at Beginning of Year	$	837		$	734
Interest Cost		25			27
Benefits Paid		(33	)		(33	)
Lump Sum Benefits Paid		(809	)		-
Actuarial (Gain) Loss		(62	)		109
Effect of Settlement/Curtailment		42			-
Obligation at End of Year	$	-		$	837
Changes in Plan Assets:
Fair Value at Beginning of Year		399			353
Actual Return on Plan Assets		-			1
Employer Contributions		443			78
Periodic Benefits Paid		(33	)		(33	)
Lump Sum Benefits Paid		(809	)		-
Fair Value at End of Year	$	-		$	399
Funded Status:
Funded Status at End of Year	$	-		$	(438	)
Amounts recognized in accumulated other comprehensive income at December 31 consist of:
		2013			2012
Net Loss (Gain)	$	-		$	360
Prior Service Cost		-			13
	$	-		$	373

Components of Net Periodic Benefit Cost Recognized in Other Comprehensive Income

Components of Net Periodic Benefit Cost and Other Amounts Recognized in Other Comprehensive Income

	2013			2012			2011
Interest Cost	$	25		$	27		$	32
Expected Return on Assets		(1	)		(1	)		(2	)
Amortization of Prior Service Cost		1			1			1
Recognition of Net Loss		46			30			31
Net Periodic Benefit Cost	$	71		$	57		$	62
Net Loss (Gain) During the Period		(19	)		110			24
Amortization of Unrecognized Loss		(341	)		(30	)		(30	)
Amortization of Prior Service Cost		(13	)		(1	)		(1	)
Total Recognized in Other Comprehensive Income (Loss)		(373	)		79			(7	)
Total Recognized in Net Periodic Benefit Cost and Other Comprehensive Income (Loss)	$	(302	)	$	136		$	55

Schedule of Assumptions used in Determining Benefit Obligations and Net Periodic Pension Cost

Assumptions

Weighted-average assumptions used to determine benefit obligations at year-end:

	2013		2012			2011
Discount Rate		N/A		3.25	%		3.75	%
Rate of Compensation Increase (1)		N/A		N/A			N/A

Weighted-average assumptions used to determine net periodic pension cost:

	2013			2012			2011
Discount Rate		3.25	%		3.75	%		4.60	%
Expected Return on Plan Assets		0.25	%		0.25	%		0.50	%
Rate of Compensation Increase (1)		N/A			N/A			N/A

⁽¹⁾ Benefits under the plan were suspended in 1998; therefore, the weighted-average rate of increase in future compensation levels was not applicable for all years presented.

Schedule of Changes in Accumulated Postretirement Benefits Obligations

Changes in Accumulated Postretirement Benefit Obligations:	2013			2012
Obligation at the Beginning of Year	$	691		$	624
Unrecognized Loss (Gain)		(33	)		43
Components of Net Periodic Postretirement Benefit Cost:
Service Cost		40			35
Interest Cost		23			24
Net Expected Benefit Payments		(50	)		(35	)
Obligation at End of Year	$	671		$	691

Components of Postretirement Benefit Expense

Components of Postretirement Benefit Expense:	2013			2012		2011
Service Cost	$	40		$	35	$	28
Interest Cost		23			24		25
Amortization of Unrecognized Net (Gain) Loss		4			-		-
Net Postretirement Benefit Expense		67			59		53
Net Gain (Loss) During Period Recognized in Other Comprehensive Income		(37	)		42		57
Total Recognized in Net Postretirement Benefit Expense and Other Comprehensive Income	$	30		$	101	$	110

Schedule of Assumption of Health Care Cost Trend Rates

Assumptions Used to Determine Net Periodic Cost and Benefit Obligations:	2013			2012			2011
Discount Rate		4.31	%		3.41	%		3.98	%

Assumed Health Care Cost Trend Rates at Year-end:	2013			2012
Health Care Cost Trend Rate Assumed for Next Year		8.00	%		8.00	%
Rate that the Cost Trend Rate Gradually Declines to		5.00	%		4.50	%
Year that the Rate Reaches the Rate it is Assumed to Remain at		2019			2019

Schedule of One-Percentage-Point Change in Assumed Health Care Cost Trend Rates

A one-percentage-point change in assumed health care cost trend rates would have the following effects as of December 31, 2013:

	One-Percentage-Point		One-Percentage-Point
	Increase		Decrease
Effect on Total of Service and Interest Cost	$	6	$	(5	)
Effect on Postretirement Benefit Obligation	$	41	$	(37	)

Schedule of Expected Benefit Payments

The following postretirement benefit payments, which reflect expected future service, are expected to be paid:

2014	$	39
2015		49
2016		49
2017		60
2018		63
2019-2023		383

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Employee Benefit Plans (Schedule of One-Percentage-Point Change in Assumed Health Care Cost Trend Rates) (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013
Employee Benefit Plans [Abstract]
Effect on Total of Service and Interest Cost, One-Percentage-Point Increase	$ 6
Effect on Postretirement Benefit Obligation, One-Percentage-Point Increase	41
Effect on Total of Service and Interest Cost, One-Percentage-Point Decrease	(5)
Effect on Postretirement Benefit Obligation, One-Percentage-Point Decrease	$ (37)

XML

Business Combinations, Goodwill and Intangible Assets (Schedule of Acquired Intangible Assets) (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012
Business Acquisition [Line Items]
Gross Amount	$ 14,460	$ 12,408
Accumulated Amortization	11,132	9,716
Core Banking [Member] | Core Deposit Intangible [Member]
Business Acquisition [Line Items]
Gross Amount	9,004	6,952
Accumulated Amortization	5,815	4,665
Core Banking [Member] | Unidentified Branch Acquisition Intangible [Member]
Business Acquisition [Line Items]
Gross Amount	257	257
Accumulated Amortization	257	257
Insurance [Member] | Customer List [Member]
Business Acquisition [Line Items]
Gross Amount	5,199	5,199
Accumulated Amortization	$ 5,060	$ 4,794

XML

Parent Company Financial Statements

12 Months Ended

Dec. 31, 2013

Parent Company Financial Statements [Abstract]

Parent Company Financial Statements

NOTE 16 - Parent Company Financial Statements

The condensed financial statements of German American Bancorp, Inc. are presented below:

CONDENSED BALANCE SHEETS

	December 31,
	2013			2012
ASSETS
Cash	$	9,721		$	29,499
Securities Available-for-Sale, at Fair Value		353			733
Investment in Subsidiary Bank		195,480			184,093
Investment in Non-banking Subsidiaries		3,650			4,064
Other Assets		6,271			6,245
Total Assets	$	215,475		$	224,634
LIABILITIES
Borrowings	$	12,024		$	35,624
Other Liabilities		3,354			3,984
Total Liabilities		15,378			39,608
SHAREHOLDERS' EQUITY
Common Stock		13,174			12,637
Additional Paid-in Capital		108,022			95,617
Retained Earnings		84,164			66,421
Accumulated Other Comprehensive Income (Loss)		(5,263	)		10,351
Total Shareholders' Equity		200,097			185,026
Total Liabilities and Shareholders' Equity	$	215,475		$	224,634

CONDENSED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

	Years Ended December 31,
	2013			2012			2011
INCOME
Dividends from Subsidiaries
Bank	$	14,000		$	17,500		$	22,500
Non-bank		1,500			-			1,350
Interest Income		31			50			38
Net Gain on Securities		343			-			935
Other Income		75			70			71
Total Income		15,949			17,620			24,894
EXPENSES
Salaries and Employee Benefits		824			458			444
Professional Fees		485			352			379
Occupancy and Equipment Expense		7			7			8
Interest Expense		1,246			2,221			2,239
Other Expenses		615			359			357
Total Expenses		3,177			3,397			3,427
INCOME BEFORE INCOME TAXES AND EQUITY IN UNDISTRIBUTED INCOME OF SUBSIDIARIES		12,772			14,223			21,467
Income Tax Benefit		1,235			1,338			1,364
INCOME BEFORE EQUITY IN UNDISTRIBUTED INCOME OF SUBSIDIARIES		14,007			15,561			22,831
Equity in Undistributed (Excess Distributed) Income of Subsidiaries		11,406			8,494			(2,582	)
NET INCOME		25,413			24,055			20,249
Other Comprehensive Income:
Changes in Unrealized Gain (Loss) on Securities, Available-for-Sale		(15,874	)		(124	)		5,677
Changes in Unrecognized Amounts in Pension, Net		231			(47	)		4
Changes in Unrecognized Loss on Postretirement Benefit Obligation, Net		29			(21	)		(38	)
TOTAL COMPREHENSIVE INCOME	$	9,799		$	23,863		$	25,892

CONDENSED STATEMENTS OF CASH FLOWS

	Years Ended December 31,
	2013			2012			2011
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income	$	25,413		$	24,055		$	20,249
Adjustments to Reconcile Net Income to Net Cash from Operations
Loss (Gain) on Securities, Net		(343	)		-			(935	)
Change in Other Assets		283			33			3,656
Change in Other Liabilities		(510	)		203			(2,191	)
Equity Based Compensation		329			628			635
Excess Tax Benefit from Restricted Share Grant		(28	)		(23	)		(37	)
Equity in Excess Distributed (Undistributed) Income of Subsidiaries		(11,406	)		(8,494	)		2,582
Net Cash from Operating Activities		13,738			16,402			23,959
CASH FLOWS FROM INVESTING ACTIVITIES
Capital Contribution to Subsidiaries		-			(150	)		-
Acquire Banking Entities		(2,135	)		-			(1,995	)
Net Cash from Investing Activities		(2,135	)		(150	)		(1,995	)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from Issuance of Long-term Debt		10,000			-			-
Repayment of Long-term Debt		(33,750	)		(1,500	)		(1,500	)
Issuance of Common Stock		20			37			12
Income Tax Benefit from Restricted Share Grant		28			23			37
Employee Stock Purchase Plan		(9	)		(67	)		(25	)
Dividends Paid		(7,670	)		(7,068	)		(7,047	)
Net Cash from Financing Activities		(31,381	)		(8,575	)		(8,523	)
Net Change in Cash and Cash Equivalents		(19,778	)		7,677			13,441
Cash and Cash Equivalents at Beginning of Year		29,499			21,822			8,381
Cash and Cash Equivalents at End of Year	$	9,721		$	29,499		$	21,822

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Loans (Schedule of Risk Category of Loans) (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013		Dec. 31, 2012		Dec. 31, 2011
Financing Receivable, Recorded Investment [Line Items]
Total Ending Loans Balance	$ 1,390,802	[1]	$ 1,213,423	[2]
Loans Acquired with Deteriorated Credit Quality	14,753		11,174		16,121
Commercial and Industrial Loans and Leases [Member]
Financing Receivable, Recorded Investment [Line Items]
Total Ending Loans Balance	351,903	[1]	336,307	[2]
Loans Acquired with Deteriorated Credit Quality	1,981		1,840		2,596
Commercial Real Estate Loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Total Ending Loans Balance	583,604	[1]	489,796	[2]
Loans Acquired with Deteriorated Credit Quality	10,871		9,037		13,209
Agricultural Loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Total Ending Loans Balance	195,171	[1]	182,575	[2]
Loans Acquired with Deteriorated Credit Quality
Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans Acquired with Deteriorated Credit Quality	3,121		319
Pass [Member] | Commercial and Industrial Loans and Leases [Member]
Financing Receivable, Recorded Investment [Line Items]
Total Ending Loans Balance	324,685		307,997
Pass [Member] | Commercial Real Estate Loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Total Ending Loans Balance	539,533		446,639
Pass [Member] | Agricultural Loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Total Ending Loans Balance	192,609		176,730
Pass [Member] | Total [Member]
Financing Receivable, Recorded Investment [Line Items]
Total Ending Loans Balance	1,056,827		931,336
Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans Acquired with Deteriorated Credit Quality	661		3,220
Special Mention [Member] | Commercial and Industrial Loans and Leases [Member]
Financing Receivable, Recorded Investment [Line Items]
Total Ending Loans Balance	15,485		14,441
Special Mention [Member] | Commercial Real Estate Loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Total Ending Loans Balance	20,168		21,338
Special Mention [Member] | Agricultural Loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Total Ending Loans Balance	2,357		2,855
Special Mention [Member] | Total [Member]
Financing Receivable, Recorded Investment [Line Items]
Total Ending Loans Balance	38,010		38,634
Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans Acquired with Deteriorated Credit Quality	9,070		7,338
Substandard [Member] | Commercial and Industrial Loans and Leases [Member]
Financing Receivable, Recorded Investment [Line Items]
Total Ending Loans Balance	11,733		13,869
Substandard [Member] | Commercial Real Estate Loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Total Ending Loans Balance	23,903		21,819
Substandard [Member] | Agricultural Loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Total Ending Loans Balance	205		2,990
Substandard [Member] | Total [Member]
Financing Receivable, Recorded Investment [Line Items]
Total Ending Loans Balance	35,841		38,678
Doubtful [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans Acquired with Deteriorated Credit Quality
Doubtful [Member] | Commercial and Industrial Loans and Leases [Member]
Financing Receivable, Recorded Investment [Line Items]
Total Ending Loans Balance
Doubtful [Member] | Commercial Real Estate Loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Total Ending Loans Balance
Doubtful [Member] | Agricultural Loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Total Ending Loans Balance
Doubtful [Member] | Total [Member]
Financing Receivable, Recorded Investment [Line Items]
Total Ending Loans Balance

[1] Total recorded investment in loans includes $5,590 in accrued interest.

[2] Total recorded investment in loans includes $5,522 in accrued interest.

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Commitments and Off-balance Sheet Items (Summary of Commitments and Contingencies) (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Commitments To Sell Loans [Member]
Commitments and Contingent Liabilities [Line Items]
Fixed Rate	$ 20,672	$ 52,511
Variable Rate
Standby Letters Of Credit [Member]
Commitments and Contingent Liabilities [Line Items]
Fixed Rate	1,515	1,408
Variable Rate	5,262	4,279
Commitments To Fund Loans [Member]
Commitments and Contingent Liabilities [Line Items]
Fixed Rate	43,906	52,461
Variable Rate	345,225	326,173
Commercial Lines [Member] | Commitments To Fund Loans [Member]
Commitments and Contingent Liabilities [Line Items]
Fixed Rate	23,717	13,444
Variable Rate	199,231	187,829
Consumer Loan [Member] | Commitments To Fund Loans [Member]
Commitments and Contingent Liabilities [Line Items]
Fixed Rate	8,940	6,013
Variable Rate	145,064	137,668
Residential Mortgage [Member] | Commitments To Fund Loans [Member]
Commitments and Contingent Liabilities [Line Items]
Fixed Rate	11,249	33,004
Variable Rate	$ 930	$ 676

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Consolidated Statements of Changes in Shareholders' Equity (Parenthetical) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Consolidated Statements of Changes in Shareholders? Equity [Abstract]
Cash Dividends, per share	$ 0.60	$ 0.56	$ 0.56

XML

Consolidated Balance Sheets (Parenthetical) (USD $) In Thousands, except Share data, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012
Consolidated Balance Sheets [Abstract]
Securities Held to Maturity, at Fair Value	$ 271	$ 351
Preferred Stock, no par value	$ 0	$ 0
Preferred Stock, shares authorized	500,000	500,000
Preferred Stock, shares issued	0	0
Common Stock, no par value	$ 0	$ 0
Common Stock, stated value	$ 1	$ 1
Common Stock, shares authorized	30,000,000	30,000,000

XML

Employee Benefit Plans

12 Months Ended

Dec. 31, 2013

Employee Benefit Plans [Abstract]

Employee Benefit Plans

NOTE 9 - Employee Benefit Plans

The Company provides a contributory trusteed 401(k) deferred compensation and profit sharing plan, which covers substantially all employees. The Company agrees to match certain employee contributions under the 401(k) portion of the plan, while profit sharing contributions are discretionary and are subject to determination by the Board of Directors. Company contributions were $882, $777, and $717 for 2013, 2012, and 2011, respectively.

The Company self-insures employee health benefits. Stop loss insurance covers annual losses exceeding $125 per covered family. Management's policy is to establish a reserve for claims not submitted by a charge to earnings based on prior experience. Charges to earnings were $2,599, $1,799, and $1,620 for 2013, 2012, and 2011, respectively.

The Company maintains deferred compensation plans for the benefit of certain directors and officers. Under the plans, the Company agrees in return for the directors and officers deferring the receipt of a portion of their current compensation, to pay a retirement benefit computed as the amount of the compensation deferred plus accrued interest at a variable rate. Accrued benefits payable totaled $1,857 and $2,003 at December 31, 2013 and 2012. Deferred compensation expense was $173, $170, and $183 for 2013, 2012, and 2011, respectively. In conjunction with the plans, the Company purchased life insurance on certain directors and officers.

The Company entered into early retirement agreements with certain officers of the Company during 2008, 2009, 2010, and 2013. Accrued benefits payable as a result of the agreements totaled $337 and $298 at December 31, 2013 and 2012, respectively. Expense associated with these agreements totaled $166, $0, and $72 during 2013, 2012, and 2011, respectively. The benefits under the agreements will be paid through 2017.

The Company acquired through previous bank mergers a noncontributory defined benefit pension plan with benefits based on years of service and compensation prior to retirement. The benefits under the plan were suspended in 1998. This defined benefit plan was terminated in 2013 with all benefits of the plan distributed to the plan's participants prior to December 31, 2013. The costs to terminate the defined benefit plan totaled $378 in 2013.

Accumulated plan benefit information for the Company's plan as of December 31, 2013 and 2012 was as follows:

Changes in Benefit Obligation:	2013			2012
Obligation at Beginning of Year	$	837		$	734
Interest Cost		25			27
Benefits Paid		(33	)		(33	)
Lump Sum Benefits Paid		(809	)		-
Actuarial (Gain) Loss		(62	)		109
Effect of Settlement/Curtailment		42			-
Obligation at End of Year	$	-		$	837
Changes in Plan Assets:
Fair Value at Beginning of Year		399			353
Actual Return on Plan Assets		-			1
Employer Contributions		443			78
Periodic Benefits Paid		(33	)		(33	)
Lump Sum Benefits Paid		(809	)		-
Fair Value at End of Year	$	-		$	399
Funded Status:
Funded Status at End of Year	$	-		$	(438	)
Amounts recognized in accumulated other comprehensive income at December 31 consist of:
		2013			2012
Net Loss (Gain)	$	-		$	360
Prior Service Cost		-			13
	$	-		$	373

The accumulated benefit obligation was $0 and $837 at year-end 2013 and 2012, respectively.

Components of Net Periodic Benefit Cost and Other Amounts Recognized in Other Comprehensive Income

	2013			2012			2011
Interest Cost	$	25		$	27		$	32
Expected Return on Assets		(1	)		(1	)		(2	)
Amortization of Prior Service Cost		1			1			1
Recognition of Net Loss		46			30			31
Net Periodic Benefit Cost	$	71		$	57		$	62
Net Loss (Gain) During the Period		(19	)		110			24
Amortization of Unrecognized Loss		(341	)		(30	)		(30	)
Amortization of Prior Service Cost		(13	)		(1	)		(1	)
Total Recognized in Other Comprehensive Income (Loss)		(373	)		79			(7	)
Total Recognized in Net Periodic Benefit Cost and Other Comprehensive Income (Loss)	$	(302	)	$	136		$	55

The estimated net loss, prior service costs, and net transition obligation (asset) for the defined benefit pension plan that will be amortized from accumulated other comprehensive income into net periodic benefit cost over the next fiscal year will be $0 as the defined benefit pension plan terminated in the current year.

Assumptions

Weighted-average assumptions used to determine benefit obligations at year-end:

	2013		2012			2011
Discount Rate		N/A		3.25	%		3.75	%
Rate of Compensation Increase (1)		N/A		N/A			N/A

Weighted-average assumptions used to determine net periodic pension cost:

	2013			2012			2011
Discount Rate		3.25	%		3.75	%		4.60	%
Expected Return on Plan Assets		0.25	%		0.25	%		0.50	%
Rate of Compensation Increase (1)		N/A			N/A			N/A

⁽¹⁾ Benefits under the plan were suspended in 1998; therefore, the weighted-average rate of increase in future compensation levels was not applicable for all years presented.

The expected return on plan assets was determined based upon rates that are expected to be available for future reinvestment of earnings and maturing investments along with consideration given to the current mix of plan assets.

Postretirement Medical and Life Benefit Plan

The Company has an unfunded postretirement benefit plan covering substantially all of its employees. The medical plan is contributory with the participants' contributions adjusted annually; the life insurance plans are noncontributory.

Changes in Accumulated Postretirement Benefit Obligations:	2013			2012
Obligation at the Beginning of Year	$	691		$	624
Unrecognized Loss (Gain)		(33	)		43
Components of Net Periodic Postretirement Benefit Cost:
Service Cost		40			35
Interest Cost		23			24
Net Expected Benefit Payments		(50	)		(35	)
Obligation at End of Year	$	671		$	691
Components of Postretirement Benefit Expense:	2013			2012			2011
Service Cost	$	40		$	35		$	28
Interest Cost		23			24			25
Amortization of Unrecognized Net (Gain) Loss		4			-			-
Net Postretirement Benefit Expense		67			59			53
Net Gain (Loss) During Period Recognized in Other Comprehensive Income		(37	)		42			57
Total Recognized in Net Postretirement Benefit Expense and Other Comprehensive Income	$	30		$	101		$	110

Assumptions Used to Determine Net Periodic Cost and Benefit Obligations:	2013			2012			2011
Discount Rate		4.31	%		3.41	%		3.98	%

Assumed Health Care Cost Trend Rates at Year-end:	2013			2012
Health Care Cost Trend Rate Assumed for Next Year		8.00	%		8.00	%
Rate that the Cost Trend Rate Gradually Declines to		5.00	%		4.50	%
Year that the Rate Reaches the Rate it is Assumed to Remain at		2019			2019

Assumed health care cost trend rates have a significant effect on the amounts reported for the health care plans. A one-percentage-point change in assumed health care cost trend rates would have the following effects as of December 31, 2013:

	One-Percentage-Point		One-Percentage-Point
	Increase		Decrease
Effect on Total of Service and Interest Cost	$	6	$	(5	)
Effect on Postretirement Benefit Obligation	$	41	$	(37	)

Contributions

The Company expects to contribute $39 to its postretirement medical and life insurance plan in 2014.

Estimated Future Benefits

The following postretirement benefit payments, which reflect expected future service, are expected to be paid:

2014	$	39
2015		49
2016		49
2017		60
2018		63
2019-2023		383

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Income Taxes (Schedule of Net Deferred Tax Liability) (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012
Deferred Tax Assets:
Allowance for Loan Losses	$ 4,871	$ 5,845
Unrealized Loss on Securities	2,809
Deferred Compensation and Employee Benefits	1,136	1,282
Other-than-temporary Impairment	388	443
Accrued Expenses	601	646
Business Combination Fair Value Adjustments	847
Pension and Postretirement Plans	35	195
Other Real Estate Owned	288	140
Non-Accrual Loan Interest Income	269	254
Net Operating Loss Carryforward	224
Other	313	279
Total Deferred Tax Assets	11,781	9,084
Deferred Tax Liabilities:
Depreciation	(1,465)	(1,419)
Leasing Activities, Net	(7,797)	(7,753)
Unrealized Gain on Securities		(5,915)
FHLB Stock Dividends	(343)	(336)
Prepaid Expenses	(492)	(516)
Intangibles	(804)	(359)
Deferred Loan Fees	(460)	(394)
Business Combination Fair Value Adjustments		(333)
General Business Tax Credits	(23)	(7)
Other	(330)	(255)
Total Deferred Tax Liabilities	(11,714)	(17,287)
Valuation Allowance		(45)
Net Deferred Tax Asset (Liability)	$ 67	$ (8,248)

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Employee Benefit Plans (Schedule of Assumptions used in Determining Benefit Obligations) (Details) (Defined Benefit Pension Plan [Member])	12 Months Ended
	Dec. 31, 2013		Dec. 31, 2012		Dec. 31, 2011
Defined Benefit Pension Plan [Member]
Weighted-average assumptions used to determine benefit obligations at year-end:
Discount Rate			3.25%		3.75%
Rate of Compensation Increase		[1]		[1]		[1]
Weighted-average assumptions used to determine net periodic pension cost:
Discount Rate	3.25%		3.75%		4.60%
Expected Return on Plan Assets	0.25%		0.25%		0.50%
Rate of Compensation Increase		[1]		[1]		[1]

[1] Benefits under the plan were suspended in 1998; therefore, the weighted-average rate of increase in future compensation levels was not applicable for all years presented.

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Employee Benefit Plans (Schedule of Accumulated Plan Benefit Information) (Details) (Defined Benefit Pension Plan [Member], USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Defined Benefit Pension Plan [Member]
Changes in Benefit Obligation:
Obligation at Beginning of Year	$ 837	$ 734
Interest Cost	25	27	32
Benefits Paid	(33)	(33)
Lump Sum Benefits Paid	(809)
Actuarial (Gain) Loss	(62)	109
Effect of Settlement/Curtailment	(42)
Obligation at End of Year		837	734
Changes in Plan Assets:
Fair Value at Beginning of Year	399	353
Actual Return on Plan Assets		1
Employer Contributions	443	78
Benefits Paid	(33)	(33)
Lump Sum Benefits Paid	(809)
Fair Value at End of Year		399	353
Funded Status at End of Year		(438)
Net Loss (Gain)		360
Prior Service Cost		13
Total		$ 373

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Business Combinations, Goodwill and Intangible Assets (Changes in Carrying Amount of Goodwill) (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Business Combinations, Goodwill and Intangible Assets [Abstract]
Beginning of Year	$ 18,865	$ 18,865	$ 9,835
Acquired Goodwill	1,671		9,030
Impairment
End of Year	$ 20,536	$ 18,865	$ 18,865

XML

Parent Company Financial Statements (Condensed Statements of Cash Flows) (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income	$ 25,413	$ 24,055	$ 20,249
Adjustments to Reconcile Net Income to Net Cash from Operations
Loss (Gain) on Securities, Net	(2,429)	(1,667)	(3,024)
Change in Other Assets	6,016	3,433	5,020
Change in Other Liabilities	(2,376)	298	(136)
Equity Based Compensation	329	628	635
Excess Tax Benefit from Restricted Share Grant	(28)	(23)	(37)
Net Cash from Operating Activities	41,646	41,997	26,616
CASH FLOWS FROM INVESTING ACTIVITIES
Net Cash from Investing Activities	(67,236)	(161,663)	(104,946)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from Issuance of Long-term Debt	47,000	20,000
Repayment of Long-term Debt	(49,379)	(21,569)	(6,549)
Issuance of Common Stock	20	37	12
Income Tax Benefit from Restricted Share Grant	28	23	37
Employee Stock Purchase Plan	(9)	(67)	(25)
Dividends Paid	(7,670)	(7,068)	(7,047)
Net Cash from Financing Activities	36,635	107,650	120,162
Net Change in Cash and Cash Equivalents	11,045	(12,016)	41,832
Cash and Cash Equivalents at Beginning of Year	49,087	61,103	19,271
Cash and Cash Equivalents at End of Year	60,132	49,087	61,103
Parent Company [Member]
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income	25,413	24,055	20,249
Adjustments to Reconcile Net Income to Net Cash from Operations
Loss (Gain) on Securities, Net	(343)		(935)
Change in Other Assets	283	33	3,656
Change in Other Liabilities	(510)	203	(2,191)
Equity Based Compensation	329	628	635
Excess Tax Benefit from Restricted Share Grant	(28)	(23)	(37)
Equity in Excess Distributed (Undistributed) Income of Subsidiaries	(11,406)	(8,494)	2,582
Net Cash from Operating Activities	13,738	16,402	23,959
CASH FLOWS FROM INVESTING ACTIVITIES
Capital Contribution to Subsidiaries		(150)
Acquire Banking Entities	(2,135)		(1,995)
Net Cash from Investing Activities	(2,135)	(150)	(1,995)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from Issuance of Long-term Debt	10,000
Repayment of Long-term Debt	(33,750)	(1,500)	(1,500)
Issuance of Common Stock	20	37	12
Income Tax Benefit from Restricted Share Grant	28	23	37
Employee Stock Purchase Plan	(9)	(67)	(25)
Dividends Paid	(7,670)	(7,068)	(7,047)
Net Cash from Financing Activities	(31,381)	(8,575)	(8,523)
Net Change in Cash and Cash Equivalents	(19,778)	7,677	13,441
Cash and Cash Equivalents at Beginning of Year	29,499	21,822	8,381
Cash and Cash Equivalents at End of Year	$ 9,721	$ 29,499	$ 21,822

XML

Document and Entity Information (USD $) In Thousands, except Share data, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Mar. 01, 2014	Jun. 30, 2013
Document Information [Line Items]
Document Type	10-K
Amendment Flag	false
Document Period End Date	Dec. 31, 2013
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	FY
Trading Symbol	GABC
Entity Registrant Name	GERMAN AMERICAN BANCORP, INC.
Entity Central Index Key	0000714395
Current Fiscal Year End Date	--12-31
Entity Well-Known Seasoned Issuer	No
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Filer Category	Accelerated Filer
Entity Common Stock Shares Outstanding		13,173,793
Entity Public Float			$ 260,154,858

XML

Business Combinations, Goodwill and Intangible Assets (Narrative) (Details) (USD $) In Thousands, except Share data, unless otherwise specified	12 Months Ended				0 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010	Oct. 03, 2013 United Commerce Bancorp [Member] Rate	Dec. 31, 2013 Core Banking [Member]	Dec. 31, 2012 Core Banking [Member]	Dec. 31, 2011 Core Banking [Member]	Dec. 31, 2013 Insurance [Member]	Dec. 31, 2012 Insurance [Member]	Dec. 31, 2011 Insurance [Member]
Business Acquisition [Line Items]
Consolidated assets	$ 2,163,827	$ 2,006,300	$ 1,873,767		$ 119,700				$ 5,636	$ 8,333	$ 7,948
Consolidated equity	200,097	185,026	167,610	121,534	13,700
Direct acquisition costs					251
Goodwill	20,536	18,865	18,865	9,835	1,671	19,204	17,533	17,533	1,332	1,332	1,332
Intangible assets acquired					2,052
Amortization Period					8 years
Shares issued in business combination					503,000
Equity issued or issuable in bussiness combination, ratio					0.5456
Outstanding common stock owned before merger					44,100
Outstanding common stock owned before merger, percentage					4.60%
Share Price					$ 1.51
Cash paid for United Commerce shares					1,391
Cash paid for United Commerce options					643
Intangible Amortization	$ 1,416	$ 1,655	$ 1,956

XML

Income Taxes

12 Months Ended

Dec. 31, 2013

Income Taxes [Abstract]

Income Taxes

NOTE 10 - Income Taxes

The provision for income taxes consists of the following:	2013		2012		2011
Current Federal	$	9,103	$	9,649	$	3,333
Current State		648		568		184
Deferred Federal		1,090		260		4,241
Deferred State		623		192		(32	)
Total	$	11,464	$	10,669	$	7,726

Income tax expense is reconciled to the 35% statutory rate applied to the pre-tax income for the years presented in the table below:

	2013			2012			2011
Statutory Rate Times Pre-tax Income	$	12,907		$	12,153		$	9,791
Add (Subtract) the Tax Effect of:
Income from Tax-exempt Loans and Investments		(1,157	)		(1,007	)		(780	)
State Income Tax, Net of Federal Tax Effect		826			494			99
General Business Tax Credits		(556	)		(547	)		(370	)
Company Owned Life Insurance		(338	)		(341	)		(385	)
Gain on United Commerce Bancorp Stock		(120	)		-			-
Gain on American Community Bancorp, Inc. Stock		-			-			(366	)
Other Differences		(98	)		(83	)		(263	)
Total Income Taxes	$	11,464		$	10,669		$	7,726

The net deferred tax liability at December 31 consists of the following:

	2013			2012
Deferred Tax Assets:
Allowance for Loan Losses	$	4,871		$	5,845
Unrealized Loss on Securities		2,809			-
Deferred Compensation and Employee Benefits		1,136			1,282
Other-than-temporary Impairment		388			443
Accrued Expenses		601			646
Business Combination Fair Value Adjustments		847			-
Pension and Postretirement Plans		35			195
Other Real Estate Owned		288			140
Non-Accrual Loan Interest Income		269			254
Net Operating Loss Carryforward		224			-
Other		313			279
Total Deferred Tax Assets		11,781			9,084
Deferred Tax Liabilities:
Depreciation		(1,465	)		(1,419	)
Leasing Activities, Net		(7,797	)		(7,753	)
Unrealized Gain on Securities		-			(5,915	)
FHLB Stock Dividends		(343	)		(336	)
Prepaid Expenses		(492	)		(516	)
Intangibles		(804	)		(359	)
Deferred Loan Fees		(460	)		(394	)
Business Combination Fair Value Adjustments		-			(333	)
General Business Tax Credits		(23	)		(7	)
Other		(330	)		(255	)
Total Deferred Tax Liabilities		(11,714	)		(17,287	)
Valuation Allowance		-			(45	)
Net Deferred Tax Asset (Liability)	$	67		$	(8,248	)

The Company held a valuation allowance at December 31, 2012 of $45. During 2013, the Company reversed the valuation allowance as the statute of limitations expired on this item. The Company has federal and state net operating loss carryforwards (acquired in the United Commerce Bancorp acquisition - See Note 17 for further discussion) of $609 (federal) and $1,420 (state). These carryforwards expire in 2032 and 2026 for federal and state purposes, respectively. The use of these federal and state carryforwards are each limited under IRC Section 382 to $538 annually.

Under the Internal Revenue Code, through 1996 two acquired banking companies, which are now a part of the Company's single banking subsidiary, were allowed a special bad debt deduction related to additions to tax bad debt reserves established for the purpose of absorbing losses. The acquired banks were formerly known as Peoples Community Bank (acquired in October 2005) and First American Bank (acquired in January 1999). Subject to certain limitations, these Banks were permitted to deduct from taxable income an allowance for bad debts based on a percentage of taxable income before such deductions or actual loss experience. The Banks generally computed its annual addition to its bad debt reserves using the percentage of taxable income method; however, due to certain limitations in 1996, the Banks were only allowed a deduction based on actual loss experience.

Retained earnings at December 31, 2013, include approximately $2,995 for which no provision for federal income taxes has been made. This amount represents allocations of income for allowable bad debt deductions. Reduction of amounts so allocated for purposes other than tax bad debt losses will create taxable income, which will be subject to the then current corporate income tax rate. It is not contemplated that amounts allocated to bad debt deductions will be used in any manner to create taxable income. The unrecorded deferred income tax liability on the above amount at December 31, 2013 was approximately $1,048.

Unrecognized Tax Benefits

The Company had no unrecognized tax benefits as of December 31, 2013, 2012, and 2011, and did not recognize any increase in unrecognized benefits during 2013 relative to any tax positions taken in 2013. Should the accrual of any interest or penalties relative to unrecognized tax benefits be necessary, it is the Company's policy to record such accruals in its income tax expense accounts; no such accruals existed as of December 31, 2013, 2012, and 2011. The Company and its corporate subsidiaries file a consolidated U.S. Federal income tax return, which is subject to examination for all years after 2009. The Company and its corporate subsidiaries doing business in Indiana file a combined Indiana unitary return, which is subject to examination for all years after 2009.

XML

FHLB Advances and Other Borrowings (Schedule of Repurchase Agreements) (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012
FHLB Advances and Other Borrowings [Abstract]
Long-term Advances from Federal Home Loan Bank collateralized by qualifying mortgages, investment securities, and mortgage-backed securities	$ 71,483	$ 51,526
Term Loans	7,000	1,500
Junior Subordinated Debentures assumed from American Community Bancorp, Inc.	5,024	4,874
Subordinated Debentures		29,250
Capital Lease Obligation	3,730	2,322
Long-term Borrowings	87,237	89,472
Overnight Variable Rate Advances from Federal Home Loan Bank collateralized by qualifying mortgages, investment securities, and mortgage-backed securities	38,000	48,500
Federal Funds Purchased		5,400
Repurchase Agreements	15,533	17,634
Short-term Borrowings	53,533	71,534
Total Borrowings	$ 140,770	$ 161,006

XML

Shareholders' Equity (Narrative) (Details) (USD $) In Thousands, except Share data, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Apr. 26, 2001
Retained Earnings, Unappropriated	$ 39,000
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant	483,813
Share-based Compensation Arrangement by Share-based Payment Award, Discount from Market Price, Offering Date	95.00%
Common stock, authorized shares repurchase	607,754		607,754
Common stock, shares repurchased	334,965
Restricted stock vesting percentage upon satisfaction of service requirement	100.00%
Restricted stock as a percent of grant	50.00%
Cash credit entitlements as a percent of grant	50.00%
Unrecognized expense related to restricted stock and cash entitlements	942	101
Stock option expiration period	10 years
Bank [Member]
Retained Earnings, Unappropriated	$ 39,000
Employee Stock Purchase Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant	500,000
Nonqualified Stock Options [Member]
Stock option expiration period	20 years

XML

Consolidated Statements of Income (USD $) In Thousands, except Per Share data, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
INTEREST INCOME
Interest and Fees on Loans	$ 61,632	$ 61,691	$ 64,445
Interest on Federal Funds Sold and Other Short-term Investments	30	91	216
Interest and Dividends on Securities:
Taxable	11,091	12,946	13,677
Non-taxable	2,919	2,432	1,823
TOTAL INTEREST INCOME	75,672	77,160	80,161
INTEREST EXPENSE
Interest on Deposits	4,697	6,958	11,986
Interest on FHLB Advances and Other Borrowings	2,458	3,954	4,194
TOTAL INTEREST EXPENSE	7,155	10,912	16,180
NET INTEREST INCOME	68,517	66,248	63,981
Provision for Loan Losses	350	2,412	6,800
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES	68,167	63,836	57,181
NON-INTEREST INCOME
Trust and Investment Product Fees	3,358	2,657	2,145
Service Charges on Deposit Accounts	4,144	4,076	4,154
Insurance Revenues	6,217	5,524	5,819
Company Owned Life Insurance	965	974	1,100
Interchange Fee Income	1,854	1,724	1,501
Other Operating Income	2,003	1,955	1,452
Net Gains on Sales of Loans	2,645	3,234	2,381
Net Gain on Securities	2,429	1,667	3,024
TOTAL NON-INTEREST INCOME	23,615	21,811	21,576
NON-INTEREST EXPENSE
Salaries and Employee Benefits	31,482	29,086	27,992
Occupancy Expense	4,545	4,277	4,264
Furniture and Equipment Expense	3,196	2,787	2,934
FDIC Premiums	1,050	1,116	1,473
Data Processing Fees	1,765	1,071	2,092
Professional Fees	2,577	2,247	2,056
Advertising and Promotion	1,863	1,714	1,525
Intangible Amortization	1,416	1,655	1,956
Other Operating Expenses	7,011	6,970	6,490
TOTAL NON-INTEREST EXPENSE	54,905	50,923	50,782
Income before Income Taxes	36,877	34,724	27,975
Income Tax Expense	11,464	10,669	7,726
NET INCOME	$ 25,413	$ 24,055	$ 20,249
Basic Earnings per Share	$ 1.99	$ 1.91	$ 1.61
Diluted Earnings per Share	$ 1.98	$ 1.90	$ 1.61

XML

Loans

12 Months Ended

Dec. 31, 2013

Loans [Abstract]

Loans

NOTE 4 - Loans

Loans were comprised of the following classifications at December 31: 

	2013			2012
Commercial:
Commercial and Industrial Loans and Leases	$	350,955		$	335,373
Commercial Real Estate Loans		582,066			488,496
Agricultural Loans		192,880			179,906
Retail:
Home Equity Loans		81,504			74,437
Consumer Loans		49,124			41,103
Residential Mortgage Loans		128,683			88,586
Subtotal		1,385,212			1,207,901
Less: Unearned Income		(2,830	)		(3,035	)
Allowance for Loan Losses		(14,584	)		(15,520	)
Loans, net	$	1,367,798		$	1,189,346

The following tables present the activity in the allowance for loan losses by portfolio class for the years ended December 31, 2013, 2012 and 2011:

	Commercial
	and
	Industrial			Commercial						Home						Residential
	Loans and			Real Estate			Agricultural			Equity			Consumer			Mortgage
	Leases			Loans			Loans			Loans			Loans			Loans			Unallocated		Total
December 31, 2013
Beginning Balance	$	4,555		$	8,931		$	989		$	141		$	214		$	186		$	504	$	15,520
Provision for Loan Losses		(197	)		(160	)		(43	)		419			112			111			108		350
Recoveries		128			102			-			-			148			8			-		386
Loans Charged-off		(503	)		(538	)		-			(321	)		(286	)		(24	)		-		(1,672	)
Ending Balance	$	3,983		$	8,335		$	946		$	239		$	188		$	281		$	612	$	14,584

	Commercial
	and
	Industrial			Commercial					Home						Residential
	Loans and			Real Estate			Agricultural		Equity			Consumer			Mortgage
	Leases			Loans			Loans		Loans			Loans			Loans			Unallocated			Total
December 31, 2012
Beginning Balance	$	3,493		$	9,297		$	926	$	258		$	190		$	402		$	746		$	15,312
Provision for Loan Losses		1,150			1,326			63		(32	)		194			(47	)		(242	)		2,412
Recoveries		74			97			-		2			123			30			-			326
Loans Charged-off		(162	)		(1,789	)		-		(87	)		(293	)		(199	)		-			(2,530	)
Ending Balance	$	4,555		$	8,931		$	989	$	141		$	214		$	186		$	504		$	15,520

	Commercial
	and
	Industrial			Commercial					Home						Residential
	Loans and			Real Estate			Agricultural		Equity			Consumer			Mortgage
	Leases			Loans			Loans		Loans			Loans			Loans			Unallocated		Total
December 31, 2011
Beginning Balance	$	3,713		$	7,497		$	750	$	220		$	362		$	543		$	232	$	13,317
Provision for Loan Losses		1,195			4,265			176		287			23			340			514		6,800
Recoveries		98			139			-		6			125			16			-		384
Loans Charged-off		(1,513	)		(2,604	)		-		(255	)		(320	)		(497	)		-		(5,189	)
Ending Balance	$	3,493		$	9,297		$	926	$	258		$	190		$	402		$	746	$	15,312

In determining the adequacy of the allowance for loan loss, general allocations are made for pools of loans, including non-classified loans, homogeneous portfolios of consumer and residential real estate loans, and loans within certain industry categories believed to present unique risk of loss. General allocations of the allowance are primarily made based on a three-year historical average for loan losses for these portfolios, judgmentally adjusted for current economic factors and portfolio trends. For 2012 and 2011, the Company utilized a 4 quarter rolling historical loan loss average. Beginning in 2013, management deemed a rolling 12 quarter historical loan loss average to be more indicative of the inherent losses in the Company's loan portfolio in the current economic environment than the 4 quarter average. This change in methodology resulted in an increase to the required loan loss allowance of approximately $280 in 2013.

Loan impairment is reported when full repayment under the terms of the loan is not expected. This methodology is used for all loans, including loans acquired with deteriorated credit quality. For purchased loans, the assessment is made at the time of acquisition as well as over the life of loan. If a loan is impaired, a portion of the allowance is allocated so that the loan is reported net, at the present value of estimated future cash flows using the loan's existing rate, or at the fair value of collateral if repayment is expected solely from the collateral. Commercial and industrial loans, commercial real estate loans, and agricultural loans are evaluated individually for impairment. Smaller balance homogeneous loans are evaluated for impairment in total. Such loans include real estate loans secured by one-to-four family residences and loans to individuals for household, family and other personal expenditures. Individually evaluated loans on non-accrual are generally considered impaired. Impaired loans, or portions thereof, are charged off when deemed uncollectible.

The following tables present the balance in the allowance for loan losses and the recorded investment in loans by portfolio class and based on impairment method as of December 31, 2013 and 2012:

			Commercial
			and
			Industrial		Commercial				Home				Residential
			Loans and		Real Estate		Agricultural		Equity		Consumer		Mortgage
December 31, 2013	Total		Leases		Loans		Loans		Loans		Loans		Loans		Unallocated
Allowance for Loan Losses:
Ending Allowance Balance Attributable to Loans:
Individually Evaluated for Impairment	$	3,095	$	45	$	3,050	$	-	$	-	$	-	$	-	$	-
Collectively Evaluated for Impairment		11,481		3,938		5,277		946		239		188		281		612
Acquired with Deteriorated Credit Quality		8		-		8		-		-		-		-		-
Total Ending Allowance Balance	$	14,584	$	3,983	$	8,335	$	946	$	239	$	188	$	281	$	612
Loans:
Loans Individually Evaluated for Impairment	$	8,458	$	2,114	$	6,344	$	-	$	-	$	-	$	-	$	-
Loans Collectively Evaluated for Impairment		1,367,591		347,808		566,389		195,171		81,812		49,131		127,280		-
Loans Acquired with Deteriorated Credit Quality		14,753		1,981		10,871		-		-		134		1,767		-
Total Ending Loans Balance (1)	$	1,390,802	$	351,903	$	583,604	$	195,171	$	81,812	$	49,265	$	129,047	$	-

⁽¹⁾ Total recorded investment in loans includes $5,590 in accrued interest.

			Commercial
			and
			Industrial		Commercial				Home				Residential
			Loans and		Real Estate		Agricultural		Equity		Consumer		Mortgage
December 31, 2012	Total		Leases		Loans		Loans		Loans		Loans		Loans		Unallocated
Allowance for Loan Losses:
Ending Allowance Balance Attributable to Loans:
Individually Evaluated  for Impairment	$	5,323	$	1,279	$	3,894	$	150	$	-	$	-	$	-	$	-
Collectively Evaluated for Impairment		10,109		3,208		5,017		839		141		214		186		504
Acquired with Deteriorated Credit Quality		88		68		20		-		-		-		-		-
Total Ending Allowance Balance	$	15,520	$	4,555	$	8,931	$	989	$	141	$	214	$	186	$	504
Loans:
Loans Individually Evaluated for Impairment	$	12,520	$	2,547	$	7,550	$	2,423	$	-	$	-	$	-	$	-
Loans Collectively Evaluated for Impairment		1,189,729		331,920		473,209		180,152		74,699		41,083		88,666		-
Loans Acquired with Deteriorated Credit Quality		11,174		1,840		9,037		-		-		148		149		-
Total Ending Loans Balance (1)	$	1,213,423	$	336,307	$	489,796	$	182,575	$	74,699	$	41,231	$	88,815	$	-

⁽¹⁾ Total recorded investment in loans includes $5,522 in accrued interest.

The following table presents loans individually evaluated for impairment by class of loans as of December 31, 2013 and 2012:

	Unpaid				Allowance for
	Principal		Recorded		Loan Losses
	Balance(1)		Investment		Allocated
December 31, 2013
With No Related Allowance Recorded:
Commercial and Industrial Loans and Leases	$	2,163	$	2,072	$	-
Commercial Real Estate Loans		4,710		2,383		-
Agricultural Loans		-		-		-
Subtotal		6,873		4,455		-
With An Allowance Recorded:
Commercial and Industrial Loans and Leases		45		45		45
Commercial Real Estate Loans		4,428		4,417		3,058
Agricultural Loans		-		-		-
Subtotal		4,473		4,462		3,103
Total	$	11,346	$	8,917	$	3,103
Loans Acquired With Deteriorated Credit Quality With No Related Allowance Recorded (Included in the Total Above)	$	987	$	451	$	-
Loans Acquired With Deteriorated Credit Quality With An Additional Allowance Recorded (Included in the Total Above)	$	33	$	8	$	8

⁽¹⁾ Unpaid Principal Balance is the remaining contractual payments inclusive of partial charge-offs.

	Unpaid				Allowance for
	Principal		Recorded		Loan Losses
	Balance(1)		Investment		Allocated
December 31, 2012
With No Related Allowance Recorded:
Commercial and Industrial Loans and Leases	$	108	$	87	$	-
Commercial Real Estate Loans		4,312		2,154		-
Agricultural Loans		2,126		2,137		-
Subtotal		6,546		4,378		-
With An Allowance Recorded:
Commercial and Industrial Loans and Leases		2,642		2,581		1,347
Commercial Real Estate Loans		5,579		5,418		3,914
Agricultural Loans		285		286		150
Subtotal		8,506		8,285		5,411
Total	$	15,052	$	12,663	$	5,411
Loans Acquired With Deteriorated Credit Quality With No Related Allowance Recorded (Included in the Total Above)	$	45	$	25	$	-
Loans Acquired With Deteriorated Credit Quality With An Additional Allowance Recorded (Included in the Total Above)	$	155	$	118	$	88

⁽¹⁾ Unpaid Principal Balance is the remaining contractual payments inclusive of partial charge-offs.

The following table presents loans individually evaluated for impairment by class of loans for the years ended December 31, 2013 and 2012:

	Average		Interest		Cash
	Recorded		Income		Basis
	Investment		Recognized		Recognized
December 31, 2013
With No Related Allowance Recorded:
Commercial and Industrial Loans and Leases	$	1,192	$	65	$	65
Commercial Real Estate Loans		2,251		5		7
Agricultural Loans		1,420		209		225
Subtotal		4,863		279		297
With An Allowance Recorded:
Commercial and Industrial Loans and Leases		1,360		3		3
Commercial Real Estate Loans		5,424		22		18
Agricultural Loans		-		-		-
Subtotal		6,784		25		21
Total	$	11,647	$	304	$	318
Loans Acquired With Deteriorated Credit Quality With No Related Allowance Recorded (Included in the Total Above)	$	30	$	3	$	3
Loans Acquired With Deteriorated Credit Quality With An Additional Allowance Recorded (Included in the Total Above)	$	142	$	2	$	2

	Average		Interest		Cash
	Recorded		Income		Basis
	Investment		Recognized		Recognized
December 31, 2012
With No Related Allowance Recorded:
Commercial and Industrial Loans and Leases	$	252	$	3	$	3
Commercial Real Estate Loans		4,506		18		18
Agricultural Loans		535		2		2
Subtotal		5,293		23		23
With An Allowance Recorded:
Commercial and Industrial Loans and Leases		2,726		9		8
Commercial Real Estate Loans		6,660		23		19
Agricultural Loans		74		-		-
Subtotal		9,460		32		27
Total	$	14,753	$	55	$	50
Loans Acquired With Deteriorated Credit Quality With No Related Allowance Recorded (Included in the Total Above)	$	26	$	2	$	2
Loans Acquired With Deteriorated Credit Quality With An Additional Allowance Recorded (Included in the Total Above)	$	154	$	6	$	4

	Average		Interest		Cash
	Recorded		Income		Basis
	Investment		Recognized		Recognized
December 31, 2011
With No Related Allowance Recorded:
Commercial and Industrial Loans and Leases	$	1,107	$	9	$	9
Commercial Real Estate Loans		4,438		75		75
Agricultural Loans		19		6		6
Subtotal		5,564		90		90
With An Allowance Recorded:
Commercial and Industrial Loans and Leases		3,642		11		11
Commercial Real Estate Loans		9,390		37		34
Agricultural Loans		-		-		-
Subtotal		13,032		48		45
Total	$	18,596	$	138	$	135
Loans Acquired With Deteriorated Credit Quality With No Related Allowance Recorded (Included in the Total Above)	$	28	$	4	$	4
Loans Acquired With Deteriorated Credit Quality With An Additional Allowance Recorded (Included in the Total Above)	$	77	$	1	$	1

All classes of loans, including loans acquired with deteriorated credit quality, are generally placed on non-accrual status when scheduled principal or interest payments are past due for 90 days or more or when the borrower's ability to repay becomes doubtful. For purchased loans, the determination is made at the time of acquisition as well as over the life of the loan. Uncollected accrued interest for each class of loans is reversed against income at the time a loan is placed on non-accrual. Interest received on such loans is accounted for on the cash-basis or cost-recovery method, until qualifying for return to accrual. All classes of loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured. Loans are typically charged-off at 180 days past due, or earlier if deemed uncollectible. Exceptions to the non-accrual and charge-off policies are made when the loan is well secured and in the process of collection.

The following table presents the recorded investment in non-accrual loans and loans past due 90 days or more still on accrual by class of loans as of December 31, 2013 and 2012:

					Loans Past Due
					90 Days or More
	Non-Accrual				& Still Accruing
	2013		2012		2013		2012
Commercial and Industrial Loans and Leases	$	31	$	2,480	$	-	$	-
Commercial Real Estate Loans		6,658		7,275		8		-
Agricultural Loans		-		-		-		-
Home Equity Loans		114		178		-		-
Consumer Loans		236		167		-		-
Residential Mortgage Loans		1,339		257		-		-
Total	$	8,378	$	10,357	$	8	$	-
Loans Acquired With Deteriorated Credit Quality (Included in the Total Above)	$	1,705	$	148	$	-	$	-

The following table presents the aging of the recorded investment in past due loans by class of loans as of December 31, 2013 and 2012:

							90 Days
			30-59 Days		60-89 Days		or More		Total		Loans Not
	Total		Past Due		Past Due		Past Due		Past Due		Past Due
December 31, 2013
Commercial and Industrial Loans and Leases	$	351,903	$	256	$	78	$	-	$	334	$	351,569
Commercial Real Estate Loans		583,604		613		62		2,234		2,909		580,695
Agricultural Loans		195,171		62		-		-		62		195,109
Home Equity Loans		81,812		303		33		114		450		81,362
Consumer Loans		49,265		149		66		102		317		48,948
Residential Mortgage Loans		129,047		2,206		192		1,115		3,513		125,534
Total (1)	$	1,390,802	$	3,589	$	431	$	3,565	$	7,585	$	1,383,217
Loans Acquired With Deteriorated Credit Quality (Included in the Total Above)	$	14,753	$	148	$	-	$	1,103	$	1,251	$	13,502

⁽¹⁾ Total recorded investment in loans includes $5,590 in accrued interest.

							90 Days
			30-59 Days		60-89 Days		or More		Total		Loans Not
	Total		Past Due		Past Due		Past Due		Past Due		Past Due
December 31, 2012
Commercial and Industrial Loans and Leases	$	336,307	$	436	$	133	$	448	$	1,017	$	335,290
Commercial Real Estate Loans		489,796		1,352		-		2,063		3,415		486,381
Agricultural Loans		182,575		42		14		-		56		182,519
Home Equity Loans		74,699		177		48		178		403		74,296
Consumer Loans		41,231		431		23		18		472		40,759
Residential Mortgage Loans		88,815		2,070		495		257		2,822		85,993
Total (1)	$	1,213,423	$	4,508	$	713	$	2,964	$	8,185	$	1,205,238
Loans Acquired With Deteriorated Credit Quality (Included in the Total Above)	$	11,174	$	-	$	120	$	-	$	120	$	11,054

⁽¹⁾ Total recorded investment in loans includes $5,522 in accrued interest.

Troubled Debt Restructurings:

In certain instances, the Company may choose to restructure the contractual terms of loans. A troubled debt restructuring occurs when the Bank grants a concession to the borrower that it would not otherwise consider due to a borrower's financial difficulty. In order to determine whether a borrower is experiencing financial difficulty, an evaluation is performed of the probability that the borrower will be in payment default on any of its debt in the foreseeable future without modification. This evaluation is performed under the Company's internal underwriting policy. The Company uses the same methodology for loans acquired with deteriorated credit quality as for all other loans when determining whether the loan is a troubled debt restructuring.

During the years ended December 31, 2013 and 2012, the terms of certain loans were modified as troubled debt restructurings. The modification of the terms of such loans included one or a combination of the following: a reduction of the stated interest rate of the loan; an extension of the maturity date at a stated rate of interest lower than the current market rate for new debt with similar risk; or a permanent reduction of the recorded investment in the loan. There were no troubled debt restructurings for the years ended December 31, 2013 and 2012 for loans acquired with deteriorated credit quality at the time of acquisition.

The following table presents the recorded investment of troubled debt restructurings by class of loans as of December 31, 2013 and 2012:

	Total		Performing		Non-Accrual(1)
December 31, 2013
Commercial and Industrial Loans and Leases	$	2,092	$	2,086	$	6
Commercial Real Estate Loans		4,325		364		3,961
Total	$	6,417	$	2,450	$	3,967

	Total		Performing		Non-Accrual(1)
December 31, 2012
Commercial and Industrial Loans and Leases	$	2,461	$	66	$	2,395
Commercial Real Estate Loans		6,031		304		5,727
Total	$	8,492	$	370	$	8,122

⁽¹⁾ The non-accrual troubled debt restructurings are included in the Non-Accrual Loan table presented on previous page.

The Company has committed to lending an additional amount of $40 as of December 31, 2013 to customers with outstanding loans that are classified as troubled debt restructurings. The Company had not committed to lending any additional amounts as of December 31, 2012 to customers with outstanding loans that are classified as troubled debt restructurings.

The following table presents loans by class modified as troubled debt restructurings that occurred during the year ending December 31, 2013, 2012 and 2011:

			Pre-Modification		Post-Modification
	Number of		Outstanding Recorded		Outstanding Recorded
December 31, 2013	Loans		Investment		Investment
Commercial and Industrial Loans and Leases		1	$	224	$	230
Commercial Real Estate Loans		1		81		118
Total		2	$	305	$	348

The troubled debt restructurings described above decreased the allowance for loan losses by $210 and resulted in charge-offs of $0 during the year ending December 31, 2013.

			Pre-Modification		Post-Modification
	Number of		Outstanding Recorded		Outstanding Recorded
December 31, 2012	Loans		Investment		Investment
Commercial and Industrial Loans and Leases		2	$	9	$	9
Commercial Real Estate Loans		-		-		-
Total		2	$	9	$	9

The troubled debt restructurings described above increased the allowance for loan losses by $0 and resulted in charge-offs of $0 during the year ending December 31, 2012.

			Pre-Modification		Post-Modification
	Number of		Outstanding Recorded		Outstanding Recorded
December 31, 2011	Loans		Investment		Investment
Commercial and Industrial Loans and Leases		4	$	4,541	$	4,499
Commercial Real Estate Loans		6		7,099		6,850
Total		10	$	11,640	$	11,349

The troubled debt restructurings described above increased the allowance for loan losses by $1,945 and resulted in charge-offs of $834 during the year ending December 31, 2011.

The following tables present loans by class modified as troubled debt restructurings for which there was a payment default within twelve months following the modification during the years ending December 31, 2013, 2012 and 2011:

Troubled Debt Restructurings That Subsequently Defaulted:	Number of Loans		Recorded Investment
December 31, 2013
Commercial and Industrial Loans and Leases		-	$	-
Commercial Real Estate Loans		-		-
Total		-	$	-

The troubled debt restructurings that subsequently defaulted described above resulted in no change to the allowance for loan losses and no charge-offs during the year ending December 31, 2013.

Troubled Debt Restructurings That Subsequently Defaulted:	Number of Loans		Recorded Investment
December 31, 2012
Commercial and Industrial Loans and Leases		1	$	565
Commercial Real Estate Loans		3		1,377
Total		4	$	1,942

The troubled debt restructurings that subsequently defaulted described above increased the allowance for loan losses by $12 and resulted in charge-offs of $306 during the year ending December 31, 2012.

Troubled Debt Restructurings That Subsequently Defaulted:	Number of Loans		Recorded Investment
December 31, 2011
Commercial and Industrial Loans and Leases		1	$	527
Commercial Real Estate Loans		-		-
Total		1	$	527

The troubled debt restructurings that subsequently defaulted described above decreased the allowance for loan losses by $500 and resulted in charge-offs of $500 during the year ending December 31, 2011.

A loan is considered to be in payment default once it is 30 days contractually past due under the modified terms.

Credit Quality Indicators:

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Company classifies loans as to credit risk by individually analyzing loans. This analysis includes commercial and industrial loans, commercial real estate loans, and agricultural loans with an outstanding balance greater than $100. This analysis is typically performed on at least an annual basis. The Company uses the following definitions for risk ratings:

Special Mention. Loans classified as special mention have a potential weakness that deserves management's close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution's credit position at some future date.

Substandard. Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

Doubtful. Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be pass rated loans. Based on the most recent analysis performed, the risk category of loans by class of loans is as follows:

			Special
	Pass		Mention		Substandard		Doubtful		Total
December 31, 2013
Commercial and Industrial Loans and Leases	$	324,685	$	15,485	$	11,733	$	-	$	351,903
Commercial Real Estate Loans		539,533		20,168		23,903		-		583,604
Agricultural Loans		192,609		2,357		205		-		195,171
Total	$	1,056,827	$	38,010	$	35,841	$	-	$	1,130,678
Loans Acquired with Deteriorated Credit Quality (Included in the Total Above)	$	3,121	$	661	$	9,070	$	-	$	12,852

			Special
	Pass		Mention		Substandard		Doubtful		Total
December 31, 2012
Commercial and Industrial Loans and Leases	$	307,997	$	14,441	$	13,869	$	-	$	336,307
Commercial Real Estate Loans		446,639		21,338		21,819		-		489,796
Agricultural Loans		176,730		2,855		2,990		-		182,575
Total	$	931,366	$	38,634	$	38,678	$	-	$	1,008,678
Loans Acquired with Deteriorated Credit Quality (Included in the Total Above)	$	319	$	3,220	$	7,338	$	-	$	10,877

The Company considers the performance of the loan portfolio and its impact on the allowance for loan losses. For home equity, consumer and residential mortgage loan classes, the Company also evaluates credit quality based on the aging status of the loan, which was previously presented, and by payment activity. The following table presents the recorded investment in home equity, consumer and residential mortgage loans based on payment activity as of December 31, 2013 and 2012:

	Home Equity		Consumer		Residential
	Loans		Loans		Mortgage Loans
December 31, 2013
Performing	$	81,698	$	49,029	$	127,708
Nonperforming		114		236		1,339
Total	$	81,812	$	49,265	$	129,047
Loans Acquired with Deteriorated Credit Quality (Included in the Total Above)	$	-	$	134	$	1,767

	Home Equity		Consumer		Residential
	Loans		Loans		Mortgage Loans
December 31, 2012
Performing	$	74,521	$	41,064	$	88,558
Nonperforming		178		167		257
Total	$	74,699	$	41,231	$	88,815
Loans Acquired with Deteriorated Credit Quality (Included in the Total Above)	$	-	$	148	$	149

The following table presents financing receivables purchased during the year ended December 31, 2013 by portfolio class (for further discussion, see Note 17 Business Combinations, Goodwill and Intangible Assets):

	Commercial
	and
	Industrial		Commercial				Home				Residential
	Loans and		Real Estate		Agricultural		Equity		Consumer		Mortgage
	Leases		Loans		Loans		Loans		Loans		Loans		Total
Purchases	$	6,399	$	47,021	$	769	$	4,536	$	1,666	$	19,184	$	79,575

The Company has purchased loans, for which there was, at acquisition, evidence of deterioration of credit quality since origination and it was probable, at acquisition, that all contractually required payments would not be collected. The recorded investment of those loans at December 31, is as follows:

	2013		2012		2011
Commercial and Industrial Loans	$	1,981	$	1,840	$	2,596
Commercial Real Estate Loans		10,871		9,037		13,209
Home Equity Loans		-		-		-
Consumer Loans		134		148		164
Residential Mortgage Loans		1,767		149		152
Total	$	14,753	$	11,174	$	16,121
Carrying Amount, Net of Allowance	$	14,745	$	11,086	$	16,044

Accretable yield, or income expected to be collected, is as follows:

	2013			2012			2011
Balance at January 1	$	170		$	967		$	-
New Loans Purchased		2,885			-			2,042
Accretion of Income		(265	)		(1,265	)		(1,130	)
Reclassifications from Non-accretable Difference		-			468			129
Charge-off of Accretable Yield		-			-			(74	)
Balance at December 31	$	2,790		$	170		$	967

For those purchased loans disclosed above, the Company increased the allowance for loan losses by $0, $88 and $77 for the years ended December 31, 2013, 2012 and 2011. No allowances for loan losses were reversed during the same period.

Contractually required payments receivable of loans purchased during the years ended December 31:

	2013		2012		2011
Commercial and Industrial Loans	$	401	$	-	$	4,542
Commercial Real Estate Loans		6,640		-		19,260
Home Equity Loans		-		-		28
Consumer Loans		-		-		217
Residential Mortgage Loans		3,684		-		458
Total	$	10,725	$	-	$	24,505
Cash Flows Expected to be Collected at Acquisition	$	7,642	$	-	$	19,695
Fair Value of Acquired Loans at Acquisition		6,252		-		17,653

Certain directors, executive officers, and principal shareholders of the Company, including their immediate families and companies in which they are principal owners, were loan customers of the Company during 2013. A summary of the activity of these loans follows:

Balance				Changes							Balance
January 1,				in Persons		Deductions					December 31,
2013		Additions		Included		Collected			Charged-off		2013
$	9,002	$	5,426	$	1,290	$	(5,387	)	$	-	$	10,331

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Derivatives

12 Months Ended

Dec. 31, 2013

Derivatives [Abstract]

Derivatives

NOTE 3 - Derivatives

The Company executes interest rate swaps with commercial banking customers to facilitate their respective risk management strategies. The notional amounts of these interest rate swaps and the offsetting counterparty derivative instruments were $17.9 million and $6.1 million at December 31, 2013 and 2012, respectively. These interest rate swaps are simultaneously hedged by offsetting interest rate swaps that the Company executes with a third party, such that the Company minimizes its net risk exposure resulting from such transactions with approved, reputable, independent counterparties with substantially matching terms. The agreements are considered stand alone derivatives and changes in the fair value of derivatives are reported in earnings as non-interest income.

Credit risk arises from the possible inability of counterparties to meet the terms of their contracts. The Company's exposure is limited to the replacement value of the contracts rather than the notional, principal or contract amounts. There are provisions in the agreements with the counterparties that allow for certain unsecured credit exposure up to an agreed threshold. Exposures in excess of the agreed thresholds are collateralized. In addition, the Company minimizes credit risk through credit approvals, limits, and monitoring procedures.

The following table reflects the fair value hedges included in the Consolidated Balance Sheets as of December 31:

	2013				2012
	Notional				Notional
	Amount		Fair Value		Amount		Fair Value
Included in Other Assets:
Interest Rate Swaps	$	17,853	$	866	$	6,051	$	187
Included in Other Liabilities:
Interest Rate Swaps	$	17,853	$	737	$	6,051	$	178

The following tables present the effect of derivative instruments on the Consolidated Statement of Income for the years ended December 31, 2013, 2012 and 2011 are as follows:

	2013		2012		2011
Interest Rate Swaps:
Included in Interest Income / (Expense)	$	-	$	-	$	-
Included in Other Income / (Expense)		528		163		-

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Segment Information

12 Months Ended

Dec. 31, 2013

Segment Information [Abstract]

Segment Information

NOTE 15 - Segment Information

The Company's operations include three primary segments: core banking, trust and investment advisory services, and insurance operations. The core banking segment involves attracting deposits from the general public and using such funds to originate consumer, commercial and agricultural, commercial and agricultural real estate, and residential mortgage loans, primarily in the Company's local markets. The core banking segment also involves the sale of residential mortgage loans in the secondary market. The trust and investment advisory services segment involves providing trust, investment advisory, and brokerage services to customers. The insurance segment offers a full range of personal and corporate property and casualty insurance products, primarily in the Company's banking subsidiary's local markets.

The core banking segment is comprised by the Company's banking subsidiary, German American Bancorp, which operated through 36 banking offices at December 31, 2013. Net interest income from loans and investments funded by deposits and borrowings is the primary revenue for the core-banking segment. The trust and investment advisory services segment's revenues are comprised primarily of fees generated by German American Financial Advisors & Trust Company. These fees are derived by providing trust, investment advisory, and brokerage services to its customers. The insurance segment primarily consists of German American Insurance, Inc., which provides a full line of personal and corporate insurance products. Commissions derived from the sale of insurance products are the primary source of revenue for the insurance segment.

The following segment financial information has been derived from the internal financial statements of German American Bancorp, Inc., which are used by management to monitor and manage the financial performance of the Company. The accounting policies of the three segments are the same as those of the Company. The evaluation process for segments does not include holding company income and expense. Holding company amounts are the primary differences between segment amounts and consolidated totals, and are reflected in the column labeled "Other" below, along with amounts to eliminate transactions between segments.

			Trust and
			Investment
	Core		Advisory								Consolidated
	Banking		Services			Insurance		Other			Totals
Year Ended December 31, 2013
Net Interest Income	$	69,634	$	21		$	17	$	(1,155	)	$	68,517
Net Gains on Sales of Loans		2,645		-			-		-			2,645
Net Gains on Securities		2,065		-			-		364			2,429
Trust and Investment Product Fees		6		3,355			-		(3	)		3,358
Insurance Revenues		39		31			6,147		-			6,217
Noncash Items:
Provision for Loan Losses		350		-			-		-			350
Depreciation and Amortization		3,944		28			339		150			4,461
Income Tax Expense (Benefit)		12,387		(32	)		320		(1,211	)		11,464
Segment Profit (Loss)		25,389		(70	)		425		(331	)		25,413
Segment Assets at December 31, 2013		2,171,837		11,663			5,636		(25,309	)		2,163,827

			Trust and
			Investment
	Core		Advisory								Consolidated
	Banking		Services			Insurance		Other			Totals
Year Ended December 31, 2012
Net Interest Income	$	68,311	$	21		$	34	$	(2,118	)	$	66,248
Net Gains on Sales of Loans		3,234		-			-		-			3,234
Net Gains on Securities		1,667		-			-		-			1,667
Trust and Investment Product Fees		5		2,657			-		(5	)		2,657
Insurance Revenues		23		36			5,465		-			5,524
Noncash Items:
Provision for Loan Losses		2,412		-			-		-			2,412
Depreciation and Amortization		4,099		24			415		150			4,688
Income Tax Expense (Benefit)		11,999		(187	)		181		(1,324	)		10,669
Segment Profit (Loss)		25,118		(298	)		250		(1,015	)		24,055
Segment Assets at December 31, 2012		2,006,992		11,551			8,333		(20,576	)		2,006,300

			Trust and
			Investment
	Core		Advisory								Consolidated
	Banking		Services			Insurance		Other			Totals
Year Ended December 31, 2011
Net Interest Income	$	66,099	$	16		$	22	$	(2,156	)	$	63,981
Net Gains on Sales of Loans		2,381		-			-		-			2,381
Net Gains on Securities		2,089		-			-		935			3,024
Trust and Investment Product Fees		3		2,147			-		(5	)		2,145
Insurance Revenues		67		13			5,755		(16	)		5,819
Noncash Items:
Provision for Loan Losses		6,800		-			-		-			6,800
Depreciation and Amortization		4,481		26			482		150			5,139
Income Tax Expense (Benefit)		9,171		(353	)		272		(1,364	)		7,726
Segment Profit (Loss)		20,855		(545	)		352		(413	)		20,249
Segment Assets at December 31, 2011		1,875,417		11,801			7,948		(21,399	)		1,873,767

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Per Share Data

12 Months Ended

Dec. 31, 2013

Per Share Data [Abstract]

Per Share Data

NOTE 11 - Per Share Data

The computation of Basic Earnings per Share and Diluted Earnings per Share are provided below:

	2013		2012		2011
Basic Earnings per Share:
Net Income	$	25,413	$	24,055	$	20,249
Weighted Average Shares Outstanding		12,786,065		12,622,049		12,581,646
Basic Earnings per Share	$	1.99	$	1.91	$	1.61
Diluted Earnings per Share:
Net Income	$	25,413	$	24,055	$	20,249
Weighted Average Shares Outstanding		12,786,065		12,622,049		12,581,646
Stock Options, Net		21,613		15,694		6,102
Diluted Weighted Average Shares Outstanding		12,807,678		12,637,743		12,587,748
Diluted Earnings per Share	$	1.98	$	1.90	$	1.61

Stock options for 89,276 shares of common stock were not considered in computing diluted earnings per common share for 2011 because they were anti-dilutive. There were no anti-dilutive shares at December 31, 2013 and 2012.

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FHLB Advances and Other Borrowings (Narrative) (Details) (USD $)
In Thousands, unless otherwise specified

12 Months Ended

1 Months Ended

12 Months Ended

Dec. 31, 2013

Dec. 31, 2012

Apr. 30, 2009

Public Issue [Member]

Dec. 31, 2012

Other Bank [Member]

Federal Home Loan Bank, Advances, Branch of FHLB Bank [Line Items]

Federal Home Loan Bank, Advances, Branch of FHLB Bank, Interest Rate, Range from

0.35%

0.39%

Federal Home Loan Bank, Advances, Branch of FHLB Bank, Interest Rate, Range to

7.22%

7.22%

Federal Home Loan Bank, Advances, Branch of FHLB Bank, Weighted Average Interest Rate

0.95%

2.07%

Long-term Advances from Federal Home Loan Bank collateralized by qualifying mortgages, investment securities, and mortgage-backed securities

$ 71,483

$ 51,526

Federal Home Loan Bank, Advances, General Debt Obligations, Disclosures, Conversion Features

Of the $51.5 million, $30.0 million or 58% of the advances contained options whereby the FHLB may convert the fixed rate advance to an adjustable rate advance, at which time the Company may prepay the advance without penalty.

Debt Instrument [Line Items]

Line of Credit Facility, Maximum Borrowing Capacity

7,000

1,500

Line of Credit Facility, Expiration Date

Dec. 31, 2015

Maturity Date

Jan. 01, 2014

Line of Credit Facility, Frequency of Payment and Payment Terms

90 days

90 days

Debt Instrument, Frequency of Periodic Payment

90 days

Line of Credit Facility, Interest Rate During Period

2.875%

3.00%

Interest rate during period

1.35%

Line of Credit Facility, Unused Capacity, Commitment Fee Percentage

0.25%

Subordinated Debentures

29,250

19,300

10,000

Tier Two Percentage Of Subordinated Debt

20.00%

Subordinated Borrowing, Interest Rate

8.00%

8.00%

Junior Subordinated Debt For Tier One Capital Purposes

$ 4,871

$ 4,725

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FHLB Advances and Other Borrowings

12 Months Ended

Dec. 31, 2013

FHLB Advances and Other Borrowings [Abstract]

FHLB Advances and Other Borrowings

NOTE 7 - FHLB Advances and Other Borrowings

The Company's funding sources include Federal Home Loan Bank advances, borrowings from other third party correspondent financial institutions, issuance and sale of subordinated debt and other capital securities, and repurchase agreements. Information regarding each of these types of borrowings or other indebtedness is as follows:

	December 31,
	2013		2012
Long-term Advances from Federal Home Loan Bank collateralized by qualifying mortgages, investment securities, and mortgage-backed securities	$	71,483	$	51,526
Term Loans		7,000		1,500
Junior Subordinated Debentures assumed from American Community Bancorp, Inc.		5,024		4,874
Subordinated Debentures		-		29,250
Capital Lease Obligation		3,730		2,322
Long-term Borrowings		87,237		89,472
Overnight Variable Rate Advances from Federal Home Loan Bank collateralized by qualifying mortgages, investment securities, and mortgage-backed securities	$	38,000	$	48,500
Federal Funds Purchased		-		5,400
Repurchase Agreements		15,533		17,634
Short-term Borrowings		53,533		71,534
Total Borrowings	$	140,770	$	161,006

Repurchase agreements, which are classified as secured borrowings, generally mature within one day of the transaction date. Repurchase agreements are reflected at the amount of cash received in connection with the transaction. The Company may be required to provide additional collateral based on the value of the underlying securities.

	2013			2012
Average Daily Balance During the Year	$	14,772		$	19,813
Average Interest Rate During the Year		0.20	%		0.23	%
Maximum Month-end Balance During the Year	$	17,722		$	24,220
Weighted Average Interest Rate at Year-end		0.20	%		0.20	%

At December 31, 2013 interest rates on the fixed rate long-term FHLB advances ranged from 0.35% to 7.22% with a weighted average rate of 0.95%. At December 31, 2013, the Company had no advances containing options whereby the FHLB may convert a fixed rate advance to an adjustable rate advance.

At December 31, 2012 interest rates on the fixed rate long-term FHLB advances ranged from 0.39% to 7.22% with a weighted average rate of 2.07%. Of the $51.5 million, $30.0 million or 58% of the advances contained options whereby the FHLB may convert the fixed rate advance to an adjustable rate advance, at which time the Company may prepay the advance without penalty. The options on these advances are subject to a variety of terms including LIBOR based strike rates.

At December 31, 2013, the Company had an outstanding term loan with the balance of $7 million of which the original principal amount was $10 million and borrowed by the parent company in January 2013. At December 31, 2013 interest on the term loan is based upon 90-day LIBOR plus 2.875%. This term loan matures December 31, 2015. At December 31, 2013, the parent company had a $10 million line of credit with no outstanding balance. The line of credit matures December 30, 2014. Interest on the line of credit is based upon 90-day LIBOR plus 2.875% and includes an unused commitment fee of 0.25%.

As of December 31, 2012 long-term borrowings included a $1.5 million outstanding balance on a term loan of which was paid off in January 2013 by the parent company. At December 31, 2012 interest on the term loan was based upon 90-day LIBOR plus 3.00%.

At December 31, 2012, the long-term borrowings shown above included an aggregate of $29.3 million of indebtedness represented by subordinated debentures issued by the Company's parent company in two separate transactions. A $10 million subordinated debenture issued by the parent company to another bank bore interest based upon 90-day LIBOR plus 1.35%. 20% of the subordinated debenture was treated as Tier 2 capital for regulatory capital purposes as of December 31, 2012. This subordinated debenture was paid off in January 2013. The parent company issued $19.3 million principal amount of 8% redeemable subordinated debentures to the Company's shareholders in April 2009. The entire principal amount of these debentures was treated as Tier 2 capital for regulatory capital purposes as of December 31, 2012. These debentures were redeemed on April 1, 2013.

At December 31, 2013, scheduled principal payments on long-term borrowings, excluding the capitalized lease obligation and acquired subordinated debentures (which are discussed below) are as follows:

2014	$	43,039
2015		24,042
2016		45
2017		749
2018		10,027
Thereafter		581
Total	$	78,483

The Company assumed the obligations of junior subordinated debentures through the acquisition of American Community Bancorp, Inc. The junior subordinated debentures were issued to ACB Capital Trust I and Capital Trust II. The trusts are wholly owned by the Company. In accordance with accounting guidelines, the trusts are not consolidated with the Company's financials, but rather the subordinated debentures are shown as borrowings. The Company guarantees payment of distributions on the trust preferred securities issued by ACB Trust I and ACB Trust II. Interest is payable on a quarterly basis. These securities qualify as Tier 1 capital (with certain limitations) for regulatory purposes. $4,871 of the junior subordinated debentures were treated as Tier 1 capital for regulatory capital purposes as of December 31, 2013. $4,725 of the junior subordinated debentures were treated as Tier 1 capital for regulatory capital purposes as of December 31, 2012. As a result of the acquisition of American Community these liabilities were recorded at fair value at the acquisition date with the discount amortizing into interest expense over the life of the liability, ultimately accreting to the issuance amount disclosed below.

The following table summarizes the terms of each issuance:

Carrying

Date of

Issuance

Amount at

Rate as of

Rate as of

Maturity

Issuance

Amount

December 31, 2013

Variable Rate

December 31, 2013

December 31, 2012

Date

ACB Trust I

5/6/2005

$

5,155

$

3,186

90 day LIBOR + 2.15%

2.40

%

2.46

%

May 2035

ACB Trust II

7/15/2005

3,093

1,838

90 day LIBOR + 1.85%

2.09

%

2.16

%

July 2035

See also Note 5 regarding the capital lease obligation.

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Loans (Schedule of Allowance for Loan Losses and Recorded Investment in Loans) (Parenthetical) (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012
Loans [Abstract]
Accrued interest	$ 5,590	$ 5,522

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Fair Value (Schedule of Assets and Liabilities Measured at Fair Value on Recurring Basis) (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012
Assets:
Securities	$ 606,032	$ 587,602
Loans Held-for-Sale	9,265	16,641
Derivative Assets	866	187
Derivative Liabilities	737	178
Fair Value, Measurements, Recurring [Member]
Assets:
Securities	606,032	587,602
Loans Held-for-Sale	9,265	16,641
Derivative Assets	866	187
Derivative Liabilities	737	178
Fair Value, Measurements, Recurring [Member] | U.S. Treasury and Agency Securities [Member]
Assets:
Securities	18,952	23,472
Fair Value, Measurements, Recurring [Member] | Corporate Securities [Member]
Assets:
Securities
Fair Value, Measurements, Recurring [Member] | Obligations of State and Political Subdivisions [Member]
Assets:
Securities	113,497	76,485
Fair Value, Measurements, Recurring [Member] | Mortgage-backed Securities - Residential [Member]
Assets:
Securities	473,230	486,912
Fair Value, Measurements, Recurring [Member] | Equity Securities [Member]
Assets:
Securities	353	733
Fair Value, Measurements, Recurring [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]
Assets:
Securities		380
Loans Held-for-Sale
Derivative Assets
Derivative Liabilities
Fair Value, Measurements, Recurring [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | U.S. Treasury and Agency Securities [Member]
Assets:
Securities
Fair Value, Measurements, Recurring [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Corporate Securities [Member]
Assets:
Securities
Fair Value, Measurements, Recurring [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Obligations of State and Political Subdivisions [Member]
Assets:
Securities
Fair Value, Measurements, Recurring [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Mortgage-backed Securities - Residential [Member]
Assets:
Securities
Fair Value, Measurements, Recurring [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Equity Securities [Member]
Assets:
Securities		380
Fair Value, Measurements, Recurring [Member] | Significant Other Observable Inputs (Level 2) [Member]
Assets:
Securities	594,847	574,700
Loans Held-for-Sale	9,265	16,641
Derivative Assets	866	187
Derivative Liabilities	737	178
Fair Value, Measurements, Recurring [Member] | Significant Other Observable Inputs (Level 2) [Member] | U.S. Treasury and Agency Securities [Member]
Assets:
Securities	18,952	23,472
Fair Value, Measurements, Recurring [Member] | Significant Other Observable Inputs (Level 2) [Member] | Corporate Securities [Member]
Assets:
Securities
Fair Value, Measurements, Recurring [Member] | Significant Other Observable Inputs (Level 2) [Member] | Obligations of State and Political Subdivisions [Member]
Assets:
Securities	102,665	64,316
Fair Value, Measurements, Recurring [Member] | Significant Other Observable Inputs (Level 2) [Member] | Mortgage-backed Securities - Residential [Member]
Assets:
Securities	473,230	486,912
Fair Value, Measurements, Recurring [Member] | Significant Other Observable Inputs (Level 2) [Member] | Equity Securities [Member]
Assets:
Securities
Fair Value, Measurements, Recurring [Member] | Significant Unobservable Inputs (Level 3) [Member]
Assets:
Securities	11,185	12,522
Loans Held-for-Sale
Derivative Assets
Derivative Liabilities
Fair Value, Measurements, Recurring [Member] | Significant Unobservable Inputs (Level 3) [Member] | U.S. Treasury and Agency Securities [Member]
Assets:
Securities
Fair Value, Measurements, Recurring [Member] | Significant Unobservable Inputs (Level 3) [Member] | Corporate Securities [Member]
Assets:
Securities
Fair Value, Measurements, Recurring [Member] | Significant Unobservable Inputs (Level 3) [Member] | Obligations of State and Political Subdivisions [Member]
Assets:
Securities	10,832	12,169
Fair Value, Measurements, Recurring [Member] | Significant Unobservable Inputs (Level 3) [Member] | Mortgage-backed Securities - Residential [Member]
Assets:
Securities
Fair Value, Measurements, Recurring [Member] | Significant Unobservable Inputs (Level 3) [Member] | Equity Securities [Member]
Assets:
Securities	$ 353	$ 353

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Premises, Furniture, and Equipment

12 Months Ended

Dec. 31, 2013

Premises, Furniture, and Equipment [Abstract]

Premises, Furniture, and Equipment

NOTE 5 - Premises, Furniture, and Equipment

Premises, furniture, and equipment was comprised of the following classifications at December 31:

	2013			2012
Land	$	8,366		$	7,948
Buildings and Improvements		47,677			43,706
Furniture and Equipment		21,544			19,584
Total Premises, Furniture and Equipment		77,587			71,238
Less:  Accumulated Depreciation		(37,157	)		(34,684	)
Total	$	40,430		$	36,554

Depreciation expense was $2,910, $2,941, and $3,261 for 2013, 2012, and 2011, respectively.

The Company leases three of its branch buildings under a capital lease. These lease arrangements require monthly payments through 2033. The Company has included the leases in buildings and improvements as follows:

	2013			2012
Capital Leases	$	3,896		$	2,442
Less: Accumulated Depreciation		(483	)		(344	)
Total	$	3,413		$	2,098

The following is a schedule of future minimum lease payments under the capitalized leases, together with the present value of net minimum lease payments at year end 2013:

2014	$	495
2015		495
2016		495
2017		495
2018		465
Thereafter		6,216
Total minimum lease payments		8,661
Less: Amount representing interest		(4,931	)
Present Value of Net Minimum Lease Payments	$	3,730

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Deposits

12 Months Ended

Dec. 31, 2013

Deposits [Abstract]

Deposits

NOTE 6 - Deposits

At year end 2013, stated maturities of time deposits were as follows:

2014	$	174,109
2015		66,131
2016		76,207
2017		17,943
2018		14,465
Thereafter		179
Total	$	349,034

Time deposits of $100 or more and brokered deposits at December 31, 2013 and 2012 were $124,673 and $95,761, respectively.

Time deposits originated from outside the geographic area, generally through brokers, totaled $1,648 and $0 at December 31, 2013 and 2012, respectively.

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Shareholders' Equity

12 Months Ended

Dec. 31, 2013

Shareholders' Equity [Abstract]

Shareholders' Equity

NOTE 8 - Shareholders' Equity

The Company and affiliate bank are subject to regulatory capital requirements administered by federal banking agencies. Capital adequacy guidelines and prompt corrective action regulations involve quantitative measures of assets, liabilities, and certain off-balance sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by regulators about components, risk weightings, and other factors, and the regulators can lower classifications in certain cases. Failure to meet various capital requirements can initiate regulatory action that could have a direct material effect on the financial statements. Management believes as of December 31, 2013, the Company and Bank meet all capital adequacy requirements to which they are subject.

The prompt corrective action regulations provide five classifications, including well-capitalized, adequately capitalized, under-capitalized, significantly under-capitalized, and critically under-capitalized, although these terms are not used to represent overall financial condition. If only adequately capitalized, regulatory approval is required to accept brokered deposits. If under-capitalized, capital distributions are limited, as is asset growth and expansion, and plans for capital restoration are required.

At December 31, 2013, consolidated and affiliate bank actual capital and minimum required levels are presented below:

												Minimum Required
												To Be Well-
						Minimum Required						Capitalized Under
						For Capital						Prompt Corrective
	Actual					Adequacy Purposes:						Action Regulations:
	Amount		Ratio			Amount		Ratio				Amount	Ratio
Total Capital (to Risk Weighted Assets)
Consolidated	$	201,233		13.07	%	$	123,189		8.00	%		N/A		N/A
Bank		191,714		12.46			123,099		8.00		$	153,874		10.00	%
Tier 1 Capital (to Risk Weighted Assets)
Consolidated	$	186,649		12.12	%	$	61,594		4.00	%		N/A		N/A
Bank		177,130		11.51			61,550		4.00		$	92,324		6.00	%
Tier 1 Capital (to Average Assets)
Consolidated	$	186,649		8.78	%	$	85,005		4.00	%		N/A		N/A
Bank		177,130		8.37			84,686		4.00		$	105,857		5.00	%

At December 31, 2012, consolidated and affiliate bank actual capital and minimum required levels are presented below:

												Minimum Required
												To Be Well-
						Minimum Required						Capitalized Under
						For Capital						Prompt Corrective
	Actual					Adequacy Purposes:						Action Regulations:
	Amount		Ratio			Amount		Ratio				Amount	Ratio
Total Capital (to Risk Weighted Assets)
Consolidated	$	194,990		13.70	%	$	113,859		8.00	%		N/A		N/A
Bank		167,904		11.83			113,523		8.00		$	141,904		10.00	%
Tier 1 Capital (to Risk Weighted Assets)
Consolidated	$	158,198		11.12	%	$	56,930		4.00	%		N/A		N/A
Bank		152,384		10.74			56,762		4.00		$	85,142		6.00	%
Tier 1 Capital (to Average Assets)
Consolidated	$	158,198		8.18	%	$	77,317		4.00	%		N/A		N/A
Bank		152,384		7.91			77,025		4.00		$	96,281		5.00	%

The Company and the affiliate bank at year end 2013 and 2012 were categorized as well-capitalized. There have been no conditions or events that management believes have changed the classification of the Company or affiliate bank under the prompt corrective action regulations since the last notification from regulators. Regulations require the maintenance of certain capital levels at the affiliate bank, and may limit the dividends payable by the affiliate to the holding company, or by the holding company to its shareholders. At December 31, 2013, the affiliate bank had $39,000 in retained earnings available for payment of dividends to the parent company without prior regulatory approval.

Equity Plans and Equity Based Compensation

The Company maintains three equity incentive plans under which stock options, restricted stock, and other equity incentive awards can be granted. At December 31, 2013, the Company has reserved 438,813 shares of Common Stock (as adjusted for subsequent stock dividends and subject to further customary anti-dilution adjustments) for the purpose of issuance pursuant to outstanding and future grants of options, restricted stock, and other equity awards to officers, directors and other employees of the Company.

Stock Options

Options may be designated as "incentive stock options" under the Internal Revenue Code of 1986, or as nonqualified options. While the date after which options are first exercisable is determined by the appropriate committee of the Board of Directors of the Company or, in the case of options granted to directors, by the Board of Directors, no stock option may be exercised after ten years from the date of grant (twenty years in the case of nonqualified stock options). The exercise price of stock options granted pursuant to the plans must be no less than the fair market value of the Common Stock on the date of the grant.

The plans authorize an optionee to pay the exercise price of options in cash or in common shares of the Company or in some combination of cash and common shares. An optionee may tender already-owned common shares to the Company in exercise of an option. Certain of these plans authorize an optionee to surrender the value of an unexercised option in payment of an equivalent amount of the exercise price of the option. The Company typically issues authorized but unissued common shares upon the exercise of options.

The following table presents activity for stock options under the Company's equity incentive plan for 2013:

	Year Ended December 31, 2013
				Weighted		Weighted Average		Aggregate
	Number of			Average Price		Life of Options		Intrinsic
	Options			of Options		(in years)		Value
Outstanding at Beginning of Period		79,917		$	16.73
Granted		-			-
Exercised		(8,300	)		17.35
Forfeited		-			-
Expired		(2,100	)		18.19
Outstanding and Exercisable at End of Period		69,517		$	16.61		3.43	$	821

The following table presents information related to stock options under the Company's equity incentive plan during the years ended 2013, 2012 and 2011:

	2013		2012		2011
Intrinsic Value of Options Exercised	$	49	$	203	$	28
Cash Received from Option Exercises	$	-	$	-	$	-
Tax Benefit of Option Exercises	$	20	$	78	$	12
Weighted Average Fair Value of Options Granted	$	-	$	-	$	-

The intrinsic value for stock options is calculated based on the exercise price of the underlying awards and the market price of common stock as of the reporting date.

During 2013, 2012 and 2011, the Company granted no options, and accordingly, recorded no stock compensation expense related to option grants. The Company recorded no other stock compensation expense applicable to options during the years ended December 31, 2013, 2012 and 2011 because all outstanding options were fully vested prior to 2007. As of December 31, 2013 and 2012, there was no unrecognized option expense as all outstanding options were fully vested.

Restricted Stock

During the periods presented, awards of long-term incentives were granted in the form of restricted stock. Awards that were granted to management under a management incentive plan were granted in tandem with cash credit entitlements (typically in the form of 50% restricted stock grants and 50% cash credit entitlements). The management restricted stock grants and tandem cash credit entitlements awarded in 2013 will vest in three equal installments of 33.3% with the first annual vesting on December 5^th of the year of the grant and on December 5^th of the next two succeeding years. The management restricted stock grants and tandem cash credit entitlements awarded in 2012 were subject to forfeiture in the event that the recipient of the grant did not continue employment with the Company through December 5th of the year of grant, at which time they generally vest 100 percent. Awards that were granted to directors as additional retainer for their services in December 2012 do not include any cash credit entitlement. These director restricted stock grants are subject to forfeiture in the event that the recipient of the grant does not continue in service as a director of the Company through December 5th of the year after grant or do not satisfy certain meeting attendance requirements, at which time they generally vest 100 percent. For measuring compensation costs, restricted stock awards are valued based upon the market value of the common shares on the date of grant.

The following table presents expense recorded for restricted stock and cash entitlements as well as the related tax effect for the years ended 2013, 2012 and 2011:

	2013			2012			2011
Restricted Stock Expense	$	329		$	628		$	636
Cash Entitlement Expense		217			588			564
Tax Effect		(221	)		(493	)		(475	)
Net of Tax	$	325		$	723		$	725

Unrecognized expense associated with the restricted stock grants and cash entitlements totaled $942 and $101 as of December 31, 2013 and 2012. There was no unrecognized expense associated with the restricted stock grants as of December 31, 2011.

The following table presents information on restricted stock grants outstanding for the period shown:

	Year Ended
	December 31, 2013
				Weighted
	Restricted			Average Market
	Shares			Price at Grant
Outstanding at Beginning of Period		4,983		$	22.07
Granted		33,031			23.41
Issued and Vested		(14,620	)		22.57
Forfeited		(453	)		22.07
Outstanding at End of Period		22,941			23.68

Employee Stock Purchase Plan

The Company maintains an Employee Stock Purchase Plan whereby eligible employees have the option to purchase the Company's common stock at a discount. The purchase price of the shares under this Plan has been set at 95% of the fair market value of the Company's common stock as of the last day of the plan year. The plan provided for the purchase of up to 500,000 shares of common stock, which the Company may obtain by purchases on the open market or from private sources, or by issuing authorized but unissued common shares. Funding for the purchase of common stock is from employee and Company contributions.

The Employee Stock Purchase Plan is not considered compensatory. There was no expense recorded for the employee stock purchase plan in 2013, 2012, and 2011 nor was there any unrecognized compensation expense as of December 31, 2013 and 2012 for the Employee Stock Purchase Plan.

Stock Repurchase Plan

On April 26, 2001, the Company announced that its Board of Directors approved a stock repurchase program for up to 607,754 of the outstanding Common Shares of the Company. Shares may be purchased from time to time in the open market and in large block privately negotiated transactions. The Company is not obligated to purchase any shares under the program, and the program may be discontinued at any time before the maximum number of shares specified by the program are purchased. The Board of Directors established no expiration date for this program. As of December 31, 2013, the Company had purchased 334,965 shares under the program. No shares were purchased under the program during the years ended December 31, 2013 and 2012.

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Loans (Schedule of Aging of Recorded Investment in Loans) (Parenthetical) (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012
Loans [Abstract]
Accrued interest	$ 5,590	$ 5,522

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Business Combinations, Goodwill and Intangible Assets (Schedule of Consideration From Business Combinations) (Details) (United Commerce Bancorp [Member], USD $) In Thousands, unless otherwise specified	0 Months Ended
	Oct. 03, 2013
United Commerce Bancorp [Member]
Business Acquisition [Line Items]
Cash for Options and Fractional Shares	$ 643
Cash paid for United Commerce shares	1,391
Equity Instruments	13,348
Fair Value of Total Consideration Transferred	$ 15,382

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Shareholders' Equity (Schedule of Consolidated and Affiliate Bank Actual Capital and Minimum Required Levels) (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012
Consolidated Entities [Member]
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Actual Amount of Total Capital (to Risk Weighted Assets)	$ 201,233	$ 194,990
Actual Amount of Tier 1 Capital (to Risk Weighted Assets)	186,649	158,198
Actual Amount of Tier 1 Capital (to Average Assets)	186,649	158,198
Actual Ratio of Total Capital (to Risk Weighted Assets)	13.07%	13.70%
Actual Ratio of Tier 1 Capital (to Risk Weighted Assets)	12.12%	11.12%
Actual Ratio of Tier 1 Capital (to Average Assets)	8.78%	8.18%
Minimum Required For Capital Adequacy Purposes: Amount, Total Capital	123,189	113,859
Minimum Required For Capital Adequacy Purposes: Amount, Tier 1 Capital (to Risk Weighted Assets)	61,594	56,930
Minimum Required For Capital Adequacy Purposes: Amount, Tier 1 Capital (to Average Assets)	85,005	77,317
Minimum Required For Capital Adequacy Purposes: Ratio, Total Capital (to Risk Weighted Assets)	8.00%	8.00%
Minimum Required For Capital Adequacy Purposes: Ratio, Tier 1 Capital (to Risk Weighted Assets)	4.00%	4.00%
Minimum Required For Capital Adequacy Purposes: Ratio, Tier 1 Capital (to Average Assets)	4.00%	4.00%
Minimum RequiredTo Be Well- Capitalized Under Prompt Corrective Action Regulations: Amount, Total Capital (to Risk Weighted Assets)
Minimum RequiredTo Be Well- Capitalized Under Prompt Corrective Action Regulations: Amount, Tier 1 Capital (to Risk Weighted Assets)
Minimum RequiredTo Be Well- Capitalized Under Prompt Corrective Action Regulations: Amount, Tier 1 Capital (to Average Assets)
Minimum Required To Be Well- Capitalized Under Prompt Corrective Action Regulations: Ratio, Total Capital (to Risk Weighted Assets)
Minimum Required To Be Well- Capitalized Under Prompt Corrective Action Regulations: Ratio, Tier 1 Capital (to Risk Weighted Assets)
Minimum Required To Be Well- Capitalized Under Prompt Corrective Action Regulations: Ratio, Tier 1 Capital (to Average Assets)
Bank [Member]
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Actual Amount of Total Capital (to Risk Weighted Assets)	191,714	167,904
Actual Amount of Tier 1 Capital (to Risk Weighted Assets)	177,130	152,384
Actual Amount of Tier 1 Capital (to Average Assets)	177,130	152,384
Actual Ratio of Total Capital (to Risk Weighted Assets)	12.46%	11.83%
Actual Ratio of Tier 1 Capital (to Risk Weighted Assets)	11.51%	10.74%
Actual Ratio of Tier 1 Capital (to Average Assets)	8.37%	7.91%
Minimum Required For Capital Adequacy Purposes: Amount, Total Capital	123,099	113,523
Minimum Required For Capital Adequacy Purposes: Amount, Tier 1 Capital (to Risk Weighted Assets)	61,550	56,762
Minimum Required For Capital Adequacy Purposes: Amount, Tier 1 Capital (to Average Assets)	84,686	77,025
Minimum Required For Capital Adequacy Purposes: Ratio, Total Capital (to Risk Weighted Assets)	8.00%	8.00%
Minimum Required For Capital Adequacy Purposes: Ratio, Tier 1 Capital (to Risk Weighted Assets)	4.00%	4.00%
Minimum Required For Capital Adequacy Purposes: Ratio, Tier 1 Capital (to Average Assets)	4.00%	4.00%
Minimum RequiredTo Be Well- Capitalized Under Prompt Corrective Action Regulations: Amount, Total Capital (to Risk Weighted Assets)	153,874	141,904
Minimum RequiredTo Be Well- Capitalized Under Prompt Corrective Action Regulations: Amount, Tier 1 Capital (to Risk Weighted Assets)	92,324	85,142
Minimum RequiredTo Be Well- Capitalized Under Prompt Corrective Action Regulations: Amount, Tier 1 Capital (to Average Assets)	$ 105,857	$ 96,281
Minimum Required To Be Well- Capitalized Under Prompt Corrective Action Regulations: Ratio, Total Capital (to Risk Weighted Assets)	10.00%	10.00%
Minimum Required To Be Well- Capitalized Under Prompt Corrective Action Regulations: Ratio, Tier 1 Capital (to Risk Weighted Assets)	6.00%	6.00%
Minimum Required To Be Well- Capitalized Under Prompt Corrective Action Regulations: Ratio, Tier 1 Capital (to Average Assets)	5.00%	5.00%

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Loans (Schedule of Loans Modified as Troubled Debt Restructurings) (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Financing Receivable, Modifications [Line Items]
Number of Loans	2	2	10
Pre-Modification Outstanding Recorded Investment	$ 305	$ 9	$ 11,640
Post-Modification Outstanding Recorded Investment	348	9	11,349
Commercial and Industrial Loans and Leases [Member]
Financing Receivable, Modifications [Line Items]
Number of Loans	1	2	4
Pre-Modification Outstanding Recorded Investment	224	9	4,541
Post-Modification Outstanding Recorded Investment	230	9	4,499
Commercial Real Estate Loans [Member]
Financing Receivable, Modifications [Line Items]
Number of Loans	1		6
Pre-Modification Outstanding Recorded Investment	81		7,099
Post-Modification Outstanding Recorded Investment	$ 118		$ 6,850

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Income Taxes (Schedule of Effective Income Tax Rate Reconciliation) (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Income Taxes [Abstract]
Statutory Rate Times Pre-tax Income	$ 12,907	$ 12,153	$ 9,791
Add (Subtract) the Tax Effect of:
Income from Tax-exempt Loans and Investments	(1,157)	(1,007)	(780)
State Income Tax, Net of Federal Tax Effect	826	494	99
General Business Tax Credits	(556)	(547)	(370)
Company Owned Life Insurance	(338)	(341)	(385)
Gain on United Commerce Bancorp Stock	(120)
Gain on American Community Bancorp, Inc, Stock			(366)
Other Differences	(98)	(83)	(263)
Total Income Taxes	$ 11,464	$ 10,669	$ 7,726

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Loans (Schedule of Aging of Recorded Investment in Loans) (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013		Dec. 31, 2012
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Ending Loans Balance	$ 1,390,802	[1]	$ 1,213,423	[2]
30-59 Days Past Due	3,589	[1]	4,508	[2]
60-89 Days Past Due	431	[1]	713	[2]
90 Days or More Past Due	3,565	[1]	2,964	[2]
Total Past Due	7,585	[1]	8,185	[2]
Loans Not Past Due	1,383,217	[1]	1,205,238	[2]
Commercial and Industrial Loans and Leases [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Ending Loans Balance	351,903	[1]	336,307	[2]
30-59 Days Past Due	256		436
60-89 Days Past Due	78		133
90 Days or More Past Due			448
Total Past Due	334		1,017
Loans Not Past Due	351,569		335,290
Commercial Real Estate Loans [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Ending Loans Balance	583,604	[1]	489,796	[2]
30-59 Days Past Due	613		1,352
60-89 Days Past Due	62
90 Days or More Past Due	2,234		2,063
Total Past Due	2,909		3,415
Loans Not Past Due	580,695		486,381
Agricultural Loans [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Ending Loans Balance	195,171	[1]	182,575	[2]
30-59 Days Past Due	62		42
60-89 Days Past Due			14
90 Days or More Past Due
Total Past Due	62		56
Loans Not Past Due	195,109		182,519
Home Equity Loans [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Ending Loans Balance	81,812	[1]	74,699	[2]
30-59 Days Past Due	303		177
60-89 Days Past Due	33		48
90 Days or More Past Due	114		178
Total Past Due	450		403
Loans Not Past Due	81,362		74,296
Consumer Loans [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Ending Loans Balance	49,265	[1]	41,231	[2]
30-59 Days Past Due	149		431
60-89 Days Past Due	66		23
90 Days or More Past Due	102		18
Total Past Due	317		472
Loans Not Past Due	48,948		40,759
Residential Mortgage Loans [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Ending Loans Balance	129,047	[1]	88,815	[2]
30-59 Days Past Due	2,206		2,070
60-89 Days Past Due	192		495
90 Days or More Past Due	1,115		257
Total Past Due	3,513		2,822
Loans Not Past Due	125,534		85,993
Loans Acquired With Deteriorated Credit Quality [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Ending Loans Balance	14,753		11,174
30-59 Days Past Due	148
60-89 Days Past Due			120
90 Days or More Past Due	1,103
Total Past Due	1,251		120
Loans Not Past Due	$ 13,502		$ 11,054

[1] Total recorded investment in loans includes $5,590 in accrued interest.

[2] Total recorded investment in loans includes $5,522 in accrued interest.

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Employee Benefit Plans (Components of Net Periodic Benefit Cost Recognized in Other Comprehensive Income) (Details) (Defined Benefit Pension Plan [Member], USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Defined Benefit Pension Plan [Member]
Defined Benefit Plan, Net Periodic Benefit Cost [Abstract]
Interest Cost	$ 25	$ 27	$ 32
Expected Return on Assets	(1)	(1)	(2)
Amortization of Prior Service Cost	1	1	1
Recognition of Net Loss	46	30	31
Net Periodic Benefit Cost	71	57	62
Total Recognized in Other Comprehensive Income
Net Loss (Gain) During the Period	(19)	110	24
Amortization of Unrecognized Loss	(341)	(30)	(30)
Amortization of Prior Service Cost	(13)	(1)	(1)
Total Recognized in Net Postretirement Benefit Expense and Other Comprehensive Income	(373)	79	(7)
Total Recognized in Net Periodic Benefit Cost and Other Comprehensive Income	$ (302)	$ 136	$ 55

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FHLB Advances and Other Borrowings (Tables)

12 Months Ended

Dec. 31, 2013

FHLB Advances and Other Borrowings [Abstract]

Schedule of Borrowings, Debt and Repurchase Agreements

Information regarding each of these types of borrowings or other indebtedness is as follows:

	December 31,
	2013		2012
Long-term Advances from Federal Home Loan Bank collateralized by qualifying mortgages, investment securities, and mortgage-backed securities	$	71,483	$	51,526
Term Loans		7,000		1,500
Junior Subordinated Debentures assumed from American Community Bancorp, Inc.		5,024		4,874
Subordinated Debentures		-		29,250
Capital Lease Obligation		3,730		2,322
Long-term Borrowings		87,237		89,472
Overnight Variable Rate Advances from Federal Home Loan Bank collateralized by qualifying mortgages, investment securities, and mortgage-backed securities	$	38,000	$	48,500
Federal Funds Purchased		-		5,400
Repurchase Agreements		15,533		17,634
Short-term Borrowings		53,533		71,534
Total Borrowings	$	140,770	$	161,006

Schedule of Repurchase Agreements

	2013			2012
Average Daily Balance During the Year	$	14,772		$	19,813
Average Interest Rate During the Year		0.20	%		0.23	%
Maximum Month-end Balance During the Year	$	17,722		$	24,220
Weighted Average Interest Rate at Year-end		0.20	%		0.20	%

Schedule of Principal Payments on Long-Term Borrowings

At December 31, 2013, scheduled principal payments on long-term borrowings, excluding the capitalized lease obligation and acquired subordinated debentures (which are discussed below) are as follows:

2014	$	43,039
2015		24,042
2016		45
2017		749
2018		10,027
Thereafter		581
Total	$	78,483

Schedule of Issuance of Subordinated Debentures

The following table summarizes the terms of each issuance:

Carrying

Date of

Issuance

Amount at

Rate as of

Rate as of

Maturity

Issuance

Amount

December 31, 2013

Variable Rate

December 31, 2013

December 31, 2012

Date

ACB Trust I

5/6/2005

$

5,155

$

3,186

90 day LIBOR + 2.15%

2.40

%

2.46

%

May 2035

ACB Trust II

7/15/2005

3,093

1,838

90 day LIBOR + 1.85%

2.09

%

2.16

%

July 2035

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Securities (Schedule of Proceeds from the Sales of Securities) (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Available-for-Sale
Proceeds from Sales	$ 162,344	$ 92,344	$ 20,061
Gross Gains on Sales	2,086	1,667	2,089
Income Tax Gross Gains	$ 730	$ 583	$ 721

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Commitments and Off-balance Sheet Items

12 Months Ended

Dec. 31, 2013

Commitments and Off-balance Sheet Items [Abstract]

Commitments and Off-balance Sheet Items

NOTE 13 - Commitments and Off-balance Sheet Items

In the normal course of business, there are various commitments and contingent liabilities, such as commitments to extend credit and commitments to sell loans, which are not reflected in the accompanying consolidated financial statements. The Company's exposure to credit loss in the event of nonperformance by the other party to the financial instruments for commitments to make loans and standby letters of credit is represented by the contractual amount of those instruments. The Company uses the same credit policy to make commitments as it uses for on-balance sheet items.

The Company's exposure to credit risk for commitments to sell loans is dependent upon the ability of the counter-party to purchase the loans. This is generally assured by the use of government sponsored entity counterparts. These commitments are subject to market risk resulting from fluctuations in interest rates. Commitments to sell loans are not mandatory (i.e., do not require net settlement with the counter-party to cancel the commitment).

Commitments and contingent liabilities are summarized as follows, at December 31:

	2013				2012
	Fixed		Variable		Fixed		Variable
	Rate		Rate		Rate		Rate
Commitments to Fund Loans:
Consumer Lines	$	8,940	$	145,064	$	6,013	$	137,668
Commercial Operating Lines		23,717		199,231		13,444		187,829
Residential Mortgages		11,249		930		33,004		676
Total Commitments to Fund Loans	$	43,906	$	345,225	$	52,461	$	326,173
Commitments to Sell Loans	$	20,672		$-	$	52,511		$-
Standby Letters of Credit	$	1,515	$	5,262	$	1,408	$	4,279

The fixed rate commitments to fund loans have interest rates ranging from 2.15% to 18.00% and maturities ranging from less than 1 year to 32 years. Since many commitments to make loans expire without being used, these amounts do not necessarily represent future cash commitments. Collateral obtained upon exercise of the commitment is determined using management's credit evaluation of the borrower, and may include accounts receivable, inventory, property, land, and other items.

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Fair Value (Narrative) (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013		Dec. 31, 2012
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities	$ 606,032		$ 587,602
Investment securities held by the company	606,032		587,602
Loan held for sale, at fair value	9,265		16,641
Contractual principal balance of Loan held for sale	9,129		16,413
Difference in amount of loan held for sale	136		228
Impaired loans, carrying amount	4,473	[1]	8,506	[1]
Valuation allowance for loans losses	3,103		5,411
Other real estate, carrying value	20		150
Cost of Real Estate Sales	321		100
Other changes in fair value	(332)		155
Impaired Loans with Specific Allocations [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Impaired loans, carrying amount	4,449	[1]	8,274	[1]
Valuation allowance for loans losses	3,103		5,411
Provision for Loan Losses	1,024		2,230
Fair Value, Measurements, Recurring [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities	606,032		587,602
Fair Value, Measurements, Recurring [Member] | Obligations of State and Political Subdivisions [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities	113,497		76,485
Fair Value, Measurements, Recurring [Member] | Equity Securities [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities	353		733
Fair Value, Measurements, Recurring [Member] | Significant Unobservable Inputs (Level 3) [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities	11,185		12,522
Fair Value, Measurements, Recurring [Member] | Significant Unobservable Inputs (Level 3) [Member] | Obligations of State and Political Subdivisions [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities	10,832		12,169
Fair Value, Measurements, Recurring [Member] | Significant Unobservable Inputs (Level 3) [Member] | Equity Securities [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities	$ 353		$ 353

[1] Unpaid Principal Balance is the remaining contractual payments inclusive of partial charge-offs.

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Other Comprehensive Income (Loss)

12 Months Ended

Dec. 31, 2013

Other Comprehensive Income (Loss) [Abstract]

Other Comprehensive Income (Loss)

NOTE 18 - Other Comprehensive Income (Loss)

The table below summarizes the changes in accumulated other comprehensive income (loss) by component for the year ending December 31, 2013, net of tax:

	Unrealized
	Gains and			Defined
	Losses on			Benefit
	Available-for-			Pension			Postretirement
	Sale Securities			Items			Benefit Items			Total
Beginning Balance	$	10,643		$	(231	)	$	(61	)	$	10,351
Other Comprehensive Income (Loss) Before
Reclassification		(14,295	)		453			51			(13,791	)
Amounts Reclassified from Accumulated
Other Comprehensive Income		(1,579	)		(222	)		(22	)		(1,823	)
Net Current Period Other
Comprehensive Income (Loss)		(15,874	)		231			29			(15,614	)
Ending Balance	$	(5,231	)	$	-		$	(32	)	$	(5,263	)

The table below summarizes the classifications out of accumulated other comprehensive income (loss) by component for the year ending December 31, 2013:

	Amount Reclassified From
Details about Accumulated Other	Accumulated Other			Affected Line Item in the Statement
Comprehensive Income (Loss) Components	Comprehensive Income (Loss)			Where Net Income is Presented
Unrealized Gains and Losses on
Available-for-Sale Securities	$	(2,429	)	Net (Gain) Loss on Securities
		850		Income Tax Expense
		(1,579	)	Net of Tax
Amortization of Defined Benefit Pension Items
Prior Service Costs	$	(13	)	Salaries and Employee Benefits
Actuarial Gains (Losses)		(360	)	Salaries and Employee Benefits
		151		Income Tax Expense
		(222	)	Net of Tax
Amortization of Post Retirement Plan Items
Actuarial Gains (Losses)	$	(37	)	Salaries and Employee Benefits
		15		Income Tax Expense
		(22	)	Net of Tax
Total Reclassifications for the Period	$	(1,823	)

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Employee Benefit Plans (Schedule of Changes in Accumulated Postretirement Benefits Obligations) (Details) (Postretirement Medical and Life Benefit Plan [Member], USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Postretirement Medical and Life Benefit Plan [Member]
Defined Benefit Plan Disclosure [Line Items]
Service Cost	$ 40	$ 35	$ 28
Interest Cost	23	24	25
Amortization of Unrecognized Net (Gain) Loss	4
Net Periodic Benefit Cost	67	59	53
Net Gain (Loss) During Period Recognized in Other Comprehensive Income	(37)	42	57
Total Recognized in Net Postretirement Benefit Expense and Other Comprehensive Income	$ 30	$ 101	$ 110

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Securities (Schedule of Securities Held-to-Maturity) (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012
Schedule of Held-to-maturity Securities [Line Items]
Carrying Amount	$ 268	$ 346
Fair value	271	351
Obligations of State and Political Subdivisions [Member]
Schedule of Held-to-maturity Securities [Line Items]
Carrying Amount	268	346
Unrecognized Gains	3	5
Unrecognized Loss
Fair value	$ 271	$ 351

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Per Share Data (Computations of Basic Earnings Per Share and Diluted Earnings Per Share) (Details) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended								12 Months Ended
	Dec. 31, 2013	Sep. 30, 2013	Jun. 30, 2013	Mar. 31, 2013	Dec. 31, 2012	Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Basic Earnings per Share:
Net Income	$ 6,589	$ 6,483	$ 6,532	$ 5,809	$ 6,194	$ 6,292	$ 5,967	$ 5,602	$ 25,413	$ 24,055	$ 20,249
Weighted Average Shares Outstanding									12,786,065	12,622,049	12,581,646
Basic Earnings per Share	$ 0.50	$ 0.51	$ 0.52	$ 0.46	$ 0.49	$ 0.50	$ 0.47	$ 0.44	$ 1.99	$ 1.91	$ 1.61
Diluted Earnings per Share:
Net Income	$ 6,589	$ 6,483	$ 6,532	$ 5,809	$ 6,194	$ 6,292	$ 5,967	$ 5,602	$ 25,413	$ 24,055	$ 20,249
Weighted Average Shares Outstanding									12,786,065	12,622,049	12,581,646
Stock Options, Net									21,613	15,694	6,102
Diluted Weighted Average Shares Outstanding									12,807,678	12,637,743	12,587,748
Diluted Earnings per Share	$ 0.50	$ 0.51	$ 0.52	$ 0.46	$ 0.49	$ 0.50	$ 0.47	$ 0.44	$ 1.98	$ 1.90	$ 1.61

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Fair Value (Tables)

12 Months Ended

Dec. 31, 2013

Fair Value [Abstract]

Schedule of Assets and Liabilities Measured at Fair Value on Recurring Basis

Assets and liabilities measured at fair value on a recurring basis, including financial assets and liabilities for which the Company has elected the fair value option, are summarized below:

	Fair Value Measurements at December 31, 2013 Using
	Quoted Prices in
	Active Markets for		Significant Other		Significant
	Identical Assets		Observable Inputs		Unobservable Inputs
	(Level 1)		(Level 2)		(Level 3)		Total
Assets:
U.S. Treasury and Agency Securities	$	-	$	18,952	$	-	$	18,952
Corporate Securities		-		-		-		-
Obligations of State and Political Subdivisions		-		102,665		10,832		113,497
Mortgage-backed Securities-Residential		-		473,230		-		473,230
Equity Securities		-		-		353		353
Total Securities	$	-	$	594,847	$	11,185	$	606,032
Loans Held-for-Sale	$	-	$	9,265	$	-	$	9,265
Derivative Assets	$	-	$	866	$	-	$	866
Derivative Liabilities	$	-	$	737	$	-	$	737

	Fair Value Measurements at December 31, 2012 Using
	Quoted Prices in
	Active Markets for		Significant Other		Significant
	Identical Assets		Observable Inputs		Unobservable Inputs
	(Level 1)		(Level 2)		(Level 3)		Total
Assets:
U.S. Treasury and Agency Securities	$	-	$	23,472	$	-	$	23,472
Corporate Securities		-		-		-		-
Obligations of State and Political Subdivisions		-		64,316		12,169		76,485
Mortgage-backed Securities-Residential		-		486,912		-		486,912
Equity Securities		380		-		353		733
Total Securities	$	380	$	574,700	$	12,522	$	587,602
Loans Held-for-Sale	$	-	$	16,641	$	-	$	16,641
Derivative Assets	$	-	$	187	$	-	$	187
Derivative Liabilities	$	-	$	178	$	-	$	178

Reconciliation of all Assets Measured at Fair Value on Recurring Basis, Using Significant Unobservable Inputs (Level 3)

The table below presents a reconciliation of all assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the year ended December 31, 2013 and 2012:

	Obligations of State
	and Political
	Subdivisions					Equity Securities				Corporate Securities
	2013			2012		2013		2012		2013		2012
Beginning Balance of Recurring Level 3 Assets at January 1	$	12,169		$	4,075	$	353	$	353	$	-	$	1,005
Total Gains or Losses (realized/unrealized) Included in earnings		(332	)		156		-		-		-		-
Maturities / Calls		(1,005	)		-		-		-		-		(1,005	)
Purchases		-			7,938		-		-		-		-
Ending Balance of Recurring Level 3 Assets at December 31	$	10,832		$	12,169	$	353	$	353	$	-	$	-

Schedule of Assets and Liabilities Measured at Fair Value on Non-Recurring Basis

Assets and liabilities measured at fair value on a non-recurring basis are summarized below:

	Fair Value Measurements at December 31, 2013 Using
	Quoted Prices in
	Active Markets for		Significant Other		Significant
	Identical Assets		Observable Inputs		Unobservable Inputs
	(Level 1)		(Level 2)		(Level 3)		Total
Assets:
Impaired Loans with Specific Allocations
Commercial and Industrial Loans	$	-	$	-	$	-	$	-
Commercial Real Estate Loans		-		-		1,346		1,346
Agricultural Loans		-		-		-		-
Other Real Estate
Commercial Real Estate		-		-		20		20

	Fair Value Measurements at December 31, 2012 Using
	Quoted Prices in
	Active Markets for		Significant Other		Significant
	Identical Assets		Observable Inputs		Unobservable Inputs
	(Level 1)		(Level 2)		(Level 3)		Total
Assets:
Impaired Loans with Specific Allocations
Commercial and Industrial Loans	$	-	$	-	$	1,231	$	1,231
Commercial Real Estate Loans		-		-		1,497		1,497
Agricultural Loans		-		-		135		135
Other Real Estate
Commercial Real Estate		-		-		150		150

Fair Value Assets and Liabilities Measured on Nonrecurring Basis Valuation Techniques

The following table presents quantitative information about Level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis at December 31, 2013 and 2012:

					Range
			Valuation		(Weighted
December 31, 2013	Fair Value		Technique(s)	Unobservable Input(s)	Average)
Impaired Loans - Commercial Real Estate Loans	$	1,346	Sales comparison approach Income approach Cost approach	Adjustment for physical condition of comparable properties sold Adjustment for net operating income generated by the property Adjustment for investor rates of return	12%-80% (53%)
Other Real Estate - Commercial Real Estate Loans	$	20	Sales comparison approach Income approach Cost approach	Adjustment for physical condition of comparable properties sold Adjustment for net operating income generated by the property Adjustment for investor rates of return	50% (50%)

					Range
			Valuation		(Weighted
December 31, 2012	Fair Value		Technique(s)	Unobservable Input(s)	Average)
Impaired Loans - Commercial and Industrial Loans	$	1,231	Sales comparison approach	Adjustment for differences between the comparable sales	4%-68% (8%)
Impaired Loans - Commercial Real Estate Loans	$	1,497	Sales comparison approach Income approach Cost approach	Adjustment for physical condition of comparable properties sold Adjustment for net operating income generated by the property Adjustment for investor rates of return	15%-78% (48%)
Impaired Loans - Agricultural Loans	$	135	Sales comparison approach Income approach	Adjustment for physical condition of comparable properties sold Adjustment for net operating income generated by the property	76% (76%)
Other Real Estate - Commercial Real Estate Loans	$	150	Sales comparison approach Income approach Cost approach	Adjustment for physical condition of comparable properties sold Adjustment for net operating income generated by the property Adjustment for investor rates of return	70% (70%)

Schedule of Carrying Amounts and Estimated Fair Values of Company's Financial Instruments

				Fair Value Measurements at
				December 31, 2013 Using
	Carrying Value			Level 1			Level 2			Level 3			Total
Financial Assets:
Cash and Short-term Investments	$	60,232		$	37,370		$	22,862		$	-		$	60,232
Securities Held-to-Maturity		268			-			271			-			271
FHLB Stock and Other Restricted Stock		9,004			N/A			N/A			N/A			N/A
Loans, Net		1,366,452			-			-			1,370,339			1,370,339
Accrued Interest Receivable		7,470			-			1,918			5,552			7,470
Financial Liabilities:
Demand, Savings, and Money Market Deposits		(1,463,122	)		(1,463,122	)		-			-			(1,463,122	)
Time Deposits		(349,034	)		-			(351,707	)		-			(351,707	)
Short-term Borrowings		(53,533	)		-			(53,533	)		-			(53,533	)
Long-term Debt		(87,237	)		-			(83,329	)		(5,311	)		(88,640	)
Accrued Interest Payable		(777	)		-			(732	)		(45	)		(777	)
Unrecognized Financial Instruments:
Commitments to Extend Credit		-			-			-			-			-
Standby Letters of Credit		-			-			-			-			-
Commitments to Sell Loans		-			-			-			-			-

				Fair Value Measurements at
				December 31, 2012 Using
	Carrying Value			Level 1			Level 2			Level 3			Total
Financial Assets:
Cash and Short-term Investments	$	51,794		$	41,624		$	10,170		$	-		$	51,794
Securities Held-to-Maturity		346			-			351			-			351
FHLB Stock and Other Restricted Stock		8,340			N/A			N/A			N/A			N/A
Loans, Net		1,186,483			-			-			1,199,566			1,199,566
Accrued Interest Receivable		7,419			-			1,893			5,526			7,419
Financial Liabilities:
Demand, Savings, and Money Market Deposits		(1,311,748	)		(1,311,748	)		-			-			(1,311,748	)
Time Deposits		(329,183	)		-			(333,170	)		-			(333,170	)
Short-term Borrowings		(71,534	)		-			(71,534	)		-			(71,534	)
Long-term Debt		(89,472	)		-			(66,892	)		(28,872	)		(95,764	)
Accrued Interest Payable		(1,275	)		-			(829	)		(446	)		(1,275	)
Unrecognized Financial Instruments:
Commitments to Extend Credit		-			-			-			-			-
Standby Letters of Credit		-			-			-			-			-
Commitments to Sell Loans		-			-			-			-			-

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Lease Commitments (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Operating Leases, Future Minimum Payments Due, Fiscal Year Maturity [Abstract]
2014	$ 608
2015	511
2016	446
2017	259
2018	154
Thereafter	1,508
Total	3,486
Operating Leases, Rent Expense, Net	$ 558	$ 486	$ 413

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Consolidated Statements of Comprehensive Income (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Net Income	$ 25,413	$ 24,055	$ 20,249
Unrealized Gains (Losses) on Securities
Unrealized Holding Gain (Loss) Arising During the Period	(22,169)	1,495	11,830
Reclassification Adjustment for Losses (Gains) Included in Net Income	(2,429)	(1,667)	(3,024)
Tax Effect	8,724	48	(3,129)
Net of Tax	(15,874)	(124)	5,677
Defined Benefit Pension Plans and Postretirement Benefit Obligation
Total Other Comprehensive Income (Loss)	(15,614)	(192)	5,643
COMPREHENSIVE INCOME	9,799	23,863	25,892
Defined Benefit Pension Plan [Member]
Defined Benefit Pension Plans and Postretirement Benefit Obligation
Net (Loss) Gain Arising During the Period	749	(155)	14
Reclassification Adjustment for Amortization of Prior Service Cost and Net (Gain) Loss Included in Net Periodic Pension Cost	(373)	78	(7)
Tax Effect	(145)	30	(3)
Net of Tax	231	(47)	4
Postretirement Benefit Obligation
Defined Benefit Pension Plans and Postretirement Benefit Obligation
Net (Loss) Gain Arising During the Period	80	(79)	(122)
Reclassification Adjustment for Amortization of Prior Service Cost and Net (Gain) Loss Included in Net Periodic Pension Cost	(37)	42	57
Tax Effect	(14)	16	27
Net of Tax	$ 29	$ (21)	$ (38)

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Shareholders' Equity (Schedule of Restricted Stock And Cash Entitlements Expense) (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Shareholders' Equity [Abstract]
Restricted Stock Expense	$ 329	$ 628	$ 636
Cash Entitlement Expense	217	588	564
Tax Effect	(221)	(493)	(475)
Net of Tax	$ 325	$ 723	$ 725

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Securities

12 Months Ended

Dec. 31, 2013

Securities [Abstract]

Securities

NOTE 2 - Securities

The amortized cost, unrealized gross gains and losses recognized in accumulated other comprehensive income (loss), and fair value of Securities Available-for-Sale were as follows:

			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
Securities Available-for-Sale:	Cost		Gains		Losses			Value
2013
U.S. Treasury and Agency Securities	$	20,000	$	-	$	(1,048	)	$	18,952
Obligations of State and Political Subdivisions		112,008		2,388		(899	)		113,497
Mortgage-backed Securities - Residential		481,724		3,497		(11,991	)		473,230
Equity Securities		353		-		-			353
Total	$	614,085	$	5,885	$	(13,938	)	$	606,032
2012
U.S. Treasury and Agency Securities	$	23,570	$	40	$	(138	)	$	23,472
Obligations of State and Political Subdivisions		71,352		5,145		(12	)		76,485
Mortgage-backed Securities - Residential		475,452		11,505		(45	)		486,912
Equity Securities		684		49		-			733
Total	$	571,058	$	16,739	$	(195	)	$	587,602

The carrying amount, unrecognized gains and losses and fair value of Securities Held-to-Maturity were as follows:

			Gross		Gross
	Carrying		Unrecognized		Unrecognized		Fair
Securities Held-to-Maturity:	Amount		Gains		Losses		Value
2013
Obligations of State and Political Subdivisions	$	268	$	3	$	-	$	271
2012
Obligations of State and Political Subdivisions	$	346	$	5	$	-	$	351

The amortized cost and fair value of Securities at December 31, 2013 by contractual maturity are shown below. Expected maturities may differ from contractual maturities because some issuers have the right to call or prepay certain obligations with or without call or prepayment penalties. Mortgage-backed and Equity Securities are not due at a single maturity date and are shown separately.

	Amortized		Fair
	Cost		Value
Securities Available-for-Sale:
Due in one year or less	$	2,935	$	2,996
Due after one year through five years		9,890		10,038
Due after five years through ten years		69,906		69,802
Due after ten years		49,277		49,613
Mortgage-backed Securities - Residential		481,724		473,230
Equity Securities		353		353
Total	$	614,085	$	606,032

	Carrying		Fair
	Amount		Value
Securities Held-to-Maturity:
Due in one year or less	$	-	$	-
Due after one year through five years		268		271
Due after five years through ten years		-		-
Due after ten years		-		-
Total	$	268	$	271

Proceeds from the Sales of Securities are summarized below:

	2013		2012		2011
	Available-		Available-		Available-
	for-Sale		for-Sale		for-Sale
Proceeds from Sales	$	162,344	$	92,344	$	20,061
Gross Gains on Sales		2,086		1,667		2,089
Income Taxes on Gross Gains		730		583		721

The Company held a minority interest in United Commerce Bancorp prior to the acquisition on October 1, 2013. For the year ended December 31, 2013, the Company recognized a gain of $343 on the stock held of United Commerce Bancorp as a result of the acquisition.

The Company held a minority interest in American Community Bancorp, Inc. prior to the acquisition on January 1, 2011. For the year ended December 31, 2011, the Company recognized a gain of $1.045 million on the stock held of American Community Bancorp, Inc. as a result of the acquisition.

The carrying value of securities pledged to secure repurchase agreements, public and trust deposits, and for other purposes as required by law was $141,240 and $61,744 as of December 31, 2013 and 2012, respectively.

Below is a summary of securities with unrealized losses as of year-end 2013 and 2012, presented by length of time the securities have been in a continuous unrealized loss position:

	Less than 12 Months					12 Months or More					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	Value		Loss			Value		Loss			Value		Loss
At December 31, 2013
U.S. Treasury and Agency Securities	$	18,952	$	(1,048	)	$	-	$	-		$	18,952	$	(1,048	)
Obligations of State and Political Subdivisions		38,878		(899	)		-		-			38,878		(899	)
Mortgage-backed Securities - Residential		346,028		(11,903	)		1,735		(88	)		347,763		(11,991	)
Equity Securities		-		-			-		-			-		-
Total	$	403,858	$	(13,850	)	$	1,735	$	(88	)	$	405,593	$	(13,938	)

	Less than 12 Months					12 Months or More				Total
	Fair		Unrealized			Fair		Unrealized		Fair		Unrealized
	Value		Loss			Value		Loss		Value		Loss
At December 31, 2012
U.S. Treasury and Agency Securities	$	19,862	$	(138	)	$	-	$	-	$	19,862	$	(138	)
Obligations of State and Political Subdivisions		1,042		(12	)		-		-		1,042		(12	)
Mortgage-backed Securities - Residential		18,323		(45	)		-		-		18,323		(45	)
Equity Securities		-		-			-		-		-		-
Total	$	39,227	$	(195	)	$	-	$	-	$	39,227	$	(195	)

Securities are written down to fair value when a decline in fair value is not considered temporary. In estimating other-than-temporary losses, management considers many factors, including: (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, (3) whether the market decline was affected by macroeconomic conditions, and (4) whether the Company has the intent to sell the debt security or more likely than not will be required to sell the debt security before its anticipated recovery. The Company doesn't intend to sell or expect to be required to sell these securities, and the decline in fair value is largely due to changes in market interest rates, therefore, the Company does not consider these securities to be other-than-temporarily impaired. All mortgage-backed securities in the Company's portfolio are guaranteed by government sponsored entities, are investment grade, and are performing as expected.

The Company's equity securities consist of non-controlling investments in other banking organizations. When a decline in fair value below cost is deemed to be other-than-temporary, the unrealized loss must be recognized as a charge to earnings. At December 31, 2013 and 2012, none of the Company's equity securities had an unrealized loss.

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Loans (Schedule of Allowance for Loan Losses) (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Financing Receivable Allowance For Credit Losses [Line Items]
Beginning Balance	$ 15,520	$ 15,312	$ 13,317
Provision for Loan Losses	350	2,412	6,800
Recoveries	386	326	384
Loans Charged-off	(1,672)	(2,530)	(5,189)
Ending Balance	14,584	15,520	15,312
Commercial and Industrial Loans and Leases [Member]
Financing Receivable Allowance For Credit Losses [Line Items]
Beginning Balance	4,555	3,493	3,713
Provision for Loan Losses	(197)	1,150	1,195
Recoveries	128	74	98
Loans Charged-off	(503)	(162)	(1,513)
Ending Balance	3,983	4,555	3,493
Commercial Real Estate Loans [Member]
Financing Receivable Allowance For Credit Losses [Line Items]
Beginning Balance	8,931	9,297	7,497
Provision for Loan Losses	(160)	1,326	4,265
Recoveries	102	97	139
Loans Charged-off	(538)	(1,789)	(2,604)
Ending Balance	8,335	8,931	9,297
Agricultural Loans [Member]
Financing Receivable Allowance For Credit Losses [Line Items]
Beginning Balance	989	926	750
Provision for Loan Losses	(43)	63	176
Recoveries
Loans Charged-off
Ending Balance	946	989	926
Home Equity Loans [Member]
Financing Receivable Allowance For Credit Losses [Line Items]
Beginning Balance	141	258	220
Provision for Loan Losses	419	(32)	287
Recoveries		2	6
Loans Charged-off	(321)	(87)	(255)
Ending Balance	239	141	258
Consumer Loans [Member]
Financing Receivable Allowance For Credit Losses [Line Items]
Beginning Balance	214	190	362
Provision for Loan Losses	112	194	23
Recoveries	148	123	125
Loans Charged-off	(286)	(293)	(320)
Ending Balance	188	214	190
Residential Mortgage Loans [Member]
Financing Receivable Allowance For Credit Losses [Line Items]
Beginning Balance	186	402	543
Provision for Loan Losses	111	(47)	340
Recoveries	8	30	16
Loans Charged-off	(24)	(199)	(497)
Ending Balance	281	186	402
Unallocated [Member]
Financing Receivable Allowance For Credit Losses [Line Items]
Beginning Balance	504	746	232
Provision for Loan Losses	108	(242)	514
Recoveries
Loans Charged-off
Ending Balance	$ 612	$ 504	$ 746

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FHLB Advances and Other Borrowings (Scheduled Principal Payments on Long-Term Borrowings) (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013
FHLB Advances and Other Borrowings [Abstract]
2014	$ 43,039
2015	24,042
2016	45
2017	749
2018	10,027
Thereafter	581
Total	$ 78,483

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Per Share Data (Narrative) (Details) (Stock Options [Member])	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Stock Options [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of earnings per share			89,276

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Loans (Schedule of Recorded Investment in Home Equity, Consumer and Residential Mortgage Loans) (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013		Dec. 31, 2012		Dec. 31, 2011
Financing Receivable, Recorded Investment [Line Items]
Total Ending Loans Balance	$ 1,390,802	[1]	$ 1,213,423	[2]
Loans Acquired with Deteriorated Credit Quality	14,753		11,174		16,121
Home Equity Loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Total Ending Loans Balance	81,812	[1]	74,699	[2]
Loans Acquired with Deteriorated Credit Quality
Consumer Loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Total Ending Loans Balance	49,265	[1]	41,231	[2]
Loans Acquired with Deteriorated Credit Quality	134		148		164
Residential Mortgage Loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Total Ending Loans Balance	129,047	[1]	88,815	[2]
Loans Acquired with Deteriorated Credit Quality	1,767		149		152
Performing [Member] | Home Equity Loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Total Ending Loans Balance	81,698		74,521
Performing [Member] | Consumer Loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Total Ending Loans Balance	49,029		41,064
Performing [Member] | Residential Mortgage Loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Total Ending Loans Balance	127,708		88,558
Nonperforming [Member] | Home Equity Loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Total Ending Loans Balance	114		178
Nonperforming [Member] | Consumer Loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Total Ending Loans Balance	236		167
Nonperforming [Member] | Residential Mortgage Loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Total Ending Loans Balance	$ 1,339		$ 257

[1] Total recorded investment in loans includes $5,590 in accrued interest.

[2] Total recorded investment in loans includes $5,522 in accrued interest.

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Quarterly Financial Data (Unaudited)

12 Months Ended

Dec. 31, 2013

Quarterly Financial Data (Unaudited) [Abstract]

Quarterly Financial Data (Unaudited)

NOTE 19 - Quarterly Financial Data (Unaudited)

The following table represents selected quarterly financial data for the Company:

	Interest		Net Interest		Net		Earnings per Share
	Income		Income		Income		Basic		Diluted
2013
First Quarter	$	18,370	$	16,225	$	5,809	$	0.46	$	0.46
Second Quarter		18,458		16,712		6,532		0.52		0.52
Third Quarter		18,812		17,192		6,483		0.51		0.51
Fourth Quarter		20,032		18,388		6,589		0.50		0.50
2012
First Quarter	$	19,727	$	16,612	$	5,602	$	0.44	$	0.44
Second Quarter		19,563		16,649		5,967		0.47		0.47
Third Quarter		18,953		16,393		6,292		0.50		0.50
Fourth Quarter		18,917		16,594		6,194		0.49		0.49

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Parent Company Financial Statements (Condensed Balance Sheets) (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
ASSETS
Securities Available-for-Sale, at Fair Value	$ 606,032	$ 587,602
Other Assets	14,727	62,252
Total Assets	2,163,827	2,006,300	1,873,767
LIABILITIES
Borrowings	140,770	161,006
Total Liabilities	1,963,730	1,821,274
SHAREHOLDERS' EQUITY
Common Stock	13,174	12,637
Additional Paid-in Capital	108,022	95,617
Retained Earnings	84,164	66,421
Accumulated Other Comprehensive Income (Loss)	(5,263)	10,351
Total Shareholders' Equity	200,097	185,026	167,610	121,534
Total Liabilities and Shareholders' Equity	2,163,827	2,006,300
Parent Company [Member]
ASSETS
Cash	9,721	29,499
Securities Available-for-Sale, at Fair Value	353	733
Investment in Subsidiary Bank	195,480	184,093
Investment in Non-banking Subsidiaries	3,650	4,064
Other Assets	6,271	6,245
Total Assets	215,475	224,634
LIABILITIES
Borrowings	12,024	35,624
Other Liabilities	3,354	3,984
Total Liabilities	15,378	39,608
SHAREHOLDERS' EQUITY
Common Stock	13,174	12,637
Additional Paid-in Capital	108,022	95,617
Retained Earnings	84,164	66,421
Accumulated Other Comprehensive Income (Loss)	(5,263)	10,351
Total Shareholders' Equity	200,097	185,026
Total Liabilities and Shareholders' Equity	$ 215,475	$ 224,634

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Other Comprehensive Income (Loss) (Schedule of Other Comprehensive Income Components) (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Accumulated Other Comprehensive Income (Loss) [Line Items]
Beginning Balance	$ 10,351
Other Comprehensive Income (Loss) Before Reclassification	(13,791)
Amounts Reclassified from Accumulated Other Comprehensive Income	(1,823)
Net Current Period Other Comprehensive Income (Loss)	(15,614)	(192)	5,643
Ending Balance	(5,263)	10,351
Unrealized Gains and Losses on Available-for-Sale Securities [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Beginning Balance	10,643
Other Comprehensive Income (Loss) Before Reclassification	(14,295)
Amounts Reclassified from Accumulated Other Comprehensive Income	(1,579)
Net Current Period Other Comprehensive Income (Loss)	(15,874)
Ending Balance	(5,231)
Defined Benefit Penion Plans [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Beginning Balance	(231)
Other Comprehensive Income (Loss) Before Reclassification	453
Amounts Reclassified from Accumulated Other Comprehensive Income	(222)
Net Current Period Other Comprehensive Income (Loss)	231
Ending Balance
Accumulated Postretirement Benefit Items [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Beginning Balance	(61)
Other Comprehensive Income (Loss) Before Reclassification	51
Amounts Reclassified from Accumulated Other Comprehensive Income	(22)
Net Current Period Other Comprehensive Income (Loss)	29
Ending Balance	$ 32

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Loans (Schedule of Loans to Shareholders Activity) (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013
Loans [Abstract]
Balance January 1, 2013	$ 9,002
Additions	5,426
Balance December 31, 2013	10,331
Changes In Persons Included	1,290
Deductions, Collected	(5,387)
Deductions, Charged-off

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Per Share Data (Tables)

12 Months Ended

Dec. 31, 2013

Per Share Data [Abstract]

Computations of Basic Earnings Per Share and Diluted Earnings Per Share

The computation of Basic Earnings per Share and Diluted Earnings per Share are provided below:

	2013		2012		2011
Basic Earnings per Share:
Net Income	$	25,413	$	24,055	$	20,249
Weighted Average Shares Outstanding		12,786,065		12,622,049		12,581,646
Basic Earnings per Share	$	1.99	$	1.91	$	1.61
Diluted Earnings per Share:
Net Income	$	25,413	$	24,055	$	20,249
Weighted Average Shares Outstanding		12,786,065		12,622,049		12,581,646
Stock Options, Net		21,613		15,694		6,102
Diluted Weighted Average Shares Outstanding		12,807,678		12,637,743		12,587,748
Diluted Earnings per Share	$	1.98	$	1.90	$	1.61

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Lease Commitments

12 Months Ended

Dec. 31, 2013

Lease Commitments [Abstract]

Lease Commitments

NOTE 12 - Lease Commitments

The total rental expense for all operating leases for the years ended December 31, 2013, 2012, and 2011 was $558, $486, and $413, respectively, including amounts paid under short-term cancelable leases.

The following is a schedule of future minimum lease payments for premises and equipment at year end 2013:

2014	$	608
2015		511
2016		446
2017		259
2018		154
Thereafter		1,508
Total	$	3,486

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Income Taxes (Provision for Income Taxes) (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Income Taxes [Abstract]
Current Federal	$ 9,103	$ 9,649	$ 3,333
Current State	648	568	184
Deferred Federal	1,090	260	4,241
Deferred State	623	192	(32)
Total Income Taxes	$ 11,464	$ 10,669	$ 7,726