10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the Quarterly Period Ended September 30, 2015

Commission File Number 001-15877

German American Bancorp, Inc.

(Exact name of registrant as specified in its charter)

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

711 Main Street, Jasper, Indiana 47546

(Address of Principal Executive Offices and Zip Code)

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

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

YES   x      NO ¨

Indicate by check mark whether the registrant has submitted electronically 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 during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

YES   x      NO ¨

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 x 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 Exchange Act): 

YES   ¨      NO x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class	Outstanding at November 1, 2015
Common Shares, no par value	13,275,678

CAUTION REGARDING FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISKS

Information included in or incorporated by reference in this Quarterly Report on Form 10-Q, our other filings with the Securities and Exchange Commission (the “SEC”) and our press releases or other public statements, contains or may contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Please refer to the discussions of our forward-looking statements and associated risks in our Annual Report on Form 10-K for the year ended December 31, 2014, in Item 1, “Business – Forward-Looking Statements and Associated Risks” and our discussion of risk factors in Item 1A, “Risk Factors” of that Annual Report on Form 10-K, as updated from time to time in our subsequent SEC filings, including by Item 2 of Part I of this Report (“Management’s Discussion and Analysis of Financial Condition and Results of Operations”) at the conclusion of that Item 2 under the heading “Forward-Looking Statements and Associated Risks.”

2

*****

INDEX

PART I.            FINANCIAL INFORMATION		4
Item 1.	Unaudited Financial Statements	4
	Consolidated Balance Sheets – September 30, 2015 and December 31, 2014	4
	Consolidated Statements of Income – Three Months Ended September 30, 2015 and 2014	5
	Consolidated Statements of Income – Nine Months Ended September 30, 2015 and 2014	6
	Consolidated Statements of Comprehensive Income – Three and Nine Months Ended September 30, 2015 and 2014	7
	Consolidated Statements of Cash Flows – Nine Months Ended September 30, 2015 and 2014	8
	Notes to Consolidated Financial Statements – September 30, 2015	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	40
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	52
Item 4.	Controls and Procedures	54
PART II.           OTHER INFORMATION		55
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	55
Item 6.	Exhibits	56
SIGNATURES		56
INDEX OF EXHIBITS		57

3

PART I.FINANCIAL INFORMATION

Item 1.           Financial Statements

GERMAN AMERICAN BANCORP, INC.

CONSOLIDATED BALANCE SHEETS

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

	September 30, 2015			December 31, 2014
ASSETS
Cash and Due from Banks	$	39,998		$	33,481
Federal Funds Sold and Other Short-term Investments	22,140			8,965
Cash and Cash Equivalents	62,138			42,446
Interest-bearing Time Deposits with Banks	100			100
Securities Available-for-Sale, at Fair Value	625,144			630,995
Securities Held-to-Maturity, at Cost (Fair value of $95 and $186 on September 30, 2015 and December 31, 2014, respectively)	95			184
Loans Held-for-Sale, at Fair Value	6,410			6,311
Loans	1,517,285			1,451,990
Less: Unearned Income	(3,705		)	(4,008		)
Allowance for Loan Losses	(14,770		)	(14,929		)
Loans, Net	1,498,810			1,433,053
Stock in FHLB of Indianapolis and Other Restricted Stock, at Cost	8,167			7,040
Premises, Furniture and Equipment, Net	37,905			39,930
Other Real Estate	123			356
Goodwill	20,536			20,536
Intangible Assets	1,443			2,074
Company Owned Life Insurance	32,497			32,043
Accrued Interest Receivable and Other Assets	19,842			22,031
TOTAL ASSETS	$	2,313,210		$	2,237,099
LIABILITIES
Non-interest-bearing Demand Deposits	$	418,947		$	428,016
Interest-bearing Demand, Savings, and Money Market Accounts	1,039,520			1,018,320
Time Deposits	345,368			333,425
Total Deposits	1,803,835			1,779,761
FHLB Advances and Other Borrowings	239,072			206,064
Accrued Interest Payable and Other Liabilities	22,951			22,450
TOTAL LIABILITIES	2,065,858			2,008,275
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	13,273			13,216
Additional Paid-in Capital	109,839			108,660
Retained Earnings	119,656			104,058
Accumulated Other Comprehensive Income	4,584			2,890
TOTAL SHAREHOLDERS’ EQUITY	247,352			228,824
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	2,313,210		$	2,237,099
End of period shares issued and outstanding	13,273,349			13,215,800

See accompanying notes to consolidated financial statements.

4

GERMAN AMERICAN BANCORP, INC.

CONSOLIDATED STATEMENTS OF INCOME

(unaudited, dollars in thousands except per share data)

	Three Months Ended   September 30,
	2015			2014
INTEREST INCOME
Interest and Fees on Loans	$	16,702		$	16,680
Interest on Federal Funds Sold and Other Short-term Investments	3			2
Interest and Dividends on Securities:
Taxable	2,176			2,531
Non-taxable	1,538			1,135
TOTAL INTEREST INCOME	20,419			20,348
INTEREST EXPENSE
Interest on Deposits	987			1,025
Interest on FHLB Advances and Other Borrowings	573			532
TOTAL INTEREST EXPENSE	1,560			1,557
NET INTEREST INCOME	18,859			18,791
Provision for Loan Losses	(500		)	—
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES	19,359			18,791
NON-INTEREST INCOME
Trust and Investment Product Fees	1,051			901
Service Charges on Deposit Accounts	1,237			1,300
Insurance Revenues	1,752			1,739
Company Owned Life Insurance	205			210
Interchange Fee Income	547			508
Other Operating Income	2,134			599
Net Gains on Sales of Loans	831			613
Net Gains on Securities	—			567
TOTAL NON-INTEREST INCOME	7,757			6,437
NON-INTEREST EXPENSE
Salaries and Employee Benefits	8,998			7,975
Occupancy Expense	1,305			1,262
Furniture and Equipment Expense	456			463
FDIC Premiums	284			277
Data Processing Fees	901			935
Professional Fees	787			516
Advertising and Promotion	2,198			613
Intangible Amortization	183			302
Other Operating Expenses	1,854			1,739
TOTAL NON-INTEREST EXPENSE	16,966			14,082
Income before Income Taxes	10,150			11,146
Income Tax Expense	2,429			3,438
NET INCOME	$	7,721		$	7,708
Basic Earnings per Share	$	0.58		$	0.58
Diluted Earnings per Share	$	0.58		$	0.58
Dividends per Share	$	0.17		$	0.16

See accompanying notes to consolidated financial statements.

5

GERMAN AMERICAN BANCORP, INC.

CONSOLIDATED STATEMENTS OF INCOME

(unaudited, dollars in thousands except per share data)

	Nine Months Ended   September 30,
	2015		2014
INTEREST INCOME
Interest and Fees on Loans	$	49,538	$	48,766
Interest on Federal Funds Sold and Other Short-term Investments	10		8
Interest and Dividends on Securities:
Taxable	6,830		7,944
Non-taxable	4,219		3,136
TOTAL INTEREST INCOME	60,597		59,854
INTEREST EXPENSE
Interest on Deposits	3,002		3,098
Interest on FHLB Advances and Other Borrowings	1,481		1,448
TOTAL INTEREST EXPENSE	4,483		4,546
NET INTEREST INCOME	56,114		55,308
Provision for Loan Losses	—		550
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES	56,114		54,758
NON-INTEREST INCOME
Trust and Investment Product Fees	2,974		2,728
Service Charges on Deposit Accounts	3,594		3,552
Insurance Revenues	5,812		5,777
Company Owned Life Insurance	617		603
Interchange Fee Income	1,593		1,467
Other Operating Income	3,341		1,579
Net Gains on Sales of Loans	2,364		1,475
Net Gains on Securities	725		1,039
TOTAL NON-INTEREST INCOME	21,020		18,220
NON-INTEREST EXPENSE
Salaries and Employee Benefits	26,082		24,285
Occupancy Expense	3,732		3,776
Furniture and Equipment Expense	1,417		1,472
FDIC Premiums	850		828
Data Processing Fees	2,608		2,892
Professional Fees	2,073		1,761
Advertising and Promotion	3,125		1,635
Intangible Amortization	630		975
Other Operating Expenses	5,597		5,687
TOTAL NON-INTEREST EXPENSE	46,114		43,311
Income before Income Taxes	31,020		29,667
Income Tax Expense	8,668		8,967
NET INCOME	$	22,352	$	20,700
Basic Earnings per Share	$	1.69	$	1.57
Diluted Earnings per Share	$	1.69	$	1.57
Dividends per Share	$	0.51	$	0.48

See accompanying notes to consolidated financial statements.

6

GERMAN AMERICAN BANCORP, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(unaudited, dollars in thousands)

	Three Months Ended   September 30,
	2015			2014
NET INCOME	$	7,721		$	7,708
Other Comprehensive Income (Loss):
Unrealized Gains (Losses) on Securities
Unrealized Holding Gain (Loss) Arising During the Period	6,420			871
Reclassification Adjustment for Losses (Gains) Included in Net Income	—			(567		)
Tax Effect	(2,259		)	(96		)
Net of Tax	4,161			208
Total Other Comprehensive Income (Loss)	4,161			208
COMPREHENSIVE INCOME	$	11,882		$	7,916

	Nine Months Ended   September 30,
	2015			2014
NET INCOME	$	22,352		$	20,700
Other Comprehensive Income (Loss):
Unrealized Gains (Losses) on Securities
Unrealized Holding Gain (Loss) Arising During the Period	3,333			9,251
Reclassification Adjustment for Losses (Gains) Included in Net Income	(725		)	(1,039		)
Tax Effect	(914		)	(2,903		)
Net of Tax	1,694			5,309
Total Other Comprehensive Income (Loss)	1,694			5,309
COMPREHENSIVE INCOME	$	24,046		$	26,009

See accompanying notes to consolidated financial statements.

7

GERMAN AMERICAN BANCORP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited, dollars in thousands)

	Nine Months Ended   September 30,
	2015			2014
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income	$	22,352		$	20,700
Adjustments to Reconcile Net Income to Net Cash from Operating Activities:
Net Amortization on Securities	1,869			1,510
Depreciation and Amortization	3,254			3,611
Loans Originated for Sale	(111,296		)	(70,603		)
Proceeds from Sales of Loans Held-for-Sale	113,472			73,696
Provision for Loan Losses	—			550
Gain on Sale of Loans, net	(2,364		)	(1,475		)
Gain on Securities, net	(725		)	(1,039		)
Loss (Gain) on Sales of Other Real Estate and Repossessed Assets	53			(46		)
Loss (Gain) on Disposition and Donation of Premises and Equipment	389			28
Increase in Cash Surrender Value of Company Owned Life Insurance	(454		)	(631		)
Equity Based Compensation	737			482
Change in Assets and Liabilities:
Interest Receivable and Other Assets	2,278			(4,708		)
Interest Payable and Other Liabilities	(412		)	2,214
Net Cash from Operating Activities	29,153			24,289
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from Maturities, Calls, Redemptions of Securities Available-for-Sale	71,026			62,892
Proceeds from Sales of Securities Available-for-Sale	18,999			52,711
Purchase of Securities Available-for-Sale	(82,711		)	(74,247		)
Proceeds from Maturities of Securities Held-to-Maturity	89			84
Purchase of Federal Home Loan Bank Stock	(1,127		)	(92		)
Purchase of Loans	(1,852		)	(1,750		)
Loans Made to Customers, net of Payments Received	(64,708		)	(49,436		)
Proceeds from Sales of Other Real Estate	983			1,831
Property and Equipment Expenditures	(886		)	(2,492		)
Proceeds from Sales of Property and Equipment	—			23
Net Cash from Investing Activities	(60,187		)	(10,476		)
CASH FLOWS FROM FINANCING ACTIVITIES
Change in Deposits	24,085			(47,658		)
Change in Short-term Borrowings	(1,993		)	66,977
Advances in Long-term Debt	75,000			20,321
Repayments of Long-term Debt	(40,111		)	(20,095		)
Issuance of Common Stock	52			50
Employee Stock Purchase Plan	447			(37		)
Dividends Paid	(6,754		)	(6,336		)
Net Cash from Financing Activities	50,726			13,222
Net Change in Cash and Cash Equivalents	19,692			27,035
Cash and Cash Equivalents at Beginning of Year	42,446			60,132
Cash and Cash Equivalents at End of Period	$	62,138		$	87,167
Cash Paid During the Year for
Interest	$	4,610		$	4,650
Income Taxes	6,219			7,192
Supplemental Non Cash Disclosures
Loans Transferred to Other Real Estate	$	864		$	1,277
Securities Sold Pending Settlement	—			(3,323		)

See accompanying notes to consolidated financial statements.

8

GERMAN AMERICAN BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2015

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

NOTE 1 – Basis of Presentation

German American Bancorp, Inc. operates primarily in the banking industry. The accounting and reporting policies of German American Bancorp, Inc. and its subsidiaries (hereinafter collectively referred to as the "Company") conform to U.S. generally accepted accounting principles. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted. All adjustments which are, in the opinion of management, necessary for a fair presentation of the results for the periods reported have been included in the accompanying unaudited consolidated financial statements, and all such adjustments are of a normal recurring nature. It is suggested that these consolidated financial statements and notes be read in conjunction with the financial statements and notes thereto in the Company's Annual Report on Form 10-K for the year ended December 31, 2014. Certain items included in the prior period financial statements were reclassified to conform to the current presentation. There was no effect on net income or total shareholder’s equity based on these reclassifications.

NOTE 2 – Per Share Data

The computations of Basic Earnings per Share and Diluted Earnings per Share are as follows:

	Three Months Ended   September 30,
	2015		2014
Basic Earnings per Share:
Net Income	$	7,721	$	7,708
Weighted Average Shares Outstanding	13,265,893		13,210,395
Basic Earnings per Share	$	0.58	$	0.58
Diluted Earnings per Share:
Net Income	$	7,721	$	7,708
Weighted Average Shares Outstanding	13,265,893		13,210,395
Potentially Dilutive Shares, Net	7,617		20,280
Diluted Weighted Average Shares Outstanding	13,273,510		13,230,675
Diluted Earnings per Share	$	0.58	$	0.58

For the three months ended September 30, 2015 and 2014, there were no anti-dilutive shares.

The computations of Basic Earnings per Share and Diluted Earnings per Share are as follows:

	Nine Months Ended   September 30,
	2015		2014
Basic Earnings per Share:
Net Income	$	22,352	$	20,700
Weighted Average Shares Outstanding	13,247,954		13,200,025
Basic Earnings per Share	$	1.69	$	1.57
Diluted Earnings per Share:
Net Income	$	22,352	$	20,700
Weighted Average Shares Outstanding	13,247,954		13,200,025
Potentially Dilutive Shares, Net	7,556		20,975
Diluted Weighted Average Shares Outstanding	13,255,510		13,221,000
Diluted Earnings per Share	$	1.69	$	1.57

For the nine months ended September 30, 2015 and 2014, there were no anti-dilutive shares.

9

GERMAN AMERICAN BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2015

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

NOTE 3 – Securities 

The amortized cost, unrealized gross gains and losses recognized in accumulated other comprehensive income (loss), and fair value of Securities Available-for-Sale at September 30, 2015 and December 31, 2014, were as follows:

Securities Available-for-Sale:	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
September 30, 2015
U.S. Treasury and Agency Securities	$	10,000	$	—	$	(30	)	$	9,970
Obligations of State and Political Subdivisions	187,819		5,885		(362		)	193,342
Mortgage-backed Securities - Residential	419,753		4,091		(2,365		)	421,479
Equity Securities	353		—		—			353
Total	$	617,925	$	9,976	$	(2,757	)	$	625,144
December 31, 2014
U.S. Treasury and Agency Securities	$	20,000	$	—	$	(439	)	$	19,561
Obligations of State and Political Subdivisions	147,321		6,515		(59		)	153,777
Mortgage-backed Securities - Residential	458,709		3,615		(5,020		)	457,304
Equity Securities	353		—		—			353
Total	$	626,383	$	10,130	$	(5,518	)	$	630,995

Equity securities that do not have readily determinable fair values are included in the above totals, are carried at historical cost and are evaluated for impairment on a periodic basis. All mortgage-backed securities in the above table are residential mortgage-backed securities and guaranteed by government sponsored entities.

The carrying amount, unrecognized gains and losses and fair value of Securities Held-to-Maturity at September 30, 2015 and December 31, 2014, were as follows:

Securities Held-to-Maturity:	Carrying Amount		Gross Unrecognized Gains		Gross Unrecognized Losses		Fair Value
September 30, 2015
Obligations of State and Political Subdivisions	$	95	$	—	$	—	$	95
December 31, 2014
Obligations of State and Political Subdivisions	$	184	$	2	$	—	$	186

10

GERMAN AMERICAN BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2015

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

NOTE 3 - Securities (continued)

The amortized cost and fair value of securities at September 30, 2015 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 in the table below.

Securities Available-for-Sale:	Amortized Cost		Fair Value
Due in one year or less	$	7,109	$	7,213
Due after one year through five years	19,186		19,449
Due after five years through ten years	66,484		69,404
Due after ten years	105,040		107,246
Mortgage-backed Securities - Residential	419,753		421,479
Equity Securities	353		353
Total	$	617,925	$	625,144

Securities Held-to-Maturity:	Carrying Amount		Fair Value
Due in one year or less	$	95	$	95
Due after one year through five years	—		—
Due after five years through ten years	—		—
Due after ten years	—		—
Total	$	95	$	95

Proceeds from the Sales of Securities are summarized below:

	Three Months Ended		Three Months Ended
	September 30, 2015		September 30, 2014
Proceeds from Sales	$	—	$	45,473
Gross Gains on Sales	—		567
Income Taxes on Gross Gains	—		198

	Nine Months Ended		Nine Months Ended
	September 30, 2015		September 30, 2014
Proceeds from Sales	$	18,999	$	52,711
Gross Gains on Sales	725		1,039
Income Taxes on Gross Gains	254		364

11

GERMAN AMERICAN BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2015

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

NOTE 3 - Securities (continued)

Below is a summary of securities with unrealized losses as of September 30, 2015 and December 31, 2014, presented by length of time the securities have been in a continuous unrealized loss position:

	Less than 12 Months					12 Months or More					Total
September 30, 2015	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss
U.S. Treasury and Agency Securities	$	—	$	—		$	9,970	$	(30	)	$	9,970	$	(30	)
Obligations of State and Political Subdivisions	32,447		(356		)	353		(6		)	32,800		(362		)
Mortgage-backed Securities - Residential	50,786		(236		)	136,030		(2,129		)	186,816		(2,365		)
Equity Securities	—		—			—		—			—		—
Total	$	83,233	$	(592	)	$	146,353	$	(2,165	)	$	229,586	$	(2,757	)

	Less than 12 Months					12 Months or More					Total
December 31, 2014	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss
U.S. Treasury and Agency Securities	$	—	$	—		$	19,561	$	(439	)	$	19,561	$	(439	)
Obligations of State and Political Subdivisions	3,765		(25		)	4,298		(34		)	8,063		(59		)
Mortgage-backed Securities - Residential	26,606		(191		)	209,679		(4,829		)	236,285		(5,020		)
Equity Securities	—		—			—		—			—		—
Total	$	30,371	$	(216	)	$	233,538	$	(5,302	)	$	263,909	$	(5,518	)

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, which may be at maturity.  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.

NOTE 4 – 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 $31.1 million at September 30, 2015 and $23.1 million at December 31, 2014. 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.

12

GERMAN AMERICAN BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2015

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

NOTE 4 - Derivatives (continued)

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

	September 30, 2015				December 31, 2014
	Notional Amount		Fair Value		Notional Amount		Fair Value
Included in Other Assets:
Interest Rate Swaps	$	31,068	$	1,433	$	23,104	$	507
Included in Other Liabilities:
Interest Rate Swaps	$	31,068	$	1,462	$	23,104	$	508

The following tables present the effect of derivative instruments on the Consolidated Statements of Income for the periods presented:

	Three Months Ended   September 30,					Nine Months Ended   September 30,
	2015		2014			2015		2014
Interest Rate Swaps:
Included in Interest Income / (Expense)	$	—	$	—		$	—	$	—
Included in Other Income / (Expense)	179		(4		)	344		74

NOTE 5 – Loans

Loans were comprised of the following classifications at September 30, 2015 and December 31, 2014: 

	September 30, 2015			December 31, 2014
Commercial:
Commercial and Industrial Loans and Leases	$	404,946		$	380,079
Commercial Real Estate Loans	600,688			583,086
Agricultural Loans	236,619			216,774
Retail:
Home Equity Loans	90,907			86,234
Consumer Loans	47,480			48,613
Residential Mortgage Loans	136,645			137,204
Subtotal	1,517,285			1,451,990
Less: Unearned Income	(3,705		)	(4,008		)
Allowance for Loan Losses	(14,770		)	(14,929		)
Loans, Net	$	1,498,810		$	1,433,053

13

GERMAN AMERICAN BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2015

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

NOTE 5 - Loans (continued)

The following table presents the activity in the allowance for loan losses by portfolio class for the three months ending September 30, 2015 and 2014:

September 30, 2015	Commercial and Industrial Loans and Leases			Commercial Real Estate Loans			Agricultural Loans		Home Equity Loans			Consumer Loans			Residential Mortgage Loans			Unallocated			Total
Beginning Balance	$	4,659		$	7,315		$	1,223	$	350		$	382		$	619		$	710		$	15,258
Provision for Loan Losses	(337		)	(568		)	754		(41		)	(105		)	(172		)	(31		)	(500		)
Recoveries	16			30			—		2			39			3			—			90
Loans Charged-off	(5		)	—			—		(2		)	(71		)	—			—			(78		)
Ending Balance	$	4,333		$	6,777		$	1,977	$	309		$	245		$	450		$	679		$	14,770

September 30, 2014	Commercial and Industrial Loans and Leases			Commercial Real Estate Loans			Agricultural Loans		Home Equity Loans			Consumer Loans			Residential Mortgage Loans			Unallocated		Total
Beginning Balance	$	5,661		$	7,199		$	1,016	$	418		$	326		$	435		$	495	$	15,550
Provision for Loan Losses	(563		)	206			156		(33		)	77			(33		)	190		—
Recoveries	19			55			—		—			41			6			—		121
Loans Charged-off	—			(6		)	—		(7		)	(65		)	(1		)	—		(79		)
Ending Balance	$	5,117		$	7,454		$	1,172	$	378		$	379		$	407		$	685	$	15,592

The following table presents the activity in the allowance for loan losses by portfolio class for the nine months ending September 30, 2015 and 2014:

September 30, 2015	Commercial and Industrial Loans and Leases			Commercial Real Estate Loans			Agricultural Loans		Home Equity Loans			Consumer Loans			Residential Mortgage Loans			Unallocated			Total
Beginning Balance	$	4,627		$	7,273		$	1,123	$	246		$	354		$	622		$	684		$	14,929
Provision for Loan Losses	(350		)	(566		)	854		88			(65		)	44			(5		)	—
Recoveries	83			81			—		8			193			14			—			379
Loans Charged-off	(27		)	(11		)	—		(33		)	(237		)	(230		)	—			(538		)
Ending Balance	$	4,333		$	6,777		$	1,977	$	309		$	245		$	450		$	679		$	14,770

September 30, 2014	Commercial and Industrial Loans and Leases			Commercial Real Estate Loans			Agricultural Loans		Home Equity Loans			Consumer Loans			Residential Mortgage Loans			Unallocated		Total
Beginning Balance	$	3,983		$	8,335		$	946	$	239		$	188		$	281		$	612	$	14,584
Provision for Loan Losses	1,124			(1,546		)	226		148			296			229			73		550
Recoveries	97			785			—		42			127			14			—		1,065
Loans Charged-off	(87		)	(120		)	—		(51		)	(232		)	(117		)	—		(607		)
Ending Balance	$	5,117		$	7,454		$	1,172	$	378		$	379		$	407		$	685	$	15,592

In determining the adequacy of the allowance for loan loss, 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 historical averages for loan losses for these portfolios, judgmentally adjusted for current economic factors and portfolio trends.  Overall the allowance

14

GERMAN AMERICAN BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2015

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

NOTE 5 - Loans (continued)

for loan and lease losses was increased in the agricultural sector as a result of qualitative considerations for current economic conditions and trends.

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 table presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio class and based on impairment method as of September 30, 2015 and December 31, 2014:

September 30, 2015	Total		Commercial and Industrial Loans and Leases		Commercial Real Estate Loans		Agricultural Loans		Home Equity Loans		Consumer Loans		Residential Mortgage Loans		Unallocated
Allowance for Loan Losses:
Ending Allowance Balance Attributable to Loans:
Individually Evaluated for Impairment	$	1,688	$	171	$	1,517	$	—	$	—	$	—	$	—	$	—
Collectively Evaluated for Impairment	13,082		4,162		5,260		1,977		309		245		450		679
Acquired with Deteriorated Credit Quality	—		—		—		—		—		—		—		—
Total Ending Allowance Balance	$	14,770	$	4,333	$	6,777	$	1,977	$	309	$	245	$	450	$	679
Loans:
Loans Individually Evaluated for Impairment	$	6,116	$	2,219	$	3,885	$	12	$	—	$	—	$	—	n/m(2)
Loans Collectively Evaluated for Impairment	1,510,330		403,027		592,735		239,660		91,178		47,602		136,128		n/m(2)
Loans Acquired with Deteriorated Credit Quality	6,924		674		5,376		—		—		—		874		n/m(2)
Total Ending Loans Balance(1)	$	1,523,370	$	405,920	$	601,996	$	239,672	$	91,178	$	47,602	$	137,002	n/m(2)

⁽¹⁾Total recorded investment in loans includes $6,085 in accrued interest.

⁽²⁾n/m = not meaningful

15

GERMAN AMERICAN BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2015

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

NOTE 5 - Loans (continued)

December 31, 2014	Total		Commercial and Industrial Loans and Leases		Commercial Real Estate Loans		Agricultural Loans		Home Equity Loans		Consumer Loans		Residential Mortgage Loans		Unallocated
Allowance for Loan Losses:
Ending Allowance Balance Attributable to Loans:
Individually Evaluated for Impairment	$	1,532	$	87	$	1,445	$	—	$	—	$	—	$	—	$	—
Collectively Evaluated for Impairment	13,343		4,540		5,818		1,123		246		354		578		684
Acquired with Deteriorated Credit Quality	54		—		10		—		—		—		44		—
Total Ending Allowance Balance	$	14,929	$	4,627	$	7,273	$	1,123	$	246	$	354	$	622	$	684
Loans:
Loans Individually Evaluated for Impairment	$	6,044	$	1,964	$	4,080	$	—	$	—	$	—	$	—	n/m(2)
Loans Collectively Evaluated for Impairment	1,443,363		378,533		573,961		219,640		86,570		48,614		136,045		n/m(2)
Loans Acquired with Deteriorated Credit Quality	8,361		354		6,385		—		—		118		1,504		n/m(2)
Total Ending Loans Balance(1)	$	1,457,768	$	380,851	$	584,426	$	219,640	$	86,570	$	48,732	$	137,549	n/m(2)

⁽¹⁾Total recorded investment in loans includes $5,778 in accrued interest.

⁽²⁾n/m = not meaningful

The following tables present loans individually evaluated for impairment by class of loans as of September 30, 2015 and December 31, 2014:

September 30, 2015	Unpaid Principal Balance(1)		Recorded Investment		Allowance for Loan Losses Allocated
With No Related Allowance Recorded:
Commercial and Industrial Loans and Leases	$	262	$	259	$	—
Commercial Real Estate Loans	1,081		962		—
Agricultural Loans	12		12		—
Subtotal	1,355		1,233		—
With An Allowance Recorded:
Commercial and Industrial Loans and Leases	1,945		1,960		171
Commercial Real Estate Loans	3,584		2,923		1,517
Agricultural Loans	—		—		—
Subtotal	5,529		4,883		1,688
Total	$	6,884	$	6,116	$	1,688
Loans Acquired With Deteriorated Credit Quality With No Related Allowance Recorded (Included in the Total Above)	$	530	$	—	$	—
Loans Acquired With Deteriorated Credit Quality With An Additional Allowance Recorded (Included in the Total Above)	$	—	$	—	$	—

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

16

GERMAN AMERICAN BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2015

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

NOTE 5 - Loans (continued)

December 31, 2014	Unpaid Principal Balance(1)		Recorded Investment		Allowance for Loan Losses Allocated
With No Related Allowance Recorded:
Commercial and Industrial Loans and Leases	$	1,887	$	1,877	$	—
Commercial Real Estate Loans	1,944		1,447		—
Agricultural Loans	—		—		—
Subtotal	3,831		3,324		—
With An Allowance Recorded:
Commercial and Industrial Loans and Leases	84		87		87
Commercial Real Estate Loans	3,653		2,975		1,455
Agricultural Loans	—		—		—
Subtotal	3,737		3,062		1,542
Total	$	7,568	$	6,386	$	1,542
Loans Acquired With Deteriorated Credit Quality With No Related Allowance Recorded (Included in the Total Above)	$	289	$	133	$	—
Loans Acquired With Deteriorated Credit Quality With An Additional Allowance Recorded (Included in the Total Above)	$	759	$	209	$	10

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

The following tables present loans individually evaluated for impairment by class of loans for the three month period ended September 30, 2015 and 2014:

September 30, 2015	Average Recorded Investment		Interest Income Recognized		Cash Basis Recognized
With No Related Allowance Recorded:
Commercial and Industrial Loans and Leases	$	366	$	12	$	12
Commercial Real Estate Loans	1,008		11		11
Agricultural Loans	12		1		1
Subtotal	1,386		24		24
With An Allowance Recorded:
Commercial and Industrial Loans and Leases	1,974		22		22
Commercial Real Estate Loans	3,067		2		1
Agricultural Loans	—		—		—
Subtotal	5,041		24		23
Total	$	6,427	$	48	$	47
Loans Acquired With Deteriorated Credit Quality With No Related Allowance Recorded (Included in the Total Above)	$	127	$	—	$	—
Loans Acquired With Deteriorated Credit Quality With An Additional Allowance Recorded (Included in the Total Above)	$	—	$	—	$	—

17

GERMAN AMERICAN BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2015

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

NOTE 5 - Loans (continued)

September 30, 2014	Average Recorded Investment		Interest Income Recognized		Cash Basis Recognized
With No Related Allowance Recorded:
Commercial and Industrial Loans and Leases	$	2,005	$	29	$	30
Commercial Real Estate Loans	2,384		18		21
Agricultural Loans	—		—		—
Subtotal	4,389		47		51
With An Allowance Recorded:
Commercial and Industrial Loans and Leases	211		1		1
Commercial Real Estate Loans	2,643		4		3
Agricultural Loans	—		—		—
Subtotal	2,854		5		4
Total	$	7,243	$	52	$	55
Loans Acquired With Deteriorated Credit Quality With No Related Allowance Recorded (Included in the Total Above)	$	773	$	—	$	—
Loans Acquired With Deteriorated Credit Quality With An Additional Allowance Recorded (Included in the Total Above)	$	31	$	1	$	1

The following tables present loans individually evaluated for impairment by class of loans for the nine month period ended September 30, 2015 and 2014:

September 30, 2015	Average Recorded Investment		Interest Income Recognized		Cash Basis Recognized
With No Related Allowance Recorded:
Commercial and Industrial Loans and Leases	$	471	$	24	$	24
Commercial Real Estate Loans	1,228		92		92
Agricultural Loans	8		1		1
Subtotal	1,707		117		117
With An Allowance Recorded:
Commercial and Industrial Loans and Leases	1,821		68		68
Commercial Real Estate Loans	3,093		3		2
Agricultural Loans	—		—		—
Subtotal	4,914		71		70
Total	$	6,621	$	188	$	187
Loans Acquired With Deteriorated Credit Quality With No Related Allowance Recorded (Included in the Total Above)	$	237	$	—	$	—
Loans Acquired With Deteriorated Credit Quality With An Additional Allowance Recorded (Included in the Total Above)	$	—	$	—	$	—

18

GERMAN AMERICAN BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2015

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

NOTE 5 - Loans (continued)

September 30, 2014	Average Recorded Investment		Interest Income Recognized		Cash Basis Recognized
With No Related Allowance Recorded:
Commercial and Industrial Loans and Leases	$	2,106	$	105	$	107
Commercial Real Estate Loans	2,714		73		70
Agricultural Loans	—		—		—
Subtotal	4,820		178		177
With An Allowance Recorded:
Commercial and Industrial Loans and Leases	1,600		1		1
Commercial Real Estate Loans	3,158		16		13
Agricultural Loans	—		—		—
Subtotal	4,758		17		14
Total	$	9,578	$	195	$	191
Loans Acquired With Deteriorated Credit Quality With No Related Allowance Recorded (Included in the Total Above)	$	873	$	3	$	3
Loans Acquired With Deteriorated Credit Quality With An Additional Allowance Recorded (Included in the Total Above)	$	32	$	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 tables present the recorded investment in non-accrual loans and loans past due 90 days or more still on accrual by class of loans as of September 30, 2015 and December 31, 2014:

	Non-Accrual				Loans Past Due 90 Days or More & Still Accruing
	2015		2014		2015		2014
Commercial and Industrial Loans and Leases	$	680	$	161	$	10	$	68
Commercial Real Estate Loans	3,077		3,460		—		—
Agricultural Loans	—		—		—		75
Home Equity Loans	226		268		—		—
Consumer Loans	94		196		—		—
Residential Mortgage Loans	1,249		1,885		—		—
Total	$	5,326	$	5,970	$	10	$	143
Loans Acquired With Deteriorated Credit Quality (Included in the Total Above)	$	71	$	1,154	$	—	$	—

19

GERMAN AMERICAN BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2015

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

NOTE 5 - Loans (continued)

The following tables present the aging of the recorded investment in past due loans by class of loans as of September 30, 2015 and December 31, 2014:

September 30, 2015	Total		30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		Total Past Due		Loans Not Past Due
Commercial and Industrial Loans and Leases	$	405,920	$	444	$	44	$	68	$	556	$	405,364
Commercial Real Estate Loans	601,996		—		39		1,210		1,249		600,747
Agricultural Loans	239,672		—		—		—		—		239,672
Home Equity Loans	91,178		364		45		226		635		90,543
Consumer Loans	47,602		409		60		94		563		47,039
Residential Mortgage Loans	137,002		2,138		210		1,104		3,452		133,550
Total(1)	$	1,523,370	$	3,355	$	398	$	2,702	$	6,455	$	1,516,915
Loans Acquired With Deteriorated Credit Quality (Included in the Total Above)	$	6,924	$	36	$	—	$	—	$	36	$	6,888

⁽¹⁾Total recorded investment in loans includes $6,085 in accrued interest.

December 31, 2014	Total		30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		Total Past Due		Loans Not Past Due
Commercial and Industrial Loans and Leases	$	380,851	$	628	$	—	$	148	$	776	$	380,075
Commercial Real Estate Loans	584,426		504		10		753		1,267		583,159
Agricultural Loans	219,640		25		—		75		100		219,540
Home Equity Loans	86,570		197		4		268		469		86,101
Consumer Loans	48,732		132		28		75		235		48,497
Residential Mortgage Loans	137,549		2,046		329		1,720		4,095		133,454
Total(1)	$	1,457,768	$	3,532	$	371	$	3,039	$	6,942	$	1,450,826
Loans Acquired With Deteriorated Credit Quality (Included in the Total Above)	$	8,361	$	—	$	—	$	648	$	648	$	7,713

⁽¹⁾Total recorded investment in loans includes $5,778 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 three months ended September 30, 2015 and 2014, there were no new troubled debt restructurings. During the nine months ended September 30, 2015, there were no new troubled debt restructurings. During the nine months ended September 30, 2014, there was one loan modified as a troubled debt restructurings. The modification of the terms of this loan included a permanent reduction of the recorded investment in the loan.

20

GERMAN AMERICAN BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2015

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

NOTE 5 - Loans (continued)

The following tables present the recorded investment of troubled debt restructurings by class of loans as of September 30, 2015 and December 31, 2014:

September 30, 2015	Total		Performing		Non-Accrual(1)
Commercial and Industrial Loans and Leases	$	1,541	$	1,539	$	2
Commercial Real Estate Loans	2,494		807		1,687
Total	$	4,035	$	2,346	$	1,689

December 31, 2014	Total		Performing		Non-Accrual(1)
Commercial and Industrial Loans and Leases	$	1,809	$	1,803	$	6
Commercial Real Estate Loans	2,841		960		1,881
Total	$	4,650	$	2,763	$	1,887

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

The Company had not committed to lending any additional amounts as of September 30, 2015 and December 31, 2014 to customers with outstanding loans that are classified as troubled debt restructurings.

The following tables present loans by class modified as troubled debt restructurings that occurred during the three months ending September 30, 2015 and 2014:

September 30, 2015	Number of Loans	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Commercial and Industrial Loans and Leases	—	$	—	$	—
Commercial Real Estate Loans	—	—		—
Total	—	$	—	$	—

The troubled debt restructurings described above increased the allowance for loan losses by $0 and resulted in charge-offs of $0 during the three months ending September 30, 2015.

September 30, 2014	Number of Loans	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Commercial and Industrial Loans and Leases	—	$	—	$	—
Commercial Real Estate Loans	—	—		—
Total	—	$	—	$	—

The troubled debt restructurings described above increased the allowance for loan losses by $0 and resulted in charge-offs of $0 during the three months ending September 30, 2014.

21

GERMAN AMERICAN BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2015

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

NOTE 5 - Loans (continued)

The following tables present loans by class modified as troubled debt restructurings that occurred during the nine months ending September 30, 2015 and 2014:

September 30, 2015	Number of Loans	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Commercial and Industrial Loans and Leases	—	$	—	$	—
Commercial Real Estate Loans	—	—		—
Total	—	$	—	$	—

The troubled debt restructurings described above increased the allowance for loan losses by $0 and resulted in charge-offs of $0 during the nine months ending September 30, 2015.

September 30, 2014	Number of Loans	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Commercial and Industrial Loans and Leases	—	$	—	$	—
Commercial Real Estate Loans	1	201		197
Total	1	$	201	$	197

The troubled debt restructurings described above increased the allowance for loan losses by $0 and resulted in charge-offs of $0 during the nine months ending September 30, 2014.

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 three months ending September 30, 2015 and 2014:

Troubled Debt Restructurings That Subsequently Defaulted:	Number of Loans	Recorded Investment
September 30, 2015
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 three months ending September 30, 2015.

Troubled Debt Restructurings That Subsequently Defaulted:	Number of Loans	Recorded Investment
September 30, 2014
Commercial and Industrial Loans and Leases	—	$	—
Commercial Real Estate Loans	1	186
Total	1	$	186

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 three months ending September 30, 2014.

22

GERMAN AMERICAN BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2015

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

NOTE 5 - 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 nine months ending September 30, 2015 and 2014:

Troubled Debt Restructurings That Subsequently Defaulted:	Number of Loans	Recorded Investment
September 30, 2015
Commercial and Industrial Loans and Leases	—	$	—
Commercial Real Estate Loans	1	95
Total	1	$	95

The troubled debt restructurings that subsequently defaulted described above resulted in no change to the allowance for loan losses and charge-offs of $95 during the nine months ending September 30, 2015.

Troubled Debt Restructurings That Subsequently Defaulted:	Number of Loans	Recorded Investment
September 30, 2014
Commercial and Industrial Loans and Leases	—	$	—
Commercial Real Estate Loans	1	186
Total	1	$	186

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 nine months ending September 30, 2014.

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.

23

GERMAN AMERICAN BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2015

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

NOTE 5 - 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:

September 30, 2015	Pass		Special Mention		Substandard		Doubtful		Total
Commercial and Industrial Loans and Leases	$	377,189	$	16,682	$	12,049	$	—	$	405,920
Commercial Real Estate Loans	565,396		23,879		12,721		—		601,996
Agricultural Loans	232,762		6,809		101		—		239,672
Total	$	1,175,347	$	47,370	$	24,871	$	—	$	1,247,588
Loans Acquired With Deteriorated Credit Quality (Included in the Total Above)	$	926	$	1,723	$	3,401	$	—	$	6,050

December 31, 2014	Pass		Special Mention		Substandard		Doubtful		Total
Commercial and Industrial Loans and Leases	$	351,250	$	18,387	$	11,214	$	—	$	380,851
Commercial Real Estate Loans	545,804		23,421		15,201		—		584,426
Agricultural Loans	214,974		4,211		455		—		219,640
Total	$	1,112,028	$	46,019	$	26,870	$	—	$	1,184,917
Loans Acquired With Deteriorated Credit Quality (Included in the Total Above)	$	651	$	1,697	$	4,391	$	—	$	6,739

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 September 30, 2015 and December 31, 2014:

September 30, 2015	Home Equity Loans		Consumer Loans		Residential Mortgage Loans
Performing	$	90,952	$	47,508	$	135,753
Nonperforming	226		94		1,249
Total	$	91,178	$	47,602	$	137,002
Loans Acquired With Deteriorated Credit Quality (Included in the Total Above)	$	—	$	—	$	874

December 31, 2014	Home Equity Loans		Consumer Loans		Residential Mortgage Loans
Performing	$	86,302	$	48,536	$	135,664
Nonperforming	268		196		1,885
Total	$	86,570	$	48,732	$	137,549
Loans Acquired With Deteriorated Credit Quality (Included in the Total Above)	$	—	$	118	$	1,504

24

GERMAN AMERICAN BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2015

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

NOTE 5 - 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 is as follows: 

	September 30, 2015		December 31, 2014
Commercial and Industrial Loans	$	674	$	354
Commercial Real Estate Loans	5,376		6,385
Home Equity Loans	—		—
Consumer Loans	—		118
Residential Mortgage Loans	874		1,504
Total	$	6,924	$	8,361
Carrying Amount, Net of Allowance	$	6,924	$	8,307

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

	2015			2014
Balance at July 1	$	1,680		$	1,126
New Loans Purchased	—			—
Accretion of Income	(251		)	(89		)
Reclassifications from Non-accretable Difference	—			—
Charge-off of Accretable Yield	—			(113		)
Balance at September 30	$	1,429		$	924

	2015			2014
Balance at January 1	$	1,685		$	1,279
New Loans Purchased	—			—
Accretion of Income	(333		)	(242		)
Reclassifications from Non-accretable Difference	104			—
Charge-off of Accretable Yield	(27		)	(113		)
Balance at September 30	$	1,429		$	924

For those purchased loans disclosed above, the Company did not increase the allowance for loan losses during the three and nine months ended September 30, 2015 and 2014. No allowances for loan losses were reversed during the same period.

The carrying amount of consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceedings are in process according to local requirements of the applicable jurisdiction totaled $123 as of September 30, 2015 and $288 as of December 31, 2014.

NOTE 6 – Repurchase Agreements Accounted for as Secured Borrowings

Repurchase agreements are short term borrowings included in FHLB Advances and Other Borrowings and mature overnight and continuously. Repurchase agreements totaled $17,079 as of September 30, 2015 and were secured by mortgage-backed securities. Risk could arise when the collateral pledged to repurchase agreement declines in fair value. The Company minimizes risk by consistently monitoring the value of the collateral pledged. At the point in time where the collateral has declined in fair value, the Company is required to provide additional collateral based on the value of the underlying securities.

25

GERMAN AMERICAN BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2015

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

NOTE 7 – 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 37 banking offices at September 30, 2015. 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 the trust operations of the Company's banking subsidiary and by German American Investment Services, Inc. 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 the Company which are used by management to monitor and manage financial performance. 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.

	Core Banking			Trust and Investment Advisory Services			Insurance		Other			Consolidated Totals
Three Months Ended
September 30, 2015
Net Interest Income	$	18,961		$	—		$	2	$	(104	)	$	18,859
Net Gains on Sales of Loans	831			—			—		—			831
Net Gains on Securities	—			—			—		—			—
Trust and Investment Product Fees	1			1,053			—		(3		)	1,051
Insurance Revenues	8			15			1,729		—			1,752
Noncash Items:
Provision for Loan Losses	(500		)	—			—		—			(500		)
Depreciation and Amortization	980			2			27		38			1,047
Income Tax Expense (Benefit)	2,571			(1		)	84		(225		)	2,429
Segment Profit (Loss)	7,702			(14		)	140		(107		)	7,721
Segment Assets at September 30, 2015	2,307,765			1,493			7,410		(3,458		)	2,313,210

26

GERMAN AMERICAN BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2015

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

NOTE 7 - Segment Information (continued)

	Core Banking		Trust and Investment Advisory Services			Insurance		Other			Consolidated Totals
Three Months Ended
September 30, 2014
Net Interest Income	$	18,908	$	4		$	1	$	(122	)	$	18,791
Net Gains on Sales of Loans	613		—			—		—			613
Net Gains on Securities	567		—			—		—			567
Trust and Investment Product Fees	2		899			—		—			901
Insurance Revenues	15		22			1,702		—			1,739
Noncash Items:
Provision for Loan Losses	—		—			—		—			—
Depreciation and Amortization	1,120		5			26		38			1,189
Income Tax Expense (Benefit)	3,496		(15		)	147		(190		)	3,438
Segment Profit (Loss)	7,540		(30		)	216		(18		)	7,708
Segment Assets at December 31, 2014	2,242,456		11,401			6,429		(23,187		)	2,237,099

	Core Banking		Trust and Investment Advisory Services			Insurance		Other			Consolidated Totals
Nine Months Ended
September 30, 2015
Net Interest Income	$	56,402	$	8		$	4	$	(300	)	$	56,114
Net Gains on Sales of Loans	2,364		—			—		—			2,364
Net Gains on Securities	698		—			—		27			725
Trust and Investment Product Fees	3		2,974			—		(3		)	2,974
Insurance Revenues	19		33			5,760		—			5,812
Noncash Items:
Provision for Loan Losses	—		—			—		—			—
Depreciation and Amortization	3,045		15			81		113			3,254
Income Tax Expense (Benefit)	8,709		(13		)	576		(604		)	8,668
Segment Profit (Loss)	21,650		(47		)	874		(125		)	22,352
Segment Assets at September 30, 2015	2,307,765		1,493			7,410		(3,458		)	2,313,210

27

GERMAN AMERICAN BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2015

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

NOTE 7 - Segment Information (continued)

	Core Banking		Trust and Investment Advisory Services			Insurance		Other			Consolidated Totals
Nine Months Ended
September 30, 2014
Net Interest Income	$	55,655	$	12		$	3	$	(362	)	$	55,308
Net Gains on Sales of Loans	1,475		—			—		—			1,475
Net Gains on Securities	1,039		—			—		—			1,039
Trust and Investment Product Fees	4		2,724			—		—			2,728
Insurance Revenues	20		33			5,724		—			5,777
Noncash Items:
Provision for Loan Losses	550		—			—		—			550
Depreciation and Amortization	3,395		18			85		113			3,611
Income Tax Expense (Benefit)	8,940		(122		)	747		(598		)	8,967
Segment Profit (Loss)	19,908		(202		)	1,078		(84		)	20,700
Segment Assets at December 31, 2014	2,242,456		11,401			6,429		(23,187		)	2,237,099

NOTE 8 – 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 shares of common stock 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 September 30, 2015, the Company had purchased 334,965 shares under the program. No shares were purchased under the program during the three and nine months ended September 30, 2015 and 2014.

28

GERMAN AMERICAN BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2015

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

NOTE 9 – 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 September 30, 2015, the Company has reserved 390,033 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. 

For the three and nine months ended September 30, 2015 and 2014, the Company granted no options.  The Company recorded no stock compensation expense applicable to options during the three and nine months ended September 30, 2015 and 2014 because all outstanding options were fully vested prior to 2007. In addition, there was no unrecognized option expense. 

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 60% restricted stock grants and 40% cash credit entitlements). The management and employee restricted stock grants and tandem cash credit entitlements awarded will vest in three equal installments of 33.3% with the first annual vesting on December 5th of the year of the grant and on December 5th of the next two succeeding years.  Awards that were granted to directors as additional retainer for their services 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. During the three months ended September 30, 2015, the Company granted awards of 102 shares of restricted stock. During the three months ended September 30, 2014, the Company granted no shares of restricted stock.  During the nine months ended September 30, 2015 and 2014, the Company granted awards of 33,480 and 31,080 shares of restricted stock, respectively. 

The following tables present expense recorded for restricted stock and cash entitlements as well as the related tax information for the periods presented:

	Three Months Ended September 30,
	2015			2014
Restricted Stock Expense	$	227		$	161
Cash Entitlement Expense	134			101
Tax Effect	(146		)	(106		)
Net of Tax	$	215		$	156

	Nine Months Ended September 30,
	2015			2014
Restricted Stock Expense	$	737		$	482
Cash Entitlement Expense	438			300
Tax Effect	(476		)	(317		)
Net of Tax	$	699		$	465

Unrecognized expense associated with the restricted stock grants and cash entitlements totaled $1,808 and $1,616 as of September 30, 2015 and 2014, respectively.

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. 

29

GERMAN AMERICAN BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2015

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

NOTE 9 - Equity Plans and Equity Based Compensation (continued)

The Employee Stock Purchase Plan is not considered compensatory.  There was $22 expense recorded for the employee stock purchase plan during the three and nine months ended September 30, 2015. There was no expense recorded for the employee stock purchase plan during the three and nine months ended September 30, 2014. There was no unrecognized compensation expense as of September 30, 2015 and 2014 for the Employee Stock Purchase Plan.

NOTE 10 – 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 September 30, 2015, the Company held $9.4 million in Level 3 securities which consist of $9.0 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 investor's 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.

30

GERMAN AMERICAN BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2015

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

NOTE 10 - Fair Value (continued)

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 September 30, 2015 Using
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Assets:
U.S. Treasury and Agency Securities	$	—	$	9,970	$	—	$	9,970
Obligations of State and Political Subdivisions	—		184,336		9,006		193,342
Mortgage-backed Securities-Residential	—		421,479		—		421,479
Equity Securities	—		—		353		353
Total Securities	$	—	$	615,785	$	9,359	$	625,144
Loans Held-for-Sale	$	—	$	6,410	$	—	$	6,410
Derivative Assets	$	—	$	1,433	$	—	$	1,433
Derivative Liabilities	$	—	$	1,462	$	—	$	1,462

	Fair Value Measurements at December 31, 2014 Using
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable  Inputs (Level 3)		Total
Assets:
U.S. Treasury and Agency Securities	$	—	$	19,561	$	—	$	19,561
Obligations of State and Political Subdivisions	—		143,636		10,141		153,777
Mortgage-backed Securities-Residential	—		457,304		—		457,304
Equity Securities	—		—		353		353
Total Securities	$	—	$	620,501	$	10,494	$	630,995
Loans Held-for-Sale	$	—	$	6,311	$	—	$	6,311
Derivative Assets	$	—	$	507	$	—	$	507
Derivative Liabilities	$	—	$	508	$	—	$	508

There were no transfers between Level 1 and Level 2 for the periods ended September 30, 2015 and December 31, 2014.

31

GERMAN AMERICAN BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2015

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

NOTE 10 - Fair Value (continued)

At September 30, 2015, the aggregate fair value of the Loans Held-for-Sale was $6,410, aggregate contractual principal balance was $6,290 with a difference of $120. At December 31, 2014, the aggregate fair value of the Loans Held-for-Sale was $6,311, aggregate contractual principal balance was $6,227 with a difference of $84.

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 three and nine months ended September 30, 2015 and 2014:

	Obligations of State and Political Subdivisions						Equity Securities
	2015			2014			2015		2014
Balance of Recurring Level 3 Assets at July 1	$	9,521		$	10,562		$	353	$	353
Total Gains or Losses (realized/unrealized) Included in Other Comprehensive Income	25			(12		)	—		—
Maturities / Calls	(540		)	(430		)	—		—
Purchases	—			—			—		—
Balance of Recurring Level 3 Assets at September 30	$	9,006		$	10,120		$	353	$	353

	Obligations of State and Political Subdivisions						Equity Securities
	2015			2014			2015		2014
Balance of Recurring Level 3 Assets at January 1	$	10,141		$	10,832		$	353	$	353
Total Gains or Losses (realized/unrealized) Included in Other Comprehensive Income	(20		)	143			—		—
Maturities / Calls	(1,115		)	(855		)	—		—
Purchases	—			—			—		—
Balance of Recurring Level 3 Assets at September 30	$	9,006		$	10,120		$	353	$	353

Of the total gain/loss included in other comprehensive income for the three and nine months ended September 30, 2015, $25 and $(20), respectively, was attributable to other changes in fair value. The three and nine months ended September 30, 2015 included no gain/loss attributable to interest income on securities. Of the total gain/loss included in other comprehensive income for the three and nine months ended September 30, 2014, $(12) and $143, respectively, was attributable to other changes in fair value. The three and nine months ended September 30, 2014 included no gain/loss attributable to interest income on securities.

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 September 30, 2015 Using
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable  Inputs (Level 3)		Total
Assets:
Impaired Loans
Commercial and Industrial Loans	$	—	$	—	$	426	$	426
Commercial Real Estate Loans	—		—		1,386		1,386
Agricultural Loans	—		—		—		—
Other Real Estate
Commercial Real Estate	—		—		—		—

32

GERMAN AMERICAN BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2015

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

NOTE 10 - Fair Value (continued)

	Fair Value Measurements at December 31, 2014 Using
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable  Inputs (Level 3)		Total
Assets:
Impaired Loans
Commercial and Industrial Loans	$	—	$	—	$	—	$	—
Commercial Real Estate Loans	—		—		1,504		1,504
Agricultural Loans	—		—		—		—
Other Real Estate
Commercial Real Estate	—		—		68		68

Impaired loans, which are measured for impairment using the fair value of the collateral for collateral dependent loans, had a carrying amount of $3,467 with a valuation allowance of $1,655, resulting in an additional provision for loan losses of $78 and $113 for the three and nine months ended September 30, 2015, respectively. For the three and nine months ended September 30, 2014, impaired loans resulted in an additional provision for loan losses of $30 and $187, respectively. Impaired loans, which are measured for impairment using the fair value of the collateral for collateral dependent loans, had a carrying amount of $3,043 with a valuation allowance of $1,539, resulting in an additional provision for loan losses of $261 for the year ended December 31, 2014.

There was no Other Real Estate carried at fair value less costs to sell at September 30, 2015. No charge to earnings was included in the three or nine months ended September 30, 2015. A charge to earnings through Other Operating Income of $83 was included in the three and nine months ended September 30, 2014. Other Real Estate which is measured at the lower of carrying or fair value less costs to sell had a carrying value of $68 at December 31, 2014.

The following tables present quantitative information about Level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis at September 30, 2015 and December 31, 2014:

September 30, 2015	Fair Value		Valuation Technique(s)	Unobservable Input(s)	Range (Weighted Average)
Impaired Loans - Commercial and Industrial Loans	$	426	Sales comparison approach	Adjustment for physical condition of comparable properties sold	100%-69% (69%)
Impaired Loans - Commercial Real Estate Loans	$	1,386	Sales comparison approach	Adjustment for physical condition of comparable properties sold	93%-30% (74%)

December 31, 2014	Fair Value		Valuation Technique(s)	Unobservable Input(s)	Range (Weighted Average)
Impaired Loans - Commercial Real Estate Loans	$	1,504	Sales comparison approach	Adjustment for physical condition of comparable properties sold	30%-86% (71%)
Other Real Estate - Commercial Real Estate Loans	$	68	Sales comparison approach	Adjustment for physical condition of comparable properties sold	55% (55%)

33

GERMAN AMERICAN BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2015

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

NOTE 10 - Fair Value (continued)

The carrying amounts and estimated fair values of the Company’s financial instruments not previously presented are provided in the tables below for the periods ending September 30, 2015 and December 31, 2014. 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 September 30, 2015 Using
	Carrying Value			Level 1			Level 2			Level 3			Total
Financial Assets:
Cash and Short-term Investments	$	62,238		$	39,998		$	22,240		$	—		$	62,238
Securities Held-to-Maturity	95			—			95			—			95
Loans, Net	1,496,998			—			—			1,500,221			1,500,221
FHLB Stock and Other Restricted Stock	8,167			N/A			N/A			N/A			N/A
Accrued Interest Receivable	8,978			—			2,819			6,159			8,978
Financial Liabilities:
Demand, Savings, and Money Market Deposits	(1,458,467		)	(1,458,467		)	—			—			(1,458,467		)
Time Deposits	(345,368		)	—			(345,415		)	—			(345,415		)
Short-term Borrowings	(139,479		)	—			(139,479		)	—			(139,479		)
Long-term Debt	(99,593		)	—			(95,393		)	(5,513		)	(100,906		)
Accrued Interest Payable	(627		)	—			(620		)	(7		)	(627		)

				Fair Value Measurements at December 31, 2014 Using
	Carrying Value			Level 1			Level 2			Level 3			Total
Financial Assets:
Cash and Short-term Investments	$	42,546		$	33,481		$	9,065		$	—		$	42,546
Securities Held-to-Maturity	184			—			186			—			186
Loans, Net	1,431,549			—			—			1,432,622			1,432,622
FHLB Stock and Other Restricted Stock	7,040			N/A			N/A			N/A			N/A
Accrued Interest Receivable	8,162			—			2,240			5,922			8,162
Financial Liabilities:
Demand, Savings, and Money Market Deposits	(1,446,336		)	(1,446,336		)	—			—			(1,446,336		)
Time Deposits	(333,425		)	—			(335,134		)	—			(335,134		)
Short-term Borrowings	(141,473		)	—			(141,473		)	—			(141,473		)
Long-term Debt	(64,591		)	—			(60,289		)	(5,429		)	(65,718		)
Accrued Interest Payable	(754		)	—			(704		)	(50		)	(754		)

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.

34

GERMAN AMERICAN BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2015

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

NOTE 10 - Fair Value (continued)

Loans:

Fair values of loans, excluding loans held for sale and collateral dependent impaired loans carried at fair value, 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 analysis, 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.

NOTE 11 – Other Comprehensive Income (Loss)

The tables below summarize the changes in accumulated other comprehensive income (loss) by component for the three and nine months ended September 30, 2015 and 2014, net of tax:

September 30, 2015	Unrealized Gains and Losses on Available-for-Sale Securities		Defined Benefit Pension Items		Postretirement Benefit Items			Total
Beginning Balance at July 1, 2015	$	491	$	—	$	(68	)	$	423
Other Comprehensive Income (Loss) Before Reclassification	4,161		—		—			4,161
Amounts Reclassified from Accumulated Other Comprehensive Income (Loss)	—		—		—			—
Net Current Period Other Comprehensive Income (Loss)	4,161		—		—			4,161
Ending Balance at September 30, 2015	$	4,652	$	—	$	(68	)	$	4,584

35

GERMAN AMERICAN BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2015

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

NOTE 11 - Other Comprehensive Income (Loss) (continued)

	Unrealized Gains and Losses on Available-for-Sale Securities			Defined Benefit Pension Items		Postretirement Benefit Items			Total
Beginning Balance at January 1, 2015	$	2,958		$	—	$	(68	)	$	2,890
Other Comprehensive Income (Loss) Before Reclassification	2,165			—		—			2,165
Amounts Reclassified from Accumulated Other Comprehensive Income (Loss)	(471		)	—		—			(471		)
Net Current Period Other Comprehensive Income (Loss)	1,694			—		—			1,694
Ending Balance at September 30, 2015	$	4,652		$	—	$	(68	)	$	4,584

September 30, 2014	Unrealized Gains and Losses on Available-for-Sale Securities			Defined Benefit Pension Items		Postretirement Benefit Items			Total
Beginning Balance at July 1, 2014	$	(130	)	$	—	$	(32	)	$	(162	)
Other Comprehensive Income (Loss) Before Reclassification	577			—		—			577
Amounts Reclassified from Accumulated Other Comprehensive Income (Loss)	(369		)	—		—			(369		)
Net Current Period Other Comprehensive Income (Loss)	208			—		—			208
Ending Balance at September 30, 2014	$	78		$	—	$	(32	)	$	46

	Unrealized Gains and Losses on Available-for-Sale Securities			Defined Benefit Pension Items		Postretirement Benefit Items			Total
Beginning Balance at January 1, 2014	$	(5,231	)	$	—	$	(32	)	$	(5,263	)
Other Comprehensive Income (Loss) Before Reclassification	5,984			—		—			5,984
Amounts Reclassified from Accumulated Other Comprehensive Income (Loss)	(675		)	—		—			(675		)
Net Current Period Other Comprehensive Income (Loss)	5,309			—		—			5,309
Ending Balance at September 30, 2014	$	78		$	—	$	(32	)	$	46

36

GERMAN AMERICAN BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2015

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

NOTE 11 - Other Comprehensive Income (Loss) (continued)

The tables below summarize the reclassifications out of accumulated other comprehensive income (loss) by component for the three and nine months ended September 30, 2015 and 2014:

Details about Accumulated Other Comprehensive Income (Loss) Components	Amount Reclassified From Accumulated Other Comprehensive Income (Loss)		Affected Line Item in the Statement Where Net Income is Presented
Unrealized Gains and Losses on Available-for-Sale Securities	$	—	Net Gain (Loss) on Securities
	—		Income Tax Expense
	—		Net of Tax
Total Reclassifications for the Three Months Ended September 30, 2015	$	—

Details about Accumulated Other Comprehensive Income (Loss) Components	Amount Reclassified From Accumulated Other Comprehensive Income (Loss)			Affected Line Item in the Statement Where Net Income is Presented
Unrealized Gains and Losses on Available-for-Sale Securities	$	725		Net Gain (Loss) on Securities
	(254		)	Income Tax Expense
	471			Net of Tax
Total Reclassifications for the Nine Months Ended September 30, 2015	$	471

Details about Accumulated Other Comprehensive Income (Loss) Components	Amount Reclassified From Accumulated Other Comprehensive Income (Loss)			Affected Line Item in the Statement Where Net Income is Presented
Unrealized Gains and Losses on Available-for-Sale Securities	$	567		Net Gain (Loss) on Securities
	(198		)	Income Tax Expense
	369			Net of Tax
Total Reclassifications for the Three Months Ended September 30, 2014	$	369

Details about Accumulated Other Comprehensive Income (Loss) Components	Amount Reclassified From Accumulated Other Comprehensive Income (Loss)			Affected Line Item in the Statement Where Net Income is Presented
Unrealized Gains and Losses on Available-for-Sale Securities	$	1,039		Net Gain (Loss) on Securities
	(364		)	Income Tax Expense
	675			Net of Tax
Total Reclassifications for the Nine Months Ended September 30, 2014	$	675

37

GERMAN AMERICAN BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2015

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

NOTE 12 – Newly Issued Accounting Pronouncements

In January 2014, the FASB amended existing guidance clarifying that an in substance repossession or foreclosure occurs, and a creditor is considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan, upon either (1) the creditor obtaining legal title to the residential real estate property upon completion of a foreclosure or (2) the borrower conveying all interest in the residential real estate property to the creditor to satisfy that loan through completion of a deed in lieu of foreclosure or through a similar legal agreement. Additionally, the amendments require interim and annual disclosure of both (1) the amount of foreclosed residential real estate property held by the creditor and (2) the recorded investment in consumer mortgage loans collateralized by residential real estate property that are in the process of foreclosure according to local requirements of the applicable jurisdiction. The amendments in this update are effective for public business entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2014. This update did not have a material impact on the Company's consolidated financial statements.

In January 2014, the FASB issued guidance for accounting for investments in qualified affordable housing projects. The new guidance allows a limited liability investor that meets certain conditions to use the proportional amortization methods. Under the proportional amortization method, an entity amortizes the initial cost of the investment in proportion to the tax credits and other tax benefits received and recognizes the net investment performance in the income statement as a component of income tax expense (benefit).

The Company adopted the proportional amortization method of accounting for its low income housing investments in the first quarter of 2015. The Company quantified the impact of adopting the proportional amortization method compared to the equity method to its current year and prior period financial statements. The Company determined that the adoption of the proportional amortization method did not have a material impact to its consolidated financial statements; therefore, the Company did not adjust its prior period consolidated financial statements. The low income housing investment losses, net of the tax benefits received, are included in income tax expense on the consolidated statements of income for the three and nine months ended September 30, 2015. At September 30, 2015 and December 31, 2014, the Company had investments in qualified housing projects totaling $5.8 million and $6.1 million, respectively. These investments are reported in the Accrued Interest Receivable and Other Assets line of the Consolidated Balance Sheet. The Company had an unfunded investment in qualified affordable housing investments of $4.4 million at September 30, 2015 and $4.8 million at December 31, 2014, which are reported in the Accrued Interest Payable and Other Liabilities line of the Consolidated Balance Sheet. For the three months ended September 30, 2015, the Company recognized $42 of low income housing investment tax credit through the income tax line of the Consolidated Statements of Income. The Company recognized $38 of low income housing investment losses net of tax credits during nine months ended September 30, 2015 through the income tax line of the Consolidated Statements of Income. Of this amount, $161 was due to the adoption of the proportional amortization method. For the third quarter and nine months ended September 30, 2014, the Company recognized $22 and $65 in the Other Operating Expense line, respectively, and $35 and $105 benefit in the Income Tax Expense line, respectively, of the Consolidated Statements of Income.

NOTE 13 – Subsequent Events

On October 26, 2015 the Company entered into a definitive agreement to acquire River Valley Bancorp (“RIVR”), through the merger of RIVR with and into the Company, and the merger of RIVR’s sole banking subsidiary, River Valley Financial Bank, into the Company’s subsidiary bank, German American Bancorp. River Valley Bank operates 14 banking offices in Southeast Indiana. RIVR’s assets and equity (unaudited) as of September 30, 2015 totaled $513.7 million and $55.6 million, respectively. Net income (unaudited) totaled $4.3 million for the nine month period ended September 30, 2015.

Under the terms of the proposed merger, the shareholders of RIVR would receive 0.770 shares of common stock of the Company and $9.90 of cash for each of their RIVR shares. Based upon the $30.02 per share 20-day volume weighted average price of the Company’s common shares on October 22, 2015 (the valuation upon which the exchange ratio was established) the transaction had a present indicated value of approximately $33.00 per RIVR common share. Because the value of the transaction to holders of RIVR common shares as of any future date will in large part be a function of the then-current market price of the Company’s common stock, the transaction value is expected to vary over the period of time prior to and at closing in the same direction as the market price of the Company’s common shares varies over that same time period.

Based on RIVR’s number of common shares outstanding at the time of entering into the definitive agreement, the Company expects to issue approximately 1.94 million shares of its common stock, and pay approximately $25 million in cash, in exchange for all

38

GERMAN AMERICAN BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2015

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

NOTE 13 - Subsequent Events (continued)

of the issued and outstanding common shares of RIVR. On this basis, the basic transaction has an aggregate indicated value (valuing the German American’s common shares at the 20-day volume weighted average price ending on October 22, 2015, NASDAQ closing price) of approximately $83.5 million. The basic transaction value also includes approximately $500,000 in cash payments to be made in cancellation of stock options.

The proposed merger is subject to the approval by shareholders of RIVR, approval of the appropriate bank regulatory agencies and other conditions customary for transactions of this nature. It is contemplated that the merger will be consummated in the first quarter of 2016.

39

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

GERMAN AMERICAN BANCORP, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

German American Bancorp, Inc., is a NASDAQ-traded (symbol: GABC) financial services holding company based in Jasper, Indiana. German American Bancorp, Inc., through its banking subsidiary German American Bancorp, operates 37 banking offices in 13 southern Indiana counties. The Company also owns an investment brokerage subsidiary (German American Investment Services, Inc.) 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 German American Bancorp, Inc. 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.

This section presents an analysis of the consolidated financial condition of the Company as of September 30, 2015 and December 31, 2014 and the consolidated results of operations for the three and nine months ended September 30, 2015 and 2014. This discussion should be read in conjunction with the consolidated financial statements and other financial data presented elsewhere herein and with the financial statements and other financial data, as well as the Management’s Discussion and Analysis of Financial Condition and Results of Operations, included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014.

MANAGEMENT OVERVIEW

This updated discussion should be read in conjunction with the Management Overview that was included in our Management’s Discussion and Analysis of Financial Condition and Results of Operations in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014 and in the Company’s Quarterly Report on Form 10-Q for the quarters ended March 31, 2015 and June 30, 2015.

Net income for the quarter ended September 30, 2015 totaled $7,721,000, or $0.58 per diluted share, which was relatively flat compared to the quarter ended September 30, 2014 net income of $7,708,000, or $0.58 per diluted share. On a year-to-date basis, 2015 earnings improved to $22,352,000, or $1.69 per diluted share, as compared to $20,700,000, or $1.57 per diluted share for the first nine months of 2014 representing an increase of 8% on a per share basis.

On October 26, 2015, the Company and River Valley Bancorp (“River Valley”) entered into a definitive agreement to merge River Valley into the Company. Immediately following this transaction, River Valley’s subsidiary bank, River Valley Financial Bank, would merge into German American’s similarly-named subsidiary bank, German American Bancorp. This transaction provides a strategic opportunity for German American to enhance its presence in the Southeast Indiana market area.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The financial condition and results of operations for the Company 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 income tax expense.

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.

40

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 impaired 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 collectability 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 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 commercial and agricultural loans that are graded as substandard based on migration analysis techniques to determine historical average losses for similar types of loans. General allocations are also 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 historical average for loan losses for these portfolios, judgmentally adjusted for economic, external and internal factors and portfolio trends. Economic factors include evaluating changes in international, national, regional and local economic and business conditions that affect the collectability of the loan portfolio. Internal factors include evaluating changes in lending policies and procedures; changes in the nature and volume of the loan portfolio; and changes in experience, ability and depth of lending management and staff. In setting our external and internal factors we also consider the overall level of the allowance for loan losses to total loans; our allowance coverage as compared to similar size bank holding companies; and regulatory requirements.

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 September 30, 2015, gross unrealized losses on the securities available-for-sale portfolio totaled approximately $2,757,000 and gross unrealized gains totaled approximately $9,976,000.  

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.

41

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 carry-back and carry-forward 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 quarter ended September 30, 2015 totaled $7,721,000, or $0.58 per diluted share, which was relatively flat to the quarter ended September 30, 2014 net income of $7,708,000, or $0.58 per diluted share. On a year-to-date basis, 2015 earnings improved to $22,352,000, or $1.69 per diluted share, as compared to $20,700,000, or $1.57 per diluted share for the first nine months of 2014 representing an increase of 8% on a per share basis.

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.

42

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

	Average Balance Sheet (Tax-equivalent basis / dollars in thousands)
	Three Months Ended September 30, 2015							Three Months Ended September 30, 2014
	Principal Balance			Income / Expense		Yield / Rate		Principal Balance			Income / Expense		Yield / Rate
Assets
Federal Funds Sold and Other Short-term Investments	$	22,155		$	3	0.06	%	$	15,788		$	2	0.04	%
Securities:
Taxable	442,907			2,176		1.97	%	489,466			2,531		2.07	%
Non-taxable	186,563			2,365		5.07	%	137,632			1,746		5.07	%
Total Loans and Leases(2)	1,492,772			16,796		4.47	%	1,424,458			16,755		4.67	%
Total Interest Earning Assets	2,144,397			21,340		3.96	%	2,067,344			21,034		4.05	%
Other Assets	145,019							140,019
Less: Allowance for Loan Losses	(15,382		)					(15,879		)
Total Assets	$	2,274,034						$	2,191,484
Liabilities and Shareholders’ Equity
Interest-bearing Demand, Savings and Money Market Deposits	$	1,027,035		$	329	0.13	%	$	1,017,266		$	317	0.12	%
Time Deposits	355,853			658		0.73	%	330,494			708		0.85	%
FHLB Advances and Other Borrowings	200,831			573		1.13	%	213,205			532		0.99	%
Total Interest-bearing Liabilities	1,583,719			1,560		0.39	%	1,560,965			1,557		0.40	%
Demand Deposit Accounts	428,380							400,223
Other Liabilities	19,628							13,028
Total Liabilities	2,031,727							1,974,216
Shareholders’ Equity	242,307							217,268
Total Liabilities and Shareholders’ Equity	$	2,274,034						$	2,191,484
Cost of Funds						0.29	%						0.30	%
Net Interest Income				$	19,780						$	19,477
Net Interest Margin						3.67	%						3.75	%

⁽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.

Net interest income increased $68,000, or less than 1%, (an increase of $303,000 or 2% on a tax-equivalent basis) for the quarter ended September 30, 2015 compared with the same quarter of 2014. The increased level of net interest income during the third quarter of 2015 compared with the third quarter of 2014 was driven by a higher level of earning assets and in particular growth of the loan portfolio. In addition, the increased level of net interest income was attributable to a shift from the taxable securities portfolio to the non-taxable securities portfolio.

The net interest margin represents tax-equivalent net interest income expressed as a percentage of average earning assets. The tax equivalent net interest margin was 3.67% for the third quarter of 2015 compared to 3.75% during the third quarter of 2014. The yield on earning assets totaled 3.96% during the quarter ended September 30, 2015 compared to 4.05% in the same period of 2014 while the cost of funds (expressed as a percentage of average earning assets) totaled 0.29% during the quarter ended September 30, 2015 compared to 0.30% in the same period of 2014.

The decline in the net interest margin in the third quarter of 2015 compared with the third quarter of 2014 was largely attributable to the continued downward pressure on earning asset yields being driven by the low market interest rate environment and a competitive marketplace for lending opportunities. Partially mitigating the decline in earning asset yields was the continued modest decline in the Company's cost of funds. Accretion of loan discounts on acquired loans contributed approximately 4 basis points on an annualized basis to the net interest margin in the third quarter of 2015 and approximately 6 basis points in the third quarter of 2014.

43

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

	Average Balance Sheet (Tax-equivalent basis / dollars in thousands)
	Nine Months Ended September 30, 2015							Nine Months Ended September 30, 2014
	Principal Balance			Income / Expense		Yield / Rate		Principal Balance			Income / Expense		Yield / Rate
Assets
Federal Funds Sold and Other Short-term Investments	$	19,755		$	10	0.07	%	$	13,490		$	8	0.08	%
Securities:
Taxable	460,499			6,830		1.98	%	499,404			7,944		2.12	%
Non-taxable	172,007			6,490		5.03	%	125,708			4,824		5.12	%
Total Loans and Leases(2)	1,464,632			49,815		4.55	%	1,395,529			48,989		4.69	%
Total Interest Earning Assets	2,116,893			63,145		3.98	%	2,034,131			61,765		4.06	%
Other Assets	145,749							140,725
Less: Allowance for Loan Losses	(15,247		)					(15,615		)
Total Assets	$	2,247,395						$	2,159,241
Liabilities and Shareholders’ Equity
Interest-bearing Demand, Savings and Money Market Deposits	$	1,033,107		$	986	0.13	%	$	1,032,463		$	960	0.12	%
Time Deposits	352,444			2,016		0.76	%	335,816			2,138		0.85	%
FHLB Advances and Other Borrowings	177,138			1,481		1.12	%	166,276			1,448		1.16	%
Total Interest-bearing Liabilities	1,562,689			4,483		0.38	%	1,534,555			4,546		0.40	%
Demand Deposit Accounts	425,379							402,070
Other Liabilities	21,223							11,621
Total Liabilities	2,009,291							1,948,246
Shareholders’ Equity	238,104							210,995
Total Liabilities and Shareholders’ Equity	$	2,247,395						$	2,159,241
Cost of Funds						0.28	%						0.30	%
Net Interest Income				$	58,662						$	57,219
Net Interest Margin						3.70	%						3.76	%

⁽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.

Net interest income increased $806,000 or 1% (an increase of $1,444,000 or 3% on a tax-equivalent basis) for the nine months ended September 30, 2015 compared with the same period of 2014. The increased level of net interest income during the first nine months of 2015 compared with the same period of 2014 was driven by a higher level of earning assets and in particular growth of the loan portfolio. In addition, the increased level of net interest income was attributable to a shift from the taxable securities portfolio to the non-taxable securities portfolio.

The tax equivalent net interest margin was 3.70% for the nine months ended September 30, 2015 compared to 3.76% during the first nine months of 2014.  The yield on earning assets totaled 3.98% during the nine months ended September 30, 2015 compared to 4.06% in the same period of 2014 while the cost of funds totaled 0.28% during the nine months ended September 30, 2015 compared to 0.30% in the same period of 2014.

The decline in the net interest margin in the first nine months of 2015 compared with the same period of 2014 was largely attributable to the continued downward pressure on earning asset yields being driven by the low market interest rate environment and a competitive marketplace for lending opportunities. Partially mitigating the decline in earning asset yields was the continued decline in the Company's cost of funds. Accretion of loan discounts on acquired loans contributed approximately 5 basis points on an annualized basis to the net interest margin during the nine months ended September 30, 2015 compared with 6 basis points during the same period of 2014.

44

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 of the allowance. During the quarter ended September 30, 2015, the Company recognized a negative provision for loan losses of $500,000 which represented an decrease of $500,000 from the third quarter of 2014 when no provision was recorded. The negative provision for loan losses during the third quarter of 2015 was attributable to continued improvement in the asset quality metrics of the Company as well as a reduction in the historical loss allocation as a result of years of higher losses migrating out of the look-back period that is used in the Company's standard methodology for determining the adequacy of its allowance for loan and lease losses. The Company recorded no provision for loan losses during the nine months ended September 30, 2015, a decrease of $550,000 compared to the provision of $550,000 during the nine months ended September 30, 2014.

The Company recorded net recoveries $12,000 during the three months ended September 30, 2015, compared with net recoveries of $42,000 during the same period of 2014. The Company realized net charge-offs of $159,000 or 1 basis point on an annualized basis of average loans outstanding during the nine months ended September 30, 2015, compared with net recoveries of $458,000 or 4 basis points on an annualized basis of average loans outstanding during the same period of 2014.

The provision for loan losses made during the three and nine months ended September 30, 2015 was made at a level deemed necessary by management to absorb changes in 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 provision 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 factors.

Non-interest Income:

During the quarter ended September 30, 2015, non-interest income totaled $7,757,000, an increase of $1,320,000, or 21%, compared with the third quarter of 2014. 

Non-interest Income (dollars in thousands)	Three Months Ended September 30,				Change From Prior Period
					Amount			Percent
	2015		2014		Change			Change
Trust and Investment Product Fees	$	1,051	$	901	$	150		17	%
Service Charges on Deposit Accounts	1,237		1,300		(63		)	(5	)
Insurance Revenues	1,752		1,739		13			1
Company Owned Life Insurance	205		210		(5		)	(2	)
Interchange Fee Income	547		508		39			8
Other Operating Income	2,134		599		1,535			256
Subtotal	6,926		5,257		1,669			32
Net Gains on Sales of Loans	831		613		218			36
Net Gains on Securities	—		567		(567		)	(100	)
Total Non-interest Income	$	7,757	$	6,437	$	1,320		21

Trust and investment product fees increased $150,000, or 17%, during the quarter ended September 30, 2015 compared with the third quarter of 2014. The increase in revenue was primarily attributable to continued growth in assets under management within in the Company's trust advisory group.

Other operating income increased $1,535,000 during the quarter ended September 30, 2015 compared with the third quarter of 2014. The donation of a building and accompanying real estate to an economic development foundation in one of the Company's market areas that had a net book value of approximately $360,000 and an estimated fair value of approximately $1.75 million resulted in a net gain on the disposition of fixed assets of approximately $1.4 million. This transaction was the primary driver of the increase in other operating income. A corresponding contribution expense of $1.75 million was recognized in advertising and promotion expense of the Company's income statement.

Net gains on sales of loans increased $218,000, or 36%, during the third quarter of 2015 compared with the third quarter of 2014. Loan sales totaled $39.1 million during the quarter ended September 30, 2015 compared with $28.6 million during the third quarter of 2014.

45

During the three months ended September 30, 2015, there were no sales of securities. During the three months ended September 30, 2014, the Company realized a net gain on the sale of securities of $567,000 related to the sale of $44.9 million of securities.

During the nine months ended September 30, 2015, non-interest income totaled $21,020,000, an increase of $2,800,000, or 15%, compared with the first nine months of 2014.

Non-interest Income (dollars in thousands)	Nine Months Ended September 30,				Change From Prior Period
					Amount			Percent
	2015		2014		Change			Change
Trust and Investment Product Fees	$	2,974	$	2,728	$	246		9	%
Service Charges on Deposit Accounts	3,594		3,552		42			1
Insurance Revenues	5,812		5,777		35			1
Company Owned Life Insurance	617		603		14			2
Interchange Fee Income	1,593		1,467		126			9
Other Operating Income	3,341		1,579		1,762			112
Subtotal	17,931		15,706		2,225			14
Net Gains on Sales of Loans	2,364		1,475		889			60
Net Gains on Securities	725		1,039		(314		)	(30	)
Total Non-interest Income	$	21,020	$	18,220	$	2,800		15

Trust and investment product fees increased $246,000, or 9%, during the nine months ended September 30, 2015 compared with the same period of 2014. The increase in revenue was primarily attributable to continued growth in assets under management within in the Company's trust advisory group.

Other operating income increased $1,762,000 during the nine months ended September 30, 2015 compared with the same period of 2014. The increase was primarily related to the aforementioned donation of a building and accompanying real estate which occurred during the third quarter of 2015 and to a lesser degree to fees and fair value adjustments associated with interest rate swap transactions with loan customers.

Net gains on sales of loans increased $889,000, or 60%, during the nine months ended September 30, 2015 compared with the first nine months of 2014. Loan sales totaled $110.6 million during the first nine moths of 2015, compared with $72.2 million during the same period of 2014.

During the nine months ended September 30, 2015, the Company realized a net gain on the sale of securities of $725,000 related to the sale of $18.3 million of securities, compared with a net gain on the sale of securities of $1,039,000 related to the sale of $51.7 million in the first nine months of 2014.

Non-interest Expense:

During the quarter ended September 30, 2015, non-interest expense totaled $16,966,000, an increase of $2,884,000, or 20%, compared with the third quarter of 2014.

46

Non-interest Expense (dollars in thousands)	Three Months Ended September 30,				Change From Prior Period
					Amount			Percent
	2015		2014		Change			Change
Salaries and Employee Benefits	$	8,998	$	7,975	$	1,023		13	%
Occupancy, Furniture and Equipment Expense	1,761		1,725		36			2
FDIC Premiums	284		277		7			3
Data Processing Fees	901		935		(34		)	(4	)
Professional Fees	787		516		271			53
Advertising and Promotion	2,198		613		1,585			259
Intangible Amortization	183		302		(119		)	(39	)
Other Operating Expenses	1,854		1,739		115			7
Total Non-interest Expense	$	16,966	$	14,082	$	2,884		20

Salaries and employee benefits increased $1,023,000, or 13%, during the quarter ended September 30, 2015 compared with the third quarter of 2014. The increase in salaries and benefits during the third quarter of 2015 compared with the third quarter of 2014 was primarily attributable to increased costs associated with the Company's partially self insured health insurance plan. Also contributing to the increased level of salaries and benefits were costs of the Company's long-term equity and short-term cash incentive compensation plans and retirement benefits for certain long-term employees.

Advertising and promotion increased $1,585,000 during the quarter ended September 30, 2015 compared with the third quarter of 2014. The primary driver of the increase in advertising and promotion was the recognition of a $1,750,000 contribution expense related to the donation of a building and accompanying real estate to an economic development foundation in one of the Company's market areas.

Professional fees increased $271,000, or 53%, during the third quarter of 2015 compared with the third quarter of 2014. This increase was largely attributable to professional fees associated with the recently announced pending acquisition of River Valley Bancorp by the Company. Also contributing to the increased professional fees were increased legal costs for the Company and also to professional fees related to the conversion to a new agency management system by the Company's property and casualty insurance agency.

Intangible amortization declined $119,000, or 39%, during the quarter ended September 30, 2015 compared with the third quarter of 2014. The decline was attributable to a reduced level of core deposit intangible amortization expense that resulted from previous bank acquisition transactions.

During the nine months ended September 30, 2015, total non-interest expense increased $2,803,000, or 6%, compared with the nine months ended September 30, 2014.

Non-interest Expense (dollars in thousands)	Nine Months Ended September 30,				Change From Prior Period
					Amount			Percent
	2015		2014		Change			Change
Salaries and Employee Benefits	$	26,082	$	24,285	$	1,797		7	%
Occupancy, Furniture and Equipment Expense	5,149		5,248		(99		)	(2	)
FDIC Premiums	850		828		22			3
Data Processing Fees	2,608		2,892		(284		)	(10	)
Professional Fees	2,073		1,761		312			18
Advertising and Promotion	3,125		1,635		1,490			91
Intangible Amortization	630		975		(345		)	(35	)
Other Operating Expenses	5,597		5,687		(90		)	(2	)
Total Non-interest Expense	$	46,114	$	43,311	$	2,803		6

Salaries and employee benefits increased $1,797,000, or 7%, during the nine months ended September 30, 2015 compared with the same nine month period of 2014. The increase in salaries and benefits during 2015 compared with 2014 was attributable to increased costs associated with the Company's partially self insured health insurance plan, costs related to the Company's long-term equity and short-term cash incentive compensation plans and variable compensation related to an increased level of secondary market mortgage loan production.

47

Data processing fees decreased $284,000, or 10%, during the nine months ended September 30, 2015 compared with the same period of 2014. The decrease was primarily attributable to costs associated with the implementation of new commercial and retail digital banking platforms in 2014.

Professional fees increased $312,000, or 18%, during the nine months ended September 30, 2015 compared with the third quarter of 2014. Increase was largely attributable to professional fees associated with the recently announced pending acquisition of River Valley Bancorp by the Company. Also contributing to the increased professional fees were increased legal costs for the Company and also to professional fees related to the conversion to a new agency management system by the Company's property and casualty insurance agency.

Advertising and promotion expense increased $1,490,000 during the nine months ended September 30, 2015 compared with the same period of 2014. The increase was primarily due to the aforementioned donation of a building and accompanying real estate to an economic development foundation in one of the Company's market areas.

Intangible amortization declined $345,000, or 35%, during the nine months ended September 30, 2015 compared with the first nine months of the same period of 2014. The decline was attributable to lower levels of amortization of core deposit intangible from previous bank acquisition transactions.

Income Taxes:

The Company’s effective income tax rate was 23.9% and 30.8%, respectively, during the three months ended September 30, 2015 and 2014. The Company’s effective income tax rate was 27.9% and 30.2%, respectively, during the nine months ended September 30, 2015 and 2014. The effective tax rate in all periods presented was lower than the blended statutory rate resulting primarily from the Company’s tax-exempt investment income on securities, loans and company owned life insurance, income tax credits generated from investments in a new markets tax credit project and affordable housing projects, and income generated by subsidiaries domiciled in a state with no state or local income tax. The decline in the effective tax rate during three months and nine months ended September 30, 2015 compared with the same periods of 2014 were primarily impacted by the aforementioned donation of a building and accompanying real estate, the overall percentage change in revenue generated from tax-advantaged sources, and the timing of the reversal of certain deferred tax items.

FINANCIAL CONDITION

Total assets at September 30, 2015 increased $76.1 million, or 5% on an annualized basis, to $2.313 billion compared with $2.237 billion in total assets at December 31, 2014.  The increase in total assets was primarily attributable to an increase in period-end loan balances.

Loans outstanding at September 30, 2015 increased $65.3 million, or 6% on an annualized basis, compared with year-end 2014. The increase in loans was primarily centered in the commercial and industrial loan, agricultural loan, and commercial real estate loan portfolios.

End of Period Loan Balances: (dollars in thousands)	September 30, 2015		December 31, 2014		Current Period Change
Commercial & Industrial Loans	$	404,946	$	380,079	$	24,867
Commercial Real Estate Loans	600,688		583,086		17,602
Agricultural Loans	236,619		216,774		19,845
Home Equity & Consumer Loans	138,387		134,847		3,540
Residential Mortgage Loans	136,645		137,204		(559		)
Total Loans	$	1,517,285	$	1,451,990	$	65,295

The Company’s allowance for loan losses totaled $14.8 million at September 30, 2015 representing a decline of $159,000, or 1% on an annualized basis, from December 31, 2014.  The allowance for loan losses represented 0.98% of period-end loans at September 30, 2015 compared with 1.03% of period-end loans at December 31, 2014. 

48

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 $3.1 million as of September 30, 2015 and $4.1 million at year-end 2014.

The following is an analysis of the Company’s non-performing assets at September 30, 2015 and December 31, 2014:

Non-performing Assets: (dollars in thousands)	September 30, 2015			December 31, 2014
Non-accrual Loans	$	5,326		$	5,970
Past Due Loans (90 days or more and still accruing)	10			140
Total Non-performing Loans	5,336			6,110
Other Real Estate	123			356
Total Non-performing Assets	$	5,459		$	6,466
Restructured Loans	$	2,309		$	2,726
Non-performing Loans to Total Loans	0.35		%	0.42		%
Allowance for Loan Loss to Non-performing Loans	276.80		%	244.34		%

Non-performing assets totaled $5.5 million, or 0.24% of total assets at September 30, 2015 compared to $6.5 million, or 0.29% of total assets at December 31, 2014.  Non-performing loans totaled $5.3 million, or 0.35% of total loans at September 30, 2015 compared to $6.1 million, or 0.42% of total loans at December 31, 2014. 

Non-accrual commercial real estate loans totaled $3.1 million at September 30, 2015 representing a decline of $383,000, or 11%, from the $3.5 million of non-accrual commercial real estate loans at year-end 2014.  Non-accrual commercial real estate loans represented 58% of the total non-performing loans at both September 30, 2015 and year-end 2014. There were no non-accrual agricultural loans at September 30, 2015 or December 31, 2014. Non-accrual commercial and industrial loans totaled $680,000 at September 30, 2015 representing an increase of $519,000 from the $161,000 on non-accrual commercial and industrial loans at year-end 2014. Non-accrual commercial and industrial loans represented 13% of non-performing loans at September 30, 2015 compared to 3% at year-end 2014. Non-accrual home equity loans totaled 4% of non-performing loans at both September 30, 2015 and year-end 2014. Non-accrual consumer loans totaled 2% of non-performing loans at September 30, 2015 compared with 3% at year-end 2014. Non-accrual residential mortgage loans totaled $1.2 million at September 30, 2015 representing a decline of $636,000, or 34%, from the $1.9 million of non-accrual residential mortgage loans at year-end 2014.  Non-accrual residential mortgage loans represented 23% of the total non-performing loans at September 30, 2015 compared to 32% of the total non-performing loans at year-end 2014.

At September 30, 2015, there was only one relationship included in non-performing loans that was greater than $1.0 million. This relationship was a $1.7 million commercial real estate loan secured by a commercial warehouse facility.  This loan was in non-performing status as of year-end 2014. The borrower has made all contractual payments due during 2015 and the principal balance of this relationship was reduced by $101,000 during the first nine months of 2015.

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.

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 2014 or during the first nine months of 2015.  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 $71,000 at September 30, 2015 compared with $1,154,000 at December 31, 2014. The non-performing purchased loans with evidence of credit deterioration since origination represented approximately 1% of total non-performing loans at September 30, 2015 and 19% at December 31, 2014.

49

As of September 30, 2015, past due purchased loans with evidence of credit deterioration since origination totaled $36,000 compared with $648,000 at year-end 2014.  Past due purchased loans with evidence of credit deterioration since origination represented 1% of total past due loans at September 30, 2015 and 9% at year-end 2014.

Adversely classified purchased loans with evidence of credit deterioration since origination totaled $3.4 million at September 30, 2015 compared with $4.4 million at December 31, 2014. Adversely classified purchased loans with evidence of credit deterioration since origination represented approximately 14% of total adversely classified loans at September 30, 2015 compared with approximately 16% of total adversely classified loans at year-end 2014.

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 specifically 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.

Total deposits increased $24.1 million, or 2% on an annualized basis, as of September 30, 2015 compared with December 31, 2014 total deposits.

End of Period Deposit Balances: (dollars in thousands)	September 30, 2015		December 31, 2014		Current Period Change
Non-interest-bearing Demand Deposits	$	418,947	$	428,016	$	(9,069	)
Interest-bearing Demand, Savings, & Money Market Accounts	1,039,520		1,018,320		21,200
Time Deposits < $100,000	194,408		198,916		(4,508		)
Time Deposits of $100,000 or more	150,960		134,509		16,451
Total Deposits	$	1,803,835	$	1,779,761	$	24,074

Capital Resources:

As of September 30, 2015, shareholders’ equity increased by $18.5 million, or 11% on an annualized basis, to $247.4 million compared with $228.8 million at year-end 2014. The increase in shareholders’ equity was primarily attributable to an increase of $15.6 million in retained earnings. Shareholders’ equity represented 10.7% of total assets at September 30, 2015 and 10.2% of total assets at December 31, 2014. Shareholders’ equity included $22.0 million of goodwill and other intangible assets at September 30, 2015 compared to $22.6 million of goodwill and other intangible assets at year-end 2014.

Federal banking regulations provide guidelines for determining the capital adequacy of bank holding companies and banks. These guidelines provide for a more narrow definition of core capital and assign a measure of risk to the various categories of assets. The Company is required to maintain minimum levels of capital in proportion to total risk-weighted assets and off-balance sheet exposures.

As of March 31, 2015, the Company and its subsidiary bank adopted the new Basel III regulatory capital framework. The adoption of this new framework modified the regulatory capital calculations, minimum capital levels and well-capitalized thresholds and added the new Common Equity Tier 1 capital ratio. Additionally, under the new rules, in order to avoid limitations on capital distributions, including dividend payments, the Company will be required to maintain a capital conservation buffer above the adequately capitalized Common Equity Tier 1 capital ratio. The capital conservation buffer is being phased in from 0.00% in 2015 to 2.50% in 2019. At September 30, 2015, the capital levels for the Company and its subsidiary bank remained well in excess of of the minimum amounts needed for capital adequacy purposes and the bank's capital levels met the necessary requirements to be considered well-capitalized.

50

The tables below presents the Company’s consolidated and the subsidiary bank's capital ratios under regulatory guidelines:

	9/30/2015 Ratio (1)		12/31/2014 Ratio		Minimum for Capital Adequacy Purposes (2)		Well-Capitalized Guidelines (2)
Common Equity Tier 1 Capital Ratio
Consolidated	12.68	%	N/A		4.50	%	N/A
Bank	11.50	%	N/A		4.50	%	6.50	%
Tier 1 Capital Ratio
Consolidated	12.97	%	12.95	%	6.00	%	N/A
Bank	11.50	%	11.64	%	6.00	%	8.00	%
Total Capital Ratio
Consolidated	13.81	%	13.88	%	8.00	%	N/A
Bank	12.34	%	12.57	%	8.00	%	10.00	%
Tier 1 Leverage Ratio
Consolidated	10.11	%	9.57	%	4.00	%	N/A
Bank	8.97	%	8.59	%	4.00	%	5.00	%

⁽¹⁾The 9/30/2015 capital ratios are calculated based on the new Basel III regulatory capital framework.

⁽²⁾The Minimum for Capital Adequacy Purposes and Well-Capitalized Guidelines are based on the new Basel III regulatory capital framework.

Under the the final rules provided for by Basel III, accumulated other comprehensive income ("AOCI") was to be included in a banking organization's Common Tier 1 capital. The final rules allowed community banks to make a one-time election not to include these additional components of AOCI in regulatory capital and instead use the existing treatment under the general risk-based capital rules that excludes most AOCI components from regulatory capital. The opt-out election was to be made in the first regulatory filings (call report and FRY-9) that were made after the banking organizations became subject to the final rules. The Company elected to opt-out and continue the existing treatment of AOCI for regulatory capital purposes. For additional information, also see the discussion in Item 1 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2014.

Liquidity:

The Consolidated Statement of Cash Flows details the elements of changes in the Company’s consolidated cash and cash equivalents. Total cash and cash equivalents increased $19.7 million during the nine months ended September 30, 2015 ending at $62.1 million.  During the nine months ended September 30, 2015, operating activities resulted in net cash inflows of $29.2 million. Investing activities resulted in net cash outflows of $60.2 million during the nine months ended September 30, 2015.  Financing activities resulted in net cash inflows for the nine months ended September 30, 2015 of $50.7 million.

The parent company is a corporation separate and distinct from its bank and other subsidiaries. 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 including debt service. 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. The parent company has in recent years supplemented the dividends received from its subsidiaries with borrowings. As of September 30, 2015, the parent company had approximately $22.3 million of cash and cash equivalents available to meet its cash flow needs.

51

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. The Company may include forward-looking statements in filings with the Securities and Exchange Commission (“SEC”), such as this Form 10-Q, in other written materials, and in oral statements made by senior management to analysts, investors, representatives of the media, and others. Such forward looking statements can include statements about the Company’s net interest income or net interest margin; its adequacy of allowance for loan losses, levels of provisions for loan losses, and the quality of the Company’s loans and other assets; simulations of changes in interest rates; expected results from mergers with or acquisitions of other businesses; litigation results; tax estimates and recognition; dividend policy; parent company cash resources and cash requirements, and parent company capital resources; 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. They often can be identified by the use of words like “expect,” “may,” “will,” “would,” “could,” “should,” “intend,” “project,” “estimate,” “believe” or “anticipate,” or similar expressions.

Forward-looking statements speak only as of the date they are made, and the Company undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the forward-looking statement is made.

Readers are cautioned that, by their nature, all forward-looking statements are based on assumptions 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 this Item 2 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 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; 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; factors driving impairment charges on investments; the impact, extent and timing of technological changes; potential cyber-attacks, information security breaches and other criminal activities; 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 Federal Reserve Board; 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 Wall Street Reform and Consumer Protection 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.

Investors should consider these risks, uncertainties, and other factors, in addition to those mentioned by the Company in its Annual Report on Form 10-K for its fiscal year ended December 31, 2014, and other SEC filings from time to time, when considering any forward-looking statement.

Item 3. 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 Boards of Directors of the parent company and its subsidiary bank. Primary market risks which impact the Company’s operations are liquidity risk and interest rate risk.

The liquidity of the parent company is dependent upon the receipt of dividends from its subsidiary bank, which is subject to certain regulatory limitations. The Bank’s source of funding is predominately core deposits, 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.

52

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, and by estimating its static interest rate sensitivity position. 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 for measuring both net interest income and NPV 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 both net interest income and 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 modeling. Lastly, the ability of many borrowers to repay their adjustable rate debt may decline during a rising interest rate environment.

The Company from time to time utilizes derivatives to manage interest rate risk. Management continuously evaluates the merits of such interest rate risk products but does not anticipate the use of such products to become a major part of the Company’s risk management strategy.

The table below provides an assessment of the risk to net interest income over the next 12 months in the event of a sudden and sustained 1% and 2% increase and decrease in prevailing interest rates (dollars in thousands).

Interest Rate Sensitivity as of September 30, 2015 - Net Interest Income

	Net Interest Income
Changes in Rates	Amount		% Change
+2%	$	70,097	(7.23	)%
+1%	72,741		(3.74	)%
Base	75,564		—
-1%	74,116		(1.92	)%
-2%	72,370		(4.23	)%

The above table is a measurement of the Company’s net interest income at risk, assuming a static balance sheet as of September 30, 2015 and instantaneous parallel changes in interest rates. The Company also monitors interest rate risk under other scenarios including a more gradual movement in market interest rates. This type of scenario can at times produce different modeling results in measuring interest rate risk sensitivity. As an example, a gradual change in rates compared with a sudden and significant change in interest rates can impact rate movement of the Company’s variable rate commercial and agricultural loan portfolio due to the Company’s extensive utilization of interest rate floors in its commercial and agricultural portfolio.

The Company’s loan portfolio as of September 30, 2015 totaled approximately $1.5 billion of which approximately $1.2 billion were commercial and industrial, commercial real estate, and agricultural loans and leases. Within the commercial and agricultural portfolio, approximately 24% were fixed rate and 76% were variable rate loans. Of the total commercial and agricultural variable rate loans, approximately one-third are currently at their interest rate floors, which are, on a weighted average basis, approximately 75 basis points above their fully indexed rate based on current market interest rates.

53

The table below provides an assessment of the risk to NPV in the event of a sudden and sustained 1% and 2% increase and decrease in prevailing interest rates (dollars in thousands).

Interest Rate Sensitivity as of September 30, 2015 - Net Portfolio Value

	Net Portfolio Value				Net Portfolio Value as a % of Present Value of Assets
Changes in Rates	Amount		% Change		NPV Ratio		Change
+2%	$	272,057	(9.00	)%	12.46	%	(60) b.p.
+1%	286,187		(4.27	)%	12.80	%	(26) b.p.
Base	298,949		—		13.06	%	—
-1%	264,089		(11.66	)%	11.38	%	(168) b.p.
-2%	222,673		(25.51	)%	9.55	%	(351) b.p.

This Item 3 includes forward-looking statements. See “Forward-looking Statements and Associated Risks” included in Part I, Item 2 of this Report for a discussion of certain factors that could cause the Company’s actual exposure to market risk to vary materially from that expressed or implied above. These factors include possible changes in economic conditions; interest rate fluctuations, competitive product and pricing pressures within the Company’s markets; and equity and fixed income market fluctuations. Actual experience may also vary materially to the extent that the Company’s assumptions described above prove to be inaccurate.

Item 4.  Controls and Procedures

As of September 30, 2015, 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 were as of that date 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.

There was no change in the Company’s internal control over financial reporting that occurred during the Company’s third fiscal quarter of 2015 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

54

PART II. OTHER INFORMATION

Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds

(c) The following table sets forth information regarding the Company’s purchases of its common shares during each of the three months ended September 30, 2015.

Period	Total Number of Shares (or Units) Purchased	Average Price Paid Per Share (or Unit)	Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs	Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased under the Plans or Programs (1)
July 2015	—	—	—	272,789
August 2015	—	—	—	272,789
September 2015	—	—	—	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 September 30, 2015 (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 three months ended September 30, 2015.

55

Item 6.      Exhibits

The exhibits described by the Exhibit Index immediately following the Signature Page of this Report are incorporated herein by reference.

SIGNATURES

Pursuant to the requirements 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.
Date: November 9, 2015	By/s/Mark A. Schroeder
	Mark A. Schroeder
	Chairman and Chief Executive Officer
Date: November 9, 2015	By/s/Bradley M. Rust
	Bradley M. Rust
	Executive Vice President and Chief Financial Officer

56

INDEX OF EXHIBITS

Exhibit No.	Description
2.1	Agreement and Plan of Reorganization between German American Bancorp, Inc. and River Valley Bancorp, dated October 26, 2015 is incorporated by reference to the Registrant's Current Report on Form 8-K filed October 26, 2015.
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, is incorporated by reference from Exhibit 3.2 to the Registrant's Annual Report on Form 10-K filed March 9, 2015.
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	Voting Agreement, dated October 26, 2015, among German American Bancorp, Inc. and certain shareholders of River Valley Bancorp is incorporated by reference to the Registrant's Current Report on Form 8-K Filed October 26, 2015.
10.2*	Description of Director Compensation Arrangements for the 12 month period ending June 30, 2016, is incorporated by reference from the description included in Item 5.02 of the Registrant’s Current Report on Form 8-K filed July 1, 2015.
31.1**	Sarbanes-Oxley Act of 2002, Section 302 Certification for Chairman of the Board and Chief Executive Officer.
31.2**	Sarbanes-Oxley Act of 2002, Section 302 Certification for Executive Vice President and Chief Financial Officer.
32.1**	Sarbanes-Oxley Act of 2002, Section 906 Certification for Chairman of the Board and Chief Executive Officer.
32.2**	Sarbanes-Oxley Act of 2002, Section 906 Certification for Executive Vice President and Chief Financial Officer.
101**+	The following materials from German American Bancorp, Inc.’s Form 10-Q Report for the quarterly period ended September 30, 2015, 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, and (v) the Notes to 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 furnished or filed with this Report (other than through incorporation by reference to other disclosures or exhibits) are indicated by a double asterisk.

+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.

57

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 Quarterly Report on Form 10-Q 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.

November 9, 2015

Date

/s/ Mark A. Schroeder

Mark A. Schroeder

Chairman and Chief Executive Officer

(principal 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 Quarterly Report on Form 10-Q 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.

November 9, 2015
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 Quarterly Report on Form 10-Q for the quarter ended September 30, 2015, (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.

November 9, 2015

Date

/s/ Mark A. Schroeder

Mark A. Schroeder

Chairman and Chief Executive Officer

(principal 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 Quarterly Report on Form 10-Q for the quarter ended September 30, 2015, (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.

November 9, 2015

Date

/s/ Bradley M. Rust

Bradley M. Rust

Executive Vice President and Chief Financial Officer

(principal accounting officer and principal financial officer)

XML

Loans (Components of Loans) (Details) - USD ($) $ in Thousands	Sep. 30, 2015	Jun. 30, 2015	Dec. 31, 2014	Sep. 30, 2014	Jun. 30, 2014	Dec. 31, 2013
Accounts, Notes, Loans and Financing Receivable [Line Items]
Subtotal	$ 1,517,285		$ 1,451,990
Less: Unearned Income	(3,705)		(4,008)
Allowance for Loan Losses	(14,770)	$ (15,258)	(14,929)	$ (15,592)	$ (15,550)	$ (14,584)
Loans, Net	1,498,810		1,433,053
Commercial
Accounts, Notes, Loans and Financing Receivable [Line Items]
Commercial and Industrial Loans and Leases	404,946		380,079
Commercial Real Estate Loans	600,688		583,086
Agricultural Loans	236,619		216,774
Retail
Accounts, Notes, Loans and Financing Receivable [Line Items]
Home Equity Loans	90,907		86,234
Consumer Loans	47,480		48,613
Residential Mortgage Loans	$ 136,645		$ 137,204

XML

Stock Repurchase Plan (Additional Information) (Details) - shares	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014	Apr. 26, 2001
Stockholders' Equity Note [Abstract]
Common stock, authorized shares repurchase (up to)					607,754
Common stock, total shares repurchased	334,965		334,965
Common stock, shares purchased	0	0	0	0

XML

Loans (Schedule of Risk Category of Loans) (Details) - USD ($) $ in Thousands	Sep. 30, 2015		Dec. 31, 2014
Financing Receivable, Recorded Investment [Line Items]
Total loans and leases	$ 1,523,370	[1],[2]	$ 1,457,768	[3],[4]
Commercial and Industrial Loans and Leases
Financing Receivable, Recorded Investment [Line Items]
Total loans and leases	405,920	[1]	380,851	[3]
Commercial Real Estate Loans
Financing Receivable, Recorded Investment [Line Items]
Total loans and leases	601,996	[1]	584,426	[3]
Agricultural Loans
Financing Receivable, Recorded Investment [Line Items]
Total loans and leases	239,672	[1]	219,640	[3]
Pass
Financing Receivable, Recorded Investment [Line Items]
Total loans and leases	1,175,347		1,112,028
Pass | Commercial and Industrial Loans and Leases
Financing Receivable, Recorded Investment [Line Items]
Total loans and leases	377,189		351,250
Pass | Commercial Real Estate Loans
Financing Receivable, Recorded Investment [Line Items]
Total loans and leases	565,396		545,804
Pass | Agricultural Loans
Financing Receivable, Recorded Investment [Line Items]
Total loans and leases	232,762		214,974
Special Mention
Financing Receivable, Recorded Investment [Line Items]
Total loans and leases	47,370		46,019
Special Mention | Commercial and Industrial Loans and Leases
Financing Receivable, Recorded Investment [Line Items]
Total loans and leases	16,682		18,387
Special Mention | Commercial Real Estate Loans
Financing Receivable, Recorded Investment [Line Items]
Total loans and leases	23,879		23,421
Special Mention | Agricultural Loans
Financing Receivable, Recorded Investment [Line Items]
Total loans and leases	6,809		4,211
Substandard
Financing Receivable, Recorded Investment [Line Items]
Total loans and leases	24,871		26,870
Substandard | Commercial and Industrial Loans and Leases
Financing Receivable, Recorded Investment [Line Items]
Total loans and leases	12,049		11,214
Substandard | Commercial Real Estate Loans
Financing Receivable, Recorded Investment [Line Items]
Total loans and leases	12,721		15,201
Substandard | Agricultural Loans
Financing Receivable, Recorded Investment [Line Items]
Total loans and leases	101		455
Doubtful
Financing Receivable, Recorded Investment [Line Items]
Total loans and leases	0		0
Doubtful | Commercial and Industrial Loans and Leases
Financing Receivable, Recorded Investment [Line Items]
Total loans and leases	0		0
Doubtful | Commercial Real Estate Loans
Financing Receivable, Recorded Investment [Line Items]
Total loans and leases	0		0
Doubtful | Agricultural Loans
Financing Receivable, Recorded Investment [Line Items]
Total loans and leases	0		0
Total
Financing Receivable, Recorded Investment [Line Items]
Total loans and leases	1,247,588		1,184,917
Total | Commercial and Industrial Loans and Leases
Financing Receivable, Recorded Investment [Line Items]
Total loans and leases	405,920		380,851
Total | Commercial Real Estate Loans
Financing Receivable, Recorded Investment [Line Items]
Total loans and leases	601,996		584,426
Total | Agricultural Loans
Financing Receivable, Recorded Investment [Line Items]
Total loans and leases	239,672		219,640
Receivables Acquired with Deteriorated Credit Quality
Financing Receivable, Recorded Investment [Line Items]
Loans Acquired With Deteriorated Credit Quality (Included in the Total Above)	6,924		8,361
Receivables Acquired with Deteriorated Credit Quality | Commercial and Industrial Loans and Leases
Financing Receivable, Recorded Investment [Line Items]
Loans Acquired With Deteriorated Credit Quality (Included in the Total Above)	674		354
Receivables Acquired with Deteriorated Credit Quality | Commercial Real Estate Loans
Financing Receivable, Recorded Investment [Line Items]
Loans Acquired With Deteriorated Credit Quality (Included in the Total Above)	5,376		6,385
Receivables Acquired with Deteriorated Credit Quality | Agricultural Loans
Financing Receivable, Recorded Investment [Line Items]
Loans Acquired With Deteriorated Credit Quality (Included in the Total Above)	0		0
Receivables Acquired with Deteriorated Credit Quality | Pass
Financing Receivable, Recorded Investment [Line Items]
Loans Acquired With Deteriorated Credit Quality (Included in the Total Above)	926		651
Receivables Acquired with Deteriorated Credit Quality | Special Mention
Financing Receivable, Recorded Investment [Line Items]
Loans Acquired With Deteriorated Credit Quality (Included in the Total Above)	1,723		1,697
Receivables Acquired with Deteriorated Credit Quality | Substandard
Financing Receivable, Recorded Investment [Line Items]
Loans Acquired With Deteriorated Credit Quality (Included in the Total Above)	3,401		4,391
Receivables Acquired with Deteriorated Credit Quality | Doubtful
Financing Receivable, Recorded Investment [Line Items]
Loans Acquired With Deteriorated Credit Quality (Included in the Total Above)	0		0
Receivables Acquired with Deteriorated Credit Quality | Total
Financing Receivable, Recorded Investment [Line Items]
Loans Acquired With Deteriorated Credit Quality (Included in the Total Above)	$ 6,050		$ 6,739

[1] Total recorded investment in loans includes $6,085 in accrued interest.

[2] Total recorded investment in loans includes $6,085 in accrued interest.

[3] Total recorded investment in loans includes $5,778 in accrued interest.

[4] Total recorded investment in loans includes $5,778 in accrued interest.

XML

Segment Information (Additional Information) (Details)	9 Months Ended
	Sep. 30, 2015 segment office
Segment Reporting [Abstract]
Number of operating segments | segment	3
Number of offices	37

XML

Loans (Schedule of Loans Modified as Troubled Debt Restructuring) (Details) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015 USD ($) loan	Sep. 30, 2014 USD ($) loan	Sep. 30, 2015 USD ($) loan	Sep. 30, 2014 USD ($) loan
Financing Receivable, Modifications [Line Items]
Number of Loans | loan	0	0	0	1
Pre-Modification Outstanding Recorded Investment	$ 0	$ 0	$ 0	$ 201
Post-Modification Outstanding Recorded Investment	$ 0	$ 0	$ 0	$ 197
Commercial and Industrial Loans and Leases
Financing Receivable, Modifications [Line Items]
Number of Loans | loan	0	0	0	0
Pre-Modification Outstanding Recorded Investment	$ 0	$ 0	$ 0	$ 0
Post-Modification Outstanding Recorded Investment	$ 0	$ 0	$ 0	$ 0
Commercial Real Estate Loans
Financing Receivable, Modifications [Line Items]
Number of Loans | loan	0	0	0	1
Pre-Modification Outstanding Recorded Investment	$ 0	$ 0	$ 0	$ 201
Post-Modification Outstanding Recorded Investment	$ 0	$ 0	$ 0	$ 197

XML

Securities (Schedule of by Contractual Maturity) (Details) - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014
Securities Available-for-Sale: Amortized cost
Due in one year or less	$ 7,109
Due after one year through five years	19,186
Due after five years through ten years	66,484
Due after ten years	105,040
Total Amortized Cost	617,925	$ 626,383
Securities Available-for-Sale, Fair Value
Due in one year or less	7,213
Due after one year through five years	19,449
Due after five years through ten years	69,404
Due after ten years	107,246
Total Fair Value	625,144	630,995
Securities Held-to-Maturity, Carrying Amount
Due in one year or less	95
Due after one year through five years	0
Due after five years through ten years	0
Due after ten years	0
Total Carrying Amount	95	184
Securities Held-to-Maturity, Fair Value
Due in one year or less	95
Due after one year through five years	0
Due after five years through ten years	0
Due after ten years	0
Total Fair Value	95	186
Mortgage-backed Securities - Residential
Securities Available-for-Sale: Amortized cost
Amortized cost	419,753
Total Amortized Cost	419,753	458,709
Securities Available-for-Sale, Fair Value
Fair value	421,479
Total Fair Value	421,479	457,304
Equity Securities
Securities Available-for-Sale: Amortized cost
Amortized cost	353
Total Amortized Cost	353	353
Securities Available-for-Sale, Fair Value
Fair value	353
Total Fair Value	$ 353	$ 353

XML

Equity Plans and Equity Based Compensation (Additional Information) (Details)	3 Months Ended		9 Months Ended
	Sep. 30, 2015 USD ($) Plan shares	Sep. 30, 2014 USD ($) shares	Sep. 30, 2015 USD ($) Plan installment shares	Sep. 30, 2014 USD ($) shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based compensation arrangement by share-based payment award, number of plans | Plan	3		3
Number of shares available for grant | shares	390,033		390,033
Stock compensation expense	$ 134,000	$ 101,000	$ 438,000	$ 300,000
Stock granted during period percentage			60.00%
Stock cash credit entitlement percentage			40.00%
Number of equal installments | installment			3
Vested in period percentage			33.30%
Stock issued during period | shares	102	0	33,480	31,080
Unrecognized stock expenses in restricted stock			$ 1,808,000	$ 1,616,000
Discount from market price, offering date			95.00%
Director
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vested in period percentage			100.00%
Employee Stock Option
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of options granted | shares	0	0	0	0
Stock compensation expense	$ 0	$ 0	$ 0	$ 0
Unrecognized option expense	$ 0	0	$ 0	0
Employee Stock
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares available for grant | shares	500,000		500,000
Stock compensation expense	$ 22,000	0	$ 22,000	0
Unrecognized option expense	$ 0	$ 0	$ 0	$ 0

XML

Segment Information (Tables)

9 Months Ended

Sep. 30, 2015

Segment Reporting [Abstract]

Segment Financial Information

The following segment financial information has been derived from the internal financial statements of the Company which are used by management to monitor and manage financial performance. 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.

	Core Banking			Trust and Investment Advisory Services			Insurance		Other			Consolidated Totals
Three Months Ended
September 30, 2015
Net Interest Income	$	18,961		$	—		$	2	$	(104	)	$	18,859
Net Gains on Sales of Loans	831			—			—		—			831
Net Gains on Securities	—			—			—		—			—
Trust and Investment Product Fees	1			1,053			—		(3		)	1,051
Insurance Revenues	8			15			1,729		—			1,752
Noncash Items:
Provision for Loan Losses	(500		)	—			—		—			(500		)
Depreciation and Amortization	980			2			27		38			1,047
Income Tax Expense (Benefit)	2,571			(1		)	84		(225		)	2,429
Segment Profit (Loss)	7,702			(14		)	140		(107		)	7,721
Segment Assets at September 30, 2015	2,307,765			1,493			7,410		(3,458		)	2,313,210

	Core Banking		Trust and Investment Advisory Services			Insurance		Other			Consolidated Totals
Three Months Ended
September 30, 2014
Net Interest Income	$	18,908	$	4		$	1	$	(122	)	$	18,791
Net Gains on Sales of Loans	613		—			—		—			613
Net Gains on Securities	567		—			—		—			567
Trust and Investment Product Fees	2		899			—		—			901
Insurance Revenues	15		22			1,702		—			1,739
Noncash Items:
Provision for Loan Losses	—		—			—		—			—
Depreciation and Amortization	1,120		5			26		38			1,189
Income Tax Expense (Benefit)	3,496		(15		)	147		(190		)	3,438
Segment Profit (Loss)	7,540		(30		)	216		(18		)	7,708
Segment Assets at December 31, 2014	2,242,456		11,401			6,429		(23,187		)	2,237,099

	Core Banking		Trust and Investment Advisory Services			Insurance		Other			Consolidated Totals
Nine Months Ended
September 30, 2015
Net Interest Income	$	56,402	$	8		$	4	$	(300	)	$	56,114
Net Gains on Sales of Loans	2,364		—			—		—			2,364
Net Gains on Securities	698		—			—		27			725
Trust and Investment Product Fees	3		2,974			—		(3		)	2,974
Insurance Revenues	19		33			5,760		—			5,812
Noncash Items:
Provision for Loan Losses	—		—			—		—			—
Depreciation and Amortization	3,045		15			81		113			3,254
Income Tax Expense (Benefit)	8,709		(13		)	576		(604		)	8,668
Segment Profit (Loss)	21,650		(47		)	874		(125		)	22,352
Segment Assets at September 30, 2015	2,307,765		1,493			7,410		(3,458		)	2,313,210

	Core Banking		Trust and Investment Advisory Services			Insurance		Other			Consolidated Totals
Nine Months Ended
September 30, 2014
Net Interest Income	$	55,655	$	12		$	3	$	(362	)	$	55,308
Net Gains on Sales of Loans	1,475		—			—		—			1,475
Net Gains on Securities	1,039		—			—		—			1,039
Trust and Investment Product Fees	4		2,724			—		—			2,728
Insurance Revenues	20		33			5,724		—			5,777
Noncash Items:
Provision for Loan Losses	550		—			—		—			550
Depreciation and Amortization	3,395		18			85		113			3,611
Income Tax Expense (Benefit)	8,940		(122		)	747		(598		)	8,967
Segment Profit (Loss)	19,908		(202		)	1,078		(84		)	20,700
Segment Assets at December 31, 2014	2,242,456		11,401			6,429		(23,187		)	2,237,099

XML

Loans (Schedule of Carrying Amount of Loans with Deterioration of Credit Quality) (Details) - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014
Financing Receivable, Recorded Investment [Line Items]
Carrying Amount, Net of Allowance	$ 6,924	$ 8,307
Receivables Acquired with Deteriorated Credit Quality
Financing Receivable, Recorded Investment [Line Items]
Loans Acquired with Deteriorated Credit Quality	6,924	8,361
Receivables Acquired with Deteriorated Credit Quality | Commercial and Industrial Loans
Financing Receivable, Recorded Investment [Line Items]
Loans Acquired with Deteriorated Credit Quality	674	354
Receivables Acquired with Deteriorated Credit Quality | Commercial Real Estate Loans
Financing Receivable, Recorded Investment [Line Items]
Loans Acquired with Deteriorated Credit Quality	5,376	6,385
Receivables Acquired with Deteriorated Credit Quality | Home Equity Loans
Financing Receivable, Recorded Investment [Line Items]
Loans Acquired with Deteriorated Credit Quality	0	0
Receivables Acquired with Deteriorated Credit Quality | Consumer Loans
Financing Receivable, Recorded Investment [Line Items]
Loans Acquired with Deteriorated Credit Quality	0	118
Receivables Acquired with Deteriorated Credit Quality | Residential Mortgage Loans
Financing Receivable, Recorded Investment [Line Items]
Loans Acquired with Deteriorated Credit Quality	$ 874	$ 1,504

XML

Loans (Schedule for Loans Individually Evaluated for Impairment) (Details) - USD ($) $ in Thousands		3 Months Ended		9 Months Ended
		Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014	Dec. 31, 2014
With An Allowance Recorded:
Allowance for Loan Losses Allocated		$ 1,688		$ 1,688		$ 1,542
Unpaid Principal Balance	[1]	6,884		6,884		7,568
Recorded Investment		6,116		6,116		6,386
Average Recorded Investment		6,427	$ 7,243	6,621	$ 9,578
Interest Income Recognized		48	52	188	195
Cash Basis Recognized		47	55	187	191
Commercial and Industrial Loans and Leases
With No Related Allowance Recorded:
Unpaid Principal Balance	[1]	262		262		1,887
Recorded Investment		259		259		1,877
Average Recorded Investment		366	2,005	471	2,106
Interest Income Recognized		12	29	24	105
Cash Basis Recognized		12	30	24	107
With An Allowance Recorded:
Unpaid Principal Balance	[1]	1,945		1,945		84
Recorded Investment		1,960		1,960		87
Allowance for Loan Losses Allocated		171		171		87
Average Recorded Investment		1,974	211	1,821	1,600
Interest Income Recognized		22	1	68	1
Cash Basis Recognized		22	1	68	1
Commercial Real Estate Loans
With No Related Allowance Recorded:
Unpaid Principal Balance	[1]	1,081		1,081		1,944
Recorded Investment		962		962		1,447
Average Recorded Investment		1,008	2,384	1,228	2,714
Interest Income Recognized		11	18	92	73
Cash Basis Recognized		11	21	92	70
With An Allowance Recorded:
Unpaid Principal Balance	[1]	3,584		3,584		3,653
Recorded Investment		2,923		2,923		2,975
Allowance for Loan Losses Allocated		1,517		1,517		1,455
Average Recorded Investment		3,067	2,643	3,093	3,158
Interest Income Recognized		2	4	3	16
Cash Basis Recognized		1	3	2	13
Agricultural Loans
With No Related Allowance Recorded:
Unpaid Principal Balance	[1]	12		12		0
Recorded Investment		12		12		0
Average Recorded Investment		12	0	8	0
Interest Income Recognized		1	0	1	0
Cash Basis Recognized		1	0	1	0
With An Allowance Recorded:
Unpaid Principal Balance	[1]	0		0		0
Recorded Investment		0		0		0
Allowance for Loan Losses Allocated		0		0		0
Average Recorded Investment		0	0	0	0
Interest Income Recognized		0	0	0	0
Cash Basis Recognized		0	0	0	0
Subtotal
With No Related Allowance Recorded:
Unpaid Principal Balance	[1]	1,355		1,355		3,831
Recorded Investment		1,233		1,233		3,324
Average Recorded Investment		1,386	4,389	1,707	4,820
Interest Income Recognized		24	47	117	178
Cash Basis Recognized		24	51	117	177
With An Allowance Recorded:
Unpaid Principal Balance	[1]	5,529		5,529		3,737
Recorded Investment		4,883		4,883		3,062
Allowance for Loan Losses Allocated		1,688		1,688		1,542
Average Recorded Investment		5,041	2,854	4,914	4,758
Interest Income Recognized		24	5	71	17
Cash Basis Recognized		23	4	70	14
Loans Acquired With Deteriorated Credit Quality With No Related Allowance Recorded (Included in the Total Above)
With No Related Allowance Recorded:
Unpaid Principal Balance	[1]	530		530		289
Recorded Investment		0		0		133
Average Recorded Investment		127	773	237	873
Interest Income Recognized		0	0	0	3
Cash Basis Recognized		0	0	0	3
Loans Acquired With Deteriorated Credit Quality With An Additional Allowance Recorded (Included in the Total Above)
With An Allowance Recorded:
Unpaid Principal Balance	[1]	0		0		759
Recorded Investment		0		0		209
Allowance for Loan Losses Allocated		0		0		$ 10
Average Recorded Investment		0	31	0	32
Interest Income Recognized		0	1	0	1
Cash Basis Recognized		$ 0	$ 1	$ 0	$ 1

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

XML

Derivatives (Derivative Instruments And Hedging Activities) (Details) - Interest Rate Swap - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014
Derivatives, Fair Value [Line Items]
Other Assets, Notional Amount of Interest Rate Swaps	$ 31,068	$ 23,104
Other Assets, Fair Value of Interest Rate Swaps	1,433	507
Other Liabilities, Notional Amount of Interest Rate Swap	31,068	23,104
Other Liabilities, Fair Value of Interest Rate Swap	$ 1,462	$ 508

XML

Loans (Additional Information) (Details)	3 Months Ended		9 Months Ended
	Sep. 30, 2015 USD ($) loan	Sep. 30, 2014 USD ($) loan	Sep. 30, 2015 USD ($) loan	Sep. 30, 2014 USD ($) loan	Dec. 31, 2014 USD ($)
Accounts, Notes, Loans and Financing Receivable [Line Items]
Number of loans modified as troubled debt restructurings | loan	0	0	0	1
Increase (decrease) in allowance for loan losses	$ 0	$ 0	$ 0	$ 0
Charge-offs due to troubled debt restructurings	0	0	0	0
Additional lending amount to customers whose loan terms has been modified in troubled debt restructuring	0		0		$ 0
Carrying amount of consumer mortgage loans secured by residential real estate properties	123,000		123,000		$ 288,000
Troubled Debt Restructuring that Subsequently Defaulted
Accounts, Notes, Loans and Financing Receivable [Line Items]
Charge-offs due to troubled debt restructurings	0	0	95,000	0
Increase (decrease) in allowance for loan losses	0	0	0	0
Loans Purchased
Accounts, Notes, Loans and Financing Receivable [Line Items]
Increase (decrease) in allowance for loan losses	0	0	0	0
Loan losses reversed	$ 0	$ 0	$ 0	$ 0

XML

Newly Issued Accounting Pronouncements (Additional Information) (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014	Dec. 31, 2014
Accrued Interest Receivable and Other Assets
Schedule of Equity Method Investments [Line Items]
Investments in qualified housing projects	$ 5,800		$ 5,800		$ 6,100
Accrued Interest Payable and Other Liabilities
Schedule of Equity Method Investments [Line Items]
Unfunded investment in qualified affordable housing investments	4,400		4,400		$ 4,800
Income Tax Expense
Schedule of Equity Method Investments [Line Items]
Low income housing investment tax credit (loss), amortization method	42		$ (38)
Low income housing investment (benefit) losses, equity method		$ (35)		$ (105)
Other Operating Expense
Schedule of Equity Method Investments [Line Items]
Low income housing investment (benefit) losses, equity method		$ 22		$ 65
FASB Issued Guidance For Qualified Housing Projects
Schedule of Equity Method Investments [Line Items]
Low income housing investment loss, due to adoption of amortization method	$ 161

XML

Fair Value (Reconciliation of all Assets Measured at Fair Value on Recurring Basis, Using Significant Unobservable Inputs (Level 3) (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Obligations of State and Political Subdivisions
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Total Gains or Losses (realized/unrealized) Included in Other Comprehensive Income	$ 25	$ (12)	$ (20)	$ 143
Fair Value, Measurements, Recurring | Obligations of State and Political Subdivisions
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Beginning Balance of Recurring Level 3 Assets	9,521	10,562	10,141	10,832
Total Gains or Losses (realized/unrealized) Included in Other Comprehensive Income	25	(12)	(20)	143
Maturities / Calls	(540)	(430)	(1,115)	(855)
Purchases	0	0	0	0
Ending Balance of Recurring Level 3 Assets	9,006	10,120	9,006	10,120
Fair Value, Measurements, Recurring | Equity Securities
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Beginning Balance of Recurring Level 3 Assets	353	353	353	353
Total Gains or Losses (realized/unrealized) Included in Other Comprehensive Income	0	0	0	0
Maturities / Calls	0	0	0	0
Purchases	0	0	0	0
Ending Balance of Recurring Level 3 Assets	$ 353	$ 353	$ 353	$ 353

XML

Loans (Schedule of Troubled Debt Restructuring, Subsequently Defaulted) (Details) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015 USD ($) loan	Sep. 30, 2014 USD ($) loan	Sep. 30, 2015 USD ($) loan	Sep. 30, 2014 USD ($) loan
Financing Receivable, Modifications [Line Items]
Number of Loans | loan	0	1	1	1
Recorded Investment	$ 0	$ 186	$ 95	$ 186
Commercial and Industrial Loans and Leases
Financing Receivable, Modifications [Line Items]
Number of Loans | loan	0	0	0	0
Recorded Investment	$ 0	$ 0	$ 0	$ 0
Commercial Real Estate Loans
Financing Receivable, Modifications [Line Items]
Number of Loans | loan	0	1	1	1
Recorded Investment	$ 0	$ 186	$ 95	$ 186

XML

Securities

9 Months Ended

Sep. 30, 2015

Investments, Debt and Equity Securities [Abstract]

Securities

Securities 

The amortized cost, unrealized gross gains and losses recognized in accumulated other comprehensive income (loss), and fair value of Securities Available-for-Sale at September 30, 2015 and December 31, 2014, were as follows:

Securities Available-for-Sale:	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
September 30, 2015
U.S. Treasury and Agency Securities	$	10,000	$	—	$	(30	)	$	9,970
Obligations of State and Political Subdivisions	187,819		5,885		(362		)	193,342
Mortgage-backed Securities - Residential	419,753		4,091		(2,365		)	421,479
Equity Securities	353		—		—			353
Total	$	617,925	$	9,976	$	(2,757	)	$	625,144
December 31, 2014
U.S. Treasury and Agency Securities	$	20,000	$	—	$	(439	)	$	19,561
Obligations of State and Political Subdivisions	147,321		6,515		(59		)	153,777
Mortgage-backed Securities - Residential	458,709		3,615		(5,020		)	457,304
Equity Securities	353		—		—			353
Total	$	626,383	$	10,130	$	(5,518	)	$	630,995

Equity securities that do not have readily determinable fair values are included in the above totals, are carried at historical cost and are evaluated for impairment on a periodic basis. All mortgage-backed securities in the above table are residential mortgage-backed securities and guaranteed by government sponsored entities.

The carrying amount, unrecognized gains and losses and fair value of Securities Held-to-Maturity at September 30, 2015 and December 31, 2014, were as follows:

Securities Held-to-Maturity:	Carrying Amount		Gross Unrecognized Gains		Gross Unrecognized Losses		Fair Value
September 30, 2015
Obligations of State and Political Subdivisions	$	95	$	—	$	—	$	95
December 31, 2014
Obligations of State and Political Subdivisions	$	184	$	2	$	—	$	186

The amortized cost and fair value of securities at September 30, 2015 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 in the table below.

Securities Available-for-Sale:	Amortized Cost		Fair Value
Due in one year or less	$	7,109	$	7,213
Due after one year through five years	19,186		19,449
Due after five years through ten years	66,484		69,404
Due after ten years	105,040		107,246
Mortgage-backed Securities - Residential	419,753		421,479
Equity Securities	353		353
Total	$	617,925	$	625,144

Securities Held-to-Maturity:	Carrying Amount		Fair Value
Due in one year or less	$	95	$	95
Due after one year through five years	—		—
Due after five years through ten years	—		—
Due after ten years	—		—
Total	$	95	$	95

Proceeds from the Sales of Securities are summarized below:

	Three Months Ended		Three Months Ended
	September 30, 2015		September 30, 2014
Proceeds from Sales	$	—	$	45,473
Gross Gains on Sales	—		567
Income Taxes on Gross Gains	—		198

	Nine Months Ended		Nine Months Ended
	September 30, 2015		September 30, 2014
Proceeds from Sales	$	18,999	$	52,711
Gross Gains on Sales	725		1,039
Income Taxes on Gross Gains	254		364

Below is a summary of securities with unrealized losses as of September 30, 2015 and December 31, 2014, presented by length of time the securities have been in a continuous unrealized loss position:

	Less than 12 Months					12 Months or More					Total
September 30, 2015	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss
U.S. Treasury and Agency Securities	$	—	$	—		$	9,970	$	(30	)	$	9,970	$	(30	)
Obligations of State and Political Subdivisions	32,447		(356		)	353		(6		)	32,800		(362		)
Mortgage-backed Securities - Residential	50,786		(236		)	136,030		(2,129		)	186,816		(2,365		)
Equity Securities	—		—			—		—			—		—
Total	$	83,233	$	(592	)	$	146,353	$	(2,165	)	$	229,586	$	(2,757	)

	Less than 12 Months					12 Months or More					Total
December 31, 2014	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss
U.S. Treasury and Agency Securities	$	—	$	—		$	19,561	$	(439	)	$	19,561	$	(439	)
Obligations of State and Political Subdivisions	3,765		(25		)	4,298		(34		)	8,063		(59		)
Mortgage-backed Securities - Residential	26,606		(191		)	209,679		(4,829		)	236,285		(5,020		)
Equity Securities	—		—			—		—			—		—
Total	$	30,371	$	(216	)	$	233,538	$	(5,302	)	$	263,909	$	(5,518	)

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, which may be at maturity.  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.

XML

Fair Value (Assets and Liabilities Measured at Fair Value on Non-Recurring Basis) (Details) - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014
Impaired Loans | Commercial and Industrial Loans and Leases
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value Assets	$ 426	$ 0
Impaired Loans | Commercial Real Estate Loans
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value Assets	1,386	1,504
Impaired Loans | Agricultural Loans
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value Assets	0	0
Other Real Estate | Commercial Real Estate
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value Assets	0	68
Quoted Prices in Active Markets for Identical Assets (Level 1) | Impaired Loans | Commercial and Industrial Loans and Leases
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value Assets	0	0
Quoted Prices in Active Markets for Identical Assets (Level 1) | Impaired Loans | Commercial Real Estate Loans
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value Assets	0	0
Quoted Prices in Active Markets for Identical Assets (Level 1) | Impaired Loans | Agricultural Loans
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value Assets	0	0
Quoted Prices in Active Markets for Identical Assets (Level 1) | Other Real Estate | Commercial Real Estate
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value Assets	0	0
Significant Other Observable Inputs (Level 2) | Impaired Loans | Commercial and Industrial Loans and Leases
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value Assets	0	0
Significant Other Observable Inputs (Level 2) | Impaired Loans | Commercial Real Estate Loans
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value Assets	0	0
Significant Other Observable Inputs (Level 2) | Impaired Loans | Agricultural Loans
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value Assets	0	0
Significant Other Observable Inputs (Level 2) | Other Real Estate | Commercial Real Estate
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value Assets	0	0
Significant Unobservable Inputs (Level 3) | Impaired Loans | Commercial and Industrial Loans and Leases
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value Assets	426	0
Significant Unobservable Inputs (Level 3) | Impaired Loans | Commercial Real Estate Loans
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value Assets	1,386	1,504
Significant Unobservable Inputs (Level 3) | Impaired Loans | Agricultural Loans
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value Assets	0	0
Significant Unobservable Inputs (Level 3) | Other Real Estate | Commercial Real Estate
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value Assets	$ 0	$ 68

XML

Loans (Schedule of Recorded Investment in Nonaccrual Loans) (Details) - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014
Financing Receivable, Recorded Investment, Past Due [Line Items]
Non-Accrual	$ 5,326	$ 5,970
Loans Past Due 90 Days or More & Still Accruing	10	143
Commercial and Industrial Loans and Leases
Financing Receivable, Recorded Investment, Past Due [Line Items]
Non-Accrual	680	161
Loans Past Due 90 Days or More & Still Accruing	10	68
Commercial Real Estate Loans
Financing Receivable, Recorded Investment, Past Due [Line Items]
Non-Accrual	3,077	3,460
Loans Past Due 90 Days or More & Still Accruing	0	0
Agricultural Loans
Financing Receivable, Recorded Investment, Past Due [Line Items]
Non-Accrual	0	0
Loans Past Due 90 Days or More & Still Accruing	0	75
Home Equity Loans
Financing Receivable, Recorded Investment, Past Due [Line Items]
Non-Accrual	226	268
Loans Past Due 90 Days or More & Still Accruing	0	0
Consumer Loans
Financing Receivable, Recorded Investment, Past Due [Line Items]
Non-Accrual	94	196
Loans Past Due 90 Days or More & Still Accruing	0	0
Residential Mortgage Loans
Financing Receivable, Recorded Investment, Past Due [Line Items]
Non-Accrual	1,249	1,885
Loans Past Due 90 Days or More & Still Accruing	0	0
Loans Acquired With Deteriorated Credit Quality (Included in the Total Above)
Financing Receivable, Recorded Investment, Past Due [Line Items]
Non-Accrual	71	1,154
Loans Past Due 90 Days or More & Still Accruing	$ 0	$ 0

XML

Per Share Data (Computations of Basic Earnings Per Share and Diluted Earnings Per Share) (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Basic Earnings per Share:
NET INCOME	$ 7,721	$ 7,708	$ 22,352	$ 20,700
Weighted Average Shares Outstanding	13,265,893	13,210,395	13,247,954	13,200,025
Basic Earnings per Share (USD per share)	$ 0.58	$ 0.58	$ 1.69	$ 1.57
Diluted Earnings per Share:
NET INCOME	$ 7,721	$ 7,708	$ 22,352	$ 20,700
Weighted Average Shares Outstanding	13,265,893	13,210,395	13,247,954	13,200,025
Potentially Dilutive Shares, Net	7,617	20,280	7,556	20,975
Diluted Weighted Average Shares Outstanding	13,273,510	13,230,675	13,255,510	13,221,000
Diluted Earnings per Share (USD per share)	$ 0.58	$ 0.58	$ 1.69	$ 1.57

XML

Other Comprehensive Income (Loss) (Tables)

9 Months Ended

Sep. 30, 2015

Equity [Abstract]

Schedule of Accumulated Other Comprehensive Income (Loss)

The tables below summarize the changes in accumulated other comprehensive income (loss) by component for the three and nine months ended September 30, 2015 and 2014, net of tax:

September 30, 2015	Unrealized Gains and Losses on Available-for-Sale Securities		Defined Benefit Pension Items		Postretirement Benefit Items			Total
Beginning Balance at July 1, 2015	$	491	$	—	$	(68	)	$	423
Other Comprehensive Income (Loss) Before Reclassification	4,161		—		—			4,161
Amounts Reclassified from Accumulated Other Comprehensive Income (Loss)	—		—		—			—
Net Current Period Other Comprehensive Income (Loss)	4,161		—		—			4,161
Ending Balance at September 30, 2015	$	4,652	$	—	$	(68	)	$	4,584

	Unrealized Gains and Losses on Available-for-Sale Securities			Defined Benefit Pension Items		Postretirement Benefit Items			Total
Beginning Balance at January 1, 2015	$	2,958		$	—	$	(68	)	$	2,890
Other Comprehensive Income (Loss) Before Reclassification	2,165			—		—			2,165
Amounts Reclassified from Accumulated Other Comprehensive Income (Loss)	(471		)	—		—			(471		)
Net Current Period Other Comprehensive Income (Loss)	1,694			—		—			1,694
Ending Balance at September 30, 2015	$	4,652		$	—	$	(68	)	$	4,584

September 30, 2014	Unrealized Gains and Losses on Available-for-Sale Securities			Defined Benefit Pension Items		Postretirement Benefit Items			Total
Beginning Balance at July 1, 2014	$	(130	)	$	—	$	(32	)	$	(162	)
Other Comprehensive Income (Loss) Before Reclassification	577			—		—			577
Amounts Reclassified from Accumulated Other Comprehensive Income (Loss)	(369		)	—		—			(369		)
Net Current Period Other Comprehensive Income (Loss)	208			—		—			208
Ending Balance at September 30, 2014	$	78		$	—	$	(32	)	$	46

	Unrealized Gains and Losses on Available-for-Sale Securities			Defined Benefit Pension Items		Postretirement Benefit Items			Total
Beginning Balance at January 1, 2014	$	(5,231	)	$	—	$	(32	)	$	(5,263	)
Other Comprehensive Income (Loss) Before Reclassification	5,984			—		—			5,984
Amounts Reclassified from Accumulated Other Comprehensive Income (Loss)	(675		)	—		—			(675		)
Net Current Period Other Comprehensive Income (Loss)	5,309			—		—			5,309
Ending Balance at September 30, 2014	$	78		$	—	$	(32	)	$	46

Classifications Out of Accumulated Other Comprehensive Income (Loss)

The tables below summarize the reclassifications out of accumulated other comprehensive income (loss) by component for the three and nine months ended September 30, 2015 and 2014:

Details about Accumulated Other Comprehensive Income (Loss) Components	Amount Reclassified From Accumulated Other Comprehensive Income (Loss)		Affected Line Item in the Statement Where Net Income is Presented
Unrealized Gains and Losses on Available-for-Sale Securities	$	—	Net Gain (Loss) on Securities
	—		Income Tax Expense
	—		Net of Tax
Total Reclassifications for the Three Months Ended September 30, 2015	$	—

Details about Accumulated Other Comprehensive Income (Loss) Components	Amount Reclassified From Accumulated Other Comprehensive Income (Loss)			Affected Line Item in the Statement Where Net Income is Presented
Unrealized Gains and Losses on Available-for-Sale Securities	$	725		Net Gain (Loss) on Securities
	(254		)	Income Tax Expense
	471			Net of Tax
Total Reclassifications for the Nine Months Ended September 30, 2015	$	471

Details about Accumulated Other Comprehensive Income (Loss) Components	Amount Reclassified From Accumulated Other Comprehensive Income (Loss)			Affected Line Item in the Statement Where Net Income is Presented
Unrealized Gains and Losses on Available-for-Sale Securities	$	567		Net Gain (Loss) on Securities
	(198		)	Income Tax Expense
	369			Net of Tax
Total Reclassifications for the Three Months Ended September 30, 2014	$	369

Details about Accumulated Other Comprehensive Income (Loss) Components	Amount Reclassified From Accumulated Other Comprehensive Income (Loss)			Affected Line Item in the Statement Where Net Income is Presented
Unrealized Gains and Losses on Available-for-Sale Securities	$	1,039		Net Gain (Loss) on Securities
	(364		)	Income Tax Expense
	675			Net of Tax
Total Reclassifications for the Nine Months Ended September 30, 2014	$	675

XML

Segment Information (Segment Financial Information) (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014	Dec. 31, 2014
Segment Reporting Information [Line Items]
Net Interest Income	$ 18,859	$ 18,791	$ 56,114	$ 55,308
Net Gains on Sales of Loans	831	613	2,364	1,475
Net Gains on Securities	0	567	725	1,039
Trust and Investment Product Fees	1,051	901	2,974	2,728
Insurance Revenues	1,752	1,739	5,812	5,777
Noncash Items:
Provision for Loan Losses	(500)	0	0	550
Depreciation and Amortization	1,047	1,189	3,254	3,611
Income Tax Expense (Benefit)	2,429	3,438	8,668	8,967
Segment Profit (Loss)	7,721	7,708	22,352	20,700
Segment Assets	2,313,210		2,313,210		$ 2,237,099
Core Banking
Segment Reporting Information [Line Items]
Net Interest Income	18,961	18,908	56,402	55,655
Net Gains on Sales of Loans	831	613	2,364	1,475
Net Gains on Securities	0	567	698	1,039
Trust and Investment Product Fees	1	2	3	4
Insurance Revenues	8	15	19	20
Noncash Items:
Provision for Loan Losses	(500)	0	0	550
Depreciation and Amortization	980	1,120	3,045	3,395
Income Tax Expense (Benefit)	2,571	3,496	8,709	8,940
Segment Profit (Loss)	7,702	7,540	21,650	19,908
Segment Assets	2,307,765		2,307,765		2,242,456
Trust and Investment Advisory Services
Segment Reporting Information [Line Items]
Net Interest Income	0	4	8	12
Net Gains on Sales of Loans	0	0	0	0
Net Gains on Securities	0	0	0	0
Trust and Investment Product Fees	1,053	899	2,974	2,724
Insurance Revenues	15	22	33	33
Noncash Items:
Provision for Loan Losses	0	0	0	0
Depreciation and Amortization	2	5	15	18
Income Tax Expense (Benefit)	(1)	(15)	(13)	(122)
Segment Profit (Loss)	(14)	(30)	(47)	(202)
Segment Assets	1,493		1,493		11,401
Insurance
Segment Reporting Information [Line Items]
Net Interest Income	2	1	4	3
Net Gains on Sales of Loans	0	0	0	0
Net Gains on Securities	0	0	0	0
Trust and Investment Product Fees	0	0	0	0
Insurance Revenues	1,729	1,702	5,760	5,724
Noncash Items:
Provision for Loan Losses	0	0	0	0
Depreciation and Amortization	27	26	81	85
Income Tax Expense (Benefit)	84	147	576	747
Segment Profit (Loss)	140	216	874	1,078
Segment Assets	7,410		7,410		6,429
Other
Segment Reporting Information [Line Items]
Net Interest Income	(104)	(122)	(300)	(362)
Net Gains on Sales of Loans	0	0	0	0
Net Gains on Securities	0	0	27	0
Trust and Investment Product Fees	(3)	0	(3)	0
Insurance Revenues	0	0	0	0
Noncash Items:
Provision for Loan Losses	0	0	0	0
Depreciation and Amortization	38	38	113	113
Income Tax Expense (Benefit)	(225)	(190)	(604)	(598)
Segment Profit (Loss)	(107)	$ (18)	(125)	$ (84)
Segment Assets	$ (3,458)		$ (3,458)		$ (23,187)

XML

Loans (Schedule of Aging of Recorded Investment in Past Due Loans) (Details) - USD ($) $ in Thousands	Sep. 30, 2015		Dec. 31, 2014
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Loans	$ 1,523,370	[1],[2]	$ 1,457,768	[3],[4]
Loans Past Due	6,455	[2]	6,942	[4]
Loans Not Past Due	1,516,915	[2]	1,450,826	[4]
Accrued interest	6,085		5,778
Commercial and Industrial Loans and Leases
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Loans	405,920	[1]	380,851	[3]
Loans Past Due	556		776
Loans Not Past Due	405,364		380,075
Commercial Real Estate Loans
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Loans	601,996	[1]	584,426	[3]
Loans Past Due	1,249		1,267
Loans Not Past Due	600,747		583,159
Agricultural Loans
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Loans	239,672	[1]	219,640	[3]
Loans Past Due	0		100
Loans Not Past Due	239,672		219,540
Home Equity Loans
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Loans	91,178	[1]	86,570	[3]
Loans Past Due	635		469
Loans Not Past Due	90,543		86,101
Consumer Loans
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Loans	47,602	[1]	48,732	[3]
Loans Past Due	563		235
Loans Not Past Due	47,039		48,497
Residential Mortgage Loans
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Loans	137,002	[1]	137,549	[3]
Loans Past Due	3,452		4,095
Loans Not Past Due	133,550		133,454
30-59 Days Past Due
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans Past Due	3,355	[2]	3,532	[4]
30-59 Days Past Due | Commercial and Industrial Loans and Leases
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans Past Due	444		628
30-59 Days Past Due | Commercial Real Estate Loans
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans Past Due	0		504
30-59 Days Past Due | Agricultural Loans
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans Past Due	0		25
30-59 Days Past Due | Home Equity Loans
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans Past Due	364		197
30-59 Days Past Due | Consumer Loans
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans Past Due	409		132
30-59 Days Past Due | Residential Mortgage Loans
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans Past Due	2,138		2,046
60-89 Days Past Due
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans Past Due	398	[2]	371	[4]
60-89 Days Past Due | Commercial and Industrial Loans and Leases
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans Past Due	44		0
60-89 Days Past Due | Commercial Real Estate Loans
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans Past Due	39		10
60-89 Days Past Due | Agricultural Loans
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans Past Due	0		0
60-89 Days Past Due | Home Equity Loans
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans Past Due	45		4
60-89 Days Past Due | Consumer Loans
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans Past Due	60		28
60-89 Days Past Due | Residential Mortgage Loans
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans Past Due	210		329
90 Days or More Past Due
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans Past Due	2,702	[2]	3,039	[4]
90 Days or More Past Due | Commercial and Industrial Loans and Leases
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans Past Due	68		148
90 Days or More Past Due | Commercial Real Estate Loans
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans Past Due	1,210		753
90 Days or More Past Due | Agricultural Loans
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans Past Due	0		75
90 Days or More Past Due | Home Equity Loans
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans Past Due	226		268
90 Days or More Past Due | Consumer Loans
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans Past Due	94		75
90 Days or More Past Due | Residential Mortgage Loans
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans Past Due	1,104		1,720
Receivables Acquired with Deteriorated Credit Quality | Loans Acquired With Deteriorated Credit Quality (Included in the Total Above)
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Loans	6,924		8,361
Loans Past Due	36		648
Loans Not Past Due	6,888		7,713
Receivables Acquired with Deteriorated Credit Quality | 30-59 Days Past Due | Loans Acquired With Deteriorated Credit Quality (Included in the Total Above)
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans Past Due	36		0
Receivables Acquired with Deteriorated Credit Quality | 60-89 Days Past Due | Loans Acquired With Deteriorated Credit Quality (Included in the Total Above)
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans Past Due	0		0
Receivables Acquired with Deteriorated Credit Quality | 90 Days or More Past Due | Loans Acquired With Deteriorated Credit Quality (Included in the Total Above)
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans Past Due	$ 0		$ 648

[1] Total recorded investment in loans includes $6,085 in accrued interest.

[2] Total recorded investment in loans includes $6,085 in accrued interest.

[3] Total recorded investment in loans includes $5,778 in accrued interest.

[4] Total recorded investment in loans includes $5,778 in accrued interest.

XML

Per share Data (Additional Information) (Details) - shares	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Earnings Per Share [Abstract]
Antidilutive securities excluded from computation of earnings per share	0	0	0	0

XML

Securities (Schedule of Securities Available-for-Sale) (Details) - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	$ 617,925	$ 626,383
Gross Unrealized Gains	9,976	10,130
Gross Unrealized Losses	(2,757)	(5,518)
Total Fair Value	625,144	630,995
U.S. Treasury and Agency Securities
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	10,000	20,000
Gross Unrealized Gains	0	0
Gross Unrealized Losses	(30)	(439)
Total Fair Value	9,970	19,561
Obligations of State and Political Subdivisions
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	187,819	147,321
Gross Unrealized Gains	5,885	6,515
Gross Unrealized Losses	(362)	(59)
Total Fair Value	193,342	153,777
Mortgage-backed Securities - Residential
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	419,753	458,709
Gross Unrealized Gains	4,091	3,615
Gross Unrealized Losses	(2,365)	(5,020)
Total Fair Value	421,479	457,304
Equity Securities
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	353	353
Gross Unrealized Gains	0	0
Gross Unrealized Losses	0	0
Total Fair Value	$ 353	$ 353

XML

Per Share Data

9 Months Ended

Sep. 30, 2015

Earnings Per Share [Abstract]

Per Share Data

Per Share Data

The computations of Basic Earnings per Share and Diluted Earnings per Share are as follows:

	Three Months Ended   September 30,
	2015		2014
Basic Earnings per Share:
Net Income	$	7,721	$	7,708
Weighted Average Shares Outstanding	13,265,893		13,210,395
Basic Earnings per Share	$	0.58	$	0.58
Diluted Earnings per Share:
Net Income	$	7,721	$	7,708
Weighted Average Shares Outstanding	13,265,893		13,210,395
Potentially Dilutive Shares, Net	7,617		20,280
Diluted Weighted Average Shares Outstanding	13,273,510		13,230,675
Diluted Earnings per Share	$	0.58	$	0.58

For the three months ended September 30, 2015 and 2014, there were no anti-dilutive shares.

The computations of Basic Earnings per Share and Diluted Earnings per Share are as follows:

	Nine Months Ended   September 30,
	2015		2014
Basic Earnings per Share:
Net Income	$	22,352	$	20,700
Weighted Average Shares Outstanding	13,247,954		13,200,025
Basic Earnings per Share	$	1.69	$	1.57
Diluted Earnings per Share:
Net Income	$	22,352	$	20,700
Weighted Average Shares Outstanding	13,247,954		13,200,025
Potentially Dilutive Shares, Net	7,556		20,975
Diluted Weighted Average Shares Outstanding	13,255,510		13,221,000
Diluted Earnings per Share	$	1.69	$	1.57

For the nine months ended September 30, 2015 and 2014, there were no anti-dilutive shares.

XML

Securities (Schedule of Securities Held-to-Maturity) (Details) - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014
Schedule of Held-to-maturity Securities [Line Items]
Total Carrying Amount	$ 95	$ 184
Fair Value	95	186
Obligations of State and Political Subdivisions
Schedule of Held-to-maturity Securities [Line Items]
Total Carrying Amount	95	184
Gross Unrecognized Gains	0	2
Gross Unrecognized Losses	0	0
Fair Value	$ 95	$ 186

XML

Loans (Schedule of Allowance for Loan Losses) (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Allowance for Loan and Lease Losses [Roll Forward]
Beginning Balance	$ 15,258	$ 15,550	$ 14,929	$ 14,584
Provision for Loan Losses	(500)	0	0	550
Recoveries	90	121	379	1,065
Loans Charged-off	(78)	(79)	(538)	(607)
Ending Balance	14,770	15,592	14,770	15,592
Commercial and Industrial Loans and Leases
Allowance for Loan and Lease Losses [Roll Forward]
Beginning Balance	4,659	5,661	4,627	3,983
Provision for Loan Losses	(337)	(563)	(350)	1,124
Recoveries	16	19	83	97
Loans Charged-off	(5)	0	(27)	(87)
Ending Balance	4,333	5,117	4,333	5,117
Commercial Real Estate Loans
Allowance for Loan and Lease Losses [Roll Forward]
Beginning Balance	7,315	7,199	7,273	8,335
Provision for Loan Losses	(568)	206	(566)	(1,546)
Recoveries	30	55	81	785
Loans Charged-off	0	(6)	(11)	(120)
Ending Balance	6,777	7,454	6,777	7,454
Agricultural Loans
Allowance for Loan and Lease Losses [Roll Forward]
Beginning Balance	1,223	1,016	1,123	946
Provision for Loan Losses	754	156	854	226
Recoveries	0	0	0	0
Loans Charged-off	0	0	0	0
Ending Balance	1,977	1,172	1,977	1,172
Home Equity Loans
Allowance for Loan and Lease Losses [Roll Forward]
Beginning Balance	350	418	246	239
Provision for Loan Losses	(41)	(33)	88	148
Recoveries	2	0	8	42
Loans Charged-off	(2)	(7)	(33)	(51)
Ending Balance	309	378	309	378
Consumer Loans
Allowance for Loan and Lease Losses [Roll Forward]
Beginning Balance	382	326	354	188
Provision for Loan Losses	(105)	77	(65)	296
Recoveries	39	41	193	127
Loans Charged-off	(71)	(65)	(237)	(232)
Ending Balance	245	379	245	379
Residential Mortgage Loans
Allowance for Loan and Lease Losses [Roll Forward]
Beginning Balance	619	435	622	281
Provision for Loan Losses	(172)	(33)	44	229
Recoveries	3	6	14	14
Loans Charged-off	0	(1)	(230)	(117)
Ending Balance	450	407	450	407
Unallocated
Allowance for Loan and Lease Losses [Roll Forward]
Beginning Balance	710	495	684	612
Provision for Loan Losses	(31)	190	(5)	73
Recoveries	0	0	0	0
Loans Charged-off	0	0	0	0
Ending Balance	$ 679	$ 685	$ 679	$ 685

XML

Repurchase Agreements Accounted for as Secured Borrowings (Details) $ in Thousands	Sep. 30, 2015 USD ($)
FHLB Advances and Other Borrowings | Collateralized Mortgage Backed Securities | Maturity Overnight
Transfer of Certain Financial Assets Accounted for as Secured Borrowings [Line Items]
Total repurchased agreement	$ 17,079

XML

CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014
ASSETS
Cash and Due from Banks	$ 39,998	$ 33,481
Federal Funds Sold and Other Short-term Investments	22,140	8,965
Cash and Cash Equivalents	62,138	42,446
Interest-bearing Time Deposits with Banks	100	100
Securities Available-for-Sale, at Fair Value	625,144	630,995
Securities Held-to-Maturity, at Cost (Fair value of $95 and $186 on September 30, 2015 and December 31, 2014, respectively)	95	184
Loans Held-for-Sale, at Fair Value	6,410	6,311
Loans	1,517,285	1,451,990
Less: Unearned Income	(3,705)	(4,008)
Allowance for Loan Losses	(14,770)	(14,929)
Loans, Net	1,498,810	1,433,053
Stock in FHLB of Indianapolis and Other Restricted Stock, at Cost	8,167	7,040
Premises, Furniture and Equipment, Net	37,905	39,930
Other Real Estate	123	356
Goodwill	20,536	20,536
Intangible Assets	1,443	2,074
Company Owned Life Insurance	32,497	32,043
Accrued Interest Receivable and Other Assets	19,842	22,031
TOTAL ASSETS	2,313,210	2,237,099
LIABILITIES
Non-interest-bearing Demand Deposits	418,947	428,016
Interest-bearing Demand, Savings, and Money Market Accounts	1,039,520	1,018,320
Time Deposits	345,368	333,425
Total Deposits	1,803,835	1,779,761
FHLB Advances and Other Borrowings	239,072	206,064
Accrued Interest Payable and Other Liabilities	22,951	22,450
TOTAL LIABILITIES	2,065,858	2,008,275
SHAREHOLDERS’ EQUITY
Preferred Stock, no par value; 500,000 shares authorized, no shares issued	0	0
Common Stock, no par value, $1 stated value; 30,000,000 shares authorized	13,273	13,216
Additional Paid-in Capital	109,839	108,660
Retained Earnings	119,656	104,058
Accumulated Other Comprehensive Income	4,584	2,890
TOTAL SHAREHOLDERS’ EQUITY	247,352	228,824
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$ 2,313,210	$ 2,237,099
End of period shares issued (shares)	13,273,349	13,215,800
End of period shares outstanding (shares)	13,273,349	13,215,800

XML

Loans (Schedule of Recorded Investment of Troubled Debt Restructurings) (Details) - USD ($) $ in Thousands		Sep. 30, 2015	Dec. 31, 2014
Financing Receivable, Modifications [Line Items]
Total		$ 4,035	$ 4,650
Commercial and Industrial Loans and Leases
Financing Receivable, Modifications [Line Items]
Total		1,541	1,809
Commercial Real Estate Loans
Financing Receivable, Modifications [Line Items]
Total		2,494	2,841
Performing
Financing Receivable, Modifications [Line Items]
Total		2,346	2,763
Performing | Commercial and Industrial Loans and Leases
Financing Receivable, Modifications [Line Items]
Total		1,539	1,803
Performing | Commercial Real Estate Loans
Financing Receivable, Modifications [Line Items]
Total		807	960
Non-Accrual
Financing Receivable, Modifications [Line Items]
Total	[1]	1,689	1,887
Non-Accrual | Commercial and Industrial Loans and Leases
Financing Receivable, Modifications [Line Items]
Total	[1]	2	6
Non-Accrual | Commercial Real Estate Loans
Financing Receivable, Modifications [Line Items]
Total	[1]	$ 1,687	$ 1,881

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

XML

CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014
CASH FLOWS FROM OPERATING ACTIVITIES
NET INCOME	$ 22,352	$ 20,700
Adjustments to Reconcile Net Income to Net Cash from Operating Activities:
Net Amortization on Securities	1,869	1,510
Depreciation and Amortization	3,254	3,611
Loans Originated for Sale	(111,296)	(70,603)
Proceeds from Sales of Loans Held-for-Sale	113,472	73,696
Provision for Loan Losses	0	550
Gain on Sale of Loans, net	(2,364)	(1,475)
Gain on Securities, net	(725)	(1,039)
Loss (Gain) on Sales of Other Real Estate and Repossessed Assets	53	(46)
Loss (Gain) on Disposition and Donation of Premises and Equipment	389	28
Increase in Cash Surrender Value of Company Owned Life Insurance	(454)	(631)
Equity Based Compensation	737	482
Change in Assets and Liabilities:
Interest Receivable and Other Assets	2,278	(4,708)
Interest Payable and Other Liabilities	(412)	2,214
Net Cash from Operating Activities	29,153	24,289
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from Maturities, Calls, Redemptions of Securities Available-for-Sale	71,026	62,892
Proceeds from Sales of Securities Available-for-Sale	18,999	52,711
Purchase of Securities Available-for-Sale	(82,711)	(74,247)
Proceeds from Maturities of Securities Held-to-Maturity	89	84
Purchase of Federal Home Loan Bank Stock	(1,127)	(92)
Purchase of Loans	(1,852)	(1,750)
Loans Made to Customers, net of Payments Received	(64,708)	(49,436)
Proceeds from Sales of Other Real Estate	983	1,831
Property and Equipment Expenditures	(886)	(2,492)
Proceeds from Sales of Property and Equipment	0	23
Net Cash from Investing Activities	(60,187)	(10,476)
CASH FLOWS FROM FINANCING ACTIVITIES
Change in Deposits	24,085	(47,658)
Change in Short-term Borrowings	(1,993)	66,977
Advances in Long-term Debt	75,000	20,321
Repayments of Long-term Debt	(40,111)	(20,095)
Issuance of Common Stock	52	50
Employee Stock Purchase Plan	447	(37)
Dividends Paid	(6,754)	(6,336)
Net Cash from Financing Activities	50,726	13,222
Net Change in Cash and Cash Equivalents	19,692	27,035
Cash and Cash Equivalents at Beginning of Year	42,446	60,132
Cash and Cash Equivalents at End of Period	62,138	87,167
Cash Paid During the Year for
Interest	4,610	4,650
Income Taxes	6,219	7,192
Supplemental Non Cash Disclosures
Loans Transferred to Other Real Estate	864	1,277
Securities Sold Pending Settlement	$ 0	$ (3,323)

XML

Equity Plans and Equity Based Compensation (Expense Recorded For Restricted Stock And Cash Entitlements) (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Restricted Stock Expense	$ 227	$ 161	$ 737	$ 482
Cash Entitlement Expense	134	101	438	300
Tax Effect	(146)	(106)	(476)	(317)
Net of Tax	$ 215	$ 156	$ 699	$ 465

XML

Securities (Schedule of Securities with Unrealized Losses) (Details) - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014
Schedule of Available-for-sale Securities [Line Items]
Less than 12 Months Fair Value	$ 83,233	$ 30,371
Less than 12 Months Unrealized Loss	(592)	(216)
12 Months or More Fair Value	146,353	233,538
12 Months or More Unrealized Loss	(2,165)	(5,302)
Total Fair Value	229,586	263,909
Total Unrealized Loss	(2,757)	(5,518)
U.S. Treasury and Agency Securities
Schedule of Available-for-sale Securities [Line Items]
Less than 12 Months Fair Value	0	0
Less than 12 Months Unrealized Loss	0	0
12 Months or More Fair Value	9,970	19,561
12 Months or More Unrealized Loss	(30)	(439)
Total Fair Value	9,970	19,561
Total Unrealized Loss	(30)	(439)
Obligations of State and Political Subdivisions
Schedule of Available-for-sale Securities [Line Items]
Less than 12 Months Fair Value	32,447	3,765
Less than 12 Months Unrealized Loss	(356)	(25)
12 Months or More Fair Value	353	4,298
12 Months or More Unrealized Loss	(6)	(34)
Total Fair Value	32,800	8,063
Total Unrealized Loss	(362)	(59)
Mortgage-backed Securities - Residential
Schedule of Available-for-sale Securities [Line Items]
Less than 12 Months Fair Value	50,786	26,606
Less than 12 Months Unrealized Loss	(236)	(191)
12 Months or More Fair Value	136,030	209,679
12 Months or More Unrealized Loss	(2,129)	(4,829)
Total Fair Value	186,816	236,285
Total Unrealized Loss	(2,365)	(5,020)
Equity Securities
Schedule of Available-for-sale Securities [Line Items]
Less than 12 Months Fair Value	0	0
Less than 12 Months Unrealized Loss	0	0
12 Months or More Fair Value	0	0
12 Months or More Unrealized Loss	0	0
Total Fair Value	0	0
Total Unrealized Loss	$ 0	$ 0

XML

Other Comprehensive Income (Loss) (Schedule of Accumulated Other Comprehensive Income) (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Accumulated Other Comprehensive Income (Loss), Net of Tax [Roll Forward]
Accumulated other comprehensive income, Beginning Balance	$ 423	$ (162)	$ 2,890	$ (5,263)
Other Comprehensive Income (Loss) Before Reclassification	4,161	577	2,165	5,984
Amounts Reclassified from Accumulated Other Comprehensive Income (Loss)	0	(369)	(471)	(675)
Total Other Comprehensive Income (Loss)	4,161	208	1,694	5,309
Accumulated other comprehensive income, Ending Balance	4,584	46	4,584	46
Unrealized Gains and Losses on Available-for-Sale Securities
Accumulated Other Comprehensive Income (Loss), Net of Tax [Roll Forward]
Accumulated other comprehensive income, Beginning Balance	491	(130)	2,958	(5,231)
Other Comprehensive Income (Loss) Before Reclassification	4,161	577	2,165	5,984
Amounts Reclassified from Accumulated Other Comprehensive Income (Loss)	0	(369)	(471)	(675)
Total Other Comprehensive Income (Loss)	4,161	208	1,694	5,309
Accumulated other comprehensive income, Ending Balance	4,652	78	4,652	78
Defined Benefit Pension Items
Accumulated Other Comprehensive Income (Loss), Net of Tax [Roll Forward]
Accumulated other comprehensive income, Beginning Balance	0	0	0	0
Other Comprehensive Income (Loss) Before Reclassification	0	0	0	0
Amounts Reclassified from Accumulated Other Comprehensive Income (Loss)	0	0	0	0
Total Other Comprehensive Income (Loss)	0	0	0	0
Accumulated other comprehensive income, Ending Balance	0	0	0	0
Postretirement Benefit Items
Accumulated Other Comprehensive Income (Loss), Net of Tax [Roll Forward]
Accumulated other comprehensive income, Beginning Balance	(68)	(32)	(68)	(32)
Other Comprehensive Income (Loss) Before Reclassification	0	0	0	0
Amounts Reclassified from Accumulated Other Comprehensive Income (Loss)	0	0	0	0
Total Other Comprehensive Income (Loss)	0	0	0	0
Accumulated other comprehensive income, Ending Balance	$ (68)	$ (32)	$ (68)	$ (32)

XML

Securities (Tables)

9 Months Ended

Sep. 30, 2015

Investments, Debt and Equity 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 at September 30, 2015 and December 31, 2014, were as follows:

Securities Available-for-Sale:	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
September 30, 2015
U.S. Treasury and Agency Securities	$	10,000	$	—	$	(30	)	$	9,970
Obligations of State and Political Subdivisions	187,819		5,885		(362		)	193,342
Mortgage-backed Securities - Residential	419,753		4,091		(2,365		)	421,479
Equity Securities	353		—		—			353
Total	$	617,925	$	9,976	$	(2,757	)	$	625,144
December 31, 2014
U.S. Treasury and Agency Securities	$	20,000	$	—	$	(439	)	$	19,561
Obligations of State and Political Subdivisions	147,321		6,515		(59		)	153,777
Mortgage-backed Securities - Residential	458,709		3,615		(5,020		)	457,304
Equity Securities	353		—		—			353
Total	$	626,383	$	10,130	$	(5,518	)	$	630,995

Schedule of Securities Held-to-Maturity

The carrying amount, unrecognized gains and losses and fair value of Securities Held-to-Maturity at September 30, 2015 and December 31, 2014, were as follows:

Securities Held-to-Maturity:	Carrying Amount		Gross Unrecognized Gains		Gross Unrecognized Losses		Fair Value
September 30, 2015
Obligations of State and Political Subdivisions	$	95	$	—	$	—	$	95
December 31, 2014
Obligations of State and Political Subdivisions	$	184	$	2	$	—	$	186

Schedule of Securities by Contractual Maturity

The amortized cost and fair value of securities at September 30, 2015 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 in the table below.

Securities Available-for-Sale:	Amortized Cost		Fair Value
Due in one year or less	$	7,109	$	7,213
Due after one year through five years	19,186		19,449
Due after five years through ten years	66,484		69,404
Due after ten years	105,040		107,246
Mortgage-backed Securities - Residential	419,753		421,479
Equity Securities	353		353
Total	$	617,925	$	625,144

Securities Held-to-Maturity:	Carrying Amount		Fair Value
Due in one year or less	$	95	$	95
Due after one year through five years	—		—
Due after five years through ten years	—		—
Due after ten years	—		—
Total	$	95	$	95

Schedule of Proceeds from the Sales of Securities

Proceeds from the Sales of Securities are summarized below:

	Three Months Ended		Three Months Ended
	September 30, 2015		September 30, 2014
Proceeds from Sales	$	—	$	45,473
Gross Gains on Sales	—		567
Income Taxes on Gross Gains	—		198

	Nine Months Ended		Nine Months Ended
	September 30, 2015		September 30, 2014
Proceeds from Sales	$	18,999	$	52,711
Gross Gains on Sales	725		1,039
Income Taxes on Gross Gains	254		364

Schedule of Securities with Unrealized Losses

Below is a summary of securities with unrealized losses as of September 30, 2015 and December 31, 2014, presented by length of time the securities have been in a continuous unrealized loss position:

	Less than 12 Months					12 Months or More					Total
September 30, 2015	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss
U.S. Treasury and Agency Securities	$	—	$	—		$	9,970	$	(30	)	$	9,970	$	(30	)
Obligations of State and Political Subdivisions	32,447		(356		)	353		(6		)	32,800		(362		)
Mortgage-backed Securities - Residential	50,786		(236		)	136,030		(2,129		)	186,816		(2,365		)
Equity Securities	—		—			—		—			—		—
Total	$	83,233	$	(592	)	$	146,353	$	(2,165	)	$	229,586	$	(2,757	)

	Less than 12 Months					12 Months or More					Total
December 31, 2014	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss
U.S. Treasury and Agency Securities	$	—	$	—		$	19,561	$	(439	)	$	19,561	$	(439	)
Obligations of State and Political Subdivisions	3,765		(25		)	4,298		(34		)	8,063		(59		)
Mortgage-backed Securities - Residential	26,606		(191		)	209,679		(4,829		)	236,285		(5,020		)
Equity Securities	—		—			—		—			—		—
Total	$	30,371	$	(216	)	$	233,538	$	(5,302	)	$	263,909	$	(5,518	)

XML

Derivatives (Additional Information) (Details) - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014
Interest Rate Swap
Derivatives, Fair Value [Line Items]
Notional amount	$ 31,068	$ 23,104

XML

Loans (Tables)

9 Months Ended

Sep. 30, 2015

Receivables [Abstract]

Components of Loans

Loans were comprised of the following classifications at September 30, 2015 and December 31, 2014: 

	September 30, 2015			December 31, 2014
Commercial:
Commercial and Industrial Loans and Leases	$	404,946		$	380,079
Commercial Real Estate Loans	600,688			583,086
Agricultural Loans	236,619			216,774
Retail:
Home Equity Loans	90,907			86,234
Consumer Loans	47,480			48,613
Residential Mortgage Loans	136,645			137,204
Subtotal	1,517,285			1,451,990
Less: Unearned Income	(3,705		)	(4,008		)
Allowance for Loan Losses	(14,770		)	(14,929		)
Loans, Net	$	1,498,810		$	1,433,053

Schedule of Allowance for Loan Losses

The following table presents the activity in the allowance for loan losses by portfolio class for the three months ending September 30, 2015 and 2014:

September 30, 2015	Commercial and Industrial Loans and Leases			Commercial Real Estate Loans			Agricultural Loans		Home Equity Loans			Consumer Loans			Residential Mortgage Loans			Unallocated			Total
Beginning Balance	$	4,659		$	7,315		$	1,223	$	350		$	382		$	619		$	710		$	15,258
Provision for Loan Losses	(337		)	(568		)	754		(41		)	(105		)	(172		)	(31		)	(500		)
Recoveries	16			30			—		2			39			3			—			90
Loans Charged-off	(5		)	—			—		(2		)	(71		)	—			—			(78		)
Ending Balance	$	4,333		$	6,777		$	1,977	$	309		$	245		$	450		$	679		$	14,770

September 30, 2014	Commercial and Industrial Loans and Leases			Commercial Real Estate Loans			Agricultural Loans		Home Equity Loans			Consumer Loans			Residential Mortgage Loans			Unallocated		Total
Beginning Balance	$	5,661		$	7,199		$	1,016	$	418		$	326		$	435		$	495	$	15,550
Provision for Loan Losses	(563		)	206			156		(33		)	77			(33		)	190		—
Recoveries	19			55			—		—			41			6			—		121
Loans Charged-off	—			(6		)	—		(7		)	(65		)	(1		)	—		(79		)
Ending Balance	$	5,117		$	7,454		$	1,172	$	378		$	379		$	407		$	685	$	15,592

The following table presents the activity in the allowance for loan losses by portfolio class for the nine months ending September 30, 2015 and 2014:

September 30, 2015	Commercial and Industrial Loans and Leases			Commercial Real Estate Loans			Agricultural Loans		Home Equity Loans			Consumer Loans			Residential Mortgage Loans			Unallocated			Total
Beginning Balance	$	4,627		$	7,273		$	1,123	$	246		$	354		$	622		$	684		$	14,929
Provision for Loan Losses	(350		)	(566		)	854		88			(65		)	44			(5		)	—
Recoveries	83			81			—		8			193			14			—			379
Loans Charged-off	(27		)	(11		)	—		(33		)	(237		)	(230		)	—			(538		)
Ending Balance	$	4,333		$	6,777		$	1,977	$	309		$	245		$	450		$	679		$	14,770

September 30, 2014	Commercial and Industrial Loans and Leases			Commercial Real Estate Loans			Agricultural Loans		Home Equity Loans			Consumer Loans			Residential Mortgage Loans			Unallocated		Total
Beginning Balance	$	3,983		$	8,335		$	946	$	239		$	188		$	281		$	612	$	14,584
Provision for Loan Losses	1,124			(1,546		)	226		148			296			229			73		550
Recoveries	97			785			—		42			127			14			—		1,065
Loans Charged-off	(87		)	(120		)	—		(51		)	(232		)	(117		)	—		(607		)
Ending Balance	$	5,117		$	7,454		$	1,172	$	378		$	379		$	407		$	685	$	15,592

Schedule of Allowance for Loan Losses and Recorded Investment in Loans

The following table presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio class and based on impairment method as of September 30, 2015 and December 31, 2014:

September 30, 2015	Total		Commercial and Industrial Loans and Leases		Commercial Real Estate Loans		Agricultural Loans		Home Equity Loans		Consumer Loans		Residential Mortgage Loans		Unallocated
Allowance for Loan Losses:
Ending Allowance Balance Attributable to Loans:
Individually Evaluated for Impairment	$	1,688	$	171	$	1,517	$	—	$	—	$	—	$	—	$	—
Collectively Evaluated for Impairment	13,082		4,162		5,260		1,977		309		245		450		679
Acquired with Deteriorated Credit Quality	—		—		—		—		—		—		—		—
Total Ending Allowance Balance	$	14,770	$	4,333	$	6,777	$	1,977	$	309	$	245	$	450	$	679
Loans:
Loans Individually Evaluated for Impairment	$	6,116	$	2,219	$	3,885	$	12	$	—	$	—	$	—	n/m(2)
Loans Collectively Evaluated for Impairment	1,510,330		403,027		592,735		239,660		91,178		47,602		136,128		n/m(2)
Loans Acquired with Deteriorated Credit Quality	6,924		674		5,376		—		—		—		874		n/m(2)
Total Ending Loans Balance(1)	$	1,523,370	$	405,920	$	601,996	$	239,672	$	91,178	$	47,602	$	137,002	n/m(2)

⁽¹⁾Total recorded investment in loans includes $6,085 in accrued interest.

⁽²⁾n/m = not meaningful

December 31, 2014	Total		Commercial and Industrial Loans and Leases		Commercial Real Estate Loans		Agricultural Loans		Home Equity Loans		Consumer Loans		Residential Mortgage Loans		Unallocated
Allowance for Loan Losses:
Ending Allowance Balance Attributable to Loans:
Individually Evaluated for Impairment	$	1,532	$	87	$	1,445	$	—	$	—	$	—	$	—	$	—
Collectively Evaluated for Impairment	13,343		4,540		5,818		1,123		246		354		578		684
Acquired with Deteriorated Credit Quality	54		—		10		—		—		—		44		—
Total Ending Allowance Balance	$	14,929	$	4,627	$	7,273	$	1,123	$	246	$	354	$	622	$	684
Loans:
Loans Individually Evaluated for Impairment	$	6,044	$	1,964	$	4,080	$	—	$	—	$	—	$	—	n/m(2)
Loans Collectively Evaluated for Impairment	1,443,363		378,533		573,961		219,640		86,570		48,614		136,045		n/m(2)
Loans Acquired with Deteriorated Credit Quality	8,361		354		6,385		—		—		118		1,504		n/m(2)
Total Ending Loans Balance(1)	$	1,457,768	$	380,851	$	584,426	$	219,640	$	86,570	$	48,732	$	137,549	n/m(2)

⁽¹⁾Total recorded investment in loans includes $5,778 in accrued interest.

⁽²⁾n/m = not meaningful

Schedule for Loans Individually Evaluated for Impairment

The following tables present loans individually evaluated for impairment by class of loans as of September 30, 2015 and December 31, 2014:

September 30, 2015	Unpaid Principal Balance(1)		Recorded Investment		Allowance for Loan Losses Allocated
With No Related Allowance Recorded:
Commercial and Industrial Loans and Leases	$	262	$	259	$	—
Commercial Real Estate Loans	1,081		962		—
Agricultural Loans	12		12		—
Subtotal	1,355		1,233		—
With An Allowance Recorded:
Commercial and Industrial Loans and Leases	1,945		1,960		171
Commercial Real Estate Loans	3,584		2,923		1,517
Agricultural Loans	—		—		—
Subtotal	5,529		4,883		1,688
Total	$	6,884	$	6,116	$	1,688
Loans Acquired With Deteriorated Credit Quality With No Related Allowance Recorded (Included in the Total Above)	$	530	$	—	$	—
Loans Acquired With Deteriorated Credit Quality With An Additional Allowance Recorded (Included in the Total Above)	$	—	$	—	$	—

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

December 31, 2014	Unpaid Principal Balance(1)		Recorded Investment		Allowance for Loan Losses Allocated
With No Related Allowance Recorded:
Commercial and Industrial Loans and Leases	$	1,887	$	1,877	$	—
Commercial Real Estate Loans	1,944		1,447		—
Agricultural Loans	—		—		—
Subtotal	3,831		3,324		—
With An Allowance Recorded:
Commercial and Industrial Loans and Leases	84		87		87
Commercial Real Estate Loans	3,653		2,975		1,455
Agricultural Loans	—		—		—
Subtotal	3,737		3,062		1,542
Total	$	7,568	$	6,386	$	1,542
Loans Acquired With Deteriorated Credit Quality With No Related Allowance Recorded (Included in the Total Above)	$	289	$	133	$	—
Loans Acquired With Deteriorated Credit Quality With An Additional Allowance Recorded (Included in the Total Above)	$	759	$	209	$	10

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

The following tables present loans individually evaluated for impairment by class of loans for the three month period ended September 30, 2015 and 2014:

September 30, 2015	Average Recorded Investment		Interest Income Recognized		Cash Basis Recognized
With No Related Allowance Recorded:
Commercial and Industrial Loans and Leases	$	366	$	12	$	12
Commercial Real Estate Loans	1,008		11		11
Agricultural Loans	12		1		1
Subtotal	1,386		24		24
With An Allowance Recorded:
Commercial and Industrial Loans and Leases	1,974		22		22
Commercial Real Estate Loans	3,067		2		1
Agricultural Loans	—		—		—
Subtotal	5,041		24		23
Total	$	6,427	$	48	$	47
Loans Acquired With Deteriorated Credit Quality With No Related Allowance Recorded (Included in the Total Above)	$	127	$	—	$	—
Loans Acquired With Deteriorated Credit Quality With An Additional Allowance Recorded (Included in the Total Above)	$	—	$	—	$	—

September 30, 2014	Average Recorded Investment		Interest Income Recognized		Cash Basis Recognized
With No Related Allowance Recorded:
Commercial and Industrial Loans and Leases	$	2,005	$	29	$	30
Commercial Real Estate Loans	2,384		18		21
Agricultural Loans	—		—		—
Subtotal	4,389		47		51
With An Allowance Recorded:
Commercial and Industrial Loans and Leases	211		1		1
Commercial Real Estate Loans	2,643		4		3
Agricultural Loans	—		—		—
Subtotal	2,854		5		4
Total	$	7,243	$	52	$	55
Loans Acquired With Deteriorated Credit Quality With No Related Allowance Recorded (Included in the Total Above)	$	773	$	—	$	—
Loans Acquired With Deteriorated Credit Quality With An Additional Allowance Recorded (Included in the Total Above)	$	31	$	1	$	1

The following tables present loans individually evaluated for impairment by class of loans for the nine month period ended September 30, 2015 and 2014:

September 30, 2015	Average Recorded Investment		Interest Income Recognized		Cash Basis Recognized
With No Related Allowance Recorded:
Commercial and Industrial Loans and Leases	$	471	$	24	$	24
Commercial Real Estate Loans	1,228		92		92
Agricultural Loans	8		1		1
Subtotal	1,707		117		117
With An Allowance Recorded:
Commercial and Industrial Loans and Leases	1,821		68		68
Commercial Real Estate Loans	3,093		3		2
Agricultural Loans	—		—		—
Subtotal	4,914		71		70
Total	$	6,621	$	188	$	187
Loans Acquired With Deteriorated Credit Quality With No Related Allowance Recorded (Included in the Total Above)	$	237	$	—	$	—
Loans Acquired With Deteriorated Credit Quality With An Additional Allowance Recorded (Included in the Total Above)	$	—	$	—	$	—

September 30, 2014	Average Recorded Investment		Interest Income Recognized		Cash Basis Recognized
With No Related Allowance Recorded:
Commercial and Industrial Loans and Leases	$	2,106	$	105	$	107
Commercial Real Estate Loans	2,714		73		70
Agricultural Loans	—		—		—
Subtotal	4,820		178		177
With An Allowance Recorded:
Commercial and Industrial Loans and Leases	1,600		1		1
Commercial Real Estate Loans	3,158		16		13
Agricultural Loans	—		—		—
Subtotal	4,758		17		14
Total	$	9,578	$	195	$	191
Loans Acquired With Deteriorated Credit Quality With No Related Allowance Recorded (Included in the Total Above)	$	873	$	3	$	3
Loans Acquired With Deteriorated Credit Quality With An Additional Allowance Recorded (Included in the Total Above)	$	32	$	1	$	1

Schedule of Recorded Investment in Nonaccrual Loans

The following tables present the recorded investment in non-accrual loans and loans past due 90 days or more still on accrual by class of loans as of September 30, 2015 and December 31, 2014:

	Non-Accrual				Loans Past Due 90 Days or More & Still Accruing
	2015		2014		2015		2014
Commercial and Industrial Loans and Leases	$	680	$	161	$	10	$	68
Commercial Real Estate Loans	3,077		3,460		—		—
Agricultural Loans	—		—		—		75
Home Equity Loans	226		268		—		—
Consumer Loans	94		196		—		—
Residential Mortgage Loans	1,249		1,885		—		—
Total	$	5,326	$	5,970	$	10	$	143
Loans Acquired With Deteriorated Credit Quality (Included in the Total Above)	$	71	$	1,154	$	—	$	—

Schedule of Aging of Recorded Investment in Past Due Loans

The following tables present the aging of the recorded investment in past due loans by class of loans as of September 30, 2015 and December 31, 2014:

September 30, 2015	Total		30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		Total Past Due		Loans Not Past Due
Commercial and Industrial Loans and Leases	$	405,920	$	444	$	44	$	68	$	556	$	405,364
Commercial Real Estate Loans	601,996		—		39		1,210		1,249		600,747
Agricultural Loans	239,672		—		—		—		—		239,672
Home Equity Loans	91,178		364		45		226		635		90,543
Consumer Loans	47,602		409		60		94		563		47,039
Residential Mortgage Loans	137,002		2,138		210		1,104		3,452		133,550
Total(1)	$	1,523,370	$	3,355	$	398	$	2,702	$	6,455	$	1,516,915
Loans Acquired With Deteriorated Credit Quality (Included in the Total Above)	$	6,924	$	36	$	—	$	—	$	36	$	6,888

⁽¹⁾Total recorded investment in loans includes $6,085 in accrued interest.

December 31, 2014	Total		30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		Total Past Due		Loans Not Past Due
Commercial and Industrial Loans and Leases	$	380,851	$	628	$	—	$	148	$	776	$	380,075
Commercial Real Estate Loans	584,426		504		10		753		1,267		583,159
Agricultural Loans	219,640		25		—		75		100		219,540
Home Equity Loans	86,570		197		4		268		469		86,101
Consumer Loans	48,732		132		28		75		235		48,497
Residential Mortgage Loans	137,549		2,046		329		1,720		4,095		133,454
Total(1)	$	1,457,768	$	3,532	$	371	$	3,039	$	6,942	$	1,450,826
Loans Acquired With Deteriorated Credit Quality (Included in the Total Above)	$	8,361	$	—	$	—	$	648	$	648	$	7,713

⁽¹⁾Total recorded investment in loans includes $5,778 in accrued interest.

Schedule of Recorded Investment of Troubled Debt Restructurings

The following tables present the recorded investment of troubled debt restructurings by class of loans as of September 30, 2015 and December 31, 2014:

September 30, 2015	Total		Performing		Non-Accrual(1)
Commercial and Industrial Loans and Leases	$	1,541	$	1,539	$	2
Commercial Real Estate Loans	2,494		807		1,687
Total	$	4,035	$	2,346	$	1,689

December 31, 2014	Total		Performing		Non-Accrual(1)
Commercial and Industrial Loans and Leases	$	1,809	$	1,803	$	6
Commercial Real Estate Loans	2,841		960		1,881
Total	$	4,650	$	2,763	$	1,887

⁽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 tables present loans by class modified as troubled debt restructurings that occurred during the three months ending September 30, 2015 and 2014:

September 30, 2015	Number of Loans	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Commercial and Industrial Loans and Leases	—	$	—	$	—
Commercial Real Estate Loans	—	—		—
Total	—	$	—	$	—

The troubled debt restructurings described above increased the allowance for loan losses by $0 and resulted in charge-offs of $0 during the three months ending September 30, 2015.

September 30, 2014	Number of Loans	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Commercial and Industrial Loans and Leases	—	$	—	$	—
Commercial Real Estate Loans	—	—		—
Total	—	$	—	$	—

The troubled debt restructurings described above increased the allowance for loan losses by $0 and resulted in charge-offs of $0 during the three months ending September 30, 2014.

The following tables present loans by class modified as troubled debt restructurings that occurred during the nine months ending September 30, 2015 and 2014:

September 30, 2015	Number of Loans	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Commercial and Industrial Loans and Leases	—	$	—	$	—
Commercial Real Estate Loans	—	—		—
Total	—	$	—	$	—

The troubled debt restructurings described above increased the allowance for loan losses by $0 and resulted in charge-offs of $0 during the nine months ending September 30, 2015.

September 30, 2014	Number of Loans	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Commercial and Industrial Loans and Leases	—	$	—	$	—
Commercial Real Estate Loans	1	201		197
Total	1	$	201	$	197

The troubled debt restructurings described above increased the allowance for loan losses by $0 and resulted in charge-offs of $0 during the nine months ending September 30, 2014.

Schedule of Troubled Debt Restructuring, Subsequently Defaulted

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 three months ending September 30, 2015 and 2014:

Troubled Debt Restructurings That Subsequently Defaulted:	Number of Loans	Recorded Investment
September 30, 2015
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 three months ending September 30, 2015.

Troubled Debt Restructurings That Subsequently Defaulted:	Number of Loans	Recorded Investment
September 30, 2014
Commercial and Industrial Loans and Leases	—	$	—
Commercial Real Estate Loans	1	186
Total	1	$	186

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 three months ending September 30, 2014.

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 nine months ending September 30, 2015 and 2014:

Troubled Debt Restructurings That Subsequently Defaulted:	Number of Loans	Recorded Investment
September 30, 2015
Commercial and Industrial Loans and Leases	—	$	—
Commercial Real Estate Loans	1	95
Total	1	$	95

The troubled debt restructurings that subsequently defaulted described above resulted in no change to the allowance for loan losses and charge-offs of $95 during the nine months ending September 30, 2015.

Troubled Debt Restructurings That Subsequently Defaulted:	Number of Loans	Recorded Investment
September 30, 2014
Commercial and Industrial Loans and Leases	—	$	—
Commercial Real Estate Loans	1	186
Total	1	$	186

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 nine months ending September 30, 2014.

Schedule of Risk Category of Loans

Based on the most recent analysis performed, the risk category of loans by class of loans is as follows:

September 30, 2015	Pass		Special Mention		Substandard		Doubtful		Total
Commercial and Industrial Loans and Leases	$	377,189	$	16,682	$	12,049	$	—	$	405,920
Commercial Real Estate Loans	565,396		23,879		12,721		—		601,996
Agricultural Loans	232,762		6,809		101		—		239,672
Total	$	1,175,347	$	47,370	$	24,871	$	—	$	1,247,588
Loans Acquired With Deteriorated Credit Quality (Included in the Total Above)	$	926	$	1,723	$	3,401	$	—	$	6,050

December 31, 2014	Pass		Special Mention		Substandard		Doubtful		Total
Commercial and Industrial Loans and Leases	$	351,250	$	18,387	$	11,214	$	—	$	380,851
Commercial Real Estate Loans	545,804		23,421		15,201		—		584,426
Agricultural Loans	214,974		4,211		455		—		219,640
Total	$	1,112,028	$	46,019	$	26,870	$	—	$	1,184,917
Loans Acquired With Deteriorated Credit Quality (Included in the Total Above)	$	651	$	1,697	$	4,391	$	—	$	6,739

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 September 30, 2015 and December 31, 2014:

September 30, 2015	Home Equity Loans		Consumer Loans		Residential Mortgage Loans
Performing	$	90,952	$	47,508	$	135,753
Nonperforming	226		94		1,249
Total	$	91,178	$	47,602	$	137,002
Loans Acquired With Deteriorated Credit Quality (Included in the Total Above)	$	—	$	—	$	874

December 31, 2014	Home Equity Loans		Consumer Loans		Residential Mortgage Loans
Performing	$	86,302	$	48,536	$	135,664
Nonperforming	268		196		1,885
Total	$	86,570	$	48,732	$	137,549
Loans Acquired With Deteriorated Credit Quality (Included in the Total Above)	$	—	$	118	$	1,504

Schedule of Carrying Amount of Loans with Deterioration of Credit Quality

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 is as follows: 

	September 30, 2015		December 31, 2014
Commercial and Industrial Loans	$	674	$	354
Commercial Real Estate Loans	5,376		6,385
Home Equity Loans	—		—
Consumer Loans	—		118
Residential Mortgage Loans	874		1,504
Total	$	6,924	$	8,361
Carrying Amount, Net of Allowance	$	6,924	$	8,307

Schedule of Accretable Yield, or Income Expected to be Collected

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

	2015			2014
Balance at July 1	$	1,680		$	1,126
New Loans Purchased	—			—
Accretion of Income	(251		)	(89		)
Reclassifications from Non-accretable Difference	—			—
Charge-off of Accretable Yield	—			(113		)
Balance at September 30	$	1,429		$	924

	2015			2014
Balance at January 1	$	1,685		$	1,279
New Loans Purchased	—			—
Accretion of Income	(333		)	(242		)
Reclassifications from Non-accretable Difference	104			—
Charge-off of Accretable Yield	(27		)	(113		)
Balance at September 30	$	1,429		$	924

XML

Subsequent Events (Details) $ / shares in Units, $ in Thousands		3 Months Ended			9 Months Ended
	Oct. 22, 2015 $ / shares	Mar. 31, 2016 USD ($) $ / shares shares	Sep. 30, 2015 USD ($) office	Sep. 30, 2014 USD ($)	Sep. 30, 2015 USD ($) office	Sep. 30, 2014 USD ($)	Oct. 26, 2015 office	Dec. 31, 2014 USD ($)
Subsequent Event [Line Items]
Number of offices | office			37		37
Assets			$ 2,313,210		$ 2,313,210			$ 2,237,099
Equity			247,352		247,352			$ 228,824
NET INCOME			7,721	$ 7,708	22,352	$ 20,700
River Valley
Subsequent Event [Line Items]
Assets			513,700		513,700
Equity			$ 55,600		55,600
NET INCOME					$ 4,300
River Valley | Subsequent Event
Subsequent Event [Line Items]
Number of offices | office							14
Volume weighted average price per share, number of days	20 days
Present indicated value (USD per share) | $ / shares	$ 33.00
Scenario, Forecast | River Valley
Subsequent Event [Line Items]
Number of the Company's common stock for each share of RIVR converted | shares		0.770
Cash portion, cash per share for RIVR common stock converted (USD per share) | $ / shares		$ 9.90
Shares of common stock issued for acquisition		$ 1,940
Cash paid for acquisition		25,000
Aggregate indicated value		83,500
Cash payments for cancellation of stock options		$ 500
Common Stock | Weighted Average | Subsequent Event
Subsequent Event [Line Items]
Share price (USD per share) | $ / shares	$ 30.02

XML

Basis of Presentation

9 Months Ended

Sep. 30, 2015

Accounting Policies [Abstract]

Basis of Presentation

Basis of Presentation

German American Bancorp, Inc. operates primarily in the banking industry. The accounting and reporting policies of German American Bancorp, Inc. and its subsidiaries (hereinafter collectively referred to as the "Company") conform to U.S. generally accepted accounting principles. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted. All adjustments which are, in the opinion of management, necessary for a fair presentation of the results for the periods reported have been included in the accompanying unaudited consolidated financial statements, and all such adjustments are of a normal recurring nature. It is suggested that these consolidated financial statements and notes be read in conjunction with the financial statements and notes thereto in the Company's Annual Report on Form 10-K for the year ended December 31, 2014. Certain items included in the prior period financial statements were reclassified to conform to the current presentation. There was no effect on net income or total shareholder’s equity based on these reclassifications.

XML

CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014
Statement of Financial Position [Abstract]
Securities Held-to-Maturity, Fair value	$ 95	$ 186
Preferred Stock, shares authorized (shares)	500,000	500,000
Preferred Stock, shares issued (shares)	0	0
Common Stock, stated value (USD per share)	$ 1	$ 1
Common Stock, shares authorized (shares)	30,000,000	30,000,000

XML

Other Comprehensive Income (Loss)

9 Months Ended

Sep. 30, 2015

Equity [Abstract]

Other Comprehensive Income (Loss)

Other Comprehensive Income (Loss)

The tables below summarize the changes in accumulated other comprehensive income (loss) by component for the three and nine months ended September 30, 2015 and 2014, net of tax:

September 30, 2015	Unrealized Gains and Losses on Available-for-Sale Securities		Defined Benefit Pension Items		Postretirement Benefit Items			Total
Beginning Balance at July 1, 2015	$	491	$	—	$	(68	)	$	423
Other Comprehensive Income (Loss) Before Reclassification	4,161		—		—			4,161
Amounts Reclassified from Accumulated Other Comprehensive Income (Loss)	—		—		—			—
Net Current Period Other Comprehensive Income (Loss)	4,161		—		—			4,161
Ending Balance at September 30, 2015	$	4,652	$	—	$	(68	)	$	4,584

	Unrealized Gains and Losses on Available-for-Sale Securities			Defined Benefit Pension Items		Postretirement Benefit Items			Total
Beginning Balance at January 1, 2015	$	2,958		$	—	$	(68	)	$	2,890
Other Comprehensive Income (Loss) Before Reclassification	2,165			—		—			2,165
Amounts Reclassified from Accumulated Other Comprehensive Income (Loss)	(471		)	—		—			(471		)
Net Current Period Other Comprehensive Income (Loss)	1,694			—		—			1,694
Ending Balance at September 30, 2015	$	4,652		$	—	$	(68	)	$	4,584

September 30, 2014	Unrealized Gains and Losses on Available-for-Sale Securities			Defined Benefit Pension Items		Postretirement Benefit Items			Total
Beginning Balance at July 1, 2014	$	(130	)	$	—	$	(32	)	$	(162	)
Other Comprehensive Income (Loss) Before Reclassification	577			—		—			577
Amounts Reclassified from Accumulated Other Comprehensive Income (Loss)	(369		)	—		—			(369		)
Net Current Period Other Comprehensive Income (Loss)	208			—		—			208
Ending Balance at September 30, 2014	$	78		$	—	$	(32	)	$	46

	Unrealized Gains and Losses on Available-for-Sale Securities			Defined Benefit Pension Items		Postretirement Benefit Items			Total
Beginning Balance at January 1, 2014	$	(5,231	)	$	—	$	(32	)	$	(5,263	)
Other Comprehensive Income (Loss) Before Reclassification	5,984			—		—			5,984
Amounts Reclassified from Accumulated Other Comprehensive Income (Loss)	(675		)	—		—			(675		)
Net Current Period Other Comprehensive Income (Loss)	5,309			—		—			5,309
Ending Balance at September 30, 2014	$	78		$	—	$	(32	)	$	46

The tables below summarize the reclassifications out of accumulated other comprehensive income (loss) by component for the three and nine months ended September 30, 2015 and 2014:

Details about Accumulated Other Comprehensive Income (Loss) Components	Amount Reclassified From Accumulated Other Comprehensive Income (Loss)		Affected Line Item in the Statement Where Net Income is Presented
Unrealized Gains and Losses on Available-for-Sale Securities	$	—	Net Gain (Loss) on Securities
	—		Income Tax Expense
	—		Net of Tax
Total Reclassifications for the Three Months Ended September 30, 2015	$	—

Details about Accumulated Other Comprehensive Income (Loss) Components	Amount Reclassified From Accumulated Other Comprehensive Income (Loss)			Affected Line Item in the Statement Where Net Income is Presented
Unrealized Gains and Losses on Available-for-Sale Securities	$	725		Net Gain (Loss) on Securities
	(254		)	Income Tax Expense
	471			Net of Tax
Total Reclassifications for the Nine Months Ended September 30, 2015	$	471

Details about Accumulated Other Comprehensive Income (Loss) Components	Amount Reclassified From Accumulated Other Comprehensive Income (Loss)			Affected Line Item in the Statement Where Net Income is Presented
Unrealized Gains and Losses on Available-for-Sale Securities	$	567		Net Gain (Loss) on Securities
	(198		)	Income Tax Expense
	369			Net of Tax
Total Reclassifications for the Three Months Ended September 30, 2014	$	369

Details about Accumulated Other Comprehensive Income (Loss) Components	Amount Reclassified From Accumulated Other Comprehensive Income (Loss)			Affected Line Item in the Statement Where Net Income is Presented
Unrealized Gains and Losses on Available-for-Sale Securities	$	1,039		Net Gain (Loss) on Securities
	(364		)	Income Tax Expense
	675			Net of Tax
Total Reclassifications for the Nine Months Ended September 30, 2014	$	675

XML

Document And Entity Information - shares	9 Months Ended
	Sep. 30, 2015	Nov. 01, 2015
Document and Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 30, 2015
Document Fiscal Year Focus	2015
Document Fiscal Period Focus	Q3
Trading Symbol	GABC
Entity Common Stock, Shares Outstanding		13,275,678
Entity Registrant Name	GERMAN AMERICAN BANCORP, INC.
Entity Central Index Key	0000714395
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer

XML

Newly Issued Accounting Pronouncements

9 Months Ended

Sep. 30, 2015

New Accounting Pronouncements and Changes in Accounting Principles [Abstract]

Newly Issued Accounting Pronouncements

Newly Issued Accounting Pronouncements

In January 2014, the FASB amended existing guidance clarifying that an in substance repossession or foreclosure occurs, and a creditor is considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan, upon either (1) the creditor obtaining legal title to the residential real estate property upon completion of a foreclosure or (2) the borrower conveying all interest in the residential real estate property to the creditor to satisfy that loan through completion of a deed in lieu of foreclosure or through a similar legal agreement. Additionally, the amendments require interim and annual disclosure of both (1) the amount of foreclosed residential real estate property held by the creditor and (2) the recorded investment in consumer mortgage loans collateralized by residential real estate property that are in the process of foreclosure according to local requirements of the applicable jurisdiction. The amendments in this update are effective for public business entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2014. This update did not have a material impact on the Company's consolidated financial statements.

In January 2014, the FASB issued guidance for accounting for investments in qualified affordable housing projects. The new guidance allows a limited liability investor that meets certain conditions to use the proportional amortization methods. Under the proportional amortization method, an entity amortizes the initial cost of the investment in proportion to the tax credits and other tax benefits received and recognizes the net investment performance in the income statement as a component of income tax expense (benefit).

The Company adopted the proportional amortization method of accounting for its low income housing investments in the first quarter of 2015. The Company quantified the impact of adopting the proportional amortization method compared to the equity method to its current year and prior period financial statements. The Company determined that the adoption of the proportional amortization method did not have a material impact to its consolidated financial statements; therefore, the Company did not adjust its prior period consolidated financial statements. The low income housing investment losses, net of the tax benefits received, are included in income tax expense on the consolidated statements of income for the three and nine months ended September 30, 2015. At September 30, 2015 and December 31, 2014, the Company had investments in qualified housing projects totaling $5.8 million and $6.1 million, respectively. These investments are reported in the Accrued Interest Receivable and Other Assets line of the Consolidated Balance Sheet. The Company had an unfunded investment in qualified affordable housing investments of $4.4 million at September 30, 2015 and $4.8 million at December 31, 2014, which are reported in the Accrued Interest Payable and Other Liabilities line of the Consolidated Balance Sheet. For the three months ended September 30, 2015, the Company recognized $42 of low income housing investment tax credit through the income tax line of the Consolidated Statements of Income. The Company recognized $38 of low income housing investment losses net of tax credits during nine months ended September 30, 2015 through the income tax line of the Consolidated Statements of Income. Of this amount, $161 was due to the adoption of the proportional amortization method. For the third quarter and nine months ended September 30, 2014, the Company recognized $22 and $65 in the Other Operating Expense line, respectively, and $35 and $105 benefit in the Income Tax Expense line, respectively, of the Consolidated Statements of Income.

XML

CONSOLIDATED STATEMENTS OF INCOME - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
INTEREST INCOME
Interest and Fees on Loans	$ 16,702	$ 16,680	$ 49,538	$ 48,766
Interest on Federal Funds Sold and Other Short-term Investments	3	2	10	8
Interest and Dividends on Securities:
Taxable	2,176	2,531	6,830	7,944
Non-taxable	1,538	1,135	4,219	3,136
TOTAL INTEREST INCOME	20,419	20,348	60,597	59,854
INTEREST EXPENSE
Interest on Deposits	987	1,025	3,002	3,098
Interest on FHLB Advances and Other Borrowings	573	532	1,481	1,448
TOTAL INTEREST EXPENSE	1,560	1,557	4,483	4,546
NET INTEREST INCOME	18,859	18,791	56,114	55,308
Provision for Loan Losses	(500)	0	0	550
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES	19,359	18,791	56,114	54,758
NON-INTEREST INCOME
Trust and Investment Product Fees	1,051	901	2,974	2,728
Service Charges on Deposit Accounts	1,237	1,300	3,594	3,552
Insurance Revenues	1,752	1,739	5,812	5,777
Company Owned Life Insurance	205	210	617	603
Interchange Fee Income	547	508	1,593	1,467
Other Operating Income	2,134	599	3,341	1,579
Net Gains on Sales of Loans	831	613	2,364	1,475
Net Gains on Securities	0	567	725	1,039
TOTAL NON-INTEREST INCOME	7,757	6,437	21,020	18,220
NON-INTEREST EXPENSE
Salaries and Employee Benefits	8,998	7,975	26,082	24,285
Occupancy Expense	1,305	1,262	3,732	3,776
Furniture and Equipment Expense	456	463	1,417	1,472
FDIC Premiums	284	277	850	828
Data Processing Fees	901	935	2,608	2,892
Professional Fees	787	516	2,073	1,761
Advertising and Promotion	2,198	613	3,125	1,635
Intangible Amortization	183	302	630	975
Other Operating Expenses	1,854	1,739	5,597	5,687
TOTAL NON-INTEREST EXPENSE	16,966	14,082	46,114	43,311
Income before Income Taxes	10,150	11,146	31,020	29,667
Income Tax Expense	2,429	3,438	8,668	8,967
NET INCOME	$ 7,721	$ 7,708	$ 22,352	$ 20,700
Basic Earnings Per Share (USD per share)	$ 0.58	$ 0.58	$ 1.69	$ 1.57
Diluted Earnings Per Share (USD per share)	0.58	0.58	1.69	1.57
Dividends Per Share (USD per share)	$ 0.17	$ 0.16	$ 0.51	$ 0.48

XML

Repurchase Agreements Accounted for as Secured Borrowings

9 Months Ended

Sep. 30, 2015

Transfers and Servicing [Abstract]

Repurchase Agreements Accounted for as Secured Borrowings

Repurchase Agreements Accounted for as Secured Borrowings

Repurchase agreements are short term borrowings included in FHLB Advances and Other Borrowings and mature overnight and continuously. Repurchase agreements totaled $17,079 as of September 30, 2015 and were secured by mortgage-backed securities. Risk could arise when the collateral pledged to repurchase agreement declines in fair value. The Company minimizes risk by consistently monitoring the value of the collateral pledged. At the point in time where the collateral has declined in fair value, the Company is required to provide additional collateral based on the value of the underlying securities.

XML

Loans

9 Months Ended

Sep. 30, 2015

Receivables [Abstract]

Loans

Loans

Loans were comprised of the following classifications at September 30, 2015 and December 31, 2014: 

	September 30, 2015			December 31, 2014
Commercial:
Commercial and Industrial Loans and Leases	$	404,946		$	380,079
Commercial Real Estate Loans	600,688			583,086
Agricultural Loans	236,619			216,774
Retail:
Home Equity Loans	90,907			86,234
Consumer Loans	47,480			48,613
Residential Mortgage Loans	136,645			137,204
Subtotal	1,517,285			1,451,990
Less: Unearned Income	(3,705		)	(4,008		)
Allowance for Loan Losses	(14,770		)	(14,929		)
Loans, Net	$	1,498,810		$	1,433,053

The following table presents the activity in the allowance for loan losses by portfolio class for the three months ending September 30, 2015 and 2014:

September 30, 2015	Commercial and Industrial Loans and Leases			Commercial Real Estate Loans			Agricultural Loans		Home Equity Loans			Consumer Loans			Residential Mortgage Loans			Unallocated			Total
Beginning Balance	$	4,659		$	7,315		$	1,223	$	350		$	382		$	619		$	710		$	15,258
Provision for Loan Losses	(337		)	(568		)	754		(41		)	(105		)	(172		)	(31		)	(500		)
Recoveries	16			30			—		2			39			3			—			90
Loans Charged-off	(5		)	—			—		(2		)	(71		)	—			—			(78		)
Ending Balance	$	4,333		$	6,777		$	1,977	$	309		$	245		$	450		$	679		$	14,770

September 30, 2014	Commercial and Industrial Loans and Leases			Commercial Real Estate Loans			Agricultural Loans		Home Equity Loans			Consumer Loans			Residential Mortgage Loans			Unallocated		Total
Beginning Balance	$	5,661		$	7,199		$	1,016	$	418		$	326		$	435		$	495	$	15,550
Provision for Loan Losses	(563		)	206			156		(33		)	77			(33		)	190		—
Recoveries	19			55			—		—			41			6			—		121
Loans Charged-off	—			(6		)	—		(7		)	(65		)	(1		)	—		(79		)
Ending Balance	$	5,117		$	7,454		$	1,172	$	378		$	379		$	407		$	685	$	15,592

The following table presents the activity in the allowance for loan losses by portfolio class for the nine months ending September 30, 2015 and 2014:

September 30, 2015	Commercial and Industrial Loans and Leases			Commercial Real Estate Loans			Agricultural Loans		Home Equity Loans			Consumer Loans			Residential Mortgage Loans			Unallocated			Total
Beginning Balance	$	4,627		$	7,273		$	1,123	$	246		$	354		$	622		$	684		$	14,929
Provision for Loan Losses	(350		)	(566		)	854		88			(65		)	44			(5		)	—
Recoveries	83			81			—		8			193			14			—			379
Loans Charged-off	(27		)	(11		)	—		(33		)	(237		)	(230		)	—			(538		)
Ending Balance	$	4,333		$	6,777		$	1,977	$	309		$	245		$	450		$	679		$	14,770

September 30, 2014	Commercial and Industrial Loans and Leases			Commercial Real Estate Loans			Agricultural Loans		Home Equity Loans			Consumer Loans			Residential Mortgage Loans			Unallocated		Total
Beginning Balance	$	3,983		$	8,335		$	946	$	239		$	188		$	281		$	612	$	14,584
Provision for Loan Losses	1,124			(1,546		)	226		148			296			229			73		550
Recoveries	97			785			—		42			127			14			—		1,065
Loans Charged-off	(87		)	(120		)	—		(51		)	(232		)	(117		)	—		(607		)
Ending Balance	$	5,117		$	7,454		$	1,172	$	378		$	379		$	407		$	685	$	15,592

In determining the adequacy of the allowance for loan loss, 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 historical averages for loan losses for these portfolios, judgmentally adjusted for current economic factors and portfolio trends.  Overall the allowance for loan and lease losses was increased in the agricultural sector as a result of qualitative considerations for current economic conditions and trends.

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 table presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio class and based on impairment method as of September 30, 2015 and December 31, 2014:

September 30, 2015	Total		Commercial and Industrial Loans and Leases		Commercial Real Estate Loans		Agricultural Loans		Home Equity Loans		Consumer Loans		Residential Mortgage Loans		Unallocated
Allowance for Loan Losses:
Ending Allowance Balance Attributable to Loans:
Individually Evaluated for Impairment	$	1,688	$	171	$	1,517	$	—	$	—	$	—	$	—	$	—
Collectively Evaluated for Impairment	13,082		4,162		5,260		1,977		309		245		450		679
Acquired with Deteriorated Credit Quality	—		—		—		—		—		—		—		—
Total Ending Allowance Balance	$	14,770	$	4,333	$	6,777	$	1,977	$	309	$	245	$	450	$	679
Loans:
Loans Individually Evaluated for Impairment	$	6,116	$	2,219	$	3,885	$	12	$	—	$	—	$	—	n/m(2)
Loans Collectively Evaluated for Impairment	1,510,330		403,027		592,735		239,660		91,178		47,602		136,128		n/m(2)
Loans Acquired with Deteriorated Credit Quality	6,924		674		5,376		—		—		—		874		n/m(2)
Total Ending Loans Balance(1)	$	1,523,370	$	405,920	$	601,996	$	239,672	$	91,178	$	47,602	$	137,002	n/m(2)

⁽¹⁾Total recorded investment in loans includes $6,085 in accrued interest.

⁽²⁾n/m = not meaningful

December 31, 2014	Total		Commercial and Industrial Loans and Leases		Commercial Real Estate Loans		Agricultural Loans		Home Equity Loans		Consumer Loans		Residential Mortgage Loans		Unallocated
Allowance for Loan Losses:
Ending Allowance Balance Attributable to Loans:
Individually Evaluated for Impairment	$	1,532	$	87	$	1,445	$	—	$	—	$	—	$	—	$	—
Collectively Evaluated for Impairment	13,343		4,540		5,818		1,123		246		354		578		684
Acquired with Deteriorated Credit Quality	54		—		10		—		—		—		44		—
Total Ending Allowance Balance	$	14,929	$	4,627	$	7,273	$	1,123	$	246	$	354	$	622	$	684
Loans:
Loans Individually Evaluated for Impairment	$	6,044	$	1,964	$	4,080	$	—	$	—	$	—	$	—	n/m(2)
Loans Collectively Evaluated for Impairment	1,443,363		378,533		573,961		219,640		86,570		48,614		136,045		n/m(2)
Loans Acquired with Deteriorated Credit Quality	8,361		354		6,385		—		—		118		1,504		n/m(2)
Total Ending Loans Balance(1)	$	1,457,768	$	380,851	$	584,426	$	219,640	$	86,570	$	48,732	$	137,549	n/m(2)

⁽¹⁾Total recorded investment in loans includes $5,778 in accrued interest.

⁽²⁾n/m = not meaningful

The following tables present loans individually evaluated for impairment by class of loans as of September 30, 2015 and December 31, 2014:

September 30, 2015	Unpaid Principal Balance(1)		Recorded Investment		Allowance for Loan Losses Allocated
With No Related Allowance Recorded:
Commercial and Industrial Loans and Leases	$	262	$	259	$	—
Commercial Real Estate Loans	1,081		962		—
Agricultural Loans	12		12		—
Subtotal	1,355		1,233		—
With An Allowance Recorded:
Commercial and Industrial Loans and Leases	1,945		1,960		171
Commercial Real Estate Loans	3,584		2,923		1,517
Agricultural Loans	—		—		—
Subtotal	5,529		4,883		1,688
Total	$	6,884	$	6,116	$	1,688
Loans Acquired With Deteriorated Credit Quality With No Related Allowance Recorded (Included in the Total Above)	$	530	$	—	$	—
Loans Acquired With Deteriorated Credit Quality With An Additional Allowance Recorded (Included in the Total Above)	$	—	$	—	$	—

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

December 31, 2014	Unpaid Principal Balance(1)		Recorded Investment		Allowance for Loan Losses Allocated
With No Related Allowance Recorded:
Commercial and Industrial Loans and Leases	$	1,887	$	1,877	$	—
Commercial Real Estate Loans	1,944		1,447		—
Agricultural Loans	—		—		—
Subtotal	3,831		3,324		—
With An Allowance Recorded:
Commercial and Industrial Loans and Leases	84		87		87
Commercial Real Estate Loans	3,653		2,975		1,455
Agricultural Loans	—		—		—
Subtotal	3,737		3,062		1,542
Total	$	7,568	$	6,386	$	1,542
Loans Acquired With Deteriorated Credit Quality With No Related Allowance Recorded (Included in the Total Above)	$	289	$	133	$	—
Loans Acquired With Deteriorated Credit Quality With An Additional Allowance Recorded (Included in the Total Above)	$	759	$	209	$	10

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

The following tables present loans individually evaluated for impairment by class of loans for the three month period ended September 30, 2015 and 2014:

September 30, 2015	Average Recorded Investment		Interest Income Recognized		Cash Basis Recognized
With No Related Allowance Recorded:
Commercial and Industrial Loans and Leases	$	366	$	12	$	12
Commercial Real Estate Loans	1,008		11		11
Agricultural Loans	12		1		1
Subtotal	1,386		24		24
With An Allowance Recorded:
Commercial and Industrial Loans and Leases	1,974		22		22
Commercial Real Estate Loans	3,067		2		1
Agricultural Loans	—		—		—
Subtotal	5,041		24		23
Total	$	6,427	$	48	$	47
Loans Acquired With Deteriorated Credit Quality With No Related Allowance Recorded (Included in the Total Above)	$	127	$	—	$	—
Loans Acquired With Deteriorated Credit Quality With An Additional Allowance Recorded (Included in the Total Above)	$	—	$	—	$	—

September 30, 2014	Average Recorded Investment		Interest Income Recognized		Cash Basis Recognized
With No Related Allowance Recorded:
Commercial and Industrial Loans and Leases	$	2,005	$	29	$	30
Commercial Real Estate Loans	2,384		18		21
Agricultural Loans	—		—		—
Subtotal	4,389		47		51
With An Allowance Recorded:
Commercial and Industrial Loans and Leases	211		1		1
Commercial Real Estate Loans	2,643		4		3
Agricultural Loans	—		—		—
Subtotal	2,854		5		4
Total	$	7,243	$	52	$	55
Loans Acquired With Deteriorated Credit Quality With No Related Allowance Recorded (Included in the Total Above)	$	773	$	—	$	—
Loans Acquired With Deteriorated Credit Quality With An Additional Allowance Recorded (Included in the Total Above)	$	31	$	1	$	1

The following tables present loans individually evaluated for impairment by class of loans for the nine month period ended September 30, 2015 and 2014:

September 30, 2015	Average Recorded Investment		Interest Income Recognized		Cash Basis Recognized
With No Related Allowance Recorded:
Commercial and Industrial Loans and Leases	$	471	$	24	$	24
Commercial Real Estate Loans	1,228		92		92
Agricultural Loans	8		1		1
Subtotal	1,707		117		117
With An Allowance Recorded:
Commercial and Industrial Loans and Leases	1,821		68		68
Commercial Real Estate Loans	3,093		3		2
Agricultural Loans	—		—		—
Subtotal	4,914		71		70
Total	$	6,621	$	188	$	187
Loans Acquired With Deteriorated Credit Quality With No Related Allowance Recorded (Included in the Total Above)	$	237	$	—	$	—
Loans Acquired With Deteriorated Credit Quality With An Additional Allowance Recorded (Included in the Total Above)	$	—	$	—	$	—

September 30, 2014	Average Recorded Investment		Interest Income Recognized		Cash Basis Recognized
With No Related Allowance Recorded:
Commercial and Industrial Loans and Leases	$	2,106	$	105	$	107
Commercial Real Estate Loans	2,714		73		70
Agricultural Loans	—		—		—
Subtotal	4,820		178		177
With An Allowance Recorded:
Commercial and Industrial Loans and Leases	1,600		1		1
Commercial Real Estate Loans	3,158		16		13
Agricultural Loans	—		—		—
Subtotal	4,758		17		14
Total	$	9,578	$	195	$	191
Loans Acquired With Deteriorated Credit Quality With No Related Allowance Recorded (Included in the Total Above)	$	873	$	3	$	3
Loans Acquired With Deteriorated Credit Quality With An Additional Allowance Recorded (Included in the Total Above)	$	32	$	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 tables present the recorded investment in non-accrual loans and loans past due 90 days or more still on accrual by class of loans as of September 30, 2015 and December 31, 2014:

	Non-Accrual				Loans Past Due 90 Days or More & Still Accruing
	2015		2014		2015		2014
Commercial and Industrial Loans and Leases	$	680	$	161	$	10	$	68
Commercial Real Estate Loans	3,077		3,460		—		—
Agricultural Loans	—		—		—		75
Home Equity Loans	226		268		—		—
Consumer Loans	94		196		—		—
Residential Mortgage Loans	1,249		1,885		—		—
Total	$	5,326	$	5,970	$	10	$	143
Loans Acquired With Deteriorated Credit Quality (Included in the Total Above)	$	71	$	1,154	$	—	$	—

The following tables present the aging of the recorded investment in past due loans by class of loans as of September 30, 2015 and December 31, 2014:

September 30, 2015	Total		30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		Total Past Due		Loans Not Past Due
Commercial and Industrial Loans and Leases	$	405,920	$	444	$	44	$	68	$	556	$	405,364
Commercial Real Estate Loans	601,996		—		39		1,210		1,249		600,747
Agricultural Loans	239,672		—		—		—		—		239,672
Home Equity Loans	91,178		364		45		226		635		90,543
Consumer Loans	47,602		409		60		94		563		47,039
Residential Mortgage Loans	137,002		2,138		210		1,104		3,452		133,550
Total(1)	$	1,523,370	$	3,355	$	398	$	2,702	$	6,455	$	1,516,915
Loans Acquired With Deteriorated Credit Quality (Included in the Total Above)	$	6,924	$	36	$	—	$	—	$	36	$	6,888

⁽¹⁾Total recorded investment in loans includes $6,085 in accrued interest.

December 31, 2014	Total		30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		Total Past Due		Loans Not Past Due
Commercial and Industrial Loans and Leases	$	380,851	$	628	$	—	$	148	$	776	$	380,075
Commercial Real Estate Loans	584,426		504		10		753		1,267		583,159
Agricultural Loans	219,640		25		—		75		100		219,540
Home Equity Loans	86,570		197		4		268		469		86,101
Consumer Loans	48,732		132		28		75		235		48,497
Residential Mortgage Loans	137,549		2,046		329		1,720		4,095		133,454
Total(1)	$	1,457,768	$	3,532	$	371	$	3,039	$	6,942	$	1,450,826
Loans Acquired With Deteriorated Credit Quality (Included in the Total Above)	$	8,361	$	—	$	—	$	648	$	648	$	7,713

⁽¹⁾Total recorded investment in loans includes $5,778 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 three months ended September 30, 2015 and 2014, there were no new troubled debt restructurings. During the nine months ended September 30, 2015, there were no new troubled debt restructurings. During the nine months ended September 30, 2014, there was one loan modified as a troubled debt restructurings. The modification of the terms of this loan included a permanent reduction of the recorded investment in the loan.

The following tables present the recorded investment of troubled debt restructurings by class of loans as of September 30, 2015 and December 31, 2014:

September 30, 2015	Total		Performing		Non-Accrual(1)
Commercial and Industrial Loans and Leases	$	1,541	$	1,539	$	2
Commercial Real Estate Loans	2,494		807		1,687
Total	$	4,035	$	2,346	$	1,689

December 31, 2014	Total		Performing		Non-Accrual(1)
Commercial and Industrial Loans and Leases	$	1,809	$	1,803	$	6
Commercial Real Estate Loans	2,841		960		1,881
Total	$	4,650	$	2,763	$	1,887

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

The Company had not committed to lending any additional amounts as of September 30, 2015 and December 31, 2014 to customers with outstanding loans that are classified as troubled debt restructurings.

The following tables present loans by class modified as troubled debt restructurings that occurred during the three months ending September 30, 2015 and 2014:

September 30, 2015	Number of Loans	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Commercial and Industrial Loans and Leases	—	$	—	$	—
Commercial Real Estate Loans	—	—		—
Total	—	$	—	$	—

The troubled debt restructurings described above increased the allowance for loan losses by $0 and resulted in charge-offs of $0 during the three months ending September 30, 2015.

September 30, 2014	Number of Loans	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Commercial and Industrial Loans and Leases	—	$	—	$	—
Commercial Real Estate Loans	—	—		—
Total	—	$	—	$	—

The troubled debt restructurings described above increased the allowance for loan losses by $0 and resulted in charge-offs of $0 during the three months ending September 30, 2014.

The following tables present loans by class modified as troubled debt restructurings that occurred during the nine months ending September 30, 2015 and 2014:

September 30, 2015	Number of Loans	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Commercial and Industrial Loans and Leases	—	$	—	$	—
Commercial Real Estate Loans	—	—		—
Total	—	$	—	$	—

The troubled debt restructurings described above increased the allowance for loan losses by $0 and resulted in charge-offs of $0 during the nine months ending September 30, 2015.

September 30, 2014	Number of Loans	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Commercial and Industrial Loans and Leases	—	$	—	$	—
Commercial Real Estate Loans	1	201		197
Total	1	$	201	$	197

The troubled debt restructurings described above increased the allowance for loan losses by $0 and resulted in charge-offs of $0 during the nine months ending September 30, 2014.

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 three months ending September 30, 2015 and 2014:

Troubled Debt Restructurings That Subsequently Defaulted:	Number of Loans	Recorded Investment
September 30, 2015
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 three months ending September 30, 2015.

Troubled Debt Restructurings That Subsequently Defaulted:	Number of Loans	Recorded Investment
September 30, 2014
Commercial and Industrial Loans and Leases	—	$	—
Commercial Real Estate Loans	1	186
Total	1	$	186

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 three months ending September 30, 2014.

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 nine months ending September 30, 2015 and 2014:

Troubled Debt Restructurings That Subsequently Defaulted:	Number of Loans	Recorded Investment
September 30, 2015
Commercial and Industrial Loans and Leases	—	$	—
Commercial Real Estate Loans	1	95
Total	1	$	95

The troubled debt restructurings that subsequently defaulted described above resulted in no change to the allowance for loan losses and charge-offs of $95 during the nine months ending September 30, 2015.

Troubled Debt Restructurings That Subsequently Defaulted:	Number of Loans	Recorded Investment
September 30, 2014
Commercial and Industrial Loans and Leases	—	$	—
Commercial Real Estate Loans	1	186
Total	1	$	186

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 nine months ending September 30, 2014.

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:

September 30, 2015	Pass		Special Mention		Substandard		Doubtful		Total
Commercial and Industrial Loans and Leases	$	377,189	$	16,682	$	12,049	$	—	$	405,920
Commercial Real Estate Loans	565,396		23,879		12,721		—		601,996
Agricultural Loans	232,762		6,809		101		—		239,672
Total	$	1,175,347	$	47,370	$	24,871	$	—	$	1,247,588
Loans Acquired With Deteriorated Credit Quality (Included in the Total Above)	$	926	$	1,723	$	3,401	$	—	$	6,050

December 31, 2014	Pass		Special Mention		Substandard		Doubtful		Total
Commercial and Industrial Loans and Leases	$	351,250	$	18,387	$	11,214	$	—	$	380,851
Commercial Real Estate Loans	545,804		23,421		15,201		—		584,426
Agricultural Loans	214,974		4,211		455		—		219,640
Total	$	1,112,028	$	46,019	$	26,870	$	—	$	1,184,917
Loans Acquired With Deteriorated Credit Quality (Included in the Total Above)	$	651	$	1,697	$	4,391	$	—	$	6,739

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 September 30, 2015 and December 31, 2014:

September 30, 2015	Home Equity Loans		Consumer Loans		Residential Mortgage Loans
Performing	$	90,952	$	47,508	$	135,753
Nonperforming	226		94		1,249
Total	$	91,178	$	47,602	$	137,002
Loans Acquired With Deteriorated Credit Quality (Included in the Total Above)	$	—	$	—	$	874

December 31, 2014	Home Equity Loans		Consumer Loans		Residential Mortgage Loans
Performing	$	86,302	$	48,536	$	135,664
Nonperforming	268		196		1,885
Total	$	86,570	$	48,732	$	137,549
Loans Acquired With Deteriorated Credit Quality (Included in the Total Above)	$	—	$	118	$	1,504

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 is as follows: 

	September 30, 2015		December 31, 2014
Commercial and Industrial Loans	$	674	$	354
Commercial Real Estate Loans	5,376		6,385
Home Equity Loans	—		—
Consumer Loans	—		118
Residential Mortgage Loans	874		1,504
Total	$	6,924	$	8,361
Carrying Amount, Net of Allowance	$	6,924	$	8,307

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

	2015			2014
Balance at July 1	$	1,680		$	1,126
New Loans Purchased	—			—
Accretion of Income	(251		)	(89		)
Reclassifications from Non-accretable Difference	—			—
Charge-off of Accretable Yield	—			(113		)
Balance at September 30	$	1,429		$	924

	2015			2014
Balance at January 1	$	1,685		$	1,279
New Loans Purchased	—			—
Accretion of Income	(333		)	(242		)
Reclassifications from Non-accretable Difference	104			—
Charge-off of Accretable Yield	(27		)	(113		)
Balance at September 30	$	1,429		$	924

For those purchased loans disclosed above, the Company did not increase the allowance for loan losses during the three and nine months ended September 30, 2015 and 2014. No allowances for loan losses were reversed during the same period.

The carrying amount of consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceedings are in process according to local requirements of the applicable jurisdiction totaled $123 as of September 30, 2015 and $288 as of December 31, 2014.

XML

Derivatives (Tables)

9 Months Ended

Sep. 30, 2015

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments And Hedging Activities

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

	September 30, 2015				December 31, 2014
	Notional Amount		Fair Value		Notional Amount		Fair Value
Included in Other Assets:
Interest Rate Swaps	$	31,068	$	1,433	$	23,104	$	507
Included in Other Liabilities:
Interest Rate Swaps	$	31,068	$	1,462	$	23,104	$	508

Derivative Instruments Consolidated Statement

The following tables present the effect of derivative instruments on the Consolidated Statements of Income for the periods presented:

	Three Months Ended   September 30,					Nine Months Ended   September 30,
	2015		2014			2015		2014
Interest Rate Swaps:
Included in Interest Income / (Expense)	$	—	$	—		$	—	$	—
Included in Other Income / (Expense)	179		(4		)	344		74

XML

Subsequent Events

9 Months Ended

Sep. 30, 2015

Subsequent Events [Abstract]

Subsequent Events

Subsequent Events

On October 26, 2015 the Company entered into a definitive agreement to acquire River Valley Bancorp (“RIVR”), through the merger of RIVR with and into the Company, and the merger of RIVR’s sole banking subsidiary, River Valley Financial Bank, into the Company’s subsidiary bank, German American Bancorp. River Valley Bank operates 14 banking offices in Southeast Indiana. RIVR’s assets and equity (unaudited) as of September 30, 2015 totaled $513.7 million and $55.6 million, respectively. Net income (unaudited) totaled $4.3 million for the nine month period ended September 30, 2015.

Under the terms of the proposed merger, the shareholders of RIVR would receive 0.770 shares of common stock of the Company and $9.90 of cash for each of their RIVR shares. Based upon the $30.02 per share 20-day volume weighted average price of the Company’s common shares on October 22, 2015 (the valuation upon which the exchange ratio was established) the transaction had a present indicated value of approximately $33.00 per RIVR common share. Because the value of the transaction to holders of RIVR common shares as of any future date will in large part be a function of the then-current market price of the Company’s common stock, the transaction value is expected to vary over the period of time prior to and at closing in the same direction as the market price of the Company’s common shares varies over that same time period.

Based on RIVR’s number of common shares outstanding at the time of entering into the definitive agreement, the Company expects to issue approximately 1.94 million shares of its common stock, and pay approximately $25 million in cash, in exchange for all of the issued and outstanding common shares of RIVR. On this basis, the basic transaction has an aggregate indicated value (valuing the German American’s common shares at the 20-day volume weighted average price ending on October 22, 2015, NASDAQ closing price) of approximately $83.5 million. The basic transaction value also includes approximately $500,000 in cash payments to be made in cancellation of stock options.

The proposed merger is subject to the approval by shareholders of RIVR, approval of the appropriate bank regulatory agencies and other conditions customary for transactions of this nature. It is contemplated that the merger will be consummated in the first quarter of 2016.

XML

Equity Plans and Equity Based Compensation

9 Months Ended

Sep. 30, 2015

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Equity Plans and Equity Based Compensation

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 September 30, 2015, the Company has reserved 390,033 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. 

For the three and nine months ended September 30, 2015 and 2014, the Company granted no options.  The Company recorded no stock compensation expense applicable to options during the three and nine months ended September 30, 2015 and 2014 because all outstanding options were fully vested prior to 2007. In addition, there was no unrecognized option expense. 

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 60% restricted stock grants and 40% cash credit entitlements). The management and employee restricted stock grants and tandem cash credit entitlements awarded will vest in three equal installments of 33.3% with the first annual vesting on December 5th of the year of the grant and on December 5th of the next two succeeding years.  Awards that were granted to directors as additional retainer for their services 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. During the three months ended September 30, 2015, the Company granted awards of 102 shares of restricted stock. During the three months ended September 30, 2014, the Company granted no shares of restricted stock.  During the nine months ended September 30, 2015 and 2014, the Company granted awards of 33,480 and 31,080 shares of restricted stock, respectively. 

The following tables present expense recorded for restricted stock and cash entitlements as well as the related tax information for the periods presented:

	Three Months Ended September 30,
	2015			2014
Restricted Stock Expense	$	227		$	161
Cash Entitlement Expense	134			101
Tax Effect	(146		)	(106		)
Net of Tax	$	215		$	156

	Nine Months Ended September 30,
	2015			2014
Restricted Stock Expense	$	737		$	482
Cash Entitlement Expense	438			300
Tax Effect	(476		)	(317		)
Net of Tax	$	699		$	465

Unrecognized expense associated with the restricted stock grants and cash entitlements totaled $1,808 and $1,616 as of September 30, 2015 and 2014, respectively.

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 $22 expense recorded for the employee stock purchase plan during the three and nine months ended September 30, 2015. There was no expense recorded for the employee stock purchase plan during the three and nine months ended September 30, 2014. There was no unrecognized compensation expense as of September 30, 2015 and 2014 for the Employee Stock Purchase Plan.

XML

Fair Value (Assets and Liabilities Measured at Fair Value on Recurring Basis) (Details) - Fair Value, Measurements, Recurring - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014
Assets:
Securities	$ 625,144	$ 630,995
Loans Held-for-Sale	6,410	6,311
Derivative Assets	1,433	507
Derivative Liabilities	1,462	508
U.S. Treasury and Agency Securities
Assets:
Securities	9,970	19,561
Obligations of State and Political Subdivisions
Assets:
Securities	193,342	153,777
Mortgage-backed Securities - Residential
Assets:
Securities	421,479	457,304
Equity Securities
Assets:
Securities	353	353
Quoted Prices in Active Markets for Identical Assets (Level 1)
Assets:
Securities	0	0
Loans Held-for-Sale	0	0
Derivative Assets	0	0
Derivative Liabilities	0	0
Quoted Prices in Active Markets for Identical Assets (Level 1) | U.S. Treasury and Agency Securities
Assets:
Securities	0	0
Quoted Prices in Active Markets for Identical Assets (Level 1) | Obligations of State and Political Subdivisions
Assets:
Securities	0	0
Quoted Prices in Active Markets for Identical Assets (Level 1) | Mortgage-backed Securities - Residential
Assets:
Securities	0	0
Quoted Prices in Active Markets for Identical Assets (Level 1) | Equity Securities
Assets:
Securities	0	0
Significant Other Observable Inputs (Level 2)
Assets:
Securities	615,785	620,501
Loans Held-for-Sale	6,410	6,311
Derivative Assets	1,433	507
Derivative Liabilities	1,462	508
Significant Other Observable Inputs (Level 2) | U.S. Treasury and Agency Securities
Assets:
Securities	9,970	19,561
Significant Other Observable Inputs (Level 2) | Obligations of State and Political Subdivisions
Assets:
Securities	184,336	143,636
Significant Other Observable Inputs (Level 2) | Mortgage-backed Securities - Residential
Assets:
Securities	421,479	457,304
Significant Other Observable Inputs (Level 2) | Equity Securities
Assets:
Securities	0	0
Significant Unobservable Inputs (Level 3)
Assets:
Securities	9,359	10,494
Loans Held-for-Sale	0	0
Derivative Assets	0	0
Derivative Liabilities	0	0
Significant Unobservable Inputs (Level 3) | U.S. Treasury and Agency Securities
Assets:
Securities	0	0
Significant Unobservable Inputs (Level 3) | Obligations of State and Political Subdivisions
Assets:
Securities	9,006	10,141
Significant Unobservable Inputs (Level 3) | Mortgage-backed Securities - Residential
Assets:
Securities	0	0
Significant Unobservable Inputs (Level 3) | Equity Securities
Assets:
Securities	$ 353	$ 353

XML

Segment Information

9 Months Ended

Sep. 30, 2015

Segment Reporting [Abstract]

Segment Information

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 37 banking offices at September 30, 2015. 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 the trust operations of the Company's banking subsidiary and by German American Investment Services, Inc. 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 the Company which are used by management to monitor and manage financial performance. 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.

	Core Banking			Trust and Investment Advisory Services			Insurance		Other			Consolidated Totals
Three Months Ended
September 30, 2015
Net Interest Income	$	18,961		$	—		$	2	$	(104	)	$	18,859
Net Gains on Sales of Loans	831			—			—		—			831
Net Gains on Securities	—			—			—		—			—
Trust and Investment Product Fees	1			1,053			—		(3		)	1,051
Insurance Revenues	8			15			1,729		—			1,752
Noncash Items:
Provision for Loan Losses	(500		)	—			—		—			(500		)
Depreciation and Amortization	980			2			27		38			1,047
Income Tax Expense (Benefit)	2,571			(1		)	84		(225		)	2,429
Segment Profit (Loss)	7,702			(14		)	140		(107		)	7,721
Segment Assets at September 30, 2015	2,307,765			1,493			7,410		(3,458		)	2,313,210

	Core Banking		Trust and Investment Advisory Services			Insurance		Other			Consolidated Totals
Three Months Ended
September 30, 2014
Net Interest Income	$	18,908	$	4		$	1	$	(122	)	$	18,791
Net Gains on Sales of Loans	613		—			—		—			613
Net Gains on Securities	567		—			—		—			567
Trust and Investment Product Fees	2		899			—		—			901
Insurance Revenues	15		22			1,702		—			1,739
Noncash Items:
Provision for Loan Losses	—		—			—		—			—
Depreciation and Amortization	1,120		5			26		38			1,189
Income Tax Expense (Benefit)	3,496		(15		)	147		(190		)	3,438
Segment Profit (Loss)	7,540		(30		)	216		(18		)	7,708
Segment Assets at December 31, 2014	2,242,456		11,401			6,429		(23,187		)	2,237,099

	Core Banking		Trust and Investment Advisory Services			Insurance		Other			Consolidated Totals
Nine Months Ended
September 30, 2015
Net Interest Income	$	56,402	$	8		$	4	$	(300	)	$	56,114
Net Gains on Sales of Loans	2,364		—			—		—			2,364
Net Gains on Securities	698		—			—		27			725
Trust and Investment Product Fees	3		2,974			—		(3		)	2,974
Insurance Revenues	19		33			5,760		—			5,812
Noncash Items:
Provision for Loan Losses	—		—			—		—			—
Depreciation and Amortization	3,045		15			81		113			3,254
Income Tax Expense (Benefit)	8,709		(13		)	576		(604		)	8,668
Segment Profit (Loss)	21,650		(47		)	874		(125		)	22,352
Segment Assets at September 30, 2015	2,307,765		1,493			7,410		(3,458		)	2,313,210

	Core Banking		Trust and Investment Advisory Services			Insurance		Other			Consolidated Totals
Nine Months Ended
September 30, 2014
Net Interest Income	$	55,655	$	12		$	3	$	(362	)	$	55,308
Net Gains on Sales of Loans	1,475		—			—		—			1,475
Net Gains on Securities	1,039		—			—		—			1,039
Trust and Investment Product Fees	4		2,724			—		—			2,728
Insurance Revenues	20		33			5,724		—			5,777
Noncash Items:
Provision for Loan Losses	550		—			—		—			550
Depreciation and Amortization	3,395		18			85		113			3,611
Income Tax Expense (Benefit)	8,940		(122		)	747		(598		)	8,967
Segment Profit (Loss)	19,908		(202		)	1,078		(84		)	20,700
Segment Assets at December 31, 2014	2,242,456		11,401			6,429		(23,187		)	2,237,099

XML

Stock Repurchase Plan

9 Months Ended

Sep. 30, 2015

Stockholders' Equity Note [Abstract]

Stock Repurchase 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 shares of common stock 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 September 30, 2015, the Company had purchased 334,965 shares under the program. No shares were purchased under the program during the three and nine months ended September 30, 2015 and 2014.

XML

Fair Value

9 Months Ended

Sep. 30, 2015

Fair Value Disclosures [Abstract]

Fair Value

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 September 30, 2015, the Company held $9.4 million in Level 3 securities which consist of $9.0 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 investor's 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 September 30, 2015 Using
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Assets:
U.S. Treasury and Agency Securities	$	—	$	9,970	$	—	$	9,970
Obligations of State and Political Subdivisions	—		184,336		9,006		193,342
Mortgage-backed Securities-Residential	—		421,479		—		421,479
Equity Securities	—		—		353		353
Total Securities	$	—	$	615,785	$	9,359	$	625,144
Loans Held-for-Sale	$	—	$	6,410	$	—	$	6,410
Derivative Assets	$	—	$	1,433	$	—	$	1,433
Derivative Liabilities	$	—	$	1,462	$	—	$	1,462

	Fair Value Measurements at December 31, 2014 Using
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable  Inputs (Level 3)		Total
Assets:
U.S. Treasury and Agency Securities	$	—	$	19,561	$	—	$	19,561
Obligations of State and Political Subdivisions	—		143,636		10,141		153,777
Mortgage-backed Securities-Residential	—		457,304		—		457,304
Equity Securities	—		—		353		353
Total Securities	$	—	$	620,501	$	10,494	$	630,995
Loans Held-for-Sale	$	—	$	6,311	$	—	$	6,311
Derivative Assets	$	—	$	507	$	—	$	507
Derivative Liabilities	$	—	$	508	$	—	$	508

There were no transfers between Level 1 and Level 2 for the periods ended September 30, 2015 and December 31, 2014.

At September 30, 2015, the aggregate fair value of the Loans Held-for-Sale was $6,410, aggregate contractual principal balance was $6,290 with a difference of $120. At December 31, 2014, the aggregate fair value of the Loans Held-for-Sale was $6,311, aggregate contractual principal balance was $6,227 with a difference of $84.

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 three and nine months ended September 30, 2015 and 2014:

	Obligations of State and Political Subdivisions						Equity Securities
	2015			2014			2015		2014
Balance of Recurring Level 3 Assets at July 1	$	9,521		$	10,562		$	353	$	353
Total Gains or Losses (realized/unrealized) Included in Other Comprehensive Income	25			(12		)	—		—
Maturities / Calls	(540		)	(430		)	—		—
Purchases	—			—			—		—
Balance of Recurring Level 3 Assets at September 30	$	9,006		$	10,120		$	353	$	353

	Obligations of State and Political Subdivisions						Equity Securities
	2015			2014			2015		2014
Balance of Recurring Level 3 Assets at January 1	$	10,141		$	10,832		$	353	$	353
Total Gains or Losses (realized/unrealized) Included in Other Comprehensive Income	(20		)	143			—		—
Maturities / Calls	(1,115		)	(855		)	—		—
Purchases	—			—			—		—
Balance of Recurring Level 3 Assets at September 30	$	9,006		$	10,120		$	353	$	353

Of the total gain/loss included in other comprehensive income for the three and nine months ended September 30, 2015, $25 and $(20), respectively, was attributable to other changes in fair value. The three and nine months ended September 30, 2015 included no gain/loss attributable to interest income on securities. Of the total gain/loss included in other comprehensive income for the three and nine months ended September 30, 2014, $(12) and $143, respectively, was attributable to other changes in fair value. The three and nine months ended September 30, 2014 included no gain/loss attributable to interest income on securities.

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 September 30, 2015 Using
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable  Inputs (Level 3)		Total
Assets:
Impaired Loans
Commercial and Industrial Loans	$	—	$	—	$	426	$	426
Commercial Real Estate Loans	—		—		1,386		1,386
Agricultural Loans	—		—		—		—
Other Real Estate
Commercial Real Estate	—		—		—		—

	Fair Value Measurements at December 31, 2014 Using
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable  Inputs (Level 3)		Total
Assets:
Impaired Loans
Commercial and Industrial Loans	$	—	$	—	$	—	$	—
Commercial Real Estate Loans	—		—		1,504		1,504
Agricultural Loans	—		—		—		—
Other Real Estate
Commercial Real Estate	—		—		68		68

Impaired loans, which are measured for impairment using the fair value of the collateral for collateral dependent loans, had a carrying amount of $3,467 with a valuation allowance of $1,655, resulting in an additional provision for loan losses of $78 and $113 for the three and nine months ended September 30, 2015, respectively. For the three and nine months ended September 30, 2014, impaired loans resulted in an additional provision for loan losses of $30 and $187, respectively. Impaired loans, which are measured for impairment using the fair value of the collateral for collateral dependent loans, had a carrying amount of $3,043 with a valuation allowance of $1,539, resulting in an additional provision for loan losses of $261 for the year ended December 31, 2014.

There was no Other Real Estate carried at fair value less costs to sell at September 30, 2015. No charge to earnings was included in the three or nine months ended September 30, 2015. A charge to earnings through Other Operating Income of $83 was included in the three and nine months ended September 30, 2014. Other Real Estate which is measured at the lower of carrying or fair value less costs to sell had a carrying value of $68 at December 31, 2014.

The following tables present quantitative information about Level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis at September 30, 2015 and December 31, 2014:

September 30, 2015	Fair Value		Valuation Technique(s)	Unobservable Input(s)	Range (Weighted Average)
Impaired Loans - Commercial and Industrial Loans	$	426	Sales comparison approach	Adjustment for physical condition of comparable properties sold	100%-69% (69%)
Impaired Loans - Commercial Real Estate Loans	$	1,386	Sales comparison approach	Adjustment for physical condition of comparable properties sold	93%-30% (74%)

December 31, 2014	Fair Value		Valuation Technique(s)	Unobservable Input(s)	Range (Weighted Average)
Impaired Loans - Commercial Real Estate Loans	$	1,504	Sales comparison approach	Adjustment for physical condition of comparable properties sold	30%-86% (71%)
Other Real Estate - Commercial Real Estate Loans	$	68	Sales comparison approach	Adjustment for physical condition of comparable properties sold	55% (55%)

The carrying amounts and estimated fair values of the Company’s financial instruments not previously presented are provided in the tables below for the periods ending September 30, 2015 and December 31, 2014. 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 September 30, 2015 Using
	Carrying Value			Level 1			Level 2			Level 3			Total
Financial Assets:
Cash and Short-term Investments	$	62,238		$	39,998		$	22,240		$	—		$	62,238
Securities Held-to-Maturity	95			—			95			—			95
Loans, Net	1,496,998			—			—			1,500,221			1,500,221
FHLB Stock and Other Restricted Stock	8,167			N/A			N/A			N/A			N/A
Accrued Interest Receivable	8,978			—			2,819			6,159			8,978
Financial Liabilities:
Demand, Savings, and Money Market Deposits	(1,458,467		)	(1,458,467		)	—			—			(1,458,467		)
Time Deposits	(345,368		)	—			(345,415		)	—			(345,415		)
Short-term Borrowings	(139,479		)	—			(139,479		)	—			(139,479		)
Long-term Debt	(99,593		)	—			(95,393		)	(5,513		)	(100,906		)
Accrued Interest Payable	(627		)	—			(620		)	(7		)	(627		)

				Fair Value Measurements at December 31, 2014 Using
	Carrying Value			Level 1			Level 2			Level 3			Total
Financial Assets:
Cash and Short-term Investments	$	42,546		$	33,481		$	9,065		$	—		$	42,546
Securities Held-to-Maturity	184			—			186			—			186
Loans, Net	1,431,549			—			—			1,432,622			1,432,622
FHLB Stock and Other Restricted Stock	7,040			N/A			N/A			N/A			N/A
Accrued Interest Receivable	8,162			—			2,240			5,922			8,162
Financial Liabilities:
Demand, Savings, and Money Market Deposits	(1,446,336		)	(1,446,336		)	—			—			(1,446,336		)
Time Deposits	(333,425		)	—			(335,134		)	—			(335,134		)
Short-term Borrowings	(141,473		)	—			(141,473		)	—			(141,473		)
Long-term Debt	(64,591		)	—			(60,289		)	(5,429		)	(65,718		)
Accrued Interest Payable	(754		)	—			(704		)	(50		)	(754		)

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 carried at fair value, 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 analysis, 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.

XML

Fair Value (Carrying Amounts and Estimated Fair Values of Company's Financial Instruments) (Details) - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014
Financial Assets:
Securities Held-to-Maturity	$ 95	$ 184
Loans, Net	1,498,810	1,433,053
FHLB Stock and Other Restricted Stock	8,167	7,040
Financial Liabilities:
Time Deposits	(345,368)	(333,425)
Level 1
Financial Assets:
Cash and Short-term Investments	39,998	33,481
Securities Held-to-Maturity	0	0
Loans, Net	0	0
Accrued Interest Receivable	0	0
Financial Liabilities:
Demand, Savings, and Money Market Deposits	(1,458,467)	(1,446,336)
Time Deposits	0	0
Short-term Borrowings	0	0
Long-term Debt	0	0
Accrued Interest Payable	0	0
Level 2
Financial Assets:
Cash and Short-term Investments	22,240	9,065
Securities Held-to-Maturity	95	186
Loans, Net	0	0
Accrued Interest Receivable	2,819	2,240
Financial Liabilities:
Demand, Savings, and Money Market Deposits	0	0
Time Deposits	(345,415)	(335,134)
Short-term Borrowings	(139,479)	(141,473)
Long-term Debt	(95,393)	(60,289)
Accrued Interest Payable	(620)	(704)
Level 3
Financial Assets:
Cash and Short-term Investments	0	0
Securities Held-to-Maturity	0	0
Loans, Net	1,500,221	1,432,622
Accrued Interest Receivable	6,159	5,922
Financial Liabilities:
Demand, Savings, and Money Market Deposits	0	0
Time Deposits	0	0
Short-term Borrowings	0	0
Long-term Debt	(5,513)	(5,429)
Accrued Interest Payable	(7)	(50)
Carrying Value
Financial Assets:
Cash and Short-term Investments	62,238	42,546
Securities Held-to-Maturity	95	184
Loans, Net	1,496,998	1,431,549
FHLB Stock and Other Restricted Stock	8,167	7,040
Accrued Interest Receivable	8,978	8,162
Financial Liabilities:
Demand, Savings, and Money Market Deposits	(1,458,467)	(1,446,336)
Time Deposits	(345,368)	(333,425)
Short-term Borrowings	(139,479)	(141,473)
Long-term Debt	(99,593)	(64,591)
Accrued Interest Payable	(627)	(754)
Total
Financial Assets:
Cash and Short-term Investments	62,238	42,546
Securities Held-to-Maturity	95	186
Loans, Net	1,500,221	1,432,622
Accrued Interest Receivable	8,978	8,162
Financial Liabilities:
Demand, Savings, and Money Market Deposits	(1,458,467)	(1,446,336)
Time Deposits	(345,415)	(335,134)
Short-term Borrowings	(139,479)	(141,473)
Long-term Debt	(100,906)	(65,718)
Accrued Interest Payable	$ (627)	$ (754)

XML

Other Comprehensive Income (Loss) (Classifications out of accumulated other comprehensive income) (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Income Tax Expense	$ (2,429)	$ (3,438)	$ (8,668)	$ (8,967)
Amount Reclassified From Accumulated Other Comprehensive Income (Loss)
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Amount Reclassified From Accumulated Other Comprehensive Income (Loss)	0	369	471	675
Unrealized Gains and Losses on Available-for-Sale Securities | Amount Reclassified From Accumulated Other Comprehensive Income (Loss)
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Net Gain (Loss) on Securities	0	567	725	1,039
Income Tax Expense	0	(198)	(254)	(364)
Amount Reclassified From Accumulated Other Comprehensive Income (Loss)	$ 0	$ 369	$ 471	$ 675

XML

Fair Value (Quantitative Information of Fair Value Measurements) (Details) - Significant Unobservable Inputs (Level 3) - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014
Impaired Loans | Commercial and Industrial Loans
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	$ 426
Impaired Loans | Commercial and Industrial Loans | Minimum
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Range (Weighted Average)	69.00%
Impaired Loans | Commercial and Industrial Loans | Maximum
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Range (Weighted Average)	100.00%
Impaired Loans | Commercial and Industrial Loans | Weighted Average
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Range (Weighted Average)	69.00%
Impaired Loans | Commercial Real Estate Loans
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	$ 1,386	$ 1,504
Impaired Loans | Commercial Real Estate Loans | Minimum
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Range (Weighted Average)	30.00%	30.00%
Impaired Loans | Commercial Real Estate Loans | Maximum
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Range (Weighted Average)	93.00%	86.00%
Impaired Loans | Commercial Real Estate Loans | Weighted Average
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Range (Weighted Average)	74.00%	71.00%
Other Real Estate | Commercial Real Estate Loans
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value		$ 68
Other Real Estate | Commercial Real Estate Loans | Maximum
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Range (Weighted Average)		55.00%
Other Real Estate | Commercial Real Estate Loans | Weighted Average
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Range (Weighted Average)		55.00%

XML

Securities (Schedule of Proceeds from Sales of Securities) (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Schedule of Investments [Line Items]
Proceeds from Sales			$ 18,999	$ 52,711
Gross Gains on Sales	$ 0	$ 567	725	1,039
Sale of Securities
Schedule of Investments [Line Items]
Proceeds from Sales	0	45,473	18,999	52,711
Gross Gains on Sales	0	567	725	1,039
Income Taxes on Gross Gains	$ 0	$ 198	$ 254	$ 364

XML

Loans (Schedule of Accretable Yield, or Income Expected to be Collected) (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Certain Loans Acquired in Transfer Not Accounted for as Debt Securities, Accretable Yield Movement Schedule [Roll Forward]
Beginning Balance	$ 1,680	$ 1,126	$ 1,685	$ 1,279
New Loans Purchased	0	0	0	0
Accretion of Income	(251)	(89)	(333)	(242)
Reclassifications from Non-accretable Difference	0	0	104	0
Charge-off of Accretable Yield	0	(113)	(27)	(113)
Ending Balance	$ 1,429	$ 924	$ 1,429	$ 924

XML

Per Share Data (Tables)

9 Months Ended

Sep. 30, 2015

Earnings Per Share [Abstract]

Computations of Basic Earnings Per Share and Diluted Earnings Per Share

The computations of Basic Earnings per Share and Diluted Earnings per Share are as follows:

	Three Months Ended   September 30,
	2015		2014
Basic Earnings per Share:
Net Income	$	7,721	$	7,708
Weighted Average Shares Outstanding	13,265,893		13,210,395
Basic Earnings per Share	$	0.58	$	0.58
Diluted Earnings per Share:
Net Income	$	7,721	$	7,708
Weighted Average Shares Outstanding	13,265,893		13,210,395
Potentially Dilutive Shares, Net	7,617		20,280
Diluted Weighted Average Shares Outstanding	13,273,510		13,230,675
Diluted Earnings per Share	$	0.58	$	0.58

For the three months ended September 30, 2015 and 2014, there were no anti-dilutive shares.

The computations of Basic Earnings per Share and Diluted Earnings per Share are as follows:

	Nine Months Ended   September 30,
	2015		2014
Basic Earnings per Share:
Net Income	$	22,352	$	20,700
Weighted Average Shares Outstanding	13,247,954		13,200,025
Basic Earnings per Share	$	1.69	$	1.57
Diluted Earnings per Share:
Net Income	$	22,352	$	20,700
Weighted Average Shares Outstanding	13,247,954		13,200,025
Potentially Dilutive Shares, Net	7,556		20,975
Diluted Weighted Average Shares Outstanding	13,255,510		13,221,000
Diluted Earnings per Share	$	1.69	$	1.57

XML

Equity Plans and Equity Based Compensation (Tables)

9 Months Ended

Sep. 30, 2015

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Expense Recorded For Restricted Stock And Cash Entitlements

The following tables present expense recorded for restricted stock and cash entitlements as well as the related tax information for the periods presented:

	Three Months Ended September 30,
	2015			2014
Restricted Stock Expense	$	227		$	161
Cash Entitlement Expense	134			101
Tax Effect	(146		)	(106		)
Net of Tax	$	215		$	156

	Nine Months Ended September 30,
	2015			2014
Restricted Stock Expense	$	737		$	482
Cash Entitlement Expense	438			300
Tax Effect	(476		)	(317		)
Net of Tax	$	699		$	465

XML

Loans (Schedule of Recorded Investment in Home Equity, Consumer and Residential Mortgage Loans) (Details) - USD ($) $ in Thousands	Sep. 30, 2015		Dec. 31, 2014
Financing Receivable, Recorded Investment [Line Items]
Total loans	$ 1,523,370	[1],[2]	$ 1,457,768	[3],[4]
Home Equity Loans
Financing Receivable, Recorded Investment [Line Items]
Total loans	91,178	[1]	86,570	[3]
Consumer Loans
Financing Receivable, Recorded Investment [Line Items]
Total loans	47,602	[1]	48,732	[3]
Residential Mortgage Loans
Financing Receivable, Recorded Investment [Line Items]
Total loans	137,002	[1]	137,549	[3]
Performing | Home Equity Loans
Financing Receivable, Recorded Investment [Line Items]
Total loans	90,952		86,302
Performing | Consumer Loans
Financing Receivable, Recorded Investment [Line Items]
Total loans	47,508		48,536
Performing | Residential Mortgage Loans
Financing Receivable, Recorded Investment [Line Items]
Total loans	135,753		135,664
Nonperforming | Home Equity Loans
Financing Receivable, Recorded Investment [Line Items]
Total loans	226		268
Nonperforming | Consumer Loans
Financing Receivable, Recorded Investment [Line Items]
Total loans	94		196
Nonperforming | Residential Mortgage Loans
Financing Receivable, Recorded Investment [Line Items]
Total loans	1,249		1,885
Receivables Acquired with Deteriorated Credit Quality
Financing Receivable, Recorded Investment [Line Items]
Loans Acquired With Deteriorated Credit Quality (Included in the Total Above)	6,924		8,361
Receivables Acquired with Deteriorated Credit Quality | Home Equity Loans
Financing Receivable, Recorded Investment [Line Items]
Loans Acquired With Deteriorated Credit Quality (Included in the Total Above)	0		0
Receivables Acquired with Deteriorated Credit Quality | Consumer Loans
Financing Receivable, Recorded Investment [Line Items]
Loans Acquired With Deteriorated Credit Quality (Included in the Total Above)	0		118
Receivables Acquired with Deteriorated Credit Quality | Residential Mortgage Loans
Financing Receivable, Recorded Investment [Line Items]
Loans Acquired With Deteriorated Credit Quality (Included in the Total Above)	$ 874		$ 1,504

[1] Total recorded investment in loans includes $6,085 in accrued interest.

[2] Total recorded investment in loans includes $6,085 in accrued interest.

[3] Total recorded investment in loans includes $5,778 in accrued interest.

[4] Total recorded investment in loans includes $5,778 in accrued interest.

XML

Loans (Schedule of Allowance for Loan Losses and Recorded Investment in Loans) (Details) - USD ($) $ in Thousands	Sep. 30, 2015		Jun. 30, 2015	Dec. 31, 2014		Sep. 30, 2014	Jun. 30, 2014	Dec. 31, 2013
Allowance for Loan Losses:
Individually Evaluated for Impairment	$ 1,688			$ 1,532
Collectively Evaluated for Impairment	13,082			13,343
Total Ending Allowance Balance	14,770		$ 15,258	14,929		$ 15,592	$ 15,550	$ 14,584
Loans:
Loans Individually Evaluated for Impairment	6,116			6,044
Loans Collectively Evaluated for Impairment	1,510,330			1,443,363
Total loans	1,523,370	[1],[2]		1,457,768	[3],[4]
Accrued interest	6,085			5,778
Commercial and Industrial Loans and Leases
Allowance for Loan Losses:
Individually Evaluated for Impairment	171			87
Collectively Evaluated for Impairment	4,162			4,540
Total Ending Allowance Balance	4,333		4,659	4,627		5,117	5,661	3,983
Loans:
Loans Individually Evaluated for Impairment	2,219			1,964
Loans Collectively Evaluated for Impairment	403,027			378,533
Total loans	405,920	[1]		380,851	[3]
Commercial Real Estate Loans
Allowance for Loan Losses:
Individually Evaluated for Impairment	1,517			1,445
Collectively Evaluated for Impairment	5,260			5,818
Total Ending Allowance Balance	6,777		7,315	7,273		7,454	7,199	8,335
Loans:
Loans Individually Evaluated for Impairment	3,885			4,080
Loans Collectively Evaluated for Impairment	592,735			573,961
Total loans	601,996	[1]		584,426	[3]
Agricultural Loans
Allowance for Loan Losses:
Individually Evaluated for Impairment	0			0
Collectively Evaluated for Impairment	1,977			1,123
Total Ending Allowance Balance	1,977		1,223	1,123		1,172	1,016	946
Loans:
Loans Individually Evaluated for Impairment	12			0
Loans Collectively Evaluated for Impairment	239,660			219,640
Total loans	239,672	[1]		219,640	[3]
Home Equity Loans
Allowance for Loan Losses:
Individually Evaluated for Impairment	0			0
Collectively Evaluated for Impairment	309			246
Total Ending Allowance Balance	309		350	246		378	418	239
Loans:
Loans Individually Evaluated for Impairment	0			0
Loans Collectively Evaluated for Impairment	91,178			86,570
Total loans	91,178	[1]		86,570	[3]
Consumer Loans
Allowance for Loan Losses:
Individually Evaluated for Impairment	0			0
Collectively Evaluated for Impairment	245			354
Total Ending Allowance Balance	245		382	354		379	326	188
Loans:
Loans Individually Evaluated for Impairment	0			0
Loans Collectively Evaluated for Impairment	47,602			48,614
Total loans	47,602	[1]		48,732	[3]
Residential Mortgage Loans
Allowance for Loan Losses:
Individually Evaluated for Impairment	0			0
Collectively Evaluated for Impairment	450			578
Total Ending Allowance Balance	450		619	622		407	435	281
Loans:
Loans Individually Evaluated for Impairment	0			0
Loans Collectively Evaluated for Impairment	136,128			136,045
Total loans	137,002	[1]		137,549	[3]
Unallocated
Allowance for Loan Losses:
Individually Evaluated for Impairment	0			0
Collectively Evaluated for Impairment	679			684
Total Ending Allowance Balance	679		$ 710	684		$ 685	$ 495	$ 612
Receivables Acquired with Deteriorated Credit Quality
Allowance for Loan Losses:
Acquired with Deteriorated Credit Quality	0			54
Loans:
Loans Acquired with Deteriorated Credit Quality	6,924			8,361
Receivables Acquired with Deteriorated Credit Quality | Commercial and Industrial Loans and Leases
Allowance for Loan Losses:
Acquired with Deteriorated Credit Quality	0			0
Loans:
Loans Acquired with Deteriorated Credit Quality	674			354
Receivables Acquired with Deteriorated Credit Quality | Commercial Real Estate Loans
Allowance for Loan Losses:
Acquired with Deteriorated Credit Quality	0			10
Loans:
Loans Acquired with Deteriorated Credit Quality	5,376			6,385
Receivables Acquired with Deteriorated Credit Quality | Agricultural Loans
Allowance for Loan Losses:
Acquired with Deteriorated Credit Quality	0			0
Loans:
Loans Acquired with Deteriorated Credit Quality	0			0
Receivables Acquired with Deteriorated Credit Quality | Home Equity Loans
Allowance for Loan Losses:
Acquired with Deteriorated Credit Quality	0			0
Loans:
Loans Acquired with Deteriorated Credit Quality	0			0
Receivables Acquired with Deteriorated Credit Quality | Consumer Loans
Allowance for Loan Losses:
Acquired with Deteriorated Credit Quality	0			0
Loans:
Loans Acquired with Deteriorated Credit Quality	0			118
Receivables Acquired with Deteriorated Credit Quality | Residential Mortgage Loans
Allowance for Loan Losses:
Acquired with Deteriorated Credit Quality	0			44
Loans:
Loans Acquired with Deteriorated Credit Quality	874			1,504
Receivables Acquired with Deteriorated Credit Quality | Unallocated
Allowance for Loan Losses:
Acquired with Deteriorated Credit Quality	$ 0			$ 0

[1] Total recorded investment in loans includes $6,085 in accrued interest.

[2] Total recorded investment in loans includes $6,085 in accrued interest.

[3] Total recorded investment in loans includes $5,778 in accrued interest.

[4] Total recorded investment in loans includes $5,778 in accrued interest.

XML

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Statement of Comprehensive Income [Abstract]
NET INCOME	$ 7,721	$ 7,708	$ 22,352	$ 20,700
Unrealized Gains (Losses) on Securities
Unrealized Holding Gain (Loss) Arising During the Period	6,420	871	3,333	9,251
Reclassification Adjustment for Losses (Gains) Included in Net Income	0	(567)	(725)	(1,039)
Tax Effect	(2,259)	(96)	(914)	(2,903)
Net of Tax	4,161	208	1,694	5,309
Total Other Comprehensive Income (Loss)	4,161	208	1,694	5,309
COMPREHENSIVE INCOME	$ 11,882	$ 7,916	$ 24,046	$ 26,009

XML

Derivatives

9 Months Ended

Sep. 30, 2015

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivatives

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 $31.1 million at September 30, 2015 and $23.1 million at December 31, 2014. 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:

	September 30, 2015				December 31, 2014
	Notional Amount		Fair Value		Notional Amount		Fair Value
Included in Other Assets:
Interest Rate Swaps	$	31,068	$	1,433	$	23,104	$	507
Included in Other Liabilities:
Interest Rate Swaps	$	31,068	$	1,462	$	23,104	$	508

The following tables present the effect of derivative instruments on the Consolidated Statements of Income for the periods presented:

	Three Months Ended   September 30,					Nine Months Ended   September 30,
	2015		2014			2015		2014
Interest Rate Swaps:
Included in Interest Income / (Expense)	$	—	$	—		$	—	$	—
Included in Other Income / (Expense)	179		(4		)	344		74

XML

Fair Value (Additional Information) (Details) - USD ($)	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014	Dec. 31, 2014
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Loan held for sale, at fair value	$ 6,410,000		$ 6,410,000		$ 6,311,000
Contractual principal balance of Loan held for sale	6,290,000		6,290,000		6,227,000
Difference in amount of loan held for sale	120,000		120,000		84,000
Valuation allowance for loans losses	1,688,000		1,688,000		1,542,000
Cost of real estate sales	0	$ 83,000	0	$ 83,000
Other real estate, carrying value	0		0		68,000
Fair Value, Measurements, Recurring
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities	625,144,000		625,144,000		630,995,000
Significant Unobservable Inputs (Level 3) | Fair Value, Measurements, Recurring
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities	9,359,000		9,359,000		10,494,000
Obligations of State and Political Subdivisions
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Total Gains or (Losses) (realized/unrealized) Included in Other Comprehensive Income	25,000	(12,000)	(20,000)	143,000
Obligations of State and Political Subdivisions | Fair Value, Measurements, Recurring
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities	193,342,000		193,342,000		153,777,000
Total Gains or (Losses) (realized/unrealized) Included in Other Comprehensive Income	25,000	(12,000)	(20,000)	143,000
Obligations of State and Political Subdivisions | Significant Unobservable Inputs (Level 3) | Fair Value, Measurements, Recurring
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities	9,006,000		9,006,000		10,141,000
Equity Securities
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Total Gains or (Losses) (realized/unrealized) Included in Earnings		0	0	0
Equity Securities | Fair Value, Measurements, Recurring
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities	353,000		353,000		353,000
Total Gains or (Losses) (realized/unrealized) Included in Other Comprehensive Income	0	0	0	0
Equity Securities | Significant Unobservable Inputs (Level 3) | Fair Value, Measurements, Recurring
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities	353,000		353,000		353,000
Commercial Real Estate
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Impaired loans, carrying amount	3,467,000		3,467,000		3,043,000
Valuation allowance for loans losses	1,655,000		1,655,000		1,539,000
Provision for loan losses	$ 78,000		$ 113,000		$ 261,000
Provision for loan lease and other losses		$ 30,000		$ 187,000

XML

Fair Value (Tables)

9 Months Ended

Sep. 30, 2015

Fair Value Disclosures [Abstract]

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 September 30, 2015 Using
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Assets:
U.S. Treasury and Agency Securities	$	—	$	9,970	$	—	$	9,970
Obligations of State and Political Subdivisions	—		184,336		9,006		193,342
Mortgage-backed Securities-Residential	—		421,479		—		421,479
Equity Securities	—		—		353		353
Total Securities	$	—	$	615,785	$	9,359	$	625,144
Loans Held-for-Sale	$	—	$	6,410	$	—	$	6,410
Derivative Assets	$	—	$	1,433	$	—	$	1,433
Derivative Liabilities	$	—	$	1,462	$	—	$	1,462

	Fair Value Measurements at December 31, 2014 Using
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable  Inputs (Level 3)		Total
Assets:
U.S. Treasury and Agency Securities	$	—	$	19,561	$	—	$	19,561
Obligations of State and Political Subdivisions	—		143,636		10,141		153,777
Mortgage-backed Securities-Residential	—		457,304		—		457,304
Equity Securities	—		—		353		353
Total Securities	$	—	$	620,501	$	10,494	$	630,995
Loans Held-for-Sale	$	—	$	6,311	$	—	$	6,311
Derivative Assets	$	—	$	507	$	—	$	507
Derivative Liabilities	$	—	$	508	$	—	$	508

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 three and nine months ended September 30, 2015 and 2014:

	Obligations of State and Political Subdivisions						Equity Securities
	2015			2014			2015		2014
Balance of Recurring Level 3 Assets at July 1	$	9,521		$	10,562		$	353	$	353
Total Gains or Losses (realized/unrealized) Included in Other Comprehensive Income	25			(12		)	—		—
Maturities / Calls	(540		)	(430		)	—		—
Purchases	—			—			—		—
Balance of Recurring Level 3 Assets at September 30	$	9,006		$	10,120		$	353	$	353

	Obligations of State and Political Subdivisions						Equity Securities
	2015			2014			2015		2014
Balance of Recurring Level 3 Assets at January 1	$	10,141		$	10,832		$	353	$	353
Total Gains or Losses (realized/unrealized) Included in Other Comprehensive Income	(20		)	143			—		—
Maturities / Calls	(1,115		)	(855		)	—		—
Purchases	—			—			—		—
Balance of Recurring Level 3 Assets at September 30	$	9,006		$	10,120		$	353	$	353

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 September 30, 2015 Using
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable  Inputs (Level 3)		Total
Assets:
Impaired Loans
Commercial and Industrial Loans	$	—	$	—	$	426	$	426
Commercial Real Estate Loans	—		—		1,386		1,386
Agricultural Loans	—		—		—		—
Other Real Estate
Commercial Real Estate	—		—		—		—

	Fair Value Measurements at December 31, 2014 Using
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable  Inputs (Level 3)		Total
Assets:
Impaired Loans
Commercial and Industrial Loans	$	—	$	—	$	—	$	—
Commercial Real Estate Loans	—		—		1,504		1,504
Agricultural Loans	—		—		—		—
Other Real Estate
Commercial Real Estate	—		—		68		68

Fair Value Assets and Liabilities Measured on Nonrecurring Basis Valuation Techniques

The following tables present quantitative information about Level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis at September 30, 2015 and December 31, 2014:

September 30, 2015	Fair Value		Valuation Technique(s)	Unobservable Input(s)	Range (Weighted Average)
Impaired Loans - Commercial and Industrial Loans	$	426	Sales comparison approach	Adjustment for physical condition of comparable properties sold	100%-69% (69%)
Impaired Loans - Commercial Real Estate Loans	$	1,386	Sales comparison approach	Adjustment for physical condition of comparable properties sold	93%-30% (74%)

December 31, 2014	Fair Value		Valuation Technique(s)	Unobservable Input(s)	Range (Weighted Average)
Impaired Loans - Commercial Real Estate Loans	$	1,504	Sales comparison approach	Adjustment for physical condition of comparable properties sold	30%-86% (71%)
Other Real Estate - Commercial Real Estate Loans	$	68	Sales comparison approach	Adjustment for physical condition of comparable properties sold	55% (55%)

Carrying Amounts and Estimated Fair Values of Company's Financial Instruments

The carrying amounts and estimated fair values of the Company’s financial instruments not previously presented are provided in the tables below for the periods ending September 30, 2015 and December 31, 2014. 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 September 30, 2015 Using
	Carrying Value			Level 1			Level 2			Level 3			Total
Financial Assets:
Cash and Short-term Investments	$	62,238		$	39,998		$	22,240		$	—		$	62,238
Securities Held-to-Maturity	95			—			95			—			95
Loans, Net	1,496,998			—			—			1,500,221			1,500,221
FHLB Stock and Other Restricted Stock	8,167			N/A			N/A			N/A			N/A
Accrued Interest Receivable	8,978			—			2,819			6,159			8,978
Financial Liabilities:
Demand, Savings, and Money Market Deposits	(1,458,467		)	(1,458,467		)	—			—			(1,458,467		)
Time Deposits	(345,368		)	—			(345,415		)	—			(345,415		)
Short-term Borrowings	(139,479		)	—			(139,479		)	—			(139,479		)
Long-term Debt	(99,593		)	—			(95,393		)	(5,513		)	(100,906		)
Accrued Interest Payable	(627		)	—			(620		)	(7		)	(627		)

				Fair Value Measurements at December 31, 2014 Using
	Carrying Value			Level 1			Level 2			Level 3			Total
Financial Assets:
Cash and Short-term Investments	$	42,546		$	33,481		$	9,065		$	—		$	42,546
Securities Held-to-Maturity	184			—			186			—			186
Loans, Net	1,431,549			—			—			1,432,622			1,432,622
FHLB Stock and Other Restricted Stock	7,040			N/A			N/A			N/A			N/A
Accrued Interest Receivable	8,162			—			2,240			5,922			8,162
Financial Liabilities:
Demand, Savings, and Money Market Deposits	(1,446,336		)	(1,446,336		)	—			—			(1,446,336		)
Time Deposits	(333,425		)	—			(335,134		)	—			(335,134		)
Short-term Borrowings	(141,473		)	—			(141,473		)	—			(141,473		)
Long-term Debt	(64,591		)	—			(60,289		)	(5,429		)	(65,718		)
Accrued Interest Payable	(754		)	—			(704		)	(50		)	(754		)

XML

Derivatives (Derivative Instruments Consolidated Statement) (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Trading Activity, Gains and Losses, Net [Line Items]
Included in Interest Income / (Expense)	$ 18,859	$ 18,791	$ 56,114	$ 55,308
Interest Rate Swap
Trading Activity, Gains and Losses, Net [Line Items]
Included in Interest Income / (Expense)	0	0	0	0
Included in Other Income / (Expense)	$ 179	$ (4)	$ 344	$ 74

XML

Newly Issued Accounting Pronouncements (Policies)

9 Months Ended

Sep. 30, 2015

New Accounting Pronouncements and Changes in Accounting Principles [Abstract]

Newly Issued Accounting Pronouncements

Newly Issued Accounting Pronouncements

In January 2014, the FASB amended existing guidance clarifying that an in substance repossession or foreclosure occurs, and a creditor is considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan, upon either (1) the creditor obtaining legal title to the residential real estate property upon completion of a foreclosure or (2) the borrower conveying all interest in the residential real estate property to the creditor to satisfy that loan through completion of a deed in lieu of foreclosure or through a similar legal agreement. Additionally, the amendments require interim and annual disclosure of both (1) the amount of foreclosed residential real estate property held by the creditor and (2) the recorded investment in consumer mortgage loans collateralized by residential real estate property that are in the process of foreclosure according to local requirements of the applicable jurisdiction. The amendments in this update are effective for public business entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2014. This update did not have a material impact on the Company's consolidated financial statements.

In January 2014, the FASB issued guidance for accounting for investments in qualified affordable housing projects. The new guidance allows a limited liability investor that meets certain conditions to use the proportional amortization methods. Under the proportional amortization method, an entity amortizes the initial cost of the investment in proportion to the tax credits and other tax benefits received and recognizes the net investment performance in the income statement as a component of income tax expense (benefit).

The Company adopted the proportional amortization method of accounting for its low income housing investments in the first quarter of 2015. The Company quantified the impact of adopting the proportional amortization method compared to the equity method to its current year and prior period financial statements. The Company determined that the adoption of the proportional amortization method did not have a material impact to its consolidated financial statements; therefore, the Company did not adjust its prior period consolidated financial statements. The low income housing investment losses, net of the tax benefits received, are included in income tax expense on the consolidated statements of income for the three and nine months ended September 30, 2015.