GLOSSARY OF TERMS AND ACRONYMS This section defines key terms and acronyms used throughout the report, referring to German American Bancorp, Inc. and its consolidated subsidiaries - References to "Company," "we," "our," "us," and similar terms refer to German American Bancorp, Inc. and its consolidated subsidiaries as a whole11 - The term "Bank" refers to German American Bank, the Company's bank subsidiary11 - Key acronyms defined include ASU, Basel III Rules, CECL, CET1, CRE, FASB, FDIC, FHLB, FRB, GAAP, LIBOR, MBS, NPV, OCC, SEC, SOFR13 PART I. FINANCIAL INFORMATION This part presents the unaudited consolidated financial statements, management's discussion and analysis, market risk disclosures, and controls and procedures for the Company Item 1. Unaudited Financial Statements This section presents the unaudited consolidated financial statements for German American Bancorp, Inc. and its subsidiaries for the quarter ended March 31, 2024, along with detailed notes explaining the basis of presentation, accounting policies, and specific financial line items Consolidated Balance Sheets – March 31, 2024 and December 31, 2023 This section provides a comparative overview of the Company's financial position at March 31, 2024, and December 31, 2023 | Metric | March 31, 2024 (in thousands) | December 31, 2023 (in thousands) | Change (in thousands) | % Change | | :----------------------------------- | :----------------------------- | :------------------------------- | :-------------------- | :------- | | Total Assets | $6,111,929 | $6,152,198 | $(40,269) | -0.65% | | Total Liabilities | $5,456,675 | $5,488,640 | $(31,965) | -0.58% | | Total Shareholders' Equity | $655,254 | $663,558 | $(8,304) | -1.25% | | Securities Available-for-Sale | $1,539,270 | $1,596,832 | $(57,562) | -3.60% | | Loans, Net | $3,928,156 | $3,927,317 | $839 | 0.02% | | Total Deposits | $5,219,347 | $5,252,963 | $(33,616) | -0.64% | Consolidated Statements of Income – Three Months Ended March 31, 2024 and 2023 This section presents the Company's financial performance for the three months ended March 31, 2024, and 2023 | Metric | Three Months Ended March 31, 2024 (in thousands) | Three Months Ended March 31, 2023 (in thousands) | Change (in thousands) | % Change | | :------------------------- | :--------------------------------------------- | :--------------------------------------------- | :-------------------- | :------- | | Net Income | $19,022 | $20,807 | $(1,785) | -8.58% | | Basic Earnings per Share | $0.64 | $0.71 | $(0.07) | -9.86% | | Diluted Earnings per Share | $0.64 | $0.71 | $(0.07) | -9.86% | | Net Interest Income | $44,994 | $49,009 | $(4,015) | -8.19% | | Total Non-Interest Income | $15,822 | $14,967 | $855 | 5.71% | | Total Non-Interest Expense | $36,738 | $37,616 | $(878) | -2.33% | Consolidated Statements of Comprehensive Income (Loss) – Three Months Ended March 31, 2024 and 2023 This section details the Company's comprehensive income and loss for the three months ended March 31, 2024, and 2023 | Metric | Three Months Ended March 31, 2024 (in thousands) | Three Months Ended March 31, 2023 (in thousands) | Change (in thousands) | | :---------------------------------------------- | :--------------------------------------------- | :--------------------------------------------- | :-------------------- | | Net Income | $19,022 | $20,807 | $(1,785) | | Unrealized Holding Gain (Loss) Arising During the Period | $(25,178) | $41,749 | $(66,927) | | Net of Tax (Other Comprehensive Income (Loss)) | $(19,895) | $32,946 | $(52,841) | | Comprehensive Income (Loss) | $(873) | $53,753 | $(54,626) | Consolidated Statements of Changes in Shareholders' Equity - Three Months Ended March 31, 2024 and 2023 This section outlines changes in the Company's shareholders' equity for the three months ended March 31, 2024, and 2023 | Metric | March 31, 2024 (in thousands) | January 1, 2024 (in thousands) | Change (in thousands) | | :----------------------------------- | :---------------------------- | :----------------------------- | :-------------------- | | Total Shareholders' Equity | $655,254 | $663,558 | $(8,304) | | Net Income | $19,022 | N/A | N/A | | Other Comprehensive Income (Loss) | $(19,895) | N/A | N/A | | Cash Dividends Paid | $(7,955) | N/A | N/A | | Issuance of Common Stock (Restricted Share Grants Net) | $524 | N/A | N/A | - Cash dividends paid were $0.27 per share for Q1 2024, up from $0.25 per share for Q1 202323 Consolidated Statements of Cash Flows – Three Months Ended March 31, 2024 and 2023 This section details the Company's cash flow activities for the three months ended March 31, 2024, and 2023 | Cash Flow Activity | Three Months Ended March 31, 2024 (in thousands) | Three Months Ended March 31, 2023 (in thousands) | Change (in thousands) | | :----------------------------- | :--------------------------------------------- | :--------------------------------------------- | :-------------------- | | Net Cash from Operating Activities | $23,853 | $31,466 | $(7,613) | | Net Cash from Investing Activities | $28,061 | $145,028 | $(116,967) | | Net Cash from Financing Activities | $(43,774) | $(215,278) | $171,504 | | Net Change in Cash and Cash Equivalents | $8,140 | $(38,784) | $46,924 | | Cash and Cash Equivalents at End of Period | $123,470 | $80,295 | $43,175 | Notes to Consolidated Financial Statements – March 31, 2024 This section provides detailed explanatory notes to the Company's consolidated financial statements as of March 31, 2024 NOTE 1 – Basis of Presentation and Market Conditions This note describes the basis of financial statement presentation and relevant market conditions affecting the Company - German American Bancorp, Inc. operates primarily in the banking industry, with financial statements conforming to U.S. GAAP29 - Certain prior period financial statements were reclassified to conform to the current presentation, with no effect on net income or total shareholders' equity29 NOTE 2 - Recent Accounting Pronouncements This note details the Company's adoption and impact of recent accounting pronouncements - The Company adopted ASU 2020-04 (Reference Rate Reform) and transitioned LIBOR-indexed loans to SOFR and other indices30 - ASU 2022-02 (Troubled Debt Restructurings and Vintage Disclosures) was adopted prospectively with no material impact to consolidated financial statements31 - The Company concluded it does not have a safeguarding obligation under SEC's Staff Accounting Bulletin No. 121 (SAB 121) for crypto-assets32 - ASU 2023-02 (Accounting for Investments in Tax Credit Structures) was adopted with no impact on the Company's financial statements or disclosures35 NOTE 3 – Per Share Data This note provides a breakdown of the Company's basic and diluted earnings per share | Metric | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :------------------------- | :-------------------------------- | :-------------------------------- | | Basic Earnings per Share | $0.64 | $0.71 | | Diluted Earnings per Share | $0.64 | $0.71 | - There were no anti-dilutive shares for the three months ended March 31, 2024 and 202336 NOTE 4 – Securities This note details the Company's securities portfolio, including available-for-sale securities and their fair value adjustments | Securities Available-for-Sale (Fair Value) | March 31, 2024 (in thousands) | December 31, 2023 (in thousands) | Change (in thousands) | % Change | | :--------------------------------------- | :---------------------------- | :------------------------------- | :-------------------- | :------- | | Total | $1,539,270 | $1,596,832 | $(57,562) | -3.60% | | Total Gross Unrealized Gains | $339 | $1,337 | $(998) | -74.64% | | Total Gross Unrealized Losses | $(299,980) | $(275,765) | $(24,215) | 8.78% | - The increase in unrealized losses from December 31, 2023, to March 31, 2024, was primarily due to fair value adjustments caused by changes in market interest rates44 - No allowance for credit losses was recorded for available-for-sale debt securities at March 31, 2024, or December 31, 202344 NOTE 5 - Derivatives This note describes the Company's derivative instruments, their notional amounts, and fair values | Derivative Metric | March 31, 2024 (in thousands) | December 31, 2023 (in thousands) | Change (in thousands) | | :---------------- | :---------------------------- | :------------------------------- | :-------------------- | | Notional Amount | $150,251 | $139,751 | $10,500 | | Fair Value (Assets) | $8,287 | $7,458 | $829 | | Fair Value (Liabilities) | $8,294 | $7,467 | $827 | - Interest rate swaps are simultaneously hedged by offsetting instruments with third parties to minimize net risk exposure47 - Changes in the fair value of derivatives are reported in earnings as non-interest income, with a gain of $225 thousand in Q1 2024 compared to a loss of $(50) thousand in Q1 202351 NOTE 6 – Loans This note provides detailed information on the Company's loan portfolio, including classifications and allowance for credit losses | Loan Classification | March 31, 2024 (in thousands) | December 31, 2023 (in thousands) | Change (in thousands) | % Change | | :------------------ | :---------------------------- | :------------------------------- | :-------------------- | :------- | | Total Loans (Gross) | $3,978,919 | $3,977,900 | $1,019 | 0.03% | | Allowance for Credit Losses | $(43,754) | $(43,765) | $11 | -0.03% | | Loans, Net | $3,928,156 | $3,927,317 | $839 | 0.02% | | Non-Accrual Loans | $9,898 | $9,136 | $762 | 8.34% | | Allowance for Credit Losses Activity | Three Months Ended March 31, 2024 (in thousands) | Three Months Ended March 31, 2023 (in thousands) | | :----------------------------------- | :--------------------------------------------- | :--------------------------------------------- | | Provision (Benefit) for credit loss expense | $900 | $1,100 | | Loans charged-off | $(1,061) | $(1,238) | | Recoveries collected | $150 | $285 | - The Company adopted ASU 2022-02, eliminating troubled debt restructuring recognition and measurement guidance, and had no modified loans for borrowers experiencing financial difficulty in Q1 2024 or Q1 20236971 NOTE 7 – Repurchase Agreements Accounted for as Secured Borrowings This note details the Company's repurchase agreements, which are accounted for as secured borrowings | Repurchase Agreements | March 31, 2024 (in thousands) | December 31, 2023 (in thousands) | Change (in thousands) | % Change | | :-------------------- | :---------------------------- | :------------------------------- | :-------------------- | :------- | | Total | $38,764 | $40,968 | $(2,204) | -5.38% | - Repurchase agreements are short-term borrowings, secured by mortgage-backed securities, and mature overnight and continuously87 NOTE 8 – Segment Information This note provides financial information broken down by the Company's operating segments - The Company operates three primary segments: core banking, wealth management services, and insurance operations88 | Segment (Q1 2024) | Net Interest Income (in thousands) | Segment Profit (in thousands) | | :----------------------- | :------------------------------- | :---------------------------- | | Core Banking | $46,218 | $18,905 | | Wealth Management Services | $29 | $1,001 | | Insurance | $1 | $676 | NOTE 9 – Stock Repurchase Plan This note outlines the Company's stock repurchase plan and related activities - The Board of Directors approved a plan in January 2022 to repurchase up to 1,000,000 shares of common stock, representing approximately 3% of outstanding shares at the time94 - No shares have been repurchased under this plan as of March 31, 202494230 - The Inflation Reduction Act of 2022 imposes a new 1% excise tax on the fair value of stock repurchased after December 31, 202295 NOTE 10 – Equity Plans and Equity Based Compensation This note details the Company's equity plans and the expense recognized for equity-based compensation - No stock options were granted or outstanding for the three months ended March 31, 2024 and 202398104 | Metric | Three Months Ended March 31, 2024 (in thousands) | Three Months Ended March 31, 2023 (in thousands) | | :------------------------- | :--------------------------------------------- | :--------------------------------------------- | | Restricted Stock Expense | $640 | $539 | | Cash Entitlement Expense | $188 | $182 | - Unrecognized expense associated with restricted stock grants and cash entitlements totaled $6,188 thousand as of March 31, 2024100 - The 2019 Employee Stock Purchase Plan (ESPP) resulted in $12 thousand of expense for both Q1 2024 and Q1 2023102 NOTE 11 – Fair Value This note describes the Company's fair value measurements and their categorization into different levels - Fair value measurements are categorized into Level 1 (quoted prices in active markets), Level 2 (significant other observable inputs), and Level 3 (significant unobservable inputs)105106 | Asset Category (Fair Value) | March 31, 2024 (in thousands) | December 31, 2023 (in thousands) | | :-------------------------- | :---------------------------- | :------------------------------- | | Total Securities | $1,539,270 | $1,596,832 | | Loans Held-for-Sale | $10,325 | $5,226 | | Derivative Assets | $8,287 | $7,458 | | Derivative Liabilities | $8,294 | $7,467 | - Individually analyzed loans and other real estate are primarily measured using Level 3 inputs, based on appraisals with significant unobservable inputs109112118120 NOTE 12 - Other Comprehensive Income (Loss) This note presents the components of the Company's other comprehensive income (loss) and its accumulated balance | Metric | March 31, 2024 (in thousands) | January 1, 2024 (in thousands) | Change (in thousands) | | :---------------------------------------------- | :---------------------------- | :----------------------------- | :-------------------- | | Ending Balance of Accumulated Other Comprehensive Income (Loss) | $(236,955) | $(217,060) | $(19,895) | | Net Current Period Other Comprehensive Income (Loss) | $(19,895) | N/A | N/A | - The primary driver of the change in accumulated other comprehensive income (loss) was unrealized gains and losses on available-for-sale securities126 NOTE 13 - Revenue Recognition This note details the Company's non-interest income streams and their recognition | Non-interest Income Stream | Three Months Ended March 31, 2024 (in thousands) | Three Months Ended March 31, 2023 (in thousands) | Change (in thousands) | % Change | | :------------------------- | :--------------------------------------------- | :--------------------------------------------- | :-------------------- | :------- | | Total Non-interest Income | $15,822 | $14,967 | $855 | 5.71% | | Wealth Management Fees | $3,366 | $2,644 | $722 | 27.31% | | Insurance Revenues | $2,878 | $3,135 | $(257) | -8.20% | | Interchange Fee Income | $4,087 | $4,199 | $(112) | -2.67% | NOTE 14 – Leases This note provides information on the Company's lease arrangements, including costs and weighted-average terms | Lease Metric | Three Months Ended March 31, 2024 (in thousands) | Three Months Ended March 31, 2023 (in thousands) | | :----------------------- | :--------------------------------------------- | :--------------------------------------------- | | Total Lease Cost | $462 | $503 | | Lease Type | Weighted Average Remaining Lease Term (March 31, 2024) | Weighted Average Discount Rate (March 31, 2024) | | :--------------- | :------------------------------------- | :------------------------------ | | Finance Leases | 8 years | 11.36% | | Operating Leases | 6 years | 3.07% | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the Company's financial performance and condition for Q1 2024. It highlights a decline in net income due to lower net interest income, partially offset by increased non-interest income and reduced non-interest expense. It also discusses critical accounting policies, loan portfolio stability, deposit trends, capital adequacy, and liquidity MANAGEMENT OVERVIEW This section provides an executive summary of the Company's financial performance and key operational highlights for the quarter - Net income for Q1 2024 totaled $19,022 thousand ($0.64 per share), a 10% decline on a per share basis compared to Q1 2023149 - The decline in net income was primarily attributable to lower net interest income due to modest net interest margin compression driven by higher deposit costs149 - Non-interest income increased $855 thousand (6%) due to increased wealth management fees, while non-interest expense declined $878 thousand (2%) due to lower salary expense149 - Total loans increased by $1,019 thousand compared to year-end 2023, with commercial real estate and retail growth offsetting seasonal agricultural and commercial and industrial line reductions150 - Deposits declined approximately $33,600 thousand (3% annualized) due to a delayed seasonal outflow of public fund deposits, but non-public funds grew151 CRITICAL ACCOUNTING POLICIES AND ESTIMATES This section outlines the Company's critical accounting policies and estimates that are most susceptible to change, including the allowance for credit losses, valuation of available-for-sale securities, income tax expense, and valuation of goodwill and other intangible assets, all of which involve significant management judgment and are subject to future market factors Allowance for Credit Losses This section details the methodology and key considerations for estimating the allowance for credit losses - The allowance for credit losses is a subjective estimate covering expected credit losses over the loan portfolio's contractual life, determined at least quarterly153154 - The Company uses a static pool methodology, historical loss experience, and qualitative adjustments for economic variables like unemployment rate, GDP, and agricultural producer price index5556159 - The allowance for credit losses remained stable at March 31, 2024, compared to December 31, 202360159 Securities Valuation This section describes the Company's policies and procedures for valuing its securities portfolio - Available-for-sale debt securities in unrealized loss positions are evaluated quarterly for impairment related to credit losses161 - No allowance for credit losses for available-for-sale debt securities was needed at March 31, 2024161 - As of March 31, 2024, gross unrealized gains totaled $339 thousand and gross unrealized losses totaled $299,980 thousand on available-for-sale securities161 Income Tax Expense This section explains the Company's accounting policies and estimates related to income tax expense - Income tax expense involves estimates related to the valuation allowance on deferred tax assets and loss contingencies from tax examinations163 - A valuation allowance reduces deferred tax assets to the amount management believes is more likely than not to be realized164 Goodwill and Other Intangible Assets This section outlines the Company's accounting treatment for goodwill and other intangible assets, including impairment testing - Goodwill is not amortized but tested for impairment at least annually, with December 31 selected as the annual test date165 - No impairment to Goodwill was indicated based on year-end testing165 - Other intangible assets (core deposit and acquired customer relationship intangibles) are amortized over estimated useful lives ranging from 6 to 10 years166 RESULTS OF OPERATIONS This section details the Company's financial performance for the three months ended March 31, 2024, compared to the same period in 2023, covering net income, net interest income, provision for credit losses, non-interest income, non-interest expense, and income taxes Net Income This section analyzes the Company's net income and earnings per share for the reporting period | Metric | Three Months Ended March 31, 2024 (in thousands) | Three Months Ended March 31, 2023 (in thousands) | | :------------------------- | :--------------------------------------------- | :--------------------------------------------- | | Net Income | $19,022 | $20,807 | | Basic Earnings per Share | $0.64 | $0.71 | - The decline in net income was largely the result of lower net interest income, driven by net interest margin compression, as higher deposit costs exceeded improved yields on earning assets167 Net Interest Income This section discusses the Company's net interest income and net interest margin performance | Metric | Three Months Ended March 31, 2024 (in thousands) | Three Months Ended March 31, 2023 (in thousands) | Change (in thousands) | % Change | | :----------------------------------- | :--------------------------------------------- | :--------------------------------------------- | :-------------------- | :------- | | Net Interest Income (non-tax-equivalent) | $44,994 | $49,009 | $(4,015) | -8.19% | | Tax Equivalent Net Interest Margin | 3.35% | 3.69% | -0.34% | -9.21% | | Cost of Funds | 1.67% | 0.84% | 0.83% | 98.81% | - The decline in net interest margin was largely driven by an increase in the cost of funds due to competitive deposit pricing and a shift to higher time deposits169 - Accretion of loan discounts on acquired loans contributed approximately 3 basis points to the net interest margin in Q1 2024, down from 4 basis points in Q1 2023170 Provision for Credit Losses This section details the Company's provision for credit losses and net charge-offs | Metric | Three Months Ended March 31, 2024 (in thousands) | Three Months Ended March 31, 2023 (in thousands) | Change (in thousands) | % Change | | :------------------------- | :--------------------------------------------- | :--------------------------------------------- | :-------------------- | :------- | | Provision for Credit Losses | $900 | $1,100 | $(200) | -18.18% | | Net Charge-offs | $911 | $953 | $(42) | -4.41% | | Net Charge-offs (annualized basis of average loans) | 9 basis points | 10 basis points | -1 basis point | -10.00% | - The provision for credit losses was deemed necessary by management to absorb expected losses in the loan portfolio, based on a quarterly evaluation173 Non-interest Income This section analyzes the various components of the Company's non-interest income | Non-interest Income Stream | Three Months Ended March 31, 2024 (in thousands) | Three Months Ended March 31, 2023 (in thousands) | Change (in thousands) | % Change | | :------------------------- | :--------------------------------------------- | :--------------------------------------------- | :-------------------- | :------- | | Total Non-interest Income | $15,822 | $14,967 | $855 | 5.71% | | Wealth Management Fees | $3,366 | $2,644 | $722 | 27% | | Insurance Revenues | $2,878 | $3,135 | $(257) | -8% | | Other Operating Income | $1,362 | $1,211 | $151 | 12% | | Net Gains on Sales of Loans | $751 | $587 | $164 | 28% | - The increase in wealth management fees was largely attributable to increased assets under management175 - The decline in insurance revenues was related to a decrease in contingency revenue, partially offset by increased commercial lines revenue176 Non-interest Expense This section details the Company's non-interest expenses, including salaries and benefits | Non-interest Expense Item | Three Months Ended March 31, 2024 (in thousands) | Three Months Ended March 31, 2023 (in thousands) | Change (in thousands) | % Change | | :------------------------ | :--------------------------------------------- | :--------------------------------------------- | :-------------------- | :------- | | Total Non-interest Expense | $36,738 | $37,616 | $(878) | -2% | | Salaries and Employee Benefits | $21,178 | $21,846 | $(668) | -3% | | Intangible Amortization | $578 | $785 | $(207) | -26% | - The decline in salaries and benefits was primarily due to a lower level of full-time equivalent employees and lower incentive compensation181 - Intangible amortization decreased due to the accelerated amortization method for core deposit intangibles182 Income Taxes This section discusses the Company's income tax expense and effective tax rate | Metric | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :------------------- | :-------------------------------- | :-------------------------------- | | Effective Income Tax Rate | 17.9% | 17.6% | - The effective tax rate was lower than the blended statutory rate due to tax-exempt investment income, affordable housing tax credits, and income from subsidiaries in states with no state or local income tax183 FINANCIAL CONDITION Total assets slightly declined by $40.3 million to $6.112 billion at March 31, 2024, primarily due to a decrease in the securities portfolio. Loans remained stable, while deposits experienced a seasonal outflow. Capital levels remained strong, and liquidity was managed through various funding sources - Total assets for the Company totaled $6.112 billion at March 31, 2024, representing a decline of $40.3 million compared with December 31, 2023184 Securities available for sale This section details the Company's available-for-sale securities portfolio and its changes - Securities available for sale declined $57.6 million as of March 31, 2024, compared with December 31, 2023, primarily due to the utilization of cash flows to fund loan growth and other balance sheet needs185 - Current projections indicate approximately $190.0 million in principal and interest cash flows from the portfolio over the next twelve months185 Total loans This section provides an overview of the Company's total loan portfolio by category | Loan Category | March 31, 2024 (in thousands) | December 31, 2023 (in thousands) | Change (in thousands) | | :---------------------------------- | :---------------------------- | :------------------------------- | :-------------------- | | Total Loans | $3,978,919 | $3,977,900 | $1,019 | | Commercial Real Estate Loans | $2,148,808 | $2,121,835 | $26,973 | | Home Equity and Consumer Loans | $421,980 | $407,889 | $14,091 | | Agricultural Loans | $400,733 | $423,803 | $(23,070) | | Commercial and Industrial Loans and Leases | $646,162 | $661,529 | $(15,367) | - The modest increase in total loans was largely attributable to increased commercial real estate loans and retail loans, partially offset by lower seasonal line utilization for agricultural loans and lower line utilization for commercial and industrial loans186 - The commercial real estate portfolio is well-diversified over numerous property types (e.g., Multi-Family Dwellings 21%, Retail Space 14%) and by occupancy type (76% non-owner occupied)188 Allowance for Credit Losses This section discusses the Company's allowance for credit losses in relation to its loan portfolio | Metric | March 31, 2024 (in thousands) | December 31, 2023 (in thousands) | | :-------------------------- | :---------------------------- | :------------------------------- | | Total Allowance for Credit Losses | $43,754 | $43,765 | - The allowance for credit losses represented 1.10% of period-end loans at both March 31, 2024, and December 31, 2023191 - As of March 31, 2024, the Company held net discounts on acquired loans of $3.6 million191 Non-performing Assets This section details the Company's non-performing assets, including non-performing loans | Non-performing Asset Category | March 31, 2024 (in thousands) | December 31, 2023 (in thousands) | Change (in thousands) | % Change | | :---------------------------- | :---------------------------- | :------------------------------- | :-------------------- | :------- | | Total Non-performing Assets | $9,983 | $9,191 | $792 | 8.62% | | Non-performing Loans | $9,983 | $9,191 | $792 | 8.62% | | Non-performing Loans to Total Loans | 0.25% | 0.23% | 0.02% | 8.70% | - The modest increase in non-performing loans was related to two commercial credit relationships of less than $1.0 million each192 Deposits This section provides a breakdown of the Company's deposit base by category | Deposit Category | March 31, 2024 (in thousands) | December 31, 2023 (in thousands) | Change (in thousands) | % Change | | :------------------------------------- | :---------------------------- | :------------------------------- | :-------------------- | :------- | | Total Deposits | $5,219,347 | $5,252,963 | $(33,616) | -0.64% | | Non-interest-bearing Demand Deposits | $1,463,933 | $1,493,160 | $(29,227) | -1.96% | | Interest-bearing Demand, Savings, & Money Market Accounts | $2,918,459 | $2,992,761 | $(74,302) | -2.48% | | Time Deposits < $100,000 | $328,804 | $289,077 | $39,727 | 13.74% | | Time Deposits of $100,000 or more | $508,151 | $477,965 | $30,186 | 6.31% | - The decline in total deposits was largely attributable to seasonal outflows of public entity funds193 - Non-interest bearing deposits remained relatively stable at 28% of total deposits, and uninsured and uncollateralized deposits were approximately 21% of total deposits193 Capital Resources This section outlines the Company's capital structure and regulatory capital ratios - Shareholders' equity declined by $8.3 million to $655.3 million at March 31, 2024, primarily due to a $20.0 million decrease in accumulated other comprehensive income (loss) related to available-for-sale securities195 - The Company and its subsidiary bank remained well-capitalized, exceeding all minimum regulatory capital ratios at March 31, 2024199 | Capital Ratio (March 31, 2024) | Consolidated | Bank | | :----------------------------- | :----------- | :------ | | Total Capital (to Risk Weighted Assets) | 16.57% | 14.53% | | Tier 1 (Core) Capital (to Risk Weighted Assets) | 14.97% | 13.73% | | Common Tier 1 (CET 1) Capital Ratio (to Risk Weighted Assets) | 14.27% | 13.73% | | Tier 1 Capital (to Average Assets) | 12.01% | 11.02% | - The Company began the three-year phase-in of CECL's regulatory capital impact on January 1, 2022, with an additional 25% phased in on January 1, 2024201 Liquidity This section discusses the Company's liquidity position and funding sources - Total cash and cash equivalents increased $8.1 million during Q1 2024, ending at $123.5 million202 - Primary funding sources include customer deposits, reciprocal deposits, and short-term borrowings from the FHLB (approx. $220 million available) and Federal Reserve Bank (approx. $186 million capacity)203204 - The parent company had approximately $83.4 million of cash and cash equivalents available to meet its cash flow needs at March 31, 2024205 FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISKS This section highlights the inherent risks and uncertainties associated with forward-looking statements in the report - Statements regarding future expectations are considered "forward-looking statements" and are subject to risks, uncertainties, and other factors that could cause actual results to differ materially206208 - Key risks include changes in interest rates, unfavorable economic conditions, changes in liquidity, competitive conditions, and regulatory actions209 - The Company undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date on which it is made207 Item 3. Quantitative and Qualitative Disclosures About Market Risk The Company's market risk exposure, primarily liquidity and interest rate risk, is regularly reviewed. Interest rate risk is monitored using computer simulation modeling to estimate the potential impact on its net interest income and net portfolio value (NPV) under various interest rate scenarios - Primary market risks impacting the Company's operations are liquidity risk and interest rate risk212 - Interest rate risk is monitored using computer simulation modeling to estimate the potential impact on net interest income and net portfolio value (NPV) under various interest rate scenarios214 | Changes in Rates | Net Interest Income Amount (in thousands) | % Change | | :--------------- | :-------------------------------------- | :------- | | +2% | $203,363 | (0.55)% | | +1% | $204,537 | 0.03% | | Base | $204,483 | — | | -1% | $202,203 | (1.12)% | | -2% | $199,037 | (2.66)% | | Changes in Rates | Net Portfolio Value Amount (in thousands) | % Change | | :--------------- | :-------------------------------------- | :------- | | +2% | $636,724 | (15.76)% | | +1% | $696,934 | (7.80)% | | Base | $755,860 | — | | -1% | $805,070 | 6.51% | | -2% | $835,197 | 10.50% | Item 4. Controls and Procedures As of March 31, 2024, the Company's principal executive officer and principal financial officer concluded that the disclosure controls and procedures were effective. There were no material changes to the Company's internal control over financial reporting during the first fiscal quarter of 2024 - The Company's principal executive officer and principal financial officer concluded that disclosure controls and procedures were effective as of March 31, 2024224 - There was no change in the Company's internal control over financial reporting that materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting during Q1 2024225 PART II. OTHER INFORMATION This part includes disclosures on legal proceedings, risk factors, equity sales, defaults, mine safety, other information, and exhibits Item 1. Legal Proceedings There are no pending legal proceedings, other than routine litigation incidental to the business of the Company's subsidiaries - There are no pending legal proceedings, other than routine litigation incidental to the business of the Company's subsidiaries227 Item 1A. Risk Factors There have been no material changes to the risk factors previously disclosed in German American Bancorp, Inc.'s Annual Report on Form 10-K for the year ended December 31, 2023 - No material changes to the risk factors previously disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2023228 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The Company did not repurchase any shares of its common stock during January, February, or March 2024 under its publicly announced repurchase plan, which authorizes up to 1,000,000 shares - The Company did not repurchase any shares of its common stock during January, February, or March 2024230 - The publicly announced plan, approved January 31, 2022, authorizes the repurchase of up to 1,000,000 shares230 Item 3. Defaults Upon Senior Securities There were no defaults upon senior securities during the period - None231 Item 4. Mine Safety Disclosures This item is not applicable to the Company - Not applicable232 Item 5. Other Information This section states that there is no information required to be disclosed in a Form 8-K, no changes to director nomination procedures, and no insider trading arrangements adopted or terminated by directors or officers in Q1 2024 - No information required to be disclosed in a report on Form 8-K234 - No changes to director nomination procedures236 - No director or officer adopted or terminated a "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement" during Q1 2024237 Item 6. Exhibits This section lists all exhibits included with the report or incorporated by reference, such as articles of incorporation, bylaws, stock certificates, indentures, executive management incentive plan descriptions, and Sarbanes-Oxley Act certifications - The report includes various exhibits such as Amended and Restated Articles of Incorporation, Bylaws, Indenture, and Form of Subordinated Note239 - Sarbanes-Oxley Act Section 302 and 906 Certifications of Principal Executive Officer and Principal Financial Officer are included239 SIGNATURES This section contains the official signatures of the Company's principal executive and financial officers, certifying the report's accuracy - The report is signed by D. Neil Dauby (Chairman and Chief Executive Officer), Bradley M. Rust (President and Chief Financial Officer), and Vicki L. Schuler (Senior Vice President, Controller) on May 8, 2024246
German American(GABC) - 2024 Q1 - Quarterly Report