What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2020-08-07 compared with 2020-05-11 · 484 added, 210 removed, 1058 unchanged (40% of the section changed)

78 unchanged sentences

GERMAN AMERICAN BANCORP, INC.

CONSOLIDATED STATEMENTS OF INCOME

(unaudited, dollars in thousands except per share data)

Six Months Ended

INTEREST INCOME

Interest and Fees on Loans

Interest on Federal Funds Sold and Other Short-term Investments

Interest and Dividends on Securities:

TOTAL INTEREST INCOME

INTEREST EXPENSE

Interest on Deposits

Interest on FHLB Advances and Other Borrowings

TOTAL INTEREST EXPENSE

NET INTEREST INCOME

Provision for Credit Losses

NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES

NON-INTEREST INCOME

Trust and Investment Product Fees

Service Charges on Deposit Accounts

Insurance Revenues

Company Owned Life Insurance

Interchange Fee Income

Other Operating Income

Net Gains on Sales of Loans

Net Gains on Securities

TOTAL NON-INTEREST INCOME

NON-INTEREST EXPENSE

Salaries and Employee Benefits

Occupancy Expense

Furniture and Equipment Expense

FDIC Premiums

Data Processing Fees

Professional Fees

Advertising and Promotion

Intangible Amortization

Other Operating Expenses

TOTAL NON-INTEREST EXPENSE

Income before Income Taxes

Income Tax Expense

Basic Earnings per Share

Diluted Earnings per Share

See accompanying notes to consolidated financial statements.

GERMAN AMERICAN BANCORP, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

7 unchanged sentences

COMPREHENSIVE INCOME

Six Months Ended

Other Comprehensive Income (Loss):

Unrealized Gains (Losses) on Securities:

Unrealized Holding Gain (Loss) Arising During the Period

Reclassification Adjustment for Gains Included in Net Income

Total Other Comprehensive Income (Loss)

COMPREHENSIVE INCOME

See accompanying notes to consolidated financial statements.

15 unchanged sentences

Balances, March 31, 2020

Other Comprehensive Income

Cash Dividends ($0.19 per share)

Issuance of Common Stock for:

Restricted Share Grants

Stock Repurchase

Balances, June 30, 2020

See accompanying notes to consolidated financial statements.

GERMAN AMERICAN BANCORP, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

(unaudited, dollars in thousands)

Additional Paid-in Capital

8 unchanged sentences

Balances, March 31, 2019

Other Comprehensive Income

Cash Dividends ($0.17 per share)

Issuance of Common Stock for:

Restricted Share Grants

Balances, June 30, 2019

See accompanying notes to consolidated financial statements.

2 unchanged sentences

(unaudited, dollars in thousands)

Three Months Ended

Six Months Ended

CASH FLOWS FROM OPERATING ACTIVITIES

7 unchanged sentences

Gain on Securities, net

Gain on Sales of Other Real Estate and Repossessed Assets

Loss on Disposition and Donation of Premises and Equipment

10 unchanged sentences

Purchase of Securities Available-for-Sale

Proceeds from Redemption of Federal Home Loan Bank Stock

Purchase of Loans

10 unchanged sentences

Repayments of Long-term Debt

Issuance (Repurchase) of Common Stock

Retirement of Common Stock

Dividends Paid

10 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2020

June 30, 2020

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

17 unchanged sentences

Such measures have significantly contributed to rising unemployment and negatively impacted consumer and business spending.

While many states have lifted quarantine and lock-down orders on a limited basis and with certain social distancing restrictions, commercial activity has not yet returned to the levels existing prior to the pandemic outbreak.

As a result, the demand for the Company’s products and services has been, and will continue to be, significantly impacted.

14 unchanged sentences

It also applies to off-balance sheet credit exposures not accounted for as insurance (loan commitments, standby letters of credit, financial guarantees, and other similar instruments).

The new CECL model requires an estimate of expected credit losses, measured over the contractual life of an instrument, which considers reasonable and supportable forecasts of future economic conditions in addition to information about past events and current conditions.

The standard provides significant flexibility and requires a high degree of judgement with regards to pooling financial assets with

The new CECL model requires an estimate of expected credit losses, measured over the contractual life of an instrument, which considers reasonable and

GERMAN AMERICAN BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2020

June 30, 2020

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

NOTE 2 - Recent Accounting Pronouncements (continued)

similar risk characteristics and adjusting the relevant historical loss information in order to develop an estimate of expected lifetime losses.

supportable forecasts of future economic conditions in addition to information about past events and current conditions.

The standard provides significant flexibility and requires a high degree of judgement with regards to pooling financial assets with similar risk characteristics and adjusting the relevant historical loss information in order to develop an estimate of expected lifetime losses.

The Company adopted ASC 326 on January 1, 2020 using the modified restrospective approach.

19 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2020

June 30, 2020

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

18 unchanged sentences

The Company is adopting the capital transition relief over the permissible five-year period.

Loans that m anagement has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at amortized cost.

Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at amortized cost.

Amortized cost is the principal balance outstanding, net of purchase premiums and discounts, deferred loan fees and costs.

Accrued interest receivable totaled $ 12,350 at March 31, 2020 and was reported in Accrued Interest Receivable and Other Assets on the Consolidated Balance Sheets.

Accrued interest receivable totaled $ 14,726 at June 30, 2020 and was reported in Accrued Interest Receivable and Other Assets on the Consolidated Balance Sheets.

Interest income is accrued on the unpaid principal balance.

14 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2020

June 30, 2020

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

32 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2020

June 30, 2020

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

44 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2020

June 30, 2020

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

15 unchanged sentences

Diluted Earnings per Share

For the three months ended March 31, 2020 and 2019, there were no anti-dilutive shares.

For the three months ended June 30, 2020 and 2019, there were no anti-dilutive shares.

Six Months Ended

Basic Earnings per Share:

Weighted Average Shares Outstanding

Basic Earnings per Share

Diluted Earnings per Share:

Weighted Average Shares Outstanding

Potentially Dilutive Shares, Net

Diluted Weighted Average Shares Outstanding

Diluted Earnings per Share

For the six months ended June 30, 2020 and 2019, there were no anti-dilutive shares.

GERMAN AMERICAN BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2020

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

NOTE 4 – Securities

2 unchanged sentences

Allowance for Credit Losses

March 31, 2020

June 30, 2020

Obligations of State and Political Subdivisions

2 unchanged sentences

All mortgage-backed securities in the above table (identified above and throughout this Note 4 as "MBS/CMO") are residential and multi-family mortgage-backed securities and guaranteed by government sponsored entities.

GERMAN AMERICAN BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2020

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

NOTE 4 - Securities (continued)

The amortized cost and fair value of Securities at March 31, 2020 by contractual maturity are shown below.

The amortized cost and fair value of Securities at June 30, 2020 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.

8 unchanged sentences

Three Months Ended

March 31, 2020

March 31, 2019

June 30, 2020

June 30, 2019

Proceeds from Sales

1 unchanged sentence

Income Taxes on Gross Gains

The carrying value of securities pledged to secure repurchase agreements, public and trust deposits, and for other purposes as required by law was $ 249,761 and $ 245,664 as of March 31, 2020 and December 31, 2019, respectively.

Below is a summary of securities with unrealized losses as of March 31, 2020 and December 31, 2019, presented by length of time the securities have been in a continuous unrealized loss position:

Six Months Ended

June 30, 2020

June 30, 2019

Proceeds from Sales

Gross Gains on Sales

Income Taxes on Gross Gains

The carrying value of securities pledged to secure repurchase agreements, public and trust deposits, and for other purposes as required by law was $ 241,349 and $ 245,664 as of June 30, 2020 and December 31, 2019, respectively.

GERMAN AMERICAN BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2020

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

NOTE 4 - Securities (continued)

Below is a summary of securities with unrealized losses as of June 30, 2020 and December 31, 2019, presented by length of time the securities have been in a continuous unrealized loss position:

Less than 12 Months

12 Months or More

March 31, 2020

June 30, 2020

Obligations of State and Political Subdivisions

3 unchanged sentences

Obligations of State and Political Subdivisions

GERMAN AMERICAN BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2020

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

NOTE 4 - Securities (continued)

Available-for-sale debt securities in unrealized loss positions are evaluated for impairment related to credit losses at least quarterly.

6 unchanged sentences

Any impairment that has not been recorded through an allowance for credit losses is recognized in other comprehensive income, net of applicable taxes.

No allowance for credit losses for available-for-sale debt securities was needed at March 31, 2020.

Accrued interest receivable on available-for-sale debt securities totaled $ 4,434 at March 31, 2020 and is excluded from the estimate of credit losses.

The Company's equity securities are listed as Other Investments on the Consolidated Balance Sheets and consist of one non-controlling investment in a single banking organization at March 31, 2020 and December 31, 2019.

No allowance for credit losses for available-for-sale debt securities was needed at June 30, 2020.

Accrued interest receivable on available-for-sale debt securities totaled $ 4,720 at June 30, 2020 and is excluded from the estimate of credit losses.

The original investment totaled $ 1,350 and other-than-temporary impairment was previously recorded totaling $ 997 .

The Company's equity securities are considered not to have readily determinable fair value and are carried at cost and evaluated for impairment.

At March 31, 2020, there was no additional impairment recognized through earnings.

At June 30, 2020, there was no additional impairment recognized through earnings.

NOTE 5 – 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 $ 109.6 million at March 31, 2020 and $ 102.4 million at December 31, 2019.

The notional amounts of these interest rate swaps and the offsetting counterparty derivative instruments were $ 110.3 million at June 30, 2020 and $ 102.4 million at December 31, 2019.

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.

5 unchanged sentences

In addition, the Company minimizes credit risk through credit approvals, limits, and monitoring procedures.

GERMAN AMERICAN BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2020

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

NOTE 5 - Derivatives (continued)

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

March 31, 2020

June 30, 2020

December 31, 2019

3 unchanged sentences

Interest Rate Swaps

GERMAN AMERICAN BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2020

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

NOTE 5 - Derivatives (continued)

The following table presents the effect of derivative instruments on the Consolidated Statements of Income for the periods presented:

Three Months Ended

Six Months Ended

Interest Rate Swaps:

1 unchanged sentence

NOTE 6 – Loans

Loans at March 31, 2020 were as follows:

Loans at June 30, 2020 were as follows:

Commercial and Industrial Loans

6 unchanged sentences

Allowance for credit losses

On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) was signed into law, providing an approximately $2 trillion stimulus package that includes direct payments to individual taxpayers, economic stimulus to significantly impacted industry sectors, emergency funding for hospitals and providers, small business loans, increased unemployment benefits, and a variety of tax incentives.

For small businesses, eligible nonprofits and certain others, the CARES Act established a Paycheck Protection Program (“PPP”), which is administered by the Small Business Administration (“SBA”).

On April 24, 2020, the Paycheck Protection Program and Health Care Enhancement Act was enacted.

Among other things, this legislation amends the initial CARES Act program by raising the appropriation level for PPP loans from $349 billion to $670 billion.

The PPP was further modified on June 5, 2020 with the adoption of the Paycheck Protection Program Flexibility Act (the “Flexibility Act”), which extended the maturity date for PPP loans from two years to five years for loans disbursed on or after the date of enactment of the Flexibility Act.

For PPP loans disbursed prior to such enactment, the Flexibility Act permits the borrower

GERMAN AMERICAN BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2020

June 30, 2020

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

NOTE 6 - Loans (continued)

and lender to mutually agree to extend the term of the loan to five years.

The vast majority of the Company's PPP loans have two-year maturities.

PPP loans earn interest at a fixed rate of 1% and are fully guaranteed by the U.S.

The Company anticipates that the majority of these loans will ultimately be forgiven by the SBA in accordance with the terms of the program.

As of June 30, 2020, the Bank has $ 349,546 in loans under this program, all of which are included above in the Commercial and Industrial Loan category.

Allowance for Credit Losses for Loans

The following table presents the activity in the allowance for credit losses by portfolio segment for the quarter ended March 31, 2020:

March 31, 2020

The following table presents the activity in the allowance for credit losses by portfolio segment for the three months ended June 30, 2020:

June 30, 2020

Commercial and Industrial

4 unchanged sentences

Allowance for Credit Losses:

Beginning balance

Provision for credit loss expense

Loans charged-off

Recoveries collected

Total ending allowance balance

The following table presents the activity in the allowance for credit losses by portfolio segment for the six months ended June 30, 2020:

June 30, 2020

Commercial and Industrial

Commercial Real Estate Loans

Consumer Loans

Home Equity Loans

Residential Mortgage Loans

Allowance for Credit Losses:

Beginning balance prior to adoption of ASC 326

12 unchanged sentences

Loans evaluated individually are not included in the collective evaluation.

When the borrower is experiencing financial difficulty at the reporting date and repayment is expected to be provided substantially through the operation or sale of the collateral, expected credit losses are based on the fair value of the collateral at the reporting date adjusted for selling costs.

When the borrower is experiencing financial difficulty at the reporting date and repayment is expected

GERMAN AMERICAN BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2020

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

NOTE 6 - Loans (continued)

to be provided substantially through the operation or sale of the collateral, expected credit losses are based on the fair value of the collateral at the reporting date adjusted for selling costs.

The Company utilizes the Static Pool methodology in determining expected future credit losses.

6 unchanged sentences

Management attempts to quantify qualitative reserves whenever possible.

For the three months ended March 31, 2020, the allowance for credit losses increased primarily due to macroeconomic factors surrounding the COVID-19 pandemic.

For the six months ended June 30, 2020, the allowance for credit losses increased primarily due to macroeconomic factors surrounding the COVID-19 pandemic.

While there continues to be great uncertainty related to COVID-19 on our borrowers and communities, we have begun to recognize significant declines in employment and gross domestic product which are key indicators utilized in our forecasting for our allowance calculations.

Based on the potential increased losses related to the economic impact of the COVID-19 pandemic, the bank has considered this loss experience may align with loss experience from the recessionary period from 2008-2011 and qualitative adjustments have been made accordingly.

GERMAN AMERICAN BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2020

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

NOTE 6 - Loans (continued)

Since PPP loans are guaranteed by the Small Business Administration (SBA), they have minimal impact on the allowance for credit losses.

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.

5 unchanged sentences

Exceptions to the non-accrual and charge-off policies are made when the loan is well secured and in the process of collection.

The following table presents the amortized cost basis of loans on non-accrual status and loans past due over 89 days still accruing as of March 31, 2020:

March 31, 2020

The following table presents the amortized cost basis of loans on non-accrual status and loans past due over 89 days still accruing as of June 30, 2020:

June 30, 2020

Non-Accrual With No Allowance for Credit Loss

6 unchanged sentences

Residential Mortgage Loans

Interest income on non-accrual loans recognized during the three months ended March 31,2020 totaled $ 3 .

The following table presents the amortized cost basis of collateral-dependent loans by class of loans as of March 31, 2020:

March 31, 2020

Interest income on non-accrual loans recognized during the three and six months ended June 30, 2020 totaled $ 13 and $ 16 , respectively.

GERMAN AMERICAN BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2020

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

NOTE 6 - Loans (continued)

The following table presents the amortized cost basis of collateral-dependent loans by class of loans as of June 30, 2020:

June 30, 2020

Accounts Receivable

5 unchanged sentences

Residential Mortgage Loans

GERMAN AMERICAN BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2020

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

NOTE 6 - Loans (continued)

The following table presents the aging of the amortized cost basis in past due loans by class of loans as of March 31, 2020:

March 31, 2020

The following table presents the aging of the amortized cost basis in past due loans by class of loans as of June 30, 2020:

June 30, 2020

30-59 Days Past Due

14 unchanged sentences

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.

As of March 31, 2020, the Company has troubled debt restructurings totaling $ 116 .

The Company has no specific allocation of allowance for these loans at March 31, 2020.

The Company had no t committed to lending any additional amounts as of March 31, 2020 and December 31, 2019 to customers with outstanding loans that are classified as troubled debt restructurings.

During the three months ended March 31, 2020 and 2019, the Company had no loans modified as troubled debt restructurings.

Additionally, there were no loans modified as troubled debt restructurings for which there was a payment default within twelve months following the modification during the three months ended March 31, 2020 and 2019.

As of June 30, 2020, the Company had troubled debt restructurings totaling $ 114 .

The Company has no specific allocation of allowance for these loans at June 30, 2020.

The Company had no t committed to lending any additional amounts as of June 30, 2020 and December 31, 2019 to customers with outstanding loans that are classified as troubled debt restructurings.

During the three and six months ended June 30, 2020 and 2019, the Company had no loans modified as troubled debt restructurings.

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

Loan Modifications and Troubled Debt Restructurings due to COVID-19

On April 7, 2020, the federal banking regulators issued a revised Interagency Statement on Loan Modifications and Reporting for Financial Institutions, which, among other things, encouraged financial institutions to work prudently with borrowers who are or may be unable to meet their contractual payment obligations because of the effects of COVID-19, and stated that institutions generally do not need to categorize COVID-19-related modifications as troubled debt restructurings and that the agencies will not direct supervised institutions to automatically categorize all COVID-19 related loan modifications as troubled debt restructurings.

Accordingly, the Company is offering short-term modifications made in response to COVID-19 to borrowers who are current and otherwise not past due.

The modifications completed in the three months ended March 31, 2020 were immaterial.

GERMAN AMERICAN BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2020

June 30, 2020

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

NOTE 6 - Loans (continued)

Loan Modifications and Troubled Debt Restructurings due to COVID-19

Accordingly, the Company is offering short-term modifications made in response to COVID-19 to borrowers who are current and otherwise not past due.

As of June 30, 2020, the following payment modifications have been made:

Type of Loans

Number of Loans

% of Loan Type (excludes PPP Loans)

(dollars in thousands)

Commercial & Industrial Loans

Commercial Real Estate Loans

Agricultural Loans

Consumer Loans

Residential Mortgage Loans

Credit Quality Indicators:

12 unchanged sentences

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.

GERMAN AMERICAN BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2020

June 30, 2020

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

NOTE 6 - 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:

Term Loans Amortized Cost Basis by Origination Year

As of March 31, 2020

As of June 30, 2020

Revolving Loans Amortized Cost Basis

11 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2020

June 30, 2020

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

4 unchanged sentences

Term Loans Amortized Cost Basis by Origination Year

As of March 31, 2020

As of June 30, 2020

Revolving Loans Amortized Cost Basis

9 unchanged sentences

Total Residential Mortgage Loans

Credit cards are excluded from the presentation of credit quality indicator by aging status of the loan as allowed by ASC 326-20-50-6.

The following table presents the amortized cost based on payment activity:

As of March 31, 2020

The Company considers the performance of the loan portfolio and its impact on the allowance for credit loan losses.

For certain retail 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 retail loans based on payment activity:

As of June 30, 2020

Nonperforming

The following table presents loans purchased and/or sold during the year by portfolio segment:

March 31, 2020

June 30, 2020

Commercial and Industrial Loans

6 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2020

June 30, 2020

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

3 unchanged sentences

The following tables are disclosures related to the allowance for loan losses in prior periods.

The following table presents the activity in the allowance for loan losses by portfolio class for the three months ended March 31, 2019:

March 31, 2019

The following table presents the activity in the allowance for loan losses by portfolio class for the three months ended June 30, 2019:

June 30, 2019

Commercial and Industrial

8 unchanged sentences

Ending Balance

The following table presents the activity in the allowance for loan losses by portfolio class for the six months ended June 30, 2019:

June 30, 2019

Commercial and Industrial

Loans and Leases

Commercial Real Estate Loans

Home Equity Loans

Consumer Loans

Residential Mortgage Loans

Beginning Balance

Provision for Loan Losses

Loans Charged-off

Ending Balance

GERMAN AMERICAN BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2020

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

NOTE 6 - Loans (continued)

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 December 31, 2019:

17 unchanged sentences

(2) n/m = not meaningful

GERMAN AMERICAN BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2020

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

NOTE 6 - Loans (continued)

The following table presents loans individually evaluated for impairment by class of loans as of December 31, 2019:

12 unchanged sentences

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

The following table presents the average balance and related interest income of loans individually evaluated for impairment by class of loans for the three month period ended March 31, 2019:

March 31, 2019

GERMAN AMERICAN BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2020

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

NOTE 6 - Loans (continued)

The following table presents the average balance and related interest income of loans individually evaluated for impairment by class of loans for the three month period ended June 30, 2019:

June 30, 2019

Average Recorded

10 unchanged sentences

Loans Acquired With Deteriorated Credit Quality With An Additional Allowance Recorded (Included in the Total Above)

The following table presents the average balance and related interest income of loans individually evaluated for impairment by class of loans for the six month period ended June 30, 2019:

June 30, 2019

Average Recorded

Interest Income Recognized

With No Related Allowance Recorded:

Commercial and Industrial Loans and Leases

Commercial Real Estate Loans

Agricultural Loans

With An Allowance Recorded:

Commercial and Industrial Loans and Leases

Commercial Real Estate Loans

Agricultural Loans

Loans Acquired With Deteriorated Credit Quality With No Related Allowance Recorded (Included in the Total Above)

Loans Acquired With Deteriorated Credit Quality With An Additional Allowance Recorded (Included in the Total Above)

GERMAN AMERICAN BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2020

June 30, 2020

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

38 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2020

June 30, 2020

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

10 unchanged sentences

Repurchase agreements are short-term borrowings included in FHLB Advances and Other Borrowings and mature overnight and continuously.

Repurchase agreements, which were secured by mortgage-backed securities, totaled $ 33,523 and $ 39,425 as of March 31, 2020 and December 31, 2019, respectively.

Repurchase agreements, which were secured by mortgage-backed securities, totaled $ 73,199 and $ 39,425 as of June 30, 2020 and December 31, 2019, respectively.

Risk could arise when the collateral pledged to a repurchase agreement declines in fair value.

8 unchanged sentences

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 Bank, which operated through 75 banking offices at March 31, 2020.

The core banking segment is comprised by the Company’s banking subsidiary, German American Bank, which operated through 74 banking offices at June 30, 2020.

Net interest income from loans and investments funded by deposits and borrowings is the primary revenue for the core-banking segment.

9 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2020

June 30, 2020

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

3 unchanged sentences

Three Months Ended

March 31, 2020

June 30, 2020

Net Interest Income

8 unchanged sentences

Segment Profit (Loss)

Segment Assets at March 31, 2020

Segment Assets at June 30, 2020

Trust and Investment Advisory Services

1 unchanged sentence

Three Months Ended

March 31, 2019

June 30, 2019

Net Interest Income

9 unchanged sentences

Segment Assets at December 31, 2019

GERMAN AMERICAN BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2020

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

NOTE 8 - Segment Information (continued)

Trust and Investment Advisory Services

Consolidated Totals

Six Months Ended

June 30, 2020

Net Interest Income

Net Gains on Sales of Loans

Net Gains on Securities

Trust and Investment Product Fees

Insurance Revenues

Noncash Items:

Provision for Loan Losses

Depreciation and Amortization

Income Tax Expense (Benefit)

Segment Profit (Loss)

Segment Assets at June 30, 2020

Trust and Investment Advisory Services

Consolidated Totals

Six Months Ended

June 30, 2019

Net Interest Income

Net Gains on Sales of Loans

Net Gains on Securities

Trust and Investment Product Fees

Insurance Revenues

Noncash Items:

Provision for Loan Losses

Depreciation and Amortization

Income Tax Expense (Benefit)

Segment Profit (Loss)

Segment Assets at December 31, 2019

NOTE 9 – Stock Repurchase Plan

5 unchanged sentences

At the time of its termination, the Company had been authorized to purchase up to 409,184 shares of common stock under the 2001 program.

The Company repurchased 173,089 shares of common stock under the 2020 plan.

The Company has repurchased 217,255 shares of common stock under the 2020 plan.

GERMAN AMERICAN BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2020

June 30, 2020

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

4 unchanged sentences

It will remain in effect until May 16, 2029, or until all shares of common stock subject to the 2019 LTI Plan are distributed, all awards have expired or terminated, or the plan is terminated pursuant to its terms, whichever occurs first.

For the three months ended March 31, 2020 and 2019, the Company granted no options.

The Company recorded no stock compensation expense applicable to options during the three months ended March 31, 2020 and 2019.

For the three and six months ended June 30, 2020 and 2019, the Company granted no options.

The Company recorded no stock compensation expense applicable to options during the three and six months ended June 30, 2020 and 2019.

In addition, there was no unrecognized option expense.

7 unchanged sentences

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 March 31, 2020, the Company awarded grants of 41,752 of restricted stock.

During the three months ended March 31, 2019, the Company granted awards of 24,780 of restricted stock.

Total unvested restricted stock awards at March 31, 2020 and December 31, 2019 were 85,031 and 43,279 , respectively.

During the three and six months ended June 30, 2020, the Company awarded grants of 1,426 and 43,178 of restricted stock, respectively.

During the six months ended June 30, 2019, the Company granted awards of 24,780 of restricted stock.

No awards were granted during the three months ended June 30, 2019.

Total unvested restricted stock awards at June 30, 2020 and December 31, 2019 were 86,457 and 43,279 , respectively.

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

2 unchanged sentences

Cash Entitlement Expense

Unrecognized expense associated with the restricted stock grants and cash entitlements totaled $ 1,665 and $ 2,931 as of March 31, 2020 and 2019, respectively.

Six Months Ended

Restricted Stock Expense

Cash Entitlement Expense

Unrecognized expense associated with the restricted stock grants and cash entitlements totaled $ 1,535 and $ 2,463 as of June 30, 2020 and 2019, respectively.

GERMAN AMERICAN BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2020

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

NOTE 10 - Equity Plans and Equity Based Compensation (continued)

Through August 16, 2019, the company maintained the 2009 Employee Stock Purchase Plan (the "2009 ESPP") whereby eligible employees had the option to purchase the Company’s common stock at a discount.

3 unchanged sentences

The 2019 ESPP replaces the 2009 ESPP, which expired by its own terms on August 16, 2019.

The 2019 ESPP, which became effective as of October 1, 2019, provides for a series of 3 -month offering periods, commencing on the first day and ending on the

GERMAN AMERICAN BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2020

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

NOTE 10 - Equity Plans and Equity Based Compensation (continued)

last trading day of each calendar quarter, for the purchase of the Company’s common stock by participating employees.

The 2019 ESPP, which became effective as of October 1, 2019, provides for a series of 3 -month offering periods, commencing on the first day and ending on the last trading day of each calendar quarter, for the purchase of the Company’s common stock by participating employees.

The purchase price of the shares has been set at 95 % of the fair market value of the Company’s common stock on the last trading day of the offering period.

2 unchanged sentences

Funding for the purchase of common stock is from employee and Company contributions.

For the three months ended March 31, 2020, the Company recorded $ 16 of expense, $ 12 net of tax, for the employee stock purchase plan.

For the three months ended June 30, 2020, the Company recorded $ 3 of expense, $ 2 net of tax, for the employee stock purchase plan.

For the six months ended June 30, 2020, the Company recorded $ 19 of expense, $ 14 net of tax, for the employee stock purchase plan.

As an annual plan, the expense for the 2009 ESPP was recorded in the third quarter of each year.

There was no expense recorded for the employee stock purchase plan during the three months ended March 31, 2019.

There was no unrecognized compensation expense as of March 31, 2020 and 2019 for the employee stock purchase plan.

There was no expense recorded for the employee stock purchase plan during the three and six months ended June 30, 2019.

There was no unrecognized compensation expense as of June 30, 2020 and 2019 for the employee stock purchase plan.

GERMAN AMERICAN BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2020

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

NOTE 11 – Fair Value

12 unchanged sentences

Level 3 pricing is obtained from a third-party based upon similar trades that are not traded frequently without adjustment by the Company.

At March 31, 2020, the Company held $ 3.5 million in Level 3 securities which consist of non-rated Obligations of State and Political Subdivisions.

At June 30, 2020, the Company held $ 2.5 million in Level 3 securities which consist of non-rated Obligations of State and Political Subdivisions.

Absent the credit rating, significant assumptions must be made such that the credit risk input becomes an unobservable input and thus these investment securities are reported by the Company in a Level 3 classification.

12 unchanged sentences

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

GERMAN AMERICAN BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2020

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

NOTE 11 - Fair Value (continued)

real estate owned, significant unobservable inputs may be used which include:

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.

5 unchanged sentences

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.

GERMAN AMERICAN BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2020

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

NOTE 11 - Fair Value (continued)

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 March 31, 2020 Using

Fair Value Measurements at June 30, 2020 Using

Quoted Prices in Active Markets for Identical Assets (Level 1)

6 unchanged sentences

Derivative Liabilities

GERMAN AMERICAN BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2020

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

NOTE 11 - Fair Value (continued)

Fair Value Measurements at December 31, 2019 Using

7 unchanged sentences

Derivative Liabilities

As of March 31, 2020 and December 31, 2019, the aggregate fair value, contractual balance (including accrued interest), and gain or loss on Loans Held-for-Sale was as follows:

March 31, 2020

As of June 30, 2020 and December 31, 2019, the aggregate fair value, contractual balance (including accrued interest), and gain or loss on Loans Held-for-Sale was as follows:

June 30, 2020

December 31, 2019

1 unchanged sentence

Contractual Balance

The total amount of gains and losses from changes in fair value included in earnings for the three months ended March 31, 2020 and 2019 were $ 5 and $ 134 , respectively.

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 months ended March 31, 2020 and 2019:

Obligations of State and Political Subdivisions

Balance of Recurring Level 3 Assets at January 1

Total Gains or Losses Included in Other Comprehensive Income

Maturities / Calls

Acquired through Bank Acquisition

Balance of Recurring Level 3 Assets at March 31

Of the total gain/loss included in earnings for the three months ended March 31, 2020 and 2019, ($ 16 ) and ($ 9 ) was attributable to other changes in fair value, respectively.

The total amount of gains and losses from changes in fair value included in earnings for the three and six months ended June 30, 2020 were $ 92 and $ 97 , respectively.

The total amount of gains and losses from changes in fair value included in earnings for the three and six months ended June 30, 2019 were $ 93 and $ 227 , respectively.

GERMAN AMERICAN BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2020

June 30, 2020

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

NOTE 11 - Fair Value (continued)

The table below presents a reconciliation of all assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three and six months ended June 30, 2020 and 2019:

Obligations of State and Political Subdivisions

Balance of Recurring Level 3 Assets at April 1

Total Gains or Losses Included in Other Comprehensive Income

Maturities / Calls

Balance of Recurring Level 3 Assets at June 30

Obligations of State and Political Subdivisions

Balance of Recurring Level 3 Assets at January 1

Total Gains or Losses Included in Other Comprehensive Income

Maturities / Calls

Balance of Recurring Level 3 Assets at June 30

Of the total gain/loss included in earnings for the three and six months ended June 30, 2020 and 2019, ( $ 7 ) and ( $ 23 ) was attributable to other changes in fair value, respectively.

Of the total gain/loss included in earnings for the three and six months ended June 30, 2019, ( $ 6 ) and ( $ 15 ) was attributable to other changes in fair value, respectively.

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 March 31, 2020 Using

Fair Value Measurements at June 30, 2020 Using

Quoted Prices in Active Markets for Identical Assets (Level 1)

6 unchanged sentences

Agricultural Loans

Consumer Loans

Home Equity Loans

Residential Mortgage Loans

Fair value for collateral dependent loans, had a carrying amount of $ 19,005 with a valuation allowance of $ 8,876 , resulting in an increase to the provision for credit losses of $ 1,849 for the three months ended March 31, 2020, respectively.

Fair value for collateral dependent loans, had a carrying amount of $ 17,000 with a valuation allowance of $ 8,313 , resulting in a decrease to the provision for credit losses of $ 163 for the three months ended June 30, 2020 and an increase to the provision for credit losses of $ 1,686 for the six months ended June 30, 2020.

As discussed in Note 2 - Recent Accounting Pronouncements, the Company adopted ASC 326 on January 1, 2020.

The table below is based upon previously applicable GAAP.

GERMAN AMERICAN BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2020

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

NOTE 11 - Fair Value (continued)

Fair Value Measurements at December 31, 2019 Using

7 unchanged sentences

Impaired loans, which are measured for impairment using the fair value of the collateral for collateral dependent loans, had a carrying amount of $ 5,574 with a valuation allowance of $ 2,971 , resulting in a decrease to the provision for loan losses of $ 1,149 for the year ended December 31, 2019.

There was no Other Real Estate carried at fair value less costs to sell at March 31, 2020.

No charge to earnings was included in the three months ended March 31, 2020 and 2019.

There was no Other Real Estate carried at fair value less costs to sell at June 30, 2020.

No charge to earnings was included in the three or six months ended June 30, 2020 and 2019.

There was no Other Real Estate carried at fair value less costs to sell at December 31, 2019.

No charge to earnings was included in the year ended December 31, 2019.

GERMAN AMERICAN BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2020

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

NOTE 11 - Fair Value (continued)

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 March 31, 2020 and December 31, 2019:

March 31, 2020

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 June 30, 2020 and December 31, 2019:

June 30, 2020

Valuation Technique(s)

10 unchanged sentences

Adjustment for physical condition of comparable properties sold

Individual Analyzed Loans - Consumer Loans

Sales comparison approach

Adjustment for physical condition of comparable properties sold

Individual Analyzed Loans - Home Equity Loans

14 unchanged sentences

Adjustment for physical condition of comparable properties sold

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 March 31, 2020 and December 31, 2019.

GERMAN AMERICAN BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2020

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

NOTE 11 - 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 June 30, 2020 and December 31, 2019.

Not all of the Company’s assets and liabilities are considered financial instruments, and therefore are not included in the tables.

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.

In accordance with the adoption of ASU 2016-01, the tables below for March 31, 2020 and December 31, 2019, present the fair values measured using an exit price notion.

In accordance with the adoption of ASU 2016-01, the tables below for June 30, 2020 and December 31, 2019, present the fair values measured using an exit price notion.

Fair Value Measurements at

March 31, 2020 Using

June 30, 2020 Using

Carrying Value

9 unchanged sentences

Accrued Interest Payable

GERMAN AMERICAN BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2020

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

NOTE 11 - Fair Value (continued)

Fair Value Measurements at

11 unchanged sentences

Accrued Interest Payable

GERMAN AMERICAN BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2020

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

NOTE 12 - Other Comprehensive Income (Loss)

The tables below summarize the changes in accumulated other comprehensive income (loss) by component for the three months ended March 31, 2020 and 2019, net of tax:

March 31, 2020

The tables below summarize the changes in accumulated other comprehensive income (loss) by component for the three and six months ended June 30, 2020 and 2019, net of tax:

June 30, 2020

Unrealized Gains and Losses on Available-for-Sale Securities

Postretirement Benefit Items

Beginning Balance at April 1, 2020

Other Comprehensive Income (Loss) Before Reclassification

Amounts Reclassified from Accumulated Other Comprehensive Income (Loss)

Net Current Period Other Comprehensive Income (Loss)

Ending Balance at June 30, 2020

June 30, 2020

Unrealized Gains and Losses on Available-for-Sale Securities

Postretirement Benefit Items

Beginning Balance at January 1, 2020

2 unchanged sentences

Net Current Period Other Comprehensive Income (Loss)

Ending Balance at March 31, 2020

March 31, 2019

Ending Balance at June 30, 2020

June 30, 2019

Unrealized Gains and Losses on Available-for-Sale Securities

Postretirement Benefit Items

Beginning Balance at April 1, 2019

Other Comprehensive Income (Loss) Before Reclassification

Amounts Reclassified from Accumulated Other Comprehensive Income (Loss)

Net Current Period Other Comprehensive Income (Loss)

Ending Balance at June 30, 2019

GERMAN AMERICAN BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2020

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

NOTE 12 - Other Comprehensive Income (Loss) (continued)

June 30, 2019

Unrealized Gains and Losses on Available-for-Sale Securities

Postretirement Benefit Items

Beginning Balance at January 1, 2019

2 unchanged sentences

Net Current Period Other Comprehensive Income (Loss)

Ending Balance at March 31, 2019

Ending Balance at June 30, 2019

The tables below summarize the classifications out of accumulated other comprehensive income (loss) by component for the three and six months ended June 30, 2020 and 2019:

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 Gains on Securities

Income Tax Expense

Total Reclassifications for the Three Months Ended June 30, 2020

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 Gains on Securities

Income Tax Expense

Total Reclassifications for the Six Months Ended June 30, 2020

GERMAN AMERICAN BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2020

June 30, 2020

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

NOTE 12 - Other Comprehensive Income (Loss) (continued)

The tables below summarize the classifications out of accumulated other comprehensive income (loss) by component for the three months ended March 31, 2020 and 2019:

Details about Accumulated Other Comprehensive Income (Loss) Components

4 unchanged sentences

Income Tax Expense

Total Reclassifications for the Three Months Ended March 31, 2020

Total Reclassifications for the Three Months Ended June 30, 2019

Details about Accumulated Other Comprehensive Income (Loss) Components

4 unchanged sentences

Income Tax Expense

Total Reclassifications for the Three Months Ended March 31, 2019

Total Reclassifications for the Six Months Ended June 30, 2019

NOTE 13 - Revenue Recognition

The following table presents non-interest income, segregated by revenue streams in-scope and out-of-scope of FASB ASU No.

2014-09, Revenue from Contracts with Customers (Topic 606), for the three months ended March 31, 2020 and 2019.

The following tables present non-interest income, segregated by revenue streams in-scope and out-of-scope of FASB ASU No.

2014-09, Revenue from Contracts with Customers (Topic 606), for the three and six months ended June 30, 2020 and 2019.

Trust and investment product fees are included in the trust and investment advisory services segment while insurance revenues are included in the insurance segment.

13 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2020

June 30, 2020

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

NOTE 13 - Revenue Recognition (continued)

Six Months Ended

Non-interest Income

In-Scope of Topic 606:

Trust and Investment Product Fees

Service Charges on Deposit Accounts

Insurance Revenues

Interchange Fee Income

Other Operating Income

Non-interest Income (in-scope of Topic 606)

Non-interest Income (out-of-scope of Topic 606)

Total Non-interest Income

A description of the Company's revenue streams accounted for under Topic 606 follows:

21 unchanged sentences

The lease liability is included in the 'Accrued Interest Payable and Other Liabilities' line of the consolidated balance sheet.

GERMAN AMERICAN BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2020

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

NOTE 14 - Leases (continued)

The Company used the implicit lease rate when determining the present value of lease payments for finance leases.

The present value of lease payments for operating leases was determined using the incremental borrowing rate as of the date the Company adopted this standard.

The components of lease expense were as follows:

The components of lease expense for the three months ended June 30, were as follows:

Three Months Ended

March 31, 2020

March 31, 2019

June 30, 2020

June 30, 2019

Finance Lease Cost:

4 unchanged sentences

Total Lease Cost

GERMAN AMERICAN BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2020

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

NOTE 14 - Leases (continued)

The components of lease expense for the six months ended June 30, were as follows:

Six Months Ended

June 30, 2020

June 30, 2019

Finance Lease Cost:

Amortization of Right-of -Use Assets

Interest on Lease Liabilities

Operating Lease Cost

Short-term Lease Cost

Total Lease Cost

The weighted average lease term and discount rates were as follows:

March 31, 2020

March 31, 2019

June 30, 2020

June 30, 2019

Weighted Average Remaining Lease Term:

5 unchanged sentences

Supplemental balance sheet information related to leases was as follows:

March 31, 2020

March 31, 2019

June 30, 2020

June 30, 2019

Finance Leases

4 unchanged sentences

Operating Lease Liabilities

GERMAN AMERICAN BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2020

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

NOTE 14 - Leases (continued)

Supplemental cash flow information related to leases was as follows:

Three Months Ended

March 31, 2020

March 31, 2019

Six Months Ended

June 30, 2020

June 30, 2019

Cash paid for amounts in the measurement of lease liabilities:

3 unchanged sentences

The following table presents a maturity analysis of Finance and Operating Lease Liabilities:

March 31, 2020

June 30, 2020

Finance Leases

2 unchanged sentences

Less Imputed Interest

GERMAN AMERICAN BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2020

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

NOTE 15 - Business Combinations

5 unchanged sentences

The Company accounted for the transaction under the acquisition method of accounting which means that the acquired assets and liabilities were recorded at fair value at the date of acquisition.

The fair value estimates included in these financial statements are based on preliminary valuations;

certain loan and deferred tax measurements have not been finalized and are subject to change.

The Company does not expect material variances from these estimates and expects that final valuation estimates will be completed prior to June 30, 2020.

In accordance with ASC 805, the Company has expensed approximately $ 3.3 million of direct acquisition costs and recorded $ 17.7 million of goodwill and $ 4.5 million of intangible assets.

2 unchanged sentences

The following table summarizes the fair value of the total consideration transferred as a part of the Citizens First acquisition as well as the fair value of identifiable assets acquired and liabilities assumed as of the effective date of the transaction.

GERMAN AMERICAN BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2020

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

NOTE 15 - Business Combinations (continued)

Consideration

16 unchanged sentences

Total Identifiable Net Assets

GERMAN AMERICAN BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2020

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

NOTE 15 - Business Combinations (continued)

Under the terms of the merger agreement, each Citizens First common shareholder of record at the effective time of the merger (other than those holding shares in the Citizens First Bank 401(k) Profit Sharing Plan (the "CFB 401(k) Plan")) became entitled to receive a cash payment of $ 5.80 and a 0.6629 share of common stock of the Company for each of their former shares of Citizens First common stock.

7 unchanged sentences

As such, these receivables were not considered impaired at the acquisition date and were not subject to the guidance relating to purchased credit impaired loans, which are loans that have shown evidence of credit deterioration since origination.

Receivables acquired that were not subject to these requirements include non-impaired loans and customer receivables with a fair value of $ 349.9 million and unpaid principal of $ 353.3 million on the date of acquisition.

Receivables acquired that were not subject to these requirements

GERMAN AMERICAN BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2020

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

NOTE 15 - Business Combinations (continued)

include non-impaired loans and customer receivables with a fair value of $ 349.9 million and unpaid principal of $ 353.3 million on the date of acquisition.

The following table presents unaudited pro forma information as if the acquisition had occured on January 1, 2019 after giving effect to certain adjustments.

The unaudited pro forma information for the three months ended March 31, 2020 and 2019 includes adjustments for interest income on loans and securities acquired, amortization of intangibles arising from the transaction, interest expense on deposits and borrowings acquired, and the related income tax effects.

The unaudited pro forma information for the three and six months ended June 30, 2019 includes adjustments for interest income on loans and securities acquired, amortization of intangibles arising from the transaction, interest expense on deposits and borrowings acquired, and the related income tax effects.

The unaudited pro forma financial information is not necessarily indicative of the results of operations that would have occurred had the transaction been effected on the assumed date.

Unaudited Pro Forma Three Months Ended 3/31/2020

Unaudited Three Months Ended 6/30/2020

Unaudited Pro Forma Three Months Ended 6/30/2019

7 unchanged sentences

Earnings Per Share and Diluted Earnings Per Share

The above pro forma financial information includes approximately $ 1,351 of net income and $ 3,979 of total revenue related to the operations of Citizens First during the three months ended March 31, 2020.

The above unaudited financial information includes approximately $ 1,226 of net income and $ 3,959 of total revenue related to the operations of Citizens First during the three months ended June 30, 2020.

Unaudited Six Months Ended 6/30/2020

Unaudited Pro Forma Six Months Ended 6/30/2019

Net Interest Income

Non-interest Income

Total Revenue

Provision for Loan Losses Expense

Non-interest Expense

Income Before Income Taxes

Income Tax Expense

Earnings Per Share and Diluted Earnings Per Share

The above unaudited financial information includes approximately $ 2,530 of net income and $ 7,938 of total revenue related to the operations of Citizens First during the six months ended June 30, 2020.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements