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German American Bancorp

German American Bancorp

711 Main Street
P.O. Box 810
Jasper, Indiana 47546
U.S.A.
Telephone: (812)482-1314
Fax: (812)482-0758
Web site: http://www.germanamericanbancorp.com

Public Company
Incorporated:
1910
Employees: 407
Total Assets: $1.07 billion (2000)
Stock Exchanges: NASDAQ
Ticker Symbol: GABC
NAIC: 551111 Offices of Bank Holding Companies

German American Bancorp (GAB) is a Jasper, Indiana-based multibank holding company. The company consists of five affiliate banks, which serve more than 60,000 individuals and businesses. These affiliate bankswhich include Citizens State Bank, First American Bank, First State Bank Southwest Indiana, German American Bank, and Peoples National Bankoperate in 27 locations throughout eight southwestern Indiana counties. GABs banking services include a full line of checking and savings accounts, as well as mortgages and consumer and commercial loans. German American Bancorp also owns five full-service independent insurance agencies: German American Insurance, Doty Agency, Inc., First Financial Insurance, Smith and Bell Insurance, and Knox County Insurance. The company has total assets of more than $1 billion.

191050s: The Beginnings of a Community Staple

The flagship bank in German American Bancorps collection is German American Bank. German American was organized on November 2, 1910 in Jasper, Indianaa small town in the southwestern part of the state, less than an hour from the Kentucky border. The town of Jasper was less than a century old at the time and was populated predominantly by German immigrants recruited to the area by a German-speaking priest who owned several acres in the county. It was the communitys German heritage that prompted the new banks name.

The bank, which was the 353rd bank chartered in Indiana, was organized by William F. Beckman, a native of the area who had just completed a term as the countys treasurer. German Americans original 57 shareholderswho included several of the towns prominent citizens along with some of the wealthiest farmers in the regionsubscribed to capital stock of $40,000. These shareholders elected seven local men as directors, and the bank opened for business on December 19, 1910 with two employees: a cashier and an assistant cashier. Its offices consisted of one-half of the first floor of a commercial building owned by William Wilson, one of the banks directors. The other half of the building was occupied by Wilsons own real estate and insurance offices.

The Indiana constitution at that time limited the corporate existence of state banks to 20 years. This meant that in 1930, German American had to apply for a second charter. In the process of so doing, the organizers increased the banks capital stock from $40,000 to $50,000. A change in leadership also accompanied the re-chartering; Winfield Hunter, who had served as the banks president since its inception, retired. He was replaced by Louis Eckstein, a local businessman.

By the mid-1940s, German American was ready to expand and modernize its facilities a bit. It purchased the building in which it was located and enlarged its offices, remodeling the interior and adding new equipment at the same time.

1960s70s: Changes in Leadership and Branching Out

Louis Eckstein held the office of bank president until his death in 1962, when he was succeeded by his brother Clem Eckstein. That same year German American opened its first branch location, in the neighboring town of Dubois, Indiana.

Clem Eckstein headed the bank for only two years, and upon his death in 1964, O. Leo Beckman became German Americans fourth president. Beckman was the son of William Beckman, the banks founder. Two years into the younger Beckmans tenure, German American outgrew its original offices. The bank razed the building it had occupied and built a new, larger two-story office on the same site. By that time, the bank employed 27 people and had capital accounts of more than $1.4 million and deposits of more than $17 million.

As the banks business grew, it began to expand its geographic reach. In 1973, two German American branches were opened in Jasper, to provide customers with more convenient, easy-to-access banking services. In 1980, the bank established a branch in Ferdinand, Indiana, a small town to the south of Jasper. The Ferdinand office, which opened for business on March 17, 1980, was housed in a newly built two-story structure.

1980s to Mid-1990s: Growth Through Acquisition

In 1983, the owners of German American Bank formed a holding companyGerman American Bancorp (GAB)as preparation for taking advantage of merger opportunities. For three years, however, the German American Bank remained the sole bank held by the company. In May 1986, GAB made its first acquisition when it purchased the Bank of Ireland. This new bank, which was located just a few miles from Jasper, in the town of Ireland, was converted into a German American branch. In the early part of 1987, the company opened still another office, in the community of Huntingburg, Indiana. This branch was German Americans seventh location.

Meanwhile, remodeling was under way at the banks main office. In June 1986, German American completely modernized its downtown headquarters, providing customers with more than 33,000 square feet of space, plenty of parking, covered drive-through units, and access to a 24-hour automatic teller machine. The mid-1980s also saw GAB offer a form of branch banking that was entirely new to the area. The bank opened offices inside two Jasper supermarkets, making it easy for customers to consolidate their grocery shopping and banking into a single stop.

The 1990s ushered in changes in federal and state banking laws that were to dramatically change the face of the industry. With the loosening of regulations governing bank ownership, an immense wave of mergers and acquisitions swept the United States. Large banks that had been pillars of the financial worldlike Chase Manhattan, Chemical Bank, CitiCorp, NBD, and Bank Onebegan to merge and meld into a seemingly ever-fluctuating series of new institutions. Smaller banks were, perhaps, even more affected. As the large banks grew even larger and more powerful, they began absorbing the smaller ones at an astonishing rate. According to Robert De Young, the Federal Reserve Bank of Chicagos senior economist and economic advisor, mergers and acquisitions began to reduce the number of commercial banks in the United States by between 4 and 6 percent annually starting in the mid-1980s and continuing into the 1990s; most of the banks absorbed were small (as cited in the September 1999 edition of the Chicago Fed Letter).

German American Bancorp entered the new decade faced with the same choice as many other small and mid-sized banks: Eat or be eaten. The company chose the first option, deciding to establish its own collection of local banks. GABs plan was to grow its assets from the $200 million it then held to approximately $1 billion. The goal of $1 billion in assets was chosen to afford the bank the efficiencies associated with size, while still keeping it small enough to stay focused on the communities it served.

The notion of community was, in fact, to play a significant role in GABs choice of acquisitions. Rather than looking far afield for candidates, the company chose instead to stay close to home, solidifying its position as a local institution. In a May 1998 interview with the Evansville Courier, GABs president and COO Mark Schroeder explained: Were very active in putting together a community bank holding company. We truly are a family of community banks. In keeping with its focus on community, GAB decided that each of its acquisitions would retain its local leadership and policies, in order to more effectively serve the specific needs of its customers and community.

Preparing to launch its expansion campaign, GAB began listing its stock on the NASDAQ exchange in 1993. It hoped that the enhanced stock liquidity resulting from this listing would serve as an enticement to the banks it planned to court, many of whom had trouble selling their thinly traded stock.

In 1993, GAB began taking serious steps toward realizing its expansion goal. In March, the company acquired Union Bank, a single-branch bank in Loogootee, Indiana, some 30 miles to the north of Jasper. Union Bank had been in existence since 1929. The following month, GAB purchased Winslow Bancorporation of Winslow, Indiana, and its subsidiary Southwestern Indiana Bank.

More acquisitions followed. In April 1994, the company acquired Otwell State Bank of Otwell, Indiana, for approximately $3.7 million. Otwell State had total assets of $15.6 million. This new bank, along with the previously acquired Southwestern Indiana Bank, was merged into Community Trust Bank, a combined banking institution operating in Otwell, Petersburg, and Winslow, Indiana. In October 1994, GAB acquired three branches of Regional Federal Savings Bank in the towns of Huntingburg, Rockport, and Tell City, Indiana, adding approximately $25 million in assets. The company then converted Regional Federals Huntingburg office into a German American branch. Regional Federals other two locationsin Tell City and Rockportwere combined into a newly formed subsidiary of GAB: First State Bank Southwest Indiana.

Company Perspectives:

Taking a personal interest in ensuring generations to come will enjoy Southwestern Indiana as home, German American Bancorp is putting money to work for clients, building for today and for the future.

Late 1990s: Further Expansion

After a two and one-half year lull, GAB got back into the acquisition game in 1997. In March of that year, the company acquired the 109-year-old Peoples National Bank for approximately $21.1 million in GAB stock. Peoples main office was located in Washington, Indiana, and it had five branches in two southwestern Indiana counties. At the time of the acquisition, GAB merged its Loogootee officeUnion Bankinto Peoples National. Once the Peoples acquisition was completed, German American Bancorp had total assets of $475 million.

In the summer of 1998, German American Bancorp made two more acquisitions: FSB Bank of Francisco, Indiana, and Citizens State Bank of Petersburg, Indiana. Formed in 1874, Citizens State Bank held the oldest banking charter in the state. GAB consolidated its two new acquisitions, rolling FSB into Citizens. At the same time, the company also merged Community Trust into Citizens, considerably expanding the historic Petersburg bank.

Early 1999 also saw acquisitions for GAB. In January, the company paid $57.1 million in stock to purchase the Vincennes, Indiana-based 1st Bancorp. 1st Bancorps subsidiaries included a three-location bank and two insurance agencies, doing business in Vincennes and Princeton, Indiana. The 1st Bancorp acquisition pushed GAB considerably closer to its goal of $1 billion in assets; with the addition of the new business, the bancorp held total assets of $850 million. The early part of 1999 also marked the acquisition of two more insurance agencies: The Doty Agency, Inc., of Petersburg, Indiana, and Smith and Bell, of Vincennes, Indiana.

In 1999, Mark Schroeder became German American Bancorps new CEO. Schroeder had been with the German American Bank for 25 years and had served as head of lending operations, chief financial officer, president, and chief operating officer before becoming the holding companys CEO. It was under Schroeders watch that GAB met its asset level goal. In July of 2000, the company announced that it had, for the first time in its history, exceeded $1 billion in assets.

Even so, GAB was not quite finished expanding. In October 2000, the company acquired Holland Bancorp, the parent company of Holland National Bank for approximately $14 million in stock. Holland Nationals four branches, which were located in the same county as GABs headquarters, were converted to German American branches. This merger, therefore, served both to eliminate a rival bank and to expand GABs presence in the area. The company also acquired its fifth insurance agencythe Fleck Insurance Agency, of Jasper. Fleck was merged into GABs recently acquired Doty Agency.

Outlook for the 21st Century

In his 2000 letter to shareholders, German American Bancorps president and CEO Mark Schroeder wrote, Throughout the previous decade, our Companys strategic focus was one of growth through acquisition. Now, as with any organization that has experienced significant growth, we have reached the point at which managements focus has turned to maximizing the value of this expanded franchise. A bit further in his letter, Schroeder continued, As we enter the new decade, century, and millennium, German American Bancorp also enters a new era, one in which management of your Company concentrates its strategic focus, attention, and energy on leveraging the potential of our existing operations.

From the tone of Schroeders letter, it appeared that GAB was wrapping up its decade-long phase of expansion and turning its focus to improving and strengthening its operations and service offerings within existing markets. Toward that end, the company planned to continue its strategy of establishing an insurance presence in each of its banking markets. It also was striving to grow its brokerage, trust, and financial planning services groups by adding more financial advisors.

Principal Subsidiaries

German American Bank; First American Bank; First State Bank Southwest Indiana; German American Holdings Corporation; GAB Mortgage Corporation; German American Reinsurance Co., Ltd.; Peoples National Bank; Citizens State Bank; The Doty Agency, Inc.; First Title Insurance Company.

Principal Competitors

Fifth Third Bancorp; First Indiana Corporation; Home Building Bancorp, Inc.; Home Federal Bancorp; Home Financial Bancorp; Indiana United Bancorp; Integra Bank Corporation; Norwood Financial Corp.; Old National Bancorp; Union Planters Corporation.

Key Dates:

1910:
German American Bank is established in Jasper, Indiana.
1930:
German American is rechartered.
1962:
The first branch office, in Dubois, Indiana, is opened.
1973:
Two additional branch offices are opened in Jasper.
1983:
The German American Bancorp holding company is established.
1986:
The Bank of Ireland is merged with German American Bank.
1993:
Bancorp goes public on NASDAQ.
1994:
An aggressive acquisition program is initiated.
1999:
First American Bank and The Doty Agency join German American.

Further Reading

DeWitte, Dave, Local Banks Remain Strong, Independent, Evans-ville Courier, June 5, 1994, p. El.

Ferdinand, Indiana: A Sesquicentennial History, Ferdinand, Ind.: Ferdinand Historical Society, 1990.

Raithel, Tom, German American Bancorp in Jasper Expands in Seven Nearby Counties, Evansville Courier, May 31, 1998, p. El.

Smith, Bruce C, Jasper Banks Taking Separate Paths, Indianapolis Star, March 7, 1993, p. C7.

Shawna Brynildssen

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