German American Bancorp

1910–1964

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 banks--which include Citizens State Bank, First American Bank, First State Bank Southwest Indiana, German American Bank, and Peoples National Bank--operate in 27 locations throughout eight southwestern Indiana counties. GAB's 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.

The flagship bank in German American Bancorp's collection is German American Bank. German American was organized on November 2, 1910 in Jasper, Indiana--a 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 community's German heritage that prompted the new bank's 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 county's treasurer. German American's original 57 shareholders--who included several of the town's prominent citizens along with some of the wealthiest farmers in the region--subscribed 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 bank's directors. The other half of the building was occupied by Wilson's 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 bank's capital stock from $40,000 to $50,000. A change in leadership also accompanied the re-chartering; Winfield Hunter, who had served as the bank's 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.

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 American's fourth president. Beckman was the son of William Beckman, the bank's founder. Two years into the younger Beckman's 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.

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.

1973–1999

As the bank's 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 company--German American Bancorp (GAB)&mdash 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 American's seventh location.

Meanwhile, remodeling was under way at the bank's 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 world--like Chase Manhattan, Chemical Bank, CitiCorp, NBD, and Bank One--began 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 DeYoung, the Federal Reserve Bank of Chicago's 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. GAB's 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 GAB's 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, GAB's president and COO Mark Schroeder explained: "We're 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.

1874–1999

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 Federal's Huntingburg office into a German American branch. Regional Federal's other two locations--in Tell City and Rockport--were combined into a newly formed subsidiary of GAB: First State Bank Southwest Indiana.

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 office--Union Bank--into 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 Bancorp's 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.

1999–2000

In 1999, Mark Schroeder became German American Bancorp's 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 company's CEO. It was under Schroeder's 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 National's four branches, which were located in the same county as GAB's headquarters, were converted to German American branches. This merger, therefore, served both to eliminate a rival bank and to expand GAB's presence in the area. The company also acquired its fifth insurance agency--the Fleck Insurance Agency, of Jasper. Fleck was merged into GAB's recently acquired Doty Agency.

Outlook for the 21st Century

In his 2000 letter to shareholders, German American Bancorp's president and CEO Mark Schroeder wrote, "Throughout the previous decade, our Company's 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 management's 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 Schroeder's 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.