10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the Quarterly Period Ended September 30, 2013

Commission File Number 001-15877

German American Bancorp, Inc.

(Exact name of registrant as specified in its charter)

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

711 Main Street, Jasper, Indiana 47546

(Address of Principal Executive Offices and Zip Code)

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

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

YES   x      NO ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

YES   x      NO ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company:

Large accelerated filer ¨ Accelerated filer x Non-accelerated filer ¨ Smaller reporting company ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): 

YES   ¨      NO x

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

Class	Outstanding at November 1, 2013
Common Shares, no par value	13,169,396

CAUTION REGARDING FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISKS

Information included in or incorporated by reference in this Quarterly Report on Form 10-Q, our other filings with the Securities and Exchange Commission (the “SEC”) and our press releases or other public statements, contains or may contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Please refer to the discussions of our forward-looking statements and associated risks in our annual report on Form 10-K for the year ended December 31, 2012, in Item 1, “Business – Forward-Looking Statements and Associated Risks” and our discussion of risk factors in Item 1A, “Risk Factors” of that annual report on Form 10-K, as updated from time to time in our subsequent SEC filings, including by Item 2 of Part I of this Report (“Management’s Discussion and Analysis of Financial Condition and Results of Operations”) at the conclusion of that Item 2 under the heading “Forward-Looking Statements and Associated Risks.”

2

 

*****

INDEX

PART I.            FINANCIAL INFORMATION		4
Item 1.	Financial Statements	4
	Consolidated Balance Sheets – September 30, 2013 and December 31, 2012	4
	Consolidated Statements of Income – Three Months Ended September 30, 2013 and 2012	5
	Consolidated Statements of Income – Nine Months Ended September 30, 2013 and 2012	6
	Consolidated Statements of Comprehensive Income – Three and Nine Months Ended September 30, 2013 and 2012	7
	Consolidated Statements of Cash Flows – Nine Months Ended September 30, 2013 and 2012	8
	Notes to Consolidated Financial Statements – September 30, 2013	9-36
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	37-49
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	49-50
Item 4.	Controls and Procedures	50
PART II.             OTHER INFORMATION		51
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	51
Item 6.	Exhibits	52
SIGNATURES		52
INDEX OF EXHIBITS		53

3

 

PART  I.         FINANCIAL INFORMATION

Item 1.           Financial Statements

GERMAN AMERICAN BANCORP, INC.

CONSOLIDATED BALANCE SHEETS

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

	September 30,		December 31,
	2013		2012
ASSETS
Cash and Due from Banks	$	46,657	$	41,624
Federal Funds Sold and Other Short-term Investments		18,014		7,463
Cash and Cash Equivalents		64,671		49,087
Interest-bearing Time Deposits with Banks		—		2,707
Securities Available-for-Sale, at Fair Value		608,653		587,602
Securities Held-to-Maturity, at Cost (Fair value of $271 and $351     on September 30, 2013 and December 31, 2012, respectively)		268		346
Loans Held-for-Sale, at Fair Value		9,054		16,641
Loans		1,284,290		1,207,901
Less: Unearned Income		(2,848)		(3,035)
Allowance for Loan Losses		(14,464)		(15,520)
Loans, Net		1,266,978		1,189,346
Stock in FHLB of Indianapolis and Other Restricted Stock, at Cost		8,340		8,340
Premises, Furniture and Equipment, Net		36,679		36,554
Other Real Estate		584		1,645
Goodwill		18,865		18,865
Intangible Assets		1,647		2,692
Company Owned Life Insurance		30,932		30,223
Accrued Interest Receivable and Other Assets		13,451		62,252
TOTAL ASSETS	$	2,060,122	$	2,006,300
LIABILITIES
Non-interest-bearing Demand Deposits	$	364,110	$	349,174
Interest-bearing Demand, Savings, and Money Market Accounts		974,748		962,574
Time Deposits		332,181		329,183
Total Deposits		1,671,039		1,640,931
FHLB Advances and Other Borrowings		191,554		161,006
Accrued Interest Payable and Other Liabilities		12,386		19,337
TOTAL LIABILITIES		1,874,979		1,821,274
SHAREHOLDERS’ EQUITY
Preferred Stock, no par value; 500,000     shares authorized, no shares issued		—		—
Common Stock, no par value, $1 stated value;     30,000,000 shares authorized		12,667		12,637
Additional Paid-in Capital		95,838		95,617
Retained Earnings		79,550		66,421
Accumulated Other Comprehensive Income (Loss)		(2,912)		10,351
TOTAL SHAREHOLDERS’ EQUITY		185,143		185,026
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	2,060,122	$	2,006,300
End of period shares issued and outstanding		12,666,836		12,636,656

See accompanying notes to consolidated financial statements.

4

 

GERMAN AMERICAN BANCORP, INC.

CONSOLIDATED STATEMENTS OF INCOME

(unaudited, dollars in thousands except per share data)

	Three Months Ended
	September 30,
	2013		2012
INTEREST INCOME
Interest and Fees on Loans	$	15,307	$	15,082
Interest on Federal Funds Sold and Other Short-term Investments		2		11
Interest and Dividends on Securities:
Taxable		2,768		3,235
Non-taxable		735		625
TOTAL INTEREST INCOME		18,812		18,953
INTEREST EXPENSE
Interest on Deposits		1,145		1,622
Interest on FHLB Advances and Other Borrowings		475		938
TOTAL INTEREST EXPENSE		1,620		2,560
NET INTEREST INCOME		17,192		16,393
Provision for Loan Losses		(400)		640
NET INTEREST INCOME AFTER PROVISION         FOR LOAN LOSSES		17,592		15,753
NON-INTEREST INCOME
Trust and Investment Product Fees		802		659
Service Charges on Deposit Accounts		1,029		1,049
Insurance Revenues		1,495		1,469
Company Owned Life Insurance		233		213
Interchange Fee Income		449		418
Other Operating Income		395		811
Net Gains on Sales of Loans		613		941
Net Gains on Securities		428		598
TOTAL NON-INTEREST INCOME		5,444		6,158
NON-INTEREST EXPENSE
Salaries and Employee Benefits		7,515		7,261
Occupancy Expense		1,155		1,066
Furniture and Equipment Expense		736		650
FDIC Premiums		261		271
Data Processing Fees		383		311
Professional Fees		970		585
Advertising and Promotion		447		439
Intangible Amortization		329		405
Other Operating Expenses		1,788		1,740
TOTAL NON-INTEREST EXPENSE		13,584		12,728
Income before Income Taxes		9,452		9,183
Income Tax Expense		2,969		2,891
NET INCOME	$	6,483	$	6,292
Basic Earnings Per Share	$	0.51	$	0.50
Diluted Earnings Per Share	$	0.51	$	0.50
Dividends Per Share	$	0.15	$	0.14

See accompanying notes to consolidated financial statements.

5

GERMAN AMERICAN BANCORP, INC.

CONSOLIDATED STATEMENTS OF INCOME

(unaudited, dollars in thousands except per share data)

	Nine Months Ended
	September 30,
	2013		2012
INTEREST INCOME
Interest and Fees on Loans	$	45,227	$	46,380
Interest on Federal Funds Sold and Other Short-term Investments		25		84
Interest and Dividends on Securities:
Taxable		8,380		9,982
Non-taxable		2,008		1,797
TOTAL INTEREST INCOME		55,640		58,243
INTEREST EXPENSE
Interest on Deposits		3,533		5,523
Interest on FHLB Advances and Other Borrowings		1,978		3,066
TOTAL INTEREST EXPENSE		5,511		8,589
NET INTEREST INCOME		50,129		49,654
Provision for Loan Losses		(250)		1,721
NET INTEREST INCOME AFTER PROVISION         FOR LOAN LOSSES		50,379		47,933
NON-INTEREST INCOME
Trust and Investment Product Fees		2,433		2,019
Service Charges on Deposit Accounts		3,034		3,001
Insurance Revenues		4,658		4,218
Company Owned Life Insurance		716		723
Interchange Fee Income		1,392		1,309
Other Operating Income		1,547		1,500
Net Gains on Sales of Loans		2,176		2,330
Net Gains on Securities		1,508		692
TOTAL NON-INTEREST INCOME		17,464		15,792
NON-INTEREST EXPENSE
Salaries and Employee Benefits		22,926		21,409
Occupancy Expense		3,359		3,219
Furniture and Equipment Expense		2,229		2,054
FDIC Premiums		776		851
Data Processing Fees		1,085		746
Professional Fees		2,156		1,777
Advertising and Promotion		1,453		1,208
Intangible Amortization		1,044		1,269
Other Operating Expenses		5,279		5,211
TOTAL NON-INTEREST EXPENSE		40,307		37,744
Income before Income Taxes		27,536		25,981
Income Tax Expense		8,712		8,120
NET INCOME	$	18,824	$	17,861
Basic Earnings Per Share	$	1.49	$	1.42
Diluted Earnings Per Share	$	1.48	$	1.41
Dividends Per Share	$	0.45	$	0.42

See accompanying notes to consolidated financial statements.

6

 

GERMAN AMERICAN BANCORP, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(unaudited, dollars in thousands)

	Three Months Ended
	September 30,
	2013		2012
NET INCOME	$	6,483	$	6,292
Other Comprehensive Income (Loss):
Unrealized Gains (Losses) on Securities
Unrealized Holding Gain (Loss) Arising During the Period		(1,860)		2,190
Reclassification Adjustment for Losses (Gains) Included in Net Income		(428)		(598)
Tax Effect		915		(406)
Net of Tax		(1,373)		1,186
Total Other Comprehensive Income (Loss)		(1,373)		1,186
COMPREHENSIVE INCOME	$	5,110	$	7,478

GERMAN AMERICAN BANCORP, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(unaudited, dollars in thousands)

	Nine Months Ended
	September 30,
	2013		2012
NET INCOME	$	18,824	$	17,861
Other Comprehensive Income (Loss):
Unrealized Gains (Losses) on Securities
Unrealized Holding Gain (Loss) Arising During the Period		(19,613)		4,075
Reclassification Adjustment for Losses (Gains) Included in Net Income		(1,508)		(692)
Tax Effect		7,858		(1,018)
Net of Tax		(13,263)		2,365
Total Other Comprehensive Income (Loss)		(13,263)		2,365
COMPREHENSIVE INCOME	$	5,561	$	20,226

See accompanying notes to consolidated financial statements.

7

 

GERMAN AMERICAN BANCORP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited, dollars in thousands)

	Nine Months Ended
	September 30,
	2013		2012
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income	$	18,824	$	17,861
Adjustments to Reconcile Net Income to Net Cash from Operating Activities:
Net Amortization on Securities		2,338		3,419
Depreciation and Amortization		3,308		3,584
Loans Originated for Sale		(132,471)		(125,770)
Proceeds from Sales of Loans Held-for-Sale		142,433		130,375
Provision for Loan Losses		(250)		1,721
Gain on Sale of Loans, net		(2,176)		(2,330)
Gain on Securities, net		(1,508)		(692)
Loss (Gain) on Sales of Other Real Estate and Repossessed Assets		258		(232)
Gain on Disposition and Impairment of Premises and Equipment		(70)		(1)
Increase in Cash Surrender Value of Company Owned Life Insurance		(709)		(712)
Equity Based Compensation		247		463
Change in Assets and Liabilities:
Interest Receivable and Other Assets		2,799		3,716
Interest Payable and Other Liabilities		278		(1,048)
Net Cash from Operating Activities		33,301		30,354
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from Maturity of Other Short-term Investments		2,690		3,236
Proceeds from Maturities, Calls, Redemptions of     Securities Available-for-Sale		114,563		100,964
Proceeds from Sales of Securities Available-for-Sale		119,952		92,344
Purchase of Securities Available-for-Sale		(231,085)		(244,755)
Proceeds from Maturities of Securities Held-to-Maturity		78		344
Purchase of Loans		(744)		—
Proceeds from Sales of Loans		3,250		7,560
Loans Made to Customers, net of Payments Received		(80,564)		(55,676)
Proceeds from Sales of Other Real Estate		1,479		3,827
Property and Equipment Expenditures		(2,296)		(3,091)
Proceeds from Sales of Property and Equipment		88		1
Net Cash from Investing Activities		(72,589)		(95,246)
CASH FLOWS FROM FINANCING ACTIVITIES
Change in Deposits		30,120		62,876
Change in Short-term Borrowings		31,258		30,090
Advances in Long-term Debt		50,000		—
Repayments of Long-term Debt		(50,815)		(20,059)
Issuance of Common Stock		13		35
Employee Stock Purchase Plan		(9)		(66)
Dividends Paid		(5,695)		(5,299)
Net Cash from Financing Activities		54,872		67,577
Net Change in Cash and Cash Equivalents		15,584		2,685
Cash and Cash Equivalents at Beginning of Year		49,087		61,103
Cash and Cash Equivalents at End of Period	$	64,671	$	63,788
Cash Paid During the Period for
Interest	$	6,096	$	9,411
Income Taxes		8,732		6,484
Supplemental Non Cash Disclosures
Loans Transferred to Other Real Estate	$	676	$	2,862
Accounts Receivable Transferred to Securities		(45,803)		(43,167)

See accompanying notes to consolidated financial statements.

8

 

GERMAN AMERICAN BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2013

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

Note 1 – Basis of Presentation

German American Bancorp, Inc. operates primarily in the banking industry. The accounting and reporting policies of German American Bancorp, Inc. and its subsidiaries conform to U.S. generally accepted accounting principles. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted. All adjustments which are, in the opinion of management, necessary for a fair presentation of the results for the periods reported have been included in the accompanying unaudited consolidated financial statements, and all such adjustments are of a normal recurring nature. It is suggested that these consolidated financial statements and notes be read in conjunction with the financial statements and notes thereto in the German American Bancorp, Inc. December 31, 2012 Annual Report on Form 10-K. 

Note 2 – Per Share Data

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

	Three Months Ended
	September 30,
	2013		2012
Basic Earnings per Share:
Net Income	$	6,483	$	6,292
Weighted Average Shares Outstanding		12,666,780		12,628,335
Basic Earnings per Share	$	0.51	$	0.50
Diluted Earnings per Share:
Net Income	$	6,483	$	6,292
Weighted Average Shares Outstanding		12,666,780		12,628,335
Potentially Dilutive Shares, Net		24,384		20,589
Diluted Weighted Average Shares Outstanding		12,691,164		12,648,924
Diluted Earnings per Share	$	0.51	$	0.50

For the three months ended September 30, 2013 and 2012, there were no anti-dilutive shares.

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

	Nine Months Ended
	September 30,
	2013		2012
Basic Earnings per Share:
Net Income	$	18,824	$	17,861
Weighted Average Shares Outstanding		12,658,403		12,618,863
Basic Earnings per Share	$	1.49	$	1.42
Diluted Earnings per Share:
Net Income	$	18,824	$	17,861
Weighted Average Shares Outstanding		12,658,403		12,618,863
Potentially Dilutive Shares, Net		19,950		15,009
Diluted Weighted Average Shares Outstanding		12,678,353		12,633,872
Diluted Earnings per Share	$	1.48	$	1.41

For the nine months ended September 30, 2013 and 2012, there were no anti-dilutive shares.

9

 

GERMAN AMERICAN BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2013

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

Note 3 – Securities 

The amortized cost, unrealized gross gains and losses recognized in accumulated other comprehensive income (loss), and fair value of Securities Available-for-Sale at September 30, 2013 and December 31, 2012, were as follows:

			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
Securities Available-for-Sale:
September 30, 2013
U.S. Treasury and Agency Securities	$	20,754	$	2	$	(969)	$	19,787
Obligations of State and Political Subdivisions		95,033		2,793		(555)		97,271
Mortgage-backed Securities - Residential		496,129		4,765		(10,325)		490,569
Equity Securities		684		342		—		1,026
Total	$	612,600	$	7,902	$	(11,849)	$	608,653
December 31, 2012
U.S. Treasury and Agency Securities	$	23,570	$	40	$	(138)	$	23,472
Obligations of State and Political Subdivisions		71,352		5,145		(12)		76,485
Mortgage-backed Securities - Residential		475,452		11,505		(45)		486,912
Equity Securities		684		49		—		733
Total	$	571,058	$	16,739	$	(195)	$	587,602

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

The carrying amount, unrecognized gains and losses and fair value of Securities Held-to-Maturity at September 30, 2013 and December 31, 2012, were as follows:

			Gross		Gross
	Carrying		Unrecognized		Unrecognized		Fair
	Amount		Gains		Losses		Value
Securities Held-to-Maturity:
September 30, 2013
Obligations of State and Political Subdivisions	$	268	$	3	$	—	$	271
December 31, 2012
Obligations of State and Political Subdivisions	$	346	$	5	$	—	$	351

The amortized cost and fair value of Securities at September 30, 2013 by contractual maturity are shown below. Expected maturities may differ from contractual maturities because some issuers have the right to call or prepay certain obligations with or without call or prepayment penalties. Mortgage-backed and Equity Securities are not due at a single maturity date and are shown separately.

	Amortized		Fair
	Cost		Value
Securities Available-for-Sale:
Due in one year or less	$	2,855	$	2,878
Due after one year through five years		11,966		12,237
Due after five years through ten years		60,770		61,075
Due after ten years		40,196		40,868
Mortgage-backed Securities - Residential		496,129		490,569
Equity Securities		684		1,026
Totals	$	612,600	$	608,653

10

 

GERMAN AMERICAN BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2013

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

Note 3 – Securities (continued)

	Carrying		Fair
	Amount		Value
Securities Held-to-Maturity:
Due in one year or less	$	—	$	—
Due after one year through five years		268		271
Due after five years through ten years		—		—
Due after ten years		—		—
Totals	$	268	$	271

Proceeds from the sales of Available-for-Sale Securities are summarized below:

	Three Months Ended		Three Months Ended
	September 30, 2013		September 30, 2012
Proceeds from Sales and Calls	$	19,231	$	40,949
Gross Gains on Sales and Calls		428		598
Income Taxes on Gross Gains		150		209

	Nine Months Ended		Nine Months Ended
	September 30, 2013		September 30, 2012
Proceeds from Sales and Calls	$	119,952	$	92,344
Gross Gains on Sales and Calls		1,508		692
Income Taxes on Gross Gains		528		242

Below is a summary of securities with unrealized losses as of September 30, 2013 and December 31, 2012, presented by length of time the securities have been in a continuous unrealized loss position:

	Less than 12 Months				12 Months or More				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Loss		Value		Loss		Value		Loss
September 30, 2013
U.S. Treasury and Agency Securities	$	19,031	$	(969)	$	—	$	—	$	19,031	$	(969)
Obligations of State and Political Subdivisions		18,166		(555)		—		—		18,166		(555)
Mortgage-backed Securities - Residential		319,113		(10,325)		—		—		319,113		(10,325)
Equity Securities		—		—		—		—		—		—
Total	$	356,310	$	(11,849)	$	—	$	—	$	356,310	$	(11,849)

	Less than 12 Months				12 Months or More				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Loss		Value		Loss		Value		Loss
December 31, 2012
U.S. Treasury and Agency Securities	$	19,862	$	(138)	$	—	$	—	$	19,862	$	(138)
Obligations of State and Political Subdivisions		1,042		(12)		—		—		1,042		(12)
Mortgage-backed Securities - Residential		18,323		(45)		—		—		18,323		(45)
Equity Securities		—		—		—		—		—		—
Total	$	39,227	$	(195)	$	—	$	—	$	39,227	$	(195)

Securities are written down to fair value when a decline in fair value is not considered temporary. In estimating other-than-temporary losses, management considers many factors, including: (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, (3) whether the market decline was affected by macroeconomic conditions, and (4) whether the Company has the intent to sell the debt security or more likely than not will be required to sell the debt security before its anticipated recovery. The Company doesn’t intend to sell or expect to be required to sell these securities, and the decline in fair value is largely due to changes in market interest rates, therefore, the Company does not consider these securities to be other-than-temporarily impaired. All mortgage-backed securities in the Company’s portfolio are guaranteed by government sponsored entities, are investment grade, and are performing as expected.

11

 

GERMAN AMERICAN BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2013

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

Note 4 – Derivatives

The Company executes interest rate swaps with commercial banking customers to facilitate their respective risk management strategies. The notional amounts of these interest rate swaps and the offsetting counterparty derivative instruments were $18.0 million at September 30, 2013 and $6.1 million at December 31, 2012. These interest rate swaps are simultaneously hedged by offsetting interest rate swaps that the Company executes with a third party, such that the Company minimizes its net risk exposure resulting from such transactions with approved, reputable, independent counterparties with substantially matching terms. The agreements are considered stand alone derivatives and changes in the fair value of derivatives are reported in earnings as non-interest income. 

Credit risk arises from the possible inability of counterparties to meet the terms of their contracts. The Company’s exposure is limited to the replacement value of the contracts rather than the notional, principal or contract amounts. There are provisions in the agreements with the counterparties that allow for certain unsecured credit exposure up to an agreed threshold. Exposures in excess of the agreed thresholds are collateralized. In addition, the Company minimizes credit risk through credit approvals, limits, and monitoring procedures.

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

	September 30, 2013				December 31, 2012
	Notional				Notional
	Amount		Fair Value		Amount		Fair Value
Included in Other Assets:
Interest Rate Swaps	$	17,951	$	511	$	6,051	$	187
Included in Other Liabilities:
Interest Rate Swaps	$	17,951	$	392	$	6,051	$	178

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

	Three Months Ended				Nine Months Ended
	September 30				September 30
	2013		2012		2013		2012
Interest Rate Swaps:
Included in Interest Income / (Expense)	$	—	$	—	$	—	$	—
Included in Other Income / (Expense)		(34)		148		517		148

Note 5 – Loans

Loans were comprised of the following classifications at September 30, 2013 and December 31, 2012:

	September 30,		December 31,
	2013		2012
Commercial:
Commercial and Industrial Loans and Leases	$	338,770	$	335,373
Commercial Real Estate Loans		530,260		488,496
Agricultural Loans		185,868		179,906
Retail:
Home Equity Loans		75,018		74,437
Consumer Loans		46,754		41,103
Residential Mortgage Loans		107,620		88,586
Subtotal		1,284,290		1,207,901
Less: Unearned Income		(2,848)		(3,035)
Allowance for Loan Losses		(14,464)		(15,520)
Loans, Net	$	1,266,978	$	1,189,346

12

GERMAN AMERICAN BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2013

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

NOTE 5 – Loans (continued)

The following table presents the activity in the allowance for loan losses by portfolio class for the three months ending September 30, 2013 and 2012:

	Commercial
	and
	Industrial		Commercial				Home				Residential
	Loans and		Real Estate		Agricultural		Equity		Consumer		Mortgage
	Leases		Loans		Loans		Loans		Loans		Loans		Unallocated		Total
September 30, 2013
Beginning Balance	$	4,258	$	8,636	$	817	$	313	$	199	$	280	$	760	$	15,263
Provision for Loan Losses		(361)		(214)		53		89		64		36		(67)		(400)
Recoveries		108		7		—		—		33		2		—		150
Loans Charged-off		(34)		(212)		—		(193)		(93)		(17)		—		(549)
Ending Balance	$	3,971	$	8,217	$	870	$	209	$	203	$	301	$	693	$	14,464

	Commercial
	and
	Industrial		Commercial				Home				Residential
	Loans and		Real Estate		Agricultural		Equity		Consumer		Mortgage
	Leases		Loans		Loans		Loans		Loans		Loans		Unallocated		Total
September 30, 2012
Beginning Balance	$	4,707	$	8,732	$	890	$	181	$	227	$	391	$	564	$	15,692
Provision for Loan Losses		193		376		21		21		12		(12)		29		640
Recoveries		8		62		—		—		35		2		—		107
Loans Charged-off		(54)		(351)		—		(7)		(63)		(42)		—		(517)
Ending Balance	$	4,854	$	8,819	$	911	$	195	$	211	$	339	$	593	$	15,922

The following table presents the activity in the allowance for loan losses by portfolio class for the nine months ending September 30, 2013 and 2012:

	Commercial
	and
	Industrial		Commercial				Home				Residential
	Loans and		Real Estate		Agricultural		Equity		Consumer		Mortgage
	Leases		Loans		Loans		Loans		Loans		Loans		Unallocated		Total
September 30, 2013
Beginning Balance	$	4,555	$	8,931	$	989	$	141	$	214	$	186	$	504	$	15,520
Provision for Loan Losses		(618)		(261)		(119)		326		100		133		189		(250)
Recoveries		121		85		—		—		104		5		—		315
Loans Charged-off		(87)		(538)		—		(258)		(215)		(23)		—		(1,121)
Ending Balance	$	3,971	$	8,217	$	870	$	209	$	203	$	301	$	693	$	14,464

	Commercial
	and
	Industrial		Commercial				Home				Residential
	Loans and		Real Estate		Agricultural		Equity		Consumer		Mortgage
	Leases		Loans		Loans		Loans		Loans		Loans		Unallocated		Total
September 30, 2012
Beginning Balance	$	3,493	$	9,297	$	926	$	258	$	190	$	402	$	746	$	15,312
Provision for Loan Losses		1,466		232		(15)		(9)		141		59		(153)		1,721
Recoveries		57		88		—		1		99		11		—		256
Loans Charged-off		(162)		(798)		—		(55)		(219)		(133)		—		(1,367)
Ending Balance	$	4,854	$	8,819	$	911	$	195	$	211	$	339	$	593	$	15,922

13

GERMAN AMERICAN BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2013

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

NOTE 5 – Loans (continued)

In determining the adequacy of the allowance for loan loss, general allocations are made for other pools of loans, including non-classified loans, homogeneous portfolios of consumer and residential real estate loans, and loans within certain industry categories believed to present unique risk of loss. General allocations of the allowance are primarily made based on a three-year historical average for loan losses for these portfolios, judgmentally adjusted for current economic factors and portfolio trends.  For 2012, the Company utilized a 4 quarter rolling historical loan loss average. Beginning in 2013, management deemed a rolling 12 quarter historical loan loss average to be more indicative of the inherent losses in the Company’s loan portfolio in the current economic environment than the 4 quarter average. This change in methodology resulted in an increase to the required loan loss allowance of approximately $280 in the first quarter of 2013.

Loan impairment is reported when full repayment under the terms of the loan is not expected. This methodology is used for all loans, including loans acquired with deteriorated credit quality. For purchased loans, the assessment is made at the time of acquisition as well as over the life of loan. If a loan is impaired, a portion of the allowance is allocated so that the loan is reported net, at the present value of estimated future cash flows using the loan’s existing rate, or at the fair value of collateral if repayment is expected solely from the collateral. Commercial and industrial loans, commercial real estate loans, and agricultural loans are evaluated individually for impairment. Smaller balance homogeneous loans are evaluated for impairment in total. Such loans include real estate loans secured by one-to-four family residences and loans to individuals for household, family and other personal expenditures. Individually evaluated loans on non-accrual are generally considered impaired. Impaired loans, or portions thereof, are charged off when deemed uncollectible.

The following table presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio class and based on impairment method as of September 30, 2013 and December 31, 2012:

			Commercial
			and
			Industrial		Commercial				Home				Residential
			Loans and		Real Estate		Agricultural		Equity		Consumer		Mortgage
	Total		Leases		Loans		Loans		Loans		Loans		Loans		Unallocated
September 30, 2013
Allowance for Loan Losses:
Ending Allowance Balance
Attributable to Loans:
Individually Evaluated     for Impairment	$	3,681	$	461	$	3,220	$	—	$	—	$	—	$	—	$	—
Collectively Evaluated     for Impairment		10,774		3,510		4,988		870		209		203		301		693
Acquired with Deteriorated     Credit Quality		9		—		9		—		—		—		—		—
Total Ending Allowance Balance	$	14,464	$	3,971	$	8,217	$	870	$	209	$	203	$	301	$	693
Loans:
Loans Individually     Evaluated for Impairment	$	9,577	$	2,622	$	6,267	$	688	$	—	$	—	$	—	$	—
Loans Collectively     Evaluated for Impairment		1,271,221		334,789		518,842		187,787		75,278		46,741		107,784		—
Loans Acquired with Deteriorated     Credit Quality		8,909		2,186		6,438		—		—		138		147		—
Total Ending Loans Balance (1)	$	1,289,707	$	339,597	$	531,547	$	188,475	$	75,278	$	46,879	$	107,931	$	—

⁽¹⁾ Total recorded investment in loans includes $5,417 in accrued interest.

14

GERMAN AMERICAN BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2013

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

NOTE 5 – Loans (continued)

			Commercial
			and
			Industrial		Commercial				Home				Residential
			Loans and		Real Estate		Agricultural		Equity		Consumer		Mortgage
	Total		Leases		Loans		Loans		Loans		Loans		Loans		Unallocated
December 31, 2012
Allowance for Loan Losses:
Ending Allowance Balance
Attributable to Loans:
Individually Evaluated    for Impairment	$	5,323	$	1,279	$	3,894	$	150	$	—	$	—	$	—	$	—
Collectively Evaluated    for Impairment		10,109		3,208		5,017		839		141		214		186		504
Acquired with Deteriorated    Credit Quality		88		68		20		—		—		—		—		—
Total Ending Allowance Balance	$	15,520	$	4,555	$	8,931	$	989	$	141	$	214	$	186	$	504
Loans:
Loans Individually    Evaluated for Impairment	$	12,520	$	2,547	$	7,550	$	2,423	$	—	$	—	$	—	$	—
Loans Collectively    Evaluated for Impairment		1,189,729		331,920		473,209		180,152		74,699		41,083		88,666		—
Loans Acquired with Deteriorated    Credit Quality		11,174		1,840		9,037		—		—		148		149		—
Total Ending Loans Balance (1)	$	1,213,423	$	336,307	$	489,796	$	182,575	$	74,699	$	41,231	$	88,815	$	—

⁽¹⁾ Total recorded investment in loans includes $5,522 in accrued interest.

The following table presents loans individually evaluated for impairment by class of loans as of September 30, 2013 and December 31, 2012:

	Unpaid				Allowance for
	Principal		Recorded		Loan Losses
	Balance(1)		Investment		Allocated
September 30, 2013
With No Related Allowance Recorded:
Commercial and Industrial Loans and Leases	$	2,143	$	2,161	$	—
Commercial Real Estate Loans		3,694		1,907		—
Agricultural Loans		675		688		—
Subtotal		6,512		4,756		—
With An Allowance Recorded:
Commercial and Industrial Loans and Leases		511		461		461
Commercial Real Estate Loans		4,608		4,488		3,229
Agricultural Loans		—		—		—
Subtotal		5,119		4,949		3,690
Total	$	11,631	$	9,705	$	3,690
Loans Acquired With Deteriorated Credit Quality With No Related Allowance      Recorded (Included in the Total Above)	$	125	$	119	$	—
Loans Acquired With Deteriorated Credit Quality With An Additional Allowance      Recorded (Included in the Total Above)	$	34	$	9	$	9

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

15

 

GERMAN AMERICAN BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2013

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

NOTE 5 – Loans (continued)

	Unpaid				Allowance for
	Principal		Recorded		Loan Losses
	Balance(1)		Investment		Allocated
December 31, 2012
With No Related Allowance Recorded:
Commercial and Industrial Loans and Leases	$	108	$	87	$	—
Commercial Real Estate Loans		4,312		2,154		—
Agricultural Loans		2,126		2,137		—
Subtotal		6,546		4,378		—
With An Allowance Recorded:
Commercial and Industrial Loans and Leases		2,642		2,581		1,347
Commercial Real Estate Loans		5,579		5,418		3,914
Agricultural Loans		285		286		150
Subtotal		8,506		8,285		5,411
Total	$	15,052	$	12,663	$	5,411
Loans Acquired With Deteriorated Credit Quality With No Related      Allowance Recorded (Included in the Total Above)	$	45	$	25	$	—
Loans Acquired With Deteriorated Credit Quality With An      Additional Allowance Recorded (Included in the Total Above)	$	155	$	118	$	88

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

The following table presents loans individually evaluated for impairment by class of loans for the three month period ended September 30, 2013 and 2012:

	Average		Interest		Cash
	Recorded		Income		Basis
	Investment		Recognized		Recognized
September 30, 2013
With No Related Allowance Recorded:
Commercial and Industrial Loans and Leases	$	2,223	$	33	$	32
Commercial Real Estate Loans		1,956		1		2
Agricultural Loans		751		21		16
Subtotal		4,930		55		50
With An Allowance Recorded:
Commercial and Industrial Loans and Leases		464		1		1
Commercial Real Estate Loans		5,415		5		4
Agricultural Loans		—		—		—
Subtotal		5,879		6		5
Total	$	10,809	$	61	$	55
Loans Acquired With Deteriorated Credit Quality With No      Related Allowance Recorded (Included in the Total Above)	$	119	$	—	$	—
Loans Acquired With Deteriorated Credit Quality With An      Additional Allowance Recorded (Included in the Total Above)	$	214	$	1	$	1

16

GERMAN AMERICAN BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2013

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

NOTE 5 – Loans (continued)

	Average		Interest		Cash
	Recorded		Income		Basis
	Investment		Recognized		Recognized
September 30, 2012
With No Related Allowance Recorded:
Commercial and Industrial Loans and Leases	$	139	$	1	$	1
Commercial Real Estate Loans		3,353		12		12
Agricultural Loans		—		—		—
Subtotal		3,492		13		13
With An Allowance Recorded:
Commercial and Industrial Loans and Leases		2,749		4		3
Commercial Real Estate Loans		7,179		6		5
Agricultural Loans		—		—		—
Subtotal		9,928		10		8
Total	$	13,420	$	23	$	21
Loans Acquired With Deteriorated Credit Quality With No      Related Allowance Recorded (Included in the Total Above)	$	471	$	1	$	1
Loans Acquired With Deteriorated Credit Quality With An      Additional Allowance Recorded (Included in the Total Above)	$	134	$	3	$	3

The following table presents loans individually evaluated for impairment by class of loans for the nine month period ended September 30, 2013 and 2012:

	Average		Interest		Cash
	Recorded		Income		Basis
	Investment		Recognized		Recognized
September 30, 2013
With No Related Allowance Recorded:
Commercial and Industrial Loans and Leases	$	818	$	33	$	33
Commercial Real Estate Loans		2,196		1		2
Agricultural Loans		1,738		196		200
Subtotal		4,752		230		235
With An Allowance Recorded:
Commercial and Industrial Loans and Leases		1,797		3		3
Commercial Real Estate Loans		5,745		17		13
Agricultural Loans		—		—		—
Subtotal		7,542		20		16
Total	$	12,294	$	250	$	251
Loans Acquired With Deteriorated Credit Quality With No      Related Allowance Recorded (Included in the Total Above)	$	39	$	—	$	—
Loans Acquired With Deteriorated Credit Quality With An      Additional Allowance Recorded (Included in the Total Above)	$	182	$	2	$	2

17

GERMAN AMERICAN BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2013

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

NOTE 5 – Loans (continued)

	Average		Interest		Cash
	Recorded		Income		Basis
	Investment		Recognized		Recognized
September 30, 2012
With No Related Allowance Recorded:
Commercial and Industrial Loans and Leases	$	298	$	3	$	3
Commercial Real Estate Loans		5,023		17		17
Agricultural Loans		49		2		2
Subtotal		5,370		22		22
With An Allowance Recorded:
Commercial and Industrial Loans and Leases		2,795		7		6
Commercial Real Estate Loans		7,003		17		14
Agricultural Loans		—		—		—
Subtotal		9,798		24		20
Total	$	15,168	$	46	$	42
Loans Acquired With Deteriorated Credit Quality With No      Related Allowance Recorded (Included in the Total Above)	$	169	$	1	$	1
Loans Acquired With Deteriorated Credit Quality With An      Additional Allowance Recorded (Included in the Total Above)	$	93	$	3	$	3

All classes of loans, including loans acquired with deteriorated credit quality, are generally placed on non-accrual status when scheduled principal or interest payments are past due for 90 days or more or when the borrower’s ability to repay becomes doubtful. For purchased loans, the determination is made at the time of acquisition as well as over the life of the loan. Uncollected accrued interest for each class of loans is reversed against income at the time a loan is placed on non-accrual. Interest received on such loans is accounted for on the cash-basis or cost-recovery method, until qualifying for return to accrual. All classes of loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured. Loans are typically charged-off at 180 days past due, or earlier if deemed uncollectible. Exceptions to the non-accrual and charge-off policies are made when the loan is well secured and in the process of collection.

The following table presents the recorded investment in non-accrual loans and loans past due 90 days or more still on accrual by class of loans as of September 30, 2013 and December 31, 2012:

					Loans Past Due
					90 Days or More
	Non-Accrual				& Still Accruing
	2013		2012		2013		2012
Commercial and Industrial Loans and Leases	$	434	$	2,480	$	—	$	—
Commercial Real Estate Loans		6,017		7,275		—		—
Agricultural Loans		—		—		94		—
Home Equity Loans		149		178		—		—
Consumer Loans		189		167		—		—
Residential Mortgage Loans		68		257		—		—
Total	$	6,857	$	10,357	$	94	$	—
Loans Acquired With Deteriorated Credit Quality
(Included in the Total Above)	$	256	$	148	$	—	$	—

18

GERMAN AMERICAN BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2013

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

NOTE 5 – Loans (continued)

The following table presents the aging of the recorded investment in past due loans by class of loans as of September 30, 2013 and December 31, 2012:

							90 Days
			30-59 Days		60-89 Days		or More		Total		Loans Not
	Total		Past Due		Past Due		Past Due		Past Due		Past Due
September 30, 2013
Commercial and Industrial Loans and Leases	$	339,597	$	251	$	19	$	413	$	683	$	338,914
Commercial Real Estate Loans		531,547		561		216		1,805		2,582		528,965
Agricultural Loans		188,475		1,021		—		94		1,115		187,360
Home Equity Loans		75,278		194		145		149		488		74,790
Consumer Loans		46,879		127		26		50		203		46,676
Residential Mortgage Loans		107,931		1,599		163		68		1,830		106,101
Total (1)	$	1,289,707	$	3,753	$	569	$	2,579	$	6,901	$	1,282,806
Loans Acquired With Deteriorated     Credit Quality (Included in the Total Above)	$	8,909	$	245	$	—	$	—	$	245	$	8,664

⁽¹⁾ Total recorded investment in loans includes $5,417 in accrued interest.

							90 Days
			30-59 Days		60-89 Days		or More		Total		Loans Not
	Total		Past Due		Past Due		Past Due		Past Due		Past Due
December 31, 2012
Commercial and Industrial Loans and Leases	$	336,307	$	436	$	133	$	448	$	1,017	$	335,290
Commercial Real Estate Loans		489,796		1,352		—		2,063		3,415		486,381
Agricultural Loans		182,575		42		14		—		56		182,519
Home Equity Loans		74,699		177		48		178		403		74,296
Consumer Loans		41,231		431		23		18		472		40,759
Residential Mortgage Loans		88,815		2,070		495		257		2,822		85,993
Total (1)	$	1,213,423	$	4,508	$	713	$	2,964	$	8,185	$	1,205,238
Loans Acquired With Deteriorated     Credit Quality (Included in the Total Above)	$	11,174	$	—	$	120	$	—	$	120	$	11,054

⁽¹⁾ Total recorded investment in loans includes $5,522 in accrued interest.

Troubled Debt Restructurings:

In certain instances, the Company may choose to restructure the contractual terms of loans. A troubled debt restructuring occurs when the Bank grants a concession to the borrower that it would not otherwise consider due to a borrower’s financial difficulty.   In order to determine whether a borrower is experiencing financial difficulty, an evaluation is performed of the probability that the borrower will be in payment default on any of its debt in the foreseeable future without modification. This evaluation is performed under the Company’s internal underwriting policy. The Company uses the same methodology for loans acquired with deteriorated credit quality as for all other loans when determining whether the loan is a troubled debt restructuring.

During the nine months ended September 30, 2013 and the year ended December 31, 2012, the terms of certain loans were modified as troubled debt restructurings. The modification of the terms of such loans included one or a combination of the following: a reduction of the stated interest rate of the loan; an extension of the maturity date at a stated rate of interest lower than the current market rate for new debt with similar risk; or a permanent reduction of the recorded investment in the loan. There were no troubled debt restructurings for the nine months ended September 30, 2013 and the year ended December 31, 2012 for loans acquired with deteriorated credit quality at the time of acquisition.

19

 

GERMAN AMERICAN BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2013

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

NOTE 5 – Loans (continued)

The following table presents the recorded investment of troubled debt restructurings by class of loans as of September 30, 2013 and December 31, 2012:

	Total		Performing		Non-Accrual(1)
September 30, 2013
Commercial and Industrial Loans and Leases	$	2,609	$	2,188	$	421
Commercial Real Estate Loans		4,417		381		4,036
Total	$	7,026	$	2,569	$	4,457

	Total		Performing		Non-Accrual(1)
December 31, 2012
Commercial and Industrial Loans and Leases	$	2,461	$	66	$	2,395
Commercial Real Estate Loans		6,031		304		5,727
Total	$	8,492	$	370	$	8,122

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

The Company has committed to lending an additional amount of $40 as of September 30, 2013 to customers with outstanding loans that are classified as troubled debt restructurings. The Company had not committed to lending any additional amounts as of December 31, 2012 to customers with outstanding loans that are classified as troubled debt restructurings.

The following table presents loans by class modified as troubled debt restructurings that occurred during the three months ending September 30, 2013 and 2012:

			Pre-Modification		Post-Modification
	Number of		Outstanding Recorded		Outstanding Recorded
	Loans		Investment		Investment
September 30, 2013
Commercial and Industrial Loans and Leases		1	$	224	$	230
Commercial Real Estate Loans		—		—		—
Total		1	$	224	$	230

The troubled debt restructurings described above increased the allowance for loan losses by $0 and resulted in charge-offs of $0 during the three months ending September 30, 2013.

			Pre-Modification		Post-Modification
	Number of		Outstanding Recorded		Outstanding Recorded
	Loans		Investment		Investment
September 30, 2012
Commercial and Industrial Loans and Leases		2	$	9	$	9
Commercial Real Estate Loans		—		—		—
Total		2	$	9	$	9

The troubled debt restructurings described above increased the allowance for loan losses by $0 and resulted in charge-offs of $0 during the three months ending September 30, 2012.

20

 

GERMAN AMERICAN BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2013

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

NOTE 5 – Loans (continued)

The following table presents loans by class modified as troubled debt restructurings that occurred during the nine months ending September 30, 2013 and 2012:

			Pre-Modification		Post-Modification
	Number of		Outstanding Recorded		Outstanding Recorded
	Loans		Investment		Investment
September 30, 2013
Commercial and Industrial Loans and Leases		1	$	224	$	230
Commercial Real Estate Loans		1		81		118
Total		2	$	305	$	348

The troubled debt restructurings described above decreased the allowance for loan losses by $210 and resulted in charge-offs of $0 during the nine months ending September 30, 2013.

			Pre-Modification		Post-Modification
	Number of		Outstanding Recorded		Outstanding Recorded
	Loans		Investment		Investment
September 30, 2012
Commercial and Industrial Loans and Leases		2	$	9	$	9
Commercial Real Estate Loans		—		—		—
Total		2	$	9	$	9

The troubled debt restructurings described above increased the allowance for loan losses by $0 and resulted in charge-offs of $0 during the nine months ending September 30, 2012.

The following table presents loans by class modified as troubled debt restructurings for which there was a payment default within twelve months following the modification during the three months ending September 30, 2013 and 2012:

Troubled Debt Restructurings That Subsequently Defaulted:	Number of Loans		Recorded Investment
September 30, 2013
Commercial and Industrial Loans and Leases		—	$	—
Commercial Real Estate Loans		—		—
Total		—	$	—

The troubled debt restructurings that subsequently defaulted described above resulted in no change to the allowance for loan losses and no charge-offs during the three months ending September 30, 2013.

Troubled Debt Restructurings That Subsequently Defaulted:	Number of Loans		Recorded Investment
September 30, 2012
Commercial and Industrial Loans and Leases		—	$	—
Commercial Real Estate Loans		1		834
Total		1	$	834

The troubled debt restructurings that subsequently defaulted described above resulted in no change to the allowance for loan losses and no charge-offs during the three months ending September 30, 2012.

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

21

 

GERMAN AMERICAN BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2013

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

NOTE 5 – Loans (continued)

The following table presents loans by class modified as troubled debt restructurings for which there was a payment default within twelve months following the modification during the nine months ending September 30, 2013 and 2012:

Troubled Debt Restructurings That Subsequently Defaulted:	Number of Loans	Recorded Investment
September 30, 2013
Commercial and Industrial Loans and Leases	—	$	—
Commercial Real Estate Loans	—		—
Total	—	$	—

The troubled debt restructurings that subsequently defaulted described above resulted in no change to the allowance for loan losses and no charge-offs during the nine months ending September 30, 2013.

Troubled Debt Restructurings That Subsequently Defaulted:	Number of Loans	Recorded Investment
September 30, 2012
Commercial and Industrial Loans and Leases	1	$	565
Commercial Real Estate Loans	2		1,126
Total	3	$	1,691

The troubled debt restructurings that subsequently defaulted described above resulted in no change to the allowance for loan losses and charge-offs of $108 during the nine months ending September 30, 2012.

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

Credit Quality Indicators:

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Company classifies loans as to credit risk by individually analyzing loans. This analysis includes commercial and industrial loans, commercial real estate loans, and agricultural loans with an outstanding balance greater than $100. This analysis is typically performed on at least an annual basis. The Company uses the following definitions for risk ratings:

Special Mention. Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date.

Substandard. Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

Doubtful. Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

22

GERMAN AMERICAN BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2013

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

NOTE 5 – Loans (continued)

Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be pass rated loans. Based on the most recent analysis performed, the risk category of loans by class of loans is as follows:

			Special
	Pass		Mention		Substandard		Doubtful		Total
September 30, 2013
Commercial and Industrial Loans and Leases	$	314,037	$	13,936	$	11,624	$	—	$	339,597
Commercial Real Estate Loans		497,670		17,380		16,497		—		531,547
Agricultural Loans		184,974		2,606		895		—		188,475
Total	$	996,681	$	33,922	$	29,016	$	—	$	1,059,619
Loans Acquired With Deteriorated Credit Quality
(Included in the Total Above)	$	3,180	$	816	$	4,628	$	—	$	8,624

			Special
	Pass		Mention		Substandard		Doubtful		Total
December 31, 2012
Commercial and Industrial Loans and Leases	$	307,997	$	14,441	$	13,869	$	—	$	336,307
Commercial Real Estate Loans		446,639		21,338		21,819		—		489,796
Agricultural Loans		176,730		2,855		2,990		—		182,575
Total	$	931,366	$	38,634	$	38,678	$	—	$	1,008,678
Loans Acquired With Deteriorated Credit Quality
(Included in the Total Above)	$	319	$	3,220	$	7,338	$	—	$	10,877

The Company considers the performance of the loan portfolio and its impact on the allowance for loan losses. For home equity, consumer and residential mortgage loan classes, the Company also evaluates credit quality based on the aging status of the loan, which was previously presented, and by payment activity.  The following table presents the recorded investment in home equity, consumer and residential mortgage loans based on payment activity as of September 30, 2013 and December 31, 2012:

	Home Equity		Consumer		Residential
	Loans		Loans		Mortgage Loans
September 30, 2013
Performing	$	75,129	$	46,690	$	107,863
Nonperforming		149		189		68
Total	$	75,278	$	46,879	$	107,931
Loans Acquired With Deteriorated Credit Quality
(Included in the Total Above)	$	—	$	138	$	147

	Home Equity		Consumer		Residential
	Loans		Loans		Mortgage Loans
December 31, 2012
Performing	$	74,521	$	41,064	$	88,558
Nonperforming		178		167		257
Total	$	74,699	$	41,231	$	88,815
Loans Acquired With Deteriorated Credit Quality
(Included in the Total Above)	$	—	$	148	$	149

23

GERMAN AMERICAN BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2013

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

NOTE 5 – Loans (continued)

The Company has purchased loans, for which there was, at acquisition, evidence of deterioration of credit quality since origination and it was probable, at acquisition, that all contractually required payments would not be collected. The recorded investment of those loans is as follows:

	September 30, 2013
Commercial and Industrial Loans	$	2,186
Commercial Real Estate Loans		6,438
Home Equity Loans		—
Consumer Loans		138
Residential Mortgage Loans		147
Total	$	8,909
Carrying amount, Net of Allowance	$	8,900

	December 31, 2012
Commercial and Industrial Loans	$	1,840
Commercial Real Estate Loans		9,037
Home Equity Loans		—
Consumer Loans		148
Residential Mortgage Loans		149
Total	$	11,174
Carrying amount, Net of Allowance	$	11,086

  

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

	September 30, 2013		September 30, 2012
Balance at July 1	$	182	$	389
New Loans Purchased		—		—
Accretion of Income		(443)		(223)
Reclassifications from Non-accretable Difference		444		262
Charge-off of Accretable Yield		—		—
Balance at September 30	$	183	$	428

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

	September 30, 2013		September 30, 2012
Balance at January 1	$	170	$	967
New Loans Purchased		—		—
Accretion of Income		(889)		(1,007)
Reclassifications from Non-accretable Difference		902		468
Charge-off of Accretable Yield		—		—
Balance at September 30	$	183	$	428

For those purchased loans disclosed above, the Company decreased the allowance for loan losses by $141 during the three months ended September 30, 2013. For those purchased loans disclosed above, the Company decreased the allowance for loan losses by $80 during the nine months ended September 30, 2013. For those purchased loans disclosed above, the Company increased the allowance for loan losses by $20 during the three and nine months ended September 30, 2012. No allowances for loan losses were reversed during the same periods.

24

 

GERMAN AMERICAN BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2013

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

Note 6 – Segment Information

The Company’s operations include three primary segments: core banking, trust and investment advisory services, and insurance operations. The core banking segment involves attracting deposits from the general public and using such funds to originate consumer, commercial and agricultural, commercial and agricultural real estate, and residential mortgage loans, primarily in the Company’s local markets. The core banking segment also involves the sale of residential mortgage loans in the secondary market. The trust and investment advisory services segment involves providing trust, investment advisory, and brokerage services to customers. The insurance segment offers a full range of personal and corporate property and casualty insurance products, primarily in the Company’s banking subsidiary’s local markets.

The core banking segment is comprised by the Company’s banking subsidiary, German American Bancorp, which operated through 37 banking offices at September 30, 2013. Net interest income from loans and investments funded by deposits and borrowings is the primary revenue for the core-banking segment. The trust and investment advisory services segment’s revenues are comprised primarily of fees generated by German American Financial Advisors & Trust Company. These fees are derived by providing trust, investment advisory, and brokerage services to its customers. The insurance segment primarily consists of German American Insurance, Inc., which provides a full line of personal and corporate insurance products. Commissions derived from the sale of insurance products are the primary source of revenue for the insurance segment.

The following segment financial information has been derived from the internal financial statements of German American Bancorp, Inc., which are used by management to monitor and manage the financial performance of the Company. The accounting policies of the three segments are the same as those of the Company. The evaluation process for segments does not include holding company income and expense. Holding company amounts are the primary differences between segment amounts and consolidated totals, and are reflected in the column labeled “Other” below, along with amounts to eliminate transactions between segments.

			Trust and
			Investment
	Core		Advisory						Consolidated
	Banking		Services		Insurance		Other		Totals
Three Months Ended
September 30, 2013
Net Interest Income	$	17,334	$	5	$	4	$	(151)	$	17,192
Net Gains on Sales of Loans		613		—		—		—		613
Net Gains on Securities		415		—		—		13		428
Trust and Investment Product Fees		1		802		—		(1)		802
Insurance Revenues		10		7		1,478		—		1,495
Noncash Items:
Provision for Loan Losses		(400)		—		—		—		(400)
Depreciation and Amortization		941		6		99		38		1,084
Income Tax Expense (Benefit)		3,218		(24)		67		(292)		2,969
Segment Profit (Loss)		6,581		(41)		96		(153)		6,483
Segment Assets at September 30, 2013		2,068,392		11,641		8,149		(28,060)		2,060,122

25

GERMAN AMERICAN BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2013

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

NOTE 6 – Segment Information (continued)

			Trust and
			Investment
	Core		Advisory						Consolidated
	Banking		Services		Insurance		Other		Totals
Three Months Ended
September 30, 2012
Net Interest Income	$	16,909	$	6	$	9	$	(531)	$	16,393
Net Gains on Sales of Loans		941		—		—		—		941
Net Gains on Securities		598		—		—		—		598
Trust and Investment Product Fees		—		659		—		—		659
Insurance Revenues		3		5		1,461		—		1,469
Noncash Items:
Provision for Loan Losses		640		—		—		—		640
Depreciation and Amortization		941		6		101		37		1,085
Income Tax Expense (Benefit)		3,186		(45)		70		(320)		2,891
Segment Profit (Loss)		6,578		(71)		100		(315)		6,292
Segment Assets at December 31, 2012		2,006,992		11,551		8,333		(20,576)		2,006,300

			Trust and
			Investment
	Core		Advisory						Consolidated
	Banking		Services		Insurance		Other		Totals
Nine Months Ended
September 30, 2013
Net Interest Income	$	51,102	$	16	$	16	$	(1,005)	$	50,129
Net Gains on Sales of Loans		2,176		—		—		—		2,176
Net Gains on Securities		1,495		—		—		13		1,508
Trust and Investment Product Fees		5		2,430		—		(2)		2,433
Insurance Revenues		25		26		4,607		—		4,658
Noncash Items:
Provision for Loan Losses		(250)		—		—		—		(250)
Depreciation and Amortization		2,864		21		310		113		3,308
Income Tax Expense (Benefit)		9,588		(50)		254		(1,080)		8,712
Segment Profit (Loss)		19,262		(90)		334		(682)		18,824
Segment Assets at September 30, 2013		2,068,392		11,641		8,149		(28,060)		2,060,122

			Trust and
			Investment
	Core		Advisory						Consolidated
	Banking		Services		Insurance		Other		Totals
Nine Months Ended
September 30, 2012
Net Interest Income	$	51,213	$	16	$	26	$	(1,601)	$	49,654
Net Gains on Sales of Loans		2,330		—		—		—		2,330
Net Gains on Securities		692		—		—		—		692
Trust and Investment Product Fees		3		2,018		—		(2)		2,019
Insurance Revenues		19		32		4,167		—		4,218
Noncash Items:
Provision for Loan Losses		1,721		—		—		—		1,721
Depreciation and Amortization		3,145		16		311		112		3,584
Income Tax Expense (Benefit)		9,041		(103)		176		(994)		8,120
Segment Profit (Loss)		18,737		(168)		245		(953)		17,861
Segment Assets at December 31, 2012		2,006,992		11,551		8,333		(20,576)		2,006,300

26

 

GERMAN AMERICAN BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2013

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

Note 7 – Stock Repurchase Plan

On April 26, 2001 the Company announced that its Board of Directors approved a stock repurchase program for up to 607,754 of the outstanding Common Shares of the Company. Shares may be purchased from time to time in the open market and in large block privately negotiated transactions. The Company is not obligated to purchase any shares under the program, and the program may be discontinued at any time before the maximum number of shares specified by the program is purchased. The Board of Directors established no expiration date for this program. As of September 30, 2013, the Company had purchased 334,965 shares under the program. No shares were purchased under the program during the three and nine months ended September 30, 2013 and 2012.

Note 8 – Equity Plans and Equity Based Compensation

The Company maintains three equity incentive plans under which stock options, restricted stock, and other equity incentive awards can be granted. At September 30, 2013, the Company has reserved 481,791 shares of Common Stock (as adjusted for subsequent stock dividends and subject to further customary anti-dilution adjustments) for the purpose of issuance pursuant to outstanding and future grants of options, restricted stock, and other equity awards to officers, directors and other employees of the Company. 

For the three and nine months ended September 30, 2013 and 2012, the Company granted no options, and accordingly, recorded no stock option expense related to option grants during the three and nine months ended September 30, 2013 and 2012. The Company recorded no other stock compensation expense applicable to options during the three and nine months ended September 30, 2013 and 2012 because all outstanding options were fully vested prior to 2007. In addition, there was no unrecognized option expense as all outstanding options were fully vested prior to September 30, 2013 and 2012. 

During the periods presented, awards of long-term incentives were granted in the form of restricted stock. Awards that were granted to management under a management incentive plan were granted in tandem with cash credit entitlements (typically in the form of 50% restricted stock grants and 50% cash credit entitlements). The management restricted stock grants and tandem cash credit entitlements awarded in 2013 will vest in three equal installments of 33.3% with the first annual vesting on December 5^th of the year of the grant and on December 5^th of the next two succeeding years. The management restricted stock grants and tandem cash credit entitlements awarded in 2012 were subject to forfeiture in the event that the recipient of the grant did not continue employment with the Company through December 5th of the year of grant, at which time they generally vest 100 percent.  Awards that were granted to directors as additional retainer for their services in December 2012 do not include any cash credit entitlement. These director restricted stock grants are subject to forfeiture in the event that the recipient of the grant does not continue in service as a director of the Company through December 5th of the year after grant or do not satisfy certain meeting attendance requirements, at which time they generally vest 100 percent. For measuring compensation costs, restricted stock awards are valued based upon the market value of the common shares on the date of grant. During the three months ended September 30, 2013, the Company granted no shares of restricted stock. During the three months ended September 30, 2012, the Company granted awards of 118 shares of restricted stock. During the nine months ended September 30, 2013 and 2012, the Company granted awards of 29,170 and 30,137 shares of restricted stock, respectively.

27

GERMAN AMERICAN BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2013

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

Note 8 – Equity Plans and Equity Based Compensation (continued)

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

	Three Months Ended
	September 30,
	2013		2012
Restricted Stock Expense	$	77	$	155
Cash Entitlement Expense		54		147
Tax Effect		(53)		(122)
Net of Tax	$	78	$	180

	Nine Months Ended
	September 30,
	2013		2012
Restricted Stock Expense	$	247	$	463
Cash Entitlement Expense		162		440
Tax Effect		(166)		(365)
Net of Tax	$	243	$	538

Unrecognized expense associated with the restricted stock grants and cash entitlements totaled $971 and $304 as of September 30, 2013 and 2012, respectively.

The Company maintains an Employee Stock Purchase Plan whereby eligible employees have the option to purchase the Company’s common stock at a discount. The purchase price of the shares under this Plan has been set at 95% of the fair market value of the Company’s common stock as of the last day of the plan year. The plan provides for the purchase of up to 500,000 shares of common stock, which the Company may obtain by purchases on the open market or from private sources, or by issuing authorized but unissued common shares. Funding for the purchase of common stock is from employee and Company contributions. 

The Employee Stock Purchase Plan is not considered compensatory.  There was no expense recorded for the employee stock purchase plan during the three and nine months ended September 30, 2013 and 2012, nor was there any unrecognized compensation expense as of September 30, 2013 and 2012 for the Employee Stock Purchase Plan.

Note 9 – Fair Value

Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. There are three levels of inputs that may be used to measure fair values:

Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3: Significant unobservable inputs that reflect a reporting entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

The Company used the following methods and significant assumptions to estimate the fair value of each type of financial instrument:

28

GERMAN AMERICAN BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2013

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

Note 9 – Fair Value (continued)

Investment Securities: The fair values for investment securities are determined by quoted market prices, if available (Level 1). For securities where quoted prices are not available, fair values are calculated based on market prices of similar securities (Level 2). For securities where quoted prices or market prices of similar securities are not available, fair values are calculated using discounted cash flows or other market indicators (Level 3). Level 3 pricing is obtained from a third-party based upon similar trades that are not traded frequently without adjustment by the Company. At September 30, 2013, the Company held $11.4 million in Level 3 securities which consist of $11.0 million of non-rated Obligations of State and Political Subdivisions and $353 thousand of equity securities that are not actively traded. Absent the credit rating, significant assumptions must be made such that the credit risk input becomes an unobservable input and thus these securities are reported by the Company in a Level 3 classification.

Derivatives: The fair values of derivatives are based on valuation models using observable market data as of the measurement date (Level 2).

Impaired Loans: Fair values for impaired collateral dependent loans are generally based on appraisals obtained from licensed real estate appraisers and in certain circumstances consideration of offers obtained to purchase properties prior to foreclosure. Appraisals for commercial real estate generally use three methods to derive value: cost, sales or market comparison and income approach. The cost method bases value in the cost to replace the current property. Value of market comparison approach evaluates the sales price of similar properties in the same market area. The income approach considers net operating income generated by the property and an investors required return. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available. Comparable sales adjustments are based on known sales prices of similar type and similar use properties and duration of time that the property has been on the market to sell. Such adjustments made in the appraisal process are typically significant and result in a Level 3 classification of the inputs for determining fair value.

Appraisals for both collateral-dependent impaired loans and other real estate owned are performed by certified general appraisers (for commercial properties) or certified residential appraisers (for residential properties) whose qualifications and licenses have been reviewed and verified by the Company. Once received, a member of the Company’s Risk Management Area reviews the assumptions and approaches utilized in the appraisal. In determining the value of impaired collateral dependent loans and other real estate owned, significant unobservable inputs may be used which include: physical condition of comparable properties sold, net operating income generated by the property and investor rates of return.

Other Real Estate: Nonrecurring adjustments to certain commercial and residential real estate properties classified as other real estate (ORE) are measured at the lower of carrying amount or fair value, less costs to sell. Fair values are generally based on third party appraisals of the property utilizing similar techniques as discussed above for Impaired Loans, resulting in a Level 3 classification. In cases where the carrying amount exceeds the fair value, less costs to sell, impairment loss is recognized.

Loans Held-for-Sale: The fair values of loans held for sale are determined by using quoted prices for similar assets, adjusted for specific attributes of that loan resulting in a Level 2 classification.

29

GERMAN AMERICAN BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2013

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

Note 9 – 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 September 30, 2013 Using
	Quoted Prices in
	Active Markets for		Significant Other		Significant
	Identical Assets		Observable Inputs		Unobservable Inputs
	(Level 1)		(Level 2)		(Level 3)		Total
Assets:
U.S. Treasury and Agency Securities	$	—	$	19,787	$	—	$	19,787
Corporate Securities		—		—		—		—
Obligations of State and
Political Subdivisions		—		86,269		11,002		97,271
Mortgage-backed Securities-Residential		—		490,569		—		490,569
Equity Securities		673		—		353		1,026
Total Securities	$	673	$	596,625	$	11,355	$	608,653
Loans Held-for-Sale	$	—	$	9,054	$	—	$	9,054
Derivatives	$	—	$	511	$	—	$	511
Financial Liabilities Derivatives	$	—	$	392	$	—	$	392

	Fair Value Measurements at December 31, 2012 Using
	Quoted Prices in
	Active Markets for		Significant Other		Significant
	Identical Assets		Observable Inputs		Unobservable Inputs
	(Level 1)		(Level 2)		(Level 3)		Total
Assets:
U.S. Treasury and Agency Securities	$	—	$	23,472	$	—	$	23,472
Corporate Securities		—		—		—		—
Obligations of State and
Political Subdivisions		—		64,316		12,169		76,485
Mortgage-backed Securities-Residential		—		486,912		—		486,912
Equity Securities		380		—		353		733
Total Securities	$	380	$	574,700	$	12,522	$	587,602
Loans Held-for-Sale	$	—	$	16,641	$	—	$	16,641
Derivatives	$	—	$	187	$	—	$	187
Financial Liabilities Derivatives	$	—	$	178	$	—	$	178

There were no transfers between Level 1 and Level 2 for the periods ended September 30, 2013 and December 31, 2012.

At September 30, 2013, the aggregate fair value of the Loans Held-for-Sale was $9,054, aggregate contractual principal balance was $8,937 with a difference of $117. At December 31, 2012, the aggregate fair value of the Loans Held-for-Sale was $16,641, aggregate contractual principle balance was $16,413 with a difference of $228.

30

 

GERMAN AMERICAN BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2013

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

Note 9 – 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 nine months ended September 30, 2013 and 2012:

	Obligations of State
	and Political
	Subdivisions				Equity Securities				Corporate Securities
	2013		2012		2013		2012		2013		2012
Balance of Recurring Level 3 Assets at June 30	$	11,439	$	11,791	$	353	$	353	$	—	$	—
Total Gains or Losses (realized/unrealized)
Included in Earnings		(12)		9		—		—		—		—
Maturities / Calls		(425)		—		—		—		—		—
Purchases		—		—		—		—		—		—
Balance of Recurring Level 3 Assets at September 30	$	11,002	$	11,800	$	353	$	353	$	—	$	—

	Obligations of State
	and Political
	Subdivisions				Equity Securities				Corporate Securities
	2013		2012		2013		2012		2013		2012
Balance of Recurring Level 3 Assets at December 31	$	12,169	$	4,772	$	353	$	353	$	—	$	1,005
Total Gains or Losses (realized/unrealized)
Included in Earnings		(162)		60		—		—		—		—
Maturities / Calls		(1,005)		(697)		—		—		—		(1,005)
Purchases		—		7,665		—		—		—		—
Balance of Recurring Level 3 Assets at September 30	$	11,002	$	11,800	$	353	$	353	$	—	$	—

Of the total gain/loss included in earnings for the three and nine months ended September 30, 2013, $12 and $162 was attributable to other changes in fair value, respectively. The three and nine months ended September 30, 2013 included no gain/loss attributable to interest income on securities. Of the total gain/loss included in earnings for the three and nine months ended September 30, 2012, $9 and $60 was attributable to other changes in fair value, respectively. The three and nine months ended September 30, 2012 included no gain/loss attributable to interest income on securities.

31

GERMAN AMERICAN BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2013

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

Note 9 – Fair Value (continued)

Assets and Liabilities Measured on a Non-Recurring Basis

Assets and liabilities measured at fair value on a non-recurring basis are summarized below:

	Fair Value Measurements at September 30, 2013 Using
	Quoted Prices in
	Active Markets for		Significant Other		Significant
	Identical Assets		Observable Inputs		Unobservable Inputs
	(Level 1)		(Level 2)		(Level 3)		Total
Assets:
Impaired Loans with Specific Allocations
Commercial and Industrial Loans	$	—	$	—	$	—	$	—
Commercial Real Estate Loans		—		—		1,257		1,257
Agricultural Loans		—		—		—		—
Other Real Estate
Commercial Real Estate		—		—		290		290

	Fair Value Measurements at December 31, 2012 Using
	Quoted Prices in
	Active Markets for		Significant Other		Significant
	Identical Assets		Observable Inputs		Unobservable Inputs
	(Level 1)		(Level 2)		(Level 3)		Total
Assets:
Impaired Loans with Specific Allocations
Commercial and Industrial Loans	$	—	$	—	$	1,231	$	1,231
Commercial Real Estate Loans		—		—		1,497		1,497
Agricultural Loans		—		—		135		135
Other Real Estate
Commercial Real Estate		—		—		150		150

Impaired loans, which are measured for impairment using the fair value of the collateral for collateral dependent loans, had a carrying amount of $4,947 with a valuation allowance of $3,690, resulting in an additional provision for loan losses of $229 and $608 for the three and nine months ended September 30, 2013. Impaired loans resulted in an additional provision for loan losses of $393 for the three months ended September 30, 2012 and an additional provision for loan losses of $1,023 for the nine months ended September 30, 2012. Impaired loans, which are measured for impairment using the fair value of the collateral for collateral dependent loans, had a carrying amount of $8,274 with a valuation allowance of $5,411, resulting in an additional provision for loan losses of $2,320 for the year ended December 31, 2012.

Other Real Estate which is measured at the lower of carrying or fair value less costs to sell had a carrying value of $290 at September 30, 2013. No charge to earnings was included in the three months ended September 30, 2013. A charge to earnings through Other Operating Income of $301 was included in the nine months ended September 30, 2013. A charge to earnings through Other Operating Income of $100 was included in the three and nine months ended September 30, 2012. Other Real Estate which is measured at the lower of carrying or fair value less costs to sell had a carrying value of $150 at December 31, 2012. 

32

 

GERMAN AMERICAN BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2013

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

Note 9 – Fair Value (continued)

The following table presents quantitative information about Level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis at September 30, 2013:

					Range
			Valuation		(Weighted
	Fair Value		Technique(s)	Unobservable Input(s)	Average)
Impaired Loans - Commercial	$	1,257	Sales comparison	Adjustment for physical	12%-80%
Real Estate Loans			approach	condition of comparable	(52)%
			Income approach	properties sold
			Cost approach	Adjustment for net operating
				income generated by the
				property
				Adjustment for investor rates
				of return
Other Real Estate - Commercial	$	290	Sales comparison	Adjustment for physical	50%
Real Estate Loans			approach	condition of comparable	(50)%
			Income approach	properties sold
			Cost approach	Adjustment for net operating
				income generated by the
				property
				Adjustment for investor rates
				of return

The carrying amounts and estimated fair values of the Company’s financial instruments not previously presented are provided in the table below for the periods ending September 30, 2013 and December 31, 2012. Not all of the Company’s assets and liabilities are considered financial instruments, and therefore are not included in the table. Because no active market exists for a significant portion of the Company’s financial instruments, fair value estimates were based on subjective judgments, and therefore cannot be determined with precision.

			Fair Value Measurements at
			September 30, 2013 Using
	Carrying Value		Level 1		Level 2		Level 3		Total
Financial Assets:
Cash and Short-term Investments	$	64,671	$	46,657	$	18,014	$	—	$	64,671
Securities Held-to-Maturity		268		—		271		—		271
FHLB Stock and Other Restricted Stock		8,340		N/A		N/A		N/A		N/A
Loans, Net		1,265,721		—		—		1,270,263		1,270,263
Accrued Interest Receivable		7,402		—		1,906		5,496		7,402
Financial Liabilities:
Demand, Savings, and Money Market Deposits		(1,338,858)		(1,338,858)		—		—		(1,338,858)
Time Deposits		(332,181)		—		(335,093)		—		(335,093)
Short-term Borrowings		(102,792)		—		(102,792)		—		(102,792)
Long-term Debt		(88,762)		—		(85,026)		(5,287)		(90,313)
Accrued Interest Payable		(690)		—		(647)		(43)		(690)
Unrecognized Financial Instruments:
Commitments to Extend Credit		—		—		—		—		—
Standby Letters of Credit		—		—		—		—		—
Commitments to Sell Loans		—		—		—		—		—

33

GERMAN AMERICAN BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2013

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

Note 9 – Fair Value (continued)

			Fair Value Measurements at
			December 31, 2012 Using
	Carrying Value		Level 1		Level 2		Level 3		Total
Financial Assets:
Cash and Short-term Investments	$	51,794	$	41,624	$	10,170	$	—	$	51,794
Securities Held-to-Maturity		346		—		351		—		351
FHLB Stock and Other Restricted Stock		8,340		N/A		N/A		N/A		N/A
Loans, Net		1,186,483		—		—		1,199,566		1,199,566
Accrued Interest Receivable		7,419		—		1,893		5,526		7,419
Financial Liabilities:
Demand, Savings, and Money Market Deposits		(1,311,748)		(1,311,748)		—		—		(1,311,748)
Time Deposits		(329,183)		—		(333,170)		—		(333,170)
Short-term Borrowings		(71,534)		—		(71,534)		—		(71,534)
Long-term Debt		(89,472)		—		(66,892)		(28,872)		(95,764)
Accrued Interest Payable		(1,275)		—		(829)		(446)		(1,275)
Unrecognized Financial Instruments:
Commitments to Extend Credit		—		—		—		—		—
Standby Letters of Credit		—		—		—		—		—
Commitments to Sell Loans		—		—		—		—		—

Cash and Short-term Investments:

The carrying amount of cash and short-term investments approximate fair values and are classified as Level 1 or Level 2.

Securities Held-to-Maturity:

The fair values for investment securities are determined by quoted market prices, if available (Level 1). For securities where quoted prices are not available, fair values are calculated based on market prices of similar securities (Level 2).

FHLB Stock and Other Restricted Stock:

It is not practical to determine the fair values of FHLB stock and other restricted stock due to restrictions placed on their transferability.

Loans:

Fair values of loans, excluding loans held for sale and collateral dependent impaired loans having a specific allowance allocation, are estimated as follows: For variable rate loans that reprice frequently and with no significant change in credit risk, fair values are based on carrying values resulting in a Level 3 classification. Fair values for other loans are estimated using discounted cash flow analyses, using interest rates currently being offered for loans with similar terms to borrowers of similar credit quality resulting in a Level 3 classification. Impaired loans are valued as described previously. The methods utilized to estimate fair value of loans do not necessarily represent an exit price.

Accrued Interest Receivable:

The carrying amount of accrued interest approximates fair value resulting in a Level 2 or Level 3 classification consistent with the asset they are associated with.

Deposits:

The fair values disclosed for demand deposits (e.g., interest and non-interest checking, savings and certain types of money market accounts) are, by definition, equal to the amount payable on demand at the reporting date (i.e., their carrying amount) resulting in a Level 1 classification. Fair values for fixed rate time deposits are estimated using a discounted cash flows calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits resulting in a Level 2 classification. 

Short-term Borrowings:

The carrying amounts of federal funds purchased, borrowings under repurchase agreements, and other short-term borrowings, generally maturing within ninety days, approximate their fair values resulting in a Level 2 classification.

34

GERMAN AMERICAN BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2013

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

Note 9 – Fair Value (continued)

Long-term Debt:

The fair values of the Company’s long-term borrowings are estimated using discounted cash flow analyses based on the current borrowing rates for similar types of borrowing arrangements resulting in a Level 2 classification. 

The fair values of the Company’s subordinated debentures are estimated using discounted cash flow analyses based on the current borrowing rates for similar types of borrowing arrangements resulting in a Level 3 classification. 

Accrued Interest Payable:

The carrying amount of accrued interest approximates fair value resulting in a Level 2 or Level 3 classification consistent with the liability they are associated with.

Off-balance Sheet Instruments:

Commitments to extend credit and standby letters of credit are generally short-term or variable rate with minimal fees charged. These instruments have no carrying value, and the fair value is not material. The fair value of commitments to sell loans is the cost or benefit of settling the commitments with the counter-party at the reporting date. At September 30, 2013 and December 31, 2012, none of the Company’s commitments to sell loans were mandatory, and there is no cost or benefit to settle these commitments.

NOTE 10 – Other Comprehensive Income (Loss)

The table below summarizes the changes in accumulated other comprehensive income (loss) by component for the three months ended September 30, 2013, net of tax:

	Unrealized
	Gains and		Defined
	Losses on		Benefit
	Available-for-		Pension		Postretirement
	Sale Securities		Items		Benefit Items		Total
Beginning Balance	$	(1,247)	$	(231)	$	(61)	$	(1,539)
Other Comprehensive Income (Loss) Before
Reclassification		(1,118)		—		—		(1,118)
Amounts Reclassified from Accumulated
Other Comprehensive Income (Loss)		(255)		—		—		(255)
Net Current Period Other
Comprehensive Income (Loss)		(1,373)		—		—		(1,373)
Ending Balance	$	(2,620)	$	(231)	$	(61)	$	(2,912)

The table below summarizes the changes in accumulated other comprehensive income (loss) by component for the nine months ended September 30, 2013, net of tax:

	Unrealized
	Gains and		Defined
	Losses on		Benefit
	Available-for-		Pension		Postretirement
	Sale Securities		Items		Benefit Items		Total
Beginning Balance	$	10,643	$	(231)	$	(61)	$	10,351
Other Comprehensive Income (Loss) Before
Reclassification		(12,366)		—		—		(12,366)
Amounts Reclassified from Accumulated
Other Comprehensive Income (Loss)		(897)		—		—		(897)
Net Current Period Other
Comprehensive Income (Loss)		(13,263)		—		—		(13,263)
Ending Balance	$	(2,620)	$	(231)	$	(61)	$	(2,912)

35

GERMAN AMERICAN BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2013

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

NOTE 10 – Other Comprehensive Income (Loss) (continued)

The table below summarizes the classifications out of accumulated other comprehensive income (loss) by component for the three months ended September 30, 2013:

	Amount Reclassified From
Details about Accumulated Other	Accumulated Other		Affected Line Item in the Statement
Comprehensive Income (Loss) Components	Comprehensive Income (Loss)		Where Net Income is Presented
Unrealized Gains and Losses on
Available-for-Sale Securities	$	(428)	Net (Gain) Loss on Securities
		173	Income Tax Expense
		(255)	Net of Tax
Total Reclassifications for the Period	$	(255)

The table below summarizes the classifications out of accumulated other comprehensive income (loss) by component for the nine months ended September 30, 2013:

	Amount Reclassified From
Details about Accumulated Other	Accumulated Other		Affected Line Item in the Statement
Comprehensive Income (Loss) Components	Comprehensive Income (Loss)		Where Net Income is Presented
Unrealized Gains and Losses on
Available-for-Sale Securities	$	(1,508)	Net (Gain) Loss on Securities
		611	Income Tax Expense
		(897)	Net of Tax
Total Reclassifications for the Period	$	(897)

Note 11 – Subsequent Event

German American Bancorp, Inc. completed its previously announced merger transaction with United Commerce Bancorp, the parent company of United Commerce Bank, of Bloomington, Indiana, effective October 1, 2013. United Commerce Bancorp merged into German American Bancorp, Inc. effective prior to the opening of business on October 1, 2013, followed immediately by the merger of United Commerce Bank with and into German American Bancorp, Inc.'s banking subsidiary. United Commerce Bank operated two banking offices in Bloomington, Indiana. United Commerce had consolidated total assets of approximately $120.2 million, total loans of approximately $83.5 million, total deposits of approximately $106.5 million, and total shareholder's equity of approximately $13.6 million as of September 30, 2013. The acquired assets and liabilities will be recorded at fair value at the date of acquisition and will be reflected in the December 31, 2013 financial statements as such; however, at the time of these financial statements, the appraisals and valuations are incomplete. The Company expects to record goodwill and a core deposit intangible in regards to this transaction based on earlier estimates, but the amount is not known as the initial fair value accounting is incomplete. The goodwill will not be deductible for tax purposes.

Under the terms of the merger, United Commerce shareholders received a combination of approximately $12.7 million in GABC stock (502,560 shares) and $1.4 million in cash consideration representing a total transaction value of approximately $14.1 million. The basic transaction value excludes the indicated value of the approximately 4.6% interest that German American owned in United Commerce's outstanding stock prior to the completion of the merger and the approximately $640 thousand in cash payments made in cancellation of dilutive stock options that had been issued by United Commerce.

Each United Commerce common shareholder of record at the effective time of the merger became entitled to receive (a) 0.5456 shares of German American common stock plus (b) a cash payment of $1.51 for each of their former shares of United Commerce common stock and a cash settlement for any fractional shares of German American otherwise issuable to them.

This acquisition was consistent with the Company’s strategy to build a regional presence in Southern Indiana. The acquisition offers the Company the opportunity to increase profitability by introducing existing products and services to the acquired customer base as well as add new customers in the expanded region.

36

 

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

GERMAN AMERICAN BANCORP, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

German American Bancorp, Inc. is a financial services holding company based in Jasper, Indiana. The Company’s Common Stock is traded on NASDAQ’s Global Select Market, under the symbol GABC. The principal subsidiary of German American Bancorp, Inc. is its banking subsidiary, German American Bancorp, which operates through 37 banking offices in 13 southern Indiana counties. German American Bancorp owns a trust, brokerage, and financial planning subsidiary, which operates from its banking offices, and a full line property and casualty insurance agency with eight insurance agency offices throughout its market area.

Throughout this Management’s Discussion and Analysis, as elsewhere in this report, when we use the term “Company,” we will usually be referring to the business and affairs (financial and otherwise) of the Company and its subsidiaries and affiliates as a whole. Occasionally, we will refer to the term “parent company” or “holding company” when we mean to refer to only German American Bancorp, Inc.

This section presents an analysis of the consolidated financial condition of the Company as of September 30, 2013 and December 31, 2012 and the consolidated results of operations for the three and nine months ended September 30, 2013 and 2012. This discussion should be read in conjunction with the consolidated financial statements and other financial data presented elsewhere herein and with the financial statements and other financial data, as well as the Management’s Discussion and Analysis of Financial Condition and Results of Operations, included in the Company’s December 31, 2012 Annual Report on Form 10-K.

MANAGEMENT OVERVIEW

This updated discussion should be read in conjunction with the Management Overview that was included in our Management’s Discussion and Analysis of Financial Condition and Results of Operations in the Company’s December 31, 2012 Annual Report on Form 10-K and in the Company’s Quarterly Reports on Form 10-Q for the quarter ended March 31, 2013 and the quarter ended June 30, 2013.

The Company’s third quarter net income totaled $6,483,000, or $0.51 per diluted share, representing an increase of approximately 2% on a per share basis, from the $6,292,000, or $0.50 per diluted share, recorded during the same quarter last year. On a year-to-date basis, 2013 earnings improved to $18,824,000 or $1.48 per diluted share, as compared to $17,861,000, or $1.41 per diluted share for the first nine months of 2012 representing an increase of approximately 5% on a per share basis.

The Company’s third quarter and first nine months of 2013 earnings were positively impacted by lower levels of provision for loan losses as compared with the same periods of 2012. The lower level of provision for loan losses were attributable to improved asset quality for the Company including lower levels of net-charge-offs, decreased non-performing loans, and lower adversely classified assets. The Company’s third quarter and first nine months of 2013 earnings were also positively impacted by a $799,000, or 5%, and $475,000, or 1%, increase in the level of net interest income as compared to the same periods of 2012.

Partially mitigating the improvement in net income during the third quarter of 2013 compared with 2012 was a decline in non-interest income of $714,000, or 12%. Non-interest income had a positive impact on year-to-date 2013 earnings compared with 2012. During the nine months ending September 30, 2013, non-interest income increased $1,672,000, or 11%, compared with the same period of 2012.

Partially mitigating the improvement in earnings was an increased level of operating expenses during the three and nine months ended September 30, 2013 compared with the same periods of 2012. Operating expenses for the third quarter of 2013 increased $856,000, or 7%, and for the first nine months of 2013 increased $2,563,000, or 7%, as compared to the same periods of 2012.

Effective October 1, 2013, the Company completed the acquisition of United Commerce Bancorp (“United Commerce”) of Bloomington, Indiana. Upon completion of the transaction, the Company merged United Commerce’s subsidiary bank, United Commerce Bank, into the Company’s subsidiary bank, German American Bancorp. United Commerce Bank operated two branch locations in the Bloomington, Indiana market. Management believes this in-market transaction enhances its presence in the Bloomington, Indiana market. 

37

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The financial condition and results of operations for German American Bancorp, Inc. presented in the Consolidated Financial Statements, accompanying Notes to the Consolidated Financial Statements, and selected financial data appearing elsewhere within this Report, are, to a large degree, dependent upon the Company’s accounting policies. The selection of and application of these policies involve estimates, judgments, and uncertainties that are subject to change. The critical accounting policies and estimates that the Company has determined to be the most susceptible to change in the near term relate to the determination of the allowance for loan losses, the valuation of securities available for sale, and the valuation allowance on deferred tax assets.

Allowance for Loan Losses

The Company maintains an allowance for loan losses to cover probable incurred credit losses at the balance sheet date. Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance. Allocations of the allowance may be made for specific loans, but the entire allowance is available for any loan that, in management’s judgment, should be charged-off. A provision for loan losses is charged to operations based on management’s periodic evaluation of the necessary allowance balance. Evaluations are conducted at least quarterly and more often if deemed necessary. The ultimate recovery of all loans is susceptible to future market factors beyond the Company’s control. 

The Company has an established process to determine the adequacy of the allowance for loan losses. The determination of the allowance is inherently subjective, as it requires significant estimates, including the amounts and timing of expected future cash flows on impaired loans, estimated losses on other classified loans and pools of homogeneous loans, and consideration of past loan loss experience, the nature and volume of the portfolio, information about specific borrower situations and estimated collateral values, economic conditions, and other factors, all of which may be susceptible to significant change. The allowance consists of two components of allocations, specific and general. These two components represent the total allowance for loan losses deemed adequate to cover losses inherent in the loan portfolio.

Commercial and agricultural loans are subject to a standardized grading process administered by an internal loan review function. The need for specific reserves is considered for credits when graded substandard or when: (a) the customer’s cash flow or net worth appears insufficient to repay the loan; (b) the loan has been criticized in a regulatory examination; (c) the loan is on non-accrual; or, (d) other reasons where the ultimate collectibility of the loan is in question, or the loan characteristics require special monitoring. Specific allowances are established in cases where management has identified significant conditions or circumstances related to an individual credit that we believe indicates the loan is impaired. Specific allocations on impaired loans are determined by comparing the loan balance to the present value of expected cash flows or expected collateral proceeds. Allocations are also applied to categories of loans not considered individually impaired but for which the rate of loss is expected to be greater than historical averages, including those graded substandard and non-performing consumer or residential real estate loans. Such allocations are based on past loss experience and information about specific borrower situations and estimated collateral values.

General allocations are made for other pools of loans, including non-classified loans, homogeneous portfolios of consumer and residential real estate loans, and loans within certain industry categories believed to present unique risk of loss. General allocations of the allowance are primarily made based on a three-year historical average for loan losses for these portfolios, judgmentally adjusted for economic factors and portfolio trends.  For 2012, the Company utilized a 4 quarter rolling historical loan loss average. Beginning in 2013, management deemed a rolling 12 quarter historical loan loss average to be more indicative of the inherent losses in the Company’s loan portfolio in the current economic environment than the 4 quarter average. This change in methodology resulted in an increase to the required loan loss allowance of approximately $280 in the first quarter of 2013.

Due to the imprecise nature of estimating the allowance for loan losses, the Company’s allowance for loan losses includes a minor unallocated component. The unallocated component of the allowance for loan losses incorporates the Company’s judgmental determination of inherent losses that may not be fully reflected in other allocations, including factors such as economic uncertainties, lending staff quality, industry trends impacting specific portfolio segments, and broad portfolio quality trends.   Therefore, the ratio of allocated to unallocated components within the total allowance may fluctuate from period to period.

Securities Valuation

Securities available-for-sale are carried at fair value, with unrealized holding gains and losses reported separately in accumulated other comprehensive income (loss), net of tax. The Company obtains market values from a third party on a monthly basis in order to adjust the securities to fair value. Equity securities that do not have readily determinable fair values are carried at cost. Additionally, when securities are deemed to be other than temporarily impaired, a charge will be recorded through earnings; therefore, future changes in the fair value of securities could have a significant impact on the Company’s operating results. In determining whether a market value decline is other than temporary, management considers the reason for the decline, the extent of the decline, the duration of the decline and whether the Company intends to sell or believes it will be required to sell the securities prior to recovery. As of September 30, 2013, gross unrealized losses on the securities available-for-sale portfolio totaled approximately $11,849,000 and gross unrealized gains totaled approximately $7,902,000. As of September 30, 2013, held-to-maturity securities had a gross unrecognized gain of approximately $3,000.

38

Income Tax Expense

Income tax expense involves estimates related to the valuation allowance on deferred tax assets and loss contingencies related to exposure from tax examinations. 

A valuation allowance reduces deferred tax assets to the amount management believes is more likely than not to be realized. In evaluating the realization of deferred tax assets, management considers the likelihood that sufficient taxable income of appropriate character will be generated within carryback and carryforward periods, including consideration of available tax planning strategies. Tax related loss contingencies, including assessments arising from tax examinations and tax strategies, are recorded as liabilities when the likelihood of loss is probable and an amount or range of loss can be reasonably estimated. In considering the likelihood of loss, management considers the nature of the contingency, the progress of any examination or related protest or appeal, the views of legal counsel and other advisors, experience of the Company or other enterprises in similar matters, if any, and management’s intended response to any assessment. 

RESULTS OF OPERATIONS

Net Income:

Net income for the quarter ended September 30, 2013 totaled $6,483,000, or $0.51 per diluted share, an increase of $191,000 or 3% from the quarter ended September 30, 2012 net income of $6,292,000, or $0.50 per diluted share. Net income for the nine months ended September 30, 2013 totaled $18,824,000, or $1.48 per diluted share, an increase of $963,000 or 5% from the nine months ended September 30, 2012 net income of $17,861,000, or $1.41 per diluted share. 

Net Interest Income:

Net interest income is the Company’s single largest source of earnings, and represents the difference between interest and fees realized on earning assets, less interest paid on deposits and borrowed funds. Several factors contribute to the determination of net interest income and net interest margin, including the volume and mix of earning assets, interest rates, and income taxes. Many factors affecting net interest income are subject to control by management policies and actions. Factors beyond the control of management include the general level of credit and deposit demand, Federal Reserve Board monetary policy, and changes in tax laws.

39

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

	Average Balance Sheet
	(Tax-equivalent basis / dollars in thousands)
	Three Months Ended						Three Months Ended
	September 30, 2013						September 30, 2012
	Principal		Income /		Yield /		Principal		Income /		Yield /
	Balance		Expense		Rate		Balance		Expense		Rate
Assets
Federal Funds Sold and Other
Short-term Investments	$	11,868	$	2	0.08	%	$	31,575	$	11	0.14	%
Securities:
Taxable		530,933		2,768	2.08	%		558,942		3,235	2.32	%
Non-taxable		86,542		1,130	5.23	%		75,663		962	5.09	%
Total Loans and Leases (2)		1,269,222		15,368	4.81	%		1,161,325		15,148	5.19	%
Total Interest Earning Assets		1,898,565		19,268	4.04	%		1,827,505		19,356	4.22	%
Other Assets		133,308						134,646
Less: Allowance for Loan Losses		(15,497)						(16,298)
Total Assets	$	2,016,376					$	1,945,853
Liabilities and Shareholders’ Equity
Interest-bearing Demand, Savings
and Money Market Deposits	$	979,049	$	387	0.16	%	$	943,035	$	387	0.16	%
Time Deposits		333,000		758	0.90	%		358,477		1,235	1.37	%
FHLB Advances and Other Borrowings		161,092		475	1.17	%		121,340		938	3.08	%
Total Interest-bearing Liabilities		1,473,141		1,620	0.44	%		1,422,852		2,560	0.72	%
Demand Deposit Accounts		349,323						322,003
Other Liabilities		11,952						20,817
Total Liabilities		1,834,416						1,765,672
Shareholders’ Equity		181,960						180,181
Total Liabilities and Shareholders’ Equity	$	2,016,376					$	1,945,853
Cost of Funds					0.34	%					0.56	%
Net Interest Income			$	17,648					$	16,796
Net Interest Margin					3.70	%					3.66	%

(1)	Effective tax rates were determined as though interest earned on the Company’s investments in municipal bonds and loans was fully taxable.
(2)	Loans held-for-sale and non-accruing loans have been included in average loans.

Net interest income increased $799,000 or 5% (an increase of $852,000 or 5% on a tax-equivalent basis) for the quarter ended September 30, 2013 compared with the same quarter of 2012.  The increased level of net interest income during the third quarter of 2013 compared with the third quarter of 2012 was largely driven by a higher level of earning assets and a higher net interest margin (expressed as a percentage of average earning assets).

The net interest margin represents tax-equivalent net interest income expressed as a percentage of average earning assets. The tax equivalent net interest margin was 3.70% for the third quarter of 2013 compared to 3.66% during the third quarter of 2012. The yield on earning assets totaled 4.04% during the quarter ended September 30, 2013 compared to 4.22% in the same period of 2012 while the cost of funds (expressed as a percentage of average earning assets) totaled 0.34% during the quarter ended September 30, 2013 compared to 0.56% in the same period of 2012. 

The increase in the net interest margin and net interest income during the third quarter of 2013 compared with the third quarter of 2012 was largely attributable to the growth of the loan portfolio, an increase in the accretion of loan discounts on acquired loans and the decline in the Company’s cost of funds. Accretion of loan discounts on acquired loans contributed approximately 10 basis points on an annualized basis to the net interest margin in the third quarter of 2013 compared to 6 basis points in the third quarter of 2012.

40

	Average Balance Sheet
	(Tax-equivalent basis / dollars in thousands)
	Nine Months Ended						Nine Months Ended
	September 30, 2013						September 30, 2012
	Principal		Income /		Yield /		Principal		Income /		Yield /
	Balance		Expense		Rate		Balance		Expense		Rate
Assets
Federal Funds Sold and Other
Short-term Investments	$	14,483	$	25	0.23	%	$	52,415	$	84	0.21	%
Securities:
Taxable		548,144		8,380	2.04	%		545,464		9,982	2.44	%
Non-taxable		80,480		3,089	5.12	%		70,126		2,765	5.26	%
Total Loans and Leases (2)		1,238,243		45,392	4.90	%		1,132,352		46,574	5.49	%
Total Interest Earning Assets		1,881,350		56,886	4.04	%		1,800,357		59,405	4.40	%
Other Assets		134,983						137,012
Less: Allowance for Loan Losses		(15,736)						(16,188)
Total Assets	$	2,000,597					$	1,921,181
Liabilities and Shareholders’ Equity
Interest-bearing Demand, Savings
and Money Market Deposits	$	982,227	$	1,167	0.16	%	$	941,179	$	1,370	0.19	%
Time Deposits		334,024		2,366	0.95	%		362,459		4,153	1.53	%
FHLB Advances and Other Borrowings		140,210		1,978	1.89	%		118,428		3,066	3.46	%
Total Interest-bearing Liabilities		1,456,461		5,511	0.51	%		1,422,066		8,589	0.81	%
Demand Deposit Accounts		342,235						304,214
Other Liabilities		16,247						19,922
Total Liabilities		1,814,943						1,746,202
Shareholders’ Equity		185,654						174,979
Total Liabilities and Shareholders’ Equity	$	2,000,597					$	1,921,181
Cost of Funds					0.39	%					0.63	%
Net Interest Income			$	51,375					$	50,816
Net Interest Margin					3.65	%					3.77	%

(1)	Effective tax rates were determined as though interest earned on the Company’s investments in municipal bonds and loans was fully taxable.
(2)	Loans held-for-sale and non-accruing loans have been included in average loans.

Net interest income increased $475,000 or 1% (an increase of $559,000 or 1% on a tax-equivalent basis) for the nine months ended September 30, 2013 compared with the first nine months of 2012.  The increased level of net interest income during the first nine months of 2013 compared with the first half of 2012 was largely driven by an increased level of earning assets partially mitigated by a decline in the accretion of loan discounts on acquired loans and a lower net interest margin (expressed as a percentage of average earning assets).

The tax equivalent net interest margin was 3.65% for the first nine months of 2013 compared to 3.77% during the first nine months of 2012. The yield on earning assets totaled 4.04% during the nine months ended September 30, 2013 compared to 4.40% in the same period of 2012 while the cost of funds (expressed as a percentage of average earning assets) totaled 0.39% during the first nine months of 2013 compared to 0.63% in the same period of 2012. 

The decline in the net interest margin in the first nine months of 2013 compared with the first nine months of 2012 was largely attributable to the continued downward pressure on earning asset yields being driven by a historically low market interest rate environment and a competitive marketplace for lending opportunities. Also contributing to the lower net interest margin was a decline in the accretion of loan discounts on certain acquired loans. Accretion contributed approximately 8 basis points on an annualized basis to the net interest margin in the nine months ended September 30, 2013 compared to approximately 14 basis points during the first nine months of 2012. The decline in the Company’s cost of funds by approximately 24 basis points during the first nine months of 2013 compared to the first nine months of 2012 was largely driven by a continued decline in deposit rates and also attributable to the repayment of $19.3 million of subordinated debentures with an interest rate of 8% that occurred in the second quarter of 2013.

Average earning assets increased by approximately $81.0 million for the nine months ended September 30, 2013 compared with the same period of 2012. Average loans outstanding increased $105.9 million during the nine months ended September 30, 2013 compared with the first nine months of 2012. Average federal funds sold and other short-term investments decreased by $37.9 million during the first nine months of 2013 compared with the same period of 2012. The average securities portfolio increased approximately $13.0 million in the nine months ended September 30, 2013 compared with the first nine months of 2012. 

41

 

Provision for Loan Losses:

The Company provides for loan losses through regular provisions to the allowance for loan losses. The provision is affected by net charge-offs on loans and changes in specific and general allocations of the allowance.  During the quarter ended September 30, 2013, the Company recognized a negative $400,000 provision for loan loss which represented a decrease of $1,040,000 from the third quarter of 2012 provision of $640,000. The Company recognized a negative provision for loan losses of $250,000 for the nine months ended September 30, 2013, a decrease of $1,971,000 compared to the provision of $1,721,000 during the nine months ended September 30, 2012. The decline in the provision for loan losses in the three and nine month periods ended September 30, 2013 compared with the same periods of 2012 was attributable to a reduced level of net charge-offs, lower levels of non-performing loans, and a lower level of adversely classified loans.

Net charge-offs totaled $399,000 or 0.13% on an annualized basis of average loans outstanding during the three months ended September 30, 2013, compared with $410,000 or 0.14% on an annualized basis of average loans outstanding during the same period of 2012. Net charge-offs totaled $806,000 or 0.09% on an annualized basis of average loans outstanding during the nine months ended September 30, 2013, compared with $1,111,000 or 0.13% on an annualized basis of average loans outstanding during the same period of 2012. 

The provision for loan losses made during the three and nine months ended September 30, 2013 was made at a level deemed necessary by management to absorb estimated, probable incurred losses in the loan portfolio. A detailed evaluation of the adequacy of the allowance for loan losses is completed quarterly by management, the results of which are used to determine provision for loan losses.  Management estimates the allowance balance required using past loan loss experience, the nature and volume of the portfolio, information about specific borrower situations and estimated collateral values, economic conditions, and other factors.

Non-interest Income:

During the quarter ended September 30, 2013, non-interest income totaled $5,444,000, a decline of $714,000, or 12%, compared with the third quarter of 2012. 

					Change from
Non-interest Income	Three Months				Prior Period
(dollars in thousands)	Ended September 30,				Amount		Percent
	2013		2012		Change		Change
Trust and Investment Product Fees	$	802	$	659	$	143	22	%
Service Charges on Deposit Accounts		1,029		1,049		(20)	(2)
Insurance Revenues		1,495		1,469		26	2
Company Owned Life Insurance		233		213		20	9
Interchange Fee Income		449		418		31	7
Other Operating Income		395		811		(416)	(51)
Subtotal		4,403		4,619		(216)	(5)
Net Gains on Sales of Loans		613		941		(328)	(35)
Net Gains on Securities		428		598		(170)	(28)
Total Non-interest Income	$	5,444	$	6,158	$	(714)	(12)

During the third quarter of 2013, trust and investment product fees increased $143,000, or 22%, compared with third quarter of 2012. The increase was due to an increase in trust revenues as well as brokerage revenues.

Other operating income decreased $416,000 or 51% during the quarter ended September 30, 2013 compared with the third quarter of 2012. The decline was largely related to fees and fair value adjustments associated with interest rate swap transactions with loan customers which declined by $182,000 and with other real estate sales activity which declined by $306,000.

Net gains on sales of loans totaled $613,000 during the quarter ended September 30, 2013, a decline of $328,000, or 35%, compared with the third quarter of 2012. Loan sales totaled $40.3 million during the third quarter of 2013, compared with $37.8 million during the third quarter of 2012.

During the third quarter of 2013, the Company realized a net gain on the sale of securities of $428,000 related to the sale of $18.8 million of securities, compared with a net gain on the sale of securities of $598,000 related to the sale of approximately $40.4 million of securities in the third quarter of 2012.

42

During the nine months ended September 30, 2013, non-interest income totaled $17,464,000, an increase of $1,672,000, or 11%, compared with the first nine months of 2012. 

					Change from
Non-interest Income	Nine Months				Prior Period
(dollars in thousands)	Ended September 30,				Amount		Percent
	2013		2012		Change		Change
Trust and Investment Product Fees	$	2,433	$	2,019	$	414	21	%
Service Charges on Deposit Accounts		3,034		3,001		33	1
Insurance Revenues		4,658		4,218		440	10
Company Owned Life Insurance		716		723		(7)	(1)
Interchange Fee Income		1,392		1,309		83	6
Other Operating Income		1,547		1,500		47	3
Subtotal		13,780		12,770		1,010	8
Net Gains on Sales of Loans		2,176		2,330		(154)	(7)
Net Gains on Securities		1,508		692		816	118
Total Non-interest Income	$	17,464	$	15,792	$	1,672	11

During the nine months ended September 30, 2013, trust and investment product fees increased $414,000, or 21%, compared with the first nine months of 2012. The increase was due primarily to an increase in trust revenues.

Insurance revenues increased $440,000, or 10%, during the nine months ended September 30, 2013, compared with the first nine months of 2012. The increase during 2013 compared with first nine months of 2012 was due to increased contingency revenue and increased commercial insurance revenue. Contingency revenue during the first nine months of 2013 totaled $246,000 compared with $88,000 during the same period of 2012. The fluctuation in contingency revenue during 2013 and 2012 is a normal course of business type of variance and is reflective of claims and loss experience with insurance carriers that the Company represents through its property and casualty insurance agency.

Net gains on sales of loans totaled $2,176,000 during the nine months ended September 30, 2013, a decline of $154,000, or 7%, compared with the same period of 2012. Loan sales totaled $139.9 million during the first nine months of 2013, compared with $128.2 million during the first nine months of 2012.

During the nine months ended September 30, 2013, the Company realized a net gain on the sale of securities of $1,508,000 related to the sale of $74.1 million of securities, compared with a net gain on the sale of securities of $692,000 in the first nine months of 2012.

Non-interest Expense:

During the quarter ended September 30, 2013, non-interest expense totaled $13,584,000, an increase of $856,000, or 7%, compared with the third quarter of 2012.

					Change from
Non-interest Expense	Three Months				Prior Period
(dollars in thousands)	Ended September 30,				Amount		Percent
	2013		2012		Change		Change
Salaries and Employee Benefits	$	7,515	$	7,261	$	254	3	%
Occupancy, Furniture and Equipment
Expense		1,891		1,716		175	10
FDIC Premiums		261		271		(10)	(4)
Data Processing Fees		383		311		72	23
Professional Fees		970		585		385	66
Advertising and Promotion		447		439		8	2
Intangible Amortization		329		405		(76)	(19)
Other Operating Expenses		1,788		1,740		48	3
Total Non-interest Expense	$	13,584	$	12,728	$	856	7

Salaries and benefits increased $254,000, or 3%, during the quarter ended September 30, 2013 compared with the third quarter of 2012. The increase in salaries and benefits during the third quarter of 2013 compared with the third quarter of 2012 was primarily the result of an increased number of full-time equivalent employees.

43

Occupancy, furniture and equipment expense increased $175,000, or 10%, during the quarter ended September 30, 2013 compared with the third quarter 2012. The increase was largely related to a larger number of banking offices and other technology related expenditures.

Professional fees increased $385,000, or 66%, during the quarter ended September 30, 2013 compared with the third quarter of 2012. The increase was largely related to professional fees associated with the recently completed acquisition of United Commerce Bancorp and related to fees associated with the Company’s review of its overall operating effectiveness and efficiency.

During the nine months ended September 30, 2013, non-interest expense totaled $40,307,000, an increase of $2,563,000, or 7%, compared with the first nine months of 2012. 

					Change from
Non-interest Expense	Nine Months				Prior Period
(dollars in thousands)	Ended September 30,				Amount		Percent
	2013		2012		Change		Change
Salaries and Employee Benefits	$	22,926	$	21,409	$	1,517	7	%
Occupancy, Furniture and Equipment
Expense		5,588		5,273		315	6
FDIC Premiums		776		851		(75)	(9)
Data Processing Fees		1,085		746		339	45
Professional Fees		2,156		1,777		379	21
Advertising and Promotion		1,453		1,208		245	20
Intangible Amortization		1,044		1,269		(225)	(18)
Other Operating Expenses		5,279		5,211		68	1
Total Non-interest Expense	$	40,307	$	37,744	$	2,563	7

Salaries and benefits increased $1,517,000, or 7%, during the nine months ended September 30, 2013 compared with the first nine months of 2012. The increase in salaries and benefits during the first nine months of 2013 compared with the first nine months of 2012 was primarily the result of an increased number of full-time equivalent employees due in part to an increased number of banking locations, increased costs related to the Company’s health insurance plan, and the pending termination of a frozen defined benefit pension plan.

Occupancy, furniture and equipment expense increased $315,000, or 6%, during the nine months ended September 30, 2013 compared with the same period of 2012. The increase was largely related to a larger number of banking offices and other technology related expenditures.

Professional fees increased $379,000, or 21%, during the nine months ended September 30, 2013 compared with the same period of 2012. The increase was largely related to professional fees associated with the recently completed acquisition of United Commerce Bancorp and related to fees associated with the Company’s review of its overall operating effectiveness and efficiency.

Data processing fees increased $339,000, or 45%, during the nine months ended September 30, 2013 compared with the first nine months of 2012. The increase was largely related to the resolution of a contractual dispute during 2012 related to the acquisition of American Community Bancorp. An expense for the cancellation of a data processing contract was recorded in the first half of 2011, and upon resolution of the contractual dispute, a portion of that accrued expense was reversed during 2012.

Advertising and promotion expense increased $245,000, or 20%, during the nine months ended September 30, 2013 compared with the first nine months of 2012. The increase was largely related to an increased level of community contributions made in the Company’s primary market areas.

Intangible amortization decreased $225,000, or 18%, during the nine months ended September 30, 2013 compared with the first nine months of 2012. The decline was attributable to a reduced level of core deposit intangible associated with previous bank and bank branch acquisitions.

Income Taxes:

The Company’s effective income tax rate was 31.4% during the three months ended September 30, 2013 and 2012. The Company’s effective income tax rate approximated 31.6% and 31.3% during the nine months ended September 30, 2013 and 2012, respectively. The effective tax rate in all periods presented was lower than the blended statutory rate of 40.5% resulting primarily from the Company’s tax-exempt investment income on securities, loans and company owned life insurance, income tax credits generated from investments in a new markets tax credit project and affordable housing projects, and income generated by subsidiaries domiciled in a state with no state or local income tax.

44

 

FINANCIAL CONDITION

Total assets at September 30, 2013 increased $53.8 million to $2.060 billion compared with $2.006 billion in total assets at December 31, 2012. Securities available-for-sale increased $21.1 million to $608.7 million at September 30, 2013 compared with $587.6 million at year-end 2012. 

September 30, 2013 loans outstanding increased by $76.4 million, or approximately 8% on an annualized basis, compared with year-end 2012. The increase in loans was broad based including commercial and industrial loans, commercial real estate loans, agricultural loans, consumer loans, and residential mortgage loans and occurred throughout the Company’s market area. 

End of Period Loan Balances:					Current
(dollars in thousands)	September 30,		December 31,		Period
	2013		2012		Change
Commercial & Industrial Loans	$	338,770	$	335,373	$	3,397
Commercial Real Estate Loans		530,260		488,496		41,764
Agricultural Loans		185,868		179,906		5,962
Home Equity & Consumer Loans		121,772		115,540		6,232
Residential Mortgage Loans		107,620		88,586		19,034
Total Loans	$	1,284,290	$	1,207,901	$	76,389

The Company’s allowance for loan losses totaled $14.5 million at September 30, 2013 representing a decrease of $1,056,000, or 9% on an annualized basis, from December 31, 2012. The allowance for loan losses represented 1.13% of period-end loans at September 30, 2013 compared with 1.29% of period-end loans at December 31, 2012. Under acquisition accounting treatment, loans acquired are recorded at fair value which includes a credit risk component, and therefore the allowance on loans acquired is not carried over from the seller. The Company held a discount on acquired loans of $2.1 million as of September 30, 2013 and $3.5 million at year-end 2012.

Total deposits increased $30.1 million, or 2% on an annualized basis, as of September 30, 2013 compared with December 31, 2012 total deposits.

End of Period Deposit Balances:					Current
(dollars in thousands)	September 30,		December 31,		Period
	2013		2012		Change
Non-interest-bearing Demand Deposits	$	364,110	$	349,174	$	14,936
Interest-bearing Demand, Savings,     & Money Market Accounts		974,748		962,574		12,174
Time Deposits < $100,000		215,082		233,422		(18,340)
Time Deposits of $100,000 or more		117,099		95,761		21,338
Total Deposits	$	1,671,039	$	1,640,931	$	30,108

45

The following is an analysis of the Company’s non-performing assets at September 30, 2013 and December 31, 2012:

Non-performing Assets:
(dollars in thousands)
	September 30,			December 31,
	2013			2012
Non-accrual Loans	$	6,857		$	10,357
Past Due Loans (90 days or more and still accruing)		91			—
Total Non-performing Loans		6,948			10,357
Other Real Estate		584			1,645
Total Non-performing Assets	$	7,532		$	12,002
Restructured Loans	$	2,536		$	362
Non-performing Loans to Total Loans		0.54	%		0.86	%
Allowance for Loan Loss to Non-performing Loans		208.18	%		149.85	%

Non-performing assets totaled $7.5 million or 0.37% of total assets at September 30, 2013 compared to $12.0 million or 0.60% of total assets at December 31, 2012. Non-performing loans totaled $6.9 million or 0.54% of total loans at September 30, 2013 representing a $3.4 million, or 33%, decline in non-performing loans compared to the $10.4 million of non-performing loans at December 31, 2012. The decline in non-performing loans was largely the result of the placement of a commercial and industrial loan to a mechanical contractor back into accrual status based on the performance of the loan and company over an extended period of time. This loan was restructured and placed into non-accrual status in a prior period. After upgrading, because the loan was previously restructured, the Company continues to carry this credit as a restructured loan at September 30, 2013. This resulted in the increase in restructured loans to $2.5 million at September 30, 2013 compared to $0.4 million at December 31, 2012.

Non-accrual commercial real estate loans totaled $6.0 million at September 30, 2013 representing a decline of $1.3 million, or 17%, from the $7.3 million of non-accrual commercial real estate loans at year-end 2012. Non-accrual commercial real estate loans represented 88% of the total non-performing loans at September 30, 2013 compared to 70% of total non-performing loans at year-end 2012. Non-accrual commercial and industrial loans totaled $0.4 million at September 30, 2013 representing a decrease of $2.1 million, or 83%, from the $2.5 million of non-accrual commercial and industrial loans at December 31, 2012. Non-accrual commercial and industrial loans represented 6% of the total non-performing loans at September 30, 2013 compared with 24% of total non-performing loans at year-end 2012.

At September 30, 2013, two commercial loan relationships represented approximately 58% of the total non-performing loans of the Company. The first relationship was a $2.1 million commercial real estate loan secured by various commercial real estate properties. This loan was in non-performing status as of December 31, 2012. The borrower has made all contractual payments due during 2013 and the principal balance of the loan was reduced by approximately $0.5 million during the first nine months of 2013. The second relationship was a $1.9 million commercial real estate loan secured by a commercial warehouse facility. This loan was in non-performing status as of year-end 2012. The borrower has made all contractual payments due during 2013 and the principal balance of this relationship was reduced by $0.05 million during the first nine months of 2013. These two relationships represent the only loan relationships greater than $1.0 million included in non-performing loans.

The Company purchases individual loans and groups of loans. Purchased loans that show evidence of credit deterioration since origination are recorded at the amount paid (or allocated fair value in a purchase business combination), such that there is no carryover of the seller’s allowance for loan losses. After acquisition, incurred losses are recognized by an increase in the allowance for loan losses.

Purchased loans that indicated evidence of credit deterioration since origination at the time of acquisition by the Company did not have a material adverse impact on the Company’s key credit metrics during 2012 or during the first nine months of 2013. The key credit metrics the Company measures generally include non-performing loans, past due loans, and adversely classified loans. 

Non-performing purchased loans with evidence of credit deterioration since origination totaled $256,000 at September 30, 2013 compared with $148,000 at December 31, 2012. The non-performing purchased loans with evidence of credit deterioration since origination represented approximately 4% of total non-performing loans at September 30, 2013 compared with approximately 1% of total non-performing loans at December 31, 2012.  

Past due purchased loans with evidence of credit deterioration since origination totaled $245,000 at September 30, 2013 and $118,000 at year-end 2012. Past due purchased loans with evidence of credit deterioration since origination represented approximately 4% of total past due loans at September 30, 2013 and approximately 1% of total past due loans at year-end 2012.

46

Adversely classified purchased loans with evidence of credit deterioration since origination totaled $4.6 million at September 30, 2013 compared with $7.3 million at December 31, 2012 a decline of approximately 37%. Adversely classified purchased loans with evidence of credit deterioration since origination represented approximately 16% of total adversely classified loans at September 30, 2013 compared with approximately 19% of total adversely classified loans at year-end 2012.

Loan impairment is reported when full repayment under the terms of the loan is not expected.  If a loan is impaired, a portion of the allowance is allocated so that the loan is reported net, at the present value of estimated future cash flows using the loan’s existing rate, or at the fair value of collateral if repayment is expected solely from the collateral. Commercial and industrial loans, commercial real estate loans, and agricultural loans are evaluated individually for impairment. Smaller balance homogeneous loans are evaluated for impairment in total. Such loans include real estate loans secured by one-to-four family residences and loans to individuals for household, family and other personal expenditures. Individually evaluated loans on non-accrual are generally considered impaired. Impaired loans, or portions thereof, are charged off when deemed uncollectible. The amount of loans individually evaluated for impairment including purchase credit impaired loans totaled $9.7 million at September 30, 2013.

Capital Resources:

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

Tier 1, or core capital, consists of shareholders’ equity plus certain amounts of instruments commonly referred to as trust preferred securities, less goodwill, core deposit intangibles, other identifiable intangibles and certain deferred tax assets defined by bank regulations. Tier 2 capital currently consists of the amount of the allowance for loan losses which does not exceed a defined maximum allowance limit of 1.25 percent of gross risk adjusted assets and certain amounts of subordinated debenture obligations. Total capital is the sum of Tier 1 and Tier 2 capital.

The minimum requirements under these standards are generally at least a 4.0 percent leverage ratio, which is Tier 1 capital divided by defined “total assets”; 4.0 percent Tier 1 capital to risk-adjusted assets; and, an 8.0 percent total capital to risk-adjusted assets ratios. Under these guidelines, the Company, on a consolidated basis, and its subsidiary bank, have capital ratios that exceed the regulatory minimums.

The Federal Deposit Insurance Corporation Improvement Act of 1991 (FDICIA) requires federal regulatory agencies to define capital tiers. These are: well-capitalized, adequately-capitalized, under-capitalized, significantly under-capitalized, and critically under-capitalized. Under these regulations, a “well-capitalized” entity must achieve a Tier 1 risk-based capital ratio of at least 6.0 percent; a total capital ratio of at least 10.0 percent; and, a leverage ratio of at least 5.0 percent, and not be under a capital directive. The Company’s subsidiary bank was categorized as well-capitalized as of September 30, 2013.

At September 30, 2013, management was not under such a capital directive, nor was it aware of any current recommendations by banking regulatory authorities which, if they were to be implemented, would have or are reasonably likely to have, a material effect on the Company’s liquidity, capital resources or operations.

The table below presents the Company’s consolidated capital ratios under regulatory guidelines:

	Minimum for
	Capital		At		At
	Adequacy		September 30,		December 31,
	Purposes		2013		2012
Leverage Ratio	4.00	%	8.63	%	8.18	%
Tier 1 Capital to Risk-adjusted Assets	4.00	%	11.92	%	11.12	%
Total Capital to Risk-adjusted Assets	8.00	%	12.93	%	13.70	%

47

In July 2013, the two federal banking regulatory agencies that have authority to regulate the Company’s capital resources and capital structure (the Board of Governors of the Federal Reserve System (FRB) and Federal Deposit Insurance Corporation (FDIC)) took action to finalize the application to the United States banking industry of new regulatory capital requirements that are established by the international banking framework commonly referred to as “Basel III” and to implement certain other changes required by the Dodd-Frank Wall Street Reform and Consumer Protection Act. As anticipated by management of the Company (see the related discussion included in Item 1 of the Company’s annual report on Form 10-K for the year 2012 filed in March 2013), these rules make significant changes to the U.S. bank regulatory capital framework, and generally increase capital requirements for banking organizations. However, in response to concerns expressed by community banks such as the Company, the final rules addressed previous concerns of community banks about the proposed rules’ regulatory capital treatment of trust preferred securities, unrealized gains and losses on available-for-sale securities in accumulated other comprehensive income ("AOCI") and mortgage risk weights. The Company has not yet fully analyzed the final rules in detail in order to determine their likely impact upon the Company, and although management does continue to believe that such requirements will in general increase the amount of capital that the Company and the Bank may be required to maintain under these new standards, the Company now believes that its prior concerns regarding volatility and trust preferred securities have been favorably addressed by the final rules. The Company does not presently expect that any materially burdensome compliance efforts with these final capital rules will be required of us prior to January 1, 2015.

As of September 30, 2013, shareholders’ equity remained stable at $185.1 million compared with $185.0 million at year-end 2012. During the first nine months of 2013 shareholders’ equity was impacted by a decline of $13.3 million in accumulated other comprehensive income related to a decrease in the fair value of the Company’s available-for-sale securities portfolio largely offset by an increase of $13.1 million in retained earnings. Shareholders’ equity represented 9.0% of total assets at September 30, 2013 and 9.2% of total assets at December 31, 2012. Shareholders’ equity included $20.5 million of goodwill and other intangible assets at September 30, 2013 compared to $21.6 million of goodwill and other intangible assets at December 31, 2012.

On April 1, 2013, the Company redeemed all $19.3 million of its 8% subordinated debentures that were scheduled to mature in 2019 at a redemption price of 100% of principal, plus accrued but unpaid interest through the redemption date. The redemption of these subordinated debentures was funded through existing cash balances on hand at the parent company as of the redemption date. The entire principal amount was includable in the parent company’s consolidated Tier 2 regulatory capital under banking agency regulatory standards prior to the redemption date.

Liquidity:

The Consolidated Statement of Cash Flows details the elements of changes in the Company’s consolidated cash and cash equivalents. Total cash and cash equivalents increased $15.6 million during the nine months ended September 30, 2013 ending at $64.7 million. During the nine months ended September 30, 2013, operating activities resulted in net cash inflows of $33.3 million. Investing activities resulted in net cash outflows of $72.6 million during the nine months ended September 30, 2013. Financing activities resulted in net cash inflows for the nine months ended September 30, 2013 of $54.9 million.

The parent company is a corporation separate and distinct from its bank and other subsidiaries. The Company uses funds at the parent company level to pay dividends to its shareholders, to acquire or make other investments in other businesses or their securities or assets, to repurchase its stock from time to time, and for other general corporate purposes including debt service. The parent company does not have access at the parent-company level to the deposits and certain other sources of funds that are available to its bank subsidiary to support its operations. Instead, the parent company has historically derived most of its revenues from dividends paid to the parent company by its bank subsidiary. The Company’s banking subsidiary is subject to statutory restrictions on its ability to pay dividends to the parent company. The parent company has in recent years supplemented the dividends received from its subsidiaries with borrowings. As of September 30, 2013, the parent company had approximately $9.2 million of cash and cash equivalents available to meet its cash flow needs.

FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISKS

The Company from time to time in its oral and written communications makes statements relating to its expectations regarding the future. These types of statements are considered “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. The Company may include forward-looking statements in filings with the Securities and Exchange Commission (“SEC”), such as this Form 10-Q, in other written materials, and in oral statements made by senior management to analysts, investors, representatives of the media, and others. Such forward looking statements can include statements about the Company’s net interest income or net interest margin; its adequacy of allowance for loan losses, levels of provisions for loan losses, and the quality of the Company’s loans and other assets; simulations of changes in interest rates; expected results from mergers with or acquisitions of other businesses; litigation results; tax estimates and recognition; dividend policy; parent company cash resources and cash requirements, and parent company capital resources; estimated cost savings, plans and objectives for future operations; and expectations about the Company’s financial and business performance and other business matters as well as economic and market conditions and trends. They often can be identified by the use of words like “expect,” “may,” “will,” “would,” “could,” “should,” “intend,” “project,” “estimate,” “believe” or “anticipate,” or similar expressions.

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

48

Readers are cautioned that, by their nature, all forward-looking statements are based on assumptions and are subject to risks, uncertainties, and other factors. Actual results may differ materially and adversely from the expectations of the Company that are expressed or implied by any forward-looking statement. The discussions in this Item 2 list some of the factors that could cause the Company’s actual results to vary materially from those expressed or implied by any forward-looking statements. Other risks, uncertainties, and factors that could cause the Company’s actual results to vary materially from those expressed or implied by any forward-looking statement include the unknown future direction of interest rates and the timing and magnitude of any changes in interest rates; changes in competitive conditions; the introduction, withdrawal, success and timing of asset/liability management strategies or of mergers and acquisitions and other business initiatives and strategies; changes in customer borrowing, repayment, investment and deposit practices; changes in fiscal, monetary and tax policies; changes in financial and capital markets; deterioration in general economic conditions, either nationally or locally, resulting in, among other things, credit quality deterioration; capital management activities, including possible future sales of new securities, or possible repurchases or redemptions by the Company of outstanding debt or equity securities; risks of expansion through acquisitions and mergers, such as unexpected credit quality problems of the acquired loans or other assets, unexpected attrition of the customer base of the acquired institution or branches, and difficulties in integration of the acquired operations; factors driving impairment charges on investments; the impact, extent and timing of technological changes; litigation liabilities, including related costs, expenses, settlements and judgments, or the outcome of matters before regulatory agencies, whether pending or commencing in the future; actions of the Federal Reserve Board; changes in accounting principles and interpretations; potential increases of federal deposit insurance premium expense, and possible future special assessments of FDIC premiums, either industry wide or specific to the Company’s banking subsidiary; actions of the regulatory authorities under the Dodd-Frank Wall Street Reform and Consumer Protection Act and the Federal Deposit Insurance Act and other possible legislative and regulatory actions and reforms; and the continued availability of earnings and excess capital sufficient for the lawful and prudent declaration and payment of cash dividends. Such statements reflect our views with respect to future events and are subject to these and other risks, uncertainties and assumptions relating to the operations, results of operations, growth strategy and liquidity of the Company. Readers are cautioned not to place undue reliance on these forward-looking statements.

Investors should consider these risks, uncertainties, and other factors, in addition to those mentioned by the Company in its Annual Report on Form 10-K for its fiscal year ended December 31, 2012, and other SEC filings from time to time, when considering any forward-looking statement.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The Company’s exposure to market risk is reviewed on a regular basis by the Asset/Liability Committee and Boards of Directors of the parent company and its subsidiary bank. Primary market risks which impact the Company’s operations are liquidity risk and interest rate risk.

The liquidity of the parent company is dependent upon the receipt of dividends from its subsidiary bank, which is subject to certain regulatory limitations. The Bank’s source of funding is predominately core deposits, maturities of securities, repayments of loan principal and interest, federal funds purchased, securities sold under agreements to repurchase and borrowings from the Federal Home Loan Bank.

The Company monitors interest rate risk by the use of computer simulation modeling to estimate the potential impact on its net interest income under various interest rate scenarios, and by estimating its static interest rate sensitivity position.  Another method by which the Company’s interest rate risk position can be estimated is by computing estimated changes in its net portfolio value (“NPV”). This method estimates interest rate risk exposure from movements in interest rates by using interest rate sensitivity analysis to determine the change in the NPV of discounted cash flows from assets and liabilities.

NPV represents the market value of portfolio equity and is equal to the estimated market value of assets minus the estimated market value of liabilities. Computations are based on a number of assumptions, including the relative levels of market interest rates and prepayments in mortgage loans and certain types of investments. These computations do not contemplate any actions management may undertake in response to changes in interest rates, and should not be relied upon as indicative of actual results. In addition, certain shortcomings are inherent in the method of computing NPV. Should interest rates remain or decrease below current levels, the proportion of adjustable rate loans could decrease in future periods due to refinancing activity. In the event of an interest rate change, prepayment levels would likely be different from those assumed in the table. Lastly, the ability of many borrowers to repay their adjustable rate debt may decline during a rising interest rate environment.

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

49

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

Interest Rate Sensitivity as of September 30, 2013

					Net Portfolio Value
	Net Portfolio				as a % of Present Value
Changes	Value				of Assets
in Rates	Amount		% Change		NPV Ratio		Change
+2%	$	171,257	(19.24)	%	8.70	%	(156)	b.p.
Base		212,062	—		10.26	%	—
-2%		191,600	(9.65)	%	9.08	%	(118)	b.p.

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

Item 4.  Controls and Procedures

As of September 30, 2013, the Company carried out an evaluation, under the supervision and with the participation of its principal executive officer and principal financial officer, of the effectiveness of the design and operation of its disclosure controls and procedures. Based on this evaluation, the Company’s principal executive officer and principal financial officer concluded that the Company’s disclosure controls and procedures were as of that date effective in timely alerting them to material information required to be included in the Company’s periodic reports filed with the Securities and Exchange Commission. There are inherent limitations to the effectiveness of systems of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective systems of disclosure controls and procedures can provide only reasonable assurances of achieving their control objectives.

There was no change in the Company’s internal control over financial reporting that occurred during the Company’s third fiscal quarter of 2013 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

50

PART II. OTHER INFORMATION

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

(e) The following table sets forth information regarding the Company’s purchases of its common shares during each of the three months ended September 30, 2013.

	Total			Maximum Number
	Number		Total Number of Shares	(or Approximate Dollar
	of Shares	Average Price	(or Units) Purchased as Part	Value) of Shares (or Units)
	(or Units)	Paid Per Share	of Publicly Announced Plans	that May Yet Be Purchased
Period	Purchased	(or Unit)	or Programs	under the Plans or Programs  (1)
7/1/13 – 7/31/13	—	—	—	272,789
8/1/13 – 8/31/13	—	—	—	272,789
9/1/13 – 9/30/13	—	—	—	272,789
	—	—	—

⁽¹⁾ On April 26, 2001, the Company announced that its Board of Directors had approved a stock repurchase program for up to 607,754 of its outstanding common shares, of which the Company had purchased 334,965 common shares through September 30, 2013 (both such numbers adjusted for subsequent stock dividends). The Board of Directors established no expiration date for this program. The Company purchased no shares under this program during the three months ended September 30, 2013.

51

Item 6.      Exhibits

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

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	GERMAN AMERICAN BANCORP, INC.
Date: November 8, 2013	By/s/Mark A. Schroeder
	Mark A. Schroeder
	Chairman of the Board and Chief Executive Officer
Date: November 8, 2013	By/s/Bradley M. Rust
	Bradley M. Rust
	Executive Vice President and Chief Financial Officer

52

INDEX OF EXHIBITS

Exhibit No.	Description
2.1	Agreement and Plan of Reorganization among German American Bancorp, Inc., United Commerce Bancorp, German American Bancorp, and United Commerce Bank, dated July 23, 2013.  The copy of this exhibit filed as Exhibit 2.1 to Registrant’s Current Report on Form 8-K filed July 24, 2013 is incorporated herein by reference. Schedules identified in the list of Schedules to this Agreement are not filed as part of this Exhibit, but the Registrant agrees to furnish to the Commission supplementally any omitted schedule upon request.
31.1**	Sarbanes-Oxley Act of 2002, Section 302 Certification for Chairman of the Board and Chief Executive Officer.
31.2**	Sarbanes-Oxley Act of 2002, Section 302 Certification for Executive Vice President and Chief Financial Officer.
32.1**	Sarbanes-Oxley Act of 2002, Section 906 Certification for Chairman of the Board and Chief Executive Officer.
32.2**	Sarbanes-Oxley Act of 2002, Section 906 Certification for Executive Vice President and Chief Financial Officer.
101**+	The following materials from German American Bancorp, Inc.’s Form 10-Q Report for the quarterly period ended September 30, 2013, formatted in XBRL: (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Income, (iii)  the Consolidated Statements of Comprehensive Income, (iv) the Consolidated Statements of Cash Flows, and (v) the Notes to Consolidated Financial Statements.

**Exhibits that are furnished or filed with this Report (other than through incorporation by reference to other disclosures or exhibits) are indicated by a double asterisk.

+Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files on Exhibit 101 hereto are furnished and not deemed filed or part of a registration statement or prospectus for purposes of Sections 11 and 12 of the Securities Act of 1933, as amended, and are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.

53

EX-31.1

Exhibit 31.1

Sarbanes-Oxley Act of 2002, Section 302 Certification for Chairman of the Board and Chief Executive Officer

I, Mark A. Schroeder, Chairman of the Board and Chief Executive Officer of German American Bancorp, Inc., certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of German American Bancorp, Inc. (the “registrant”):

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

November 8, 2013
Date

/s/ Mark A. Schroeder

Mark A. Schroeder
Chairman of the Board and

Chief Executive Officer

EX-31.2

Exhibit 31.2

Sarbanes-Oxley Act of 2002, Section 302 Certification for Executive Vice President and Chief Financial Officer

I, Bradley M. Rust, Executive Vice President and Chief Financial Officer of German American Bancorp, Inc. certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of German American Bancorp, Inc., (the “registrant”):

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

November 8, 2013
Date

/s/ Bradley M. Rust

Bradley M. Rust
Executive Vice President and Chief Financial Officer

(principal accounting officer and principal financial officer)

EX-32.1

Exhibit 32.1

Sarbanes-Oxley Act of 2002, Section 906 Certification for Chairman of the Board and Chief Executive Officer

I, Mark A. Schroeder, Chairman of the Board and Chief Executive Officer of German American Bancorp, Inc. certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350), that:

(1) the Quarterly Report on Form 10-Q for the quarter ended September 30, 2013, (the “Periodic Report”) which this statement accompanies fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78m); and

(2) information contained in the Periodic Report fairly presents, in all material respects, the financial condition and results of operations of German American Bancorp, Inc.

This certificate is being furnished solely for purposes of Section 906 and is not being filed as part of the Periodic Report.

November 8, 2013
Date

/s/ Mark A. Schroeder

Mark A. Schroeder
Chairman of the Board and

Chief Executive Officer

EX-32.2

Exhibit 32.2

Sarbanes-Oxley Act of 2002, Section 906 Certification for Executive Vice President and Chief Financial Officer

I, Bradley M. Rust, Executive Vice President and Chief Financial Officer of German American Bancorp, Inc. certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350), that:

(1) the Quarterly Report on Form 10-Q for the quarter ended September 30, 2013, (the “Periodic Report”) which this statement accompanies fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78m); and

(2) information contained in the Periodic Report fairly presents, in all material respects, the financial condition and results of operations of German American Bancorp, Inc.

This certificate is being furnished solely for purposes of Section 906 and is not being filed as part of the Periodic Report.

November 8, 2013
Date

/s/ Bradley M. Rust

Bradley M. Rust
Executive Vice President and Chief Financial Officer

(principal accounting officer and principal financial officer)

XML

Subsequent Event

9 Months Ended

Sep. 30, 2013

Subsequent Events [Abstract]

Subsequent Events

Note 11 – Subsequent Event

German American Bancorp, Inc. completed its previously announced merger transaction with United Commerce Bancorp, the parent company of United Commerce Bank, of Bloomington, Indiana, effective October 1, 2013.  United Commerce Bancorp merged into German American Bancorp, Inc. effective prior to the opening of business on October 1, 2013, followed immediately by the merger of United Commerce Bank with and into German American Bancorp, Inc.'s banking subsidiary.  United Commerce Bank operated two banking offices in Bloomington, Indiana.  United Commerce had consolidated total assets of approximately $120.2 million, total loans of approximately $83.5 million, total deposits of approximately $106.5 million, and total shareholder's equity of approximately $13.6 million as of September 30, 2013. The acquired assets and liabilities will be recorded at fair value at the date of acquisition and will be reflected in the December 31, 2013 financial statements as such; however, at the time of these financial statements, the appraisals and valuations are incomplete. The Company expects to record goodwill and a core deposit intangible in regards to this transaction based on earlier estimates, but the amount is not known as the initial fair value accounting is incomplete. The goodwill will not be deductible for tax purposes.

Under the terms of the merger, United Commerce shareholders received a combination of approximately $12.7 million in GABC stock (502,560 shares) and $1.4 million in cash consideration representing a total transaction value of approximately $14.1 million. The basic transaction value excludes the indicated value of the approximately 4.6% interest that German American owned in United Commerce's outstanding stock prior to the completion of the merger and the approximately $640 thousand in cash payments made in cancellation of dilutive stock options that had been issued by United Commerce.

Each United Commerce common shareholder of record at the effective time of the merger became entitled to receive (a) 0.5456 shares of German American common stock plus (b) a cash payment of $1.51 for each of their former shares of United Commerce common stock and a cash settlement for any fractional shares of German American otherwise issuable to them.

This acquisition was consistent with the Company’s strategy to build a regional presence in Southern Indiana. The acquisition offers the Company the opportunity to increase profitability by introducing existing products and services to the acquired customer base as well as add new customers in the expanded region.

XML

Stock Repurchase Plan (Additional Information) (Details)	Sep. 30, 2013	Apr. 26, 2001
Common stock, authorized shares repurchase		607,754
Common stock, total shares repurchased	334,965

XML

CONSOLIDATED STATEMENTS OF INCOME (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
INTEREST INCOME
Interest and Fees on Loans	$ 15,307	$ 15,082	$ 45,227	$ 46,380
Interest on Federal Funds Sold and Other Short-term Investments	2	11	25	84
Interest and Dividends on Securities:
Taxable	2,768	3,235	8,380	9,982
Non-taxable	735	625	2,008	1,797
TOTAL INTEREST INCOME	18,812	18,953	55,640	58,243
INTEREST EXPENSE
Interest on Deposits	1,145	1,622	3,533	5,523
Interest on FHLB Advances and Other Borrowings	475	938	1,978	3,066
TOTAL INTEREST EXPENSE	1,620	2,560	5,511	8,589
NET INTEREST INCOME	17,192	16,393	50,129	49,654
Provision for Loan Losses	(400)	640	(250)	1,721
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES	17,592	15,753	50,379	47,933
NON-INTEREST INCOME
Trust and Investment Product Fees	802	659	2,433	2,019
Service Charges on Deposit Accounts	1,029	1,049	3,034	3,001
Insurance Revenues	1,495	1,469	4,658	4,218
Company Owned Life Insurance	233	213	716	723
Interchange Fee Income	449	418	1,392	1,309
Other Operating Income	395	811	1,547	1,500
Net Gains on Sales of Loans	613	941	2,176	2,330
Net Gains on Securities	428	598	1,508	692
TOTAL NON-INTEREST INCOME	5,444	6,158	17,464	15,792
NON-INTEREST EXPENSE
Salaries and Employee Benefits	7,515	7,261	22,926	21,409
Occupancy Expense	1,155	1,066	3,359	3,219
Furniture and Equipment Expense	736	650	2,229	2,054
FDIC Premiums	261	271	776	851
Data Processing Fees	383	311	1,085	746
Professional Fees	970	585	2,156	1,777
Advertising and Promotion	447	439	1,453	1,208
Intangible Amortization	329	405	1,044	1,269
Other Operating Expenses	1,788	1,740	5,279	5,211
TOTAL NON-INTEREST EXPENSE	13,584	12,728	40,307	37,744
Income before Income Taxes	9,452	9,183	27,536	25,981
Income Tax Expense	2,969	2,891	8,712	8,120
NET INCOME	$ 6,483	$ 6,292	$ 18,824	$ 17,861
Basic Earnings Per Share	$ 0.51	$ 0.50	$ 1.49	$ 1.42
Diluted Earnings Per Share	$ 0.51	$ 0.50	$ 1.48	$ 1.41
Dividends Per Share	$ 0.15	$ 0.14	$ 0.45	$ 0.42

XML

Derivatives

9 Months Ended

Sep. 30, 2013

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivatives

Note 4 – Derivatives

The Company executes interest rate swaps with commercial banking customers to facilitate their respective risk management strategies.  The notional amounts of these interest rate swaps and the offsetting counterparty derivative instruments were $18.0 million at September 30, 2013 and $6.1 million at December 31, 2012.  These interest rate swaps are simultaneously hedged by offsetting interest rate swaps that the Company executes with a third party, such that the Company minimizes its net risk exposure resulting from such transactions with approved, reputable, independent counterparties with substantially matching terms.  The agreements are considered stand alone derivatives and changes in the fair value of derivatives are reported in earnings as non-interest income. 

Credit risk arises from the possible inability of counterparties to meet the terms of their contracts.  The Company’s exposure is limited to the replacement value of the contracts rather than the notional, principal or contract amounts.  There are provisions in the agreements with the counterparties that allow for certain unsecured credit exposure up to an agreed threshold.  Exposures in excess of the agreed thresholds are collateralized.  In addition, the Company minimizes credit risk through credit approvals, limits, and monitoring procedures.

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

	September 30, 2013				December 31, 2012
	Notional				Notional
	Amount		Fair Value		Amount		Fair Value
Included in Other Assets:
Interest Rate Swaps	$	17,951	$	511	$	6,051	$	187
Included in Other Liabilities:
Interest Rate Swaps	$	17,951	$	392	$	6,051	$	178

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

	Three Months Ended				Nine Months Ended
	September 30				September 30
	2013		2012		2013		2012
Interest Rate Swaps:
Included in Interest Income / (Expense)	$	—	$	—	$	—	$	—
Included in Other Income / (Expense)		(34)		148		517		148

XML

Fair Value (Tables)

9 Months Ended

Sep. 30, 2013

Fair Value [Abstract]

Assets and Liabilities Measured at Fair Value on Recurring Basis

Assets and liabilities measured at fair value on a recurring basis, including financial assets and liabilities for which the Company has elected the fair value option, are summarized below:

	Fair Value Measurements at September 30, 2013 Using
	Quoted Prices in
	Active Markets for		Significant Other		Significant
	Identical Assets		Observable Inputs		Unobservable Inputs
	(Level 1)		(Level 2)		(Level 3)		Total
Assets:
U.S. Treasury and Agency Securities	$	—	$	19,787	$	—	$	19,787
Corporate Securities		—		—		—		—
Obligations of State and
Political Subdivisions		—		86,269		11,002		97,271
Mortgage-backed Securities-Residential		—		490,569		—		490,569
Equity Securities		673		—		353		1,026
Total Securities	$	673	$	596,625	$	11,355	$	608,653
Loans Held-for-Sale	$	—	$	9,054	$	—	$	9,054
Derivatives	$	—	$	511	$	—	$	511
Financial Liabilities Derivatives	$	—	$	392	$	—	$	392

	Fair Value Measurements at December 31, 2012 Using
	Quoted Prices in
	Active Markets for		Significant Other		Significant
	Identical Assets		Observable Inputs		Unobservable Inputs
	(Level 1)		(Level 2)		(Level 3)		Total
Assets:
U.S. Treasury and Agency Securities	$	—	$	23,472	$	—	$	23,472
Corporate Securities		—		—		—		—
Obligations of State and
Political Subdivisions		—		64,316		12,169		76,485
Mortgage-backed Securities-Residential		—		486,912		—		486,912
Equity Securities		380		—		353		733
Total Securities	$	380	$	574,700	$	12,522	$	587,602
Loans Held-for-Sale	$	—	$	16,641	$	—	$	16,641
Derivatives	$	—	$	187	$	—	$	187
Financial Liabilities Derivatives	$	—	$	178	$	—	$	178

Reconciliation of all Assets Measured at Fair Value on Recurring Basis, Using Significant Unobservable Inputs (Level 3)

The table below presents a reconciliation of all assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three and nine months ended September 30, 2013 and 2012:

	Obligations of State
	and Political
	Subdivisions				Equity Securities				Corporate Securities
	2013		2012		2013		2012		2013		2012
Balance of Recurring Level 3 Assets at June 30	$	11,439	$	11,791	$	353	$	353	$	—	$	—
Total Gains or Losses (realized/unrealized)
Included in Earnings		(12)		9		—		—		—		—
Maturities / Calls		(425)		—		—		—		—		—
Purchases		—		—		—		—		—		—
Balance of Recurring Level 3 Assets at September 30	$	11,002	$	11,800	$	353	$	353	$	—	$	—

	Obligations of State
	and Political
	Subdivisions				Equity Securities				Corporate Securities
	2013		2012		2013		2012		2013		2012
Balance of Recurring Level 3 Assets at December 31	$	12,169	$	4,772	$	353	$	353	$	—	$	1,005
Total Gains or Losses (realized/unrealized)
Included in Earnings		(162)		60		—		—		—		—
Maturities / Calls		(1,005)		(697)		—		—		—		(1,005)
Purchases		—		7,665		—		—		—		—
Balance of Recurring Level 3 Assets at September 30	$	11,002	$	11,800	$	353	$	353	$	—	$	—

Assets and Liabilities Measured at Fair Value on Non-Recurring Basis

Assets and liabilities measured at fair value on a non-recurring basis are summarized below:

	Fair Value Measurements at September 30, 2013 Using
	Quoted Prices in
	Active Markets for		Significant Other		Significant
	Identical Assets		Observable Inputs		Unobservable Inputs
	(Level 1)		(Level 2)		(Level 3)		Total
Assets:
Impaired Loans with Specific Allocations
Commercial and Industrial Loans	$	—	$	—	$	—	$	—
Commercial Real Estate Loans		—		—		1,257		1,257
Agricultural Loans		—		—		—		—
Other Real Estate
Commercial Real Estate		—		—		290		290

	Fair Value Measurements at December 31, 2012 Using
	Quoted Prices in
	Active Markets for		Significant Other		Significant
	Identical Assets		Observable Inputs		Unobservable Inputs
	(Level 1)		(Level 2)		(Level 3)		Total
Assets:
Impaired Loans with Specific Allocations
Commercial and Industrial Loans	$	—	$	—	$	1,231	$	1,231
Commercial Real Estate Loans		—		—		1,497		1,497
Agricultural Loans		—		—		135		135
Other Real Estate
Commercial Real Estate		—		—		150		150

Fair Value Assets and Liabilities Measured on Nonrecurring Basis Valuation Techniques

The following table presents quantitative information about Level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis at September 30, 2013:

					Range
			Valuation		(Weighted
	Fair Value		Technique(s)	Unobservable Input(s)	Average)
Impaired Loans - Commercial	$	1,257	Sales comparison	Adjustment for physical	12%-80%
Real Estate Loans			approach	condition of comparable	(52)%
			Income approach	properties sold
			Cost approach	Adjustment for net operating
				income generated by the
				property
				Adjustment for investor rates
				of return
Other Real Estate - Commercial	$	290	Sales comparison	Adjustment for physical	50%
Real Estate Loans			approach	condition of comparable	(50)%
			Income approach	properties sold
			Cost approach	Adjustment for net operating
				income generated by the
				property
				Adjustment for investor rates
				of return

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

The carrying amounts and estimated fair values of the Company’s financial instruments not previously presented are provided in the table below for the periods ending September 30, 2013 and December 31, 2012.  Not all of the Company’s assets and liabilities are considered financial instruments, and therefore are not included in the table.  Because no active market exists for a significant portion of the Company’s financial instruments, fair value estimates were based on subjective judgments, and therefore cannot be determined with precision.

			Fair Value Measurements at
			September 30, 2013 Using
	Carrying Value		Level 1		Level 2		Level 3		Total
Financial Assets:
Cash and Short-term Investments	$	64,671	$	46,657	$	18,014	$	—	$	64,671
Securities Held-to-Maturity		268		—		271		—		271
FHLB Stock and Other Restricted Stock		8,340		N/A		N/A		N/A		N/A
Loans, Net		1,265,721		—		—		1,270,263		1,270,263
Accrued Interest Receivable		7,402		—		1,906		5,496		7,402
Financial Liabilities:
Demand, Savings, and Money Market Deposits		(1,338,858)		(1,338,858)		—		—		(1,338,858)
Time Deposits		(332,181)		—		(335,093)		—		(335,093)
Short-term Borrowings		(102,792)		—		(102,792)		—		(102,792)
Long-term Debt		(88,762)		—		(85,026)		(5,287)		(90,313)
Accrued Interest Payable		(690)		—		(647)		(43)		(690)
Unrecognized Financial Instruments:
Commitments to Extend Credit		—		—		—		—		—
Standby Letters of Credit		—		—		—		—		—
Commitments to Sell Loans		—		—		—		—		—

			Fair Value Measurements at
			December 31, 2012 Using
	Carrying Value		Level 1		Level 2		Level 3		Total
Financial Assets:
Cash and Short-term Investments	$	51,794	$	41,624	$	10,170	$	—	$	51,794
Securities Held-to-Maturity		346		—		351		—		351
FHLB Stock and Other Restricted Stock		8,340		N/A		N/A		N/A		N/A
Loans, Net		1,186,483		—		—		1,199,566		1,199,566
Accrued Interest Receivable		7,419		—		1,893		5,526		7,419
Financial Liabilities:
Demand, Savings, and Money Market Deposits		(1,311,748)		(1,311,748)		—		—		(1,311,748)
Time Deposits		(329,183)		—		(333,170)		—		(333,170)
Short-term Borrowings		(71,534)		—		(71,534)		—		(71,534)
Long-term Debt		(89,472)		—		(66,892)		(28,872)		(95,764)
Accrued Interest Payable		(1,275)		—		(829)		(446)		(1,275)
Unrecognized Financial Instruments:
Commitments to Extend Credit		—		—		—		—		—
Standby Letters of Credit		—		—		—		—		—
Commitments to Sell Loans		—		—		—		—		—

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Fair Value (Assets and Liabilities Measured at Fair Value on Recurring Basis) (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
Assets:
Securities	$ 608,653	$ 587,602
Loans Held-for-Sale	9,054	16,641
Derivatives	511	187
Financial Liabilities Derivatives	392	178
Fair Value, Measurements, Recurring [Member] | U.S. Treasury and Agency Securities [Member]
Assets:
Securities	19,787	23,472
Fair Value, Measurements, Recurring [Member] | Corporate Securities [Member]
Assets:
Securities	0	0
Fair Value, Measurements, Recurring [Member] | Obligations of State and Political Subdivisions [Member]
Assets:
Securities	97,271	76,485
Fair Value, Measurements, Recurring [Member] | Mortgage-backed Securities - Residential [Member]
Assets:
Securities	490,569	486,912
Fair Value, Measurements, Recurring [Member] | Equity Securities [Member]
Assets:
Securities	1,026	733
Fair Value, Measurements, Recurring [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]
Assets:
Securities	673	380
Loans Held-for-Sale	0	0
Derivatives	0	0
Financial Liabilities Derivatives	0	0
Fair Value, Measurements, Recurring [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | U.S. Treasury and Agency Securities [Member]
Assets:
Securities	0	0
Fair Value, Measurements, Recurring [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Corporate Securities [Member]
Assets:
Securities	0	0
Fair Value, Measurements, Recurring [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Obligations of State and Political Subdivisions [Member]
Assets:
Securities	0	0
Fair Value, Measurements, Recurring [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Mortgage-backed Securities - Residential [Member]
Assets:
Securities	0	0
Fair Value, Measurements, Recurring [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Equity Securities [Member]
Assets:
Securities	673	380
Fair Value, Measurements, Recurring [Member] | Significant Other Observable Inputs (Level 2) [Member]
Assets:
Securities	596,625	574,700
Loans Held-for-Sale	9,054	16,641
Derivatives	511	187
Financial Liabilities Derivatives	392	178
Fair Value, Measurements, Recurring [Member] | Significant Other Observable Inputs (Level 2) [Member] | U.S. Treasury and Agency Securities [Member]
Assets:
Securities	19,787	23,472
Fair Value, Measurements, Recurring [Member] | Significant Other Observable Inputs (Level 2) [Member] | Corporate Securities [Member]
Assets:
Securities	0	0
Fair Value, Measurements, Recurring [Member] | Significant Other Observable Inputs (Level 2) [Member] | Obligations of State and Political Subdivisions [Member]
Assets:
Securities	86,269	64,316
Fair Value, Measurements, Recurring [Member] | Significant Other Observable Inputs (Level 2) [Member] | Mortgage-backed Securities - Residential [Member]
Assets:
Securities	490,569	486,912
Fair Value, Measurements, Recurring [Member] | Significant Other Observable Inputs (Level 2) [Member] | Equity Securities [Member]
Assets:
Securities	0	0
Fair Value, Measurements, Recurring [Member] | Significant Unobservable Inputs (Level 3) [Member]
Assets:
Securities	11,355	12,522
Loans Held-for-Sale	0	0
Derivatives	0	0
Financial Liabilities Derivatives	0	0
Fair Value, Measurements, Recurring [Member] | Significant Unobservable Inputs (Level 3) [Member] | U.S. Treasury and Agency Securities [Member]
Assets:
Securities	0	0
Fair Value, Measurements, Recurring [Member] | Significant Unobservable Inputs (Level 3) [Member] | Corporate Securities [Member]
Assets:
Securities	0	0
Fair Value, Measurements, Recurring [Member] | Significant Unobservable Inputs (Level 3) [Member] | Obligations of State and Political Subdivisions [Member]
Assets:
Securities	11,002	12,169
Fair Value, Measurements, Recurring [Member] | Significant Unobservable Inputs (Level 3) [Member] | Mortgage-backed Securities - Residential [Member]
Assets:
Securities	0	0
Fair Value, Measurements, Recurring [Member] | Significant Unobservable Inputs (Level 3) [Member] | Equity Securities [Member]
Assets:
Securities	$ 353	$ 353

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Per Share Data (Tables)

9 Months Ended

Sep. 30, 2013

Per Share Data [Abstract]

Computations of Basic Earnings Per Share and Diluted Earnings Per Share

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

	Three Months Ended
	September 30,
	2013		2012
Basic Earnings per Share:
Net Income	$	6,483	$	6,292
Weighted Average Shares Outstanding		12,666,780		12,628,335
Basic Earnings per Share	$	0.51	$	0.50
Diluted Earnings per Share:
Net Income	$	6,483	$	6,292
Weighted Average Shares Outstanding		12,666,780		12,628,335
Potentially Dilutive Shares, Net		24,384		20,589
Diluted Weighted Average Shares Outstanding		12,691,164		12,648,924
Diluted Earnings per Share	$	0.51	$	0.50

	Nine Months Ended
	September 30,
	2013		2012
Basic Earnings per Share:
Net Income	$	18,824	$	17,861
Weighted Average Shares Outstanding		12,658,403		12,618,863
Basic Earnings per Share	$	1.49	$	1.42
Diluted Earnings per Share:
Net Income	$	18,824	$	17,861
Weighted Average Shares Outstanding		12,658,403		12,618,863
Potentially Dilutive Shares, Net		19,950		15,009
Diluted Weighted Average Shares Outstanding		12,678,353		12,633,872
Diluted Earnings per Share	$	1.48	$	1.41

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Loans (Carrying Amount of Loans with Deterioration of Credit Quality) (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
Financing Receivable, Recorded Investment [Line Items]
Loans Acquired with Deteriorated Credit Quality	$ 8,909	$ 11,174
Carrying amount, Net of Allowance	8,900	11,086
Commercial and Industrial Loans and Leases [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans Acquired with Deteriorated Credit Quality	2,186	1,840
Commercial Real Estate Loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans Acquired with Deteriorated Credit Quality	6,438	9,037
Home Equity Loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans Acquired with Deteriorated Credit Quality	0	0
Consumer Loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans Acquired with Deteriorated Credit Quality	138	148
Residential Mortgage Loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans Acquired with Deteriorated Credit Quality	$ 147	$ 149

XML

Fair Value (Reconciliation of all Assets Measured at Fair Value on Recurring Basis, Using Significant Unobservable Inputs (Level 3) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Obligations of State and Political Subdivisions [Member]
Fair Value Assets Measured On Recurring Basis Unobservable Input Reconciliation [Line Items]
Beginning Balance of Recurring Level 3 Assets	$ 11,439	$ 11,791	$ 12,169	$ 4,772
Total Gains or Losses (realized/unrealized) Included in Earnings	(12)	9	(162)	60
Maturities / Calls	(425)	0	(1,005)	(697)
Purchases	0	0	0	7,665
Ending Balance of Recurring Level 3 Assets	11,002	11,800	11,002	11,800
Equity Securities [Member]
Fair Value Assets Measured On Recurring Basis Unobservable Input Reconciliation [Line Items]
Beginning Balance of Recurring Level 3 Assets	353	353	353	353
Total Gains or Losses (realized/unrealized) Included in Earnings	0	0	0	0
Maturities / Calls	0	0	0	0
Purchases	0	0	0	0
Ending Balance of Recurring Level 3 Assets	353	353	353	353
Corporate Securities [Member]
Fair Value Assets Measured On Recurring Basis Unobservable Input Reconciliation [Line Items]
Beginning Balance of Recurring Level 3 Assets	0	0	0	1,005
Total Gains or Losses (realized/unrealized) Included in Earnings	0	0	0	0
Maturities / Calls	0	0	0	(1,005)
Purchases	0	0	0	0
Ending Balance of Recurring Level 3 Assets	$ 0	$ 0	$ 0	$ 0

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Loans (Allowance for Loan Losses and Recorded Investment in Loans by Portfolio Class) (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013		Jun. 30, 2013	Dec. 31, 2012		Sep. 30, 2012	Jun. 30, 2012	Dec. 31, 2011
Allowance for Loan Losses:
Individually Evaluated for Impairment	$ 3,681			$ 5,323
Collectively Evaluated for Impairment	10,774			10,109
Acquired with Deteriorated Credit Quality	9			88
Total Ending Allowance Balance	14,464		15,263	15,520		15,922	15,692	15,312
Loans:
Loans Individually Evaluated for Impairment	9,577			12,520
Loans Collectively Evaluated for Impairment	1,271,221			1,189,729
Loans Acquired with Deteriorated Credit Quality	8,909			11,174
Total Ending Loans Balance	1,289,707	[1]		1,213,423	[2]
Commercial and Industrial Loans and Leases [Member]
Allowance for Loan Losses:
Individually Evaluated for Impairment	461			1,279
Collectively Evaluated for Impairment	3,510			3,208
Acquired with Deteriorated Credit Quality	0			68
Total Ending Allowance Balance	3,971		4,258	4,555		4,854	4,707	3,493
Loans:
Loans Individually Evaluated for Impairment	2,622			2,547
Loans Collectively Evaluated for Impairment	334,789			331,920
Loans Acquired with Deteriorated Credit Quality	2,186			1,840
Total Ending Loans Balance	339,597	[1]		336,307	[2]
Commercial Real Estate Loans [Member]
Allowance for Loan Losses:
Individually Evaluated for Impairment	3,220			3,894
Collectively Evaluated for Impairment	4,988			5,017
Acquired with Deteriorated Credit Quality	9			20
Total Ending Allowance Balance	8,217		8,636	8,931		8,819	8,732	9,297
Loans:
Loans Individually Evaluated for Impairment	6,267			7,550
Loans Collectively Evaluated for Impairment	518,842			473,209
Loans Acquired with Deteriorated Credit Quality	6,438			9,037
Total Ending Loans Balance	531,547	[1]		489,796	[2]
Agricultural Loans [Member]
Allowance for Loan Losses:
Individually Evaluated for Impairment	0			150
Collectively Evaluated for Impairment	870			839
Acquired with Deteriorated Credit Quality	0			0
Total Ending Allowance Balance	870		817	989		911	890	926
Loans:
Loans Individually Evaluated for Impairment	688			2,423
Loans Collectively Evaluated for Impairment	187,787			180,152
Loans Acquired with Deteriorated Credit Quality	0			0
Total Ending Loans Balance	188,475	[1]		182,575	[2]
Home Equity Loans [Member]
Allowance for Loan Losses:
Individually Evaluated for Impairment	0			0
Collectively Evaluated for Impairment	209			141
Acquired with Deteriorated Credit Quality	0			0
Total Ending Allowance Balance	209		313	141		195	181	258
Loans:
Loans Individually Evaluated for Impairment	0			0
Loans Collectively Evaluated for Impairment	75,278			74,699
Loans Acquired with Deteriorated Credit Quality	0			0
Total Ending Loans Balance	75,278	[1]		74,699	[2]
Consumer Loans [Member]
Allowance for Loan Losses:
Individually Evaluated for Impairment	0			0
Collectively Evaluated for Impairment	203			214
Acquired with Deteriorated Credit Quality	0			0
Total Ending Allowance Balance	203		199	214		211	227	190
Loans:
Loans Individually Evaluated for Impairment	0			0
Loans Collectively Evaluated for Impairment	46,741			41,083
Loans Acquired with Deteriorated Credit Quality	138			148
Total Ending Loans Balance	46,879	[1]		41,231	[2]
Residential Mortgage Loans [Member]
Allowance for Loan Losses:
Individually Evaluated for Impairment	0			0
Collectively Evaluated for Impairment	301			186
Acquired with Deteriorated Credit Quality	0			0
Total Ending Allowance Balance	301		280	186		339	391	402
Loans:
Loans Individually Evaluated for Impairment	0			0
Loans Collectively Evaluated for Impairment	107,784			88,666
Loans Acquired with Deteriorated Credit Quality	147			149
Total Ending Loans Balance	107,931	[1]		88,815	[2]
Unallocated [Member]
Allowance for Loan Losses:
Individually Evaluated for Impairment	0			0
Collectively Evaluated for Impairment	693			504
Acquired with Deteriorated Credit Quality	0			0
Total Ending Allowance Balance	693		760	504		593	564	746
Loans:
Loans Individually Evaluated for Impairment	0			0
Loans Collectively Evaluated for Impairment	0			0
Loans Acquired with Deteriorated Credit Quality	0			0
Total Ending Loans Balance	$ 0	[1]		$ 0	[2]

[1] Total recorded investment in loans includes $5,417 in accrued interest.

[2] Total recorded investment in loans includes $5,522 in accrued interest.

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Per share Data (Additional Information) (Details) (Employee Stock Option [Member])	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Employee Stock Option [Member]
Earnings Per Share Disclosure [Line Items]
Antidilutive securities excluded from computation of earnings per share	0	0	0	0

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Per Share Data (Computations of Basic Earnings Per Share and Diluted Earnings Per Share) (Details) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Basic Earnings per Share:
Net Income	$ 6,483	$ 6,292	$ 18,824	$ 17,861
Weighted Average Shares Outstanding	12,666,780	12,628,335	12,658,403	12,618,863
Basic Earnings per Share	$ 0.51	$ 0.50	$ 1.49	$ 1.42
Diluted Earnings per Share:
Net Income	$ 6,483	$ 6,292	$ 18,824	$ 17,861
Weighted Average Shares Outstanding	12,666,780	12,628,335	12,658,403	12,618,863
Potentially Dilutive Shares, Net	24,384	20,589	19,950	15,009
Diluted Weighted Average Shares Outstanding	12,691,164	12,648,924	12,678,353	12,633,872
Diluted Earnings per Share	$ 0.51	$ 0.50	$ 1.48	$ 1.41

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Loans (Risk Category of Loans) (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
Financing Receivable, Recorded Investment [Line Items]
Total loans and leases	$ 1,059,619	$ 1,008,678
Loans Acquired With Deteriorated Credit Quality	8,624	10,877
Commercial and Industrial Loans and Leases [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans and leases	339,597	336,307
Commercial Real Estate Loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans and leases	531,547	489,796
Agricultural Loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans and leases	188,475	182,575
Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans and leases	996,681	931,366
Loans Acquired With Deteriorated Credit Quality	3,180	319
Pass [Member] | Commercial and Industrial Loans and Leases [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans and leases	314,037	307,997
Pass [Member] | Commercial Real Estate Loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans and leases	497,670	446,639
Pass [Member] | Agricultural Loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans and leases	184,974	176,730
Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans and leases	33,922	38,634
Loans Acquired With Deteriorated Credit Quality	816	3,220
Special Mention [Member] | Commercial and Industrial Loans and Leases [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans and leases	13,936	14,441
Special Mention [Member] | Commercial Real Estate Loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans and leases	17,380	21,338
Special Mention [Member] | Agricultural Loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans and leases	2,606	2,855
Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans and leases	29,016	38,678
Loans Acquired With Deteriorated Credit Quality	4,628	7,338
Substandard [Member] | Commercial and Industrial Loans and Leases [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans and leases	11,624	13,869
Substandard [Member] | Commercial Real Estate Loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans and leases	16,497	21,819
Substandard [Member] | Agricultural Loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans and leases	895	2,990
Doubtful [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans and leases	0	0
Loans Acquired With Deteriorated Credit Quality	0	0
Doubtful [Member] | Commercial and Industrial Loans and Leases [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans and leases	0	0
Doubtful [Member] | Commercial Real Estate Loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans and leases	0	0
Doubtful [Member] | Agricultural Loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans and leases	$ 0	$ 0

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Derivatives (Derivative Instruments Consolidated Statement) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Derivative [Line Items]
Included in Interest Income / (Expense)	$ 0	$ 0	$ 0	$ 0
Included in Other Income / (Expense)	$ (34)	$ 148	$ 517	$ 148

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Loans (Loans Individually Evaluated for Impairment by Class of Loans) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended			9 Months Ended
	Sep. 30, 2013		Sep. 30, 2012	Sep. 30, 2013		Sep. 30, 2012	Dec. 31, 2012
Financing Receivable, Impaired [Line Items]
Unpaid Principal Balance	$ 11,631	[1]		$ 11,631	[1]		$ 15,052	[1]
Recorded Investment	9,705			9,705			12,663
Allowance for Loan Losses Allocated	3,690			3,690			5,411
Average Recorded Investment	10,809		13,420	12,294		15,168
Interest Income Recognized	61		23	250		46
Cash Basis Recognized	55		21	251		42
Impaired Financing Receivables with No Related Allowance [Member] | Commercial and Industrial Loans and Leases [Member]
Financing Receivable, Impaired [Line Items]
Unpaid Principal Balance	2,143	[1]		2,143	[1]		108	[1]
Recorded Investment	2,161			2,161			87
Allowance for Loan Losses Allocated	0			0			0
Average Recorded Investment	2,223		139	818		298
Interest Income Recognized	33		1	33		3
Cash Basis Recognized	32		1	33		3
Impaired Financing Receivables with No Related Allowance [Member] | Commercial Real Estate Loans [Member]
Financing Receivable, Impaired [Line Items]
Unpaid Principal Balance	3,694	[1]		3,694	[1]		4,312	[1]
Recorded Investment	1,907			1,907			2,154
Allowance for Loan Losses Allocated	0			0			0
Average Recorded Investment	1,956		3,353	2,196		5,023
Interest Income Recognized	1		12	1		17
Cash Basis Recognized	2		12	2		17
Impaired Financing Receivables with No Related Allowance [Member] | Agricultural Loans [Member]
Financing Receivable, Impaired [Line Items]
Unpaid Principal Balance	675	[1]		675	[1]		2,126	[1]
Recorded Investment	688			688			2,137
Allowance for Loan Losses Allocated	0			0			0
Average Recorded Investment	751		0	1,738		49
Interest Income Recognized	21		0	196		2
Cash Basis Recognized	16		0	200		2
Impaired Financing Receivables with No Related Allowance [Member] | Subtotal [Member]
Financing Receivable, Impaired [Line Items]
Unpaid Principal Balance	6,512	[1]		6,512	[1]		6,546	[1]
Recorded Investment	4,756			4,756			4,378
Allowance for Loan Losses Allocated	0			0			0
Average Recorded Investment	4,930		3,492	4,752		5,370
Interest Income Recognized	55		13	230		22
Cash Basis Recognized	50		13	235		22
Impaired Financing Receivables with Related Allowance [Member] | Commercial and Industrial Loans and Leases [Member]
Financing Receivable, Impaired [Line Items]
Unpaid Principal Balance	511	[1]		511	[1]		2,642	[1]
Recorded Investment	461			461			2,581
Allowance for Loan Losses Allocated	461			461			1,347
Average Recorded Investment	464		2,749	1,797		2,795
Interest Income Recognized	1		4	3		7
Cash Basis Recognized	1		3	3		6
Impaired Financing Receivables with Related Allowance [Member] | Commercial Real Estate Loans [Member]
Financing Receivable, Impaired [Line Items]
Unpaid Principal Balance	4,608	[1]		4,608	[1]		5,579	[1]
Recorded Investment	4,488			4,488			5,418
Allowance for Loan Losses Allocated	3,229			3,229			3,914
Average Recorded Investment	5,415		7,179	5,745		7,003
Interest Income Recognized	5		6	17		17
Cash Basis Recognized	4		5	13		14
Impaired Financing Receivables with Related Allowance [Member] | Agricultural Loans [Member]
Financing Receivable, Impaired [Line Items]
Unpaid Principal Balance	0	[1]		0	[1]		285	[1]
Recorded Investment	0			0			286
Allowance for Loan Losses Allocated	0			0			150
Average Recorded Investment	0		0	0		0
Interest Income Recognized	0		0	0		0
Cash Basis Recognized	0		0	0		0
Impaired Financing Receivables with Related Allowance [Member] | Subtotal [Member]
Financing Receivable, Impaired [Line Items]
Unpaid Principal Balance	5,119	[1]		5,119	[1]		8,506	[1]
Recorded Investment	4,949			4,949			8,285
Allowance for Loan Losses Allocated	3,690			3,690			5,411
Average Recorded Investment	5,879		9,928	7,542		9,798
Interest Income Recognized	6		10	20		24
Cash Basis Recognized	5		8	16		20
Loans Acquired With Deteriorated Credit Quality With No Related Allowance Recorded [Member]
Financing Receivable, Impaired [Line Items]
Unpaid Principal Balance	125	[1]		125	[1]		45	[1]
Recorded Investment	119			119			25
Allowance for Loan Losses Allocated	0			0			0
Average Recorded Investment	119		471	39		169
Interest Income Recognized	0		1	0		1
Cash Basis Recognized	0		1	0		1
Loans Acquired With Deteriorated Credit Quality With Additional Allowance Recorded [Member]
Financing Receivable, Impaired [Line Items]
Unpaid Principal Balance	34	[1]		34	[1]		155	[1]
Recorded Investment	9			9			118
Allowance for Loan Losses Allocated	9			9			88
Average Recorded Investment	214		134	182		93
Interest Income Recognized	1		3	2		3
Cash Basis Recognized	$ 1		$ 3	$ 2		$ 3

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

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Loans (Accretable Yield, or Income Expected to be Collected) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Accounts, Notes, Loans and Financing Receivable [Line Items]
Beginning Balance	$ 182	$ 389	$ 170	$ 967
New Loans Purchased	0	0	0	0
Accretion of Income	(443)	(223)	(889)	(1,007)
Reclassifications from Non-accretable Difference	444	262	902	468
Charge-off of Accretable Yield	0	0	0	0
Ending Balance	$ 183	$ 428	$ 183	$ 428

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Securities (Proceeds from the sales of Available-for-Sale Securities) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Schedule of Investments [Line Items]
Proceeds from Sales and Calls			$ 119,952	$ 92,344
Gross Gains on Sales and Calls	428	598	1,508	692
Available-for-sale Securities [Member]
Schedule of Investments [Line Items]
Proceeds from Sales and Calls	19,231	40,949	119,952	92,344
Gross Gains on Sales and Calls	428	598	1,508	692
Income Taxes on Gross Gains	$ 150	$ 209	$ 528	$ 242

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Subsequent Event (Additional Information) (Details) (USD $)			9 Months Ended
	Sep. 30, 2013	Dec. 31, 2012	Sep. 30, 2013 Subsequent Event [Member] United Commerce [Member]
Subsequent Event [Line Items]
Assets	$ 2,060,122,000	$ 2,006,300,000	$ 120,200,000
Stockholders' Equity Attributable To Parent	185,143,000	185,026,000	13,600,000
Loans and Leases Receivable, Gross	1,284,290,000	1,207,901,000	83,500,000
Deposits			106,500,000
Business Acquisition, Equity Interest Issued or Issuable, Value Assigned			12,700,000
Business Acquisition, Equity Interest Issued or Issuable, Number of Shares			502,560
Payments to Acquire Businesses, Gross			1,400,000
Business Combination, Consideration Transferred			14,100,000
Business Combination, Step Acquisition, Equity Interest in Acquiree, Percentage			4.60%
Payments To Acquire Businesses In Cancellation Of Dilutive Securities			$ 640,000
Business Acquisition Equity Interest Issued Or Issuable Ratio			0.5456
Business Acquisition Cash Consideration Per Share			1.51
Business Combination Consideration Arrangements Description			entitled to receive (a) 0.5456 shares of German American common stock plus (b) a cash payment of $1.51 for each of their former shares of United Commerce common stock and a cash settlement for any fractional shares of German American otherwise issuable to them

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Other Comprehensive Income (Loss) (Classifications out of accumulated other comprehensive income) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Unrealized Gains and Losses on Available-for-Sale Securities
Net (Gain) Loss on Securities	$ (428)	$ (598)	$ (1,508)	$ (692)
Income Tax Expense	173		611
Net of Tax	(255)		(897)
Total Reclassifications for the Period	$ (255)		$ (897)

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Loans (Recorded Investment Of Troubled Debt Restructurings By Class Of Loans) (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013		Dec. 31, 2012
Financing Receivable, Modifications [Line Items]
Total	$ 7,026		$ 8,492
Commercial and Industrial Loans and Leases [Member]
Financing Receivable, Modifications [Line Items]
Total	2,609		2,461
Commercial Real Estate Loans [Member]
Financing Receivable, Modifications [Line Items]
Total	4,417		6,031
Performing Financing Receivable [Member]
Financing Receivable, Modifications [Line Items]
Total	2,569		370
Performing Financing Receivable [Member] | Commercial and Industrial Loans and Leases [Member]
Financing Receivable, Modifications [Line Items]
Total	2,188		66
Performing Financing Receivable [Member] | Commercial Real Estate Loans [Member]
Financing Receivable, Modifications [Line Items]
Total	381		304
Non-Accrual [Member]
Financing Receivable, Modifications [Line Items]
Total	4,457	[1]	8,122	[1]
Non-Accrual [Member] | Commercial and Industrial Loans and Leases [Member]
Financing Receivable, Modifications [Line Items]
Total	421	[1]	2,395	[1]
Non-Accrual [Member] | Commercial Real Estate Loans [Member]
Financing Receivable, Modifications [Line Items]
Total	$ 4,036	[1]	$ 5,727	[1]

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

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Other Comprehensive Income (Loss) (Tables)

9 Months Ended

Sep. 30, 2013

Equity [Abstract]

Schedule of Accumulated Other Comprehensive Income

The table below summarizes the changes in accumulated other comprehensive income (loss) by component for the three months ended September 30, 2013, net of tax:

	Unrealized
	Gains and		Defined
	Losses on		Benefit
	Available-for-		Pension		Postretirement
	Sale Securities		Items		Benefit Items		Total
Beginning Balance	$	(1,247)	$	(231)	$	(61)	$	(1,539)
Other Comprehensive Income (Loss) Before
Reclassification		(1,118)		—		—		(1,118)
Amounts Reclassified from Accumulated
Other Comprehensive Income (Loss)		(255)		—		—		(255)
Net Current Period Other
Comprehensive Income (Loss)		(1,373)		—		—		(1,373)
Ending Balance	$	(2,620)	$	(231)	$	(61)	$	(2,912)

The table below summarizes the changes in accumulated other comprehensive income (loss) by component for the nine months ended September 30, 2013, net of tax:

	Unrealized
	Gains and		Defined
	Losses on		Benefit
	Available-for-		Pension		Postretirement
	Sale Securities		Items		Benefit Items		Total
Beginning Balance	$	10,643	$	(231)	$	(61)	$	10,351
Other Comprehensive Income (Loss) Before
Reclassification		(12,366)		—		—		(12,366)
Amounts Reclassified from Accumulated
Other Comprehensive Income (Loss)		(897)		—		—		(897)
Net Current Period Other
Comprehensive Income (Loss)		(13,263)		—		—		(13,263)
Ending Balance	$	(2,620)	$	(231)	$	(61)	$	(2,912)

Classifications out of accumulated other comprehensive income

The table below summarizes the classifications out of accumulated other comprehensive income (loss) by component for the three months ended September 30, 2013:

	Amount Reclassified From
Details about Accumulated Other	Accumulated Other		Affected Line Item in the Statement
Comprehensive Income (Loss) Components	Comprehensive Income (Loss)		Where Net Income is Presented
Unrealized Gains and Losses on
Available-for-Sale Securities	$	(428)	Net (Gain) Loss on Securities
		173	Income Tax Expense
		(255)	Net of Tax
Total Reclassifications for the Period	$	(255)

The table below summarizes the classifications out of accumulated other comprehensive income (loss) by component for the nine months ended September 30, 2013:

	Amount Reclassified From
Details about Accumulated Other	Accumulated Other		Affected Line Item in the Statement
Comprehensive Income (Loss) Components	Comprehensive Income (Loss)		Where Net Income is Presented
Unrealized Gains and Losses on
Available-for-Sale Securities	$	(1,508)	Net (Gain) Loss on Securities
		611	Income Tax Expense
		(897)	Net of Tax
Total Reclassifications for the Period	$	(897)

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CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012
CASH FLOWS FROM OPERATING ACTIVITIES
NET INCOME	$ 18,824	$ 17,861
Adjustments to Reconcile Net Income to Net Cash from Operating Activities:
Net Amortization on Securities	2,338	3,419
Depreciation and Amortization	3,308	3,584
Loans Originated for Sale	(132,471)	(125,770)
Proceeds from Sales of Loans Held-for-Sale	142,433	130,375
Provision for Loan Losses	(250)	1,721
Gain on Sale of Loans, net	(2,176)	(2,330)
Gain on Securities, net	(1,508)	(692)
Loss (Gain) on Sales of Other Real Estate and Repossessed Assets	258	(232)
Gain on Disposition and Impairment of Premises and Equipment	(70)	(1)
Increase in Cash Surrender Value of Company Owned Life Insurance	(709)	(712)
Equity Based Compensation	247	463
Change in Assets and Liabilities:
Interest Receivable and Other Assets	2,799	3,716
Interest Payable and Other Liabilities	278	(1,048)
Net Cash from Operating Activities	33,301	30,354
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from Maturity of Other Short-term Investments	2,690	3,236
Proceeds from Maturities, Calls, Redemptions of Securities Available-for-Sale	114,563	100,964
Proceeds from Sales of Securities Available-for-Sale	119,952	92,344
Purchase of Securities Available-for-Sale	(231,085)	(244,755)
Proceeds from Maturities of Securities Held-to-Maturity	78	344
Purchase of Loans	(744)	0
Proceeds from Sales of Loans	3,250	7,560
Loans Made to Customers, net of Payments Received	(80,564)	(55,676)
Proceeds from Sales of Other Real Estate	1,479	3,827
Property and Equipment Expenditures	(2,296)	(3,091)
Proceeds from Sales of Property and Equipment	88	1
Net Cash from Investing Activities	(72,589)	(95,246)
CASH FLOWS FROM FINANCING ACTIVITIES
Change in Deposits	30,120	62,876
Change in Short-term Borrowings	31,258	30,090
Advances in Long-term Debt	50,000	0
Repayments of Long-term Debt	(50,815)	(20,059)
Issuance of Common Stock	13	35
Employee Stock Purchase Plan	(9)	(66)
Dividends Paid	(5,695)	(5,299)
Net Cash from Financing Activities	54,872	67,577
Net Change in Cash and Cash Equivalents	15,584	2,685
Cash and Cash Equivalents at Beginning of Year	49,087	61,103
Cash and Cash Equivalents at End of Period	64,671	63,788
Cash Paid During the Period for
Interest	6,096	9,411
Income Taxes	8,732	6,484
Supplemental Non Cash Disclosures
Loans Transferred to Other Real Estate	676	2,862
Accounts Receivable Transferred to Securities	$ (45,803)	$ (43,167)

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Per Share Data

9 Months Ended

Sep. 30, 2013

Per Share Data [Abstract]

Per Share Data

Note 2 – Per Share Data

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

	Three Months Ended
	September 30,
	2013		2012
Basic Earnings per Share:
Net Income	$	6,483	$	6,292
Weighted Average Shares Outstanding		12,666,780		12,628,335
Basic Earnings per Share	$	0.51	$	0.50
Diluted Earnings per Share:
Net Income	$	6,483	$	6,292
Weighted Average Shares Outstanding		12,666,780		12,628,335
Potentially Dilutive Shares, Net		24,384		20,589
Diluted Weighted Average Shares Outstanding		12,691,164		12,648,924
Diluted Earnings per Share	$	0.51	$	0.50

For the three months ended September 30, 2013 and 2012, there were no anti-dilutive shares.

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

	Nine Months Ended
	September 30,
	2013		2012
Basic Earnings per Share:
Net Income	$	18,824	$	17,861
Weighted Average Shares Outstanding		12,658,403		12,618,863
Basic Earnings per Share	$	1.49	$	1.42
Diluted Earnings per Share:
Net Income	$	18,824	$	17,861
Weighted Average Shares Outstanding		12,658,403		12,618,863
Potentially Dilutive Shares, Net		19,950		15,009
Diluted Weighted Average Shares Outstanding		12,678,353		12,633,872
Diluted Earnings per Share	$	1.48	$	1.41

For the nine months ended September 30, 2013 and 2012, there were no anti-dilutive shares.

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Loans

9 Months Ended

Sep. 30, 2013

Loans [Abstract]

Loans

Note 5 – Loans

Loans were comprised of the following classifications at September 30, 2013 and December 31, 2012:

	September 30,		December 31,
	2013		2012
Commercial:
Commercial and Industrial Loans and Leases	$	338,770	$	335,373
Commercial Real Estate Loans		530,260		488,496
Agricultural Loans		185,868		179,906
Retail:
Home Equity Loans		75,018		74,437
Consumer Loans		46,754		41,103
Residential Mortgage Loans		107,620		88,586
Subtotal		1,284,290		1,207,901
Less: Unearned Income		(2,848)		(3,035)
Allowance for Loan Losses		(14,464)		(15,520)
Loans, Net	$	1,266,978	$	1,189,346

 

The following table presents the activity in the allowance for loan losses by portfolio class for the three months ending September 30, 2013 and 2012:

	Commercial
	and
	Industrial		Commercial				Home				Residential
	Loans and		Real Estate		Agricultural		Equity		Consumer		Mortgage
	Leases		Loans		Loans		Loans		Loans		Loans		Unallocated		Total
September 30, 2013
Beginning Balance	$	4,258	$	8,636	$	817	$	313	$	199	$	280	$	760	$	15,263
Provision for Loan Losses		(361)		(214)		53		89		64		36		(67)		(400)
Recoveries		108		7		—		—		33		2		—		150
Loans Charged-off		(34)		(212)		—		(193)		(93)		(17)		—		(549)
Ending Balance	$	3,971	$	8,217	$	870	$	209	$	203	$	301	$	693	$	14,464

	Commercial
	and
	Industrial		Commercial				Home				Residential
	Loans and		Real Estate		Agricultural		Equity		Consumer		Mortgage
	Leases		Loans		Loans		Loans		Loans		Loans		Unallocated		Total
September 30, 2012
Beginning Balance	$	4,707	$	8,732	$	890	$	181	$	227	$	391	$	564	$	15,692
Provision for Loan Losses		193		376		21		21		12		(12)		29		640
Recoveries		8		62		—		—		35		2		—		107
Loans Charged-off		(54)		(351)		—		(7)		(63)		(42)		—		(517)
Ending Balance	$	4,854	$	8,819	$	911	$	195	$	211	$	339	$	593	$	15,922

The following table presents the activity in the allowance for loan losses by portfolio class for the nine months ending September 30, 2013 and 2012:

	Commercial
	and
	Industrial		Commercial				Home				Residential
	Loans and		Real Estate		Agricultural		Equity		Consumer		Mortgage
	Leases		Loans		Loans		Loans		Loans		Loans		Unallocated		Total
September 30, 2013
Beginning Balance	$	4,555	$	8,931	$	989	$	141	$	214	$	186	$	504	$	15,520
Provision for Loan Losses		(618)		(261)		(119)		326		100		133		189		(250)
Recoveries		121		85		—		—		104		5		—		315
Loans Charged-off		(87)		(538)		—		(258)		(215)		(23)		—		(1,121)
Ending Balance	$	3,971	$	8,217	$	870	$	209	$	203	$	301	$	693	$	14,464

	Commercial
	and
	Industrial		Commercial				Home				Residential
	Loans and		Real Estate		Agricultural		Equity		Consumer		Mortgage
	Leases		Loans		Loans		Loans		Loans		Loans		Unallocated		Total
September 30, 2012
Beginning Balance	$	3,493	$	9,297	$	926	$	258	$	190	$	402	$	746	$	15,312
Provision for Loan Losses		1,466		232		(15)		(9)		141		59		(153)		1,721
Recoveries		57		88		—		1		99		11		—		256
Loans Charged-off		(162)		(798)		—		(55)		(219)		(133)		—		(1,367)
Ending Balance	$	4,854	$	8,819	$	911	$	195	$	211	$	339	$	593	$	15,922

In determining the adequacy of the allowance for loan loss, general allocations are made for other pools of loans, including non-classified loans, homogeneous portfolios of consumer and residential real estate loans, and loans within certain industry categories believed to present unique risk of loss.  General allocations of the allowance are primarily made based on a three-year historical average for loan losses for these portfolios, judgmentally adjusted for current economic factors and portfolio trends.  For 2012, the Company utilized a 4 quarter rolling historical loan loss average.  Beginning in 2013, management deemed a rolling 12 quarter historical loan loss average to be more indicative of the inherent losses in the Company’s loan portfolio in the current economic environment than the 4 quarter average.  This change in methodology resulted in an increase to the required loan loss allowance of approximately $280 in the first quarter of 2013.

Loan impairment is reported when full repayment under the terms of the loan is not expected.  This methodology is used for all loans, including loans acquired with deteriorated credit quality.  For purchased loans, the assessment is made at the time of acquisition as well as over the life of loan.  If a loan is impaired, a portion of the allowance is allocated so that the loan is reported net, at the present value of estimated future cash flows using the loan’s existing rate, or at the fair value of collateral if repayment is expected solely from the collateral. Commercial and industrial loans, commercial real estate loans, and agricultural loans are evaluated individually for impairment.  Smaller balance homogeneous loans are evaluated for impairment in total.  Such loans include real estate loans secured by one-to-four family residences and loans to individuals for household, family and other personal expenditures.  Individually evaluated loans on non-accrual are generally considered impaired.  Impaired loans, or portions thereof, are charged off when deemed uncollectible.

The following table presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio class and based on impairment method as of September 30, 2013 and December 31, 2012:

			Commercial
			and
			Industrial		Commercial				Home				Residential
			Loans and		Real Estate		Agricultural		Equity		Consumer		Mortgage
	Total		Leases		Loans		Loans		Loans		Loans		Loans		Unallocated
September 30, 2013
Allowance for Loan Losses:
Ending Allowance Balance
Attributable to Loans:
Individually Evaluated     for Impairment	$	3,681	$	461	$	3,220	$	—	$	—	$	—	$	—	$	—
Collectively Evaluated     for Impairment		10,774		3,510		4,988		870		209		203		301		693
Acquired with Deteriorated     Credit Quality		9		—		9		—		—		—		—		—
Total Ending Allowance Balance	$	14,464	$	3,971	$	8,217	$	870	$	209	$	203	$	301	$	693
Loans:
Loans Individually     Evaluated for Impairment	$	9,577	$	2,622	$	6,267	$	688	$	—	$	—	$	—	$	—
Loans Collectively     Evaluated for Impairment		1,271,221		334,789		518,842		187,787		75,278		46,741		107,784		—
Loans Acquired with Deteriorated     Credit Quality		8,909		2,186		6,438		—		—		138		147		—
Total Ending Loans Balance (1)	$	1,289,707	$	339,597	$	531,547	$	188,475	$	75,278	$	46,879	$	107,931	$	—

⁽¹⁾  Total recorded investment in loans includes $5,417 in accrued interest.

 

			Commercial
			and
			Industrial		Commercial				Home				Residential
			Loans and		Real Estate		Agricultural		Equity		Consumer		Mortgage
	Total		Leases		Loans		Loans		Loans		Loans		Loans		Unallocated
December 31, 2012
Allowance for Loan Losses:
Ending Allowance Balance
Attributable to Loans:
Individually Evaluated    for Impairment	$	5,323	$	1,279	$	3,894	$	150	$	—	$	—	$	—	$	—
Collectively Evaluated    for Impairment		10,109		3,208		5,017		839		141		214		186		504
Acquired with Deteriorated    Credit Quality		88		68		20		—		—		—		—		—
Total Ending Allowance Balance	$	15,520	$	4,555	$	8,931	$	989	$	141	$	214	$	186	$	504
Loans:
Loans Individually    Evaluated for Impairment	$	12,520	$	2,547	$	7,550	$	2,423	$	—	$	—	$	—	$	—
Loans Collectively    Evaluated for Impairment		1,189,729		331,920		473,209		180,152		74,699		41,083		88,666		—
Loans Acquired with Deteriorated    Credit Quality		11,174		1,840		9,037		—		—		148		149		—
Total Ending Loans Balance (1)	$	1,213,423	$	336,307	$	489,796	$	182,575	$	74,699	$	41,231	$	88,815	$	—

⁽¹⁾  Total recorded investment in loans includes $5,522 in accrued interest.

The following table presents loans individually evaluated for impairment by class of loans as of September 30, 2013 and December 31, 2012:

	Unpaid				Allowance for
	Principal		Recorded		Loan Losses
	Balance(1)		Investment		Allocated
September 30, 2013
With No Related Allowance Recorded:
Commercial and Industrial Loans and Leases	$	2,143	$	2,161	$	—
Commercial Real Estate Loans		3,694		1,907		—
Agricultural Loans		675		688		—
Subtotal		6,512		4,756		—
With An Allowance Recorded:
Commercial and Industrial Loans and Leases		511		461		461
Commercial Real Estate Loans		4,608		4,488		3,229
Agricultural Loans		—		—		—
Subtotal		5,119		4,949		3,690
Total	$	11,631	$	9,705	$	3,690
Loans Acquired With Deteriorated Credit Quality With No Related Allowance      Recorded (Included in the Total Above)	$	125	$	119	$	—
Loans Acquired With Deteriorated Credit Quality With An Additional Allowance      Recorded (Included in the Total Above)	$	34	$	9	$	9

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

	Unpaid				Allowance for
	Principal		Recorded		Loan Losses
	Balance(1)		Investment		Allocated
December 31, 2012
With No Related Allowance Recorded:
Commercial and Industrial Loans and Leases	$	108	$	87	$	—
Commercial Real Estate Loans		4,312		2,154		—
Agricultural Loans		2,126		2,137		—
Subtotal		6,546		4,378		—
With An Allowance Recorded:
Commercial and Industrial Loans and Leases		2,642		2,581		1,347
Commercial Real Estate Loans		5,579		5,418		3,914
Agricultural Loans		285		286		150
Subtotal		8,506		8,285		5,411
Total	$	15,052	$	12,663	$	5,411
Loans Acquired With Deteriorated Credit Quality With No Related      Allowance Recorded (Included in the Total Above)	$	45	$	25	$	—
Loans Acquired With Deteriorated Credit Quality With An      Additional Allowance Recorded (Included in the Total Above)	$	155	$	118	$	88

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

The following table presents loans individually evaluated for impairment by class of loans for the three month period ended September 30, 2013 and 2012:

	Average		Interest		Cash
	Recorded		Income		Basis
	Investment		Recognized		Recognized
September 30, 2013
With No Related Allowance Recorded:
Commercial and Industrial Loans and Leases	$	2,223	$	33	$	32
Commercial Real Estate Loans		1,956		1		2
Agricultural Loans		751		21		16
Subtotal		4,930		55		50
With An Allowance Recorded:
Commercial and Industrial Loans and Leases		464		1		1
Commercial Real Estate Loans		5,415		5		4
Agricultural Loans		—		—		—
Subtotal		5,879		6		5
Total	$	10,809	$	61	$	55
Loans Acquired With Deteriorated Credit Quality With No      Related Allowance Recorded (Included in the Total Above)	$	119	$	—	$	—
Loans Acquired With Deteriorated Credit Quality With An      Additional Allowance Recorded (Included in the Total Above)	$	214	$	1	$	1

	Average		Interest		Cash
	Recorded		Income		Basis
	Investment		Recognized		Recognized
September 30, 2012
With No Related Allowance Recorded:
Commercial and Industrial Loans and Leases	$	139	$	1	$	1
Commercial Real Estate Loans		3,353		12		12
Agricultural Loans		—		—		—
Subtotal		3,492		13		13
With An Allowance Recorded:
Commercial and Industrial Loans and Leases		2,749		4		3
Commercial Real Estate Loans		7,179		6		5
Agricultural Loans		—		—		—
Subtotal		9,928		10		8
Total	$	13,420	$	23	$	21
Loans Acquired With Deteriorated Credit Quality With No      Related Allowance Recorded (Included in the Total Above)	$	471	$	1	$	1
Loans Acquired With Deteriorated Credit Quality With An      Additional Allowance Recorded (Included in the Total Above)	$	134	$	3	$	3

The following table presents loans individually evaluated for impairment by class of loans for the nine month period ended September 30, 2013 and 2012:

	Average		Interest		Cash
	Recorded		Income		Basis
	Investment		Recognized		Recognized
September 30, 2013
With No Related Allowance Recorded:
Commercial and Industrial Loans and Leases	$	818	$	33	$	33
Commercial Real Estate Loans		2,196		1		2
Agricultural Loans		1,738		196		200
Subtotal		4,752		230		235
With An Allowance Recorded:
Commercial and Industrial Loans and Leases		1,797		3		3
Commercial Real Estate Loans		5,745		17		13
Agricultural Loans		—		—		—
Subtotal		7,542		20		16
Total	$	12,294	$	250	$	251
Loans Acquired With Deteriorated Credit Quality With No      Related Allowance Recorded (Included in the Total Above)	$	39	$	—	$	—
Loans Acquired With Deteriorated Credit Quality With An      Additional Allowance Recorded (Included in the Total Above)	$	182	$	2	$	2

	Average		Interest		Cash
	Recorded		Income		Basis
	Investment		Recognized		Recognized
September 30, 2012
With No Related Allowance Recorded:
Commercial and Industrial Loans and Leases	$	298	$	3	$	3
Commercial Real Estate Loans		5,023		17		17
Agricultural Loans		49		2		2
Subtotal		5,370		22		22
With An Allowance Recorded:
Commercial and Industrial Loans and Leases		2,795		7		6
Commercial Real Estate Loans		7,003		17		14
Agricultural Loans		—		—		—
Subtotal		9,798		24		20
Total	$	15,168	$	46	$	42
Loans Acquired With Deteriorated Credit Quality With No      Related Allowance Recorded (Included in the Total Above)	$	169	$	1	$	1
Loans Acquired With Deteriorated Credit Quality With An      Additional Allowance Recorded (Included in the Total Above)	$	93	$	3	$	3

All classes of loans, including loans acquired with deteriorated credit quality, are generally placed on non-accrual status when scheduled principal or interest payments are past due for 90 days or more or when the borrower’s ability to repay becomes doubtful.  For purchased loans, the determination is made at the time of acquisition as well as over the life of the loan.  Uncollected accrued interest for each class of loans is reversed against income at the time a loan is placed on non-accrual. Interest received on such loans is accounted for on the cash-basis or cost-recovery method, until qualifying for return to accrual. All classes of loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured. Loans are typically charged-off at 180 days past due, or earlier if deemed uncollectible.  Exceptions to the non-accrual and charge-off policies are made when the loan is well secured and in the process of collection.

The following table presents the recorded investment in non-accrual loans and loans past due 90 days or more still on accrual by class of loans as of September 30, 2013 and December 31, 2012:

					Loans Past Due
					90 Days or More
	Non-Accrual				& Still Accruing
	2013		2012		2013		2012
Commercial and Industrial Loans and Leases	$	434	$	2,480	$	—	$	—
Commercial Real Estate Loans		6,017		7,275		—		—
Agricultural Loans		—		—		94		—
Home Equity Loans		149		178		—		—
Consumer Loans		189		167		—		—
Residential Mortgage Loans		68		257		—		—
Total	$	6,857	$	10,357	$	94	$	—
Loans Acquired With Deteriorated Credit Quality
(Included in the Total Above)	$	256	$	148	$	—	$	—

The following table presents the aging of the recorded investment in past due loans by class of loans as of September 30, 2013 and December 31, 2012:

							90 Days
			30-59 Days		60-89 Days		or More		Total		Loans Not
	Total		Past Due		Past Due		Past Due		Past Due		Past Due
September 30, 2013
Commercial and Industrial Loans and Leases	$	339,597	$	251	$	19	$	413	$	683	$	338,914
Commercial Real Estate Loans		531,547		561		216		1,805		2,582		528,965
Agricultural Loans		188,475		1,021		—		94		1,115		187,360
Home Equity Loans		75,278		194		145		149		488		74,790
Consumer Loans		46,879		127		26		50		203		46,676
Residential Mortgage Loans		107,931		1,599		163		68		1,830		106,101
Total (1)	$	1,289,707	$	3,753	$	569	$	2,579	$	6,901	$	1,282,806
Loans Acquired With Deteriorated     Credit Quality (Included in the Total Above)	$	8,909	$	245	$	—	$	—	$	245	$	8,664

⁽¹⁾  Total recorded investment in loans includes $5,417 in accrued interest.

							90 Days
			30-59 Days		60-89 Days		or More		Total		Loans Not
	Total		Past Due		Past Due		Past Due		Past Due		Past Due
December 31, 2012
Commercial and Industrial Loans and Leases	$	336,307	$	436	$	133	$	448	$	1,017	$	335,290
Commercial Real Estate Loans		489,796		1,352		—		2,063		3,415		486,381
Agricultural Loans		182,575		42		14		—		56		182,519
Home Equity Loans		74,699		177		48		178		403		74,296
Consumer Loans		41,231		431		23		18		472		40,759
Residential Mortgage Loans		88,815		2,070		495		257		2,822		85,993
Total (1)	$	1,213,423	$	4,508	$	713	$	2,964	$	8,185	$	1,205,238
Loans Acquired With Deteriorated     Credit Quality (Included in the Total Above)	$	11,174	$	—	$	120	$	—	$	120	$	11,054

⁽¹⁾  Total recorded investment in loans includes $5,522 in accrued interest.

Troubled Debt Restructurings:

In certain instances, the Company may choose to restructure the contractual terms of loans.  A troubled debt restructuring occurs when the Bank grants a concession to the borrower that it would not otherwise consider due to a borrower’s financial difficulty.    In order to determine whether a borrower is experiencing financial difficulty, an evaluation is performed of the probability that the borrower will be in payment default on any of its debt in the foreseeable future without modification.  This evaluation is performed under the Company’s internal underwriting policy.  The Company uses the same methodology for loans acquired with deteriorated credit quality as for all other loans when determining whether the loan is a troubled debt restructuring.

During the nine months ended September 30, 2013 and the year ended December 31, 2012, the terms of certain loans were modified as troubled debt restructurings. The modification of the terms of such loans included one or a combination of the following:  a reduction of the stated interest rate of the loan; an extension of the maturity date at a stated rate of interest lower than the current market rate for new debt with similar risk; or a permanent reduction of the recorded investment in the loan.  There were no troubled debt restructurings for the nine months ended September 30, 2013 and the year ended December 31, 2012 for loans acquired with deteriorated credit quality at the time of acquisition.

The following table presents the recorded investment of troubled debt restructurings by class of loans as of September 30, 2013 and December 31, 2012:

	Total		Performing		Non-Accrual(1)
September 30, 2013
Commercial and Industrial Loans and Leases	$	2,609	$	2,188	$	421
Commercial Real Estate Loans		4,417		381		4,036
Total	$	7,026	$	2,569	$	4,457

	Total		Performing		Non-Accrual(1)
December 31, 2012
Commercial and Industrial Loans and Leases	$	2,461	$	66	$	2,395
Commercial Real Estate Loans		6,031		304		5,727
Total	$	8,492	$	370	$	8,122

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

The Company has committed to lending an additional amount of $40 as of September 30, 2013 to customers with outstanding loans that are classified as troubled debt restructurings.  The Company had not committed to lending any additional amounts as of December 31, 2012 to customers with outstanding loans that are classified as troubled debt restructurings.

The following table presents loans by class modified as troubled debt restructurings that occurred during the three months ending September 30, 2013 and 2012:

			Pre-Modification		Post-Modification
	Number of		Outstanding Recorded		Outstanding Recorded
	Loans		Investment		Investment
September 30, 2013
Commercial and Industrial Loans and Leases		1	$	224	$	230
Commercial Real Estate Loans		—		—		—
Total		1	$	224	$	230

The troubled debt restructurings described above increased the allowance for loan losses by $0 and resulted in charge-offs of $0 during the three months ending September 30, 2013.

			Pre-Modification		Post-Modification
	Number of		Outstanding Recorded		Outstanding Recorded
	Loans		Investment		Investment
September 30, 2012
Commercial and Industrial Loans and Leases		2	$	9	$	9
Commercial Real Estate Loans		—		—		—
Total		2	$	9	$	9

The troubled debt restructurings described above increased the allowance for loan losses by $0 and resulted in charge-offs of $0 during the three months ending September 30, 2012.

The following table presents loans by class modified as troubled debt restructurings that occurred during the nine months ending September 30, 2013 and 2012:

			Pre-Modification		Post-Modification
	Number of		Outstanding Recorded		Outstanding Recorded
	Loans		Investment		Investment
September 30, 2013
Commercial and Industrial Loans and Leases		1	$	224	$	230
Commercial Real Estate Loans		1		81		118
Total		2	$	305	$	348

The troubled debt restructurings described above decreased the allowance for loan losses by $210 and resulted in charge-offs of $0 during the nine months ending September 30, 2013.

			Pre-Modification		Post-Modification
	Number of		Outstanding Recorded		Outstanding Recorded
	Loans		Investment		Investment
September 30, 2012
Commercial and Industrial Loans and Leases		2	$	9	$	9
Commercial Real Estate Loans		—		—		—
Total		2	$	9	$	9

The troubled debt restructurings described above increased the allowance for loan losses by $0 and resulted in charge-offs of $0 during the nine months ending September 30, 2012.

The following table presents loans by class modified as troubled debt restructurings for which there was a payment default within twelve months following the modification during the three months ending September 30, 2013 and 2012:

Troubled Debt Restructurings That Subsequently Defaulted:	Number of Loans		Recorded Investment
September 30, 2013
Commercial and Industrial Loans and Leases		—	$	—
Commercial Real Estate Loans		—		—
Total		—	$	—

The troubled debt restructurings that subsequently defaulted described above resulted in no change to the allowance for loan losses and no charge-offs during the three months ending September 30, 2013.

Troubled Debt Restructurings That Subsequently Defaulted:	Number of Loans		Recorded Investment
September 30, 2012
Commercial and Industrial Loans and Leases		—	$	—
Commercial Real Estate Loans		1		834
Total		1	$	834

The troubled debt restructurings that subsequently defaulted described above resulted in no change to the allowance for loan losses and no charge-offs during the three months ending September 30, 2012.

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

The following table presents loans by class modified as troubled debt restructurings for which there was a payment default within twelve months following the modification during the nine months ending September 30, 2013 and 2012:

Troubled Debt Restructurings That Subsequently Defaulted:	Number of Loans	Recorded Investment
September 30, 2013
Commercial and Industrial Loans and Leases	—	$	—
Commercial Real Estate Loans	—		—
Total	—	$	—

The troubled debt restructurings that subsequently defaulted described above resulted in no change to the allowance for loan losses and no charge-offs during the nine months ending September 30, 2013.

Troubled Debt Restructurings That Subsequently Defaulted:	Number of Loans	Recorded Investment
September 30, 2012
Commercial and Industrial Loans and Leases	1	$	565
Commercial Real Estate Loans	2		1,126
Total	3	$	1,691

The troubled debt restructurings that subsequently defaulted described above resulted in no change to the allowance for loan losses and charge-offs of $108 during the nine months ending September 30, 2012.

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

Credit Quality Indicators:

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors.  The Company classifies loans as to credit risk by individually analyzing loans.  This analysis includes commercial and industrial loans, commercial real estate loans, and agricultural loans with an outstanding balance greater than $100.  This analysis is typically performed on at least an annual basis.  The Company uses the following definitions for risk ratings:

Special Mention. Loans classified as special mention have a potential weakness that deserves management’s close attention.  If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date.

Substandard.  Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any.  Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt.  They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

Doubtful.  Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be pass rated loans. Based on the most recent analysis performed, the risk category of loans by class of loans is as follows:

			Special
	Pass		Mention		Substandard		Doubtful		Total
September 30, 2013
Commercial and Industrial Loans and Leases	$	314,037	$	13,936	$	11,624	$	—	$	339,597
Commercial Real Estate Loans		497,670		17,380		16,497		—		531,547
Agricultural Loans		184,974		2,606		895		—		188,475
Total	$	996,681	$	33,922	$	29,016	$	—	$	1,059,619
Loans Acquired With Deteriorated Credit Quality
(Included in the Total Above)	$	3,180	$	816	$	4,628	$	—	$	8,624

			Special
	Pass		Mention		Substandard		Doubtful		Total
December 31, 2012
Commercial and Industrial Loans and Leases	$	307,997	$	14,441	$	13,869	$	—	$	336,307
Commercial Real Estate Loans		446,639		21,338		21,819		—		489,796
Agricultural Loans		176,730		2,855		2,990		—		182,575
Total	$	931,366	$	38,634	$	38,678	$	—	$	1,008,678
Loans Acquired With Deteriorated Credit Quality
(Included in the Total Above)	$	319	$	3,220	$	7,338	$	—	$	10,877

The Company considers the performance of the loan portfolio and its impact on the allowance for loan losses. For home equity, consumer and residential mortgage loan classes, the Company also evaluates credit quality based on the aging status of the loan, which was previously presented, and by payment activity.  The following table presents the recorded investment in home equity, consumer and residential mortgage loans based on payment activity as of September 30, 2013 and December 31, 2012:

	Home Equity		Consumer		Residential
	Loans		Loans		Mortgage Loans
September 30, 2013
Performing	$	75,129	$	46,690	$	107,863
Nonperforming		149		189		68
Total	$	75,278	$	46,879	$	107,931
Loans Acquired With Deteriorated Credit Quality
(Included in the Total Above)	$	—	$	138	$	147

	Home Equity		Consumer		Residential
	Loans		Loans		Mortgage Loans
December 31, 2012
Performing	$	74,521	$	41,064	$	88,558
Nonperforming		178		167		257
Total	$	74,699	$	41,231	$	88,815
Loans Acquired With Deteriorated Credit Quality
(Included in the Total Above)	$	—	$	148	$	149

 

The Company has purchased loans, for which there was, at acquisition, evidence of deterioration of credit quality since origination and it was probable, at acquisition, that all contractually required payments would not be collected.  The recorded investment of those loans is as follows:

	September 30, 2013
Commercial and Industrial Loans	$	2,186
Commercial Real Estate Loans		6,438
Home Equity Loans		—
Consumer Loans		138
Residential Mortgage Loans		147
Total	$	8,909
Carrying amount, Net of Allowance	$	8,900

	December 31, 2012
Commercial and Industrial Loans	$	1,840
Commercial Real Estate Loans		9,037
Home Equity Loans		—
Consumer Loans		148
Residential Mortgage Loans		149
Total	$	11,174
Carrying amount, Net of Allowance	$	11,086

   

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

	September 30, 2013		September 30, 2012
Balance at July 1	$	182	$	389
New Loans Purchased		—		—
Accretion of Income		(443)		(223)
Reclassifications from Non-accretable Difference		444		262
Charge-off of Accretable Yield		—		—
Balance at September 30	$	183	$	428

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

	September 30, 2013		September 30, 2012
Balance at January 1	$	170	$	967
New Loans Purchased		—		—
Accretion of Income		(889)		(1,007)
Reclassifications from Non-accretable Difference		902		468
Charge-off of Accretable Yield		—		—
Balance at September 30	$	183	$	428

For those purchased loans disclosed above, the Company decreased the allowance for loan losses by $141 during the three months ended September 30, 2013.  For those purchased loans disclosed above, the Company decreased the allowance for loan losses by $80 during the nine months ended September 30, 2013.  For those purchased loans disclosed above, the Company increased the allowance for loan losses by $20 during the three and nine months ended September 30, 2012. No allowances for loan losses were reversed during the same periods.

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Securities

9 Months Ended

Sep. 30, 2013

Securities [Abstract]

Securities

Note 3 – Securities 

The amortized cost, unrealized gross gains and losses recognized in accumulated other comprehensive income (loss), and fair value of Securities Available-for-Sale at September 30, 2013 and December 31, 2012, were as follows:

			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
Securities Available-for-Sale:
September 30, 2013
U.S. Treasury and Agency Securities	$	20,754	$	2	$	(969)	$	19,787
Obligations of State and Political Subdivisions		95,033		2,793		(555)		97,271
Mortgage-backed Securities - Residential		496,129		4,765		(10,325)		490,569
Equity Securities		684		342		—		1,026
Total	$	612,600	$	7,902	$	(11,849)	$	608,653
December 31, 2012
U.S. Treasury and Agency Securities	$	23,570	$	40	$	(138)	$	23,472
Obligations of State and Political Subdivisions		71,352		5,145		(12)		76,485
Mortgage-backed Securities - Residential		475,452		11,505		(45)		486,912
Equity Securities		684		49		—		733
Total	$	571,058	$	16,739	$	(195)	$	587,602

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

The carrying amount, unrecognized gains and losses and fair value of Securities Held-to-Maturity at September 30, 2013 and December 31, 2012, were as follows:

			Gross		Gross
	Carrying		Unrecognized		Unrecognized		Fair
	Amount		Gains		Losses		Value
Securities Held-to-Maturity:
September 30, 2013
Obligations of State and Political Subdivisions	$	268	$	3	$	—	$	271
December 31, 2012
Obligations of State and Political Subdivisions	$	346	$	5	$	—	$	351

The amortized cost and fair value of Securities at September 30, 2013 by contractual maturity are shown below.  Expected maturities may differ from contractual maturities because some issuers have the right to call or prepay certain obligations with or without call or prepayment penalties.  Mortgage-backed and Equity Securities are not due at a single maturity date and are shown separately.

	Amortized		Fair
	Cost		Value
Securities Available-for-Sale:
Due in one year or less	$	2,855	$	2,878
Due after one year through five years		11,966		12,237
Due after five years through ten years		60,770		61,075
Due after ten years		40,196		40,868
Mortgage-backed Securities - Residential		496,129		490,569
Equity Securities		684		1,026
Totals	$	612,600	$	608,653

 

	Carrying		Fair
	Amount		Value
Securities Held-to-Maturity:
Due in one year or less	$	—	$	—
Due after one year through five years		268		271
Due after five years through ten years		—		—
Due after ten years		—		—
Totals	$	268	$	271

Proceeds from the sales of Available-for-Sale Securities are summarized below:

	Three Months Ended		Three Months Ended
	September 30, 2013		September 30, 2012
Proceeds from Sales and Calls	$	19,231	$	40,949
Gross Gains on Sales and Calls		428		598
Income Taxes on Gross Gains		150		209

	Nine Months Ended		Nine Months Ended
	September 30, 2013		September 30, 2012
Proceeds from Sales and Calls	$	119,952	$	92,344
Gross Gains on Sales and Calls		1,508		692
Income Taxes on Gross Gains		528		242

Below is a summary of securities with unrealized losses as of September 30, 2013 and December 31, 2012, presented by length of time the securities have been in a continuous unrealized loss position:

	Less than 12 Months				12 Months or More				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Loss		Value		Loss		Value		Loss
September 30, 2013
U.S. Treasury and Agency Securities	$	19,031	$	(969)	$	—	$	—	$	19,031	$	(969)
Obligations of State and Political Subdivisions		18,166		(555)		—		—		18,166		(555)
Mortgage-backed Securities - Residential		319,113		(10,325)		—		—		319,113		(10,325)
Equity Securities		—		—		—		—		—		—
Total	$	356,310	$	(11,849)	$	—	$	—	$	356,310	$	(11,849)

	Less than 12 Months				12 Months or More				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Loss		Value		Loss		Value		Loss
December 31, 2012
U.S. Treasury and Agency Securities	$	19,862	$	(138)	$	—	$	—	$	19,862	$	(138)
Obligations of State and Political Subdivisions		1,042		(12)		—		—		1,042		(12)
Mortgage-backed Securities - Residential		18,323		(45)		—		—		18,323		(45)
Equity Securities		—		—		—		—		—		—
Total	$	39,227	$	(195)	$	—	$	—	$	39,227	$	(195)

Securities are written down to fair value when a decline in fair value is not considered temporary.  In estimating other-than-temporary losses, management considers many factors, including: (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, (3) whether the market decline was affected by macroeconomic conditions, and (4) whether the Company has the intent to sell the debt security or more likely than not will be required to sell the debt security before its anticipated recovery.  The Company doesn’t intend to sell or expect to be required to sell these securities, and the decline in fair value is largely due to changes in market interest rates, therefore, the Company does not consider these securities to be other-than-temporarily impaired.  All mortgage-backed securities in the Company’s portfolio are guaranteed by government sponsored entities, are investment grade, and are performing as expected.

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Loans (Recorded Investment in Nonaccrual and Loans Past Due Over 90 Days Still On Accrual by Class of Loans) (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Sep. 30, 2012
Financing Receivable, Recorded Investment, Past Due [Line Items]
Non-Accrual	$ 6,857	$ 10,357
Loans Past Due 90 Days or More & Still Accruing	94	0
Commercial and Industrial Loans and Leases [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Non-Accrual	434	2,480
Loans Past Due 90 Days or More & Still Accruing	0	0
Commercial Real Estate Loans [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Non-Accrual	6,017	7,275
Loans Past Due 90 Days or More & Still Accruing	0	0
Agricultural Loans [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Non-Accrual	0	0
Loans Past Due 90 Days or More & Still Accruing	94	0
Home Equity Loans [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Non-Accrual	149	178
Loans Past Due 90 Days or More & Still Accruing	0	0
Consumer Loans [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Non-Accrual	189	167
Loans Past Due 90 Days or More & Still Accruing	0	0
Residential Mortgage Loans [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Non-Accrual	68	257
Loans Past Due 90 Days or More & Still Accruing	0	0
Loans Acquired With Deteriorated Credit Quality [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Non-Accrual	256	148
Loans Past Due 90 Days or More & Still Accruing	$ 0	$ 0

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Securities (Amortized Cost, Unrealized Gross Gains and Losses Recognized in Accumulated Other Comprehensive Income (Loss), and Fair Value of Securities Available-for-Sale) (Details) (USD $) In Thousands, unless otherwise specified	9 Months Ended	12 Months Ended
	Sep. 30, 2013	Dec. 31, 2012
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	$ 612,600	$ 571,058
Gross Unrealized Gains	7,902	16,739
Gross Unrealized Losses	(11,849)	(195)
Fair Value	608,653	587,602
U.S. Treasury and Agency Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	20,754	23,570
Gross Unrealized Gains	2	40
Gross Unrealized Losses	(969)	(138)
Fair Value	19,787	23,472
Obligations of State and Political Subdivisions [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	95,033	71,352
Gross Unrealized Gains	2,793	5,145
Gross Unrealized Losses	(555)	(12)
Fair Value	97,271	76,485
Mortgage-backed Securities - Residential [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	496,129	475,452
Gross Unrealized Gains	4,765	11,505
Gross Unrealized Losses	(10,325)	(45)
Fair Value	490,569	486,912
Equity Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	684	684
Gross Unrealized Gains	342	49
Gross Unrealized Losses	0	0
Fair Value	$ 1,026	$ 733

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Securities (Securities with Unrealized Losses, Presented by Length of Time Securities Have Been in Continuous Unrealized Loss Position) (Details) (USD $) In Thousands, unless otherwise specified	9 Months Ended	12 Months Ended
	Sep. 30, 2013	Dec. 31, 2012
Investments, Unrealized Loss Position [Line Items]
Less than 12 Months Fair Value	$ 356,310	$ 39,227
Less than 12 Months Unrealized Loss	(11,849)	(195)
12 Months or More Fair Value	0	0
12 Months or More Unrealized Loss	0	0
Total Fair Value	356,310	39,227
Total Unrealized Loss	(11,849)	(195)
U.S. Treasury and Agency Securities [Member]
Investments, Unrealized Loss Position [Line Items]
Less than 12 Months Fair Value	19,031	19,862
Less than 12 Months Unrealized Loss	(969)	(138)
12 Months or More Fair Value	0	0
12 Months or More Unrealized Loss	0	0
Total Fair Value	19,031	19,862
Total Unrealized Loss	(969)	(138)
Obligations of State and Political Subdivisions [Member]
Investments, Unrealized Loss Position [Line Items]
Less than 12 Months Fair Value	18,166	1,042
Less than 12 Months Unrealized Loss	(555)	(12)
12 Months or More Fair Value	0	0
12 Months or More Unrealized Loss	0	0
Total Fair Value	18,166	1,042
Total Unrealized Loss	(555)	(12)
Mortgage-backed Securities - Residential [Member]
Investments, Unrealized Loss Position [Line Items]
Less than 12 Months Fair Value	319,113	18,323
Less than 12 Months Unrealized Loss	(10,325)	(45)
12 Months or More Fair Value	0	0
12 Months or More Unrealized Loss	0	0
Total Fair Value	319,113	18,323
Total Unrealized Loss	(10,325)	(45)
Equity Securities [Member]
Investments, Unrealized Loss Position [Line Items]
Less than 12 Months Fair Value	0	0
Less than 12 Months Unrealized Loss	0	0
12 Months or More Fair Value	0	0
12 Months or More Unrealized Loss	0	0
Total Fair Value	0	0
Total Unrealized Loss	$ 0	$ 0

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Loans (Allowance for Loan Losses by Portfolio Class) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Financing Receivable Allowance For Credit Losses [Line Items]
Beginning Balance	$ 15,263	$ 15,692	$ 15,520	$ 15,312
Provision for Loan Losses	(400)	640	(250)	1,721
Recoveries	150	107	315	256
Loans Charged-off	(549)	(517)	(1,121)	(1,367)
Ending Balance	14,464	15,922	14,464	15,922
Commercial and Industrial Loans and Leases [Member]
Financing Receivable Allowance For Credit Losses [Line Items]
Beginning Balance	4,258	4,707	4,555	3,493
Provision for Loan Losses	(361)	193	(618)	1,466
Recoveries	108	8	121	57
Loans Charged-off	(34)	(54)	(87)	(162)
Ending Balance	3,971	4,854	3,971	4,854
Commercial Real Estate Loans [Member]
Financing Receivable Allowance For Credit Losses [Line Items]
Beginning Balance	8,636	8,732	8,931	9,297
Provision for Loan Losses	(214)	376	(261)	232
Recoveries	7	62	85	88
Loans Charged-off	(212)	(351)	(538)	(798)
Ending Balance	8,217	8,819	8,217	8,819
Agricultural Loans [Member]
Financing Receivable Allowance For Credit Losses [Line Items]
Beginning Balance	817	890	989	926
Provision for Loan Losses	53	21	(119)	(15)
Recoveries	0	0	0	0
Loans Charged-off	0	0	0	0
Ending Balance	870	911	870	911
Home Equity Loans [Member]
Financing Receivable Allowance For Credit Losses [Line Items]
Beginning Balance	313	181	141	258
Provision for Loan Losses	89	21	326	(9)
Recoveries	0	0	0	1
Loans Charged-off	(193)	(7)	(258)	(55)
Ending Balance	209	195	209	195
Consumer Loans [Member]
Financing Receivable Allowance For Credit Losses [Line Items]
Beginning Balance	199	227	214	190
Provision for Loan Losses	64	12	100	141
Recoveries	33	35	104	99
Loans Charged-off	(93)	(63)	(215)	(219)
Ending Balance	203	211	203	211
Residential Mortgage Loans [Member]
Financing Receivable Allowance For Credit Losses [Line Items]
Beginning Balance	280	391	186	402
Provision for Loan Losses	36	(12)	133	59
Recoveries	2	2	5	11
Loans Charged-off	(17)	(42)	(23)	(133)
Ending Balance	301	339	301	339
Unallocated [Member]
Financing Receivable Allowance For Credit Losses [Line Items]
Beginning Balance	760	564	504	746
Provision for Loan Losses	(67)	29	189	(153)
Recoveries	0	0	0	0
Loans Charged-off	0	0	0	0
Ending Balance	$ 693	$ 593	$ 693	$ 593

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Equity Plans and Equity Based Compensation (Additional Information) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended	9 Months Ended
	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant		481,791
Schedule Of Share Based Compensation Restricted Stock and Restricted Stock Grant During Period Percentage		50.00%
Schedule Of Share Based Compensation Restricted Stock and Restricted Stock Cash Credit Entitlement Percentage		50.00%
Schedule Of Share Based Compensation Restricted Stock and Restricted Stock Vested In Percentage		100.00%
Stock Issued During Period, Shares, Restricted Stock Award, Net of Forfeitures	118	29,170	30,137
Unrecognized Stock Expenses In Restricted Stock		$ 971	$ 304
Share-based Compensation Arrangement by Share-based Payment Award, Discount from Market Price, Offering Date		95.00%
Share Based Compensation Arrangement By Share Based Payment Award Options Vested In Period Percentage		33.30%
Employee Stock Purchase Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant		500,000

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Loans (Additional Information) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended			9 Months Ended
	Sep. 30, 2013	Mar. 31, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Accounts, Notes, Loans and Financing Receivable [Line Items]
Specific reserves to customers whose loan terms have been modified in troubled debt restructurings	$ 40			$ 40
Charge-offs due to troubled debt restructurings				0	108
Allowance for Loan and Lease Losses, Period Increase (Decrease)	(141)	280	20	(80)	20
Troubled Debt Restructuring [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Charge-offs due to troubled debt restructurings	0		0	0	0
Allowance for Loan and Lease Losses, Period Increase (Decrease)	$ 0		$ 0	$ (210)	$ 0

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Loans (Troubled Debt Restructurings, Subsequently Defaulted) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013 Number	Sep. 30, 2012 Number	Sep. 30, 2013 Numbers	Sep. 30, 2012 Numbers
Financing Receivable, Modifications [Line Items]
Financing Receivable, Modifications, Subsequent Default, Number of Contracts	0	1	0	3
Defaulted payment following modification for troubled debt restructurings	$ 0	$ 834	$ 0	$ 1,691
Commercial and Industrial Loans and Leases [Member]
Financing Receivable, Modifications [Line Items]
Financing Receivable, Modifications, Subsequent Default, Number of Contracts	0	0	0	1
Defaulted payment following modification for troubled debt restructurings	0	0	0	565
Commercial Real Estate Loans [Member]
Financing Receivable, Modifications [Line Items]
Financing Receivable, Modifications, Subsequent Default, Number of Contracts	0	1	0	2
Defaulted payment following modification for troubled debt restructurings	$ 0	$ 834	$ 0	$ 1,126

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CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $) In Thousands, except Share data, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
Securities Held-to-Maturity, Fair value	$ 271	$ 351
Preferred Stock, no par value	$ 0	$ 0
Preferred Stock, shares authorized	500,000	500,000
Preferred Stock, shares issued	0	0
Common Stock, no par value	$ 0	$ 0
Common Stock, stated value	$ 1	$ 1
Common Stock, shares authorized	30,000,000	30,000,000

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Equity Plans and Equity Based Compensation

9 Months Ended

Sep. 30, 2013

Equity Plans And Equity Based Compensation [Abstract]

Equity Plans and Equity Based Compensation

Note 8 – Equity Plans and Equity Based Compensation

The Company maintains three equity incentive plans under which stock options, restricted stock, and other equity incentive awards can be granted.  At September 30, 2013, the Company has reserved 481,791 shares of Common Stock (as adjusted for subsequent stock dividends and subject to further customary anti-dilution adjustments) for the purpose of issuance pursuant to outstanding and future grants of options, restricted stock, and other equity awards to officers, directors and other employees of the Company. 

For the three and nine months ended September 30, 2013 and 2012, the Company granted no options, and accordingly, recorded no stock option expense related to option grants during the three and nine months ended September 30, 2013 and 2012.  The Company recorded no other stock compensation expense applicable to options during the three and nine months ended September 30, 2013 and 2012 because all outstanding options were fully vested prior to 2007.  In addition, there was no unrecognized option expense as all outstanding options were fully vested prior to September 30, 2013 and 2012. 

During the periods presented, awards of long-term incentives were granted in the form of restricted stock.  Awards that were granted to management under a management incentive plan were granted in tandem with cash credit entitlements (typically in the form of 50% restricted stock grants and 50% cash credit entitlements).  The management restricted stock grants and tandem cash credit entitlements awarded in 2013 will vest in three equal installments of 33.3% with the first annual vesting on December 5^th of the year of the grant and on December 5^th of the next two succeeding years.  The management restricted stock grants and tandem cash credit entitlements awarded in 2012 were subject to forfeiture in the event that the recipient of the grant did not continue employment with the Company through December 5th of the year of grant, at which time they generally vest 100 percent.  Awards that were granted to directors as additional retainer for their services in December 2012 do not include any cash credit entitlement.  These director restricted stock grants are subject to forfeiture in the event that the recipient of the grant does not continue in service as a director of the Company through December 5th of the year after grant or do not satisfy certain meeting attendance requirements, at which time they generally vest 100 percent.  For measuring compensation costs, restricted stock awards are valued based upon the market value of the common shares on the date of grant.  During the three months ended September 30, 2013, the Company granted no shares of restricted stock.  During the three months ended September 30, 2012, the Company granted awards of 118 shares of restricted stock.  During the nine months ended September 30, 2013 and 2012, the Company granted awards of 29,170 and 30,137 shares of restricted stock, respectively.

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

	Three Months Ended
	September 30,
	2013		2012
Restricted Stock Expense	$	77	$	155
Cash Entitlement Expense		54		147
Tax Effect		(53)		(122)
Net of Tax	$	78	$	180

	Nine Months Ended
	September 30,
	2013		2012
Restricted Stock Expense	$	247	$	463
Cash Entitlement Expense		162		440
Tax Effect		(166)		(365)
Net of Tax	$	243	$	538

Unrecognized expense associated with the restricted stock grants and cash entitlements totaled $971 and $304 as of September 30, 2013 and 2012, respectively.

The Company maintains an Employee Stock Purchase Plan whereby eligible employees have the option to purchase the Company’s common stock at a discount.  The purchase price of the shares under this Plan has been set at 95% of the fair market value of the Company’s common stock as of the last day of the plan year.  The plan provides for the purchase of up to 500,000 shares of common stock, which the Company may obtain by purchases on the open market or from private sources, or by issuing authorized but unissued common shares.  Funding for the purchase of common stock is from employee and Company contributions. 

The Employee Stock Purchase Plan is not considered compensatory.  There was no expense recorded for the employee stock purchase plan during the three and nine months ended September 30, 2013 and 2012, nor was there any unrecognized compensation expense as of September 30, 2013 and 2012 for the Employee Stock Purchase Plan.

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
NET INCOME	$ 6,483	$ 6,292	$ 18,824	$ 17,861
Other Comprehensive Income (Loss):
Unrealized Holding Gain (Loss) Arising During the Period	(1,860)	2,190	(19,613)	4,075
Reclassification Adjustment for Losses (Gains) Included in Net Income	(428)	(598)	(1,508)	(692)
Tax Effect	915	(406)	7,858	(1,018)
Net of Tax	(1,373)	1,186	(13,263)	2,365
Total Other Comprehensive Income (Loss)	(1,373)	1,186	(13,263)	2,365
COMPREHENSIVE INCOME	$ 5,110	$ 7,478	$ 5,561	$ 20,226

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Fair Value (Assets and Liabilities Measured at Fair Value on Non-Recurring Basis) (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
Impaired Loans with Specific Allocations [Member] | Commercial and Industrial Loans and Leases [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value Assets	$ 0	$ 1,231
Impaired Loans with Specific Allocations [Member] | Commercial Real Estate Loans [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value Assets	1,257	1,497
Impaired Loans with Specific Allocations [Member] | Agricultural Loans [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value Assets	0	135
Other Real Estate [Member] | Commercial Real Estate [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value Assets	290	150
Significant Unobservable Inputs (Level 3) [Member] | Impaired Loans with Specific Allocations [Member] | Commercial and Industrial Loans and Leases [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value Assets	0	1,231
Significant Unobservable Inputs (Level 3) [Member] | Impaired Loans with Specific Allocations [Member] | Commercial Real Estate Loans [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value Assets	1,257	1,497
Significant Unobservable Inputs (Level 3) [Member] | Impaired Loans with Specific Allocations [Member] | Agricultural Loans [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value Assets	0	135
Significant Unobservable Inputs (Level 3) [Member] | Other Real Estate [Member] | Commercial Real Estate [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value Assets	290	150
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Impaired Loans with Specific Allocations [Member] | Commercial and Industrial Loans and Leases [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value Assets	0	0
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Impaired Loans with Specific Allocations [Member] | Commercial Real Estate Loans [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value Assets	0	0
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Impaired Loans with Specific Allocations [Member] | Agricultural Loans [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value Assets	0	0
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Other Real Estate [Member] | Commercial Real Estate [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value Assets	0	0
Significant Other Observable Inputs (Level 2) [Member] | Impaired Loans with Specific Allocations [Member] | Commercial and Industrial Loans and Leases [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value Assets	0	0
Significant Other Observable Inputs (Level 2) [Member] | Impaired Loans with Specific Allocations [Member] | Commercial Real Estate Loans [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value Assets	0	0
Significant Other Observable Inputs (Level 2) [Member] | Impaired Loans with Specific Allocations [Member] | Agricultural Loans [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value Assets	0	0
Significant Other Observable Inputs (Level 2) [Member] | Other Real Estate [Member] | Commercial Real Estate [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value Assets	$ 0	$ 0

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CONSOLIDATED BALANCE SHEETS (USD $) In Thousands, except Share data, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
ASSETS
Cash and Due from Banks	$ 46,657	$ 41,624
Federal Funds Sold and Other Short-term Investments	18,014	7,463
Cash and Cash Equivalents	64,671	49,087
Interest-bearing Time Deposits with Banks	0	2,707
Securities Available-for-Sale, at Fair Value	608,653	587,602
Securities Held-to-Maturity, at Cost (Fair value of $271 and $351 on September 30, 2013 and December 31, 2012, respectively)	268	346
Loans Held-for-Sale, at Fair Value	9,054	16,641
Loans	1,284,290	1,207,901
Less: Unearned Income	(2,848)	(3,035)
Allowance for Loan Losses	(14,464)	(15,520)
Loans, Net	1,266,978	1,189,346
Stock in FHLB of Indianapolis and Other Restricted Stock, at Cost	8,340	8,340
Premises, Furniture and Equipment, Net	36,679	36,554
Other Real Estate	584	1,645
Goodwill	18,865	18,865
Intangible Assets	1,647	2,692
Company Owned Life Insurance	30,932	30,223
Accrued Interest Receivable and Other Assets	13,451	62,252
TOTAL ASSETS	2,060,122	2,006,300
LIABILITIES
Non-interest-bearing Demand Deposits	364,110	349,174
Interest-bearing Demand, Savings, and Money Market Accounts	974,748	962,574
Time Deposits	332,181	329,183
Total Deposits	1,671,039	1,640,931
FHLB Advances and Other Borrowings	191,554	161,006
Accrued Interest Payable and Other Liabilities	12,386	19,337
TOTAL LIABILITIES	1,874,979	1,821,274
SHAREHOLDERS' EQUITY
Preferred Stock, no par value; 500,000 shares authorized, no shares issued	0	0
Common Stock, no par value, $1 stated value; 30,000,000 shares authorized	12,667	12,637
Additional Paid-in Capital	95,838	95,617
Retained Earnings	79,550	66,421
Accumulated Other Comprehensive Income (Loss)	(2,912)	10,351
TOTAL SHAREHOLDERS' EQUITY	185,143	185,026
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$ 2,060,122	$ 2,006,300
End of period shares issued and outstanding	12,666,836	12,636,656

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Segment Information (Segment Financial Information) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012	Dec. 31, 2012
Segment Reporting Information [Line Items]
Net Interest Income	$ 17,192	$ 16,393	$ 50,129	$ 49,654
Net Gains on Sales of Loans	613	941	2,176	2,330
Net Gains on Securities	428	598	1,508	692
Trust and Investment Product Fees	802	659	2,433	2,019
Insurance Revenues	1,495	1,469	4,658	4,218
Noncash Items:
Provision for Loan Losses	(400)	640	(250)	1,721
Depreciation and Amortization	1,084	1,085	3,308	3,584
Income Tax Expense (Benefit)	2,969	2,891	8,712	8,120
Segment Profit (Loss)	6,483	6,292	18,824	17,861
Segment Assets	2,060,122		2,060,122		2,006,300
Core Banking [Member]
Segment Reporting Information [Line Items]
Net Interest Income	17,334	16,909	51,102	51,213
Net Gains on Sales of Loans	613	941	2,176	2,330
Net Gains on Securities	415	598	1,495	692
Trust and Investment Product Fees	1	0	5	3
Insurance Revenues	10	3	25	19
Noncash Items:
Provision for Loan Losses	(400)	640	(250)	1,721
Depreciation and Amortization	941	941	2,864	3,145
Income Tax Expense (Benefit)	3,218	3,186	9,588	9,041
Segment Profit (Loss)	6,581	6,578	19,262	18,737
Segment Assets	2,068,392		2,068,392		2,006,992
Trust and Investment Advisory Services [Member]
Segment Reporting Information [Line Items]
Net Interest Income	5	6	16	16
Net Gains on Sales of Loans	0	0	0	0
Net Gains on Securities	0	0	0	0
Trust and Investment Product Fees	802	659	2,430	2,018
Insurance Revenues	7	5	26	32
Noncash Items:
Provision for Loan Losses	0	0	0	0
Depreciation and Amortization	6	6	21	16
Income Tax Expense (Benefit)	(24)	(45)	(50)	(103)
Segment Profit (Loss)	(41)	(71)	(90)	(168)
Segment Assets	11,641		11,641		11,551
Insurance [Member]
Segment Reporting Information [Line Items]
Net Interest Income	4	9	16	26
Net Gains on Sales of Loans	0	0	0	0
Net Gains on Securities	0	0	0	0
Trust and Investment Product Fees	0	0	0	0
Insurance Revenues	1,478	1,461	4,607	4,167
Noncash Items:
Provision for Loan Losses	0	0	0	0
Depreciation and Amortization	99	101	310	311
Income Tax Expense (Benefit)	67	70	254	176
Segment Profit (Loss)	96	100	334	245
Segment Assets	8,149		8,149		8,333
Other [Member]
Segment Reporting Information [Line Items]
Net Interest Income	(151)	(531)	(1,005)	(1,601)
Net Gains on Sales of Loans	0	0	0	0
Net Gains on Securities	13	0	13	0
Trust and Investment Product Fees	(1)	0	(2)	(2)
Insurance Revenues	0	0	0	0
Noncash Items:
Provision for Loan Losses	0	0	0	0
Depreciation and Amortization	38	37	113	112
Income Tax Expense (Benefit)	(292)	(320)	(1,080)	(994)
Segment Profit (Loss)	(153)	(315)	(682)	(953)
Segment Assets	$ (28,060)		$ (28,060)		$ (20,576)

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Securities (Carrying Amount, Unrecognized Gains and Losses and Fair Value of Securities Held-to-Maturity) (Details) (USD $) In Thousands, unless otherwise specified	9 Months Ended	12 Months Ended
	Sep. 30, 2013	Dec. 31, 2012
Schedule of Held-to-maturity Securities [Line Items]
Carrying Amount	$ 268	$ 346
Fair Value	271	351
Obligations of State and Political Subdivisions [Member]
Schedule of Held-to-maturity Securities [Line Items]
Carrying Amount	268	346
Gross Unrealized Gains	3	5
Gross Unrealized Losses	0	0
Fair Value	$ 271	$ 351

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Equity Plans and Equity Based Compensation (Tables)

9 Months Ended

Sep. 30, 2013

Equity Plans And Equity Based Compensation [Abstract]

Expense Recorded For Restricted Stock And Cash Entitlements

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

	Three Months Ended
	September 30,
	2013		2012
Restricted Stock Expense	$	77	$	155
Cash Entitlement Expense		54		147
Tax Effect		(53)		(122)
Net of Tax	$	78	$	180

	Nine Months Ended
	September 30,
	2013		2012
Restricted Stock Expense	$	247	$	463
Cash Entitlement Expense		162		440
Tax Effect		(166)		(365)
Net of Tax	$	243	$	538

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Loans (Loans By Class Modified As Troubled Debt Restructurings) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013 Number	Sep. 30, 2012 Number	Sep. 30, 2013 Number	Sep. 30, 2012 Number
Financing Receivable, Modifications [Line Items]
Mortgage Loan On Real Estate Number Of Loans	1	2	2	2
Financing Receivable Modification Pre Modification Recorded Investment	$ 224	$ 9	$ 305	$ 9
Financing Receivable, Modifications, Post-Modification Recorded Investment	230	9	348	9
Commercial and Industrial Loans and Leases [Member]
Financing Receivable, Modifications [Line Items]
Mortgage Loan On Real Estate Number Of Loans	1	2	1	2
Financing Receivable Modification Pre Modification Recorded Investment	224	9	224	9
Financing Receivable, Modifications, Post-Modification Recorded Investment	230	9	230	9
Commercial Real Estate Loans [Member]
Financing Receivable, Modifications [Line Items]
Mortgage Loan On Real Estate Number Of Loans	0	0	1	0
Financing Receivable Modification Pre Modification Recorded Investment	0	0	81	0
Financing Receivable, Modifications, Post-Modification Recorded Investment	$ 0	$ 0	$ 118	$ 0

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Equity Plans and Equity Based Compensation (Expense Recorded For Restricted Stock And Cash Entitlements) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Restricted Stock Expense	$ 77	$ 155	$ 247	$ 463
Cash Entitlement Expense	54	147	162	440
Tax Effect	(53)	(122)	(166)	(365)
Net of Tax	$ 78	$ 180	$ 243	$ 538

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Loans (Allowance for Loan Losses and Recorded Investment in Loans by Portfolio Class) (Parenthetical) (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
Financing Receivable, Impaired [Line Items]
Accrued interest	$ 5,417	$ 5,522

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Derivatives (Additional Information) (Details) (USD $) In Millions, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
Derivative [Line Items]
Derivative, Notional Amount	$ 18.0	$ 6.1
Offsetting Counterparty Derivative Instruments	$ 18.0	$ 6.1

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Loans (Components of Loans) (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Jun. 30, 2013	Dec. 31, 2012	Sep. 30, 2012	Jun. 30, 2012	Dec. 31, 2011
Accounts, Notes, Loans and Financing Receivable [Line Items]
Subtotal	$ 1,284,290		$ 1,207,901
Less: Unearned Income	(2,848)		(3,035)
Allowance for Loan Losses	(14,464)	(15,263)	(15,520)	(15,922)	(15,692)	(15,312)
Loans, Net	1,266,978		1,189,346
Commercial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Commercial and Industrial Loans and Leases	338,770		335,373
Commercial Real Estate Loans	530,260		488,496
Agricultural Loans	185,868		179,906
Retail [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Home Equity Loans	75,018		74,437
Consumer Loans	46,754		41,103
Residential Mortgage Loans	$ 107,620		$ 88,586

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Stock Repurchase Plan

9 Months Ended

Sep. 30, 2013

Stock Repurchase Plan [Abstract]

Stock Repurchase Plan

Note 7 – Stock Repurchase Plan

On April 26, 2001 the Company announced that its Board of Directors approved a stock repurchase program for up to 607,754 of the outstanding Common Shares of the Company.  Shares may be purchased from time to time in the open market and in large block privately negotiated transactions.  The Company is not obligated to purchase any shares under the program, and the program may be discontinued at any time before the maximum number of shares specified by the program is purchased.  The Board of Directors established no expiration date for this program.  As of September 30, 2013, the Company had purchased 334,965 shares under the program.  No shares were purchased under the program during the three and nine months ended September 30, 2013 and 2012.

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Other Comprehensive Income (Loss) (Schedule of Accumulated Other Comprehensive Income) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Other Comprehensive Income [Line Items]
Unrealized Gains and Losses on Available-for-Sale Securities, Beginning Balance	$ (1,247)		$ 10,643
Unrealized Gains and Losses on Available-for-Sale Securities, Other Comprehensive Income (Loss) Before Reclassification	(1,118)		(12,366)
Unrealized Gains and Losses on Available-for-Sale Securities, Amounts Reclassified from Accumulated Other Comprehensive Income (Loss)	(255)		(897)
Unrealized Gains and Losses on Available-for-Sale Securities, Net Current Period Other Comprehensive Income (Loss)	(1,373)	1,186	(13,263)	2,365
Unrealized Gains and Losses on Available-for-Sale Securities, Ending Balance	(2,620)		(2,620)
Defined Benefit Pension Items, Beginning Balance	(231)		(231)
Defined Benefit Pension Items, Other Comprehensive Income (Loss) Before Reclassification	0		0
Defined Benefit Pension Items, Amounts Reclassified from Accumulated Other Comprehensive Income	0		0
Defined Benefit Pension Items, Net Current Period Other Comprehensive Income (Loss)	0		0
Defined Benefit Pension Items, Ending Balance	(231)		(231)
Postretirement Benefit Items, Beginning Balance	(61)		(61)
Postretirement Benefit Items, Other Comprehensive Income (Loss) Before Reclassification	0		0
Postretirement Benefit Items, Amounts Reclassified from Accumulated Other Comprehensive Income	0		0
Postretirement Benefit Items, Net Current Period Other Comprehensive Income (Loss)	0		0
Postretirement Benefit Items, Ending Balance	(61)		(61)
Accumulated other comprehensive income, Beginning Balance	(1,539)		10,351
Other Comprehensive Income (Loss) Before Reclassification	(1,118)		(12,366)
Amounts Reclassified from Accumulated Other Comprehensive Income	(255)		(897)
Net Current Period Other Comprehensive Income (Loss)	(1,373)		(13,263)
Accumulated other comprehensive income, Ending Balance	$ (2,912)		$ (2,912)

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Securities (Amortized Cost and Fair Value of Securities by Contractual Maturity) (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
Securities Available-for-Sale: Amortized cost
Due in one year or less	$ 2,855
Due after one year through five years	11,966
Due after five years through ten years	60,770
Due after ten years	40,196
Total	612,600	571,058
Securities Available-for-Sale, Fair Value
Due in one year or less	2,878
Due after one year through five years	12,237
Due after five years through ten years	61,075
Due after ten years	40,868
Total	608,653	587,602
Securities Held-to-Maturity, Carrying Amount
Due in one year or less	0
Due after one year through five years	268
Due after five years through ten years	0
Due after ten years	0
Total	268	346
Securities Held-to-Maturity, Fair Value
Due in one year or less	0
Due after one year through five years	271
Due after five years through ten years	0
Due after ten years	0
Fair Value	271	351
Mortgage-backed Securities - Residential [Member]
Securities Available-for-Sale: Amortized cost
Available-for-Sale, amortized cost	496,129
Total	496,129	475,452
Securities Available-for-Sale, Fair Value
Available-for-Sale, Fair Value	490,569
Total	490,569	486,912
Equity Securities [Member]
Securities Available-for-Sale: Amortized cost
Available-for-Sale, amortized cost	684
Total	684	684
Securities Available-for-Sale, Fair Value
Available-for-Sale, Fair Value	1,026
Total	$ 1,026	$ 733

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Loans (Aging of Recorded Investment in Past Due Loans by Class of Loans) (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013		Dec. 31, 2012
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Ending Loans Balance	$ 1,289,707	[1]	$ 1,213,423	[2]
30-59 Days Past Due	3,753	[1]	4,508	[2]
60-89 Days Past Due	569	[1]	713	[2]
90 Days or More Past Due	2,579	[1]	2,964	[2]
Total Past Due	6,901	[1]	8,185	[2]
Loans Not Past Due	1,282,806	[1]	1,205,238	[2]
Commercial and Industrial Loans and Leases [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Ending Loans Balance	339,597	[1]	336,307	[2]
30-59 Days Past Due	251		436
60-89 Days Past Due	19		133
90 Days or More Past Due	413		448
Total Past Due	683		1,017
Loans Not Past Due	338,914		335,290
Commercial Real Estate Loans [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Ending Loans Balance	531,547	[1]	489,796	[2]
30-59 Days Past Due	561		1,352
60-89 Days Past Due	216		0
90 Days or More Past Due	1,805		2,063
Total Past Due	2,582		3,415
Loans Not Past Due	528,965		486,381
Agricultural Loans [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Ending Loans Balance	188,475	[1]	182,575	[2]
30-59 Days Past Due	1,021		42
60-89 Days Past Due	0		14
90 Days or More Past Due	94		0
Total Past Due	1,115		56
Loans Not Past Due	187,360		182,519
Home Equity Loans [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Ending Loans Balance	75,278	[1]	74,699	[2]
30-59 Days Past Due	194		177
60-89 Days Past Due	145		48
90 Days or More Past Due	149		178
Total Past Due	488		403
Loans Not Past Due	74,790		74,296
Consumer Loans [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Ending Loans Balance	46,879	[1]	41,231	[2]
30-59 Days Past Due	127		431
60-89 Days Past Due	26		23
90 Days or More Past Due	50		18
Total Past Due	203		472
Loans Not Past Due	46,676		40,759
Residential Mortgage Loans [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Ending Loans Balance	107,931	[1]	88,815	[2]
30-59 Days Past Due	1,599		2,070
60-89 Days Past Due	163		495
90 Days or More Past Due	68		257
Total Past Due	1,830		2,822
Loans Not Past Due	106,101		85,993
Loans Acquired With Deteriorated Credit Quality [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Ending Loans Balance	8,909		11,174
30-59 Days Past Due	245		0
60-89 Days Past Due	0		120
90 Days or More Past Due	0		0
Total Past Due	245		120
Loans Not Past Due	$ 8,664		$ 11,054

[1] Total recorded investment in loans includes $5,417 in accrued interest.

[2] Total recorded investment in loans includes $5,522 in accrued interest.

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Other Comprehensive Income (Loss)

9 Months Ended

Sep. 30, 2013

Equity [Abstract]

Other Comprehensive Income (Loss)

NOTE 10 – Other Comprehensive Income (Loss)

The table below summarizes the changes in accumulated other comprehensive income (loss) by component for the three months ended September 30, 2013, net of tax:

	Unrealized
	Gains and		Defined
	Losses on		Benefit
	Available-for-		Pension		Postretirement
	Sale Securities		Items		Benefit Items		Total
Beginning Balance	$	(1,247)	$	(231)	$	(61)	$	(1,539)
Other Comprehensive Income (Loss) Before
Reclassification		(1,118)		—		—		(1,118)
Amounts Reclassified from Accumulated
Other Comprehensive Income (Loss)		(255)		—		—		(255)
Net Current Period Other
Comprehensive Income (Loss)		(1,373)		—		—		(1,373)
Ending Balance	$	(2,620)	$	(231)	$	(61)	$	(2,912)

The table below summarizes the changes in accumulated other comprehensive income (loss) by component for the nine months ended September 30, 2013, net of tax:

	Unrealized
	Gains and		Defined
	Losses on		Benefit
	Available-for-		Pension		Postretirement
	Sale Securities		Items		Benefit Items		Total
Beginning Balance	$	10,643	$	(231)	$	(61)	$	10,351
Other Comprehensive Income (Loss) Before
Reclassification		(12,366)		—		—		(12,366)
Amounts Reclassified from Accumulated
Other Comprehensive Income (Loss)		(897)		—		—		(897)
Net Current Period Other
Comprehensive Income (Loss)		(13,263)		—		—		(13,263)
Ending Balance	$	(2,620)	$	(231)	$	(61)	$	(2,912)

The table below summarizes the classifications out of accumulated other comprehensive income (loss) by component for the three months ended September 30, 2013:

	Amount Reclassified From
Details about Accumulated Other	Accumulated Other		Affected Line Item in the Statement
Comprehensive Income (Loss) Components	Comprehensive Income (Loss)		Where Net Income is Presented
Unrealized Gains and Losses on
Available-for-Sale Securities	$	(428)	Net (Gain) Loss on Securities
		173	Income Tax Expense
		(255)	Net of Tax
Total Reclassifications for the Period	$	(255)

The table below summarizes the classifications out of accumulated other comprehensive income (loss) by component for the nine months ended September 30, 2013:

	Amount Reclassified From
Details about Accumulated Other	Accumulated Other		Affected Line Item in the Statement
Comprehensive Income (Loss) Components	Comprehensive Income (Loss)		Where Net Income is Presented
Unrealized Gains and Losses on
Available-for-Sale Securities	$	(1,508)	Net (Gain) Loss on Securities
		611	Income Tax Expense
		(897)	Net of Tax
Total Reclassifications for the Period	$	(897)

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Segment Information

9 Months Ended

Sep. 30, 2013

Segment Reporting [Abstract]

Segment Information

Note 6 – Segment Information

The Company’s operations include three primary segments: core banking, trust and investment advisory services, and insurance operations.  The core banking segment involves attracting deposits from the general public and using such funds to originate consumer, commercial and agricultural, commercial and agricultural real estate, and residential mortgage loans, primarily in the Company’s local markets.  The core banking segment also involves the sale of residential mortgage loans in the secondary market.  The trust and investment advisory services segment involves providing trust, investment advisory, and brokerage services to customers.  The insurance segment offers a full range of personal and corporate property and casualty insurance products, primarily in the Company’s banking subsidiary’s local markets.

The core banking segment is comprised by the Company’s banking subsidiary, German American Bancorp, which operated through 37 banking offices at September 30, 2013.  Net interest income from loans and investments funded by deposits and borrowings is the primary revenue for the core-banking segment.  The trust and investment advisory services segment’s revenues are comprised primarily of fees generated by German American Financial Advisors & Trust Company.  These fees are derived by providing trust, investment advisory, and brokerage services to its customers. The insurance segment primarily consists of German American Insurance, Inc., which provides a full line of personal and corporate insurance products. Commissions derived from the sale of insurance products are the primary source of revenue for the insurance segment.

The following segment financial information has been derived from the internal financial statements of German American Bancorp, Inc., which are used by management to monitor and manage the financial performance of the Company.  The accounting policies of the three segments are the same as those of the Company.  The evaluation process for segments does not include holding company income and expense.  Holding company amounts are the primary differences between segment amounts and consolidated totals, and are reflected in the column labeled “Other” below, along with amounts to eliminate transactions between segments.

			Trust and
			Investment
	Core		Advisory						Consolidated
	Banking		Services		Insurance		Other		Totals
Three Months Ended
September 30, 2013
Net Interest Income	$	17,334	$	5	$	4	$	(151)	$	17,192
Net Gains on Sales of Loans		613		—		—		—		613
Net Gains on Securities		415		—		—		13		428
Trust and Investment Product Fees		1		802		—		(1)		802
Insurance Revenues		10		7		1,478		—		1,495
Noncash Items:
Provision for Loan Losses		(400)		—		—		—		(400)
Depreciation and Amortization		941		6		99		38		1,084
Income Tax Expense (Benefit)		3,218		(24)		67		(292)		2,969
Segment Profit (Loss)		6,581		(41)		96		(153)		6,483
Segment Assets at September 30, 2013		2,068,392		11,641		8,149		(28,060)		2,060,122

			Trust and
			Investment
	Core		Advisory						Consolidated
	Banking		Services		Insurance		Other		Totals
Three Months Ended
September 30, 2012
Net Interest Income	$	16,909	$	6	$	9	$	(531)	$	16,393
Net Gains on Sales of Loans		941		—		—		—		941
Net Gains on Securities		598		—		—		—		598
Trust and Investment Product Fees		—		659		—		—		659
Insurance Revenues		3		5		1,461		—		1,469
Noncash Items:
Provision for Loan Losses		640		—		—		—		640
Depreciation and Amortization		941		6		101		37		1,085
Income Tax Expense (Benefit)		3,186		(45)		70		(320)		2,891
Segment Profit (Loss)		6,578		(71)		100		(315)		6,292
Segment Assets at December 31, 2012		2,006,992		11,551		8,333		(20,576)		2,006,300

			Trust and
			Investment
	Core		Advisory						Consolidated
	Banking		Services		Insurance		Other		Totals
Nine Months Ended
September 30, 2013
Net Interest Income	$	51,102	$	16	$	16	$	(1,005)	$	50,129
Net Gains on Sales of Loans		2,176		—		—		—		2,176
Net Gains on Securities		1,495		—		—		13		1,508
Trust and Investment Product Fees		5		2,430		—		(2)		2,433
Insurance Revenues		25		26		4,607		—		4,658
Noncash Items:
Provision for Loan Losses		(250)		—		—		—		(250)
Depreciation and Amortization		2,864		21		310		113		3,308
Income Tax Expense (Benefit)		9,588		(50)		254		(1,080)		8,712
Segment Profit (Loss)		19,262		(90)		334		(682)		18,824
Segment Assets at September 30, 2013		2,068,392		11,641		8,149		(28,060)		2,060,122

			Trust and
			Investment
	Core		Advisory						Consolidated
	Banking		Services		Insurance		Other		Totals
Nine Months Ended
September 30, 2012
Net Interest Income	$	51,213	$	16	$	26	$	(1,601)	$	49,654
Net Gains on Sales of Loans		2,330		—		—		—		2,330
Net Gains on Securities		692		—		—		—		692
Trust and Investment Product Fees		3		2,018		—		(2)		2,019
Insurance Revenues		19		32		4,167		—		4,218
Noncash Items:
Provision for Loan Losses		1,721		—		—		—		1,721
Depreciation and Amortization		3,145		16		311		112		3,584
Income Tax Expense (Benefit)		9,041		(103)		176		(994)		8,120
Segment Profit (Loss)		18,737		(168)		245		(953)		17,861
Segment Assets at December 31, 2012		2,006,992		11,551		8,333		(20,576)		2,006,300

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Basis of Presentation

9 Months Ended

Sep. 30, 2013

Accounting Policies [Abstract]

Basis of Presentation

Note 1 – Basis of Presentation

German American Bancorp, Inc. operates primarily in the banking industry.  The accounting and reporting policies of German American Bancorp, Inc. and its subsidiaries conform to U.S. generally accepted accounting principles.  Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted.  All adjustments which are, in the opinion of management, necessary for a fair presentation of the results for the periods reported have been included in the accompanying unaudited consolidated financial statements, and all such adjustments are of a normal recurring nature.  It is suggested that these consolidated financial statements and notes be read in conjunction with the financial statements and notes thereto in the German American Bancorp, Inc. December 31, 2012 Annual Report on Form 10-K. 

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Segment Information (Additional Information) (Details)	9 Months Ended
	Sep. 30, 2013 Number
Segment Reporting Information [Line Items]
Number of operating segments	3
Number of offices	37

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Loans (Recorded Investment in Home Equity, Consumer and Residential Mortgage Loans Based on Payment Activity) (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013		Dec. 31, 2012
Financing Receivable, Recorded Investment [Line Items]
Total loans	$ 1,289,707	[1]	$ 1,213,423	[2]
Loans Acquired With Deteriorated Credit Quality	8,624		10,877
Home Equity Loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	75,278	[1]	74,699	[2]
Loans Acquired With Deteriorated Credit Quality	0		0
Consumer Loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	46,879	[1]	41,231	[2]
Loans Acquired With Deteriorated Credit Quality	138		148
Residential Mortgage Loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	107,931	[1]	88,815	[2]
Loans Acquired With Deteriorated Credit Quality	147		149
Performing [Member] | Home Equity Loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	75,129		74,521
Performing [Member] | Consumer Loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	46,690		41,064
Performing [Member] | Residential Mortgage Loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	107,863		88,558
Nonperforming [Member] | Home Equity Loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	149		178
Nonperforming [Member] | Consumer Loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	189		167
Nonperforming [Member] | Residential Mortgage Loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	$ 68		$ 257

[1] Total recorded investment in loans includes $5,417 in accrued interest.

[2] Total recorded investment in loans includes $5,522 in accrued interest.

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Derivatives (Derivative Instruments And Hedging Activities) (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
Derivatives, Fair Value [Line Items]
Derivative Asset, Notional Amount	$ 17,951	$ 6,051
Other Assets Interest Rate Swaps Fair Value	511	187
Derivative Liability, Notional Amount	17,951	6,051
Other Liabilities Interest Rate Swaps Fair Value	$ 392	$ 178

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Fair Value (Recurring Basis) (Details) (Significant Unobservable Inputs (Level 3) [Member], Commercial Real Estate Loans [Member], USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2013
Impaired Loans with Specific Allocations [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	$ 1,257
Valuation Technique(s)	Sales comparison approach Income approach Cost approach
Unobservable Input(s)	Adjustment for physical condition of comparable properties sold Adjustment for net operating income generated by the property Adjustment for investor rates of return
Impaired Loans with Specific Allocations [Member] | Minimum [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Weighted Average	12.00%
Impaired Loans with Specific Allocations [Member] | Maximum [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Weighted Average	80.00%
Impaired Loans with Specific Allocations [Member] | Weighted Average [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Weighted Average	52.00%
Other Real Estate [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	$ 290
Valuation Technique(s)	Sales comparison approach Income approach Cost approach
Unobservable Input(s)	Adjustment for physical condition of comparable properties sold Adjustment for net operating income generated by the property Adjustment for investor rates of return
Weighted Average	50.00%
Other Real Estate [Member] | Weighted Average [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Weighted Average	50.00%

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Securities (Tables)

9 Months Ended

Sep. 30, 2013

Securities [Abstract]

Amortized Cost, Unrealized Gross Gains and Losses Recognized in Accumulated Other Comprehensive Income (Loss), and Fair Value of Securities Available-for-Sale

The amortized cost, unrealized gross gains and losses recognized in accumulated other comprehensive income (loss), and fair value of Securities Available-for-Sale at September 30, 2013 and December 31, 2012, were as follows:

			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
Securities Available-for-Sale:
September 30, 2013
U.S. Treasury and Agency Securities	$	20,754	$	2	$	(969)	$	19,787
Obligations of State and Political Subdivisions		95,033		2,793		(555)		97,271
Mortgage-backed Securities - Residential		496,129		4,765		(10,325)		490,569
Equity Securities		684		342		—		1,026
Total	$	612,600	$	7,902	$	(11,849)	$	608,653
December 31, 2012
U.S. Treasury and Agency Securities	$	23,570	$	40	$	(138)	$	23,472
Obligations of State and Political Subdivisions		71,352		5,145		(12)		76,485
Mortgage-backed Securities - Residential		475,452		11,505		(45)		486,912
Equity Securities		684		49		—		733
Total	$	571,058	$	16,739	$	(195)	$	587,602

Carrying Amount, Unrecognized Gains and Losses and Fair Value of Securities Held-to-Maturity

The carrying amount, unrecognized gains and losses and fair value of Securities Held-to-Maturity at September 30, 2013 and December 31, 2012, were as follows:

			Gross		Gross
	Carrying		Unrecognized		Unrecognized		Fair
	Amount		Gains		Losses		Value
Securities Held-to-Maturity:
September 30, 2013
Obligations of State and Political Subdivisions	$	268	$	3	$	—	$	271
December 31, 2012
Obligations of State and Political Subdivisions	$	346	$	5	$	—	$	351

Amortized Cost and Fair Value of Securities by Contractual Maturity

The amortized cost and fair value of Securities at September 30, 2013 by contractual maturity are shown below.  Expected maturities may differ from contractual maturities because some issuers have the right to call or prepay certain obligations with or without call or prepayment penalties.  Mortgage-backed and Equity Securities are not due at a single maturity date and are shown separately.

	Amortized		Fair
	Cost		Value
Securities Available-for-Sale:
Due in one year or less	$	2,855	$	2,878
Due after one year through five years		11,966		12,237
Due after five years through ten years		60,770		61,075
Due after ten years		40,196		40,868
Mortgage-backed Securities - Residential		496,129		490,569
Equity Securities		684		1,026
Totals	$	612,600	$	608,653

 

	Carrying		Fair
	Amount		Value
Securities Held-to-Maturity:
Due in one year or less	$	—	$	—
Due after one year through five years		268		271
Due after five years through ten years		—		—
Due after ten years		—		—
Totals	$	268	$	271

Proceeds from the sales of Available-for-Sale Securities

Proceeds from the sales of Available-for-Sale Securities are summarized below:

	Three Months Ended		Three Months Ended
	September 30, 2013		September 30, 2012
Proceeds from Sales and Calls	$	19,231	$	40,949
Gross Gains on Sales and Calls		428		598
Income Taxes on Gross Gains		150		209

	Nine Months Ended		Nine Months Ended
	September 30, 2013		September 30, 2012
Proceeds from Sales and Calls	$	119,952	$	92,344
Gross Gains on Sales and Calls		1,508		692
Income Taxes on Gross Gains		528		242

Summary of Securities with Unrealized Losses, Presented by Length of Time Securities Have Been in Continuous Unrealized Loss Position

Below is a summary of securities with unrealized losses as of September 30, 2013 and December 31, 2012, presented by length of time the securities have been in a continuous unrealized loss position:

	Less than 12 Months				12 Months or More				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Loss		Value		Loss		Value		Loss
September 30, 2013
U.S. Treasury and Agency Securities	$	19,031	$	(969)	$	—	$	—	$	19,031	$	(969)
Obligations of State and Political Subdivisions		18,166		(555)		—		—		18,166		(555)
Mortgage-backed Securities - Residential		319,113		(10,325)		—		—		319,113		(10,325)
Equity Securities		—		—		—		—		—		—
Total	$	356,310	$	(11,849)	$	—	$	—	$	356,310	$	(11,849)

	Less than 12 Months				12 Months or More				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Loss		Value		Loss		Value		Loss
December 31, 2012
U.S. Treasury and Agency Securities	$	19,862	$	(138)	$	—	$	—	$	19,862	$	(138)
Obligations of State and Political Subdivisions		1,042		(12)		—		—		1,042		(12)
Mortgage-backed Securities - Residential		18,323		(45)		—		—		18,323		(45)
Equity Securities		—		—		—		—		—		—
Total	$	39,227	$	(195)	$	—	$	—	$	39,227	$	(195)

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Fair Value

9 Months Ended

Sep. 30, 2013

Fair Value [Abstract]

Fair Value

Note 9 – Fair Value

Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.  There are three levels of inputs that may be used to measure fair values:

Level 1:  Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

Level 2:  Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3: Significant unobservable inputs that reflect a reporting entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

The Company used the following methods and significant assumptions to estimate the fair value of each type of financial instrument:

Investment Securities:  The fair values for investment securities are determined by quoted market prices, if available (Level 1).  For securities where quoted prices are not available, fair values are calculated based on market prices of similar securities (Level 2).  For securities where quoted prices or market prices of similar securities are not available, fair values are calculated using discounted cash flows or other market indicators (Level 3).  Level 3 pricing is obtained from a third-party based upon similar trades that are not traded frequently without adjustment by the Company.  At September 30, 2013, the Company held $11.4 million in Level 3 securities which consist of $11.0 million of non-rated Obligations of State and Political Subdivisions and $353 thousand of equity securities that are not actively traded.  Absent the credit rating, significant assumptions must be made such that the credit risk input becomes an unobservable input and thus these securities are reported by the Company in a Level 3 classification.

Derivatives:  The fair values of derivatives are based on valuation models using observable market data as of the measurement date (Level 2).

Impaired Loans: Fair values for impaired collateral dependent loans are generally based on appraisals obtained from licensed real estate appraisers and in certain circumstances consideration of offers obtained to purchase properties prior to foreclosure.  Appraisals for commercial real estate generally use three methods to derive value: cost, sales or market comparison and income approach.  The cost method bases value in the cost to replace the current property.  Value of market comparison approach evaluates the sales price of similar properties in the same market area.  The income approach considers net operating income generated by the property and an investors required return.  Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available.  Comparable sales adjustments are based on known sales prices of similar type and similar use properties and duration of time that the property has been on the market to sell.  Such adjustments made in the appraisal process are typically significant and result in a Level 3 classification of the inputs for determining fair value.

Appraisals for both collateral-dependent impaired loans and other real estate owned are performed by certified general appraisers (for commercial properties) or certified residential appraisers (for residential properties) whose qualifications and licenses have been reviewed and verified by the Company.  Once received, a member of the Company’s Risk Management Area reviews the assumptions and approaches utilized in the appraisal.  In determining the value of impaired collateral dependent loans and other real estate owned, significant unobservable inputs may be used which include:  physical condition of comparable properties sold, net operating income generated by the property and investor rates of return.

Other Real Estate:  Nonrecurring adjustments to certain commercial and residential real estate properties classified as other real estate (ORE) are measured at the lower of carrying amount or fair value, less costs to sell.  Fair values are generally based on third party appraisals of the property utilizing similar techniques as discussed above for Impaired Loans, resulting in a Level 3 classification.  In cases where the carrying amount exceeds the fair value, less costs to sell, impairment loss is recognized.

Loans Held-for-Sale:  The fair values of loans held for sale are determined by using quoted prices for similar assets, adjusted for specific attributes of that loan resulting in a Level 2 classification.

Assets and Liabilities Measured on a Recurring Basis

Assets and liabilities measured at fair value on a recurring basis, including financial assets and liabilities for which the Company has elected the fair value option, are summarized below:

	Fair Value Measurements at September 30, 2013 Using
	Quoted Prices in
	Active Markets for		Significant Other		Significant
	Identical Assets		Observable Inputs		Unobservable Inputs
	(Level 1)		(Level 2)		(Level 3)		Total
Assets:
U.S. Treasury and Agency Securities	$	—	$	19,787	$	—	$	19,787
Corporate Securities		—		—		—		—
Obligations of State and
Political Subdivisions		—		86,269		11,002		97,271
Mortgage-backed Securities-Residential		—		490,569		—		490,569
Equity Securities		673		—		353		1,026
Total Securities	$	673	$	596,625	$	11,355	$	608,653
Loans Held-for-Sale	$	—	$	9,054	$	—	$	9,054
Derivatives	$	—	$	511	$	—	$	511
Financial Liabilities Derivatives	$	—	$	392	$	—	$	392

	Fair Value Measurements at December 31, 2012 Using
	Quoted Prices in
	Active Markets for		Significant Other		Significant
	Identical Assets		Observable Inputs		Unobservable Inputs
	(Level 1)		(Level 2)		(Level 3)		Total
Assets:
U.S. Treasury and Agency Securities	$	—	$	23,472	$	—	$	23,472
Corporate Securities		—		—		—		—
Obligations of State and
Political Subdivisions		—		64,316		12,169		76,485
Mortgage-backed Securities-Residential		—		486,912		—		486,912
Equity Securities		380		—		353		733
Total Securities	$	380	$	574,700	$	12,522	$	587,602
Loans Held-for-Sale	$	—	$	16,641	$	—	$	16,641
Derivatives	$	—	$	187	$	—	$	187
Financial Liabilities Derivatives	$	—	$	178	$	—	$	178

There were no transfers between Level 1 and Level 2 for the periods ended September 30, 2013 and December 31, 2012.

At September 30, 2013, the aggregate fair value of the Loans Held-for-Sale was $9,054, aggregate contractual principal balance was $8,937 with a difference of $117.  At December 31, 2012, the aggregate fair value of the Loans Held-for-Sale was $16,641, aggregate contractual principle balance was $16,413 with a difference of $228.

The table below presents a reconciliation of all assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three and nine months ended September 30, 2013 and 2012:

	Obligations of State
	and Political
	Subdivisions				Equity Securities				Corporate Securities
	2013		2012		2013		2012		2013		2012
Balance of Recurring Level 3 Assets at June 30	$	11,439	$	11,791	$	353	$	353	$	—	$	—
Total Gains or Losses (realized/unrealized)
Included in Earnings		(12)		9		—		—		—		—
Maturities / Calls		(425)		—		—		—		—		—
Purchases		—		—		—		—		—		—
Balance of Recurring Level 3 Assets at September 30	$	11,002	$	11,800	$	353	$	353	$	—	$	—

	Obligations of State
	and Political
	Subdivisions				Equity Securities				Corporate Securities
	2013		2012		2013		2012		2013		2012
Balance of Recurring Level 3 Assets at December 31	$	12,169	$	4,772	$	353	$	353	$	—	$	1,005
Total Gains or Losses (realized/unrealized)
Included in Earnings		(162)		60		—		—		—		—
Maturities / Calls		(1,005)		(697)		—		—		—		(1,005)
Purchases		—		7,665		—		—		—		—
Balance of Recurring Level 3 Assets at September 30	$	11,002	$	11,800	$	353	$	353	$	—	$	—

Of the total gain/loss included in earnings for the three and nine months ended September 30, 2013, $12 and $162 was attributable to other changes in fair value, respectively.  The three and nine months ended September 30, 2013 included no gain/loss attributable to interest income on securities. Of the total gain/loss included in earnings for the three and nine months ended September 30, 2012, $9 and $60 was attributable to other changes in fair value, respectively.  The three and nine months ended September 30, 2012 included no gain/loss attributable to interest income on securities.

Assets and Liabilities Measured on a Non-Recurring Basis

Assets and liabilities measured at fair value on a non-recurring basis are summarized below:

	Fair Value Measurements at September 30, 2013 Using
	Quoted Prices in
	Active Markets for		Significant Other		Significant
	Identical Assets		Observable Inputs		Unobservable Inputs
	(Level 1)		(Level 2)		(Level 3)		Total
Assets:
Impaired Loans with Specific Allocations
Commercial and Industrial Loans	$	—	$	—	$	—	$	—
Commercial Real Estate Loans		—		—		1,257		1,257
Agricultural Loans		—		—		—		—
Other Real Estate
Commercial Real Estate		—		—		290		290

	Fair Value Measurements at December 31, 2012 Using
	Quoted Prices in
	Active Markets for		Significant Other		Significant
	Identical Assets		Observable Inputs		Unobservable Inputs
	(Level 1)		(Level 2)		(Level 3)		Total
Assets:
Impaired Loans with Specific Allocations
Commercial and Industrial Loans	$	—	$	—	$	1,231	$	1,231
Commercial Real Estate Loans		—		—		1,497		1,497
Agricultural Loans		—		—		135		135
Other Real Estate
Commercial Real Estate		—		—		150		150

Impaired loans, which are measured for impairment using the fair value of the collateral for collateral dependent loans, had a carrying amount of $4,947 with a valuation allowance of $3,690, resulting in an additional provision for loan losses of $229 and $608 for the three and nine months ended September 30, 2013.  Impaired loans resulted in an additional provision for loan losses of $393 for the three months ended September 30, 2012 and an additional provision for loan losses of $1,023 for the nine months ended September 30, 2012.  Impaired loans, which are measured for impairment using the fair value of the collateral for collateral dependent loans, had a carrying amount of $8,274 with a valuation allowance of $5,411, resulting in an additional provision for loan losses of $2,320 for the year ended December 31, 2012.

Other Real Estate which is measured at the lower of carrying or fair value less costs to sell had a carrying value of $290 at September 30, 2013.  No charge to earnings was included in the three months ended September 30, 2013.  A charge to earnings through Other Operating Income of $301 was included in the nine months ended September 30, 2013.  A charge to earnings through Other Operating Income of $100 was included in the three and nine months ended September 30, 2012.  Other Real Estate which is measured at the lower of carrying or fair value less costs to sell had a carrying value of $150 at December 31, 2012. 

The following table presents quantitative information about Level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis at September 30, 2013:

					Range
			Valuation		(Weighted
	Fair Value		Technique(s)	Unobservable Input(s)	Average)
Impaired Loans - Commercial	$	1,257	Sales comparison	Adjustment for physical	12%-80%
Real Estate Loans			approach	condition of comparable	(52)%
			Income approach	properties sold
			Cost approach	Adjustment for net operating
				income generated by the
				property
				Adjustment for investor rates
				of return
Other Real Estate - Commercial	$	290	Sales comparison	Adjustment for physical	50%
Real Estate Loans			approach	condition of comparable	(50)%
			Income approach	properties sold
			Cost approach	Adjustment for net operating
				income generated by the
				property
				Adjustment for investor rates
				of return

The carrying amounts and estimated fair values of the Company’s financial instruments not previously presented are provided in the table below for the periods ending September 30, 2013 and December 31, 2012.  Not all of the Company’s assets and liabilities are considered financial instruments, and therefore are not included in the table.  Because no active market exists for a significant portion of the Company’s financial instruments, fair value estimates were based on subjective judgments, and therefore cannot be determined with precision.

			Fair Value Measurements at
			September 30, 2013 Using
	Carrying Value		Level 1		Level 2		Level 3		Total
Financial Assets:
Cash and Short-term Investments	$	64,671	$	46,657	$	18,014	$	—	$	64,671
Securities Held-to-Maturity		268		—		271		—		271
FHLB Stock and Other Restricted Stock		8,340		N/A		N/A		N/A		N/A
Loans, Net		1,265,721		—		—		1,270,263		1,270,263
Accrued Interest Receivable		7,402		—		1,906		5,496		7,402
Financial Liabilities:
Demand, Savings, and Money Market Deposits		(1,338,858)		(1,338,858)		—		—		(1,338,858)
Time Deposits		(332,181)		—		(335,093)		—		(335,093)
Short-term Borrowings		(102,792)		—		(102,792)		—		(102,792)
Long-term Debt		(88,762)		—		(85,026)		(5,287)		(90,313)
Accrued Interest Payable		(690)		—		(647)		(43)		(690)
Unrecognized Financial Instruments:
Commitments to Extend Credit		—		—		—		—		—
Standby Letters of Credit		—		—		—		—		—
Commitments to Sell Loans		—		—		—		—		—

			Fair Value Measurements at
			December 31, 2012 Using
	Carrying Value		Level 1		Level 2		Level 3		Total
Financial Assets:
Cash and Short-term Investments	$	51,794	$	41,624	$	10,170	$	—	$	51,794
Securities Held-to-Maturity		346		—		351		—		351
FHLB Stock and Other Restricted Stock		8,340		N/A		N/A		N/A		N/A
Loans, Net		1,186,483		—		—		1,199,566		1,199,566
Accrued Interest Receivable		7,419		—		1,893		5,526		7,419
Financial Liabilities:
Demand, Savings, and Money Market Deposits		(1,311,748)		(1,311,748)		—		—		(1,311,748)
Time Deposits		(329,183)		—		(333,170)		—		(333,170)
Short-term Borrowings		(71,534)		—		(71,534)		—		(71,534)
Long-term Debt		(89,472)		—		(66,892)		(28,872)		(95,764)
Accrued Interest Payable		(1,275)		—		(829)		(446)		(1,275)
Unrecognized Financial Instruments:
Commitments to Extend Credit		—		—		—		—		—
Standby Letters of Credit		—		—		—		—		—
Commitments to Sell Loans		—		—		—		—		—

Cash and Short-term Investments:

The carrying amount of cash and short-term investments approximate fair values and are classified as Level 1 or Level 2.

Securities Held-to-Maturity:

The fair values for investment securities are determined by quoted market prices, if available (Level 1).  For securities where quoted prices are not available, fair values are calculated based on market prices of similar securities (Level 2).

FHLB Stock and Other Restricted Stock:

It is not practical to determine the fair values of FHLB stock and other restricted stock due to restrictions placed on their transferability.

Loans:

Fair values of loans, excluding loans held for sale and collateral dependent impaired loans having a specific allowance allocation, are estimated as follows:  For variable rate loans that reprice frequently and with no significant change in credit risk, fair values are based on carrying values resulting in a Level 3 classification.  Fair values for other loans are estimated using discounted cash flow analyses, using interest rates currently being offered for loans with similar terms to borrowers of similar credit quality resulting in a Level 3 classification.  Impaired loans are valued as described previously.  The methods utilized to estimate fair value of loans do not necessarily represent an exit price.

Accrued Interest Receivable:

The carrying amount of accrued interest approximates fair value resulting in a Level 2 or Level 3 classification consistent with the asset they are associated with.

Deposits:

The fair values disclosed for demand deposits (e.g., interest and non-interest checking, savings and certain types of money market accounts) are, by definition, equal to the amount payable on demand at the reporting date (i.e., their carrying amount) resulting in a Level 1 classification.  Fair values for fixed rate time deposits are estimated using a discounted cash flows calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits resulting in a Level 2 classification. 

Short-term Borrowings:

The carrying amounts of federal funds purchased, borrowings under repurchase agreements, and other short-term borrowings, generally maturing within ninety days, approximate their fair values resulting in a Level 2 classification.

Long-term Debt:

The fair values of the Company’s long-term borrowings are estimated using discounted cash flow analyses based on the current borrowing rates for similar types of borrowing arrangements resulting in a Level 2 classification. 

The fair values of the Company’s subordinated debentures are estimated using discounted cash flow analyses based on the current borrowing rates for similar types of borrowing arrangements resulting in a Level 3 classification. 

Accrued Interest Payable:

The carrying amount of accrued interest approximates fair value resulting in a Level 2 or Level 3 classification consistent with the liability they are associated with.

Off-balance Sheet Instruments:

Commitments to extend credit and standby letters of credit are generally short-term or variable rate with minimal fees charged.  These instruments have no carrying value, and the fair value is not material.  The fair value of commitments to sell loans is the cost or benefit of settling the commitments with the counter-party at the reporting date.  At September 30, 2013 and December 31, 2012, none of the Company’s commitments to sell loans were mandatory, and there is no cost or benefit to settle these commitments.

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Segment Information (Tables)

9 Months Ended

Sep. 30, 2013

Segment Reporting [Abstract]

Segment Financial Information

The following segment financial information has been derived from the internal financial statements of German American Bancorp, Inc., which are used by management to monitor and manage the financial performance of the Company.  The accounting policies of the three segments are the same as those of the Company.  The evaluation process for segments does not include holding company income and expense.  Holding company amounts are the primary differences between segment amounts and consolidated totals, and are reflected in the column labeled “Other” below, along with amounts to eliminate transactions between segments.

			Trust and
			Investment
	Core		Advisory						Consolidated
	Banking		Services		Insurance		Other		Totals
Three Months Ended
September 30, 2013
Net Interest Income	$	17,334	$	5	$	4	$	(151)	$	17,192
Net Gains on Sales of Loans		613		—		—		—		613
Net Gains on Securities		415		—		—		13		428
Trust and Investment Product Fees		1		802		—		(1)		802
Insurance Revenues		10		7		1,478		—		1,495
Noncash Items:
Provision for Loan Losses		(400)		—		—		—		(400)
Depreciation and Amortization		941		6		99		38		1,084
Income Tax Expense (Benefit)		3,218		(24)		67		(292)		2,969
Segment Profit (Loss)		6,581		(41)		96		(153)		6,483
Segment Assets at September 30, 2013		2,068,392		11,641		8,149		(28,060)		2,060,122

			Trust and
			Investment
	Core		Advisory						Consolidated
	Banking		Services		Insurance		Other		Totals
Three Months Ended
September 30, 2012
Net Interest Income	$	16,909	$	6	$	9	$	(531)	$	16,393
Net Gains on Sales of Loans		941		—		—		—		941
Net Gains on Securities		598		—		—		—		598
Trust and Investment Product Fees		—		659		—		—		659
Insurance Revenues		3		5		1,461		—		1,469
Noncash Items:
Provision for Loan Losses		640		—		—		—		640
Depreciation and Amortization		941		6		101		37		1,085
Income Tax Expense (Benefit)		3,186		(45)		70		(320)		2,891
Segment Profit (Loss)		6,578		(71)		100		(315)		6,292
Segment Assets at December 31, 2012		2,006,992		11,551		8,333		(20,576)		2,006,300

			Trust and
			Investment
	Core		Advisory						Consolidated
	Banking		Services		Insurance		Other		Totals
Nine Months Ended
September 30, 2013
Net Interest Income	$	51,102	$	16	$	16	$	(1,005)	$	50,129
Net Gains on Sales of Loans		2,176		—		—		—		2,176
Net Gains on Securities		1,495		—		—		13		1,508
Trust and Investment Product Fees		5		2,430		—		(2)		2,433
Insurance Revenues		25		26		4,607		—		4,658
Noncash Items:
Provision for Loan Losses		(250)		—		—		—		(250)
Depreciation and Amortization		2,864		21		310		113		3,308
Income Tax Expense (Benefit)		9,588		(50)		254		(1,080)		8,712
Segment Profit (Loss)		19,262		(90)		334		(682)		18,824
Segment Assets at September 30, 2013		2,068,392		11,641		8,149		(28,060)		2,060,122

			Trust and
			Investment
	Core		Advisory						Consolidated
	Banking		Services		Insurance		Other		Totals
Nine Months Ended
September 30, 2012
Net Interest Income	$	51,213	$	16	$	26	$	(1,601)	$	49,654
Net Gains on Sales of Loans		2,330		—		—		—		2,330
Net Gains on Securities		692		—		—		—		692
Trust and Investment Product Fees		3		2,018		—		(2)		2,019
Insurance Revenues		19		32		4,167		—		4,218
Noncash Items:
Provision for Loan Losses		1,721		—		—		—		1,721
Depreciation and Amortization		3,145		16		311		112		3,584
Income Tax Expense (Benefit)		9,041		(103)		176		(994)		8,120
Segment Profit (Loss)		18,737		(168)		245		(953)		17,861
Segment Assets at December 31, 2012		2,006,992		11,551		8,333		(20,576)		2,006,300

XML

Derivatives (Tables)

9 Months Ended

Sep. 30, 2013

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments And Hedging Activities

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

	September 30, 2013				December 31, 2012
	Notional				Notional
	Amount		Fair Value		Amount		Fair Value
Included in Other Assets:
Interest Rate Swaps	$	17,951	$	511	$	6,051	$	187
Included in Other Liabilities:
Interest Rate Swaps	$	17,951	$	392	$	6,051	$	178

Derivative Instruments Consolidated Statement

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

	Three Months Ended				Nine Months Ended
	September 30				September 30
	2013		2012		2013		2012
Interest Rate Swaps:
Included in Interest Income / (Expense)	$	—	$	—	$	—	$	—
Included in Other Income / (Expense)		(34)		148		517		148

XML

Document And Entity Information	9 Months Ended
	Sep. 30, 2013	Nov. 01, 2013
Document Information [Line Items]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 30, 2013
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	Q3
Trading Symbol	GABC
Entity Common Stock, Shares Outstanding		13,169,396
Entity Registrant Name	GERMAN AMERICAN BANCORP, INC.
Entity Central Index Key	0000714395
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer

XML

Loans (Tables)

9 Months Ended

Sep. 30, 2013

Loans [Abstract]

Components of Loans

Loans were comprised of the following classifications at September 30, 2013 and December 31, 2012:

	September 30,		December 31,
	2013		2012
Commercial:
Commercial and Industrial Loans and Leases	$	338,770	$	335,373
Commercial Real Estate Loans		530,260		488,496
Agricultural Loans		185,868		179,906
Retail:
Home Equity Loans		75,018		74,437
Consumer Loans		46,754		41,103
Residential Mortgage Loans		107,620		88,586
Subtotal		1,284,290		1,207,901
Less: Unearned Income		(2,848)		(3,035)
Allowance for Loan Losses		(14,464)		(15,520)
Loans, Net	$	1,266,978	$	1,189,346

Allowance for Loan Losses by Portfolio Class

The following table presents the activity in the allowance for loan losses by portfolio class for the three months ending September 30, 2013 and 2012:

	Commercial
	and
	Industrial		Commercial				Home				Residential
	Loans and		Real Estate		Agricultural		Equity		Consumer		Mortgage
	Leases		Loans		Loans		Loans		Loans		Loans		Unallocated		Total
September 30, 2013
Beginning Balance	$	4,258	$	8,636	$	817	$	313	$	199	$	280	$	760	$	15,263
Provision for Loan Losses		(361)		(214)		53		89		64		36		(67)		(400)
Recoveries		108		7		—		—		33		2		—		150
Loans Charged-off		(34)		(212)		—		(193)		(93)		(17)		—		(549)
Ending Balance	$	3,971	$	8,217	$	870	$	209	$	203	$	301	$	693	$	14,464

	Commercial
	and
	Industrial		Commercial				Home				Residential
	Loans and		Real Estate		Agricultural		Equity		Consumer		Mortgage
	Leases		Loans		Loans		Loans		Loans		Loans		Unallocated		Total
September 30, 2012
Beginning Balance	$	4,707	$	8,732	$	890	$	181	$	227	$	391	$	564	$	15,692
Provision for Loan Losses		193		376		21		21		12		(12)		29		640
Recoveries		8		62		—		—		35		2		—		107
Loans Charged-off		(54)		(351)		—		(7)		(63)		(42)		—		(517)
Ending Balance	$	4,854	$	8,819	$	911	$	195	$	211	$	339	$	593	$	15,922

The following table presents the activity in the allowance for loan losses by portfolio class for the nine months ending September 30, 2013 and 2012:

	Commercial
	and
	Industrial		Commercial				Home				Residential
	Loans and		Real Estate		Agricultural		Equity		Consumer		Mortgage
	Leases		Loans		Loans		Loans		Loans		Loans		Unallocated		Total
September 30, 2013
Beginning Balance	$	4,555	$	8,931	$	989	$	141	$	214	$	186	$	504	$	15,520
Provision for Loan Losses		(618)		(261)		(119)		326		100		133		189		(250)
Recoveries		121		85		—		—		104		5		—		315
Loans Charged-off		(87)		(538)		—		(258)		(215)		(23)		—		(1,121)
Ending Balance	$	3,971	$	8,217	$	870	$	209	$	203	$	301	$	693	$	14,464

	Commercial
	and
	Industrial		Commercial				Home				Residential
	Loans and		Real Estate		Agricultural		Equity		Consumer		Mortgage
	Leases		Loans		Loans		Loans		Loans		Loans		Unallocated		Total
September 30, 2012
Beginning Balance	$	3,493	$	9,297	$	926	$	258	$	190	$	402	$	746	$	15,312
Provision for Loan Losses		1,466		232		(15)		(9)		141		59		(153)		1,721
Recoveries		57		88		—		1		99		11		—		256
Loans Charged-off		(162)		(798)		—		(55)		(219)		(133)		—		(1,367)
Ending Balance	$	4,854	$	8,819	$	911	$	195	$	211	$	339	$	593	$	15,922

Allowance for Loan Losses and Recorded Investment in Loans by Portfolio Class

The following table presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio class and based on impairment method as of September 30, 2013 and December 31, 2012:

			Commercial
			and
			Industrial		Commercial				Home				Residential
			Loans and		Real Estate		Agricultural		Equity		Consumer		Mortgage
	Total		Leases		Loans		Loans		Loans		Loans		Loans		Unallocated
September 30, 2013
Allowance for Loan Losses:
Ending Allowance Balance
Attributable to Loans:
Individually Evaluated     for Impairment	$	3,681	$	461	$	3,220	$	—	$	—	$	—	$	—	$	—
Collectively Evaluated     for Impairment		10,774		3,510		4,988		870		209		203		301		693
Acquired with Deteriorated     Credit Quality		9		—		9		—		—		—		—		—
Total Ending Allowance Balance	$	14,464	$	3,971	$	8,217	$	870	$	209	$	203	$	301	$	693
Loans:
Loans Individually     Evaluated for Impairment	$	9,577	$	2,622	$	6,267	$	688	$	—	$	—	$	—	$	—
Loans Collectively     Evaluated for Impairment		1,271,221		334,789		518,842		187,787		75,278		46,741		107,784		—
Loans Acquired with Deteriorated     Credit Quality		8,909		2,186		6,438		—		—		138		147		—
Total Ending Loans Balance (1)	$	1,289,707	$	339,597	$	531,547	$	188,475	$	75,278	$	46,879	$	107,931	$	—

⁽¹⁾  Total recorded investment in loans includes $5,417 in accrued interest.

 

			Commercial
			and
			Industrial		Commercial				Home				Residential
			Loans and		Real Estate		Agricultural		Equity		Consumer		Mortgage
	Total		Leases		Loans		Loans		Loans		Loans		Loans		Unallocated
December 31, 2012
Allowance for Loan Losses:
Ending Allowance Balance
Attributable to Loans:
Individually Evaluated    for Impairment	$	5,323	$	1,279	$	3,894	$	150	$	—	$	—	$	—	$	—
Collectively Evaluated    for Impairment		10,109		3,208		5,017		839		141		214		186		504
Acquired with Deteriorated    Credit Quality		88		68		20		—		—		—		—		—
Total Ending Allowance Balance	$	15,520	$	4,555	$	8,931	$	989	$	141	$	214	$	186	$	504
Loans:
Loans Individually    Evaluated for Impairment	$	12,520	$	2,547	$	7,550	$	2,423	$	—	$	—	$	—	$	—
Loans Collectively    Evaluated for Impairment		1,189,729		331,920		473,209		180,152		74,699		41,083		88,666		—
Loans Acquired with Deteriorated    Credit Quality		11,174		1,840		9,037		—		—		148		149		—
Total Ending Loans Balance (1)	$	1,213,423	$	336,307	$	489,796	$	182,575	$	74,699	$	41,231	$	88,815	$	—

⁽¹⁾  Total recorded investment in loans includes $5,522 in accrued interest.

Loans Individually Evaluated for Impairment by Class of Loans

The following table presents loans individually evaluated for impairment by class of loans as of September 30, 2013 and December 31, 2012:

	Unpaid				Allowance for
	Principal		Recorded		Loan Losses
	Balance(1)		Investment		Allocated
September 30, 2013
With No Related Allowance Recorded:
Commercial and Industrial Loans and Leases	$	2,143	$	2,161	$	—
Commercial Real Estate Loans		3,694		1,907		—
Agricultural Loans		675		688		—
Subtotal		6,512		4,756		—
With An Allowance Recorded:
Commercial and Industrial Loans and Leases		511		461		461
Commercial Real Estate Loans		4,608		4,488		3,229
Agricultural Loans		—		—		—
Subtotal		5,119		4,949		3,690
Total	$	11,631	$	9,705	$	3,690
Loans Acquired With Deteriorated Credit Quality With No Related Allowance      Recorded (Included in the Total Above)	$	125	$	119	$	—
Loans Acquired With Deteriorated Credit Quality With An Additional Allowance      Recorded (Included in the Total Above)	$	34	$	9	$	9

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

	Unpaid				Allowance for
	Principal		Recorded		Loan Losses
	Balance(1)		Investment		Allocated
December 31, 2012
With No Related Allowance Recorded:
Commercial and Industrial Loans and Leases	$	108	$	87	$	—
Commercial Real Estate Loans		4,312		2,154		—
Agricultural Loans		2,126		2,137		—
Subtotal		6,546		4,378		—
With An Allowance Recorded:
Commercial and Industrial Loans and Leases		2,642		2,581		1,347
Commercial Real Estate Loans		5,579		5,418		3,914
Agricultural Loans		285		286		150
Subtotal		8,506		8,285		5,411
Total	$	15,052	$	12,663	$	5,411
Loans Acquired With Deteriorated Credit Quality With No Related      Allowance Recorded (Included in the Total Above)	$	45	$	25	$	—
Loans Acquired With Deteriorated Credit Quality With An      Additional Allowance Recorded (Included in the Total Above)	$	155	$	118	$	88

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

The following table presents loans individually evaluated for impairment by class of loans for the three month period ended September 30, 2013 and 2012:

	Average		Interest		Cash
	Recorded		Income		Basis
	Investment		Recognized		Recognized
September 30, 2013
With No Related Allowance Recorded:
Commercial and Industrial Loans and Leases	$	2,223	$	33	$	32
Commercial Real Estate Loans		1,956		1		2
Agricultural Loans		751		21		16
Subtotal		4,930		55		50
With An Allowance Recorded:
Commercial and Industrial Loans and Leases		464		1		1
Commercial Real Estate Loans		5,415		5		4
Agricultural Loans		—		—		—
Subtotal		5,879		6		5
Total	$	10,809	$	61	$	55
Loans Acquired With Deteriorated Credit Quality With No      Related Allowance Recorded (Included in the Total Above)	$	119	$	—	$	—
Loans Acquired With Deteriorated Credit Quality With An      Additional Allowance Recorded (Included in the Total Above)	$	214	$	1	$	1

	Average		Interest		Cash
	Recorded		Income		Basis
	Investment		Recognized		Recognized
September 30, 2012
With No Related Allowance Recorded:
Commercial and Industrial Loans and Leases	$	139	$	1	$	1
Commercial Real Estate Loans		3,353		12		12
Agricultural Loans		—		—		—
Subtotal		3,492		13		13
With An Allowance Recorded:
Commercial and Industrial Loans and Leases		2,749		4		3
Commercial Real Estate Loans		7,179		6		5
Agricultural Loans		—		—		—
Subtotal		9,928		10		8
Total	$	13,420	$	23	$	21
Loans Acquired With Deteriorated Credit Quality With No      Related Allowance Recorded (Included in the Total Above)	$	471	$	1	$	1
Loans Acquired With Deteriorated Credit Quality With An      Additional Allowance Recorded (Included in the Total Above)	$	134	$	3	$	3

The following table presents loans individually evaluated for impairment by class of loans for the nine month period ended September 30, 2013 and 2012:

	Average		Interest		Cash
	Recorded		Income		Basis
	Investment		Recognized		Recognized
September 30, 2013
With No Related Allowance Recorded:
Commercial and Industrial Loans and Leases	$	818	$	33	$	33
Commercial Real Estate Loans		2,196		1		2
Agricultural Loans		1,738		196		200
Subtotal		4,752		230		235
With An Allowance Recorded:
Commercial and Industrial Loans and Leases		1,797		3		3
Commercial Real Estate Loans		5,745		17		13
Agricultural Loans		—		—		—
Subtotal		7,542		20		16
Total	$	12,294	$	250	$	251
Loans Acquired With Deteriorated Credit Quality With No      Related Allowance Recorded (Included in the Total Above)	$	39	$	—	$	—
Loans Acquired With Deteriorated Credit Quality With An      Additional Allowance Recorded (Included in the Total Above)	$	182	$	2	$	2

	Average		Interest		Cash
	Recorded		Income		Basis
	Investment		Recognized		Recognized
September 30, 2012
With No Related Allowance Recorded:
Commercial and Industrial Loans and Leases	$	298	$	3	$	3
Commercial Real Estate Loans		5,023		17		17
Agricultural Loans		49		2		2
Subtotal		5,370		22		22
With An Allowance Recorded:
Commercial and Industrial Loans and Leases		2,795		7		6
Commercial Real Estate Loans		7,003		17		14
Agricultural Loans		—		—		—
Subtotal		9,798		24		20
Total	$	15,168	$	46	$	42
Loans Acquired With Deteriorated Credit Quality With No      Related Allowance Recorded (Included in the Total Above)	$	169	$	1	$	1
Loans Acquired With Deteriorated Credit Quality With An      Additional Allowance Recorded (Included in the Total Above)	$	93	$	3	$	3

Recorded Investment in Nonaccrual and Loans Past Due Over 90 Days Still On Accrual by Class of Loans

The following table presents the recorded investment in non-accrual loans and loans past due 90 days or more still on accrual by class of loans as of September 30, 2013 and December 31, 2012:

					Loans Past Due
					90 Days or More
	Non-Accrual				& Still Accruing
	2013		2012		2013		2012
Commercial and Industrial Loans and Leases	$	434	$	2,480	$	—	$	—
Commercial Real Estate Loans		6,017		7,275		—		—
Agricultural Loans		—		—		94		—
Home Equity Loans		149		178		—		—
Consumer Loans		189		167		—		—
Residential Mortgage Loans		68		257		—		—
Total	$	6,857	$	10,357	$	94	$	—
Loans Acquired With Deteriorated Credit Quality
(Included in the Total Above)	$	256	$	148	$	—	$	—

Aging of Recorded Investment in Past Due Loans by Class of Loans

The following table presents the aging of the recorded investment in past due loans by class of loans as of September 30, 2013 and December 31, 2012:

							90 Days
			30-59 Days		60-89 Days		or More		Total		Loans Not
	Total		Past Due		Past Due		Past Due		Past Due		Past Due
September 30, 2013
Commercial and Industrial Loans and Leases	$	339,597	$	251	$	19	$	413	$	683	$	338,914
Commercial Real Estate Loans		531,547		561		216		1,805		2,582		528,965
Agricultural Loans		188,475		1,021		—		94		1,115		187,360
Home Equity Loans		75,278		194		145		149		488		74,790
Consumer Loans		46,879		127		26		50		203		46,676
Residential Mortgage Loans		107,931		1,599		163		68		1,830		106,101
Total (1)	$	1,289,707	$	3,753	$	569	$	2,579	$	6,901	$	1,282,806
Loans Acquired With Deteriorated     Credit Quality (Included in the Total Above)	$	8,909	$	245	$	—	$	—	$	245	$	8,664

⁽¹⁾  Total recorded investment in loans includes $5,417 in accrued interest.

							90 Days
			30-59 Days		60-89 Days		or More		Total		Loans Not
	Total		Past Due		Past Due		Past Due		Past Due		Past Due
December 31, 2012
Commercial and Industrial Loans and Leases	$	336,307	$	436	$	133	$	448	$	1,017	$	335,290
Commercial Real Estate Loans		489,796		1,352		—		2,063		3,415		486,381
Agricultural Loans		182,575		42		14		—		56		182,519
Home Equity Loans		74,699		177		48		178		403		74,296
Consumer Loans		41,231		431		23		18		472		40,759
Residential Mortgage Loans		88,815		2,070		495		257		2,822		85,993
Total (1)	$	1,213,423	$	4,508	$	713	$	2,964	$	8,185	$	1,205,238
Loans Acquired With Deteriorated     Credit Quality (Included in the Total Above)	$	11,174	$	—	$	120	$	—	$	120	$	11,054

⁽¹⁾  Total recorded investment in loans includes $5,522 in accrued interest.

Troubled Debt Restructurings on Financing Receivables

The following table presents the recorded investment of troubled debt restructurings by class of loans as of September 30, 2013 and December 31, 2012:

	Total		Performing		Non-Accrual(1)
September 30, 2013
Commercial and Industrial Loans and Leases	$	2,609	$	2,188	$	421
Commercial Real Estate Loans		4,417		381		4,036
Total	$	7,026	$	2,569	$	4,457

	Total		Performing		Non-Accrual(1)
December 31, 2012
Commercial and Industrial Loans and Leases	$	2,461	$	66	$	2,395
Commercial Real Estate Loans		6,031		304		5,727
Total	$	8,492	$	370	$	8,122

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

Loans By Class Modified As Troubled Debt Restructurings

The following table presents loans by class modified as troubled debt restructurings that occurred during the three months ending September 30, 2013 and 2012:

			Pre-Modification		Post-Modification
	Number of		Outstanding Recorded		Outstanding Recorded
	Loans		Investment		Investment
September 30, 2013
Commercial and Industrial Loans and Leases		1	$	224	$	230
Commercial Real Estate Loans		—		—		—
Total		1	$	224	$	230

The troubled debt restructurings described above increased the allowance for loan losses by $0 and resulted in charge-offs of $0 during the three months ending September 30, 2013.

			Pre-Modification		Post-Modification
	Number of		Outstanding Recorded		Outstanding Recorded
	Loans		Investment		Investment
September 30, 2012
Commercial and Industrial Loans and Leases		2	$	9	$	9
Commercial Real Estate Loans		—		—		—
Total		2	$	9	$	9

The troubled debt restructurings described above increased the allowance for loan losses by $0 and resulted in charge-offs of $0 during the three months ending September 30, 2012.

The following table presents loans by class modified as troubled debt restructurings that occurred during the nine months ending September 30, 2013 and 2012:

			Pre-Modification		Post-Modification
	Number of		Outstanding Recorded		Outstanding Recorded
	Loans		Investment		Investment
September 30, 2013
Commercial and Industrial Loans and Leases		1	$	224	$	230
Commercial Real Estate Loans		1		81		118
Total		2	$	305	$	348

The troubled debt restructurings described above decreased the allowance for loan losses by $210 and resulted in charge-offs of $0 during the nine months ending September 30, 2013.

			Pre-Modification		Post-Modification
	Number of		Outstanding Recorded		Outstanding Recorded
	Loans		Investment		Investment
September 30, 2012
Commercial and Industrial Loans and Leases		2	$	9	$	9
Commercial Real Estate Loans		—		—		—
Total		2	$	9	$	9

The troubled debt restructurings described above increased the allowance for loan losses by $0 and resulted in charge-offs of $0 during the nine months ending September 30, 2012.

Troubled Debt Restructurings, Subsequently Defaulted

The following table presents loans by class modified as troubled debt restructurings for which there was a payment default within twelve months following the modification during the three months ending September 30, 2013 and 2012:

Troubled Debt Restructurings That Subsequently Defaulted:	Number of Loans		Recorded Investment
September 30, 2013
Commercial and Industrial Loans and Leases		—	$	—
Commercial Real Estate Loans		—		—
Total		—	$	—

The troubled debt restructurings that subsequently defaulted described above resulted in no change to the allowance for loan losses and no charge-offs during the three months ending September 30, 2013.

Troubled Debt Restructurings That Subsequently Defaulted:	Number of Loans		Recorded Investment
September 30, 2012
Commercial and Industrial Loans and Leases		—	$	—
Commercial Real Estate Loans		1		834
Total		1	$	834

The troubled debt restructurings that subsequently defaulted described above resulted in no change to the allowance for loan losses and no charge-offs during the three months ending September 30, 2012.

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

The following table presents loans by class modified as troubled debt restructurings for which there was a payment default within twelve months following the modification during the nine months ending September 30, 2013 and 2012:

Troubled Debt Restructurings That Subsequently Defaulted:	Number of Loans	Recorded Investment
September 30, 2013
Commercial and Industrial Loans and Leases	—	$	—
Commercial Real Estate Loans	—		—
Total	—	$	—

The troubled debt restructurings that subsequently defaulted described above resulted in no change to the allowance for loan losses and no charge-offs during the nine months ending September 30, 2013.

Troubled Debt Restructurings That Subsequently Defaulted:	Number of Loans	Recorded Investment
September 30, 2012
Commercial and Industrial Loans and Leases	1	$	565
Commercial Real Estate Loans	2		1,126
Total	3	$	1,691

Risk Category of Loans

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

			Special
	Pass		Mention		Substandard		Doubtful		Total
September 30, 2013
Commercial and Industrial Loans and Leases	$	314,037	$	13,936	$	11,624	$	—	$	339,597
Commercial Real Estate Loans		497,670		17,380		16,497		—		531,547
Agricultural Loans		184,974		2,606		895		—		188,475
Total	$	996,681	$	33,922	$	29,016	$	—	$	1,059,619
Loans Acquired With Deteriorated Credit Quality
(Included in the Total Above)	$	3,180	$	816	$	4,628	$	—	$	8,624

			Special
	Pass		Mention		Substandard		Doubtful		Total
December 31, 2012
Commercial and Industrial Loans and Leases	$	307,997	$	14,441	$	13,869	$	—	$	336,307
Commercial Real Estate Loans		446,639		21,338		21,819		—		489,796
Agricultural Loans		176,730		2,855		2,990		—		182,575
Total	$	931,366	$	38,634	$	38,678	$	—	$	1,008,678
Loans Acquired With Deteriorated Credit Quality
(Included in the Total Above)	$	319	$	3,220	$	7,338	$	—	$	10,877

Recorded Investment in Home Equity, Consumer and Residential Mortgage Loans Based on Payment

The following table presents the recorded investment in home equity, consumer and residential mortgage loans based on payment activity as of September 30, 2013 and December 31, 2012:

	Home Equity		Consumer		Residential
	Loans		Loans		Mortgage Loans
September 30, 2013
Performing	$	75,129	$	46,690	$	107,863
Nonperforming		149		189		68
Total	$	75,278	$	46,879	$	107,931
Loans Acquired With Deteriorated Credit Quality
(Included in the Total Above)	$	—	$	138	$	147

	Home Equity		Consumer		Residential
	Loans		Loans		Mortgage Loans
December 31, 2012
Performing	$	74,521	$	41,064	$	88,558
Nonperforming		178		167		257
Total	$	74,699	$	41,231	$	88,815
Loans Acquired With Deteriorated Credit Quality
(Included in the Total Above)	$	—	$	148	$	149

Carrying Amount of Loans with Deterioration of Credit Quality

The Company has purchased loans, for which there was, at acquisition, evidence of deterioration of credit quality since origination and it was probable, at acquisition, that all contractually required payments would not be collected.  The recorded investment of those loans is as follows:

	September 30, 2013
Commercial and Industrial Loans	$	2,186
Commercial Real Estate Loans		6,438
Home Equity Loans		—
Consumer Loans		138
Residential Mortgage Loans		147
Total	$	8,909
Carrying amount, Net of Allowance	$	8,900

	December 31, 2012
Commercial and Industrial Loans	$	1,840
Commercial Real Estate Loans		9,037
Home Equity Loans		—
Consumer Loans		148
Residential Mortgage Loans		149
Total	$	11,174
Carrying amount, Net of Allowance	$	11,086

Accretable Yield, or Income Expected to be Collected

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

	September 30, 2013		September 30, 2012
Balance at July 1	$	182	$	389
New Loans Purchased		—		—
Accretion of Income		(443)		(223)
Reclassifications from Non-accretable Difference		444		262
Charge-off of Accretable Yield		—		—
Balance at September 30	$	183	$	428

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

	September 30, 2013		September 30, 2012
Balance at January 1	$	170	$	967
New Loans Purchased		—		—
Accretion of Income		(889)		(1,007)
Reclassifications from Non-accretable Difference		902		468
Charge-off of Accretable Yield		—		—
Balance at September 30	$	183	$	428

XML

Fair Value (Additional Information) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012	Dec. 31, 2012
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities	$ 608,653		$ 608,653		$ 587,602
Loan held for sale, at fair value	9,054		9,054		16,641
Contractual principal balance of Loan held for sale	8,937		8,937		16,413
Difference in amount of loan held for sale	117		117		228
Impaired loans, carrying amount	4,947		4,947		8,274
Valuation allowance for loans losses	3,690		3,690		5,411
Provision for Loan Losses	229		608		2,320
Other real estate, carrying value	290		290		150
Cost of Real Estate Sales		100	301	100
Provision For Loan Lease And Other Losses		393		1,023
Fair Value, Measurements, Recurring [Member] | Obligations of State and Political Subdivisions [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities	97,271		97,271		76,485
Fair Value, Measurements, Recurring [Member] | Equity Securities [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities	1,026		1,026		733
Fair Value, Measurements, Recurring [Member] | Significant Unobservable Inputs (Level 3) [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities	11,355		11,355		12,522
Fair Value, Measurements, Recurring [Member] | Significant Unobservable Inputs (Level 3) [Member] | Obligations of State and Political Subdivisions [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities	11,002		11,002		12,169
Fair Value, Measurements, Recurring [Member] | Significant Unobservable Inputs (Level 3) [Member] | Equity Securities [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities	$ 353		$ 353		$ 353

XML

Fair Value (Carrying Amounts and Estimated Fair Values of Company's Financial Instruments) (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
Financial Assets:
Securities Held-to-Maturity	$ 268	$ 346
FHLB Stock and Other Restricted Stock	8,340	8,340
Loans, Net	1,266,978	1,189,346
Financial Liabilities:
Time Deposits	(332,181)	(329,183)
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]
Financial Assets:
Cash and Short-term Investments	46,657	41,624
Securities Held-to-Maturity	0	0
FHLB Stock and Other Restricted Stock		0
Loans, Net	0	0
Accrued Interest Receivable	0	0
Financial Liabilities:
Demand, Savings, and Money Market Deposits	(1,338,858)	(1,311,748)
Time Deposits	0	0
Short-term Borrowings	0	0
Long-term Debt	0	0
Accrued Interest Payable	0	0
Significant Other Observable Inputs (Level 2) [Member]
Financial Assets:
Cash and Short-term Investments	18,014	10,170
Securities Held-to-Maturity	271	351
FHLB Stock and Other Restricted Stock		0
Loans, Net	0	0
Accrued Interest Receivable	1,906	1,893
Financial Liabilities:
Demand, Savings, and Money Market Deposits	0	0
Time Deposits	(335,093)	(333,170)
Short-term Borrowings	(102,792)	(71,534)
Long-term Debt	(85,026)	(66,892)
Accrued Interest Payable	(647)	(829)
Significant Unobservable Inputs (Level 3) [Member]
Financial Assets:
Cash and Short-term Investments	0	0
Securities Held-to-Maturity	0	0
FHLB Stock and Other Restricted Stock		0
Loans, Net	1,270,263	1,199,566
Accrued Interest Receivable	5,496	5,526
Financial Liabilities:
Demand, Savings, and Money Market Deposits	0	0
Time Deposits	0	0
Short-term Borrowings	0	0
Long-term Debt	(5,287)	(28,872)
Accrued Interest Payable	(43)	(446)
Commitments to Extend Credit [Member]
Unrecognized Financial Instruments:
Financial Instruments with Off-Balance Sheet Risk, carrying value	0	0
Financial Instruments with Off-Balance Sheet Risk, fair value	0	0
Standby Letters of Credit [Member]
Unrecognized Financial Instruments:
Financial Instruments with Off-Balance Sheet Risk, carrying value	0	0
Financial Instruments with Off-Balance Sheet Risk, fair value	0	0
Commitments to Sell Loans [Member]
Unrecognized Financial Instruments:
Financial Instruments with Off-Balance Sheet Risk, carrying value	0	0
Financial Instruments with Off-Balance Sheet Risk, fair value	0	0
Carrying Value [Member]
Financial Assets:
Cash and Short-term Investments	64,671	51,794
Securities Held-to-Maturity	268	346
FHLB Stock and Other Restricted Stock	8,340	8,340
Loans, Net	1,265,721	1,186,483
Accrued Interest Receivable	7,402	7,419
Financial Liabilities:
Demand, Savings, and Money Market Deposits	(1,338,858)	(1,311,748)
Time Deposits	(332,181)	(329,183)
Short-term Borrowings	(102,792)	(71,534)
Long-term Debt	(88,762)	(89,472)
Accrued Interest Payable	(690)	(1,275)
Fair Value [Member]
Financial Assets:
Cash and Short-term Investments	64,671	51,794
Securities Held-to-Maturity	271	351
FHLB Stock and Other Restricted Stock		0
Loans, Net	1,270,263	1,199,566
Accrued Interest Receivable	7,402	7,419
Financial Liabilities:
Demand, Savings, and Money Market Deposits	(1,338,858)	(1,311,748)
Time Deposits	(335,093)	(333,170)
Short-term Borrowings	(102,792)	(71,534)
Long-term Debt	(90,313)	(95,764)
Accrued Interest Payable	$ (690)	$ (1,275)