-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DsjuEk52289c4NGhuSMyB/cG8tggsaOJonj1cwD62ub/GFeGDSYjrdOWEaoLs1aO DzLCj8DrDlPt1FvYRaO6RA== 0000908834-01-000070.txt : 20010315 0000908834-01-000070.hdr.sgml : 20010315 ACCESSION NUMBER: 0000908834-01-000070 CONFORMED SUBMISSION TYPE: DEF 14A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20010314 FILED AS OF DATE: 20010314 FILER: COMPANY DATA: COMPANY CONFORMED NAME: RIVER VALLEY BANCORP CENTRAL INDEX KEY: 0001015593 STANDARD INDUSTRIAL CLASSIFICATION: SAVINGS INSTITUTION, FEDERALLY CHARTERED [6035] IRS NUMBER: 351984567 STATE OF INCORPORATION: IN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: DEF 14A SEC ACT: SEC FILE NUMBER: 000-21765 FILM NUMBER: 1568183 BUSINESS ADDRESS: STREET 1: 430 CLIFTY DR CITY: MADISON STATE: IN ZIP: 47250 BUSINESS PHONE: 8122734949 MAIL ADDRESS: STREET 1: 430 CLIFTY DR CITY: MADISON STATE: IN ZIP: 47250 DEF 14A 1 0001.txt PROXY STATEMENT FOR RIVER VALLEY BANCORP SCHEDULE 14A Information Required in Proxy Statement SCHEDULE 14A INFORMATION Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934 Filed by the Registrant: Yes. Filed by a Party other than the Registrant: No. Check the appropriate box: [ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission Only (as Permitted by Rule 14a-6(e)(2)) [X] Definitive Proxy Statement [ ] Definitive Additional Materials [ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12 RIVER VALLEY BANCORP (Name Of Registrant As Specified In Its Charter) RIVER VALLEY BANCORP (Name of Person(s) Filing Proxy Statement) Payment of Filing Fee (Check the appropriate box): [X] No fee required [ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11 (1) Title of each class of securities to which transaction applies: N/A (2) Aggregate number of securities to which transaction applies: N/A (3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is calculated and state how it was determined): N/A (4) Proposed maximum aggregate value of transaction: N/A (5) Total fee paid: [ ] Fee paid previously with preliminary materials [ ] Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. N/A (1) Amount Previously Paid: (2) Form, Schedule or Registration Statement No.: (3) Filing Party: (4) Date Filed: River Valley Bancorp 303 Clifty Drive P.O. Box 1590 Madison, Indiana 47250-0590 (812) 273-4949 ---------------------------------------- NOTICE OF ANNUAL MEETING OF SHAREHOLDERS ---------------------------------------- To Be Held On April 18, 2001 Notice is hereby given that the Annual Meeting of Shareholders of River Valley Bancorp (the "Holding Company") will be held at 430 Clifty Drive, Madison, Indiana, on Wednesday, April 18, 2001, at 3:00 p.m., Eastern Standard Time. The Annual Meeting will be held for the following purposes: 1. Election of Directors. Election of two of the directors of the Holding Company for terms expiring in 2004, and one director for a term expiring in 2002. 2. Other Business. Such other matters as may properly come before the meeting or any adjournment thereof. Shareholders of record at the close of business on February 19, 2001, are entitled to vote at the meeting or any adjournment thereof. We urge you to read the enclosed Proxy Statement carefully so that you may be informed about the business to come before the meeting, or any adjournment thereof. At your earliest convenience, please sign and return the accompanying proxy in the postage-paid envelope furnished for that purpose. A copy of our Annual Report for the fiscal year ended December 31, 2000, is enclosed. The Annual Report is not a part of the proxy soliciting material enclosed with this letter. By Order of the Board of Directors /s/ Matthew P. Forrester Matthew P. Forrester, President Madison, Indiana March 14, 2001 IT IS IMPORTANT THAT THE PROXIES BE RETURNED PROMPTLY. THEREFORE, WHETHER OR NOT YOU PLAN TO BE PRESENT IN PERSON AT THE ANNUAL MEETING, PLEASE SIGN, DATE AND COMPLETE THE ENCLOSED PROXY AND RETURN IT IN THE ENCLOSED ENVELOPE WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. River Valley Bancorp 303 Clifty Drive P.O. Box 1590 Madison, Indiana 47250-0590 (812) 273-4949 --------------- PROXY STATEMENT --------------- FOR ANNUAL MEETING OF SHAREHOLDERS April 18, 2001 This Proxy Statement is being furnished to the holders of common stock, without par value (the "Common Stock"), of River Valley Bancorp (the "Holding Company"), an Indiana corporation, in connection with the solicitation of proxies by the Board of Directors of the Holding Company to be voted at the Annual Meeting of Shareholders to be held at 3:00 p.m., Eastern Standard Time, on April 18, 2001, at 430 Clifty Drive, Madison, Indiana, and at any adjournment of such meeting. The principal asset of the Holding Company consists of 100% of the issued and outstanding shares of common stock, $.01 par value per share, of River Valley Financial Bank (the "Bank"). This Proxy Statement is expected to be mailed to the shareholders of the Holding Company on or about March 14, 2001. The proxy solicited hereby, if properly signed and returned to the Holding Company and not revoked prior to its use, will be voted in accordance with the instructions contained therein. If no contrary instructions are given, each proxy received will be voted for each of the matters described below and, upon the transaction of such other business as may properly come before the meeting, in accordance with the best judgment of the persons appointed as proxies. Any shareholder giving a proxy has the power to revoke it at any time before it is exercised by (i) filing with the Secretary of the Holding Company written notice thereof (Lonnie D. Collins, 303 Clifty Drive, P.O. Box 1590, Madison, Indiana 47250-0590), (ii) submitting a duly executed proxy bearing a later date, or (iii) by appearing at the Annual Meeting and giving the Secretary notice of his or her intention to vote in person. Proxies solicited hereby may be exercised only at the Annual Meeting and any adjournment thereof and will not be used for any other meeting. VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF Only shareholders of record at the close of business on February 19, 2001 ("Voting Record Date"), will be entitled to vote at the Annual Meeting. On the Voting Record Date, there were 868,874 shares of the Common Stock issued and outstanding, and the Holding Company had no other class of equity securities outstanding. Each share of Common Stock is entitled to one vote at the Annual Meeting on all matters properly presented at the Annual Meeting. The holders of over 50% of the outstanding shares of Common Stock as of the Voting Record Date must be present in person or by proxy at the Annual Meeting to constitute a quorum. In determining whether a quorum is present, shareholders who abstain, cast broker non-votes, or withhold authority to vote on one or more director nominees will be deemed present at the Annual Meeting. The following table sets forth certain information regarding the beneficial ownership of the Common Stock as of February 19, 2001, by each person who is known by the Holding Company to own beneficially 5% or more of the Common Stock. Unless otherwise indicated, the named beneficial owner has sole voting and dispositive power with respect to the shares.
Number of Shares Name and Address of Common Stock Percent of Beneficial Owner(1) Beneficially Owned (1) of Class ---------------------- ---------------------- -------- First Bankers Trust Company, as Trustee 91,889 (2) 10.58% 1201 Broadway Quincy, IL 62301 Jeffrey L. Gendell 86,500 (3) 9.96% Tontine Financial Partners, L.P. Tontine Management, L.L.C. 200 Park Avenue, Suite 3900 New York, NY 10166
- ---------------- (1) The information in this chart is based on Schedule 13D and 13G Report(s) filed by the above-listed person(s) with the Securities and Exchange Commission (the "SEC") containing information concerning shares held by them. It does not reflect any changes in those shareholdings which may have occurred since the date of such filings. (2) These shares are held by the Trustee of the River Valley Bancorp Employee Stock Ownership Plan and Trust (the "ESOP"). The Employees participating in the ESOP are entitled to instruct the Trustee how to vote shares held in their accounts under the ESOP. Unallocated shares held in a suspense account under the ESOP are required under the ESOP terms to be voted by the Trustee in the same proportion as allocated shares are voted. (3) These shares are held by Tontine Partners, L.P., a Delaware limited partnership. Tontine Management, L.L.C. is its general partner and Mr. Gendell is the managing member of the general partner. These persons share voting and investment power with respect to the shares. PROPOSAL I -- ELECTION OF DIRECTORS The Board of Directors consists of seven members. The By-Laws provide that the directors are to be divided into three classes as nearly equal in number as possible. The members of each class are to be elected for a term of three years and until their successors are elected and qualified. One class of directors is to be elected annually. Directors must have their principal domicile in either Jefferson County, Indiana or Trimble County, Kentucky, must have had a loan or deposit relationship with the Bank for a continuous period of twelve months prior to their nomination to the Board, and non-employee directors must have served as a member of a civic or community organization based in Jefferson County, Indiana or Trimble County, Kentucky for at least a continuous period of twelve months during the five years prior to their nomination to the Board. The three nominees for election as a director this year are Jonnie L. Davis, Earl W. Johann and Charles J. McKay, each of whom currently serves as a director whose current term will expire upon completion of the election at the Annual Meeting. Jonnie L. Davis and Charles J. McKay have been nominated to serve for three-year terms expiring in 2004. Mr. McKay was added to the Board of Directors of the Holding Company in 2000 to fill a vacancy created by the death of Cecil L. Dorten. Because no director of the Holding Company may serve beyond the year in which he turns age 70, Earl W. Johann has been nominated to serve for a one-year term expiring in 2002. Unless otherwise directed, each proxy executed and returned by a shareholder will be voted for the election of the nominees listed below. If any person named as a nominee should be unable or unwilling to stand for election at the time of the Annual Meeting, the proxy holders will nominate and vote for a replacement nominee recommended by the Board of Directors. At this time, the Board of Directors knows of no reason why the nominees listed below may not be able to serve as directors if elected. The following table sets forth certain information regarding the nominees for the position of director of the Holding Company, including the number and percent of shares of Common Stock beneficially owned by such persons as of the Voting Record Date. Unless otherwise indicated, each nominee has sole investment and/or voting power with respect to the shares shown as beneficially owned by him. No nominee for director is related to any other nominee for director or executive officer of the Holding Company by blood, marriage, or adoption, and there are no arrangements or understandings between any nominee and any other person pursuant to which such nominee was selected. The table also sets forth the number of shares of Holding Company Common Stock beneficially owned by all directors and executive officers of the Holding Company as a group.
Common Stock Expiration of Director of the Beneficially Term as Holding Owned as of Percentage Name Director Company Since February 19, 2001(1) of Class ---- -------- ------------- -------------------- -------- Director Nominees - ----------------- Jonnie L. Davis 2004 1997 5,015 (2) .58% Earl W. Johann 2002 1996 15,101 (3) 1.73% Charles J. McKay 2004 2000 1,100 (4) .13% Directors Continuing in Office - -------------------- Robert W. Anger 2003 1996 10,142 (5) 1.16% Matthew P. Forrester 2003 1999 14,127 (6) 1.62% Michael J. Hensley 2002 1996 11,273 (7) 1.29% Fred W. Koehler 2002 1996 26,859 (8) 3.08% All directors and executive officers as a group (13 persons) 133,570 (9) 14.73%
- ---------------- (1) Based upon information furnished by the respective director nominees. Under applicable regulations, shares are deemed to be beneficially owned by a person if he or she directly or indirectly has or shares the power to vote or dispose of the shares, whether or not he or she has any economic power with respect to the shares. Includes shares beneficially owned by members of the immediate families of the directors residing in their homes. These share figures include shares allocated to employees' accounts under the ESOP as of December 31, 1999. (2) Of these shares, 500 are held jointly by Mrs. Davis and her spouse, 550 are held under the River Valley Bancorp Recognition and Retention Plan and Trust (the "RRP"), and 3,142 are subject to stock options granted under the River Valley Bancorp Stock Option Plan (the "Option Plan"). Excludes 1,429 shares subject to a stock option granted under the Option Plan which may not be exercised within 60 days following the Voting Record Date. (3) Of these shares, 824 are held under the RRP and 4,213 are subject to stock options granted under the Option Plan. Excludes 2,143 shares subject to a stock option granted under the Option Plan which may not be exercised within 60 days following the Voting Record Date. (4) Includes 100 shares held jointly by Mr. McKay and his spouse and 1,000 shares subject to a stock option granted under the Option Plan. (5) Of these shares, 1,023 are held jointly by Mr. Anger and his spouse, 824 are held under the RRP and 4,213 are subject to stock options granted under the Option Plan. Excludes 2,143 shares subject to a stock option granted under the Option Plan which may not be exercised within 60 days following the Voting Record Date. (6) Of these shares, 4,926 are held jointly by Mr. Forrester and his spouse, 4,000 are held under the RRP, 96 are held by him as custodian for his minor children, and 2,000 are subject to a stock option granted under the Option Plan. Excludes 13,000 shares subject to stock options granted under the Option Plan which may not be exercised within 60 days following the Voting Record Date. (7) Of these shares, 5,000 are held jointly by Mr. Hensley and his spouse, 824 are held under the RRP and 4,213 are subject to stock options granted under the Option Plan. Excludes 2,143 shares subject to a stock option granted under the Option Plan which may not be exercised within 60 days following the Voting Record Date. (8) Of these shares, 916 are held under the RRP and 4,570 shares are subject to stock options granted under the Option Plan. Excludes 2,381 shares subject to a stock option granted under the Option Plan which may not be exercised within 60 days following the Voting Record Date. (9) Of these shares, 13,003 are held under the RRP, 37,927 are subject to stock options granted under the Option Plan, and 6,008 were allocated to such persons under the River Valley Bancorp Employee Stock Ownership Plan and Trust (the "ESOP") as of December 31, 1999. Excludes 43,088 shares subject to stock options granted under the Option Plan which may not be exercised within 60 days following the Voting Record Date. Presented below is certain information concerning the director nominees of the Holding Company: Robert W. Anger (age 63) served as the Bank's Vice President -- Lending from August, 1995 until his retirement in January, 1999. Prior to that, Mr. Anger served as the Bank's President and Chief Executive Officer. Jonnie L. Davis (age 66) is retired. From July, 1995 to December, 1998, Ms. Davis served as an administrative assistant with Fewel, Pettitt, Bender & Associates, a surveying firm in Hanover, Indiana. From July 1994 to July 1995, Ms. Davis served as an accounting clerk for Stockdale Motors, an automobile retailer in Madison, Indiana. From April 1984 to December 1994, Ms. Davis served as a bookkeeping clerk for D&B Enterprises, a partnership involved in owning and operating apartment complexes and other nonresidential real estate ventures. Matthew P. Forrester (age 44) became President and Chief Executive Officer of the Holding Company and the Bank in October, 1999; theretofore he served as Senior Vice President, Treasurer and Chief Financial Officer of Home Loan Bank and Home Loan Bancorp in Fort Wayne, Indiana for more than five years. Michael J. Hensley (age 45) is a partner in the law firm Hensley, Walro, Collins and Hensley. Mr. Hensley served as a Compliance Officer, Assistant Trust Officer and the General Counsel to The Madison Bank & Trust Company from 1980 to January, 1989. Earl W. Johann (age 69) retired in 1999; previously he served as the President and Chairman of the Board of Madison Distributing Co. since 1979. Fred W. Koehler (age 60) is the former owner of Koehler Tire Co., a tire and automotive parts store in Madison, Indiana, and is the Jefferson County Auditor. Charles J. McKay (age 48) is a certified public accountant with the firm Scott Callicotte & McKay LLC, which is based in Madison, Indiana. THE DIRECTORS SHALL BE ELECTED UPON RECEIPT OF A PLURALITY OF VOTES CAST AT THE ANNUAL SHAREHOLDERS MEETING. PLURALITY MEANS THAT INDIVIDUALS WHO RECEIVE THE LARGEST NUMBER OF VOTES CAST ARE ELECTED UP TO THE MAXIMUM NUMBER OF DIRECTORS TO BE CHOSEN AT THE MEETING. ABSTENTIONS, BROKER NON-VOTES, AND INSTRUCTIONS ON THE ACCOMPANYING PROXY TO WITHHOLD AUTHORITY TO VOTE FOR ONE OR MORE OF THE NOMINEES WILL RESULT IN THE RESPECTIVE NOMINEE RECEIVING FEWER VOTES. HOWEVER, THE NUMBER OF VOTES OTHERWISE RECEIVED BY THE NOMINEE WILL NOT BE REDUCED BY SUCH ACTION. The Board of Directors and its Committees During the fiscal year ended December 31, 2000, the Board of Directors of the Holding Company acted by written consent or held meetings six times. No director attended fewer than 75% of the aggregate total number of meetings during the last fiscal year of the Board of Directors of the Holding Company held while he served as director and of meetings of committees which he served during that fiscal year. The Board of Directors of the Holding Company has an Audit Committee and a Stock Compensation Committee, among its other Board Committees. All committee members are appointed by the Board of Directors. The Audit Committee, comprised of all directors except Matthew P. Forrester, recommends the appointment of the Holding Company's independent accountants, and meets with them to outline the scope and review the results of such audit. The Audit Committee met five times during the fiscal year ended December 31, 2000. The Stock Compensation Committee administers the Option Plan and the RRP. The members of that Committee are all directors except Matthew P. Forrester. The Stock Compensation Committee met two times during the fiscal year ended December 31, 2000. The Board of Directors of the Holding Company nominated the slate of directors set forth in the Proxy Statement. Although the Board of Directors of the Holding Company will consider nominees recommended by shareholders, it has not actively solicited recommendations for nominees from shareholders nor has it established procedures for this purpose. Directors must satisfy certain qualification requirements set forth in the Holding Company's By-Laws. Article III, Section 12 of the Holding Company's By-Laws provides that shareholders entitled to vote for the election of directors may name nominees for election to the Board of Directors but there are certain requirements that must be satisfied in order to do so. Among other things, written notice of a proposed nomination must be received by the Secretary of the Holding Company not less than 120 days prior to the Annual Meeting; provided, however, that in the event that less than 130 days' notice or public disclosure of the date of the meeting is given or made to shareholders (which notice or public disclosure includes the date of the Annual Meeting specified in the Holding Company's By-Laws if the Annual Meeting is held on such date), notice must be received not later than the close of business on the 10th day following the day on which such notice of the date of the meeting was mailed or such public disclosure was made. Management Remuneration and Related Transactions Remuneration of Named Executive Officer During the fiscal year ended December 31, 2000, no cash compensation was paid directly by the Holding Company to any of its executive officers. Each of such officers was compensated by the Bank. The following tables set forth information as to annual, long term and other compensation for services in all capacities to the President and Chief Executive Officer of the Holding Company (the "Named Executive Officer") for the last two fiscal years. There were no other executive officers of the Holding Company who earned over $100,000 in salary and bonuses during the fiscal year ended December 31, 2000.
Summary Compensation Table Long Term Compensation Annual Compensation Awards -------------------------------------- ----------------------- Other All Annual Restricted Securities Other Name and Fiscal Compen- Stock Underlying Compen- Principal Position Year Salary ($)(2) Bonus sation(3) Awards($) Options(#) sation($)(5) - ------------------ ---- ------------- ----- --------- --------- ---------- ------------ Matthew P. Forrester, 2000 $103,449 $3,925 --- --- 5,000 $762 President and Chief 1999 $ 24,044 --- --- $63,125 (4) 10,000 $--- Executive Officer (1)
- ------------------------- (1) Mr. Forrester became President and Chief Executive Officer on October 12, 1999. (2) Includes directors fees. (3) The Named Executive Officer received certain perquisites, but, except as otherwise noted, the incremental cost of providing such perquisites did not exceed the lesser of $50,000 or 10% of his salary and bonus. (4) The value of the restricted stock awards was determined by multiplying the fair market value of the Common Stock on the date the shares were awarded by the number of shares awarded. These shares vest over a five year period, commencing with the date of the grant. As of December 31, 2000, 4,000 shares of restricted stock with a value of $64,000 were held by Mr. Forrester. Dividends paid on the restricted shares are payable to the grantee as the shares are vested and are not included in the table. (5) Constitutes matching contributions made by the Bank to the Holding Company's 401(k) Plan. Stock Options The following table sets forth information related to options granted during fiscal year 2000 to the Named Executive Officer.
Option Grants - Last Fiscal Year Individual Grants % of Total Options Granted Exercise or Options to Employees Base Price Expiration Name Granted(#)(1) In Fiscal Year ($/Share)(2) Date(3) ---- ------------- -------------- ------------ ------- Matthew P. Forrester 5,000 29.41% $13.97 9/18/2010
- -------------------- (1) Options to acquire shares of the Corporation's Common Stock. (2) The option exercise price may be paid in cash or with the approval of the Stock Compensation Committee in shares of the Corporation's Common Stock or a combination thereof. The option exercise price equaled the market value of a share of the Corporation's Common Stock on the date of grant. (3) Mr. Forrester's options are exercisable at the rate of 20% per year over a 5-year period. The following table includes the number of shares covered by stock options held by Matthew P. Forrester as of December 31, 2000. Also reported are the values for "in-the-money" options (options whose exercise price is lower than the market value of the shares at fiscal year end) which represent the spread between the exercise price of any such existing stock options and the fiscal year-end market price of the stock.
Option Values as of 12/31/00 ---------------------------- Number of Unexercised Value of Unexercised In-the-Money Options at Fiscal Year End Options at Fiscal Year End (1) --------------------------------- ----------------------------------- Name Exercisable Unexercisable(2) Exercisable Unexercisable(2) ---- ----------- ---------------- ----------- ---------------- Matthew P. Forrester 2,000 13,000 $6,750 $37,150
- ------------------------ (1) Amounts reflecting gains on outstanding options are based on the average between the high and low prices for the shares on December 29, 2000, which was $16.00 per share. (2) The shares represented could not be acquired by the Named Executive Officer as of December 31, 2000. No stock options were exercised by the Named Executive Officer during the fiscal year ended December 31, 2000. Employment Contracts Effective October 12, 1999, the Bank entered into an employment agreement with Matthew P. Forrester, the Bank's President and Chief Executive Officer. The agreement is for a three-year term and extends annually for an additional one-year term to maintain its three-year term if the Bank's Board of Directors determines to so extend it. Under the agreement, the employee receives an initial annual salary equal to his current salary, subject to increases approved by the Board of Directors. The agreement also provides, among other things, for the employee's participation in other bonus and fringe benefit plans available to other employees. The employee may terminate his employment upon ninety (90) days' prior written notice to the Bank. The Bank may discharge the employee for just cause (as defined in the agreement) at any time or in certain events specified by applicable law or regulations. If the Bank terminates the employee's employment for other than just cause or the employee is constructively discharged and such termination does not occur within twelve months after a change in control of the Bank or the Holding Company, the agreement provides for the employee's receipt of a lump-sum or periodic payment of an amount equal to the sum of (A) his base salary through the end of the then-current term, plus (B) his base salary for an additional twelve-month period, plus (C) in the employee's sole discretion and in lieu of continued participation in his employer's fringe benefit plans, cash in an amount equal to the cost of obtaining all health, life, disability and other benefits in which the employee would otherwise be eligible to participate. In the event the Bank terminates the employee's employment for other than just cause or the employee is constructively discharged within twelve months following a change in control of the Bank or the Holding Company, the agreement provides for the employee's receipt of a lump-sum payment of an amount equal to the difference between (A) the product of 2.99 times his "base amount" (as defined in Section 280G(b)(3) of the Internal Revenue Code of 1986, as amended ("Code")) and (B) the sum of any other parachute payments, as determined under Section 280G(b)(2) of the Code. If the payments provided for under the agreement, together with any other payments made to the employee by the Bank, are determined to be payments in violation of the "golden parachute" rules of the Code, such payments will be reduced to the largest amount which would not cause the Bank to lose a tax deduction for such payments under those rules. As of the date hereof, the cash compensation that would be paid to Mr. Forrester under the agreement if such agreement was terminated after a change in control of the Bank would be $328,900. The Holding Company has guaranteed the obligations of the Bank under this employment agreement. Special Termination Agreements The Bank has entered into Termination Agreements with certain of its employees (the "Covered Employees"). The Termination Agreements have terms ending on February 1st of each year, subject to annual extension by the Board of Directors of the Bank, and provide that upon the termination of a Covered Employee's employment by the employer for other than cause or by the Covered Employee for constructive termination, or within 12 months following a "change in control" (as defined in the Termination Agreements) which occurs during the term of the applicable Termination Agreement, such Covered Employee shall be entitled to a lump sum payment of 100% of his or her base amount of compensation, as determined pursuant to Section 280G(b)(3) of the Code (the "Termination Benefit"). Covered Employees may elect to receive the Termination Benefit in semi-monthly payments over a twelve month period. The Termination Agreements also provide for continued life, health and disability coverage for Covered Employees until the expiration of twelve months following the termination of employment or until the Covered Employee obtains coverage from another employer, whichever occurs first. If a Covered Employee obtains coverage from another employer, and does not have substantially identical life, health and disability coverage, the Bank shall maintain substantially identical coverage on behalf of the Covered Employee for a period of twelve months. Compensation of Directors Outside directors of the Holding Company are paid directors' fees of $250 for each meeting attended. All directors of the Bank are entitled to receive monthly director fees in the amount of $835 for their services. Jerry Allen also receives $850 per month as a Director Emeritus of the Bank. Outside directors of the Bank also receive fees in the amount of $250 for each special meeting of the Board. Total fees paid to or deferred by directors, former advisory directors, and Mr. Allen for the year ended December 31, 2000 were $76,860. The Bank's directors and directors emeritus may, pursuant to deferred compensation agreements, defer payment of some or all of such monthly directors' fees or salary for a maximum period of five years. Upon reaching the retirement age specified in their respective joinder agreements, directors who participate in the deferred compensation plan receive fixed monthly payments for a specific period ranging from 60 to 180 months, depending on the specific director's election in his joinder agreement, but may also elect to receive their benefits in a lump sum in the event of financial hardship. The agreements also provide for death and disability benefits. The Bank has purchased paid-up life insurance on the lives of directors and directors emeritus participating in the deferred compensation plan to fund benefits payable thereunder. The insurance is provided by Pacific Mutual and Transamerica. At December 31, 2000, the cash surrender value of the policies was carried on the books of the Bank at approximately $1,096,499. The Bank expensed $14,144 in connection with these agreements for the year ended December 31, 2000. Transactions With Certain Related Persons The Bank has followed a policy of offering to its directors, officers, and employees real estate mortgage loans secured by their principal residence and other loans. These loans are made in the ordinary course of business with the same collateral, interest rates and underwriting criteria as those of comparable transactions prevailing at the time and do not involve more than the normal risk of collectibility or present other unfavorable features. The law firm Hensley, Walro, Collins and Hensley, based in Madison, Indiana, of which Michael J. Hensley, a director of the Holding Company, is a partner, serves as counsel to the Bank in connection with loan delinquencies and related matters. The Bank expects to continue using the services of this law firm for such matters in the current fiscal year. Audit Committee Report, Charter, and Independence Audit Committee Report. The Audit Committee reports as follows with respect to the audit of the Holding Company's financial statements for the fiscal year ended December 31, 2000, included in the Holding Company's Shareholder Annual Report accompanying this Proxy Statement ("2000 Audited Financial Statements"): The Committee has reviewed and discussed the Holding Company's 2000 Audited Financial Statements with the Company's management. The Committee has discussed with its independent auditors (Olive LLP) the matters required to be discussed by Statement on Auditing Standards 61, which include, among other items, matters related to the conduct of the audit of the Holding Company's financial statements. Olive LLP did not use any employees other than its full-time permanent employees on its audit of the Holding Company's 2000 Audited Financial Statements. The Committee has received written disclosures and the letter from the independent auditors required by Independence Standards Board Standard No. 1 (which relates to the auditor's independence from the Holding Company and its related entities) and has discussed with the auditors the auditors' independence from the Holding Company. The Committee considered whether the provision of services by its independent auditors, other than audit services and reviews of Forms 10-Q, is compatible with maintaining the auditors' independence. Based on review and discussions of the Holding Company's 2000 Audited Financial Statements with management and discussions with the independent auditors, the Audit Committee recommended to the Board of Directors that the Holding Company's 2000 Audited Financial Statements be included in the Holding Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2000. This Report is respectfully submitted by the Audit Committee of the Holding Company's Board of Directors. Audit Committee Members ----------------------- Robert W. Anger Earl W. Johann Jonnie L. Davis Fred W. Koehler Michael J. Hensley Charles J. McKay Audit Committee Charter. The Board of Directors has adopted a written charter for the Audit Committee, a copy of which is attached as Exhibit A. The Board of Directors reviews and approves changes to the Audit Committee Charter annually. Accountants' Fees Audit Services. The aggregate fees billed by Olive LLP for audit services relating to the audit of the 2000 Audited Financial Statements and for reviews of the Holding Company's financial statements included in its Forms 10-Q for the year 2000 were $42,800. Financial Information System Design and Implementation Fees. Olive LLP did not bill the Holding Company for any information technology services rendered during 2000. All Other Fees. Olive LLP billed the Holding Company $6,955 for services other than those described above rendered during 2000. Independence of Audit Committee Members. The Holding Company's Audit Committee is comprised of all of the directors except Matthew P. Forrester. A majority of these members meets the requirements for independence set forth in the Listing Standards of the National Association of Securities Dealers. Mr. Anger retired from his position as an employee of the Bank in January, 1999, and Mr. Hensley provides certain legal services to the Bank. ACCOUNTANTS On May 18, 2000, the Holding Company engaged the accounting firm of Olive LLP to examine the consolidated financial statements of the Holding Company for the fiscal year ending December 31, 2000. This action was taken following a recommendation of the Holding Company's Audit Committee to the Board of Directors to take such action and the approval of the change in auditors by the Board of Directors. Grant Thornton LLP, which had acted as the independent public accountant for the Holding Company since 1996 and audited its consolidated financial statements for 1998 and 1999, was notified of the Holding Company's decision. The audit reports issued by Grand Thornton LLP with respect to the Holding Company's consolidated financial statements for 1998 and 1999 did not contain an adverse opinion or disclaimer of opinion, and were not qualified as to uncertainty, audit scope or accounting principles. During 1998 and 1999 (and any subsequent interim period), there had been no disagreements between the Holding Company and Grant Thornton LLP on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of Grant Thornton LLP, would have caused it to make a reference to the subject matter of the disagreement in connection with its audit report. Moreover, none of the events listed in Item 304(a)(1)(iv)(B) of Regulation S-B occurred during 1998 or 1999 or any subsequent interim period. Prior to its engagement, Olive LLP had not been consulted by the Holding Company as to the application of accounting principles to a specific completed or contemplated transaction or the type of audit opinion that might be rendered on the Holding Company's financial statements. It is anticipated that a representative of Olive LLP will be present at the Annual Meeting with the opportunity to make a statement if he or she so desires. He or she will also be available to respond to any appropriate questions shareholders may have. The Board of Directors of the Holding Company has not yet completed the process of selecting an independent public accounting firm to audit its books, records and accounts for the fiscal year ended December 31, 2001. SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE Section 16(a) of the Securities and Exchange Act of 1934 ("1934 Act") requires that the Holding Company's officers and directors and persons who own more than 10% of the Holding Company's Common Stock file reports of ownership and changes in ownership with the Securities and Exchange Commission (the "SEC"). Officers, directors and greater than 10% shareholders are required by SEC regulations to furnish the Holding Company with copies of all Section 16(a) forms that they file. Based solely on its review of the copies of such forms received by it, and/or written representations from certain reporting persons that no Forms 5 were required for those persons, the Holding Company believes that during the fiscal year ended December 31, 2000, all filing requirements applicable to its officers, directors and greater than 10% beneficial owners with respect to Section 16(a) of the 1934 Act were satisfied in a timely manner. SHAREHOLDER PROPOSALS Any proposal which a shareholder wishes to have presented at the next Annual Meeting of the Holding Company must be received at the main office of the Holding Company for inclusion in the proxy statement no later than 120 days in advance of March 14, 2001. Any such proposal should be sent to the attention of the Secretary of the Holding Company at 303 Clifty Drive, P.O. Box 1590, Madison, Indiana 47250. A shareholder proposal being submitted outside the process of Rule 14a-8 promulgated under the 1934 Act will be considered untimely if it is received by the Holding Company later than 45 days in advance of March 14, 2001. If the Holding Company receives notice of such proposal after such time, each proxy that the Holding Company receives will confer upon it the discretionary authority to vote on the proposal in the manner the proxies deem appropriate. OTHER MATTERS Management is not aware of any business to come before the Annual Meeting other than those matters described in the Proxy Statement. However, if any other matters should properly come before the Annual Meeting, it is intended that the proxies solicited hereby will be voted with respect to those other matters in accordance with the judgment of the persons voting the proxies. The cost of solicitation of proxies will be borne by the Holding Company. The Holding Company will reimburse brokerage firms and other custodians, nominees and fiduciaries for reasonable expenses incurred by them in sending proxy material to the beneficial owners of the Common Stock. In addition to solicitation by mail, directors, officers, and employees of the Holding Company may solicit proxies personally or by telephone without additional compensation. Each shareholder is urged to complete, date and sign the proxy and return it promptly in the enclosed envelope. By Order of the Board of Directors /s/ Matthew P. Forrester Matthew P. Forrester March 14, 2001 Exhibit A River Valley Financial Bank River Valley Bancorp Audit Committee Charter Adopted May 16, 2000 Organization There shall be a committee of the board of directors to be known as the audit committee. The audit committee shall be composed of directors who are independent of the management of the corporation and are free of any relationship that, in the opinion of the board of directors, would interfere with their exercise of independent judgement as a committee member, Statement of Policy The audit committee's primary responsibility is to assist the board in fulfilling its oversight responsibilities by reviewing the financial information which will be provided to the shareholders and others, the systems of internal controls which management and the board of directors have established, and the audit process. In so doing, it is the responsibility of the audit committee to maintain free and open means of communication between the directors, the independent auditors, internal audit/compliance personnel, and the financial management of the corporation. Responsibilities In carrying out its responsibilities, the audit committee believes its policies and procedures should remain flexible, in order to best react to changing conditions and to ensure to the directors and the shareholders that the corporate accounting and reporting practices of the corporation are in accordance with all requirements and are of the highest quality. In carrying out these responsibilities, the audit committee will: o Review and recommend to the directors the independent auditors to be selected to audit the financial statements of the corporation and its divisions and subsidiaries. The committee or the directors, upon recommendation of the committee, shall have the authority and responsibility to select, evaluate, and, where appropriate, replace the independent auditors or to nominate the independent auditors to be proposed for shareholder approval in any proxy statement. The independent auditor is ultimately accountable to the board of directors and the audit committee, as representatives of shareholders. o Meet with the independent auditors and financial management of the corporation to review the scope of the proposed audit for the current year and the audit procedures to be utilized, and at the conclusion thereof review such audit, including any comments or recommendations of the independent auditors. o Review with the independent auditors, the company's internal audit/compliance personnel, and the financial and accounting personnel, the adequacy and effectiveness of the accounting and financial controls of the corporation, and elicit any recommendations for the improvement of such internal control procedures or particular areas where new or more detailed controls or procedures are desirable. Particular emphasis should be given to the adequacy of such internal controls to expose any payments, transactions, or procedures that might be illegal or otherwise improper. Further, the committee periodically should review company policy statements to determine their adherence to the code of conduct. o Review the internal audit/compliance function of the corporation including the independence and authority of its reporting obligations, the proposed audit plans for the coming year and the coordination of such plans with the independent auditors. o Receive prior to each meeting, a summary of findings from completed internal audits. Further a progress report of ongoing audits will be discussed as well as explanation for any deviations from proposed audit plans. o Review the financial statements contained in the annual report to shareholders with management and the independent auditors to determine that the independent auditors are satisfied with the disclosure and content of the financial statements to be presented to the shareholders. Any changes in accounting principles should be reviewed. o Provide sufficient opportunity for the internal/compliance and independent auditors to meet with the members of the audit committee without members of management present. The items to be discussed in these meetings are the independent auditor's evaluation of the corporation's financial, accounting, and auditing personnel and the cooperation that the independent auditors received during the course of the audit. o Require the independent auditors to provide the audit committee a formal written statement delineating all relationships between the auditors and the corporation, consistent with Independence Standards Board Standard 1. o Require the independent auditors to report to the audit committee on matters that may be deemed to affect the independence of the independent auditors, including any management consulting services provided, or proposed to be provided, by the independent auditors for the corporation or any of its affiliates and the fees paid or proposed to be paid for such services; to assess any effect of any of the foregoing on the independence of the independent auditors and the appearance of propriety of any of the foregoing and to direct management to take, or recommend that the board of directors of the corporation take, action in respect of such matters. o Review accounting and financial human resources and succession planning within the company. o Submit the minutes of all meetings of the audit committee to, or discuss the matters discussed at each meeting with, the board of directors. o Investigate any matter brought to its attention within the scope of its duties, with the power to retain outside counsel for this purpose if, in its judgment, that is appropriate. REVOCABLE PROXY RIVER VALLEY BANCORP Annual Meeting of Shareholders April 18, 2001 The undersigned hereby appoints Lonnie D. Collins and Larry C. Fouse, with full powers of substitution, to act as attorneys and proxies for the undersigned to vote all shares of common stock of River Valley Bancorp which the undersigned is entitled to vote at the Annual Meeting of Shareholders to be held at 430 Clifty Drive, Madison, Indiana, on Wednesday, April 18, 2001, at 3:00 p.m., and at any and all adjournments thereof, as follows: 1. The election as directors of all nominees listed below, except as marked to The contrary |_| FOR |_| VOTE WITHHELD INSTRUCTIONS: To withhold authority to vote for any individual nominee, strike a line through the nominee's name on the list below: Jonnie L. Davis Earl W. Johann Charles J. McKay (for a three-year term) (for a one-year term) (for a three-year term) In their discretion, the proxies are authorized to vote on any other business that may properly come before the Meeting or any adjournment thereof. The Board of Directors recommends a vote "FOR" each of the listed propositions. THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS This Proxy may be revoked at any time prior to the voting thereof. The undersigned acknowledges receipt from River Valley Bancorp, prior to the execution of this Proxy, of a Notice of the Meeting, a Proxy Statement and an Annual Report to Shareholders. THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE SPECIFIED, THIS PROXY WILL BE VOTED FOR EACH OF THE PROPOSITIONS STATED. IF ANY OTHER BUSINESS IS PRESENTED AT SUCH MEETING, THIS PROXY WILL BE VOTED BY THOSE NAMED IN THIS PROXY IN THEIR BEST JUDGMENT. AT THE PRESENT TIME, THE BOARD OF DIRECTORS KNOWS OF NO OTHER BUSINESS TO BE PRESENTED AT THE MEETING. _________________, 2001 ---------------------------------------- Signature of Shareholder ---------------------------------------- Signature of Shareholder Please sign as your name appears on the envelope in which this card was mailed. When signing as attorney, executor, administrator, trustee or guardian, please give your full title. If shares are held jointly, each holder should sign. EX-13 2 0002.txt SHAREHOLDER ANNUAL REPORT River Valley Bancorp P.O. Box 1590 Madison, Indiana 47250-0590 (812)273-4949 Fax - (812)273-4944 To Our Shareholders, Customers, and Friends: It is my pleasure to present to you River Valley Bancorp's fifth Annual Report to Shareholders covering the year ending December 31, 2000. While the passing of a century marked a defining moment in time, year 2000 truly was a momentous event in the annals of River Valley Bancorp. I previously characterized the year 1999 as a year of transitions for the organization and it was hoped that 2000 would be the foundation on which River Valley Bancorp would be reinvigorated. I am proud to say that the employees, and communities we serve, have responded. Year 2000 was a record year! A year that was not defined by one or two new records or record improvements, but a year where there was meaningful improvement in nearly every area of financial measurement. Year 2000 was a year that also saw the organization position itself for the future. The Corporation made a commitment to expand and renovate what will be its main bank office. This expansion will afford the Bank to close a duplicate full service office just blocks away while expanding its physical plant to accommodate growth in lending and deposit services. The Bank also made necessary commitments in technological improvements that are providing new efficiencies and controlling operating expenses. The Corporation has positioned itself to respond to opportunities without disregarding conservative principles that have served the organization so well. Operationally for the year ended December 31, 2000, net income was $1,610,000, or basic earnings per share of $1.88, compared to $1,039,000, or $1.03 basic earnings per share, reported in 1999. The return on average assets for fiscal 2000 was 1.05%; the return on average equity was 9.45%. For fiscal 1999 those numbers were 0.76% and 5.87% respectively. The earnings per share reflect continued prudent repurchase of shares to be held as treasury shares. The book value per share was $19.78 as of December 31, 2000 compared to $17.38 at December 31, 1999. The Organization experienced good asset growth in fiscal 2000 led by superior net loan growth. Assets totaled $162.1 million as of December 31, 2000, an increase of 16.9%. Net loans were $141.0 million, an increase of $25.9 million from that recorded as of December 31, 1999, or a 22.5% increase. Deposits also increased by $15.9 million, or 13.9%, to $130.2 million as of December 31, 2000. Additionally, during 2000 the Company continued to reduce non-performing loans, lowered its net loan charge-offs, as well as, increased dollar funding of its allowance for loan losses. As of December 31, 2000, non-performing loans totaled $621,000, or 0.38% of total assets, compared to 0.62% of total assets at year-end 1999. Net loan charge-offs for fiscal 2000 totaled just $47,000, or a 50.5% dollar improvement over the year earlier period. Furthermore, the Corporation made provision for loan losses of $227,000 in year 2000, up from $140,000 provided for in fiscal year 1999. Our Bank's service promise is "Expect a Difference!" We have worked very diligently to demonstrate that to our customer base each and every day. We trust that commitment is illustrated here in these pages. We thank you for your continued support and patronage. Respectfully, /s/ Matthew P. Forrester Matthew P. Forrester President, CEO River Valley Bancorp BUSINESS OF RIVER VALLEY River Valley Bancorp ("River Valley" or the "Corporation"), an Indiana corporation, was formed in 1996 for the primary purpose of purchasing all of the issued and outstanding common stock of River Valley Financial Bank (formerly Madison First Federal Savings and Loan Association; hereinafter "River Valley Financial" or the "Bank") in its conversion from mutual to stock form. The conversion offering was completed on December 20, 1996, with the sale of 1,190,250 common shares at an initial offering price of $10.00 per share. On December 23, 1996, the Corporation utilized approximately $3.0 million of the net conversion proceeds to purchase 95.6% of the outstanding common shares of Citizens National Bank of Madison ("Citizens") in a transaction that was accounted for using the purchase method of accounting. River Valley Financial and Citizens merged on November 20, 1997. Future references to River Valley, River Valley Financial and Citizens are utilized herein, as the context requires. The activities of River Valley have been limited primarily to holding the stock of the Bank. River Valley Financial was organized in 1875 under the laws of the United States of America. River Valley Financial conducts operations from its five full-service office locations in Jefferson County, Indiana and offers a variety of deposit and lending services to consumer and commercial customers in Jefferson and surrounding counties. The Corporation is subject to regulation, supervision and examination by the Office of Thrift Supervision of the U.S. Department of Treasury (the "OTS"). River Valley Financial is subject to regulation, supervision and examination by the OTS and the Federal Deposit Insurance Corporation (the "FDIC"). Deposits in River Valley Financial are insured up to applicable limits by the Savings Association Insurance Fund ("SAIF") of the FDIC. MARKET PRICE OF THE CORPORATION'S COMMON SHARES AND RELATED SHAREHOLDER MATTERS There were 868,874 common shares of River Valley Bancorp outstanding at February 19, 2001, held of record by 379 shareholders. The number of shareholders does not reflect the number of persons or entities who may hold stock in nominee or "street name." Since December of 1996, the Corporation's common shares have been listed on The Nasdaq SmallCap Market ("Nasdaq"), under the symbol "RIVR". Presented on the following page are the high and low sale prices for the Corporation's common shares, as well as cash distributions paid thereon since December 1998. Such sales prices do not include retail financial markups, markdowns or commissions. Information relating to sales prices has been obtained from Nasdaq.
MARKET PRICE OF THE CORPORATION'S COMMON SHARES AND RELATED SHAREHOLDER MATTERS (CONTINUED) Quarter Ended High Low Cash Distributions (1) 2000 December 31, 2000 $16.00 $13.63 $0.100 September 30, 2000 14.25 12.88 0.085 June 30, 2000 13.00 10.44 0.085 March 31, 2000 12.63 10.25 0.075 1999 December 31, 1999 $12.63 $11.50 $0.075 September 30, 1999 14.38 13.00 0.065 June 30, 1999 14.75 12.25 0.065 March 31, 1999 15.75 13.13 0.060 1998 December 31, 1998 $16.00 $13.25 $0.060 September 30, 1998 19.00 13.75 0.055 June 30, 1998 20.75 18.38 0.055 March 31, 1998 19.75 18.50 0.050
(1) River Valley Financial had filed a request with the Internal Revenue Service ("IRS") in 1995 to deconsolidate the Bank's subsidiaries in future federal income tax return filings. In August 1998, the Corporation finalized a closing agreement with the IRS that enabled the Corporation and each of its subsidiaries to file separate returns. By definition, the 1998 cash distributions have been deemed a tax-free return of capital. The high and low sales prices for River Valley's common shares between December 31, 2000 and February 19, 2001 were $16.88 and $15.19, respectively. Under OTS regulations applicable to converted savings associations, River Valley Financial is not permitted to pay a cash dividend on its common shares if the regulatory capital of River Valley Financial would, as a result of the payment of such dividend, be reduced below the amount required for the liquidation account (which was established for the purpose of granting a limited priority claim on the assets of River Valley Financial, in the event of a complete liquidation, to those members of River Valley Financial before the Conversion who maintain a savings account at River Valley Financial after the Conversion) or applicable regulatory capital requirements prescribed by the OTS. Regulations of the OTS impose limitations on the payment of dividends and other capital distributions by savings associations. The OTS recently amended its capital distribution regulation in a final rule which took effect on April 1, 1999. Because the Bank is a subsidiary of a savings and loan holding company, it is required to file a notice with the OTS 30 days before making any capital distributions to the Holding Company. It may also have to file an application for approval of a proposed capital distribution with the OTS if the Bank is not eligible for expedited treatment under the OTS's application processing rules, or the total amount of all capital distributions, including the proposed capital distribution, for the applicable calendar year would exceed an amount equal to the Bank's net earnings for that year to date plus the Bank's retained net earnings for the preceding two years. The Bank must also file an application for approval of a proposed capital distribution if, following the proposed distribution, the Bank would not be at least adequately capitalized under the OTS prompt corrective action regulations, or if the proposed distribution would violate a prohibition contained in any applicable statute, regulation, or agreement between the OTS or the FDIC. SELECTED CONSOLIDATED FINANCIAL INFORMATION AND OTHER DATA The following tables set forth certain information concerning the consolidated financial condition, earnings, and other data regarding River Valley at the dates and for the periods indicated.
Selected consolidated financial condition data: (1) At December 31, 2000 1999 1998 1997 1996 Total amount of: (In thousands) Assets $162,130 $138,695 $138,369 $136,933 $145,541 Loans receivable - net (2) 140,970 115,131 112,385 111,887 108,994 Cash and cash equivalents (3) 6,382 8,052 12,307 5,765 8,785 Mortgage-backed and related securities (4) 1,918 4,209 5,986 8,978 12,846 Investment securities (4) 5,329 5,230 1,283 4,272 8,948 Deposits 130,225 114,251 118,151 114,955 125,656 FHLB advances and other borrowings 13,450 6,500 270 2,000 1,100 Shareholders' equity- net 17,184 16,866 18,613 17,989 16,805 Summary of consolidated earnings data: (1) Year Ended December 31, 2000 1999 1998 1997 1996 (In thousands, except share data) Total interest income $ 11,118 $ 9,734 $10,108 $10,362 $ 5,875 Total interest expense 5,637 4,617 4,842 5,049 3,412 -------- --------- ------- ------- ---------- Net interest income 5,481 5,117 5,266 5,313 2,463 Provision for losses on loans 227 140 275 304 22 -------- --------- ------- ------- ---------- Net interest income after provision for losses on loans 5,254 4,977 4,991 5,009 2,441 Other income 1,053 844 1,188 1,134 578 General, administrative and other expense 3,764 4,080 4,093 4,003 2,870 -------- --------- ------- ------- ---------- Earnings before income tax expense 2,543 1,741 2,086 2,140 149 Income tax expense 933 702 833 830 76 -------- --------- ------- ------- ---------- Net earnings $ 1,610 $1,039 $ 1,253 $ 1,310 $ 73 ======== ========= ======= ======= ========== Basic earnings per share (5) $1.88 $1.03 $1.13 $1.20 N/A ======== ========= ======= ======= ========== Diluted earnings per share (5) $1.87 $1.03 $1.12 $1.18 N/A ======== ========= ======= ======= ==========
---------------------------- (1) River Valley acquired Citizens as of December 20, 1996. The acquisition was accounted for using the purchase method of accounting. The 1998 and 1997 consolidated financial statements reflect the results of operations for a full year while the 1996 financial statements reflect only eleven days of activity with respect to Citizens. (2) Includes loans held for sale. (3) Includes interest earning assets, federal funds sold and certificates of deposit in other financial institutions. (4) Includes securities designated as available for sale. (5) Earnings per share is not applicable for the year ended December 31, 1996, as River Valley converted to stock form in 1996.
SELECTED CONSOLIDATED FINANCIAL INFORMATION AND OTHER DATA (CONTINUED) Selected financial ratios and other data: Year ended December 31, 2000 1999 1998 1997 1996 Interest rate spread during period 3.47% 3.63% 3.66% 3.64% 2.79% Net yield on interest-earning assets (1) 3.79 3.94 4.08 4.00 2.98 Return on assets (2) 1.05 0.76 0.92 0.99 0.08 Return on equity (3) 9.45 5.87 6.85 7.53 1.05 Equity to assets (4) 10.60 12.16 13.45 13.12 11.55 Average interest-earning assets to average interest-bearing liabilities 108.02 108.81 111.07 109.56 104.64 Non-performing assets to total assets (4) 0.38 0.62 1.47 0.58 0.56 Allowance for loan losses to total loans outstanding (4) 1.21 1.28 1.33 1.13 1.06 Allowance for loan losses to non-performing loans (4) 274.07 164.41 75.78 177.72 145.30 Net charge-offs to average total loans outstanding 0.04 0.08 0.06 0.20 0.01 General, administrative and other expense to average assets (5) (6) 2.47 2.97 3.01 2.83 3.33 Dividend payment ratio (7) 18.45 25.73 19.64 11.02 -- Number of full service offices (4) 5 5 5 6 6
- ------------------------------------- (1) Net interest income divided by average interest-earning assets. (2) Net earnings divided by average total assets. (3) Net earnings divided by average total equity. (4) At end of period. (5) General, administrative and other expense divided by average total assets. (6) Includes a $503,000 charge (or .94% of weighted-average assets) in 1996 related to the SAIF recapitalization assessment. (7) Dividends per share divided by diluted earnings per share. River Valley Bancorp MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS General As discussed previously, River Valley was incorporated for the primary purpose of owning all of the outstanding shares of River Valley Financial. As a result, the discussion that follows focuses on River Valley Financial's financial condition and results of operations for the periods presented. The following discussion and analysis of the financial condition as of December 31, 2000 and River Valley's results of operations for periods prior to that date should be read in conjunction with the consolidated financial statements and the notes thereto, included elsewhere in this Annual Report. In addition to the historical information contained herein, the following discussion contains forward-looking statements that involve risks and uncertainties. River Valley's operations and River Valley's actual results could differ significantly from those discussed in the forward-looking statements. Some of the factors that could cause or contribute to such differences are discussed herein but also include, but are not limited to, changes in the economy and interest rates in the nation and River Valley's general market area. The forward-looking statements contained herein include those with respect to the following matters: 1. Management's determination as to the amount and adequacy of the loan loss allowance; 2. The effect of changes in interest rates on financial condition and results of operations; 3. The effects of proposed legislation that would eliminate the federal thrift charter and the separate federal regulation of thrifts; 4. Management's opinion as to the effect of recent accounting pronouncements on River Valley's consolidated financial position and results of operations. Discussion of Changes in Financial Condition from December 31, 1999 to December 31, 2000 At December 31, 2000, River Valley's consolidated assets totaled $162.1 million, representing an increase of $23.4 million over the December 31, 1999 total. This increase in assets was funded in part by a $15.9 million increase in deposits and a $7.0 million increase in borrowings. Deposits increased to $130.2 million as of December 31, 2000 from $114.3 million while borrowings increased from $6.5 million as of December 31, 1999 to $13.5 million as of December 31, 2000. Shareholders' equity was $17.2 million as December 31, 2000, a net increase of $0.3 million from $16.9 million as of December 31, 1999. The modest increase in equity was attributed primarily to net income of $1.6 million offset by the repurchase of approximately $1,367,000, or 101,623 shares of common stock held as treasury shares. Liquid assets (i.e.), cash, federal funds sold, interest-earning deposits and certificates of deposit) decreased by $1.7 million from December 31, 1999 levels to a total of $6.4 million at December 31, 2000. Investment securities totaled $5.3 million at December 31, 2000, consistent with the $5.2 million reported at December 31, 1999. Mortgage-backed securities decreased by $2.3 million, or 54.8%, to a total of $1.9 million at December 31, 2000, primarily due to principal repayments. River Valley Bancorp MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) Discussion of Changes in Financial Condition from December 31, 1999 to December 31, 2000 (continued) Loans receivable, including loans held for sale, totaled $141.0 million at December 31, 2000, an increase of $25.9 million, or 22.5%, over the $115.1 million total at December 31, 1999. The increase resulted primarily from loan originations during 2000 of $85.3 million, which were partially offset by principal repayments of $58.2 million and sales of $2.6 million. Loan origination volume for 2000 exceeded that of 1999 by $28.3 million, or 49.7%. There were significant increases in all types of lending with the exception of land and multi-family loans. The volume of loan sales into the secondary mortgage market decreased during 2000 from 1999 volume by $11.6 million, or 81.6%, due in large part to the maturation of the market and to interest rate pressures. River Valley's consolidated allowance for loan losses totaled approximately $1.7 million for the year ended December 31, 2000, which represented 1.21% of total loans at that date. The allowance for loan losses totaled $1.5 million, or 1.28% of total loans for the period ended December 31, 1999. Nonperforming loans (defined as loans delinquent greater than 90 days and loans on nonaccrual status) totaled $0.6 million and $0.9 million at December 31, 2000 and 1999, respectively. The consolidated allowance for loan losses represented 274% and 178% of nonperforming loans at December 31, 2000 and 1999, respectively. Although management believes that its allowance for loan losses at December 31, 2000, was adequate based upon the available facts and circumstances, there can be no assurance that additions to such allowance will not be necessary in future periods, which could negatively affect the Corporation's results of operations. Deposits increased by $15.9 million, or 13.9%, to a total of $130.2 million at December 31, 2000, compared to $114.3 million total at December 31, 1999. Savings and demand deposits decreased by $3.0 million, or 5.4%, during 2000, while certificates of deposit increased by $19.0 million, or 32.4%. These fluctuations in balances were attributed to customers' preference for fixed rate savings products that typically provide higher yields than transactional accounts. Advances from the Federal Home Loan Bank and other borrowed money increased by $7.0 million from the total at December 31, 1999, as current period borrowings of $13.5 million were used in part to fund loan growth. Shareholders' equity totaled $17.2 million at December 31, 2000, an increase of $0.3 million from the $16.9 million total at December 31, 1999. The increase resulted primarily from net income of $1.6 million, which was partially offset by repurchases of shares totaling $1.4 million and cash dividends of $279,000. This net increase also includes a net increase of $268,000 related to stock benefit plans and unrealized gain on securities available for sale of $86,000. Comparison of Results of Operations for the Years Ended December 31, 2000 and 1999 General River Valley's net earnings for the year ended December 31, 2000, totaled $1.61 million, an increase of $571,000, or 55.0%, from net earnings reported in 1999. The increase in net earnings in the 2000 period was primarily attributable to an increase in net interest income of $364,000 and an increase of $209,000 in other income, while general, administrative and other expense were $316,000 lower in the current period. The provision for federal income taxes was $231,000 more in fiscal year 2000 as compared to the same period in 1999. The provision for loan losses in 2000 was $227,000 as compared to $140,000 in 1999. Net Interest Income Total interest income for the year ended December 31, 2000, amounted to $11.1 million, an increase of $1.4 million, or 14.2%, from the 1999 total, reflecting the effects of higher average balances on average assets. The average balance of interest-earning assets outstanding year-to-year increased by $14.7 million and the yield on those assets increased from an average yield of 7.49% in 1999 to 7.68% in 2000. Interest income on loans and mortgage-backed securities totaled $10.6 million for 2000, an increase of approximately $1.5 million, or 16.8%, from 1999. Interest income on investments and interest-earning deposits decreased by $132,000, or 19.0%, due to significantly smaller average balances despite higher average yields on those investments. Interest expense on deposits increased by $663,000, or 14.8%, to a total of $5.1 million for the year ended December 31, 2000, due primarily to higher average balances and a 28 basis point increase in the weighted average cost of those deposits. The cost of deposits increased from 3.82% in 1999 to 4.10% in fiscal 2000. Interest expense on borrowings totaled $500,000 for the year ended December 31, 2000, an increase of $357,000 from 1999. The increase resulted primarily from higher average borrowings year-to-year, partially offset by a 76 basis point decrease in average cost. As a result of the foregoing changes in interest income and interest expense, net interest income increased during 2000 by $364,000, or 7.1%, compared to 1999. The interest rate spread decreased by 16 basis points for 2000, to 3.47% from 3.63% in the 1999 period, while the net interest margin amounted to 3.79% in 2000 and 3.94% in 1999. Provision for Losses on Loans A provision for losses on loans is charged to earnings to bring the total allowance for loan losses to a level considered appropriate by management based upon historical experience, the volume and type of lending conducted by River Valley Financial, the status of past due principal and interest payments, general economic conditions, particularly as such conditions relate to the primary market area, and other factors related to the collectability of the loan portfolio. As a result of such analysis, management recorded a $227,000 provision for losses on loans in 2000, an increase of $87,000, or 62.1%, compared to the $140,000 provision recorded in 1999. The current period provision generally reflects growth in the loan portfolio, coupled with a decrease in the level of nonperforming loans year-to-year. Comparison of Results of Operations for the Years Ended December 31, 2000 and 1999 (continued) Nonperforming loans for the period ended December 31, 2000, were $621,000, a reduction of approximately $236,000 from the $857,000 recorded as of fiscal year ended 1999. Net charge-offs amounted to $47,000 in 2000, compared to $95,000 in 1999. While management believes that the allowance for losses on loans is adequate at December 31, 2000, based upon available facts and circumstances, there can be no assurance that the loan loss allowance will be adequate to cover losses on nonperforming assets in the future. Other Income Other income amounted to $1.1 million for the year ended December 31, 2000, an increase of $209,000, or 24.8%, compared to 1999, due primarily to increases in service fees, charges and other operating income. General, Administrative and Other Expense General, administrative and other expense totaled $3.8 million for the year ended December 31, 2000, a decrease of $316,000 over the 1999 total. Employee compensation and benefits decreased by $137,000 in fiscal 2000 as compared to 1999 primarily from $150,000 in non-recurring expense associated with a severance agreement in a managerial restructuring completed in the third quarter of fiscal 1999. Occupancy and equipment expense increased only $4,000 in fiscal 2000 primarily from cost containment efforts, lower depreciation costs, and from higher charges in 1999 associated with equipment upgrades and expenses associated with Year 2000. All other operating expenses decreased by $183,000 from decreases in legal and professional services, office supplies, and educational expenses of staff. Income Taxes The provision for income taxes increased by $231,000, or 32.9 %, for the year ended December 31, 2000, as compared to 1999. The effective tax rates were 36.7% and 40.3% for the years ended December 31, 2000 and 1999, respectively. Comparison of Results of Operations for the Years Ended December 31, 1999 and 1998 General River Valley's net earnings for the year ended December 31, 1999, totaled $1.04 million, a decrease of $214,000, or 17.1%, from net earnings reported in 1998. The decrease in net earnings in the 1999 period was primarily attributable to a decrease in net interest income of $149,000 and a decrease of $344,000 in other income, including a decrease of $265,000 in the sale of loans from the prior year period. General, administrative and other expense for the year was marginally lower, but included $150,000 in non-recurring expenses associated with severance agreements. The provision for federal income taxes decreased by $131,000 in fiscal year 1999 as compared to the same period in 1998. The provision for loan losses in 1999 was $140,000 as compared to $275,000 in 1998. Comparison of Results of Operations for the Years Ended December 31, 1999 and 1998 (continued) Net Interest Income Total interest income for the year ended December 31, 1999, amounted to $9.7 million, a decrease of $374,000, or 3.7%, from the 1998 total, reflecting the effects of a lower yield on average assets. While the average balance of average interest-earning assets outstanding year-to-year increased by $823,000, the yield on those assets decreased from an average yield of 7.82% in 1998 to 7.49% in 1999. Interest income on loans and mortgage-backed securities totaled $9.0 million for 1999, a decrease of approximately $684,000, or 7.0%, from 1998. Interest income on investments and interest-earning deposits increased by $310,000, or 80.9%, due to an increase in the average balance outstanding of $6.0 million associated with a modest decrease in the average yield of approximately 5 basis points in yield from the comparable 1998 period. Interest expense on deposits decreased by $208,000, or 4.4%, to a total of $4.5 million for the year ended December 31, 1999, due primarily to a 30 basis point decrease in the weighted average cost of deposits. The cost of deposits fell from 4.12% in 1998 to 3.82% in 1999. Interest expense on borrowings totaled $143,000 for the year ended December 31, 1999, a decrease of $17,000, or 10.6%, from 1998. The decrease resulted primarily from lower average borrowings year-to-year, partially offset by a 14 basis point increase in average cost. As a result of the foregoing changes in interest income and interest expense, net interest income decreased during 1999 by $149,000, or 2.8%, compared to 1998. The interest rate spread decreased by 3 basis points for 1999, to 3.63% from 3.66% in the 1998 period, while the net interest margin amounted to 3.94% in 1999 and 4.08% in 1998. Provision for Losses on Loans A provision for losses on loans is charged to earnings to bring the total allowance for loan losses to a level considered appropriate by management based upon historical experience, the volume and type of lending conducted by River Valley Financial, the status of past due principal and interest payments, general economic conditions, particularly as such conditions relate to the primary market area, and other factors related to the collectibility of the loan portfolio. As a result of such analysis, management recorded a $140,000 provision for losses on loans in 1999, a decrease of $135,000, or 49.1%, compared to the $275,000 provision recorded in 1998. The current period provision generally reflects growth in the loan portfolio, coupled with a decrease in the level of nonperforming loans year-to-year. Nonperforming loans for the period ended December 31, 1999, were $857,000, a reduction of approximately $1.0 million from the $1.9 million recorded as of fiscal year ended 1998. Net charge-offs amounted to $95,000 in 1999, compared to $74,000 in 1998. While management believes that the allowance for losses on loans was adequate at December 31, 1999, based upon available facts and circumstances, there can be no assurance that the loan loss allowance will be adequate to cover losses on nonperforming assets in the future. Other Income Other income amounted to $844,000 for the year ended December 31, 1999, a decrease of $344,000, or 29.0%, compared to 1998, due primarily to a $265,000, or 78.2%, decrease in gain on sale of loans and a $79,000 decrease in service fees, charges and other operating income. General, Administrative and Other Expense General, administrative and other expense totaled $4.1 million for the year ended December 31, 1999, a decrease of $13,000 from the 1998 total. Employee compensation and benefits decreased by $147,000 or 6.4% in fiscal 1999 as compared to 1998 primarily from the decrease in the Corporation's stock price used to record expense for various compensation programs, and by decreases in staffing levels. Included in the 1999 compensation expense is $150,000 in non-recurring expense associated with a severance agreement in a managerial restructuring completed in the third quarter of fiscal 1999. Occupancy and equipment expense increased by $80,000 or 16.5% in fiscal 1999 primarily from charges associated with equipment upgrades and expenses associated with Year 2000. All other operating expenses increased by $76,000 or 6.9% due primarily to increases in advertising, legal and professional fees, office supplies, and educational expenses of staff. Income Taxes The provision for income taxes decreased by $131,000, or 15.7 %, for the year ended December 31, 1999, as compared to 1998. The effective tax rates were 40.3% and 39.9% for the years ended December 31, 1999 and 1998, respectively.
AVERAGE BALANCE, YIELD, RATE AND VOLUME DATA The following table presents certain information relating to River Valley's average balance sheet and reflects the average yield on interest-earning assets and the average cost of interest-bearing liabilities for the periods indicated. Such yields and costs are derived by dividing annual income or expense by the average monthly balance of interest-earning assets or interest-bearing liabilities, respectively, for the years presented. Average balances are derived from month-end balances, which include nonaccruing loans in the loan portfolio. Year ended December 31, 2000 1999 Average Interest Average Interest Average outstanding earned/ Yield/ outstanding earned/ Yield/ outstanding balance paid rate balance paid rate balance (Dollars in thousands) Interest-earning assets: Interest-earning deposits and other $ 4,948 $ 318 6.43% $ 7,821 $ 417 5.33% $ 4,337 Investment securities (1) 3,580 243 6.79 5,347 276 5.16 2,871 Mortgage-backed and related securities (1)2,976 192 6.45 5,051 301 5.96 7,542 Loans receivable, net (2) 133,255 10,365 7.78 111,794 8,740 7.82 114,440 -------- ------- -------- -------- Total interest-earning assets $144,759 11,118 7.68 $130,013 9,734 7.49 $129,190 ======== ------- ---- ======== ------- ---- ======== Interest-bearing liabilities: Deposits $125,197 5,137 4.10 $117,258 4,474 3.82 $113,770 FHLB advances and other borrowings 8,813 500 5.67 2,228 143 6.42 2,549 -------- -------- -------- Total interest-bearing liabilities $134,010 5,637 4.21 $119,486 4,617 3.86 $116,319 ======== ------- ---- ======== ------- ---- ======== Net interest income $ 5,481 $ 5,117 ======= ======= Interest rate spread (3) 3.47% 3.63% ===== ===== Net yield on weighted average interest-earning assets (4) 3.79% 3.94% ===== ===== Average interest-earning assets to average interest-bearing liabilities 108.02% 108.81% ======= ======= 1998 Interest earned/ Yield/ paid rate Interest-earning assets: Interest-earning deposits and other $ 233 5.37% Investment securities (1) 150 5.22 Mortgage-backed and related securities 462 6.13 Loans receivable, net (2) 9,263 8.09 -------- ---- Total interest-earning assets 10,108 7.82 -------- ---- Interest-bearing liabilities: Deposits 4,682 4.12 FHLB advances and other borrowings 160 6.28 -------- ---- Total interest-bearing liabilities 4,842 4.16 -------- ---- Net interest income $ 5,266 ======== Interest rate spread (3) 3.66% ===== Net yield on weighted average interest-earning assets (4) 4.08% ===== Average interest-earning assets to average interest-bearing liabilities 111.07% =======
- ------------------------- (1) Includes securities available for sale at amortized cost prior to SFAS No. 115 adjustments. (2) Total loans less loans in process plus loans held for sale. (3) Interest rate spread is calculated by subtracting weighted average interest rate cost from weighted average interest rate yield for the period indicated. (4) The net yield on weighted average interest-earning assets is calculated by dividing net interest income by weighted average interest-earning assets for the period indicated. River Valley Bancorp MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) Rate/Volume Table The following table describes the extent to which changes in interest rates and changes in volume of interest-related assets and liabilities have affected River Valley's interest income and expense during the years indicated. For each category of interest-earning assets and interest-bearing liabilities, information is provided on changes attributable to (i) changes in volume (change in volume multiplied by prior year rate), (ii) changes in rate (change in rate multiplied by prior year volume), and (iii) total changes in rate and volume. The combined effects of changes in both volume and rate, which cannot be separately identified, have been allocated proportionately to the change due to volume and the change due to rate:
Year ended December 31, 2000 vs. 1999 1999 vs. 1998 Increase Increase (decrease) (decrease) due to due to Volume Rate Total Volume Rate Total (In thousands) Interest-earning assets: Interest-earning deposits and other $ (173) $ 74 $ (99) $186 $ (2) $184 Investment securities (132) 23 (109) 128 (2) 126 Mortgage-backed and related securities (106) 73 (33) (149) (12) (161) Loans receivable, net 1,670 (45) 1,625 (211) (312) (523) ----- ------ ----- ----- ----- ----- Total 1,259 125 1,384 (46) (328) (374) Interest-bearing liabilities: Deposits 314 349 663 151 (359) (208) FHLB advances and other borrowing 375 (18) 357 (21) 4 (17) ----- ------ ----- ----- ----- ----- Total 689 331 1,020 130 (355) (225) ----- ------ ----- ----- ----- ----- Net change in interest income $ 570 $(206) $ 364 $(176) $ 27 $(149) ===== ====== ===== ====== ===== ======
Asset and Liability Management Like other financial institutions, River Valley Financial is subject to interest rate risk to the extent that interest-earning assets re-price differently than interest-bearing liabilities. As part of its effort to monitor and manage interest rate risk, River Valley Financial is using the Net Portfolio Value ("NPV") methodology adopted by the OTS as part of its capital regulations. Although River Valley Financial is not subject to the NPV regulation because such regulation does not apply to institutions with less than $300 million in assets and risk-based capital in excess of 12%, the application of the NPV methodology can illustrate River Valley Financial's degree of interest rate risk. Presented on the following table is an analysis of River Valley Financial's interest rate risk, as of December 31, 2000 and December 31, 1999, as measured by changes in NPV for an instantaneous and sustained parallel shift of 100 through 300 basis points in market interest rates. River Valley Bancorp MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) Asset and Liability Management (continued) As illustrated below, River Valley Financial's NPV is currently more sensitive to rising rates than declining rates. Such difference in sensitivity occurs principally because, as rates rise, the Bank's assets reprice slower than the deposits that fund them. As a result, in a rising interest rate environment, the amount of interest River Valley Financial would receive on loans would increase as loans are slowly prepaid and new loans at higher rates are made. Moreover, the interest River Valley Financial would pay on deposits would increase, but generally quicker than the Bank's ability to reprice its interest-earning assets.
As of December 31, 2000 (Dollars in thousands) Change in Interest Rates Estimated Amount (basis points) NPV of Change Percent +300 $17,112 $(1,285) (7)% +200 17,898 (499) (3) +100 18,309 (88) 0 - 18,397 - - - -100 18,296 (101) (1) - -200 19,025 628 3 - -300 20,294 1,897 10 As of December 31, 1999 (Dollars in thousands) Change in Interest Rates Estimated Amount (basis points) NPV of Change Percent +300 $19,427 $ 801 4% +200 19,463 836 4 +100 19,198 571 3 - 18,627 - - - -100 17,759 (867) (5) - -200 17,402 (1,225) (7) - -300 17,349 (1,278) (7)
Asset and Liability Management (continued) As with any method of measuring interest rate risk, certain shortcomings are inherent in the NPV approach. For example, although certain assets and liabilities may have similar maturities or periods of repricing, they may react in different degrees to changes in market interest rates. Also, the interest rates on certain types of assets and liabilities may fluctuate in advance of changes in market interest rates, while interest rates on other types may lag behind changes in market rates. Further, in the event of a change in interest rates, expected rates of prepayment on loans and mortgage-backed securities and early withdrawal levels from certificates of deposit would likely deviate significantly from those assumed in making the risk calculations. Liquidity and Capital Resources The Corporation's principal sources of funds are deposits, loan and mortgage-backed securities repayments, maturities of securities, borrowings and other funds provided by operations. While scheduled loan repayments and maturing investments are relatively predictable, deposit flows and loan and mortgage-backed securities prepayments are more influenced by interest rates, general economic conditions and competition. The Corporation maintains investments in liquid assets based upon management's assessment of (1) the need for funds, (2) expected deposit flows, (3) the yield available on short-term liquid assets and (4) the objectives of the asset/liability management program. OTS regulations presently require River Valley Financial to maintain an average daily balance of cash, investments in United States Treasury and agency securities and other investments in an amount equal to 4% of the sum of River Valley Financial's average daily balance of net withdrawable deposit accounts. The liquidity requirement, which may be changed from time to time by the OTS to reflect changing economic conditions, is intended to provide a source of relatively liquid funds upon which River Valley Financial may rely if necessary to fund deposit withdrawals or other short-term funding needs. At December 31, 2000, River Valley Financial's regulatory liquidity ratio was 11.4%. At such date, River Valley Financial had commitments to originate loans totaling $2.4 million and, in addition, had undisbursed loans in process, unused lines of credit and standby letters of credit totaling $11.8 million. At December 31, 2000, River Valley Financial had no commitments to sell loans and no outstanding commitments to purchase loans. The Corporation considers River Valley Financial's liquidity and capital resources sufficient to meet outstanding short- and long-term needs. At December 31, 2000, the Corporation had a commitment of $2.9 million to renovate and expand its office at 430 Clifty Drive to be its main office. Subsequent to the completion of the project, the Corporation intends to sell its office at 303 Clifty Drive. Liquidity and Capital Resources (continued) The Corporation's liquidity, primarily represented by cash and cash equivalents, is a result of the funds provided by or used in the Corporation's operating, investing and financing activities. These activities are summarized below for the years ended December 31, 2000, 1999, and 1998:
Year ended December 31, 2000 1999 1998 (In thousands) Cash flows from operating activities $2,028 $5,346 $(1,955) Cash flows from investing activities: Purchase of securities (7,949) (21,537) - Proceeds from maturities of securities 8,297 19,399 5,970 Proceeds from sales of securities 2,002 - - Net loan (originations) repayments (26,165) (6,673) 2,145 Other (1,087) (121) 773 Cash flows from financing activities: Net increase (decrease) in deposits 15,974 (3,900) 3,196 Net increase (decrease) in borrowings 6,950 6,230 (1,730) Purchase of stock (1,367) (2,724) (270) Other (353) (275) (690) -------- -------- -------- Net increase (decrease) in cash and cash equivalents $(1,670) $(4,255) $ 7,439 ======== ======== =======
River Valley Financial is required by applicable law and regulation to meet certain minimum capital standards. Such capital standards include a tangible capital requirement, a core capital requirement, or leverage ratio, and a risk-based capital requirement. The tangible capital requirement requires savings associations to maintain "tangible capital" of not less than 1.5% of the association's adjusted total assets. Tangible capital is defined in OTS regulations as core capital minus intangible assets. "Core capital" is comprised of common shareholders' equity (including retained earnings), noncumulative preferred stock and related surplus, minority interests in consolidated subsidiaries, certain nonwithdrawable accounts and pledged deposits of mutual associations. OTS regulations require savings associations to maintain core capital generally equal to 4% of the association's total assets except those associations with the highest examination rating and acceptable levels of risk. Liquidity and Capital Resources (continued) OTS regulations require that savings associations maintain "risk-based capital" in an amount not less than 8% of "risk-weighted assets." Risk-based capital is defined as core capital plus certain additional items of capital, which in the case of River Valley Financial includes a general loan loss allowance of $1.7 million at December 31, 2000. River Valley Financial exceeded all of its regulatory capital requirements at December 31, 2000. The following table summarizes River Valley Financial's regulatory capital requirements and regulatory capital at December 31, 2000:
OTS Requirement Actual Amount Percent of Percent of Amount Assets Amount Assets(1) Amount of Excess (Dollars in thousands) Tangible capital 1.50% $2,422 10.45% $16,867 $14,445 Core capital (2) 4.00% 6,458 10.45% 16,867 10,409 Risk-based capital 8.00% 9,293 15.52% 18,031 8,738
(1) Tangible and core capital levels are shown as a percentage of total assets; risk-based capital levels are shown as a percentage of risk-weighted assets. (2) The OTS has proposed and is expected to adopt a core capital requirement for savings associations comparable to that adopted by the OCC for national banks. The regulation requires core capital of at least 3% of total adjusted assets for savings associations that received the highest supervisory rating for safety and soundness, and 4% to 5% for all other savings associations. River Valley Financial is in compliance with this requirement. Effect of Recent Accounting Pronouncements In June 1998, the Financial Accounting Standards Board (the "FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities," which requires entities to recognize all derivatives in their financial statements as either assets or liabilities measured at fair value. SFAS No. 133 also specifies new methods of accounting for hedging transactions, prescribes the items and transactions that may be hedged, and specifies detailed criteria to be met to qualify for hedge accounting. The definition of a derivative financial instrument is complex, but in general, it is an instrument with one or more underlyings, such as an interest rate or foreign exchange rate, that is applied to a notional amount, such as an amount of currency, to determine the settlement amount(s). It generally requires no significant initial investment and can be settled net or by delivery of an asset that is readily convertible to cash. SFAS No. 133 applies to derivatives embedded in other contracts, unless the underlying of the embedded derivative is clearly and closely related to the host contract. SFAS No. 133, as amended by SFAS No. 137, was effective for fiscal years beginning after June 15, 2000. On adoption, entities were permitted to transfer held-to-maturity debt securities to the available-for-sale or trading category without calling into question their intent to hold other debt securities to maturity in the future. Adoption of SFAS No. 133 did not have a material impact on the Corporation's consolidated financial statements. Impact of Inflation and Changing Prices The consolidated financial statements and notes thereto included herein have been prepared in accordance with generally accepted accounting principles, which require River Valley to measure financial position and results of operations in terms of historical dollars with the exception of investment and mortgage-backed securities available-for-sale, which are carried at fair value. Changes in the relative value of money due to inflation or recession are generally not considered. In management's opinion, changes in interest rates affect the financial condition of a financial institution to a far greater degree than changes in the rate of inflation. While interest rates are greatly influenced by changes in the rate of inflation, they do not change at the same rate or in the same magnitude as the rate of inflation. Rather, interest rate volatility is based on changes in the expected rate of inflation, as well as changes in monetary and fiscal policies. Change in Accountants On May 18, 2000, the Holding Company engaged the accounting firm of Olive LLP to examine the consolidated financial statements of the Holding Company for the fiscal year ending December 31, 2000. This action was taken following the recommendation of the Holding Company's Audit Committee to the Board of Directors. Grant Thornton LLP, which had acted as the independent public accountant for the Holding Company since 1996 and audited its consolidated financial statements for 1998 and 1999, was notified of the Holding Company's decision. The audit reports issued by Grant Thornton LLP with respect to the Holding Company's consolidated financial statements for 1998 and 1999 did not contain an adverse opinion or disclaimer of opinion, and were not qualified as to uncertainty, audit scope or accounting principles. During 1998 and 1999 (and any subsequent interim period), there had been no disagreements between the Holding Company and Grant Thornton LLP on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of Grant Thornton LLP, would have caused it to make a reference to the subject matter of the disagreement in connection with its audit report. Moreover, none of the events listed in Item 304(a)(1)(iv)(B) of Regulation S-B occurred during 1998 or 1999 or any subsequent interim period. Prior to its engagement, Olive LLP had not been consulted by the Holding Company as to the application of accounting principles to a specific completed or contemplated transaction or the type of audit opinion that might be rendered on the Holding Company's financial statements. Independent Auditor's Report To the Stockholders and Board of Directors River Valley Bancorp Madison, Indiana We have audited the accompanying consolidated balance sheet of River Valley Bancorp and subsidiary as of December 31, 2000, and the related consolidated statements of income, comprehensive income, stockholders' equity, and cash flows for the year then ended. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. The financial statements as of December 31, 1999, and for the years ended December 31, 1999 and 1998, were audited by other auditors whose report dated February 16, 2000, expressed an unqualified opinion on those statements. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the consolidated financial statements described above present fairly, in all material respects, the consolidated financial position of River Valley Bancorp and subsidiary as of December 31, 2000, and the results of their operations and their cash flows for the year then ended in conformity with generally accepted accounting principles. As discussed in the notes to the consolidated financial statements, the Company changed its method of accounting for derivative instruments and hedging activities in 2000. Olive LLP /s/ Olive LLP Indianapolis, Indiana February 23, 2001
River Valley Bancorp and Subsidiary Consolidated Balance Sheet December 31 2000 1999 - ---------------------------------------------------------------------------------------------------------------- (In Thousands, Except Share Amounts) Assets Cash and due from banks $ 3,361 $ 3,648 Federal funds sold 1,550 Interest-bearing demand deposits 3,021 2,854 ----------------------------------------- Cash and cash equivalents 6,382 8,052 Investment securities Available for sale 7,247 6,301 Held to maturity (fair value of $3,142) 3,138 ----------------------------------------- Total investment securities 7,247 9,439 Loans, net of allowance for loan losses of $1,702 and $1,522 140,970 115,131 Premises and equipment 2,817 1,928 Federal Home Loan Bank stock 943 943 Interest receivable 1,468 1,043 Other assets 2,303 2,159 ----------------------------------------- Total assets $162,130 $138,695 ========================================= Liabilities Deposits Noninterest-bearing $ 9,170 $ 7,903 Interest-bearing 121,055 106,348 ----------------------------------------- Total deposits 130,225 114,251 Borrowings 13,450 6,500 Interest payable 598 330 Other liabilities 673 748 ----------------------------------------- Total liabilities 144,946 121,829 ----------------------------------------- Commitments and Contingencies Stockholders' Equity Preferred stock, no par value Authorized and unissued--2,000,000 shares Common stock, no par value Authorized--5,000,000 shares Issued--1,190,250 shares Additional paid-in capital 11,349 11,314 Retained earnings 10,882 9,551 Shares acquired by stock benefit plans (734) (967) Less 321,376 and 219,753 treasury shares, at cost (4,343) (2,976) Accumulated other comprehensive income (loss) 30 (56) ----------------------------------------- Total stockholders' equity 17,184 16,866 ----------------------------------------- Total liabilities and stockholders' equity $162,130 $138,695 =========================================
See notes to consolidated financial statements.
River Valley Bancorp and Subsidiary Consolidated Statement of Income Year Ended December 31 2000 1999 1998 - ---------------------------------------------------------------------------------------------------------------------------- (In Thousands, Except Per Share Amounts) Interest Income Loans receivable $10,365 $8,740 $9,263 Investment securities 435 577 612 Interest-earning deposits and other 318 417 233 ------------------------------------------------------ Total interest income 11,118 9,734 10,108 ------------------------------------------------------ Interest Expense Deposits 5,137 4,474 4,682 Borrowings 500 143 160 ------------------------------------------------------ Total interest expense 5,637 4,617 4,842 ------------------------------------------------------ Net Interest Income 5,481 5,117 5,266 Provision for loan losses 227 140 275 ------------------------------------------------------ Net Interest Income After Provision for Loan Losses 5,254 4,977 4,991 ------------------------------------------------------ Other Income Service fees and charges 931 723 739 Net realized losses on sales of available-for-sale securities (2) Net gains on loan sales 44 74 339 Other income 80 47 110 ------------------------------------------------------ Total other income 1,053 844 1,188 ------------------------------------------------------ Other Expenses Salaries and employee benefits 2,025 2,162 2,309 Net occupancy and equipment expenses 568 564 484 Data processing fees 151 126 127 Advertising 190 182 178 Legal and professional fees 144 155 106 Other expenses 686 891 889 ------------------------------------------------------ Total other expenses 3,764 4,080 4,093 ------------------------------------------------------ Income Before Income Tax 2,543 1,741 2,086 Income tax expense 933 702 833 ------------------------------------------------------ Net Income $ 1,610 $1,039 $1,253 ====================================================== Basic Earnings per Share $1.88 $1.03 $1.13 ====================================================== Diluted Earnings per Share $1.87 $1.03 $1.12 ======================================================
See notes to consolidated financial statements.
River Valley Bancorp and Subsidiary Consolidated Statement of Comprehensive Income Year Ended December 31 2000 1999 1998 - ---------------------------------------------------------------------------------------------------------------------------- (In Thousands) Net Income $1,610 $1,039 $1,253 Other comprehensive income, net of tax Unrealized gains (losses) on securities available for sale Unrealized holding gains (losses) arising during the period, net of tax expense (benefit) of $55, $(22), and $10 85 (43) 19 Less: Reclassification adjustment for losses included in net income, net of tax benefit of $1 (1) --------------------------------------------------- 86 (43) 19 --------------------------------------------------- Comprehensive Income $1,696 $ 996 $1,272 ===================================================
See notes to consolidated financial statements.
River Valley Bancorp and Subsidiary Consolidated Statement of Stockholders' Equity Shares Accumulated Acquired Other Common Stock Additional by Stock Comprehensive Treasury Stock --------------------- Paid-in Retained Benefit Income ---------------------- Shares Amount Capital Earnings Plans (Loss) Shares Amount Total - --------------------------------------------------------------------------------------------------------------------------------- (In Thousands, Except for Share Amounts) Balances, January 1, 1998 1,190,250 $11,229 $ 7,797 $(1,005) $(32) $17,989 Net income 1,253 1,253 Unrealized gains on 19 19 securities Cash dividends ($.22 per (261) (261) share) Purchase of shares for stock benefit plans ( 428) (428) Amortization of expense related to stock benefit 59 234 293 plans Purchase of treasury stock (18,000) $ (270) (270) Issuance of shares for stock benefit plans 1,190 18 18 --------------------------------------------------------------------------------------------------- Balances, December 31, 1998 1,190,250 11,288 8,789 (1,199) (13) (16,810) (252) 18,613 Net income 1,039 1,039 Unrealized losses on (43) (43) securities Cash dividends ($.265 per (277) (277) share) Amortization of expense related to stock benefit 26 232 258 plans Purchase of treasury stock (202,943) (2,724) (2,724) --------------------------------------------------------------------------------------------------- Balances, December 31, 1999 1,190,250 11,314 9,551 (967) (56) (219,753) (2,976) 16,866 Net income 1,610 1,610 Unrealized gains on securities, net of reclassification adjustment 86 86 Cash dividends ($.345 per (279) (279) share) Contribution to stock (8) (8) benefit plans Amortization of expense related to stock benefit plans 35 241 276 Purchase of treasury stock (101,623) (1,367) (1,367) --------------------------------------------------------------------------------------------------- Balances, December 31, 2000 1,190,250 $11,349 $10,882 $ (734) $30 (321,376) $(4,343) $17,184 ===================================================================================================
See notes to consolidated financial statements.
River Valley Bancorp and Subsidiary Consolidated Statement of Cash Flows Year Ended December 31 2000 1999 1998 - ---------------------------------------------------------------------------------------------------------------------------- (In Thousands) Operating Activities Net income $1,610 $1,039 $ 1,253 Adjustments to reconcile net income to net cash provided (used) by operating activities Provision for loan losses 227 140 275 Depreciation and amortization 240 250 223 Amortization of goodwill 6 6 27 Deferred income tax (77) 38 14 Investment securities amortization (accretion), net (26) (95) 39 Investment securities losses 2 Loans originated for sale in the secondary market (2,614) (10,552) (20,042) Proceeds from sale of loans in the secondary market 2,632 14,226 17,194 (Gain) loss on sale of loans (18) 27 (169) Amortization of deferred loan origination cost 99 93 99 Amortization of expense related to stock benefit plans 276 258 293 Gain on sale of premises and equipment (42) (11) (57) Net change in Interest receivable (425) 13 42 Interest payable 268 (138) 5 Other adjustments (130) 52 (1,151) ------------------------------------------------ Net cash provided (used) by operating activities 2,028 5,346 (1,955) ------------------------------------------------ Investing Activities Net change in interest-bearing deposits 897 Purchases of securities available for sale (7,949) (21,537) Proceeds from maturities of securities available for sale 7,093 18,347 1,286 Proceeds from sales of securities available for sale 2,002 Proceeds from maturities of securities held to maturity 1,204 1,052 4,684 Net change in loans (26,165) (6,673) 2,145 Purchases of premises and equipment (1,143) (245) (191) Proceeds from sale of premises and equipment 56 49 67 Proceeds from sale of real estate acquired through foreclosure 75 ------------------------------------------------ Net cash provided (used) by investing activities (24,902) (8,932) 8,888 ------------------------------------------------ Financing Activities Net change in Noninterest-bearing, interest-bearing demand and savings deposits (2,991) 3,614 1,424 Certificates of deposit 18,965 (7,514) 1,772 Proceeds from borrowings 23,450 9,131 6,270 Repayment of borrowings (16,500) (2,901) (8,000) Cash dividends (350) (277) (261) Purchase of stock (1,367) (2,724) (270) Proceeds from exercise of stock options 18 Advances by borrowers for taxes and insurance 5 2 (19) Acquisition of stock for stock benefit plans (8) (428) ------------------------------------------------ Net cash provided (used) by financing activities 21,204 (669) 506 ------------------------------------------------ Net Change in Cash and Cash Equivalents (1,670) (4,255) 7,439 Cash and Cash Equivalents, Beginning of Year 8,052 12,307 4,868 ------------------------------------------------ Cash and Cash Equivalents, End of Year $6,382 $8,052 $12,307 ================================================ Additional Cash Flows Information Interest paid $5,369 $4,755 $4,837 Income tax paid 876 657 1,159 Investment securities held to maturity transferred to available for sale 1,934
See notes to consolidated financial statements. River Valley Bancorp and Subsidiary Notes to Consolidated Financial Statements (Table Dollar Amounts in Thousands) Note 1-- Nature of Operations and Summary of Significant Accounting Policies The accounting and reporting policies of River Valley Bancorp (Company) and its wholly owned subsidiary, River Valley Financial Bank (Bank), and the Bank's wholly owned subsidiary, Madison First Service Corporation (First Service), conform to generally accepted accounting principles and reporting practices followed by the thrift industry. The more significant of the policies are described below. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. The Company is a thrift holding company whose principal activity is the ownership and management of the Bank. The Bank operates under a federal thrift charter and provides full banking services, in a single significant business segment. As a federally-chartered thrift, the Bank is subject to regulation by the Office of Thrift Supervision, and the Federal Deposit Insurance Corporation. The Bank generates commercial, mortgage and consumer loans and receives deposits from customers located primarily in southeastern Indiana. The Bank's loans are generally secured by specific items of collateral including real property, consumer assets and business assets. Consolidation--The consolidated financial statements include the accounts of the Company, the Bank and First Service after elimination of all material intercompany transactions. Investment Securities--Debt securities are classified as held to maturity when the Company has the positive intent and ability to hold the securities to maturity. Securities held to maturity are carried at amortized cost. Debt securities not classified as held to maturity and marketable equity securities are classified as available for sale. Securities available for sale are carried at fair value with unrealized gains and losses reported separately in accumulated other comprehensive income, net of tax. Amortization of premiums and accretion of discounts are recorded as interest income from securities. Realized gains and losses are recorded as net security gains (losses). Gains and losses on sales of securities are determined on the specific-identification method. Loans held for sale are carried at the lower of aggregate cost or market. Market is determined using the aggregate method. Net unrealized losses, if any, are recognized through a valuation allowance by charges to income based on the difference between estimated sales proceeds and aggregate cost. River Valley Bancorp and Subsidiary Notes to Consolidated Financial Statements (Table Dollar Amounts in Thousands) Loans are carried at the principal amount outstanding. A loan is impaired when, based on current information or events, it is probable that the Company will be unable to collect all amounts due (principal and interest) according to the contractual terms of the loan agreement. Payments with insignificant delays not exceeding 90 days outstanding are not considered impaired. Certain nonaccrual and substantially delinquent loans may be considered to be impaired. The Company considers its investment in one-to-four family residential loans and consumer loans to be homogeneous and therefore excluded from separate identification for evaluation of impairment. Interest income is accrued on the principal balances of loans. The accrual of interest on impaired and nonaccural loans is discontinued when, in management's opinion, the borrower may be unable to meet payments as they become due. When interest accrual is discontinued, all unpaid accrued interest is reversed when considered uncollectible. Interest income is subsequently recognized only to the extent cash payments are received. Certain loan fees and direct costs are being deferred and amortized as an adjustment of yield on the loans over the contractual lives of the loans. When a loan is paid off or sold, any unamortized loan origination fee balance is credited to income. Allowance for loan losses is maintained to absorb loan losses based on management's continuing review and evaluation of the loan portfolio and its judgment as to the impact of economic conditions on the portfolio. The evaluation by management includes consideration of past loss experience, changes in the composition of the portfolio, the current condition and amount of loans outstanding, and the probability of collecting all amounts due. Impaired loans are measured by the present value of expected future cash flows, or the fair value of the collateral of the loan, if collateral dependent. The determination of the adequacy of the allowance for loan losses is based on estimates that are particularly susceptible to significant changes in the economic environment and market conditions. Management believes that as of December 31, 2000, the allowance for loan losses is adequate based on information currently available. A worsening or protracted economic decline in the areas within which the Bank operates would increase the likelihood of additional losses due to credit and market risks and could create the need for additional loss reserves. Premises and equipment are carried at cost net of accumulated depreciation. Depreciation is computed using the straight-line method based principally on the estimated useful lives of the assets. Maintenance and repairs are expensed as incurred while major additions and improvements are capitalized. Gains and losses on dispositions are included in current operations. Federal Home Loan Bank stock is a required investment for institutions that are members of the Federal Home Loan Bank system. The required investment in the common stock is based on a predetermined formula. Foreclosed assets are carried at the lower of cost or fair value less estimated selling costs. When foreclosed assets are acquired, any required adjustment is charged to the allowance for loan losses. All subsequent activity is included in current operations. Goodwill, resulting from the acquisition of Citizens National Bank of Madison, is being amortized on the straight-line basis over a period of ten years. During 1998, goodwill was reduced by approximately $168,000 for the favorable resolution of certain preacquisition contingencies, and for the purchase of minority interest shares at a price below the assigned value at acquisition. It is periodically evaluated as to the recoverability of its carrying value. River Valley Bancorp and Subsidiary Notes to Consolidated Financial Statements (Table Dollar Amounts in Thousands) Mortgage servicing rights on originated loans are capitalized by allocating the total cost of the mortgage loans between the mortgage servicing rights and the loans based on their relative fair values. Capitalized servicing rights are amortized in proportion to and over the period of estimated servicing revenues. Treasury stock is stated at cost. Cost is determined by the first-in, first-out method. Stock options are granted for a fixed number of shares to employees with an exercise price equal to the fair value of the shares at the date of grant. The Company accounts for and will continue to account for stock option grants in accordance with APB Opinion No. 25, Accounting for Stock Issued to Employees, and, accordingly, recognizes no compensation expense for the stock option grants. Income tax in the consolidated statement of income includes deferred income tax provisions or benefits for all significant temporary differences in recognizing income and expenses for financial reporting and income tax purposes. Earnings per share have been computed based upon the weighted-average common shares outstanding during each year. Unearned ESOP shares have been excluded from the computation of average shares outstanding. Reclassifications of certain amounts in the 1999 and 1998 consolidated financial statements have been made to conform to the 2000 presentation. Note 2 -- Restriction on Cash and Due From Banks The Bank is required to maintain reserve funds in cash and/or on deposit with the Federal Reserve Bank. The reserve required at December 31, 2000, was $862,000. Note 3 -- Investment Securities
2000 --------------------------------------------------------------------- Gross Gross Amortized Unrealized Unrealized Fair December 31 Cost Gains Losses Value - ---------------------------------------------------------------------------------------------------------------------------- Available for sale Federal agencies $4,921 $68 $4,989 State and municipal 336 4 340 Mortgage-backed securities 1,941 5 $28 1,918 --------------------------------------------------------------------- Total investment securities $7,198 $77 $28 $7,247 =====================================================================
River Valley Bancorp and Subsidiary Notes to Consolidated Financial Statements (Table Dollar Amounts in Thousands) 1999 ------------------------------------------------------------------ Gross Gross Amortized Unrealized Unrealized Fair December 31 Cost Gains Losses Value - ------------------------------------------------------------------------------------------------------------------------- Available for sale State and municipal $ 276 $ 3 $ 273 Mortgage-backed securities 2,138 67 2,071 Corporate obligations 1,000 1,000 Other securities 2,972 15 2,957 ------------------------------------------------------------------ Total available for sale 6,386 85 6,301 ------------------------------------------------------------------ Held to maturity Federal agencies 1,000 5 995 Mortgage-backed securities 2,138 $15 6 2,147 ------------------------------------------------------------------ Total held to maturity 3,138 15 11 3,142 ------------------------------------------------------------------ Total investment securities $9,524 $15 $96 $9,443 ==================================================================
The amortized cost and fair value of securities available for sale at December 31, 2000, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties. Available for Sale ----------------------------------- Amortized Fair Cost Value - -------------------------------------------------------------------------------- Within one year $1,001 $1,003 One to five years 4,196 4,263 Five to ten years 60 63 ----------------------------------- 5,257 5,329 Mortgage-backed securities 1,303 1,279 Other asset-backed securities 638 639 ----------------------------------- Totals $7,198 $7,247 =================================== Securities with a carrying value of $6,851,000 and $5,209,000 were pledged at December 31, 2000 and 1999 to secure certain deposits and for other purposes as permitted or required by law. Proceeds from sales of securities available for sale during 2000 were $2,002,000. Gross gains of $10,000 and gross losses of $12,000 were realized on those sales. There were no sales of securities available for sale during 1999 and 1998. On April 1, 2000, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 133, Accounting of Derivative Instruments and Hedging Activities. As permitted by SFAS No. 133, all securities classified as held to maturity were transferred to available for sale. The adoption of this statement did not have a significant impact on the Company's financial statement. River Valley Bancorp and Subsidiary Notes to Consolidated Financial Statements (Table Dollar Amounts in Thousands) Note 4 -- Loans and Allowance December 31 2000 1999 - ------------------------------------------------------------------------------- Residential real estate One-to-four family residential $ 77,304 $ 69,588 Multi-family residential 3,319 2,918 Construction 6,827 4,163 Nonresidential real estate and land 30,213 22,837 Commercial 16,361 9,780 Consumer and other 14,686 9,544 ------------------------------- 148,710 118,830 Unamortized deferred loan costs 324 245 Undisbursed loans in process (6,362) (2,422) Allowance for loan losses (1,702) (1,522) ------------------------------- Total loans $140,970 $115,131 =============================== 2000 1999 1998 - ------------------------------------------------------------------------------- Allowance for loan losses Balances, January 1 $1,522 $1,477 $1,276 Provision for losses 227 140 275 Recoveries on loans 37 28 149 Loans charged off (84) (123) (223) --------------------------------------- Balances, December 31 $1,702 $1,522 $1,477 ======================================= Information on impaired loans is summarized below. December 31 2000 - -------------------------------------------------------------------------------- Impaired loans with an allowance $ 250 Impaired loans for which the discounted cash flows or collateral value exceeds the carrying value of the loan 885 ------------- Total impaired loans $1,135 ============= Allowance for impaired loans (included in the Company's allowance for loan losses) $57 River Valley Bancorp and Subsidiary Notes to Consolidated Financial Statements (Table Dollar Amounts in Thousands) Year Ended December 31 2000 - -------------------------------------------------------------------------------- Average balance of impaired loans $1,128 Interest income recognized on impaired loans 89 Cash-basis interest included above 85 At December 31, 1999, the Company had approximately $600,000 of impaired loans. At December 31, 2000, 1999 and 1998, the Company had nonperforming loans totaling $621,000, $857,000, and $1,947,000, respectively. Note 5 -- Premises and Equipment December 31 2000 1999 - -------------------------------------------------------------------------------- Land $ 805 $ 792 Buildings 1,629 1,637 Leasehold improvements 117 117 Equipment 2,472 2,201 Construction in progress 853 ---------------------------- Total cost 5,876 4,747 Accumulated depreciation and amortization (3,059) (2,819) ---------------------------- Net $2,817 $1,928 ============================ At December 31, 2000, the Company had committed $2,900,000 for office building renovation and expansion. River Valley Bancorp and Subsidiary Notes to Consolidated Financial Statements (Table Dollar Amounts in Thousands) Note 6 -- Deposits
December 31 2000 1999 - ----------------------------------------------------------------------------------------------- Demand deposits $ 31,559 $ 29,118 Savings deposits 21,208 26,640 Certificates and other time deposits of $100,000 or more 30,606 13,884 Other certificates and time deposits 46,852 44,609 ------------------------------------ Total deposits $130,225 $114,251 ====================================
Certificates and other time deposits maturing in years ending December 31 2001 $61,873 2002 12,250 2003 1,623 2004 553 2005 664 Thereafter 495 ------------------ $77,458 ================== Note 7 -- Borrowings
December 31 2000 1999 - --------------------------------------------------------------------------------------------- Federal Home Loan Bank advances $13,000 $6,000 Line of credit 450 500 -------------------------------- Total borrowings $13,450 $6,500 ================================
Maturities by year for advances at December 31, 2000 are $9,000,000 in 2001 and $4,000,000 in 2002. The weighted-average interest rate at December 31, 2000 and 1999 was 6.35% and 5.91%. The Federal Home Loan Bank advances are secured by first-mortgage loans and investment securities totaling $61,701,000 at December 31, 2000. Advances are subject to restrictions or penalties in the event of prepayment. The Company has a $1,000,000 line of credit with another financial institution which matures in November 2001 with a variable interest rate of .5% under prime. The line of credit is collateralized by a pledge of 1,000 shares of the Bank's stock. River Valley Bancorp and Subsidiary Notes to Consolidated Financial Statements (Table Dollar Amounts in Thousands) Note 8 -- Loan Servicing Loans serviced for others are not included in the accompanying consolidated balance sheet. The unpaid principal balances of loans serviced for others totaled $37,562,000, $40,212,000 and $34,300,000 at December 31, 2000, 1999 and 1998, respectively. The aggregate fair value of capitalized mortgage servicing rights at December 31, 2000 and 1999 totaled $290,000 and $286,000. Comparable market values and a valuation model that calculates the present value of future cash flows were used to estimate fair value. For purposes of measuring impairment, risk characteristics including product type, investor type, and interest rates, were used to stratify the originated mortgage servicing rights. 2000 1999 1998 - -------------------------------------------------------------------------------- Mortgage Servicing Rights Balances, January 1 $225 $222 $113 Servicing rights capitalized 26 102 170 Amortization of servicing rights (24) (99) (34) -------------------------------------- 227 225 249 Valuation allowance (27) -------------------------------------- Balances, December 31 $227 $225 $222 ====================================== Note 9 -- Income Tax Year Ended December 31 2000 1999 1998 - -------------------------------------------------------------------------------- Income tax expense (benefit) Currently payable Federal $805 $505 $631 State 205 159 188 Deferred Federal (61) 38 16 State (16) (2) ---------------------------------------- Total income tax expense $933 $702 $833 ======================================== Reconciliation of federal statutory to actual tax expense Federal statutory income tax at 34% $865 $592 $709 Effect of state income taxes 125 105 122 Other (57) 5 2 ---------------------------------------- Actual tax expense $933 $702 $833 ======================================== Effective tax rate 36.7% 40.3% 39.9% River Valley Bancorp and Subsidiary Notes to Consolidated Financial Statements (Table Dollar Amounts in Thousands) A cumulative net deferred tax asset is included in other assets. The components of the liability are as follows: December 31 2000 1999 - -------------------------------------------------------------------------------- Assets Allowance for loan losses $564 $469 Deferred compensation 147 106 Pensions and employee benefits 60 66 Securities available for sale 83 119 Purchase accounting adjustments 131 142 Other 6 ---------------------------- Total assets 991 902 ---------------------------- Liabilities Depreciation and amortization (103) (93) Loan fees (127) (83) Mortgage servicing rights (93) (86) ---------------------------- Total liabilities (323) (262) ---------------------------- $668 $640 ============================ Retained earnings include approximately $2,100,000 for which no deferred income tax liability has been recognized. This amount represents an allocation of income to bad debt deductions as of December 31, 1987 for tax purposes only. Reduction of amounts so allocated for purposes other than tax bad debt losses or adjustments arising from carryback of net operating losses would create income for tax purposes only, which income would be subject to the then-current corporate income tax rate. The unrecorded deferred income tax liability on the above amount was approximately $714,000. Note 10 -- Commitments and Contingent Liabilities In the normal course of business there are outstanding commitments and contingent liabilities, such as commitments to extend credit and standby letters of credit, which are not included in the accompanying financial statements. The Bank's exposure to credit loss in the event of nonperformance by the other party to the financial instruments for commitments to extend credit and standby letters of credit is represented by the contractual or notional amount of those instruments. The Bank uses the same credit policies in making such commitments as it does for instruments that are included in the consolidated balance sheet. River Valley Bancorp and Subsidiary Notes to Consolidated Financial Statements (Table Dollar Amounts in Thousands) Financial instruments whose contract amount represents credit risk as of December 31 were as follows: 2000 1999 - -------------------------------------------------------------------------------- Commitments to extend credit $14,070 $9,310 Standby letters of credit 196 97 Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Bank evaluates each customer's credit worthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Bank upon extension of credit, is based on management's credit evaluation. Collateral held varies but may include accounts receivable, inventory, property and equipment, and income-producing commercial properties. Standby letters of credit are conditional commitments issued by the Bank to guarantee the performance of a customer to a third party. The Company and subsidiary are also subject to claims and lawsuits which arise primarily in the ordinary course of business. It is the opinion of management that the disposition or ultimate resolution of such claims and lawsuits will not have a material adverse effect on the consolidated financial position of the Company. Note 11 -- Dividend and Capital Restrictions Without prior approval, current regulations allow the Bank to pay dividends to the Company not exceeding net profits (as defined) for the current year plus those for the previous two years. The Bank normally restricts dividends to a lesser amount because of the need to maintain an adequate capital structure. At December 31, 2000, the stockholder's equity of the Bank was $17,161,000, of which none was available for the payment of dividends without prior regulatory approval. Note 12 -- Regulatory Capital The Bank is subject to various regulatory capital requirements administered by the federal banking agencies and is assigned to a capital category. The assigned capital category is largely determined by three ratios that are calculated according to the regulations: total risk adjusted capital, Tier 1 capital, and Tier 1 leverage ratios. The ratios are intended to measure capital relative to assets and credit risk associated with those assets and off-balance sheet exposures of the entity. The capital category assigned to an entity can also be affected by qualitative judgments made by regulatory agencies about the risk inherent in the entity's activities that are not part of the calculated ratios. There are five capital categories defined in the regulations, ranging from well capitalized to critically undercapitalized. Classification of a bank in any of the undercapitalized categories can result in actions by regulators that could have a material effect on a bank's operations. At December 31, 2000 and 1999, the Bank is categorized as well capitalized and met all subject capital adequacy requirements. There are no conditions or events since December 31, 2000 that management believes have changed the Bank's classification.
River Valley Bancorp and Subsidiary Notes to Consolidated Financial Statements (Table Dollar Amounts in Thousands) Required for Adequate To Be Well Actual Capital 1 Capitalized 1 ----------------------------------------------------------------------- December 31 Amount Ratio Amount Ratio Amount Ratio - ---------------------------------------------------------------------------------------------------------------------------- As of December 31, 2000 Total risk-based capital 1 (to risk-weighted assets) $18,031 15.5% $9,293 8.0% $11,617 10.0% Tier 1 capital 1 (to risk-weighted assets) 16,867 14.5% 4,647 4.0% 6,970 6.0% Core capital 1 (to adjusted total assets) 16,867 10.5% 6,458 4.0% 8,072 5.0% Core capital 1 (to adjusted tangible assets) 16,867 10.5% 3,229 2.0% N/A Tangible capital 1 (to adjusted total assets) 16,867 10.5% 2,422 1.5% N/A As of December 31, 1999 Total risk-based capital 1 (to risk-weighted assets) $18,040 19.0% $7,615 8.0% $9,518 10.0% Tier 1 capital 1 (to risk-weighted assets) 16,850 17.7% 3,808 4.0% 5,711 6.0% Core capital 1 (to adjusted total assets) 16,850 12.1% 5,563 4.0% 6,954 5.0% Core capital 1 (to adjusted tangible assets) 16,850 12.1% 2,781 2.0% N/A Tangible capital 1 (to adjusted total assets) 16,850 12.1% 2,086 1.5% N/A
1 As defined by regulatory agencies Note 13 -- Employee Benefits The Bank provides pension benefits for substantially all of the Bank's employees and is a participant in a pension fund known as the Pentegra Group. This plan is a multi-employer plan; separate actuarial valuations are not made with respect to each participating employer. There was no pension expense or benefit for the years ended December 31, 2000, 1999 and 1998. The Bank has a retirement savings 401(k) plan in which substantially all employees may participate. The Bank matches employees' contributions at the rate of 50 percent for the first 6 percent of W-2 earnings contributed by participants. The Bank's expense for the plan was $20,000, $24,000 and $28,000 for the years ended December 31, 2000, 1999 and 1998. The Bank has a supplemental retirement plan which provides retirement benefits to all directors. The Bank's obligations under the plan have been funded via the purchase of key man life insurance policies, of which the Bank is the beneficiary. Expense recognized under the supplemental retirement plan totaled approximately $24,000, $32,000 and $22,000 for the years ended December 31, 2000, 1999 and 1998, respectively. River Valley Bancorp and Subsidiary Notes to Consolidated Financial Statements (Table Dollar Amounts in Thousands) As part of the conversion in 1996, the Company established an ESOP covering substantially all employees of the Company and Bank. The ESOP acquired 95,220 shares of the Company common stock at $10 per share in the conversion with funds provided by a loan from the Company. Accordingly, the $952,000 of common stock acquired by the ESOP is shown as a reduction of stockholders' equity. Unearned ESOP shares totaled 48,695 and 60,876 at December 31, 2000 and 1999 and had a fair value of $779,000 and $777,000 at December 31, 2000 and 1999. Shares are released to participants proportionately as the loan is repaid. Dividends on allocated shares are recorded as dividends and charged to retained earnings. Dividends on unallocated shares, which may be distributed to participants or used to repay the loan, are treated as compensation expense. Compensation expense is recorded equal to the fair market value of the stock when contributions, which are determined annually by the Board of Directors of the Company and Bank, are made to the ESOP. ESOP expense for the years ended December 31, 2000, 1999 and 1998 was $156,000, $147,000 and $200,000. At December 31, 2000, the ESOP had 46,525 allocated shares, 48,695 suspense shares and no committed-to-be released shares. At December 31, 1999, the ESOP had 34,344 allocated shares, 60,876 suspense shares and no committed-to-be released shares. The Company also has a Recognition and Retention Plan (RRP) which provides for the award and issuance of up to 47,610 shares of the Company's stock to members of the Board of Directors and management. During 2000, 1998 and 1997, the RRP purchased 32,920 shares of the Company's common stock in the open market. At December 31, 2000, 32,920 shares had been awarded. Common stock awarded under the RRP vests ratably over a five-year period, commencing with the date of the award. Expense recognized under the RRP plan totaled approximately $105,000, $113,000 and $113,000 for the years ended December 31, 2000, 1999 and 1998, respectively. Note 14 -- Related Party Transactions The Bank has entered into transactions with certain directors, executive officers, significant stockholders and their affiliates or associates (related parties). Such transactions were made in the ordinary course of business on substantially the same terms and conditions, including interest rates and collateral, as those prevailing at the same time for comparable transactions with other customers, and did not, in the opinion of management, involve more than normal credit risk or present other unfavorable features. The aggregate amount of loans, as defined, to such related parties were as follows: Balances, January 1, 2000 $893 Changes in composition of related parties (407) New loans, including renewals 197 Payments, etc., including renewals (26) ------------------- Balances, December 31, 2000 $657 =================== Deposits from related parties held by the Banks at December 31, 2000 totaled $915,000. River Valley Bancorp and Subsidiary Notes to Consolidated Financial Statements (Table Dollar Amounts in Thousands) Note 15 -- Stock Option Plan Under the Company's incentive stock option plan, which is accounted for in accordance with Accounting Principles Board Opinion (APB) No. 25, Accounting for Stock Issued to Employees, and related interpretations, the Company grants selected executives and other key employees stock option awards which vest at a rate of 20 percent a year. During 1997, the Company authorized the grant of options for up to 119,025 shares of the Company's common stock. The exercise price of each option, which has a ten-year life, was equal to the market price of the Company's stock on the date of grant; therefore, no compensation expense was recognized. Although the Company has elected to follow APB No. 25, SFAS No. 123 requires pro forma disclosures of net income and earnings per share as if the Company had accounted for its employee stock options under that Statement. The fair value of each option grant was estimated on the grant date using an option-pricing model with the following assumptions: 2000 1999 - ------------------------------------------------------------------------------- Risk-free interest rates 6.5 and 5.9% 5.5% Dividend yields 2.7% 2.2% Volatility factors of expected market price of common stock 11.7% 10.0% Weighted-average expected life of the options 10 years 10 years Under SFAS No. 123, compensation cost is recognized in the amount of the estimated fair value of the options and amortized to expense over the options' vesting period. The pro forma effect on net income and earnings per share of this statement are as follows: 2000 1999 1998 - -------------------------------------------------------------------------------- Net income As reported $1,610 $1,039 $1,253 Pro forma 1,575 999 1,165 Basic earnings per share As reported 1.88 1.03 1.13 Pro forma 1.83 .99 1.05 Diluted earnings per share As reported 1.87 1.03 1.12 Pro forma 1.83 .99 1.04 River Valley Bancorp and Subsidiary Notes to Consolidated Financial Statements (Table Dollar Amounts in Thousands) The following is a summary of the status of the Company's stock option plan and changes in that plan as of and for the years ended December 31, 2000, 1999 and 1998.
Year Ended December 31 2000 1999 1998 - ------------------------------------------------------------------------------------------------------------------------------ Weighted- Weighted- Weighted- Average Average Average Options Shares Exercise Price Shares Exercise Price Shares Exercise Price - ------------------------------------------------------------------------------------------------------------------------------ Outstanding, beginning of year 93,959 $14.58 103,959 $14.81 105,149 $14.81 Granted 24,000 13.17 10,000 12.63 Exercised (1,190) 14.78 Forfeited/expired (18,614) 14.78 (20,000) 14.78 --------------- -------------- -------------- Outstanding, end of year 99,345 $14.17 93,959 $14.58 103,959 $14.81 =============== ============== ============== Options exercisable at year end 51,725 39,787 19,834 Weighted-average fair value of options granted during the year $3.18 $2.79
As of December 31, 2000, the 99,345 options outstanding have exercise prices ranging from $10.75 to $14.78 and a weighted-average remaining contractual life of 6.6 years. Note 16 -- Earnings Per Share
2000 1999 1998 -------------------------------------------------------------------------------------------------- Weighted- Weighted- Weighted- Average Per Share Average Per Share Average Per Share Year Ended December 31 Income Shares Amount Income Shares Amount Income Shares Amount - ------------------------------------------------------------------------------------------------------------------------------ Basic Earnings Per Share Income available to common stockholders $1,610 858,059 $1.88 $1,039 1,007,087 $1.03 $1,253 1,105,930 $1.13 =========== ============ =========== Effect Of Dilutive Stock Options 1,486 16,056 ------------------------ ----------------------- ---------------------- Diluted Earnings Per Share Income available to common stockholders and assumed conversions $1,610 859,545 $1.87 $1,039 1,007,087 $1.03 $1,253 1,121,986 $1.12 ==================================================================================================
Options to purchase 65,345 shares of common stock with a weighted-average exercise price of $14.78 per share and 93,959 shares with a weighted-average exercise price of $14.58 per share were outstanding at December 31, 2000 and 1999, respectively, but were not included in the computation of diluted EPS because the options' exercise price was greater than the average market price of the common shares. River Valley Bancorp and Subsidiary Notes to Consolidated Financial Statements (Table Dollar Amounts in Thousands) Note 17 -- Fair Values of Financial Instruments The following methods and assumptions were used to estimate the fair value of each class of financial instrument: Cash and Cash Equivalents--The fair value of cash and cash equivalents approximates carrying value. Securities and Mortgage-backed Securities--Fair values are based on quoted market prices. Loans--The fair value for loans is estimated using discounted cash flow analyses, using interest rates currently being offered for loans with similar terms to borrowers of similar credit quality. Interest Receivable/Payable--The fair values of interest receivable/payable approximate carrying values. FHLB Stock--Fair value of FHLB stock is based on the price at which it may be resold to the FHLB. Deposits--The fair values of noninterest-bearing, interest-bearing demand and savings accounts are equal to the amount payable on demand at the balance sheet date. The carrying amounts for variable rate, fixed-term certificates of deposit approximate their fair values at the balance sheet date. Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on such time deposits. Federal Home Loan Bank Advances--The fair value of these borrowings are estimated using a discounted cash flow calculation, based on current rates for similar debt. Line of Credit--The approximate market value for this variable borrowing approximates carrying value. Advance Payment by Borrowers for Taxes and Insurance--The fair value approximates carrying value. Off-Balance Sheet Commitments--For fixed-rate and adjustable-rate loan commitments, the fair value estimate considers the difference between current levels of interest rates and committed rates. The difference between the fair value and notional amount of outstanding loan commitments at December 31, 2000 and 1999, was not material. River Valley Bancorp and Subsidiary Notes to Consolidated Financial Statements (Table Dollar Amounts in Thousands) The estimated fair values of the Company's financial instruments are as follows:
2000 1999 ------------------------------------------------------------------ Carrying Fair Carrying Fair December 31 Amount Value Amount Value - ---------------------------------------------------------------------------------------------------------------------------- Assets Cash and cash equivalents $6,382 $6,382 $8,052 $8,052 Investment securities available for sale 7,247 7,247 6,301 6,301 Investment securities held to maturity 3,138 3,142 Loans including loans held for sale, net 140,970 139,660 115,131 112,633 Interest receivable 1,468 1,468 1,043 1,043 Stock in FHLB 943 943 943 943 Liabilities Deposits 130,225 130,168 114,251 114,527 FHLB advances 13,000 13,034 6,000 6,000 Line of credit 450 450 500 500 Interest payable 598 598 330 330 Advance payments by borrowers for taxes and insurance 41 41 36 36
Note 18 -- Condensed Financial Information (Parent Company Only) Presented below is condensed financial information as to financial position, results of operations and cash flows of the Company:
Condensed Balance Sheet December 31 2000 1999 - ---------------------------------------------------------------------------------------------------------------------------- Assets Cash and due from banks $ 202 $ 371 Investment in common stock of subsidiary 17,161 16,861 Other assets 271 134 ------------------------------------ Total assets $17,634 $17,366 ==================================== Liabilities--borrowings $ 450 $ 500 Stockholders' Equity 17,184 16,866 ------------------------------------ Total liabilities and stockholders' equity $17,634 $17,366 ====================================
River Valley Bancorp and Subsidiary Notes to Consolidated Financial Statements (Table Dollar Amounts in Thousands)
Condensed Statement of Income Year Ended December 31 2000 1999 1998 - ---------------------------------------------------------------------------------------------------------------------------- Income Dividends from subsidiary $1,621 $3,158 Other income 65 62 $ 71 ----------------------------------------------- Total income 1,686 3,220 71 ----------------------------------------------- Expenses Interest expense 63 101 3 Other expenses 120 105 102 ----------------------------------------------- Total expenses 183 206 105 ----------------------------------------------- Income (loss) before income tax and equity in undistributed (distribution in excess of) income of subsidiary 1,503 3,014 (34) Income tax benefit 47 58 13 ----------------------------------------------- Income (loss) before equity in undistributed (distribution in excess of) income of subsidiary 1,550 3,072 (21) Equity in undistributed (distribution in excess of) income of subsidiary 60 (2,033) 1,274 ----------------------------------------------- Net Income $1,610 $1,039 $1,253 ===============================================
River Valley Bancorp and Subsidiary Notes to Consolidated Financial Statements (Table Dollar Amounts in Thousands)
Condensed Statement of Cash Flows Year Ended December 31 2000 1999 1998 - ---------------------------------------------------------------------------------------------------------------------------- Operating Activities Net income $1,610 $1,039 $1,253 Adjustments to reconcile net income to net cash provided by operating activities (4) 1,905 (1,186) ------------------------------------------------- Net cash provided by operating activities 1,606 2,944 67 ------------------------------------------------- Financing Activities Purchase of stock (1,367) (2,724) (270) Proceeds from exercise of stock options 18 Acquisition of stock for stock benefit plans (8) Proceeds from borrowings 450 3,131 270 Repayment of borrowings (500) (2,901) Cash dividends (350) (277) (261) ------------------------------------------------- Net cash used by financing activities (1,775) (2,771) (243) ------------------------------------------------- Net Change in Cash and Cash Equivalents (169) 173 (176) Cash and Cash Equivalents at Beginning of Year 371 198 374 ------------------------------------------------- Cash and Cash Equivalents at End of Year $ 202 $ 371 $ 198 =================================================
GENERAL INFORMATION FOR SHAREHOLDERS Transfer Agent and Registrar: Shareholder and General Inquiries: Corporate Trust Services River Valley Bancorp Fifth Third Center Attn: Matthew P. Forrester 38 Fountain Square Plaza 303 Clifty Drive, P.O. Box 1590 Mail Drop #10AT66 Madison, Indiana 47250 Cincinnati, Ohio 45263 Tel: (812) 273-4949 Tel: (800) 837-2755 or Fax: (812) 273-4944 (513) 579-5320 Corporate Counsel: Special Counsel: Lonnie D. Collins, Attorney Barnes & Thornburg 426 E. Main Street 11 S. Meridian Street Madison, Indiana 47250 Indianapolis, Indiana 46204 Tel: (812) 265-3616 Tel: (317) 236-1313 Fax: (812) 273-3143 Fax: (317) 231-7433 Annual and Other Reports: Additional copies of this Annual Report to Shareholders and copies of the most recent Form 10-KSB may be obtained without charge by contacting the Corporation. Offices of River Valley Financial Bank: Hilltop: 303 Clifty Drive 430 Clifty Drive Downtown: 233 East Main Street Drive thru: 401 East Main Street Wal-Mart: 567 Ivy Tech Drive Hanover: 10 Medical Plaza E-MAIL Address: rvfbank.com Annual Meeting: The Annual Meeting of Shareholders of River Valley Bancorp will be held on Wednesday, April 18, 2001, at 3:00 PM, at 430 Clifty Drive, Madison, IN 47250. BOARD OF DIRECTORS Fred W. Koehler, Chairman Auditor Jefferson County, Indiana Robert W. Anger Retired, Former CEO Madison First Federal Jonnie L. Davis Retired, Administrative Assistant, Various Firms Matthew P. Forrester President, CEO River Valley Financial Bank Michael J. Hensley Partner, Law Firm- Hensley, Walro, Collins, & Hensley Earl W. Johann Retired, Former Owner Madison Distributing Co. Charles J. McKay Partner - Scott, Callicotte, & McKay LLC CPAs ***************** Lonnie D. Collins Board Secretary Partner, Law Firm- Hensley, Walro, Collins & Hensley EXECUTIVE OFFICERS OF RIVER VALLEY FINANCIAL BANK Matthew P. Forrester President, CEO Mark A. Goley Vice President of Lending Barbara J. Eades Vice President of Retail Banking Larry C. Fouse Vice President of Finance Deanna J. Liter Vice President of Data Services Loy M. Skirvin Director of Human Resources OFFICERS OF RIVER VALLEY FINANCIAL BANK Dawn M. Moore Internal Audit/Compliance Officer Robert J. Schoenstein Jr. Assistant Vice President Loan Officer Theresa A. Dryden Loan Officer Angela D. Adams Branch Manager James B. Allen Loan Officer Kenneth L. Cull Loan Officer Debbie R. Finnegan Branch Manager Rachael A. Goble Branch Manager Rick T. Nelson Loan Officer Linda L. Ralston Branch Manager Rhonda E. Wingham Branch Manager -----END PRIVACY-ENHANCED MESSAGE-----