10QSB 1 rv_10q.txt FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-QSB (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2001 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO Commission file number: 0-21765 RIVER VALLEY BANCORP (Exact name of small business issuer as specified in its charter) Indiana 35-1984567 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 430 Clifty Drive Madison, Indiana 47250 (Address of principal executive offices) (812) 273-4949 (Issuer's telephone number) APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS Check whether the issuer filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court. Yes [ ] No [ ] APPLICABLE ONLY TO CORPORATE ISSUERS State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: August 8, 2001 - 822,681 common shares Transitional Small Business Disclosure Format (Check one): Yes [ ] No [ X ] RIVER VALLEY BANCORP FORM 10-QSB INDEX Page No. -------- PART I. FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Condensed Balance Sheet 3 Consolidated Condensed Statement of Income 4 Consolidated Condensed Statement of Comprehensive Income 5 Consolidated Condensed Statement of Cash Flows 6 Notes to Unaudited Consolidated Condensed Financial Statements 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. 8 PART II. OTHER INFORMATION Item 1. Legal Proceedings 12 Item 2. Changes in Securities 12 Item 3. Defaults Upon Senior Securities 12 Item 4. Submission of Matters to a Vote of Security Holders 12 Item 5. Other Information 12 Item 6. Exhibits and Reports on Form 8-K 12 SIGNATURES 13 PART I FINANCIAL INFORMATION Item 1. Financial Statements
RIVER VALLEY BANCORP Consolidated Condensed Balance Sheet (Unaudited) June 30, December 31, 2001 2000 ------------------------------------------ (In Thousands, Except Share Amounts) Assets Cash and due from banks $ 3,498 $ 3,361 Interest-bearing demand deposits 7,108 3,021 ------------------------------------------ Cash and cash equivalents 10,606 6,382 Investment securities available for sale 9,318 7,247 Loans 154,129 142,672 Allowance for loan losses 1,799 1,702 ------------------------------------------ Net Loans 152,330 140,970 Premises and equipment 4,368 2,817 Federal Home Loan Bank stock 1,150 943 Interest receivable 1,439 1,468 Other assets 2,395 2,303 ------------------------------------------ Total assets $ 181,606 $162,130 ========================================== Liabilities Deposits Non-interest-bearing $ 12,139 $ 9,170 Interest-bearing 131,534 121,055 ------------------------------------------ Total deposits 143,673 130,225 Borrowings 18,850 13,450 Interest payable 706 598 Other liabilities 959 673 ------------------------------------------ Total liabilities 164,188 144,946 ------------------------------------------ Commitments and Contingencies Shareholders' Equity Preferred stock, without par value Authorized and unissued - 2,000,000 shares Common stock, without par value Authorized - 5,000,000 shares Issued and outstanding - 829,981 and 868,874 shares Additional paid-in capital 7,796 8,135 Retained earnings 10,146 9,753 Shares acquired by stock benefit plans (609) (734) Accumulated other comprehensive income 85 30 ------------------------------------------ Total shareholders' equity 17,418 17,184 ------------------------------------------ Total liabilities and shareholders' equity $ 181,606 $162,130 ==========================================
See notes to consolidated condensed financial statements.
RIVER VALLEY BANCORP Consolidated Condensed Statement of Income (Unaudited) Six Months Ended Three Months Ended June 30, June 30, -------------------------------------------------------- 2001 2000 2001 2000 -------------------------------------------------------- Interest Income (In Thousands, Except Share Amounts) Loans receivable $ 6,064 $ 4,782 3,100 $ 2,466 Investment securities 251 210 123 85 Interest-earning deposits and other 147 188 66 89 ------------------------------------------------------- Total interest income 6,462 5,180 3,289 2,640 ------------------------------------------------------- Interest Expense Deposits 3,002 2,373 1,501 1,214 Borrowings 447 157 244 74 ------------------------------------------------------- Total interest expense 3,449 2,530 1,745 1,288 ------------------------------------------------------- Net Interest Income 3,013 2,650 1,544 1,352 Provision for loan losses 200 57 110 44 ------------------------------------------------------- Net Interest Income After Provision for Loan Losses 2,813 2,593 1,434 1,308 ------------------------------------------------------- Other Income Loss on investment securities (1) (4) (1) Service fees and charges 441 430 235 186 Net gains on loan sales 217 24 161 12 Other income 16 76 6 51 ------------------------------------------------------- Total other income 673 526 401 249 ------------------------------------------------------- Other Expenses Salaries and employee benefits 1,063 995 530 481 Net occupancy and equipment expenses 278 287 137 153 Data processing fees 84 64 41 38 Advertising 94 87 55 44 Legal and professional fees 93 70 46 43 Other expenses 453 346 247 157 ------------------------------------------------------- Total other expenses 2,065 1,849 1,056 916 ------------------------------------------------------- Income Before Income Tax 1,421 1,270 779 641 Income tax expense 547 483 300 235 ------------------------------------------------------- Net Income $ 874 $ 787 $ 479 $ 406 ====================================================== Basic earnings per share $ 1.08 $ .91 $ .60 $ .47 Diluted earnings per share 1.06 .91 .59 .47
See notes to consolidated condensed financial statements.
RIVER VALLEY BANCORP Consolidated Condensed Statement of Comprehensive Income (Unaudited) Six Months Ended Three Months Ended June 30, June 30, -------------------------------------------------------- 2001 2000 2001 2000 -------------------------------------------------------- (In Thousands) Net income $ 874 $ 787 $ 479 $ 406 Other comprehensive income, net of tax Unrealized gains on securities available for sale Unrealized holding gains arising during the period, net of tax expense of $36, $3, $7 and $0. 55 6 10 1 Less: Reclassification adjustment for losses included in net income, net of tax benefit of $1. (3) --------------------------------------------------------- 55 9 10 1 --------------------------------------------------------- Comprehensive income $ 929 $ 796 $ 489 $ 407 =========================================================
See notes to consolidated condensed financial statements.
RIVER VALLEY BANCORP Consolidated Condensed Statement of Cash Flows (Unaudited) Six Months Ended June 30, ---------------------------------------- 2001 2000 ---------------------------------------- Operating Activities (In Thousands) Net income $874 $ 787 Adjustments to reconcile net income to net cash provided by operating activities Provision for loan losses 200 57 Depreciation and amortization 169 117 Amortization of goodwill 3 3 Investment securities accretion, net (2) (24) Investment securities losses 1 4 Loans originated for sale in the secondary market (13,953) (1,429) Proceeds from sale of loans in the secondary market 14,036 1,443 Gain on sale of loans (83) (14) Amortization of deferred loan origination cost 70 45 Amortization of expense related to stock benefit plans 159 120 Gain on sale of premises and equipment (2) (42) Capitalized interest on construction (37) Net change in: Interest receivable 29 (129) Interest payable 108 68 Other adjustments 145 158 ---------------------------------------- Net cash provided by operating activities 1,717 1,164 ---------------------------------------- Investing Activities Purchases of securities available for sale (8,262) (2,961) Proceeds from maturities of securities available for sale 3,156 4,919 Proceeds from sale of securities available for sale 3,127 569 Proceeds from maturities of securities held to maturity 1,204 Purchase of Federal Home Loan Bank stock (207) Net change in loans (11,630) (13,671) Premiums paid on life insurance (95) (216) Purchases of premises and equipment (1,683) (129) Proceeds from sale of premises and equipment 2 56 ---------------------------------------- Net cash used by investing activities (15,592) (10,229) ---------------------------------------- Financing Activities Net change in Noninterest-bearing, interest-bearing demand and savings deposits 9,316 (842) Certificates of deposit 4,132 8,626 Proceeds from borrowings 24,400 6,350 Repayment of borrowings (19,000) (6,000) Cash dividends (87) (153) Purchase of stock (686) (606) Stock options exercised 15 Advances by borrowers for taxes and insurance 9 4 ---------------------------------------- Net cash provided by financing activities 18,099 7,379 ---------------------------------------- Net Change in Cash and Cash Equivalents 4,224 (1,690) Cash and Cash Equivalents, Beginning of Period 6,382 8,052 ---------------------------------------- Cash and Cash Equivalents, End of Period $10,606 $ 6,362 ======================================== Additional Cash Flows and Supplementary Information Interest paid $3,341 $ 2,462 Income tax paid 463 386 Investment securities held to maturity transferred to available for sale - 1,934
See notes to consolidated condensed financial statements. RIVER VALLEY BANCORP Notes to Unaudited Consolidated Condensed Financial Statements River Valley Bancorp (the "Corporation") is a unitary savings and loan holding company whose activities are primarily limited to holding the stock of River Valley Financial Bank ("River Valley" or the "Bank"). The Bank conducts a general banking business in southeastern Indiana which consists of attracting deposits from the general public and applying those funds to the origination of loans for consumer, residential and commercial purposes. River Valley's profitability is significantly dependent on net interest income, which is the difference between interest income generated from interest-earning assets (i.e. loans and investments) and the interest expense paid on interest-bearing liabilities (i.e. customer deposits and borrowed funds). Net interest income is affected by the relative amount of interest-earning assets and interest-bearing liabilities and the interest received or paid on these balances. The level of interest rates paid or received by the Bank can be significantly influenced by a number of competitive factors, such as governmental monetary policy, that are outside of management's control. Note 1: Basis of Presentation The accompanying unaudited consolidated condensed financial statements were prepared in accordance with instructions for Form 10-QSB and, therefore, do not include information or footnotes necessary for a complete presentation of financial position, results of operations and cash flows in conformity with generally accepted accounting principles. Accordingly, these financial statements should be read in conjunction with the consolidated financial statements and notes thereto of the Corporation included in the Annual Report on Form 10-KSB for the year ended December 31, 2000. However, in the opinion of management, all adjustments (consisting of only normal recurring accruals) which are necessary for a fair presentation of the financial statements have been included. The results of operations for the six- and three-month periods ended June 30, 2001, are not necessarily indicative of the results which may be expected for the entire year. Note 2: Principles of Consolidation The consolidated financial statements include the accounts of the Corporation and its subsidiary, the Bank and the Bank's subsidiary, Madison First Service Corporation ("First Service"). All significant intercompany balances and transactions have been eliminated in the accompanying consolidated financial statements. Note 3: Earnings Per Share Earnings per share have been computed based upon the weighted average common shares outstanding. Unearned Employee Stock Ownership Plan shares have been excluded from the computation of average common shares outstanding.
Six Months Ended Six Months Ended June 30, 2001 June 30, 2000 ------------- ------------- Weighted Per Weighted Per Average Share Average Share Income Shares Amount Income Shares Amount ------ ------ ------ ------ ------ ------ (In Thousands, Except Share Amounts) Basic earnings per share Income available to common shareholders $ 874 809,254 $1.08 $787 866,000 $ .91 =========== ========== Effect of dilutive RRP awards and stock options 12,994 -------------------------- --------------------------------- Diluted earnings per share Income available to common shareholders and assumed conversions $ 874 822,248 $ 1.06 $787 866,000 $ .91 ======================================== ============================================= Three Months Ended Three Months Ended June 30, 2001 June 30, 2000 ------------- ------------- Weighted Per Weighted Per Average Share Average Share Income Shares Amount Income Shares Amount ------ ------ ------ ------ ------ ------ (In Thousands, Except Share Amounts) Basic earnings per share Income available to common shareholders $479 798,702 $ .60 $406 861,096 $ .47 =========== =========== Effect of dilutive RRP awards and stock options 14,135 -------------------------- --------------------------------- Diluted earnings per share Income available to common shareholders and assumed conversions $479 812,837 $ .59 $406 861,096 $ .47 ======================================== =============================================
Note 4: Reclassifications Certain reclassifications have been made to the 2000 consolidated financial statements to conform to the June 30, 2001 presentation. Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations. Forward Looking Statements This Quarterly Report on Form 10-QSB ("Form 10-QSB") contains statements which constitute forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements appear in a number of places in this Form 10-QSB and include statements regarding the intent, belief, outlook, estimate or expectations of the Corporation (as defined in the notes to the consolidated condensed financial statements), its directors or its officers primarily with respect to future events and the future financial performance of the Corporation. Readers of this Form 10-QSB are cautioned that any such forward looking statements are not guarantees of future events or performance and involve risks and uncertainties, and that actual results may differ materially from those in the forward looking statements as a result of various factors. The accompanying information contained in this Form 10-QSB identifies important factors that could cause such differences. These factors include changes in interest rates; loss of deposits and loan demand to other financial institutions; substantial changes in financial markets; changes in real estate values and the real estate market; or regulatory changes. Financial Condition At June 30, 2001, the Corporation's assets totaled $181.6 million, an increase of $19.5 million, or 12.0%, from December 31, 2000. The increase in assets resulted primarily from an increase in net loans receivable. Liquid assets (i.e., cash and interest earning deposits) increased by $4.2 million from December 31, 2000 levels, to a total of $10.6 million at June 30, 2001. Investment securities increased by $2.1 million, or 28.6 %, to a total of $9.3 million at June 30, 2001. Net loans receivable were $152.3 million at June 30, 2001, an increase of $11.3 million, or 8.0% from $141.0 million at December 31, 2000. These increases were funded by an increase in deposits of $13.5 million. The Corporation's consolidated allowance for loan losses totaled $1.7 million and $1.8 million on December 31, 2000 and June 30, 2001, respectively, which represented 1.2 % of total loans at both dates. Non-performing loans (defined as loans delinquent greater than 90 days and loans on non-accrual status) totaled $621,000 and $611,000 at December 31, 2000 and June 30, 2001, respectively. Although management believes that its allowance for loan losses at June 30, 2001, 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 totaled $143.7 million at June 30, 2001, and increase of $13.5 million, or 10.3 %, compared to total deposits at December 31, 2000. The growth for the six-month period resulted from the marketing and interest rate strategies. Advances from the Federal Home Loan Bank totaled $13.0 million at December 31, 2000 and $18.0 million on June 30, 2001. These advances had a positive effect on the bottom line during the first and second quarters due to a decline in their interest rates. The average cost of Federal Home Loan Bank advances at June 30, 2001 was 5.56%. Stockholders' equity totaled $17.4 at June 30, 2001, an increase of $200,000, or 1.2 % from $17.2 million at December 31, 2000. The increase resulted primarily from the Corporation's net income, offset by cash dividends and stock repurchases. The Bank is required to maintain minimum regulatory capital pursuant to federal regulations. At June 30, 2001, the Bank's regulatory capital exceeded all applicable regulatory capital requirements. Comparison of Operating Results for the Six Months Ended June 30, 2001 and 2000 General The Corporation's net income for the six months ended June 30, 2001, totaled $874,000, an increase of $87,000 or 11.1% from the $787,000 reported for the period ended June 30, 2000. The increase in income in the 2001 period was primarily attributable to a increase in net interest income of $363,000, which was partially offset by an increase in the provision for loan losses of $143,000 and an increase in other expenses of $216,000. Net Interest Income Total interest income for the six months ended June 30, 2001 amounted to $6.5 million, an increase of $1.3 million, or 24.7%, over the comparable period in 2000, reflecting the effects of an increase in average interest-earning assets outstanding. Interest expense on deposits increased by $629,000, or 26.5%, to a total of $3.0 million for the six months ended June 30, 2001, due primarily to an increase in the average cost of deposits, and by an increase in the average balance of deposits outstanding year-to-year. Interest expense on borrowings totaled $447,000 for the six months ended June 30, 2001, an increase of $290,000, from the comparable period in 2000. The increase resulted primarily from an increase in average borrowings year-to-year. As a result of the foregoing changes in interest income and interest expense, net interest income increased by $363,000 or 13.7%, for the six months ended June 30, 2001, as compared to the comparable period in 2000. This increase was due to the increase in volume of average interest earning assets offset in part by the increase in average interest bearing liabilities. Provision for Losses on Loans A provision for losses on loans is charged to income 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 the Bank, the status of past due principal and interest payment, general economic conditions, particularly as such conditions relate to the Bank's market area, and other factors related to the collectibility of the Bank's loan portfolio. As a result of such analysis, management recorded a $200,000 provision for losses on loans for the six months ended June 30, 2001, compared to the $57,000 amount recorded in the 2000 period. The 2001 provision amount was predicated on the increase in the balance of the loan portfolio, coupled with the level of delinquent loans year-to-year. While management believes that the allowance for losses on loans is adequate at June 30, 2001, based upon the available facts and circumstances, there can be no assurance that the loan loss allowance will be adequate to cover losses on non-performing assets in the future. Other Income Other income increased by $147,000, or 27.9% for the six months ended June 30, 2001, as compared to the same period in 2000, due primarily to the fact that the gain on sale of loans increased by $193,000. The Bank sold loans of approximately $14.0 million during the six months ended June 30, 2001. Other Expense Other expense increased by $216,000, or 11.7%, during the six months ended June 30, 2001 as compared to the same period in 2000. The increase was due primarily to the increase in loan volume/administrative expense, both balance sheet and off-balance sheet volume, and general expense increases due to growth. Income Taxes The provision for income taxes totaled $547,000 for the six months ended June 30, 2001, an increase of $64,000, or 13.3%, as compared to the same period in 2000. The effective tax rates amounted to 38.5% and 38.0% for the six months ended June 30, 2001 and 2000, respectively. Comparison of Operating Results for the Three Months Ended June 30, 2001 and 2000 General The Corporation's net income for the three months ended June 30, 2001, totaled $479,000, an increase of $73,000, or 18.0%, from the $406,000 of net income reported in the comparable 2000 period. The increase in earnings in the 2001 period was primarily attributable to an increase in net interest income of $192,000 and an increase in other income of approximately $152,000. Net Interest Income Total interest income for the three months ended June 30, 2001 amounted to $3.3 million, an increase of $649,000, or 24.6%, from the comparable quarter in 2000, reflecting the effects of an increase in average interest-earning assets outstanding, coupled with an increase in the yield year-to-year. Interest income on loans totaled $3.1 million for the three months ended June 30, 2001, an increase of $634,000, or 25.7%, from the comparable 2000 quarter. Interest expense on deposits increased by $287,000, or 23.6%, to a total of $1.5 million for the quarter ended June 30, 2001, due primarily to an increase in the average cost of deposits and an increase in the average balance of deposits outstanding. Interest expense on borrowings totaled $244,000 for the three months ended June 30, 2001, an increase of $170,000 over the comparable quarter in 2000. The increase resulted from an increase in average borrowings outstanding from year-to-year. As a result of the foregoing changes in interest income and interest expense, net interest income increased by $192,000, or 14.2%, for the three months ended June 30, 2001, as compared to the same quarter in 2000. This increase was due to the increase in volume of average interest earning assets offset in part by an increase in average interest bearing liabilities. 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 the Bank, the status of past due principal and interest payments, general economic conditions, particularly as such conditions relate to the Bank's market area, and other factors related to the collectibility of the Bank's loan portfolio. As a result of such analysis, management recorded a $110,000 provision for losses on loan for the three months ended June 30, 2001, compared to the $44,000 recorded in the 2000 period. While management believes that the allowance for losses on loans is adequate at June 30, 2001, based upon the available facts and circumstances, there can be no assurance that the loan loss allowance will be adequate to cover losses on non-performing assets in the future. Other Income Other income increased by $152,000, or 61.0%, for the three months ended June 30, 2001, as compared to the same period in 2000, due primarily to a $49,000, or 26.3%, increase in service fees and charges coupled with an increase of $149,000 in gains on sale of loans. The Bank sold loans of approximately $10.7 million during the second quarter of 2001. Other Expense Other expenses increased by $140,000, or 15.3%, during the three months ended June 30, 2001, compared to the same period in 2000. The increase was due primarily to the increase in loan volume/administrative expense, both balance sheet and off-balance sheet volume, and general expense increases due to growth. Income Taxes The provision for income taxes totaled $300,000 for the three months ended June 30, 2001, an increase of $65,000, or 27.7%, as compared to the same period in 2000. This increase resulted primarily from an increase in net income before income taxes of $138,000, or 21.5%. The effective tax rates amounted to 38.5% and 36.7% for the three months ended June 30, 2001 and 2000, respectively. Other The Securities and Exchange Commission maintains a Web site that contains reports, proxy information statements, and other information regarding registrants that file electronically with the Commission, including the Corporation. The address is http://www.sec.gov. PART II. OTHER INFORMATION Item 1. Legal Proceedings. None. Item 2. Changes in Securities and Use of Proceeds. None. Item 3. Defaults Upon Senior Securities. None. Item 4. Submission of Matters to Vote of Security Holders. On April 18, 2001, the Annul Meeting of the Corporation's shareholders was held. Three directors were elected to the following terms and by the following votes: For Votes Withheld --- -------------- Jonnie L. Davis (three-year term) 719,675 87,525 Charles J. McKay (three-year term) 720,519 86,681 Earl W. Johann (one-year term) 720,523 86,677 Directors continuing in office are Michael J. Hensley, Fred W. Koehler, Robert W. Anger and Matthew P. Forrester. Item 5. Other Information. None. Item 6. Exhibits and Reports on Form 8-K. (a) No reports on Form 8-K were filed during the quarter ended June 30, 2001. Signatures Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Issuer has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. RIVER VALLEY BANCORP Date: August 13, 2001 By: /s/ Matthew P. Forrester ----------------------------------------- Matthew P. Forrester President and Chief Executive Officer Date: August 13, 2001 By: /s/ Larry C. Fouse ----------------------------------------- Larry C. Fouse Vice President of Finance