-----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, JYxYh8HfOO82+Iggbr+o1ORapf7vi0xHzw6ZSND7WbHT9txpyH7fmWAUlB6JTmkR dmcK8xjUmeJy6hrMoaMLIQ== 0000908834-03-000310.txt : 20030814 0000908834-03-000310.hdr.sgml : 20030814 20030814155425 ACCESSION NUMBER: 0000908834-03-000310 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20030630 FILED AS OF DATE: 20030814 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: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-21765 FILM NUMBER: 03847571 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 10QSB 1 rv10qsb_0630.txt RIVER VALLEY FORM 10-QSB 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, 2003 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, 2003 - 813,996 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 Sheets 3 Consolidated Condensed Statements of Income 4 Consolidated Condensed Statements of Comprehensive Income 5 Consolidated Condensed Statements of Cash Flows 6 Notes to Unaudited Consolidated Condensed Financial Statements 7 Item 2. Management's Discussion and Analysis or Plan of Operation 11 Item 3. Controls and Procedures 15 PART II.OTHER INFORMATION Item 1. Legal Proceedings 16 Item 2. Changes in Securities 16 Item 3. Defaults Upon Senior Securities 16 Item 4. Submission of Matters to a Vote of Security Holders 16 Item 5. Other Information 16 Item 6. Exhibits and Reports on Form 8-K 16 SIGNATURES 17 EXHIBITS 18 PART I FINANCIAL INFORMATION Item 1. Financial Statements RIVER VALLEY BANCORP Consolidated Condensed Balance Sheets
June 30, December 31, 2003 2002 --------------------- -------------------- (In Thousands, Except Share Amounts) Assets (Unaudited) Cash and due from banks $ 3,589 $ 5,094 Interest-bearing demand deposits 7,206 13,516 --------------------- -------------------- Cash and cash equivalents 10,795 18,610 Investment securities available for sale 34,107 28,174 Loans held for sale 2,680 1,062 Loans, net of allowance for loan losses of $2,008 and $2,101 176,703 164,895 Premises and equipment 5,899 5,741 Federal Home Loan Bank stock 2,027 2,000 Interest receivable 1,359 1,467 Cash surrender value life insurance 4,993 1,326 Other assets 883 745 --------------------- -------------------- Total assets $239,446 $224,020 ===================== ==================== Liabilities Deposits $ 13,505 $ 11,115 Non-interest-bearing Interest-bearing 155,479 150,714 --------------------- -------------------- Total deposits 168,984 161,829 Borrowings 47,000 40,000 Interest payable 373 459 Other liabilities 1,375 1,099 --------------------- -------------------- Total liabilities 217,732 203,387 --------------------- -------------------- 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 - 809,520 and 810,844 shares Additional paid-in capital 8,096 7,957 Retained earnings 13,361 12,654 Shares acquired by stock benefit plans (269) (339) Accumulated other comprehensive income 526 361 --------------------- -------------------- Total shareholders' equity 21,714 20,633 --------------------- -------------------- Total liabilities and shareholders' equity $ 239,446 $224,020 ===================== ====================
See notes to consolidated condensed financial statements. RIVER VALLEY BANCORP Consolidated Condensed Statements of Income (Unaudited)
Six Months Ended Three Months Ended June 30, June 30, -------------- -------------- ---------------- -------------- 2003 2002 2003 2002 -------------- -------------- ---------------- -------------- Interest Income (In Thousands, Except Share Amounts) Loans receivable $ 5,515 $ 5,759 2,740 2,881 Investment securities 509 440 271 231 Interest-earning deposits and other 110 87 41 51 -------------- --------------- --------------- -------------- Total interest income 6,134 6,286 3,052 3,163 -------------- --------------- --------------- -------------- Interest Expense Deposits 1,719 2,094 834 1,017 Borrowings 954 688 518 375 -------------- --------------- --------------- -------------- Total interest expense 2,673 2,782 1,352 1,392 -------------- --------------- --------------- -------------- Net Interest Income 3,461 3,504 1,700 1,771 Provision for loan losses 180 260 90 130 -------------- --------------- --------------- -------------- Net Interest Income After Provision for Loan Losses 3,281 3,244 1,610 1,641 -------------- --------------- --------------- -------------- Other Income Net realized gains (losses) on sales of available-for-sale securities (2) 6 (2) 6 Service fees and charges 684 647 344 328 Net gains on loan sales 979 150 487 103 Gain on sale of premises and equipment 0 352 0 352 Other income 72 64 35 16 -------------- --------------- --------------- -------------- Total other income 1,733 1,219 864 805 -------------- --------------- --------------- -------------- Other Expenses Salaries and employee benefits 1,333 1,157 676 595 Net occupancy and equipment expenses 389 402 202 202 Data processing fees 58 103 38 57 Advertising 131 86 58 45 Legal and professional fees 105 24 60 17 Amortization of mortgage servicing rights 325 138 62 94 Other expenses 580 463 300 230 -------------- --------------- --------------- -------------- Total other expenses 2,921 2,373 1,396 1,240 -------------- --------------- --------------- -------------- Income Before Income Tax 2,093 2,090 1,078 1,206 Income tax expense 817 828 398 471 -------------- --------------- --------------- -------------- Net Income $1,276 $1,262 $ 680 $ 735 ============== =============== =============== ============== Basic earnings per share $ 1.61 $ 1.63 $ .86 $ .94 Diluted earnings per share 1.54 1.56 .82 .91 Dividends per share .55 .35 .30 .20
RIVER VALLEY BANCORP Consolidated Condensed Statements of Comprehensive Income (Unaudited)
Six Months Ended Three Months Ended June 30, June 30, ------------- ------------ ------------- ----------- 2003 2002 2003 2002 ------------- ------------ ------------- ----------- (In Thousands) Net income $1,276 $1,262 $680 $735 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 $108, $66, $100 and $144 164 100 152 219 Less: Reclassification adjustment for gains (losses) included in net income, of tax expense (benefit) of $(1), $2, $(1), and $2 (1) 4 (1) 4 ------------- ---------- ------------- ------------ 165 96 153 215 ------------- ---------- ------------- ------------ Comprehensive income $1,441 $1,358 $833 $950 ============= ========== ============= ============
See notes to consolidated condensed financial statements.
RIVER VALLEY BANCORP Consolidated Condensed Statements of Cash Flows (Unaudited) Six Months Ended June 30, ------------------ ------------------- 2003 2002 ------------------ ------------------- Operating Activities (In Thousands) Net income $ 1,276 $ 1,262 Adjustments to reconcile net income to net cash provided by operating activities Provision for loan losses 180 260 Depreciation and amortization 245 254 Investment securities (gains) losses 2 (6) Loans originated for sale in the secondary market (44,760) (14,633) Proceeds from sale of loans in the secondary market 43,724 16,656 Gain on sale of loans (979) (150) Amortization of deferred loan origination cost 94 65 Amortization of expense related to stock benefit plans 200 196 Gain on sale of premises and equipment - (352) Capitalized interest on construction - (1) Net change in: Interest receivable 108 166 Interest payable (86) (153) Other adjustments 2 (321) ------------------ ------------------- Net cash provided by operating activities 6 3,243 ------------------ ------------------- Investing Activities Purchases of securities available for sale (8,006) (6,992) Proceeds from maturities of securities available for sale 1,183 90 Proceeds from sale of securities available for sale 1,098 5,889 Purchase of Federal Home Loan Bank stock - (400) Net change in loans (11,685) (6,556) Premiums paid on life insurance (3,639) - Purchases of premises and equipment (403) (708) Proceeds from sale of real estate owned - 30 Proceeds from sale of premises and equipment - 629 ------------------ ------------------- Net cash used in investing activities (21,452) (8,018) ------------------ ------------------- Financing Activities Net change in Noninterest-bearing, interest-bearing demand and savings deposits 9,356 (776) Certificates of deposit (2,201) 6,595 Proceeds from borrowings 11,000 34,000 Repayment of borrowings (4,000) (28,950) Cash dividends (385) (229) Purchase of stock (205) (140) Stock options exercised 69 92 Acquisition of stock for stock benefit plans - (22) Advances by borrowers for taxes and insurance (3) 4 ------------------ ------------------- Net cash provided by financing activities 13,631 10,574 ------------------ ------------------- Net Change in Cash and Cash Equivalents (7,815) 5,799 Cash and Cash Equivalents, Beginning of Period 18,610 5,641 ------------------ ------------------- Cash and Cash Equivalents, End of Period $ 10,795 $ 11,440 ================== =================== Additional Cash Flows and Supplementary Information Interest paid $ 2,759 $ 2,935 Income tax paid 624 575 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 included 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, 2002. 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, 2003, are not necessarily indicative of the results which may be expected for the entire year. The consolidated condensed balance sheet of the Corporation as of December 31, 2002 has been derived from the audited consolidated balance sheet of the Corporation as of that date. Note 2: Principles of Consolidation The consolidated financial statements include the accounts of the Corporation and its subsidiaries. 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, 2003 June 30, 2002 ------------- ------------- Weighted Per Weighted Per Average Share Average Share Income Shares Amount Income Shares Amount ------ -------- ------ ------ -------- ------ (Dollar Amounts In Thousands, Except Share Amounts) Basic earnings per share Income available to common shareholders $1,276 790,295 $1.61 $1,262 775,503 $1.63 =========== =========== Effect of dilutive RRP awards and stock options 38,351 31,173 ------------- -------------- -------------- -------------- Diluted earnings per share Income available to common shareholders and assumed conversions $ 1,276 828,646 $1.54 $ 1,262 806,676 $1.56 ============= ============== =========== ============== ============== =========== Three Months Ended Three Months Ended June 30, 2003 June 30, 2002 ------------- ------------- Weighted Per Weighted Per Average Share Average Share Income Shares Amount Income Shares Amount ------ -------- ------ ------ -------- ------ (Dollar Amounts In Thousands, Except Share Amounts) Basic earnings per share Income available to common shareholders $ 680 791,359 $ .86 $735 778,342 $ .94 =========== =========== Effect of dilutive RRP awards and stock options 40,270 33,060 ------------- -------------- -------------- -------------- Diluted earnings per share Income available to common shareholders and assumed conversions $680 831,629 $ .82 $735 811,402 $ .91 ============= ============== =========== ============== ============== ===========
Note 4: Stock Options The Company has a stock-based employee compensation plan, which is described more fully in Notes to Financial Statements included in the December 31, 2002 Annual Report to shareholders. The Company accounts for this plan under the recognition and measurement principles of APB Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations. No stock-based employee compensation cost is reflected in net income, as all options granted under the plan had an exercise price equal to the market value of the underlying common stock on the grant date. The following table illustrates the effect on net income and earnings per share if the Company had applied the fair value provisions of Statement of Financial Accounting Standards ("SFAS") No. 123, Accounting for Stock-Based Compensation, to stock-based employee compensation.
Six Months Six Months Three Months Three Months Ended Ended Ended Ended June 30, 2003 June 30, 2002 June 30, 2003 June 30, 2002 ------------------------------------------------------------ Net income, as reported $1,276 $1,262 $ 680 $ 735 Less: Total stock-based employee compensation cost determined under the fair value based method, net of income taxes 13 29 6 14 ------------------------------------------------------------ Pro forma net income $1,263 $1,233 $ 674 $ 721 ============================================================ Earnings per share: Basic - as reported $ 1.61 $1.63 $ .86 $ .94 Basic - pro forma 1.60 1.59 .85 .93 Diluted - as reported 1.54 1.56 .82 .91 Diluted - pro forma 1.52 1.53 .81 .89
Note 5: Effect of Recent Accounting Pronouncements The Financial Accounting Standards Board ("FASB") recently adopted Statement of Financial Accounting Standards ("SFAS") No. 148, Accounting for Stock-Based Compensation - Transition and Disclosure. This Statement amends FASB Statement No. 123, Accounting for Stock-Based Compensation. SFAS No. 148 provides alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, SFAS No. 148 amends the disclosure requirements of SFAS No. 123 to require more prominent and more frequent disclosures in financial statements about the effects of stock-based compensation. Under the provisions of SFAS No. 123, companies that adopted the fair value based method were required to apply that method prospectively for new stock option awards. This contributed to a "ramp-up" effect on stock-based compensation expense in the first few years following adoption, which caused concern for companies and investors because of the lack of consistency in reported results. To address that concern, SFAS No. 148 provides two additional methods of transition that reflect an entity's full complement of stock-based compensation expense immediately upon adoption, thereby eliminating the ramp-up effect. SFAS No. 148 also improves the clarity and prominence of disclosures about the proforma effects of using the fair value based method of accounting for stock-based compensation for all companies - regardless of the accounting method used - by requiring that the data be presented more prominently and in a more user-friendly format in the footnotes to the financial statements. In addition, SFAS No. 148 improves the timeliness of those disclosures by requiring that this information be included in interim as well as annual financial statements. In the past, companies were required to make proforma disclosures only in annual financial statements. The transition guidance and annual disclosure provisions of SFAS No. 148 are effective for fiscal years ending after December 15, 2002, with earlier application permitted in certain circumstances. The interim disclosure provisions are effective for financial reports containing financial statements for interim periods beginning after December 15, 2002. The FASB has stated it intends to issue a new statement on accounting for stock-based compensation and will require companies to expense stock options using a fair value based method at date of grant. The implementation for this proposed statement is not known. In November 2002, the FASB issued Interpretation No. 45, Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others ("FIN 45"). FIN 45 will change current practice in the accounting for and disclosure of guarantees. Guarantees meeting the characteristics described in FIN 45 are required to be initially recorded at fair value, which is different from the general current practice of recording a liability only when a loss is probable and reasonably estimable, as those terms are defined in FASB Statement No. 5, Accounting for Contingencies. FIN 45 also requires a guarantor to make new disclosures for virtually all guarantees even if the likelihood of the guarantor's having to make payments under the guarantee is remote. In general, FIN 45 applies to contracts or indemnification agreements that contingently require the guarantor to make payments to the guaranteed party based on changes in an underlying asset, liability, or an equity security of the guaranteed party such as financial standby letters of credit. Disclosure requirements of FIN 45 are effective for financial statements of interim or annual periods ending after December 31, 2002. The initial recognition and measurement provisions are applicable on a prospective basis to guarantees issued or modified after December 31, 2002, irrespective of the guarantor's fiscal year-end. The guarantor's previous accounting for guarantees issued prior to the date of FIN 45 initial applications should not be revised or restated to reflect the provisions of FIN 45. The Company adopted FIN 45 on January 1, 2003. The adoption of FIN 45 does not currently have a material impact on the Company's consolidated financial statements. Note 6: Reclassifications Certain reclassifications have been made to the 2002 consolidated financial statements to conform to the June 30, 2003 presentation. Item 2: Management's Discussion and Analysis or Plan of Operation Forward Looking Statement 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. Critical Accounting Policies The notes to the consolidated financial statements contain a summary of the Company's significant accounting policies presented on pages 31 through 33 of the Annual Report to Shareholders for the year ended December 31, 2002. Certain of these policies are important to the portrayal of the Company's financial condition, since they require management to make difficult, complex or subjective judgments, some of which may relate to matters that are inherently uncertain. Management believes that its critical accounting policies include determining the allowance for loan losses and the valuation of mortgage servicing rights. Allowance for loan losses The allowance for loan losses is a significant estimate that can and does change based on management's assumptions about specific borrowers and current general economic and business conditions, among other factors. Management reviews the adequacy of the allowance for loan losses on at least a quarterly basis. The evaluation by management includes consideration of past loss experience, changes in the composition of the loan portfolio, the current condition and amount of loans outstanding, identified problem loans and the probability of collecting all amounts due. 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. A worsening or protracted economic decline would increase the likelihood of additional losses due to credit and market risk and could create the need for additional loss reserves. Valuation of Mortgage Servicing Rights The Company recognizes the right to service mortgage loans as separate assets in the consolidated balance sheet. The total cost of loans when sold is allocated between loans and mortgage servicing rights based on the relative fair values of each. Mortgage servicing rights are subsequently carried at the lower of the initial carrying value, adjusted for amortization, or fair value. Mortgage servicing rights are evaluated for impairment based on the fair value of those rights. Factors included in the calculation of fair value of the mortgage servicing rights include, estimating the present value of future net cash flows, market loan prepayment speeds for similar loans, discount rates, servicing costs, and other economic factors. Servicing rights are amortized over the estimated period of net servicing revenue. It is likely that these economic factors will change over the life of the mortgage servicing rights, resulting in different valuations of the mortgage servicing rights. The differing valuations will affect the carrying value of the mortgage servicing rights on the consolidated balance sheet as well as the income recorded from loan servicing in the income statement. As of June 30, 2003 and December 31, 2002, mortgage servicing rights had carrying values of $703,000 and $630,000, respectively. Financial Condition At June 30, 2003, the Corporation's assets totaled $239.4 million, an increase of $15.4 million, or 6.9%, from December 31, 2002. The increase in assets resulted primarily from an increase in net loans receivable. Liquid assets (i.e., cash and interest earning deposits) decreased by $7.8 million from December 31, 2002 levels, to a total of $10.8 million at June 30, 2003. Investment securities increased by $5.9 million, or 21.1%, to a total of $34.1 million at June 30, 2003. Net loans receivable were $176.7 million at June 30, 2003, an increase of $11.8 million, or 7.2%, from $164.9 million at December 31, 2002. These increases were funded by an increase in deposits of $7.2 million and the decrease of cash and interest earning deposits. The Corporation's allowance for loan losses totaled $2.1 million at December 31, 2002 and $2.0 million at June 30, 2003, which represented approximately 1.2% and 1.1% respectively of total loans. Non-performing loans (defined as loans delinquent greater than 90 days and loans on non-accrual status) totaled $1.0 million and $1.4 million at December 31, 2002 and June 30, 2003, respectively. Although management believes that its allowance for loan losses at June 30, 2003, 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 $169.0 million at June 30, 2003, an increase of $7.2 million, or 4.4%, compared to total deposits at December 31, 2002. The growth for the six-month period resulted from marketing and interest rate strategies. Advances from the Federal Home Loan Bank totaled $40.0 million at both December 31, 2002 and June 30, 2003. 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, 2003 was 4.29%. Stockholders' equity totaled $21.7 at June 30, 2003, an increase of $1.1 million, or 5.2%, from $20.6 million at December 31, 2002. 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, 2003, the Bank's regulatory capital exceeded all applicable regulatory capital requirements. On March 13, 2003, the Corporation formed the RIVR Statutory Trust I, a statutory trust formed under Connecticut law ("RIVR Trust I"). On March 26, 2003, the RIVR Trust I issued 7,000 Fixed/Floating Rate Capital Securities with a liquidation amount of $1,000 per Capital Security in a private placement to an offshore entity for an aggregate offering price of $7,000,000, and 217 Common Securities with a liquidation amount of $1,000 per Common Security to the Corporation for $217,000. The aggregate proceeds of $7,217,000 were used by the RIVR Trust I to purchase $7,217,000 in Fixed/Floating Rate Junior Subordinated Deferrable Interest Debentures from the Corporation. The Debentures and the Common and Capital Securities have a term of 30 years, bear interest at the annual rate of 6.4% for five years and thereafter bear interest at the rate of the 3-Month Libor plus 3.15%. The Corporation has guaranteed payment of amounts owed by the RIVR Trust I to holders of the Capital Securities. The proceeds of the offering will be used for general corporate purposes of the Corporation, including the repurchase of the Corporation's shares from time to time. Comparison of Operating Results for the Six Months Ended June 30, 2003 and 2002 General The Corporation's net income for the six months ended June 30, 2003, totaled $1,276,000, an increase of $14,000 or 1.1% from the $1,262,000 reported for the period ended June 30, 2002. The increase in income in the 2003 period was primarily attributable to an increase in other income of $514,000 and a decrease in the provision of $80,000. This increase was mostly offset by an increase in other expenses of $548,000. Net Interest Income Total interest income for the six months ended June 30, 2003 amounted to $6.1 million, a decrease of $.2 million, or 2.5%, below the comparable period in 2002, reflecting the effects of a decrease in the yield on our loan portfolio. The loan yield went from 7.3% for the 2002 period to 6.4% for the 2003 period. Interest expense on deposits decreased by $ 0.4 million, or 17.9%, to a total of $1.7 million for the six months ended June 30, 2003, due primarily to a decrease in the average cost of deposits, as there was an increase in the average balance of deposits outstanding year-to-year. Interest expense on borrowings totaled $954,000 for the six months ended June 30, 2003, an increase of $266,000, from the comparable period in 2002. 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 decreased by $43,000 or 1.2%, for the six months ended June 30, 2003, as compared to the comparable period in 2002. 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 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 $180,000 provision for losses on loans for the six months ended June 30, 2003, compared to the $260,000 amount recorded in the 2002 period. The 2003 provision amount was predicated on the increase in the balance of the loan portfolio, coupled with the decrease in the level of delinquent loans year-to-year. While management believes that the allowance for losses on loans is adequate at June 30, 2003, 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 $514,000, or 42.2%, for the six months ended June 30, 2003, as compared to the same period in 2002, due primarily to the $829,000 increase in gain on sale of loans. This was an extraordinary period for refinancing due to the historical low rates. Also, these increases were offset in part by a $352,000 decrease in gain on sale of premises and equipment. During the second quarter of 2002, a building was sold for a gain of $352,000. Other Expense Other expense increased by $548,000, or 23.1%, during the six months ended June 30, 2003, as compared to the same period in 2002. The increase was due primarily to the increase in loan volume/administrative expense (both portfolio and sales volume), and general expense increases due to growth, as well as some increase in salary/benefit expense due to an increase in employees to service an increased asset base and expanded branch network. Income Taxes The provision for income taxes totaled $817,000 for the six months ended June 30, 2003, an decrease of $12,000, or 1.4%, as compared to the same period in 2002. The effective tax rates were 39.0% and 39.6% for the six months ended June 30, 2003 and 2002, respectively. Comparison of Operating Results for the Three Months Ended June 30, 2003 and 2002 General The Corporation's net income for the three months ended June 30, 2003, totaled $680,000, a decrease of $55,000, or 7.5%, from the $735,000 of net income reported in the comparable 2002 period. The decrease in earnings in the 2003 period was primarily attributable to a decrease in net interest income of $71,000, due to the decrease in the average loan yield of approximately 0.75%. Net Interest Income Total interest income for the three months ended June 30, 2003 amounted to $3.1 million, a decrease of $111,000, or 3.5%, from the comparable quarter in 2002, reflecting the effects of a decrease in average interest rate. Interest income on loans totaled $2.7 million for the three months ended June 30, 2003, a decrease of approximately $141,000, or 4.9%, from the comparable 2002 quarter. Interest expense on deposits decreased by $183,000, or 18.0%, to a total of $ 0.8 million for the quarter ended June 30, 2003, due primarily to a decrease in the average cost of deposits. Interest expense on borrowings totaled $518,000 for the three months ended June 30, 2003, an increase of $143,000 over the comparable quarter in 2002. The increase resulted primarily 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 decreased by $71,000, or 4.0%, for the three months ended June 30, 2003, as compared to the same quarter in 2002. 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 $90,000 provision for losses on loan for the three months ended June 30, 2003, compared to the $130,000 recorded in the 2002 period. While management believes that the allowance for losses on loans is adequate at June 30, 2003, 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 $59,000 for the three months ended June 30, 2003, as compared to the same period in 2002, due primarily to a $384,000 increase in gain on loan sales. In addition, service fees and charges increased $16,000 for the three months ended June 30, 2003, as compared to the same period in 2002. These increases were offset in part by a $352,000 decrease in gain on sale of premises and equipment. During the second quarter of 2002, a building was sold for a gain of $352,000. Other Expense Other expense increased by $156,000, or 12.6%, during the three months ended June 30, 2003, compared to the same period in 2002. This increase resulted primarily from 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 $398,000 for the three months ended June 30, 2003, an decrease of $73,000, or 15.5%, as compared to the same period in 2002. This decrease resulted primarily from a decrease in net income before income taxes of $128,000, or 10.6%. The effective tax rates were 36.9% and 39.1% for the three months ended June 30, 2003 and 2002, respectively. Off-balance Sheet Arrangements As of the date of this Report, the Company does not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the Company's financial condition, change in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors. The term "off-balance sheet arrangement" generally means any transaction, agreement, or other contractual arrangement to which an entity unconsolidated with the Company is a party under which the Company has (i) any obligation arising under a guarantee contract, derivative instrument or variable interest; or (ii) a retained or contingent interest in assets transferred to such entity or similar arrangement that serves as credit, liquidity or market risk support for such assets. 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. Item 3. Controls and Procedures A. Evaluation of disclosure controls and procedures. The Company's chief executive officer and chief financial officer, after evaluating the effectiveness of the Company's disclosure controls and procedures (as defined in Sections 13a-15(e) and 15d-15(e) of regulations promulgated under the Securities Exchange Act of 1934, as amended), as of the end of the most recent fiscal quarter covered by this quarterly report (the "Evaluation Date"), have concluded that as of the Evaluation Date, the Company's disclosure controls and procedures were adequate and are designed to ensure that material information relating to the Company would be made known to such officers by others within the Company on a timely basis. B. Changes in internal controls. There were no significant changes in the Company's internal control over financial reporting identified in connection with the Company's evaluation of controls that occurred during the Company's last fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting. 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 16, 2003, the Annual Meeting of the Corporation's shareholders was held. Two directors were elected to the following terms and by the following votes: For Votes Withheld Robert W. Anger 719,028 3,880 Matthew P. Forrester 721,623 1,285 Directors continuing in office are Jonnie L. Davis, Charles J. McKay, Michael J. Hensley, Fred W. Koehler, and L. Sue Livers. Item 5. Other Information. None. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits: 31(1) CEO Certification required by 17 C.F.R. Section 240.13a-14(a) 31(2) CFO Certification required by 17 C.F.R. Section 240.13a-14(a) 32 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (b) Reports on Form 8-K: (i) On April 17, 2003, a press release concerning the results of operations of the Corporation for the period ended March 31, 2003 was filed under Items 7 and 9 of Form 8-K. 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 14, 2003 By: /s/ Matthew P. Forrester ------------------------------------- Matthew P. Forrester President and Chief Executive Officer Date: August 14, 2003 By: /s/ Larry C. Fouse ------------------------------------- Larry C. Fouse Vice President of Finance EX-31 3 ex311_0630.txt FORRESTER CERTIFICATION Exhibit 31(1) CERTIFICATION I, Matthew P. Forrester, certify that: 1. I have reviewed this quarterly report on Form 10-QSB of River Valley Bancorp; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report. 4. The small business issuer's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the small business issuer and have: a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b. Evaluated the effectiveness of the small business issuer's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c. Disclosed in this report any change in the small business issuer's internal control over financial reporting that occurred during the small business issuer's most recent fiscal quarter (the small business issuer's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer's internal control over financial reporting; and 5. The small business issuer's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer's auditors and the audit committee of the small business issuer's board of directors (or persons performing the equivalent functions): a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer's ability to record, process, summarize and report financial information; and b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer's internal control over financial reporting. Date: August 14, 2003 /s/ Matthew P. Forrester ------------------------------------- Matthew P. Forrester President and Chief Executive Officer EX-31 4 ex312_0630.txt FOUSE CERTIFICATION EXHIBIT 31(2) CERTIFICATION I, Larry C. Fouse, certify that: 1. I have reviewed this quarterly report on Form 10-QSB of River Valley Bancorp; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report. 4. The small business issuer's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the small business issuer and have: a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b. Evaluated the effectiveness of the small business issuer's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c. Disclosed in this report any change in the small business issuer's internal control over financial reporting that occurred during the small business issuer's most recent fiscal quarter (the small business issuer's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer's internal control over financial reporting; and 5. The small business issuer's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer's auditors and the audit committee of the small business issuer's board of directors (or persons performing the equivalent functions): a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer's ability to record, process, summarize and report financial information; and b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer's internal control over financial reporting. Date: August 14, 2003 /s/ Larry C. Fouse ---------------------------- Larry C. Fouse Vice President of Finance EX-32 5 ex32_0630.txt SECTION 906 EXHIBIT 32 CERTIFICATION By signing below, each of the undersigned officers hereby certifies pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to his or her knowledge, (i) this report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and (ii) the information contained in this report fairly presents, in all material respects, the financial condition and results of operations of River Valley Bancorp. Signed this 14th day of August, 2003. By: /s/ Larry C. Fouse By: /s/ Matthew P. Forrester --------------------------- ------------------------------------ Larry C. Fouse Matthew P. Forrester Vice President of Finance President and Chief Executive Officer A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to River Valley Bancorp and will be retained by River Valley Bancorp and furnished to the Securities and Exchange Commission or its staff upon request. -----END PRIVACY-ENHANCED MESSAGE-----