-----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, EwItcuofhGWcgtgASRCqoE+MsvQ5xHPYH2TBVIrn83eDPRE8kAEvAFAa6aKCAwxV KM2QCSe4vu4UjKItr/2bsA== 0000908834-05-000269.txt : 20050331 0000908834-05-000269.hdr.sgml : 20050331 20050331140321 ACCESSION NUMBER: 0000908834-05-000269 CONFORMED SUBMISSION TYPE: 10KSB PUBLIC DOCUMENT COUNT: 14 CONFORMED PERIOD OF REPORT: 20041231 FILED AS OF DATE: 20050331 DATE AS OF CHANGE: 20050331 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: 10KSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-21765 FILM NUMBER: 05718745 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 10KSB 1 rvb_10k.txt FORM 10-KSB SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (Mark One) [X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal year ended December 31, 2004 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 000-21765 RIVER VALLEY BANCORP (Name of small business issuer) INDIANA 35-1984567 (State or other Jurisdiction (I.R.S. Employer Identification of Incorporation or Organization) Number) 430 Clifty Drive P.O. Box 1590 Madison, Indiana 47250-0590 (Address of Principal Executive Offices) (Zip Code) Issuer's telephone number: (812) 273-4949 Securities Registered Pursuant to Section 12(b) of the Act: None Securities Registered Pursuant to Section 12(g) of the Act: Common Stock, without par value (Title of Class) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such requirements for the past 90 days. YES [X] NO [ ] Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B contained in this form, and no disclosure will be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. [ ] The issuer had $16,063,000 in revenues for the fiscal year ended December 31, 2004. As of February 25, 2005, there were issued and outstanding 1,584,877 shares of the issuer's Common Stock. The aggregate market value of the voting stock held by non-affiliates of the issuer, computed by reference to the average sale price of such stock as of February 25, 2005 was $25,141,650. DOCUMENTS INCORPORATED BY REFERENCE Portions of the Annual Report to Shareholders for the year ended December 31, 2004 are incorporated into Part II. Portions of the Proxy Statement for the 2005 Annual Meeting of Shareholders are incorporated in Part I and Part III. Transitional Small Business Disclosure Format (check one): YES [ ] NO [X] Exhibit Index on Page E-1 Page 1 of 39 pages RIVER VALLEY BANCORP Form 10-KSB INDEX Page FORWARD LOOKING STATEMENT......................................................3 PART I Item 1. Description of Business............................................3 Item 2. Description of Properties.........................................31 Item 3. Legal Proceedings.................................................32 Item 4. Submission of Matters to a Vote of Security Holders...............32 Item 4.5. Executive Officers of the Registrant..............................32 PART II Item 5. Market for Common Equity, Related Stockholder Matters and Small Business Issuer Purchases of Equity Securities............33 Item 5.5. Selected Consolidated Financial Data..............................34 Item 6. Management's Discussion and Analysis or Plan of Operation.........34 Item 7. Financial Statements..............................................34 Item 8. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure...........................................34 Item 8A. Controls and Procedures...........................................34 Item 8B. Other Information.................................................35 PART III Item 9. Directors, Executive Officers, Promoters and Control Persons, Compliance with Section 16(a) of the Exchange Act..............35 Item 10. Executive Compensation............................................35 Item 11. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters................................35 Item 12. Certain Relationships and Related Transactions....................36 Item 13. Exhibits..........................................................37 Item 14. Principal Accountant Fees and Services............................37 SIGNATURES....................................................................38 2 FORWARD LOOKING STATEMENT This Annual Report on Form 10-KSB ("Form 10-KSB") 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-KSB and include statements regarding the intent, belief, outlook, estimates or expectations of the Holding Company (as defined below), its directors, or its officers primarily with respect to future events and the future financial performance of the Holding Company. Readers of this Form 10-KSB 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-KSB identifies important factors that could cause such differences. These factors include but are not limited to changes in interest rates; loss of deposits and loan demand to other savings and financial institutions; substantial changes in financial markets; changes in real estate values and the real estate market; regulatory changes; or unanticipated results in pending legal proceedings. Item 1. Description of Business. General River Valley Bancorp (the "Holding Company" and together with the "Bank," the "Company"), 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. 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"), and River Valley Financial and Citizens merged on November 20, 1997. The activities of the Holding Company 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 six full-service office locations in Jefferson and Clark Counties, Indiana, and Carroll County, Kentucky, and offers a variety of deposit and lending services to consumer and commercial customers. The Company 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. The Bank historically has concentrated its lending activities on the origination of loans secured by first mortgage liens for the purchase, construction, or refinancing of one- to four- family residential real property. One- to four-family residential mortgage loans continue to be the major focus of the Bank's loan origination activities, representing 43.2% of the Bank's total loan portfolio at December 31, 2004. The Bank identified $337,000 in loans held for sale at December 31, 2004. The Bank also offers multi-family mortgage loans, non-residential real estate loans, land loans, construction loans, nonmortgage commercial loans and consumer loans. Its principal market area is Jefferson County, Indiana and adjoining counties. The Company's internet address is www.rvfbank.com, and the Company makes available all filings with the Securities and Exchange Commission via its internet website. 3 Loan Portfolio Data. The following table sets forth the composition of the Bank's loan portfolio, including loans held for sale, as of December 31, 2004, 2003, 2002, 2001 and 2000 by loan type as of the dates indicated, including a reconciliation of gross loans receivable after consideration of the allowance for loan losses, deferred loan origination costs and loans in process.

The following table sets forth certain information at December 31, 2004 regarding the dollar amount of loans maturing in the Bank's loan portfolio based on the contractual terms to maturity. Demand loans, loans having no stated schedule of repayments and no stated maturity and overdrafts are reported as due in one year or less. This schedule does not reflect the effects of possible prepayments or enforcement of due-on-sale clauses. Management expects prepayments will cause actual maturities to be shorter.

4 The following table sets forth, as of December 31, 2004, the dollar amount of all loans due after one year that have fixed interest rates and floating or adjustable interest rates.

Residential Loans. Residential loans consist primarily of one- to four-family loans. Approximately $104.5 million, or 43.2% of the Bank's portfolio of loans, at December 31, 2004, consisted of one- to four-family residential loans, of which approximately 85.3% had adjustable rates. The Bank currently offers adjustable rate one- to four-family residential mortgage loans ("ARMs") which adjust annually and are indexed to the one-year U.S. Treasury securities yields adjusted to a constant maturity, although until late 1995, the Bank's ARMs were indexed to the 11th District Cost of Funds. Some of the Bank's residential ARMs are originated at a discount or "teaser" rate which is generally 150 to 175 basis points below the "fully indexed" rate. These ARMs then adjust annually to maintain a margin above the applicable index, subject to maximum rate adjustments discussed below. The Bank's ARMs have a current margin above such index of 2.5% for owner-occupied properties and 3.0% for non-owner-occupied properties. A substantial portion of the ARMs in the Bank's portfolio at December 31, 2004 provide for maximum rate adjustments per year and over the life of the loan of 1% and 4%, respectively, although the Bank also originates residential ARMs which provide for maximum rate adjustments per year and over the life of the loan of 1.5% and 6%, respectively. The Bank's ARMs generally provide for interest rate minimums of 1% below the origination rate. The Bank's residential ARMs are amortized for terms up to 30 years. Adjustable rate loans decrease the risk associated with changes in interest rates but involve other risks, primarily because as interest rates rise, the payments by the borrowers may rise to the extent permitted by the terms of the loan, thereby increasing the potential for default. Also, adjustable rate loans have features which restrict changes in interest rates on a short-term basis and over the life of the loan. At the same time, the market value of the underlying property may be adversely affected by higher interest rates. The Bank currently offers fixed rate one- to four-family residential mortgage loans which provide for the payment of principal and interest over periods of 10 to 30 years. At December 31, 2004, approximately 14.7% of the Bank's one- to four-family residential mortgage loans had fixed rates. The Bank currently underwrites its fixed-rate residential mortgage loans for potential sale to the Federal Home Loan Mortgage Corporation (the "FHLMC"). The Bank retains all servicing rights on the residential mortgage loans sold to the FHLMC. At December 31, 2004, the Bank had approximately $88.7 million of fixed rate residential mortgage loans which were sold to the FHLMC and for which the Bank provides servicing. The Bank generally does not originate one- to four-family residential mortgage loans if the ratio of the loan amount to the lesser of the current cost or appraised value of the property (the "Loan-to-Value Ratio") 5 exceeds 95% and generally does not originate one- to four-family residential ARMs if the Loan-to-Value Ratio exceeds 80%. The Bank generally requires private mortgage insurance on all conventional one- to four-family residential real estate mortgage loans with Loan-to-Value Ratios in excess of 80%. The cost of such insurance is factored into the annual percentage yield on such loans, and is not automatically eliminated when the principal balance is reduced over the term of the loan. Substantially all of the one- to four-family residential mortgage loans that the Bank originates include "due-on-sale" clauses, which give the Bank the right to declare a loan immediately due and payable in the event that, among other things, the borrower sells or otherwise disposes of the real property subject to the mortgage and the loan is not repaid. At December 31, 2004, the Bank had outstanding approximately $9.8 million of home equity loans, with unused lines of credit totaling approximately $11.8 million. Three home equity loans were included in non-performing assets on that date in the amount of $48,000. The Bank's home equity lines of credit are adjustable rate lines of credit tied to the prime rate and are amortized based on a 10- to 20-year maturity. The Bank generally allows a maximum 90% Loan-to-Value Ratio for its home equity loans (taking into account any other mortgages on the property). Payments on such home equity loans equal 1.5% of the outstanding principal balance per month. The Bank also offers indemnification mortgage loans ("ID Mortgage Loans"), which are typically written as fixed rate second mortgage loans. The Bank's ID Mortgage Loans are written for terms of five years and generally have maximum Loan-to-Value Ratios of 80%. The Bank also offers standard second mortgage loans, which are adjustable rate loans tied to the U.S. Treasury securities yields adjusted to a constant maturity with a current margin above such index of 3%. The Bank's second mortgage loans have maximum rate adjustments per year and over the terms of the loans equal to 1% and 4%, respectively. The Bank's second mortgage loans have terms of 10 to 30 years. At December 31, 2004, $893,000 of one- to four-family residential mortgage loans, or .4% of total loans, were included in the Bank's non-performing assets. Construction Loans. The Bank offers construction loans with respect to residential and nonresidential real estate and, in certain cases, to builders or developers constructing such properties on a speculative basis (i.e., before the builder/developer obtains a commitment from a buyer). Generally, construction loans are written as 12-month fixed rate loans with interest calculated on the amount disbursed under the loan and payable on a semi-annual or monthly basis. The Bank generally requires an 80% Loan-to-Value Ratio for its construction loans, although the Bank may permit an 85% Loan-to-Value Ratio for one- to four-family residential construction loans. Inspections are generally made prior to any disbursement under a construction loan, and the Bank does not charge commitment fees for its construction loans. At December 31, 2004, $20.0 million, or 8.3% of the Bank's total loan portfolio, consisted of construction loans. The largest construction loan at December 31, 2004 totaled $3.4 million. Construction loans in the amount of $158,000, or .1% of total loans, were included in non-performing assets on that date. While providing the Bank with a comparable, and in some cases higher, yield than a conventional mortgage loan, construction loans involve a higher level of risk. For example, if a project is not completed and the borrower defaults, the Bank may have to hire another contractor to complete the project at a higher cost. Also, a project may be completed, but may not be saleable, resulting in the borrower defaulting and the Bank taking title to the project. Nonresidential Real Estate Loans. At December 31, 2004, $59.7 million, or 24.7% of the Bank's portfolio, consisted of nonresidential real estate loans. Nonresidential real estate loans are primarily secured 6 by real estate such as churches, farms and small business properties. The Bank generally originates nonresidential real estate loans as one-year adjustable rate loans indexed to the one-year U.S. Treasury securities yields adjusted to a constant maturity, written for maximum terms of 30 years. The Bank's adjustable rate nonresidential real estate loans have maximum adjustments per year and over the life of the loan of 1% and 4%, respectively, and interest rate minimums of 1% below the origination rate. The Bank generally requires a Loan-to-Value Ratio of up to 80%, depending on the nature of the real estate collateral. The Bank underwrites its nonresidential real estate loans on a case-by-case basis and, in addition to its normal underwriting criteria, evaluates the borrower's ability to service the debt from the net operating income of the property. As of December 31, 2004, the Bank's largest nonresidential real estate loan was $4.7 million. Nonresidential real estate loans in the amount of $255,000 or .11% were included in non-performing assets at December 31, 2004. Loans secured by nonresidential real estate generally are larger than one- to four-family residential loans and involve a greater degree of risk. Nonresidential real estate loans often involve large loan balances to single borrowers or groups of related borrowers. Payments on these loans depend to a large degree on results of operations and management of the properties and may be affected to a greater extent by adverse conditions in the real estate market or the economy in general. Accordingly, the nature of the loans makes them more difficult for management to monitor and evaluate. Multi-family Loans. At December 31, 2004, approximately $8.1 million, or 3.4% of the Bank's total loan portfolio, consisted of mortgage loans secured by multi-family dwellings (those consisting of more than four units). The Bank writes multi-family loans on terms and conditions similar to its nonresidential real estate loans. The largest multi-family loan in the Bank's portfolio as of December 31, 2004 was $1.4 million and was secured by a 46-unit apartment complex in Hanover, Indiana. No multi-family loans were included in non-performing assets on that date. Multi-family loans, like nonresidential real estate loans, involve a greater risk than residential loans. See "Nonresidential Real Estate Loans" above. Also, the loan-to-one borrower limitations restrict the ability of the Bank to make loans to developers of apartment complexes and other multi-family units. Land Loans. At December 31, 2004, approximately $7.9 million, or 3.3% of the Bank's total loan portfolio, consisted of mortgage loans secured by undeveloped real estate. The Bank's land loans are generally written on terms and conditions similar to its nonresidential real estate loans. Some of the Bank's land loans are land development loans; i.e., the proceeds of the loans are used for improvements to the real estate such as streets and sewers. At December 31, 2004, the Bank's largest land loan totaled $1.8 million. No land loans were included in non-performing assets as of December 31, 2004. Such loans are more risky than conventional loans since land development borrowers who are over budget may divert the loan funds to cover cost-overruns rather than direct them toward the purpose for which such loans were made. In addition, those loans are more difficult to monitor than conventional mortgage loans. As such, a defaulting borrower could cause the Bank to take title to partially improved land that is unmarketable without further capital investment. Commercial Loans. At December 31, 2004, $32.6 million, or 13.5% of the Bank's total loan portfolio, consisted of nonmortgage commercial loans. The Bank's commercial loans are written on either a fixed rate or an adjustable rate basis with terms that vary depending on the type of security, if any. At December 31, 2004, approximately $27.8 million, or 85.3%, of the Bank's commercial loans were secured by collateral, such as equipment, inventory and crops. The Bank's adjustable rate commercial loans are generally indexed to the prime rate with varying margins and terms depending on the type of collateral securing the loans and the credit quality of the borrowers. At December 31, 2004, the largest commercial loan was $2.0 million. As of the same date, commercial loans totaling $821,000 were included in non-performing assets. 7 Commercial loans tend to bear somewhat greater risk than residential mortgage loans, depending on the ability of the underlying enterprise to repay the loan. Further, they are frequently larger in amount than the Bank's average residential mortgage loans. Consumer Loans. The Bank's consumer loans, consisting primarily of auto loans, home improvement loans, unsecured installment loans, loans secured by deposits and mobile home loans, aggregated approximately $8.9 million at December 31, 2004, or 3.7% of the Bank's total loan portfolio. The Bank consistently originates consumer loans to meet the needs of its customers and to assist in meeting its asset/liability management goals. All of the Bank's consumer loans, except loans secured by deposits, are fixed rate loans with terms that vary from six months (for unsecured installment loans) to 60 months (for home improvement loans and loans secured by new automobiles). At December 31, 2004, 82.4% of the Bank's consumer loans were secured by collateral. The Bank's loans secured by deposits are made in amounts up to 90% of the current account balance and accrue at a rate of 2% over the underlying passbook or certificate of deposit rate. The Bank offers both direct and indirect automobile loans. Under the Bank's indirect automobile program, participating automobile dealers receive loan applications from prospective purchasers of automobiles at the point of sale and deliver them to the Bank for processing. The dealer receives a portion of the interest payable on approved loans. Consumer loans may entail greater risk than residential mortgage loans, particularly in the case of consumer loans which are unsecured or are secured by rapidly depreciable assets, such as automobiles. Further, any repossessed collateral for a defaulted consumer loan may not provide an adequate source of repayment of the outstanding loan balance. In addition, consumer loan collections depend upon the borrower's continuing financial stability, and thus are more likely to be affected by adverse personal circumstances. Furthermore, the application of various federal and state laws, including bankruptcy and insolvency laws, may limit the amount which can be recovered on such loans. At December 31, 2004, consumer loans amounting to $26,000 were included in non-performing assets. Origination, Purchase and Sale of Loans. The Bank historically originated its ARMs pursuant to its own underwriting standards which did not conform with the standard criteria of the FHLMC or Federal National Mortgage Association ("FNMA"). The Bank's ARMs varied from secondary market criteria because, among other things, the Bank did not require current property surveys in most cases and did not permit the conversion of those loans to fixed rate loans in the first three years of its term. If the Bank desired to sell its non-conforming ARMs, it may have experienced difficulty in selling such loans quickly in the secondary market. In 1996, the Bank began underwriting fixed rate residential mortgage loans for potential sale to the FHLMC on a servicing-retained basis. Loans originated for sale to the FHLMC in the secondary market are originated in accordance with the guidelines established by the FHLMC and are sold promptly after they are originated. The Bank receives a servicing fee of one-fourth of 1% of the principal balance of all loans serviced. At December 31, 2004, the Bank serviced $88.7 million in loans sold to the FHLMC. The Bank confines its loan origination activities primarily to Jefferson County and surrounding counties. At December 31, 2004, the Bank held loans totaling approximately $23.7 million that were secured by property located outside of Indiana. The Bank's loan originations are generated from referrals from existing customers, real estate brokers and newspaper and periodical advertising. Loan applications are taken at any of the Bank's five full-service offices. The Bank's loan approval processes are intended to assess the borrower's ability to repay the loan, the viability of the loan and the adequacy of the value of the property that will secure the loan. To assess the 8 borrower's ability to repay, the Bank evaluates the employment and credit history and information on the historical and projected income and expenses of its borrowers. Under the Bank's lending policy, a loan officer may approve mortgage loans up to $150,000, a Senior Loan Officer may approve mortgage loans up to $275,000 and the President may approve mortgage loans up to $359,650. All other mortgage loans must be approved by at least four members of the Bank's Board of Directors. The lending policy further provides that loans secured by readily marketable collateral, such as stock, bonds and certificates of deposit may be approved by a Loan Officer for up to $150,000, by a Senior Loan Officer for up to $250,000 and by the President up to $333,700. Loans secured by other non-real estate collateral may be approved by a Loan Officer for up to $50,000, by a Senior Loan Officer up to $75,000 and by the President up to $175,000. Finally, the lending policy provides that unsecured loans may be approved by a Loan Officer up to $15,000 or up to $25,000 by a Senior Loan Officer or up to $50,000 by the President. All other unsecured loans or loans secured by non-real estate collateral must be approved by at least four members of the Bank's Board of Directors. The Bank generally requires appraisals on all real property securing its loans and requires an attorney's opinion or title insurance and a valid lien on the mortgaged real estate. Appraisals for all real property securing mortgage loans are performed by independent appraisers who are state-licensed. The Bank requires fire and extended coverage insurance in amounts at least equal to the principal amount of the loan and also requires flood insurance to protect the property securing the loan if the property is in a flood plain. The Bank also generally requires private mortgage insurance for all residential mortgage loans with Loan-to-Value Ratios of greater than 80%. The Bank does not require escrow accounts for insurance premiums or taxes. The Bank's underwriting standards for consumer and commercial loans are intended to protect against some of the risks inherent in making such loans. Borrower character, paying habits and financial strengths are important considerations. The Bank occasionally purchases participations in commercial loans, nonresidential real estate and multi-family loans from other financial institutions. At December 31, 2004, the Bank held in its loan portfolio participations in these types of loans aggregating approximately $2.3 million that it had purchased, all of which were serviced by others. The Bank generally does not sell participations in any loans that it originates. 9 The following table shows loan disbursement and repayment activity for the Bank during the periods indicated:

(1) Includes loans originated for sale in the secondary market. (2) Other items consist of amortization of deferred loan origination costs, the provision for losses on loans and net charges to the allowance for loan losses. Origination and Other Fees. The Bank realizes income from loan origination fees, loan servicing fees, late charges, checking account service charges and fees for other miscellaneous services. Late charges are generally assessed if payment is not received within a specified number of days after it is due. The grace period depends on the individual loan documents. Non-Performing and Problem Assets Mortgage loans are reviewed by the Bank on a regular basis and are placed on a non-accrual status when management determines that the collectibility of the interest is less than probable or collection of any amount of principal is in doubt. Generally, when loans are placed on non-accrual status, unpaid accrued interest is written off, and further income is recognized only to the extent received. The Bank delivers delinquency notices with respect to all mortgage loans contractually past due 5 to 10 days. When loans are 30 days in default, personal contact is made with the borrower to establish an acceptable repayment schedule. Management is authorized to commence foreclosure proceedings for any loan upon making a determination that it is prudent to do so. Commercial and consumer loans are treated similarly. Interest income on consumer, commercial and other nonmortgage loans is accrued over the term of the loan except when serious doubt exists as to the collectibility of a loan, in which case accrual of interest is discontinued and the loan is written-off, or written down to the fair value of the collateral securing the loan. It is the Bank's policy to recognize losses on these loans as soon as they become apparent. Non-performing Assets. At December 31, 2004, $2.2 million, or .76% of consolidated total assets, were non-performing loans compared to $514,000, or 0.2% of consolidated total assets, at December 31, 2003. The Bank had no REO at December 31, 2004. The table below sets forth the amounts and categories of the Bank's non-performing assets (non-performing loans, foreclosed real estate and troubled debt restructurings) for the last three years. It is 10 the policy of the Bank that all earned but uncollected interest on all loans be reviewed monthly to determine if any portion thereof should be classified as uncollectible for any loan past due in excess of 90 days.

At December 31, 2004, the Bank held loans delinquent from 30 to 89 days totaling $2,386,000. Other than in connection with these loans and other delinquent loans disclosed in this section, management was not aware of any other borrowers who were experiencing financial difficulties. In addition, there were no other assets that would need to be disclosed as non-performing assets. Delinquent Loans. The following table sets forth certain information at December 31, 2004, 2003, and 2002 relating to delinquencies in the Bank's portfolio. Delinquent loans that are 90 days or more past due are considered non-performing assets.

Classified Assets. Federal regulations and the Bank's Asset Classification Policy provide for the classification of loans and other assets such as debt and equity securities to be of lesser quality as "substandard," "doubtful," or "loss" assets. An asset is considered "substandard" if it is inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. "Substandard" assets include those characterized by the "distinct possibility" that the Bank will sustain "some loss" if the deficiencies are not corrected. Assets classified as "doubtful" have all of the weaknesses inherent in those classified "substandard," with the added characteristic that the weaknesses present make "collection or liquidation in full," on the basis of currently existing facts, conditions, and values, "highly questionable and improbable." Assets classified as "loss" are those considered "uncollectible" and of such little value that their continuance as assets without the establishment of a specific loss reserve is not warranted. An insured institution is required to establish general allowances for loan losses in an amount deemed prudent by management for loans classified substandard or doubtful, as well as for other problem loans. General allowances represent loss allowances which have been established to recognize the inherent risk 11 associated with lending activities, but which, unlike specific allowances, have not been allocated to particular problem assets. When an insured institution classifies problem assets as "loss," it is required either to establish a specific allowance for losses equal to 100% of the amount of the asset so classified or to charge off such amount. An institution's determination as to the classification of its assets and the amount of its valuation allowances is subject to review by the OTS, which can order the establishment of additional general or specific loss allowances. At December 31, 2004, the aggregate amount of the Bank's classified assets are as follows: At December 31, 2004 -------------------- (In thousands) Substandard assets............................... $5,446 Doubtful assets.................................. 378 Loss assets...................................... -- ------ Total classified assets....................... $5,824 ====== The Bank regularly reviews its loan portfolio to determine whether any loans require classification in accordance with applicable regulations. Not all of the Bank's classified assets constitute non-performing assets. Allowance for Loan Losses The allowance for loan losses is maintained through the provision for loan losses, which is charged to earnings. The provision for loan losses is determined in conjunction with management's review and evaluation of current economic conditions (including those of the Bank's lending area), changes in the character and size of the loan portfolio, loan delinquencies (current status as well as past and anticipated trends) and adequacy of collateral securing loan delinquencies, historical and estimated net charge-offs and other pertinent information derived from a review of the loan portfolio. In management's opinion, the Bank's allowance for loan losses is adequate to absorb probable losses from loans at December 31, 2004. However, there can be no assurance that regulators, when reviewing the Bank's loan portfolio in the future, will not require increases in its allowances for loan losses or that changes in economic conditions will not adversely affect the Bank's loan portfolio. 12 Summary of Loan Loss Experience. The following table analyzes changes in the allowance during the five years ended December 31, 2004.

Allocation of Allowance for Loan Losses. The following table presents an analysis of the allocation of the Bank's allowance for loan losses at the dates indicated.

Investments and Mortgage-Backed Securities Investments. The Bank's investment portfolio (excluding mortgage-backed securities) consists of U.S. government and agency obligations, corporate bonds, municipal securities and Federal Home Loan Bank ("FHLB") stock. At December 31, 2004, the investments in the portfolio had a carrying value of approximately $30.1 million, or 10.4%, of the consolidated total assets. 13 The following table sets forth the amortized cost and the market value of the Bank's investment portfolio at the dates indicated.

The following table sets forth the amount of investment securities (excluding FHLB stock) which mature during each of the periods indicated and the weighted average yields for each range of maturities at December 31, 2004.

Mortgage-Backed Securities. The Bank maintains a portfolio of mortgage-backed pass-through securities in the form of FHLMC, FNMA and Government National Mortgage Association ("GNMA") participation certificates. Mortgage-backed pass-through securities generally entitle the Bank to receive a portion of the cash flows from an identified pool of mortgages and gives the Bank an interest in that pool of mortgages. FHLMC, FNMA and GNMA securities are each guaranteed by its respective agencies as to principal and interest. Except for a $2,000 investment in interest-only certificates, the Bank does not invest in any derivative products. Although mortgage-backed securities generally yield less than individual loans originated by the Bank, they present less credit risk. Because mortgage-backed securities have a lower yield relative to current market rates, retention of such investments could adversely affect the Bank's earnings, particularly in a rising interest rate environment. The mortgage-backed securities portfolio is generally considered to have very low credit risk because they are guaranteed as to principal repayment by the issuing agency. In addition, the Bank has purchased adjustable rate mortgage-backed securities as part of its effort to reduce its interest rate risk. In a period of declining interest rates, the Bank is subject to prepayment risk on such adjustable rate mortgage-backed securities. The Bank attempts to mitigate this prepayment risk by purchasing mortgage-backed securities at or near par. If interest rates rise in general, the interest rates on the loans backing the mortgage-backed securities will also adjust upward, subject to the interest rate caps in the underlying mortgage loans. However, the Bank is still subject to interest rate risk on such securities if interest rates rise faster than 1% to 2% maximum annual interest rate adjustments on the underlying loans. 14 At December 31, 2004, the Bank had mortgage-backed securities with a carrying value of approximately $113,000, all of which were classified as available for sale. These mortgage-backed securities may be used as collateral for borrowings and, through repayments, as a source of liquidity. The following table sets forth the amortized cost and market value of the Bank's mortgage-backed securities at the dates indicated.

The following table sets forth the amount of mortgage-backed securities which mature during each of the periods indicated and the weighted average yields for each range of maturities at December 31, 2004.

The following table sets forth the changes in the Bank's mortgage-backed securities portfolio for the years ended December 31, 2004, 2003, and 2002.

Sources of Funds General. Deposits have traditionally been the Bank's primary source of funds for use in lending and investment activities. In addition to deposits, the Bank derives funds from scheduled loan payments, investment maturities, loan prepayments, retained earnings, income on earning assets and borrowings. While scheduled loan payments and income on earning assets are relatively stable sources of funds, deposit inflows and outflows can vary widely and are influenced by prevailing interest rates, market conditions and levels of competition. Borrowings from the FHLB of Indianapolis may be used in the short-term to compensate for reductions in deposits or deposit inflows at less than projected levels. 15 Deposits. Deposits are attracted, principally from within Jefferson County, through the offering of a broad selection of deposit instruments including fixed rate certificates of deposit, NOW, MMDAs and other transaction accounts, individual retirement accounts and savings accounts. The Bank actively solicits and advertises for deposits outside of Jefferson County. Since the opening of our branch in Charlestown, Indiana (Clark County), and the branch in Carrollton, Kentucky (Carroll County), the Bank's market area has expanded. Deposits will come from all of our market area. Deposit account terms vary, with the principal differences being the minimum balance required, the amount of time the funds remain on deposit and the interest rate. The Bank does not pay a fee for any deposits it receives. Interest rates paid, maturity terms, service fees and withdrawal penalties are established by the Bank on a periodic basis. Determination of rates and terms are predicated on funds acquisition and liquidity requirements, rates paid by competitors, growth goals and applicable regulations. The Bank relies, in part, on customer service and long-standing relationships with customers to attract and retain its deposits, but also closely prices its deposits in relation to rates offered by its competitors. The flow of deposits is influenced significantly by general economic conditions, changes in money market and prevailing interest rates and competition. The variety of deposit accounts offered by the Bank has allowed it to be competitive in obtaining funds and to respond with flexibility to changes in consumer demand. The Bank has become more susceptible to short-term fluctuations in deposit flows as customers have become more interest rate conscious. The Bank manages the pricing of its deposits in keeping with its asset/liability management and profitability objectives. Based on its experience, the Bank believes that its NOW and MMDAs are relatively stable sources of deposits. However, the ability of the Bank to attract and maintain certificates of deposit, and the rates paid on these deposits, have been and will continue to be significantly affected by market conditions. 16 An analysis of the Company's deposit accounts by type, maturity and rate at December 31, 2004 is as follows:

The following table sets forth by various interest rate categories the composition of time deposits of the Bank at the dates indicated:

17 The following table represents, by various interest rate categories, the amounts of time deposits maturing during each of the three years following December 31, 2004. Matured certificates, which have not been renewed as of December 31, 2004, have been allocated based upon certain rollover assumptions.

The following table indicates the amount of the Bank's jumbo and other certificates of deposit of $100,000 or more by time remaining until maturity as of December 31, 2004.

18 The following table sets forth the dollar amount of savings deposits in the various types of deposits offered by the Bank at the dates indicated, and the amount of increase or decrease in such deposits as compared to the previous period.

Borrowings. The Bank focuses on generating high quality loans and then seeks the best source of funding from deposits, investments, or borrowings. At December 31, 2004, the Bank had $65.0 million in FHLB advances. The Bank does not anticipate any difficulty in obtaining advances appropriate to meet its requirements in the future. The following table presents certain information relating to the Holding Company's and the Bank's borrowings at or for the years ended December 31, 2004, 2003, and 2002.

Service Corporation Subsidiaries Office of Thrift Supervision regulations permit federal savings associations to invest in the capital stock, obligations or other specified types of securities of subsidiaries (referred to as "service corporations") and to make loans to such subsidiaries and joint ventures in which such subsidiaries are participants in an aggregate 19 amount not exceeding 2% of the association's assets, plus an additional 1% of assets if the amount over 2% is used for specified community or inner-city development purposes. In addition, federal regulations permit associations to make specified types of loans to such subsidiaries (other than special purpose finance subsidiaries) in which the association owns more than 10% of the stock, in an aggregate amount not exceeding 50% of the association's regulatory capital if the association's regulatory capital is in compliance with applicable regulations. A savings association that acquires a non-savings association subsidiary, or that elects to conduct a new activity within a subsidiary, must give the Federal Deposit Insurance Corporation, the Office of Thrift Supervision and the Department of Financial Institutions at least 30 days advance written notice. The Federal Deposit Insurance Corporation may, after consultation with the Office of Thrift Supervision, prohibit specified activities if it determines such activities pose a serious threat to the Savings Association Insurance Fund. Moreover, a savings association must deduct from capital, for purposes of meeting the core capital, tangible capital and risk-based capital requirements, its entire investment in and loans to a subsidiary engaged in activities not permissible for a national bank (other than exclusively agency activities for its customers or mortgage banking subsidiaries). The Bank currently owns one subsidiary, Madison First Service Corporation, which was incorporated under the laws of the State of Indiana on July 3, 1973. Madison First Service Corporation currently holds land but does not otherwise engage in significant business activities. Financing Subsidiary On March 13, 2003, the Company formed the "RIVR Statutory Trust I," a statutory trust formed under Connecticut law, and filed a Certificate of Trust with the Secretary of the State of Connecticut. The sole purpose of the Trust is to issue and sell certain securities representing undivided beneficial interests in the assets of the Trust and to invest the proceeds thereof in certain debentures of the Company. Employees As of December 31, 2004, the Bank employed 66 persons on a full-time basis and 14 persons on a part-time basis. None of the employees is represented by a collective bargaining group. Management considers its employee relations to be good. COMPETITION The Bank originates most of its loans to and accepts most of its deposits from residents of Jefferson and Clark Counties, Indiana, and Carroll County, Kentucky. The Bank is subject to competition from various financial institutions, including state and national banks, state and federal savings associations, credit unions and certain nonbanking consumer lenders that provide similar services in Jefferson County and which have significantly larger resources available to them than does the Bank. In total, there are 11 financial institutions located in Jefferson County, Indiana, including the Bank. The Bank also competes with money market funds with respect to deposit accounts and with insurance companies with respect to individual retirement accounts. The primary factors influencing competition for deposits are interest rates, service and convenience of office locations. The Bank competes for loan originations primarily through the efficiency and quality of services it provides borrowers and through interest rates and loan fees charged. Competition is affected by, among other things, the general availability of lendable funds, general and local economic conditions, current interest rate levels and other factors that are not readily predictable. 20 REGULATION General As a federally-chartered, SAIF-insured savings association, the Bank is subject to extensive regulation by the OTS and the FDIC. For example, the Bank must obtain OTS approval before it may engage in certain activities and must file reports with the OTS regarding its activities and financial condition. The OTS periodically examines the Bank's books and records and, in conjunction with the FDIC in certain situations, has examination and enforcement powers. This supervision and regulation are intended primarily for the protection of depositors and the federal deposit insurance funds. A savings association must pay a semi-annual assessment to the OTS based upon a marginal assessment rate that decreases as the asset size of the savings association increases, and which includes a fixed-cost component that is assessed on all savings associations. The assessment rate that applies to a savings association depends upon the institution's size, condition and the complexity of its operations. The Bank's semi-annual assessment is approximately $32,000. The Bank is also subject to federal and state regulation as to such matters as loans to officers, directors, or principal shareholders, required reserves, limitations as to the nature and amount of its loans and investments, regulatory approval of any merger or consolidation, issuances or retirements of its securities, and limitations upon other aspects of banking operations. In addition, the Bank's activities and operations are subject to a number of additional detailed, complex and sometimes overlapping federal and state laws and regulations. These include state usury and consumer credit laws, state laws relating to fiduciaries, the Federal Truth-In-Lending Act and Regulation Z, the Federal Equal Credit Opportunity Act and Regulation B, the Fair Credit Reporting Act, the Community Reinvestment Act, anti-redlining legislation, antitrust laws and regulations protecting the confidentiality of consumer financial information. Savings and Loan Holding Company Regulation As the holding company for the Bank, the Holding Company is regulated as a "non-diversified savings and loan holding company" within the meaning of the Home Owners' Loan Act, as amended ("HOLA"), and is subject to regulatory oversight by the Director of the OTS. As such, the Holding Company is registered with the OTS and is thereby subject to OTS regulations, examinations, supervision and reporting requirements. As a subsidiary of a savings and loan holding company, the Bank is subject to certain restrictions in its dealings with the Holding Company and with other companies affiliated with the Holding Company. In general, the HOLA prohibits a savings and loan holding company, without obtaining the prior approval of the Director of the OTS, from acquiring control of another savings association or savings and loan holding company or retaining more than 5% of the voting shares of a savings association or of another holding company which is not a subsidiary. The HOLA also restricts the ability of a director or officer of the Holding Company, or any person who owns more than 25% of the Holding Company's stock, from acquiring control of another savings association or savings and loan holding company without obtaining the prior approval of the Director of the OTS. The Holding Company currently operates as a unitary savings and loan holding company. Prior to the enactment of the Gramm-Leach-Bliley Act (the "GLB Act") in 1999, there were no restrictions on the permissible business activities of a unitary savings and loan holding company. The GLB Act included a provision that prohibits any new unitary savings and loan holding company, defined as a company that acquires a thrift after May 4, 1999, from engaging in commercial activities. This provision also includes a grandfather clause, however, that permits a company that was a savings and loan holding company as of May 4, 1999, or had an application to become a savings and loan holding company on file with the OTS as of that date, to acquire and continue to control a thrift and to continue to engage in commercial activities. Because the Holding Company qualifies under this grandfather provision, the GLB Act did not affect the Holding Company's authority to engage in diversified business activities. 21 If the Holding Company were to acquire control of another savings association other than through a merger or other business combination with the Bank, the Holding Company would thereupon become a multiple savings and loan holding company. Except where such acquisition is pursuant to the authority to approve emergency thrift acquisitions and where each subsidiary savings association meets the QTL test, the activities of the Holding Company and any of its subsidiaries (other than the Bank or other subsidiary savings associations) would thereafter be subject to further restrictions. The HOLA provides that, among other things, a multiple savings and loan holding company may not, either directly or acting through a subsidiary that is not a savings association, conduct, any business activity other than (i) furnishing or performing management services for a subsidiary savings association, (ii) conducting an insurance agency or escrow business, (iii) holding, managing, or liquidating assets owned by or acquired from a subsidiary savings association, (iv) holding or managing properties used or occupied by a subsidiary savings association, (v) acting as trustee under deeds of trust, (vi) those activities in which multiple savings and loan holding companies were authorized (by regulation) to directly engage on March 5, 1987, or (vii) those activities authorized by the FRB as permissible for bank holding companies, unless the Director of the OTS by regulation prohibits or limits such activities for savings and loan holding companies. Those activities described in (viii) above must also be approved by the Director of the OTS before a multiple savings and loan holding company may engage in such activities. The Director of the OTS may also approve acquisitions resulting in the formation of a multiple savings and loan holding company which controls savings associations in more than one state, if the multiple savings and loan holding company involved controls a savings association which operated a home or branch office in the state of the association to be acquired as of March 5, 1987, or if the laws of the state in which the association to be acquired is located specifically permit associations to be acquired by state-chartered associations or savings and loan holding companies located in the state where the acquiring entity is located (or by a holding company that controls such state-chartered savings associations). Also, the Director of the OTS may approve an acquisition resulting in a multiple savings and loan holding company controlling savings associations in more than one state in the case of certain emergency thrift acquisitions. Notwithstanding the above rules as to permissible business activities of savings and loan holding companies, if the savings association subsidiary of such a holding company fails to meet the Qualified Thrift Lender ("QTL") test, then such holding company would be deemed to be a bank holding company subject to all of the provisions of the Bank Holding Company Act of 1956 and other statutes applicable to bank holding companies, to the same extent as if the Holding Company were a bank holding company and the Bank were a bank. See "-Qualified Thrift Lender." At December 31, 2004, the Bank's asset composition was in excess of that required to qualify as a Qualified Thrift Lender. Indiana law permits federal and state savings association holding companies with their home offices located outside of Indiana to acquire savings associations whose home offices are located in Indiana and savings association holding companies with their principal place of business in Indiana ("Indiana Savings Association Holding Companies") upon receipt of approval by the Indiana Department of Financial Institutions. Moreover, Indiana Savings Association Holding Companies may acquire savings associations with their home offices located outside of Indiana and savings association holding companies with their principal place of business located outside of Indiana upon receipt of approval by the Indiana Department of Financial Institutions. No subsidiary savings association of a savings and loan holding company may declare or pay a dividend or make a capital distribution on its permanent or nonwithdrawable stock unless it first gives the Director of the OTS 30 days advance notice of such declaration and payment. Any dividend declared during such period or without giving notice shall be invalid. 22 Federal Home Loan Bank System The Bank is a member of the FHLB system, which consists of 12 regional banks. The Federal Housing Finance Board ("FHFB"), an independent agency, controls the FHLB System including the FHLB of Indianapolis. The FHLB System provides a central credit facility primarily for member financial institutions. At December 31, 2004, the Bank's investment in stock of the FHLB of Indianapolis was $3.3 million. For the fiscal year ended December 31, 2004, the FHLB of Indianapolis paid approximately $122,000 in dividends to the Bank, for an annual rate of 4.3%. All 12 FHLBs are required to provide funds to establish affordable housing programs through direct loans or interest subsidies on advances to members to be used for lending at subsidized interest rates for low-and moderate-income, owner-occupied housing projects, affordable rental housing, and certain other community projects. These contributions and obligations could adversely affect the value of FHLB stock in the future. A reduction in the value of such stock may result in a corresponding reduction in the Bank's capital. The FHLB of Indianapolis serves as a reserve or central bank for its member institutions. It is funded primarily from proceeds derived from the sale of consolidated obligations of the FHLB System. It makes advances to members in accordance with policies and procedures established by the FHLB and the Board of Directors of the FHLB of Indianapolis. All FHLB advances must be fully secured by sufficient collateral as determined by the FHLB. Eligible collateral includes first mortgage loans not more than 90 days delinquent or securities evidencing interests therein, securities (including mortgage-backed securities) issued, insured or guaranteed by the federal government or any agency thereof, cash or FHLB deposits, certain small business and agricultural loans of smaller institutions and real estate with readily ascertainable value in which a perfected security interest may be obtained. Other forms of collateral may be accepted as additional security or, under certain circumstances, to renew outstanding advances. All long-term advances are required to provide funds for residential home financing and the FHLB has established standards of community service that members must meet to maintain access to long-term advances. Interest rates charged for advances vary depending upon maturity, the cost of funds to the FHLB of Indianapolis and the purpose of the borrowing. Insurance of Deposits Deposit Insurance. The FDIC is an independent federal agency that insures the deposits, up to prescribed statutory limits, of banks and thrifts and safeguards the safety and soundness of the banking and thrift industries. The FDIC administers two separate insurance funds, the BIF for commercial banks and state savings banks and the SAIF for savings associations such as the Bank, and for banks that have acquired deposits from savings associations. The FDIC is required to maintain designated levels of reserves in each fund. Assessments. The FDIC is authorized to establish separate annual assessment rates for deposit insurance for members of the BIF and members of the SAIF. The FDIC may increase assessment rates for either fund if necessary to restore the fund's ratio of reserves to insured deposits to the target level within a reasonable time and may decrease these rates if the target level has been met. The FDIC has established a risk-based assessment system for both SAIF and BIF members. Under this system, assessments vary depending on the risk the institution poses to its deposit insurance fund. An institution's risk level is determined based on its capital level and the FDIC's level of supervisory concern about the institution. In addition to the assessment for deposit insurance, savings institutions are required to pay on bonds issued in the late 1980s by the Financing Corporation ("FICO"), which is a federally-chartered corporation that was organized to provide some of the financing to resolve the thrift crisis in the 1980s. Prior to 2000, 23 FICO payments for SAIF members approximated 6.10 basis points, while BIF members paid 1.22 basis points. By law, payments on FICO obligations have been shared equally between BIF members and SAIF members since January 1, 2000. From time to time, legislation may be introduced before Congress that would increase the deposit insurance assessments paid by all financial institutions, including the Bank. Although Congress has considered merging the SAIF and the BIF, until then, savings associations with SAIF deposits may not transfer deposits into the BIF system without paying various exit and entrance fees. Such exit and entrance fees need not be paid if a SAIF institution converts to a bank charter or merges with a bank, as long as the resulting bank continues to pay applicable insurance assessments to the SAIF, and as long as certain other conditions are met. Savings Association Regulatory Capital Currently, savings associations are subject to three separate minimum capital-to-assets requirements: (i) a leverage limit, (ii) a tangible capital requirement, and (iii) a risk-based capital requirement. The leverage limit requires that savings associations maintain "core capital" of at least 3% of total assets. Core capital is generally defined as common shareholders' equity (including retained earnings), noncumulative perpetual preferred stock and related surplus, certain minority equity interests in subsidiaries, qualifying supervisory goodwill, purchased mortgage servicing rights and purchased credit card relationships (subject to certain limits) less nonqualifying intangibles. The OTS requires a core capital level of 3% of total adjusted assets for savings associations that receive the highest supervisory rating for safety and soundness, and no less than 4% for all other savings associations. Under the tangible capital requirement, a savings association must maintain tangible capital (core capital less all intangible assets except purchased mortgage servicing rights which may be included after making the above-noted adjustment in an amount up to 100% of tangible capital) of at least 1.5% of total assets. Under the risk-based capital requirements, a minimum amount of capital must be maintained by a savings association to account for the relative risks inherent in the type and amount of assets held by the savings association. The risk-based capital requirement requires a savings association to maintain capital (defined generally for these purposes as core capital plus general valuation allowances and permanent or maturing capital instruments such as preferred stock and subordinated debt less assets required to be deducted) equal to 8.0% of risk-weighted assets. Assets are ranked as to risk in one of four categories (0-100%). A credit risk-free asset, such as cash, requires no risk-based capital, while an asset with a significant credit risk, such as a non-accrual loan, requires a risk factor of 100%. Moreover, a savings association must deduct from capital, for purposes of meeting the core capital, tangible capital and risk-based capital requirements, its entire investment in and loans to a subsidiary engaged in activities not permissible for a national bank (other than exclusively agency activities for its customers or mortgage banking subsidiaries). At December 31, 2004, the Bank was in compliance with all capital requirements imposed by law. The OTS issued a final rule in 1993 which sets forth a methodology for calculating an interest rate risk component to be used by savings associations in calculating regulatory capital. The OTS delayed the implementation of this rule, however, and in 2002 deleted this interest rate risk component from the capital requirements applicable to savings associations. If an association is not in compliance with the capital requirements, the OTS is required to prohibit asset growth and to impose a capital directive that may restrict, among other things, the payment of dividends and officers' compensation. In addition, the OTS and the FDIC generally are authorized to take enforcement actions against a savings association that fails to meet its capital requirements. These actions may include restricting the operations activities of the association, imposing a capital directive, cease and desist order, or civil money penalties, or imposing harsher measures such as appointing a receiver or conservator or forcing the association to merge into another institution. 24 Prompt Corrective Regulatory Action The Federal Deposit Insurance Corporation Improvement Act of 1991 ("FedICIA") requires, among other things, that federal bank regulatory authorities take "prompt corrective action" with respect to institutions that do not meet minimum capital requirements. For these purposes, FedICIA establishes five capital tiers: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized and critically undercapitalized. At December 31, 2004, the Bank was categorized as "well capitalized," meaning that its total risk-based capital ratio exceeded 10%, its Tier I risk-based capital ratio exceeded 6%, its leverage ratio exceeded 5%, and it was not subject to a regulatory order, agreement or directive to meet and maintain a specific capital level for any capital measure. The FDIC may order savings associations which have insufficient capital to take corrective actions. For example, a savings association which is categorized as "undercapitalized" would be subject to growth limitations and would be required to submit a capital restoration plan, and a holding company that controls such a savings association would be required to guarantee that the savings association complies with the restoration plan. "Significantly undercapitalized" savings associations would be subject to additional restrictions. Savings associations deemed by the FDIC to be "critically undercapitalized" would be subject to the appointment of a receiver or conservator. Dividend Limitations The OTS also restricts the amount of "capital distributions" that may be made by savings associations. The applicable regulation defines a capital distribution as a distribution of cash or other property to a savings association's owners, made on account of their ownership. This definition includes a savings association's payment of cash dividends to shareholders, or any payment by a savings association to repurchase, redeem, retire, or otherwise acquire any of its shares or debt instruments that are included in total capital, and any extension of credit to finance an affiliate's acquisition of those shares or interests. The amended regulation does not apply to dividends consisting only of a savings association's shares or rights to purchase such shares. The regulation exempts certain savings associations from filing either a notice or an application with the OTS before making any capital distribution, and requires a savings association to file an application for approval of a proposed capital distribution with the OTS if the association is not eligible for expedited treatment under 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 savings association's net income for that year to date plus the savings association's retained net income for the preceding two years (the "retained net income standard"). A savings association must also file an application for approval of a proposed capital distribution if, following the proposed distribution, the association 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 association and the OTS or the FDIC. The regulation requires a savings association to file a notice of a proposed capital distribution in lieu of an application if the association or the proposed capital distribution do not meet the conditions described above, and: (1) the savings association will not be at least well capitalized (as defined under the OTS prompt corrective action regulations) following the capital distribution; (2) the capital distribution would reduce the amount of, or retire any part of the savings association's common or preferred stock, or retire any part of debt instruments such as notes or debentures included in the association's capital under the OTS capital regulation; or (3) the savings association is a subsidiary of a savings and loan holding company. Because the Bank is a subsidiary of a savings and loan holding company, this latter provision requires, at a minimum, that the Bank file a notice with the OTS 30 days before making any capital distributions to the Holding Company. 25 In addition to these regulatory restrictions, the Bank's Plan of Conversion imposes additional limitations on the amount of capital distributions it may make to the Holding Company. The Plan of Conversion requires the Bank to establish and maintain a liquidation account for the benefit of Eligible Account Holders and Supplemental Eligible Account Holders and prohibits the Bank from making capital distributions to the Holding Company if its net worth would be reduced below the amount required for the liquidation account. Limitations on Rates Paid for Deposits Regulations promulgated by the FDIC pursuant to FedICIA place limitations on the ability of insured depository institutions to accept, renew or roll over deposits by offering rates of interest which are significantly higher than the prevailing rates of interest on deposits offered by other insured depository institutions having the same type of charter in the institution's normal market area. Under these regulations, "well-capitalized" depository institutions may accept, renew, or roll such deposits over without restriction, "adequately capitalized" depository institutions may accept, renew or roll such deposits over with a waiver from the FDIC (subject to certain restrictions on payments of rates) and "undercapitalized" depository institutions may not accept, renew or roll such deposits over. The regulations contemplate that the definitions of "well capitalized," "adequately capitalized" and "undercapitalized" will be the same as the definition adopted by the agencies to implement the corrective action provisions of FedICIA. Management does not believe that these regulations will have a materially adverse effect on the Bank's current operations. Liquidity The Financial Regulatory Relief and Economic Efficiency Act of 2000 repealed the former statutory requirement that all savings associations maintain an average daily balance of liquid assets in a minimum amount of not less than 4% or more than 10% of their withdrawable accounts plus short-term borrowings. The OTS adopted an interim final rule in March 2001 that implemented this revised statutory requirement, although savings associations remain subject to the OTS regulation that requires them to maintain sufficient liquidity to ensure their safe and sound operation. Safety and Soundness Standards The federal banking agencies have adopted final safety and soundness standards for all insured depository institutions. The standards, which were issued in the form of guidelines rather than regulations, relate to internal controls, information systems, internal audit systems, loan underwriting and documentation, compensation, interest rate exposure, asset quality and earnings standards. In general, the standards are designed to assist the federal banking agencies in identifying and addressing problems at insured depository institutions before capital becomes impaired. If an institution fails to meet these standards, the appropriate federal banking agency may require the institution to submit a compliance plan. Failure to submit a compliance plan may result in enforcement proceedings. Real Estate Lending Standards OTS regulations require savings associations to establish and maintain written internal real estate lending policies. Each association's lending policies must be consistent with safe and sound banking practices and be appropriate to the size of the association and the nature and scope of its operations. The policies must establish loan portfolio diversification standards; establish prudent underwriting standards, including loan-to-value limits, that are clear and measurable; establish loan administration procedures for the association's real estate portfolio; and establish documentation, approval and reporting requirements to monitor compliance with the association's real estate lending policies. The association's written real estate lending policies must be reviewed and approved by the association's Board of Directors at least annually. Further, each association is expected to monitor conditions in its real estate market to ensure that its lending policies continue to be appropriate for current market conditions. 26 Loans to One Borrower Under OTS regulations, the Bank may not make a loan or extend credit to a single or related group of borrowers in excess of 15% of its unimpaired capital and surplus. Additional amounts may be lent, not in excess of 10% of unimpaired capital and surplus, if such loans or extensions of credit are fully secured by readily marketable collateral, including certain debt and equity securities but not including real estate. In some cases, a savings association may lend up to 30 percent of unimpaired capital and surplus to one borrower for purposes of developing domestic residential housing, provided that the association meets its regulatory capital requirements and the OTS authorizes the association to use this expanded lending authority. At December 31, 2004, the Bank did not have any loans or extensions of credit to a single or related group of borrowers in excess of its lending limits. Management does not believe that the loans-to-one-borrower limits will have a significant impact on the Bank's business operations or earnings. Qualified Thrift Lender Savings associations must meet a QTL test that requires the association to maintain an appropriate level of qualified thrift investments ("QTIs") (primarily residential mortgages and related investments, including certain mortgage-related securities) and otherwise to qualify as a QTL. The required percentage of QTIs is 65% of portfolio assets (defined as all assets minus intangible assets, property used by the association in conducting its business and liquid assets equal to 10% of total assets). Certain assets are subject to a percentage limitation of 20% of portfolio assets. In addition, savings associations may include shares of stock of the FHLBs, FNMA, and FHLMC as QTIs. Compliance with the QTL test is determined on a monthly basis in nine out of every twelve months. As of December 31, 2004, the Bank was in compliance with its QTL requirement, with approximately 77.3% of its portfolio assets invested in QTIs. A savings association which fails to meet the QTL test must either convert to a bank (but its deposit insurance assessments and payments will be those of and paid to the SAIF) or be subject to the following penalties: (i) it may not enter into any new activity except for those permissible for a national bank and for a savings association; (ii) its branching activities shall be limited to those of a national bank; and (iii) it shall be bound by regulations applicable to national banks respecting payment of dividends. Three years after failing the QTL test the association must dispose of any investment or activity not permissible for a national bank and a savings association. If such a savings association is controlled by a savings and loan holding company, then such holding company must, within a prescribed time period, become registered as a bank holding company and become subject to all rules and regulations applicable to bank holding companies (including restrictions as to the scope of permissible business activities). Acquisitions or Dispositions and Branching The Bank Holding Company Act specifically authorizes a bank holding company, upon receipt of appropriate regulatory approvals, to acquire control of any savings association or holding company thereof wherever located. Similarly, a savings and loan holding company may acquire control of a bank. Moreover, federal savings associations may acquire or be acquired by any insured depository institution. Regulations promulgated by the FRB restrict the branching authority of savings associations acquired by bank holding companies. Savings associations acquired by bank holding companies may be converted to banks if they continue to pay SAIF premiums, but as such they become subject to branching and activity restrictions applicable to banks. Subject to certain exceptions, commonly-controlled banks and savings associations must reimburse the FDIC for any losses suffered in connection with a failed bank or savings association affiliate. Institutions are commonly controlled if one is owned by another or if both are owned by the same holding company. Such claims by the FDIC under this provision are subordinate to claims of depositors, secured creditors, and holders of subordinated debt, other than affiliates. 27 The OTS has adopted regulations which permit nationwide branching to the extent permitted by federal statute. Federal statutes permit federal savings associations to branch outside of their home state if the association meets the domestic building and loan test in ss.7701(a)(19) of the Code or the asset composition test of ss.7701(c) of the Code. Branching that would result in the formation of a multiple savings and loan holding company controlling savings associations in more than one state is permitted if the law of the state in which the savings association to be acquired is located specifically authorizes acquisitions of its state-chartered associations by state-chartered associations or their holding companies in the state where the acquiring association or holding company is located. Moreover, Indiana banks and savings associations are permitted to acquire other Indiana banks and savings associations and to establish branches throughout Indiana. Finally, The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (the "Riegle-Neal Act") permits bank holding companies to acquire banks in other states and, with state consent and subject to certain limitations, allows banks to acquire out-of-state branches either through merger or de novo expansion. The State of Indiana enacted legislation establishing interstate branching provisions for Indiana state-chartered banks consistent with those established by the Riegle-Neal Act (the "Indiana Branching Law"). The Indiana Branching Law, which became effective in 1996, authorizes Indiana banks to branch interstate by merger or de novo expansion, provided that such transactions are not permitted to out-of-state banks unless the laws of their home states permit Indiana banks to merge or establish de novo banks on a reciprocal basis. Transactions with Affiliates The Bank is subject to Sections 22(h), 23A and 23B of the Federal Reserve Act, which limits credit transactions between a bank or savings association and its executive officers and its affiliates. These provisions also prescribe terms and conditions deemed to be consistent with safe and sound banking practices for transactions between a financial institution and its affiliates, and restrict the types of collateral security permitted in connection with a financial institution's extension of credit to an affiliate. Federal Securities Law The shares of Common Stock of the Holding Company have been registered with the SEC under the Securities Exchange Act (the "1934 Act"). The Holding Company is subject to the information, proxy solicitation, insider trading restrictions and other requirements of the 1934 Act and the rules of the SEC thereunder. After three years following the Bank's conversion to stock form, if the Holding Company has fewer than 300 shareholders, it may deregister its shares under the 1934 Act and cease to be subject to the foregoing requirements. Shares of Common Stock held by persons who are affiliates of the Holding Company may not be resold without registration unless sold in accordance with the resale restrictions of Rule 144 under the Securities Act of 1933. If the Holding Company meets the current public information requirements under Rule 144, each affiliate of the Holding Company who complies with the other conditions of Rule 144 (including those that require the affiliate's sale to be aggregated with those of certain other persons) would be able to sell in the public market, without registration, a number of shares not to exceed, in any three-month period, the greater of (i) 1% of the outstanding shares of the Holding Company or (ii) the average weekly volume of trading in such shares during the preceding four calendar weeks. Sarbanes-Oxley Act of 2002 On July 30, 2002, President Bush signed into law the Sarbanes-Oxley Act of 2002 (the "Sarbanes-Oxley" Act). The Sarbanes-Oxley Act's stated goals include enhancing corporate responsibility, increasing penalties for accounting and auditing improprieties at publicly traded companies and protecting investors by improving the accuracy and reliability of corporate disclosures pursuant to the securities laws. 28 The Sarbanes-Oxley Act generally applies to all companies that file or are required to file periodic reports with the Securities and Exchange Commission under the 1934 Act. Among other things, the Sarbanes-Oxley Act creates the Public Company Accounting Oversight Board as an independent body subject to SEC supervision with responsibility for setting auditing, quality control and ethical standards for auditors of public companies. The Sarbanes-Oxley Act also requires public companies to make faster and more-extensive financial disclosures, requires the chief executive officer and chief financial officer of public companies to provide signed certifications as to the accuracy and completeness of financial information filed with the SEC, and provides enhanced criminal and civil penalties for violations of the federal securities laws. The Sarbanes-Oxley Act also addresses functions and responsibilities of audit committees of public companies. The statute makes the audit committee directly responsible for the appointment, compensation and oversight of the work of the company's outside auditor, and requires the auditor to report directly to the audit committee. The Sarbanes-Oxley Act authorizes each audit committee to engage independent counsel and other advisors, and requires a public company to provide the appropriate funding, as determined by its audit committee, to pay the company's auditors and any advisors that its audit committee retains. The Sarbanes-Oxley Act also requires public companies to include an internal control report and assessment by management, along with an attestation to this report prepared by the company's registered public accounting firm, in their annual reports to stockholders. Although the Holding Company will incur additional expense in complying with the provisions of the Sarbanes-Oxley Act and the resulting regulations, management does not expect that such compliance will have a material impact on the Holding Company's results of operations or financial condition. Community Reinvestment Act Matters Federal law requires that ratings of depository institutions under the Community Reinvestment Act of 1977 ("CRA") be disclosed. The disclosure includes both a four-unit descriptive rating - outstanding, satisfactory, needs to improve, and substantial noncompliance - and a written evaluation of an institution's performance. Each FHLB is required to establish standards of community investment or service that its members must maintain for continued access to long-term advances from the FHLBs. The standards take into account a member's performance under the CRA and its record of lending to first-time home buyers. The OTS has designated the Bank's record of meeting community credit needs as satisfactory. Predatory Lending The Federal Reserve Board issued a regulation that became effective on October 1, 2002 that is aimed at curbing "predatory lending." The term "predatory lending" encompasses a variety of practices, but the term generally is used to refer to abusive lending practices involving fraud, deception or unfairness. Predatory lending typically involves one or more of the following: (i) making unaffordable loans based on the assets of the borrower rather than on the borrower's ability to repay an obligation ("asset-based lending"); (ii) inducing a borrower to refinance a loan repeatedly in order to charge high points and fees each time the loan is refinanced ("loan flipping"); or (iii) engaging in fraud or deception to conceal the true nature of the loan obligation from an unsuspecting or unsophisticated borrower. The Federal Reserve Board amended Regulation Z to broaden the scope of loans subject to the protections of the Home Ownership and Equity Protection Act of 1994 ("HOEPA"). Among other things, the regulation brings within the scope of HOEPA first-lien mortgage loans with interest rates that are at least 8 percentage points above Treasury securities having a comparable maturity. In addition, the regulation requires that the cost of optional insurance and similar debt protection products paid by a borrower at closing be included in calculating the finance charge paid by the borrower. HOEPA coverage is triggered if such finance charges exceed 8 percent of the total loan. Finally, the regulation restricts creditors from engaging in repeated refinancings of their own HOEPA loans over a short time period when the transactions are not in the borrower's interest. Lenders that violate 29 the rules face cancellation of loans and penalties equal to the finance charges paid. The Bank does not anticipate that these provisions, or any similar state predatory lending regulations, will materially affect its financial condition or results of operations. USA Patriot Act of 2001 On October 26, 2001, President Bush signed the USA Patriot Act of 2001. The Patriot Act (the "Patriot Act") is intended to strengthen U.S. law enforcement's and the intelligence communities' abilities to work cohesively to combat terrorism on a variety of fronts. The potential impact of the Patriot Act on financial institutions of all kinds is significant and wide ranging. The Patriot Act contains sweeping anti-money laundering and financial transparency laws. The Treasury Department issued final regulations that became effective on June 9, 2003 that, among other things, require institutions to incorporate into their written money laundering plans a board-approved customer identification program implementing reasonable procedures for: (i) verifying the identity of any person seeking to open an account, to the extent reasonable and practicable; (ii) maintaining records of the information used to verify the person's identity; and (iii) determining whether the person appears on any list of known or suspected terrorists or terrorist organizations. The Bank does not anticipate that these requirements will materially affect its operations. TAXATION Federal Taxation Historically, savings associations, such as the Bank, have been permitted to compute bad debt deductions using either the bank experience method or the percentage of taxable income method. However, for years beginning after December 31, 1995, the Bank can no longer use the percentage of taxable income method of computing its allowable tax bad debt deduction and instead must compute its allowable deduction using the experience method. In addition, the pre-1988 reserve, for which no deferred taxes have been recorded, will not have to be recaptured into income unless (i) the Bank no longer qualifies as a bank under the Code or (ii) excess dividends or distributions are paid out by the Bank or the Bank redeems its own stock. Depending on the composition of its items of income and expense, a savings association may be subject to the alternative minimum tax. A savings association must pay an alternative minimum tax equal to the amount (if any) by which 20% of alternative minimum taxable income ("AMTI"), as reduced by an exemption varying with AMTI, exceeds the regular tax due. AMTI equals regular taxable income increased or decreased by certain tax preferences and adjustments, including depreciation deductions in excess of that allowable for alternative minimum tax purposes, tax-exempt interest on most private activity bonds issued after August 7, 1986 (reduced by any related interest expense disallowed for regular tax purposes), the amount of the bad debt reserve deduction claimed in excess of the deduction based on the experience method and 75% of the excess of adjusted current earnings over AMTI (before this adjustment and before any alternative tax net operating loss). AMTI may be reduced only up to 90% by net operating loss carryovers, but alternative minimum tax paid can be credited against regular tax due in later years. For federal income tax purposes, the Company has been reporting its income and expenses on the accrual method of accounting. The Company's federal income tax returns [have not] been audited in recent years. State Taxation The Company is subject to Indiana's Financial Bank Tax ("IFBT"), which is imposed at a flat rate of 8.5% on apportioned "adjusted gross income." "Adjusted gross income," for purposes of IFBT, begins with taxable income as defined by Section 63 of the Code and, thus, incorporates federal tax law to the extent that it affects the computation of taxable income. Federal taxable income is then adjusted by several Indiana modifications. Other applicable state taxes include generally applicable sales and use taxes plus real and personal property taxes. The Company's state income tax returns have not been audited in recent years. 30 The Company is subject to Kentucky's Bank Franchise Tax ("KBFT"), which is imposed at a flat rate of 1.1% on apportioned "net capital." For purposes of the KBFT, "net capital" is determined by (1) adding together the Company's paid-in capital stock, surplus, undivided profits, capital reserves, net unrealized gains or losses on certain securities, and cumulative foreign currency translation adjustments and (2) deducting from the total an amount equal to the same percentage of the total as the book value of U.S. obligations and Kentucky obligations bears to the book value of the total assets of the Company. "Kentucky obligations" are all obligations of the state, counties, municipalities, taxing districts, and school districts that are exempt from taxation under Kentucky law. Other applicable state taxes include generally applicable sales and use taxes as well as Kentucky bank deposit and local deposit taxes which are generally imposed on the Company with respect to the deposits of Kentucky resident individuals at rates of .001% and .025%, respectively. Item 2. Description of Properties. The following table provides certain information with respect to the Bank's offices as of December 31, 2004.

The Bank owns computer and data processing equipment which is used for transaction processing, loan origination, and accounting. The net book value of electronic data processing equipment owned by the Bank was approximately $256,000 at December 31, 2004. The Bank operates 11 automated teller machines ("ATMs"), one at each office location (the main office has two), one at Hanover College, one at a Kroger supermarket, all in Madison, Indiana, one at Great Escape 31 Theatres in New Albany, Indiana, and two in Carrolton, Kentucky. The Bank's ATMs participate in the Shazam(R) network. The Bank performs its own data processing and reporting services. Item 3. Legal Proceedings. Neither the Holding Company nor the Bank is a party to any pending legal proceedings, other than routine litigation incidental to the Holding Company's or the Bank's business. Item 4. Submission of Matters to a Vote of Security Holders. No matter was submitted to a vote of the Holding Company's shareholders during the quarter ended December 31, 2004. Item 4.5. Executive Officers of the Registrant. The executive officers of the Holding Company are identified below. The executive officers of the Bank are elected annually by the Holding Company's Board of Directors.

Matthew P. Forrester (age 48) has served as the Bank and Holding Company President and Chief Executive Officer since October 1999. Prior to that, Mr. Forrester served as the Chief Financial Officer for Home Loan Bank in Fort Wayne, Indiana and Senior Vice President and Treasurer for its holding company, Home Bancorp. Prior to joining Home Loan Bank, Mr. Forrester was an examiner for the Indiana Department of Financial Institutions. Lonnie D. Collins (age 56) has served as Secretary of the Bank since September 1994 and as Secretary of the Holding Company since 1996. Mr. Collins has also practiced law since October 1975 and has served as the Bank's outside counsel since 1980. Larry C. Fouse (age 59) has served as the Holding Company's Controller since 1997. From 1993 to 1997, he served as the Chief Financial Officer and Controller of Citizens and from 1989 to 1993 served as Citizens' Vice President and Operations Officer. 32 Deanna Liter (age 41) has served as Vice President of Data Services since 1999. From 1986 to 1997, she was manager of the Citizens' Data Processing Department. Barbara Eades (age 55) has served as Vice President of Retail Banking since 2000. From 1997 to 1999, she was Branch Manager of the downtown branch. She served as Assistant Vice President for Madison First Federal from 1990 to 1996. Loy Skirvin (age 56) has served as Vice President of Human Resources since 1998. From 1991 to 1997, she was Human Resources Manager for a manufacturing firm. Mark A. Goley (age 49) has served as Vice President of Loan Services since 1997. From 1989 to 1997, he served as Senior Loan Officer for Citizens. Anthony D. Brandon (age 33) has served as Vice President of Loan Administration since September of 2001. Prior to joining the Bank, he served as President of Republic Bank of Indiana. John Muessel (age 52) has served as Vice President - Trust Officer since April of 2002. Prior to joining the Bank, he served as Trust Officer of National City Bank of Indiana. PART II Item 5. Market for Common Equity, Related Stockholder Matters and Small Business Issuer Purchases of Equity Securities. The Holding Company's common stock, without par value ("Common Stock"), is quoted on the National Association of Securities Dealers Automated Quotation System ("NASDAQ"), Small Cap Market, under the symbol "RIVR." Since the Holding Company has no independent operation or other subsidiaries to generate income, its ability to accumulate earnings for the payment of cash dividends to its shareholders directly depends upon the ability of the Bank to pay dividends to the Holding Company and upon the earnings on its investment securities. Any dividend distributions by the Bank to the Holding Company in excess of current or accumulated earnings and profits will be treated for federal income tax purposes as a distribution from the Bank's accumulated bad debt reserves, which could result in increased federal income tax liability for the Bank. Moreover, the Bank may not pay dividends to the Holding Company if such dividends would result in the impairment of the liquidation account established in connection with the Conversion. Generally, there is no OTS regulatory restriction on the payment of dividends by the Holding Company unless there is a determination by the Director of the OTS that there is reasonable cause to believe that the payment of dividends constitutes a serious risk to the financial safety, soundness or stability of the Bank. The FDIC also has authority under current law to prohibit a bank from paying dividends if, in its opinion, the payment of dividends would constitute an unsafe or unsound practice in light of the Bank's financial condition. Indiana law, however, would prohibit the Holding Company from paying a dividend, if, after giving effect to the payment of that dividend, the Holding Company would not be able to pay its debts as they become due in the usual course of business or the Holding Company's total assets would be less than the sum of its total liabilities plus preferential rights of holders of preferred stock, if any. Other information required by this item is incorporated by reference to the material under the heading "Market Price of the Corporation's Common Shares and Related Shareholder Matters" on page 2 of the Holding Company's 2004 Shareholder Annual Report (the "Shareholder Annual Report"). Purchases of common stock made by or on behalf of the Company during the three months ended December 31, 2004, are set forth below: 33

(1) During the periods reported above, there were no shares of Common Stock which were repurchased by the Company other than through a publicly announced plan or program. (2) Up to 10% of total shares outstanding may be repurchased at a given time by the Company. Item 5.5. Selected Consolidated Financial Data. The information required by this item is incorporated by reference to the material under the heading "Selected Consolidated Financial Information and Other Data" on pages 3 and 4 of the Shareholder Annual Report. Item 6. Management's Discussion and Analysis or Plan of Operation. The information required by this item is incorporated by reference to pages 5 through 15 of the Shareholder Annual Report. Item 7. Financial Statements. The Holding Company's Consolidated Financial Statements and Notes thereto contained on pages 19 through 42 in the Shareholder Annual Report are incorporated herein by reference. Item 8. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure. There are no such changes and disagreements to report during the applicable period. Item 8A. Controls and Procedures. (a) Evaluation of disclosure controls and procedures. The Company's President and Vice President of Finance, after evaluating the effectiveness of the Company's disclosure controls and procedures (as defined in Sections 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended), as of the end of the most recent fiscal quarter covered by this annual 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, except as provided in the paragraph below. Our independent registered public accounting firm noted a material weakness in the design or operation of the Company's internal controls that could adversely affect the Company's ability to record, process, summarize and report financial data consistent with the assertions of management in the financial statements. The material weakness identified by management and our independent auditors was that the Company does not have adequate controls in place to ensure that all accounts are properly reconciled and reviewed in a timely manner and that appropriate period-end entries are recorded. Management of the Company has reviewed these items with the Audit Committee of the Board and is implementing procedures and plans to ensure that the above noted items are addressed. (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, except as provided in the preceding paragraph. 34 Item 8B. Other Information. There is no information that was required to be disclosed on a Form 8-K during the fourth quarter, but was not reported. PART III Item 9. Directors, Executive Officers, Promoters and Control Persons, Compliance with Section 16(a) of the Exchange Act. The information required by this item with respect to directors is incorporated by reference to the sections of the Holding Company's Proxy Statement for its Annual Shareholder Meeting to be held on April 20, 2005 (the "2005 Proxy Statement") with the captions "Proposal I - Election of Directors" and "Section 16(a) Beneficial Ownership Reporting Compliance." Information concerning the Registrant's executive officers is included in Item 4.5 in Part I of this report. The Company has a separate Audit Committee established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934. Its members are Robert W. Anger (Chairman), Fred W. Koehler, Jonnie L. Davis, Michael J. Hensley, L. Sue Livers and Charles J. McKay. The Board of Directors of the Company has determined that the Company does not have an "audit committee financial expert," as defined in 17 CFR ss. 228.401(e)(2), serving on its Audit Committee. The Board has selected Audit Committee members based on the Board's determination that they are qualified to oversee the accounting and financial reporting processes of the Company and audits of the Company's financial statements. The Company has adopted a code of ethics that applies, among other persons, to its principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. A copy of that Code of Ethics was filed as an exhibit to the Company's Form 10-KSB filed for the year ended December 31, 2003. Item 10. Executive Compensation. The information required by this item with respect to executive compensation is incorporated by reference to the section of the 2005 Proxy Statement with the caption "Proposal I - Election of Directors - Management Remuneration and Related Transactions." Item 11. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters. The information required by this item is incorporated by reference to the sections of the 2005 Proxy Statement with the captions "Voting Securities and Principal Holders Thereof" and "Proposal I - Election of Directors." The following table sets forth certain information pertaining to the Bank's equity compensation plans: 35

(1) River Valley Bancorp Stock Option Plan. (2) River Valley Bancorp Recognition and Retention Plan and Trust ("RRP"). Column (a) includes 6,270 shares granted to management but not yet vested. In addition, 72,366 shares granted to management have fully vested, and shares have been issued to management in connection therewith. (3) The total in Column (b) includes only the weighted-average price of stock options, as the restricted shares awarded under the RRP plan have no exercise price. Item 12. Certain Relationships and Related Transactions. The information required by this item is incorporated by reference to the section of the 2005 Proxy Statement with the caption "Proposal I - Election of Directors - Transactions with Certain Related Persons." 36 Item 13. Exhibits. (a) List the following documents filed as part of the report: Annual Report Financial Statements Page No. ------------------------------------------------- ------------- Report of Independent Registered Public Accounting Firm............. 18 Consolidated Balance Sheets at December 31, 2004 and 2003........... 19 Consolidated Statements of Income for the Years Ended December 31, 2004, 2003, and 2002........................................... 20 Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2004, 2003, and 2002.............................. 21 Consolidated Statements of Stockholders' Equity for the Years Ended December 31, 2004, 2003, and 2002.............................. 22 Consolidated Statements of Cash Flows for the Years Ended December 31, 2004, 2003, and 2002........................................... 23 Notes to Consolidated Financial Statements.......................... 24-42 (b) The exhibits filed herewith or incorporated by reference herein are set forth on the Exhibit Index on page E-1. (c) All schedules are omitted as the required information either is not applicable or is included in the Consolidated Financial Statements or related notes. Item 14. Principal Accountant Fees and Services. The information required by this item with respect to principal accountant fees and services is incorporated by reference to the section of the 2005 Proxy Statement with the caption "Accountants." 37 SIGNATURES In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. RIVER VALLEY BANCORP Date: March 30, 2005 By: /s/ Matthew P. Forrester ------------------------------------ Matthew P. Forrester, President and Chief Executive Officer In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

39 EXHIBIT INDEX Exhibit No. Description - ---------- ----------------------------------------------------------------- 3(1) Registrant's Articles of Incorporation are incorporated by reference to Exhibit 3(1) to the Registration Statement on Form S-1 (Registration No. 333-05121) (the "Registration Statement") (2) Amended Code of By-Laws 4(1) Form of Fixed/Floating Rate Junior Subordinated Deferrable Interest Debentures Indenture, dated March 26, 2003, incorporated by reference to Exhibit 4.1 of Registrant's Form 10-QSB filed May 15, 2003 (2) Form of Fixed/Floating Rate Junior Subordinated Deferrable Interest Debentures Trust Agreement, dated March 26, 2003, incorporated by reference to Exhibit 4.2 of Registrant's Form 10-QSB filed May 15, 2003 (3) Form of Fixed/Floating Rate Junior Subordinated Deferrable Interest Guarantee Agreement, dated March 26, 2003, incorporated by reference to Exhibit 4.3 of Registrant's Form 10-QSB filed May 15, 2003 10(1) Employment Agreement between River Valley Financial Bank and Matthew P. Forrester (2) Director Deferred Compensation Master Agreement is incorporated by reference to Exhibit 10(8) to the Registration Statement (3) Director Deferred Compensation Joinder Agreement -- Robert W. Anger is incorporated by reference to Exhibit 10(10) to the Registration Statement (4) Director Deferred Compensation Joinder Agreement -- Earl W. Johann is incorporated by reference to Exhibit 10(12) to the Registration Statement (5) Director Deferred Compensation Joinder Agreement -- Frederick W. Koehler is incorporated by reference to Exhibit 10(13) to the Registration Statement (6) Director Deferred Compensation Joinder Agreement -- Michael Hensley is incorporated by reference to Exhibit 10(15) to the Registration Statement (7) Exempt Loan and Share Purchase Agreement between Trust under River Valley Bancorp Employee Stock Ownership Plan and Trust Agreement and River Valley Bancorp is incorporated by reference to Exhibit 10(22) to the Registration Statement (8) River Valley Bancorp Recognition and Retention Plan and Trust (9) River Valley Bancorp Stock Option Plan (10) Employment Agreement between River Valley Financial Bank and Gregory T. Siegrist is incorporated by reference to Exhibit 10 of Registrant's Form 10-QSB filed November 15, 2004 (11) First Amendment of the Director Deferred Compensation Master Agreement is incorporated by reference to Exhibit 10.1 of Registrant's Form 8-K filed March 21, 2005 (12) Form of Employee Incentive Stock Option Agreement under the River Valley Bancorp Stock Option Plan (13) Form of Director Non-Qualified Stock Option Agreement (14) Form of Award Notification under the River Valley Bancorp Recognition and Retention Plan and Trust E-1 13 Shareholder Annual Report 14 Code of Ethics is incorporated by reference to Exhibit 14 of Registrant's Form 10-KSB filed March 30, 2004 21 Subsidiaries of the Registrant is incorporated by reference to Exhibit 21 of Registrant's Form 10-KSB filed March 30, 2004 23 Consent of BKD, LLP 31(1) CEO Certification 31(2) CFO Certification 32 Section 906 Certification E-2 EX-3.2 2 ex32_0322.txt AMENDED CODE OF BY-LAWS EXHIBIT 3(2) AMENDED CODE OF BY-LAWS OF RIVER VALLEY BANCORP ARTICLE I Offices Section 1. Principal Office. The principal office (the "Principal Office") of River Valley Bancorp (the "Corporation") shall be at 303 Clifty Drive, P.O. Box 626, Madison, Indiana 47250, or such other place as shall be determined by resolution of the Board of Directors of the Corporation (the "Board"). Section 2. Other Offices. The Corporation may have such other offices at such other places within or without the State of Indiana as the Board may from time to time designate, or as the business of the Corporation may require. ARTICLE II Seal Section 1. Corporate Seal. The corporate seal of the Corporation (the "Seal") shall be circular in form and shall have inscribed thereon the words "River Valley Bancorp" and "INDIANA." In the center of the seal shall appear the word "Seal." Use of the Seal or an impression thereof shall not be required, and shall not affect the validity of any instrument whatsoever. ARTICLE III Shareholder Meetings Section 1. Place of Meeting. Every meeting of the shareholders of the Corporation (the "Shareholders") shall be held at the Principal Office, unless a different place is specified in the notice or waiver of notice of such meeting or by resolution of the Board or the Shareholders, in which event such meeting may be held at the place so specified, either within or without the State of Indiana. Section 2. Annual Meeting. The annual meeting of the Shareholders (the "Annual Meeting") shall be held each year at 3:00 o'clock P.M. on the third Wednesday in April (or, if such day is a legal holiday, on the next succeeding day not a legal holiday), for the purpose of electing directors of the Corporation ("Directors") and for the transaction of such other business as may legally come before the Annual Meeting. If for any reason the Annual Meeting shall not be held at the date and time herein provided, the same may be held at any time thereafter, or the business to be transacted at such Annual Meeting may be transacted at any special meeting of the Shareholders (a "Special Meeting") called for that purpose. Section 3. Notice of Annual Meeting. Written or printed notice of the Annual Meeting, stating the date, time and place thereof, shall be delivered or mailed by the Secretary or an Assistant Secretary to each Shareholder of record entitled to notice of such Meeting, at such address as appears on the records of the Corporation, at least ten and not more than seventy days before the date of such Meeting. Section 4. Special Meetings. Special Meetings, for any purpose or purposes (unless otherwise prescribed by law), may be called by only the Chairman of the Board of Directors (the "Chairman"), if any, or by the Board, pursuant to a resolution adopted by a majority of the total number of Directors of the Corporation, to vote on the business proposed to be transacted thereat. All requests for Special Meetings shall state the purpose or purposes thereof, and the business transacted at such Meeting shall be confined to the purposes stated in the call and matters germane thereto. Section 5. Notice of Special Meetings. Written or printed notice of all Special Meetings, stating the date, time, place and purpose or purposes thereof, shall be delivered or mailed by the Secretary or the President or any Vice President calling the Meeting to each Shareholder of record entitled to notice of such Meeting, at such address as appears on the records of the Corporation, at least ten and not more than sixty days before the date of such Meeting. Section 6. Waiver of Notice of Meetings. Notice of any Annual or Special Meeting (a "Meeting") may be waived in writing by any Shareholder, before or after the date and time of the Meeting specified in the notice thereof, by a written waiver delivered to the Corporation for inclusion in the minutes or filing with the corporate records. A Shareholder's attendance at any Meeting in person or by proxy shall constitute a waiver of (a) notice of such Meeting, unless the Shareholder at the beginning of the Meeting objects to the holding of or the transaction of business at the Meeting, and (b) consideration at such Meeting of any business that is not within the purpose or purposes described in the Meeting notice, unless the Shareholder objects to considering the matter when it is presented. Section 7. Quorum. At any Meeting, the holders of a majority of the voting power of all shares of the Corporation (the "Shares") issued and outstanding and entitled to vote at such Meeting (after giving effect to the provisions in Article 11 of the Articles of Incorporation of the Corporation, as the same may, from time to time, be amended (the "Articles")), represented in person or by proxy, shall constitute a quorum for the election of Directors or for the transaction of other business, unless otherwise provided by law, the Articles or this Code of By-Laws, as the same may, from time to time, be amended (these "By-Laws"). If, however, a quorum shall not be present or represented at any Meeting, the Shareholders entitled to vote thereat, present in person or represented by proxy, shall have power to adjourn the Meeting from time to time, without notice other than announcement at the Meeting of the date, time and place of the adjourned Meeting, unless the date of the adjourned Meeting requires that the Board fix a new record date (the "Record Date") therefor, in which case notice of the adjourned Meeting shall be given. At such adjourned Meeting, if a quorum shall be present or represented, any business may be transacted that might have been transacted at the Meeting as originally scheduled. Section 8. Voting. At each Meeting, every Shareholder entitled to vote shall have one vote for each Share standing in his name on the books of the Corporation as of the Record Date fixed by the Board for such Meeting, except as otherwise provided by law or the Articles, and except that no Share shall be voted at any Meeting upon which any installment is due and unpaid and no share which is not entitled to vote pursuant to Article 11 of the Articles shall be voted at any Meeting. Voting for Directors and, upon the demand of any Shareholder, voting upon any question properly before a Meeting, shall be by ballot. A plurality vote shall be necessary to elect any Director, and on all other matters, the action or a question shall be approved if the number of votes cast thereon in favor of the action or question exceeds the number of votes cast opposing the action or question, except as otherwise provided by law or the Articles. Section 9. Shareholder List. The Secretary shall prepare before each Meeting a complete list of the Shareholders entitled to notice of such Meeting, arranged in alphabetical order by class of Shares (and each series within a class), and showing the address of, and the number of Shares entitled to vote held by, each Shareholder (the "Shareholder List"). Beginning five business days before the Meeting and continuing throughout the Meeting, the Shareholder List shall be on file at the Principal Office or at a place identified in the Meeting notice in the city where the Meeting will be held, and shall be available for inspection by any Shareholder entitled to vote at the Meeting. On written demand, made in good faith and for a proper purpose and describing with reasonable particularity the Shareholder's purpose, and if the Shareholder List is directly connected with the Shareholder's purpose, a Shareholder (or such Shareholder's agent or attorney authorized in writing) shall be entitled to inspect and to copy the Shareholder List, during regular business hours and at the Shareholder's expense, during the period the Shareholder List is available for inspection. The original stock register or transfer book (the "Stock Book"), or a duplicate thereof kept in the State of Indiana, shall be the only evidence as to who are the Shareholders entitled to examine the Shareholder List, or to notice of or to vote at any Meeting. Section 10. Proxies. A Shareholder may vote either in person or by proxy executed in writing by the Shareholder or a duly authorized attorney-in-fact. No proxy shall be valid after eleven months from the date of its execution, unless a shorter or longer time is expressly provided therein. Section 11. Notice of Shareholder Business. At an Annual Meeting of the Shareholders, only such business shall be conducted as shall have been properly brought before the Meeting. To be properly brought before an Annual Meeting, business must be (a) specified in the notice of Meeting (or any supplement thereto) given by or at the direction of the Board, (b) otherwise properly brought before the Meeting by or at the direction of the Board, or (c) otherwise properly brought before the Meeting by a Shareholder. For business to be properly brought before an Annual Meeting by a Shareholder, the Shareholder must have the legal right and authority to make the Proposal for consideration at the Meeting and the Shareholder must have given timely notice thereof in writing to the Secretary of the Corporation. To be timely, a Shareholder's notice must be delivered to or mailed and received at the principal executive offices of the Corporation, not less than 120 days prior to the Meeting; provided, however, that in the event that less than 130 days' notice or prior public disclosure of the date of the Meeting is given or made to Shareholders (which notice or public disclosure shall include the date of the Annual Meeting specified in these By-Laws, if such By-Laws have been filed with the Securities and Exchange Commission and if the Annual Meeting is held on such date), notice by the Shareholder to be timely must be so received not later than the close of business on the 10th day following the day on which such notice of the date of the Annual Meeting was mailed or such public disclosure was made. A Shareholder's notice to the Secretary shall set forth as to each matter the Shareholder proposes to bring before the Annual Meeting (a) a brief description of the business desired to be brought before the Annual Meeting and the reasons for conducting such business at the Annual Meeting, (b) the name and record address of the Shareholders proposing such business, (c) the class and number of shares of the Corporation which are beneficially owned by the Shareholder, and (d) any material interest of the Shareholder in such business. Notwithstanding anything in these By-Laws to the contrary, no business shall be conducted at an Annual Meeting except in accordance with the procedures set forth in this Section 11. The Chairman of an Annual Meeting shall, if the facts warrant, determine and declare to the Meeting that business was not properly brought before the Meeting and in accordance with the provisions of this Section 11, and if he should so determine, he shall so declare to the Meeting and any such business not properly brought before the Meeting shall not be transacted. At any Special Meeting of the Shareholders, only such business shall be conducted as shall have been brought before the Meeting by or at the direction of the Board of Directors. Section 12. Notice of Shareholder Nominees. Only persons who are nominated in accordance with the procedures set forth in this Section 12 shall be eligible for election as Directors. Nominations of persons for election to the Board may be made at a Meeting of Shareholders by or at the direction of the Board of Directors, by any nominating committee or person appointed by the Board of Directors or by any Shareholder of the Corporation entitled to vote for the election of Directors at the Meeting who complies with the notice procedures set forth in this Section 12. Such nominations, other than those made by or at the direction of the Board, shall be made pursuant to timely notice in writing to the Secretary of the Corporation. To be timely, a Shareholder's notice shall be delivered to or mailed and received at the principal executive offices of the Corporation not less than 120 days prior to the Meeting; provided, however, that in the event that less than 130 days' notice or prior public disclosure of the date of the Meeting is given or made to Shareholders (which notice or public disclosure shall include the date of the Annual Meeting specified in these By-Laws, if such By-Laws have been filed with the Securities and Exchange Commission and if the Annual Meeting is held on such date), notice by the Shareholders to be timely must be so 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. Such Shareholder's notice shall set forth (a) as to each person whom the Shareholder proposes to nominate for election or re-election as a Director, (i) the name, age, business address and residence address of such person, (ii) the principal occupation or employment of such person, (iii) the class and number of shares of the Corporation which are beneficially owned by such person and (iv) any other information relating to such person that is required to be disclosed in solicitations of proxies for election of Directors, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (including without limitation such person's written consent to being named in the proxy statement as a nominee and to serving as a Director if elected); and (b) as to the Shareholder giving the notice (i) the name and record address of such Shareholder and (ii) the class and number of shares of the Corporation which are beneficially owned by such Shareholder. No person shall be eligible for election as a Director of the Corporation unless nominated in accordance with the procedures set forth in this Section 12. The Chairman of the Meeting shall, if the facts warrant, determine and declare to the Meeting that a nomination was not made in accordance with the procedures prescribed by these By-Laws, and if he should so determine, he shall so declare to the Meeting and the defective nomination shall be disregarded. ARTICLE IV Board of Directors Section 1. Number. The business and affairs of the Corporation shall be managed by a Board of not less than five (5) nor more than fifteen (15) Directors, as may be specified from time to time by resolution adopted by a majority of the total number of the Corporation's Directors, divided into three classes as provided in the Articles. If and whenever the Board of Directors has not specified the number of Directors, the number shall be six. Directors (a) must have their primary domicile in either Jefferson County, Indiana or Trimble County, Kentucky, and (b) must have a loan or deposit relationship with Madison First Federal Savings & Loan Association which they have maintained for at least a continuous period of twelve (12) months immediately prior to their nomination to the Board. In addition, each Director who is not an employee of the Corporation or any of its subsidiaries 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 (12) months during the five (5) years prior to his or her nomination to the Board. The Board may elect or appoint, from among its members, a Chairman of the Board (the "Chairman"), who need not be an officer (an "Officer") or employee of the Corporation. The Chairman, if elected or appointed, shall preside at all Shareholder Meetings and Board Meetings and shall have such other powers and perform such other duties as are incident to such position and as may be assigned by the Board. Section 2. Vacancies and Removal. Any vacancy occurring in the Board shall be filled as provided in the Articles. Shareholders shall be notified of any increase in the number of Directors and the name, principal occupation and other pertinent information about any Director elected by the Board to fill any vacancy. Any Director, or the entire Board, may be removed from office only as provided in the Articles. Section 3. Powers and Duties. In addition to the powers and duties expressly conferred upon it by law, the Articles or these By-Laws, the Board may exercise all such powers of the Corporation and do all such lawful acts and things as are not inconsistent with the law, the Articles or these By-Laws. Section 4. Annual Board Meeting. Unless otherwise determined by the Board, the Board shall meet each year immediately after the Annual Meeting, at the place where such Meeting has been held, for the purpose of organization, election of Officers of the Corporation (the "Officers") and consideration of any other business that may properly be brought before such annual meeting of the Board (the "Annual Board Meeting"). No notice shall be necessary for the holding of the Annual Board Meeting. If the Annual Board Meeting is not held as above provided, the election of Officers may be held at any subsequent duly constituted meeting of the Board (a "Board Meeting"). Section 5. Regular Board Meetings. Regular meetings of the Board ("Regular Board Meetings") may be held at stated times or from time to time, and at such place, either within or without the State of Indiana, as the Board may determine, without call and without notice. Section 6. Special Board Meetings. Special meetings of the Board ("Special Board Meetings") may be called at any time or from time to time, and shall be called on the written request of at least two Directors, by the Chairman or the President, by causing the Secretary or any Assistant Secretary to give to each Director, either personally or by mail, telephone, telegraph, teletype or other form of wire or wireless communication at least two days' notice of the date, time and place of such Meeting. Special Board Meetings shall be held at the Principal Office or at such other place, within or without the State of Indiana, as shall be specified in the respective notices or waivers of notice thereof. Section 7. Waiver of Notice and Assent. A Director may waive notice of any Board Meeting before or after the date and time of the Board Meeting stated in the notice by a written waiver signed by the Director and filed with the minutes or corporate records. A Director's attendance at or participation in a Board Meeting shall constitute a waiver of notice of such Meeting and assent to any corporate action taken at such Meeting, unless (a) the Director at the beginning of such Meeting (or promptly upon his arrival) objects to holding of or transacting business at the Meeting and does not thereafter vote for or assent to action taken at the Meeting; (b) the Director's dissent or abstention from the action taken is entered in the minutes of such Meeting; or (c) the Director delivers written notice of his dissent or abstention to the presiding Director at such Meeting before its adjournment, or to the Secretary immediately after its adjournment. The right of dissent or abstention is not available to a Director who votes in favor of the action taken. Section 8. Quorum. At all Board Meetings, a majority of the number of Directors designated for the full Board (the "Full Board") shall be necessary to constitute a quorum for the transaction of any business, except (a) that for the purpose of filling of vacancies a majority of Directors then in office shall constitute a quorum, and (b) that a lesser number may adjourn the Meeting from time to time until a quorum is present. The act of a majority of the Board present at a Meeting at which a quorum is present shall be the act of the Board, unless the act of a greater number is required by law, the Articles or these By-Laws. Section 9. Audit and Other Committees of the Board. The Board shall, by resolution adopted by a majority of the Full Board, designate an Audit Committee comprised of two or more Directors, which shall have such authority and exercise such duties as shall be provided by resolution of the Board. The Board may, by resolution adopted by such majority, also designate other regular or special committees of the Board ("Committees"), in each case comprised of two or more Directors and to have such powers and exercise such duties as shall be provided by resolution of the Board. Section 10. Resignations. Any Director may resign at any time by giving written notice to the Board, The Chairman, the President or the Secretary. Any such resignation shall take effect when delivered unless the notice specifies a later effective date. Unless otherwise specified in the notice, the acceptance of such resignation shall not be necessary to make it effective. Section 11. Age Limitations. No person seventy (70) years of age or older shall be eligible for election, reelection, appointment, or reappointment to the Board. No Director shall serve as such beyond the Annual Meeting of the Corporation immediately following the Director becoming seventy (70) years of age. ARTICLE V Officers Section 1. Officers. The Officers shall be the President, one or more Vice Presidents, the Secretary and the Treasurer, and may include one or more Assistant Secretaries, one or more Assistant Treasurers, a Comptroller and one or more Assistant Comptrollers. Any two or more offices may be held by the same person. The Board may from time to time elect or appoint such other Officers as it shall deem necessary, who shall exercise such powers and perform such duties as may be prescribed from time to time by these By-Laws or, in the absence of a provision in these By-Laws in respect thereto, as may be prescribed from time to time by the Board. Section 2. Election of Officers. The Officers shall be elected by the Board at the Annual Board Meeting and shall hold office for one year or until their respective successors shall have been duly elected and shall have qualified; provided, however, that the Board may at any time elect one or more persons to new or different offices and/or change the title, designation and duties and responsibilities of any of the Officers consistent with the law, the Articles and these By-Laws. Section 3. Vacancies; Removal. Any vacancy among the Officers may be filled for the unexpired term by the Board. Any Officer may be removed at any time by the affirmative vote of a majority of the Full Board. Section 4. Delegation of Duties. In the case of the absence, disability, death, resignation or removal from office of any Officer, or for any other reason that the Board shall deem sufficient, the Board may delegate, for the time being, any or all of the powers or duties of such Officer to any other Officer or to any Director. Section 5. President. The President shall be a Director and, subject to the control of the Board, shall have general charge of and supervision and authority over the business and affairs of the Corporation, and shall have such other powers and perform such other duties as are incident to this office and as may be assigned to him by the Board. In the case of the absence or disability of the Chairman or if no Chairman shall be elected or appointed by the Board, the President shall preside at all Shareholder Meetings and Board Meetings. Section 6. Vice Presidents. Each of the Vice Presidents shall have such powers and perform such duties as may be prescribed for him by the Board or delegated to him by the President. In the case of the absence, disability, death, resignation or removal from office of the President, the powers and duties of the President shall, for the time being, devolve upon and be exercised by the Executive Vice President, if there be one, and if not, then by such one of the Vice Presidents as the Board or the President may designate, or, if there be but one Vice President, then upon such Vice President; and he shall thereupon, during such period, exercise and perform all of the powers and duties of the President, except as may be otherwise provided by the Board. Section 7. Secretary. The Secretary shall have the custody and care of the Seal, records, minutes and the Stock Book of the Corporation; shall attend all Shareholder Meetings and Board Meetings, and duly record and keep the minutes of their proceedings in a book or books to be kept for that purpose; shall give or cause to be given notice of all Shareholder Meetings and Board Meetings when such notice shall be required; shall file and take charge of all papers and documents belonging to the Corporation; and shall have such other powers and perform such other duties as are incident to the office of secretary of a business corporation, subject at all times to the direction and control of the Board and the President. Section 8. Assistant Secretaries. Each of the Assistant Secretaries shall assist the Secretary in his duties and shall have such other powers and perform such other duties as may be prescribed for him by the Board or delegated to him by the President. In case of the absence, disability, death, resignation or removal from office of the Secretary, his powers and duties shall, for the time being, devolve upon such one of the Assistant Secretaries as the Board, the President or the Secretary may designate, or, if there be but one Assistant Secretary, then upon such Assistant Secretary; and he shall thereupon, during such period, exercise and perform all of the powers and duties of the Secretary, except as may be otherwise provided by the Board. Section 9. Treasurer. The Treasurer shall have control over all records of the Corporation pertaining to moneys and securities belonging to the Corporation; shall have charge of, and be responsible for, the collection, receipt, custody and disbursements of funds of the Corporation; shall have the custody of all securities belonging to the Corporation; shall keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation; and shall disburse the funds of the Corporation as may be ordered by the Board, taking proper receipts or making proper vouchers for such disbursements and preserving the same at all times during his term of office. When necessary or proper, he shall endorse on behalf of the Corporation all checks, notes or other obligations payable to the Corporation or coming into his possession for or on behalf of the Corporation, and shall deposit the funds arising therefrom, together with all other funds and valuable effects of the Corporation coming into his possession, in the name and the credit of the Corporation in such depositories as the Board from time to time shall direct, or in the absence of such action by the Board, as may be determined by the President or any Vice President. If the Board has not elected a Comptroller or an Assistant Comptroller, or in the absence or disability of the Comptroller and each Assistant Comptroller or if, for any reason, a vacancy shall occur in such offices, then during such period the Treasurer shall have, exercise and perform all of the powers and duties of the Comptroller. The Treasurer shall also have such other powers and perform such other duties as are incident to the office of treasurer of a business corporation, subject at all times to the direction and control of the Board and the President. If required by the Board, the Treasurer shall give the Corporation a bond, in such an amount and with such surety or sureties as may be ordered by the Board, for the faithful performance of the duties of his office and for the restoration to the Corporation, in case of his death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in his possession or under his control belonging to the Corporation. Section 10. Assistant Treasurers. Each of the Assistant Treasurers shall assist the Treasurer in his duties, and shall have such other powers and perform such other duties as may be prescribed for him by the Board or delegated to him by the President. In case of the absence, disability, death, resignation or removal from office of the Treasurer, his powers and duties shall, for the time being, devolve upon such one of the Assistant Treasurers as the Board, the President or the Treasurer may designate, or, if there be but one Assistant Treasurer, then upon such Assistant Treasurer; and he shall thereupon, during such period, exercise and perform all the powers and duties of the Treasurer except as may be otherwise provided by the Board. If required by the Board, each Assistant Treasurer shall likewise give the Corporation a bond, in such amount and with such surety or sureties as may be ordered by the Board, for the same purposes as the bond that may be required to be given by the Treasurer. Section 11. Comptroller. The Comptroller shall have direct control over all accounting records of the Corporation pertaining to moneys, properties, materials and supplies, including the bookkeeping and accounting departments; shall have direct supervision over the accounting records in all other departments pertaining to moneys, properties, materials and supplies; shall render to the President and the Board, at Regular Board Meetings or whenever the same shall be required, an account of all his transactions as Comptroller and of the financial condition of the Corporation; and shall have such other powers and perform such other duties as are incident to the office of comptroller of a business corporation, subject at all times to the direction and control of the Board and the President. Section 12. Assistant Comptrollers. Each of the Assistant Comptrollers shall assist the Comptroller in his duties, and shall have such other powers and perform such other duties as may be prescribed for him by the Board or delegated to him by the President. In case of the absence, disability, death, resignation or removal from office of the Comptroller, his powers and duties shall, for the time being, devolve upon such one of the Assistant Comptrollers as the Board, the President or the Comptroller may designate, or, if there be but one Assistant Comptroller, then upon such Assistant Comptroller; and he shall thereupon, during such period, exercise and perform all the powers and duties of the Comptroller, except as may be otherwise provided by the Board. Section 13. Age Limitations. No person seventy (70) years of age or older shall be eligible for election, reelection, appointment, or reappointment as an Officer of the Corporation. No Officer shall serve beyond the Annual Meeting of the Corporation immediately following the Officer becoming seventy (70) years of age. ARTICLE VI Certificates for Shares Section 1. Certificates. Certificates for Shares ("Certificates") shall be in such form, consistent with law and the Articles, as shall be approved by the Board. Certificates for each class, or series within a class, of Shares, shall be numbered consecutively as issued. Each Certificate shall state the name of the Corporation and that it is organized under the laws of the State of Indiana; the name of the registered holder; the number and class and the designation of the series, if any, of the Shares represented thereby; and a summary of the designations, relative rights, preferences and limitations applicable to such class and, if applicable, the variations in rights, preferences and limitations determined for each series and the authority of the Board to determine such variations for future series; provided, however, that such summary may be omitted if the Certificate states conspicuously on its front or back that the Corporation will furnish the Shareholder such information upon written request and without charge. Each Certificate shall be signed (either manually or in facsimile) by (i) the President or a Vice President and (ii) the Secretary or an Assistant Secretary, or by any two or more Officers that may be designated by the Board, and may have affixed thereto the Seal, which may be a facsimile, engraved or printed. Section 2. Record of Certificates. Shares shall be entered in the Stock Book as they are issued, and shall be transferable on the Stock Book by the holder thereof in person, or by his attorney duly authorized thereto in writing, upon the surrender of the outstanding Certificate therefor properly endorsed. Section 3. Lost or Destroyed Certificates. Any person claiming a Certificate to be lost or destroyed shall make affidavit or affirmation of that fact and, if the Board or the President shall so require, shall give the Corporation and/or the transfer agents and registrars, if they shall so require, a bond of indemnity, in form and with one or more sureties satisfactory to the Board or the President and/or the transfer agents and registrars, in such amount as the Board or the President may direct and/or the transfer agents and registrars may require, whereupon a new Certificate may be issued of the same tenor and for the same number of Shares as the one alleged to be lost or destroyed. Section 4. Shareholder Addresses. Every Shareholder shall furnish the Secretary with an address to which notices of Meetings and all other notices may be served upon him or mailed to him, and in default thereof notices may be addressed to him at his last known address or at the Principal Office. ARTICLE VII Corporate Books and Records Section 1. Places of Keeping. Except as otherwise provided by law, the Articles or these By-Laws, the books and records of the Corporation (including the "Corporate Records," as defined in the Articles) may be kept at such place or places, within or without the State of Indiana, as the Board may from time to time by resolution determine or, in the absence of such determination by the Board, as shall be determined by the President. Section 2. Stock Book. The Corporation shall keep at the Principal Office the original Stock Book or a duplicate thereof, or, in case the Corporation employs a stock registrar or transfer agent within or without the State of Indiana, another record of the Shareholders in a form that permits preparation of a list of the names and addresses of all the Shareholders, in alphabetical order by class of Shares, stating the number and class of Shares held by each Shareholder (the "Record of Shareholders"). Section 3. Inspection of Corporate Records. Any Shareholder (or the Shareholder's agent or attorney authorized in writing) shall be entitled to inspect and copy at his expense, after giving the Corporation at least five business days' written notice of his demand to do so, the following Corporate Records: (1) the Articles; (2) these By-Laws; (3) minutes of all Shareholder Meetings and records of all actions taken by the Shareholders without a meeting (collectively, "Shareholders Minutes") for the prior three years; (4) all written communications by the Corporation to the Shareholders including the financial statements furnished by the Corporation to the Shareholders for the prior three years; (5) a list of the names and business addresses of the current Directors and the current Officers; and (6) the most recent Annual Report of the Corporation as filed with the Secretary of State of Indiana. Any Shareholder (or the Shareholder's agent or attorney authorized in writing) shall also be entitled to inspect and copy at his expense, after giving the Corporation at least five business days' written notice of his demand to do so, the following Corporate Records, if his demand is made in good faith and for a proper purpose and describes with reasonable particularity his purpose and the records he desires to inspect, and the records are directly connected with his purpose: (1) to the extent not subject to inspection under the previous sentence, Shareholders Minutes, excerpts from minutes of Board Meetings and of Committee meetings, and records of any actions taken by the Board or any Committee without a meeting; (2) appropriate accounting records of the Corporation; and (3) the Record of Shareholders. Section 4. Record Date. The Board may, in its discretion, fix in advance a Record Date not more than seventy days before the date (a) of any Shareholder Meeting, (b) for the payment of any dividend or the making of any other distribution, (c) for the allotment of rights, or (d) when any change or conversion or exchange of Shares shall go into effect. If the Board fixes a Record Date, then only Shareholders who are Shareholders of record on such Record Date shall be entitled (a) to notice of and/or to vote at any such Meeting, (b) to receive any such dividend or other distribution, (c) to receive any such allotment of rights, or (d) to exercise the rights in respect of any such change, conversion or exchange of Shares, as the case may be, notwithstanding any transfer of Shares on the Stock Book after such Record Date. Section 5. Transfer Agents; Registrars. The Board may appoint one or more transfer agents and registrars for its Shares and may require all Certificates to bear the signature either of a transfer agent or of a registrar, or both. ARTICLE VIII Checks, Drafts, Deeds and Shares of Stock Section 1. Checks, Drafts, Notes, Etc. All checks, drafts, notes or orders for the payment of money of the Corporation shall, unless otherwise directed by the Board or otherwise required by law, be signed by one or more Officers as authorized in writing by the President. In addition, the President may authorize any one or more employees of the Corporation ("Employees") to sign checks, drafts and orders for the payment of money not to exceed specific maximum amounts as designated in writing by the President for any one check, draft or order. When so authorized by the President, the signature of any such Officer or Employee may be a facsimile signature. Section 2. Deeds, Notes, Bonds, Mortgages, Contracts, Etc. All deeds, notes, bonds and mortgages made by the Corporation, and all other written contracts and agreements, other than those executed in the ordinary course of corporate business, to which the Corporation shall be a party, shall be executed in its name by the President, a Vice President or any other Officer so authorized by the Board and, when necessary or required, the Secretary or an Assistant Secretary shall attest the execution thereof. All written contracts and agreements into which the Corporation enters in the ordinary course of corporate business shall be executed by any Officer or by any other Employee designated by the President or a Vice President to execute such contracts and agreements. Section 3. Sale or Transfer of Stock. Subject always to the further orders and directions of the Board, any share of stock issued by any corporation and owned by the Corporation (including reacquired Shares of the Corporation) may, for sale or transfer, be endorsed in the name of the Corporation by the President or a Vice President, and said endorsement shall be duly attested by the Secretary or an Assistant Secretary either with or without affixing thereto the Seal. Section 4. Voting of Stock of Other Corporations. Subject always to the further orders and directions of the Board, any share of stock issued by any other corporation and owned or controlled by the Corporation (an "Investment Share") may be voted at any shareholders' meeting of such other corporation by the President or by a Vice President. Whenever, in the judgment of the President, it is desirable for the Corporation to execute a proxy or give a shareholder's consent in respect of any Investment Share, such proxy or consent shall be executed in the name of the Corporation by the President or a Vice President, and, when necessary or required, shall be attested by the Secretary or an Assistant Secretary either with or without affixing thereto the Seal. Any person or persons designated in the manner above stated as the proxy or proxies of the Corporation shall have full right, power and authority to vote an Investment Share the same as such Investment Share might be voted by the Corporation. ARTICLE IX Fiscal Year Section 1. Fiscal Year. The Corporation's fiscal year shall begin on January 1 of each year and end on December 31 of the same year. ARTICLE X Amendments Section 1. Amendments. These By-Laws may be altered, amended or repealed, in whole or in part, and new By-Laws may be adopted, at any Board Meeting by the affirmative vote of a majority of the Full Board. EX-10.1 3 ex101_322.txt FORRESTER EMPLOYMENT AGREEMENT EXHIBIT 10(1) EMPLOYMENT AGREEMENT THIS AGREEMENT entered into and effective this 15th day of July, 1999, by and between River Valley Financial Bank, a federal savings bank (the "Bank"), and Matthew P. Forrester (the "Employee"). The parties agree, however, that the "Effective Date" of this Agreement shall be October 12, 1999. WHEREAS, the Employee is being employed by the Bank as its President and as such will perform valuable services for the Bank; and WHEREAS, the Board of Directors of the Bank believes it is in the best interests of the Bank to enter into this Agreement with the Employee in order to assure continuity of management of the Bank and to reinforce and encourage the continued attention and dedication of the Employee to his assigned duties; and WHEREAS, the parties desire by this writing to set forth the continuing employment relationship of the Bank and the Employee. NOW, THEREFORE, it is AGREED as follows: 1. Employment: The Employee is employed as the President of the Bank. The Employee shall render such administrative and management services for the Bank as are currently rendered and as are customarily performed by persons situated in a similar executive capacity. The Employee shall also promote, by entertainment or otherwise, as and to the extent permitted by law, the business of the Bank. The Employee's other duties shall be such as the Board of Directors (the "Board") of the Bank may from time to time reasonably direct, including normal duties as an officer of the Bank. 2. Base Compensation: The Bank agrees to pay the Employee during the term of this Agreement a salary at the rate of $95,000.00 per annum, payable in cash not less frequently than monthly, and shall be effective and calculated commencing the Effective Date. The salary shall be reviewed annually by the Board of Directors of the Bank in February of each year commencing February of 2000 and any adjustment in the future on salary shall be effective on February 1st of each year. 3. Bonuses: The Employee shall participate in any year end bonus granted to other employees by the Board. The Employee shall further participate in an equitable manner with all other senior management employees of the Bank in discretionary bonuses that the Board may award from time to time to the Bank's senior management employees. No other compensation provided for in this Agreement shall be deemed a substitute for the Employee's right to participate in such discretionary bonuses. 4.(a) Participation in Retirement, Medical and Other Plans: During the term of this Agreement, the Employee shall be eligible to participate in the following benefit plans: group hospitalization, disability, health, dental, sick leave, retirement, pension, and/or other present or future qualified plans provided by the Bank, generally, which benefits, taken as a whole, must be at least as favorable as those in effect on the Effective Date, unless the continued operation of such plans would adversely affect the Bank's operating results or financial condition in a material way, the Bank's Board of Directors concludes that modifications to such plans are necessary to avoid such adverse effects and such modifications apply consistently to all employees of the Bank. (b) Employee Benefits: Expenses: The Employee shall be eligible to participate in any fringe benefits which are or may become available to the Bank's senior management employees, including, for example, any stock option or incentive compensation plans, and any other benefits which are commensurate with the responsibilities and functions to be performed by the Employee under this Agreement. The Employee shall be reimbursed for all reasonable out-of-pocket business expenses which he shall incur in connection with his services under this Agreement, upon substantiation of such expenses in accordance with the policies of the Bank. 5. Term: The Bank hereby employs the Employee, and the Employee hereby accepts such employment under this Agreement, for the period commencing on the Effective Date and ending thirty six months thereafter (or such earlier date as is determined in accordance with Section 9). Additionally, on each annual anniversary date from the Effective Date, the Employee's term of employment shall be extended for an additional one-year period beyond the then effective expiration date, provided the Board determines in a duly adopted resolution that the performance of the Employee has met the Board's requirements and standards, and that this Agreement shall be extended. Only those members of the Board of Directors who have no personal interest in this Employment Agreement shall discuss and vote on the approval and subsequent review of this Agreement. 6. Loyalty; Noncompetition: (a) During the period of his employment hereunder and except for illnesses, reasonable vacation periods, and reasonable leaves of absence, the Employee shall devote all his full business time, attention, skill, and efforts to the faithful performance of his duties hereunder; provided, however, from time to time, the Employee may serve on the Boards of Directors of, and hold any other offices or positions in, companies or organizations, which will not present any conflict of interest with the Bank or any of its subsidiaries or affiliates, or unfavorably affect the performance of Employee's duties pursuant to this Agreement, or will not violate any applicable statute or regulation. "Full business time" is hereby defined as that amount of time usually devoted to like companies by similarly situated executive officers. During the term of his employment under this Agreement, the Employee shall not engage in any business or activity contrary to the business affairs or interests of the Bank, or be gainfully employed in any other position or job other than as provided above. (b) Nothing contained in this Paragraph 6 shall be deemed to prevent or limit the Employee's right to invest in the capital stock or other securities of any business dissimilar from that of the Bank, or, solely as a passive or minority investor, in any business. (c) While Employee is employed by the Bank and for a period of three years after termination of Employee's employment by the Bank or by the Employee for reasons other than those set forth in Section 9 (d) hereof, the Employee shall not directly or indirectly, engage in any bank or bank-related business which competes with the business of the Bank as conducted during Employee's employment by the Bank for any financial institution, including but not limited to banks, savings and loan associations, and credit unions within a forty mile radius of Madison, Indiana. 7. Standards: The Employee shall perform his duties under this Agreement in accordance with such reasonable standards as the Board may establish from time to time. The Bank will provide Employee with the working facilities and staff customary for similar executives and necessary for him to perform his duties. 8. Vacation, Sick Leave and Disability: The Employee shall be entitled to twenty days vacation annually and shall be entitled to the same sick leave and disability leave as other employees of the Bank. The Employee shall not receive any additional compensation from the Bank on account of his failure to take a vacation or sick leave, and the Employee shall not accumulate unused vacation or sick leave from one fiscal year to the next, except in either case to the extent authorized by the Board. In addition to the aforesaid paid vacations, the Employee shall be entitled, without loss of pay, to absent himself voluntarily from the performance of his employment with the Bank for such additional periods of time and for such valid and legitimate reasons as the Board may in its discretion determine. Further, the Board may grant to the Employee a leave or leaves of absence, with or without pay, at such time or times and upon such terms and conditions as such Board in its discretion may determine. 9. Termination and Termination Pay: Subject to Section 11 hereof, the Employee's employment hereunder may be terminated under the following circumstances: (a) Death. The Employee's employment under this Agreement shall terminate upon his death during the term of this Agreement, in which event the Employee's estate shall be entitled to receive the compensation due the Employee through the last day of the calendar month in which his death occurred. (b) Disability. (1) The Bank may terminate the Employee's employment, should the Employee become disabled, in a manner consistent with the Bank's and the Employee's rights and obligations under the Americans With Disabilities Act or other applicable state and federal laws concerning disability. For the purpose of this Agreement, "Disability" means a physical or mental condition which substantially limits the employee's ability to perform the essential functions of his position, as established by this Agreement, and which results in the Employee becoming eligible for long-term disability benefits under the Bank's long-term disability plan. (2) During any period that the Employee shall receive disability benefits and to the extent that the Employee shall be physically and mentally able to do so, he shall furnish such information, assistance and documents so as to assist in the continued ongoing business of the Bank and, if able, shall make himself available to the Bank to undertake reasonable assignments consistent with his prior position and his physical and mental health. The Bank shall pay all reasonable expenses incident to the performance of any assignment given to the Employee during the disability period. (c) Just Cause: The Board may, by written notice to the Employee, immediately terminate his employment at any time, for Just Cause. The Employee shall have no right to receive compensation or other benefits for any period after termination for Just Cause. Termination for "Just Cause" shall mean termination because of, in the good faith determination of the Board, the Employee's personal dishonesty, incompetence, willful misconduct, breach of fiduciary duty involving personal profit, intentional failure to perform stated duties, willful violation of any law, rule or regulation (other than traffic violations or similar offenses) or final cease-and-desist order, or material breach of any provision of this Agreement. Notwithstanding the foregoing, in the event of termination for Just Cause there shall be delivered to the Employee a copy of a resolution duly adopted by the affirmative vote of not less than a majority of the entire membership of the Board at a meeting of the Board called and held for that purpose (after reasonable notice to the Employee and an opportunity for the Employee, together with the Employee's counsel, to be heard before the Board), such meeting and the opportunity to be heard to be held at least 30 days prior to such termination, finding that in the good faith opinion of the Board the Employee was guilty of conduct set forth above in the second sentence of this Subsection (c) and specifying the particulars thereof in detail. (d) Without Just Cause; Constructive Discharge: (1) The Board may, by written notice to the Employee, immediately terminate his employment at any time for a reason other than Just Cause, in which event the Employee shall be entitled to receive the following compensation and benefits (unless such termination occurs within the time period set forth in Section 11(b) hereof, in which event the benefits and compensation provided for in Section 11 shall apply): (i) the salary provided pursuant to Section 2 hereof, up to the date of termination of the term as provided in Section 5 hereof (including any renewal term) of this Agreement (the "Expiration Date"), plus said salary for an additional 12-month period, and (ii) at the Employee's election, either (A) cash in an amount equal to the cost to the Employee of obtaining all health, life, disability and other benefits (excluding stock options) which the Employee would have been eligible to participate in through the Expiration Date, based upon the benefit levels substantially equal to those that the Bank provided for the Employee at the date of termination of employment, or (B) continued participation under such Bank benefit plans through the Expiration Date, but only to the extent the Employee continues to qualify for participation therein. All amounts payable to the Employee shall be paid, at the option of the Employee, either (I) in periodic payments through the Expiration Date, or (II) in one lump sum within ten (10) days of such termination. (2) The Employee may voluntarily terminate his employment under this Agreement, and the Employee shall thereupon be entitled to receive the compensation and benefits payable under Section 9(d)(1) hereof, within ninety (90) days following the occurrence of any of the following events, which has not been consented to in advance by the Employee in writing (unless such voluntary termination occurs within the time period set forth in Section 11(b) hereof, in which event the benefits and compensation provided for in Section 11 shall apply): (i) the requirement that the Employee move his personal residence, or perform his principal executive functions, more than thirty (30) miles from his primary office; (ii) a material reduction in the Employee's base compensation, unless part of an institution-wide reduction; (iii) the failure by the Bank to continue to provide the Employee with compensation and benefits provided for under this Agreement, as the same may be increased from time to time, or with benefits substantially similar to those provided to him under any of the employee benefit plans in which the Employee now or hereafter becomes a participant, or the taking of any action by the Bank which would directly or indirectly reduce any of such benefits or deprive the Employee of any material fringe benefit enjoyed by him, unless part of an institution-wide reduction; (iv) the assignment to the Employee of duties and responsibilities materially different from those normally associated with his position as referenced in Section 1; (v) a failure to elect or re-elect the Employee to the Board of Directors of the Bank; or (vi) a material diminution or reduction in the Employee's responsibilities or authority (including reporting responsibilities) in connection with his employment with the Bank. (3) Notwithstanding the foregoing, but only to the extent required under federal banking law, the amount payable under clause (d)(1)(i) hereof shall be reduced to the extent that on the date of the Employee's termination of employment, the present value of the benefits payable under clauses (d)(1)(i) and (ii) hereof exceeds the limitation on severance benefits that is set forth in Regulatory Bulletin 27a of the Office of Thrift Supervision, as in effect on the Effective Date. In the event that Section 280G of the Internal Revenue Code of 1986, as amended (the "Code"), becomes applicable to payments made under this Section 9(d), and the payments exceed the "Maximum Amount" as defined in Section 11(a)(1) hereof, the payments shall be reduced as provided by Section 11(a)(2) of this Agreement. (e) Termination or Suspension Under Federal Law. (1) If the Employee is removed and/or permanently prohibited from participating in the conduct of the Bank's affairs by an order issued under Sections 8(e)(4) or 8(g)(1) of the Federal Deposit Insurance Act ("FDIA") (12 U.S.C. 1818(e)(4) and (g)(1)), all obligations of the Bank under this Agreement shall terminate, as of the effective date of the order, but vested rights of the parties shall not be affected. (2) If the Bank is in default (as defined in Section 3(x)(1) of FDIA), all obligations under this Agreement shall terminate as of the date of default; however, this Paragraph shall not affect the vested rights of the parties. (3) All obligations under this Agreement shall terminate, except to the extent determined that continuation of this Agreement is necessary for the continued operation of the Bank; (i) by the Director of the Office of Thrift Supervision ("Director of OTS"), or his or her designee, at the time that the Federal Deposit Insurance Corporation ("FDIC") enters into an agreement to provide assistance to or on behalf of the Bank under the authority contained in Section 13(c) of FDIA; or (ii) by the Director of the OTS, or his or her designee, at the time that the Director of the OTS, or his or her designee approves a supervisory merger to resolve problems related to operation of the Bank or when the Bank is determined by the Director of the OTS to be in an unsafe or unsound condition. Such action shall not affect any vested rights of the parties. (4) If a notice served under Section 8(e)(3) or (g)(1) of the FDIA (12 U.S.C. 1818(e)(3) or (g)(1) suspends and/or temporarily prohibits the Employee from participating in the conduct of the Bank's affairs, the Bank's obligations under this Agreement shall be suspended as of the date of such service, unless stayed by appropriate proceedings. If the charges in the notice are dismissed, the Bank may in its discretion (i) pay the Employee all or part of the compensation withheld while its contract obligations were suspended, and (ii) reinstate (in whole or in part) any of its obligations which were suspended. (f) Voluntary Termination by Employee: Subject to Section 11 hereof, the Employee may voluntarily terminate employment with the Bank during the term of this Agreement, upon at least ninety (90) days' prior written notice to the Board of Directors, in which case the Employee shall receive only his compensation, vested rights and employee benefits up to the date of his termination (unless such termination occurs pursuant to Section 9(d)(2) hereof, in which event the benefits and compensation provided for in section 9(d) shall apply). 10. No Mitigation: The Employee shall not be required to mitigate the amount of any payment provided for in this Agreement by seeking other employment or otherwise and no such payment shall be offset or reduced by the amount of any compensation or benefits provided to the Employee in any subsequent employment. 11. Change in Control: (a) Change in Control; Involuntary Termination: (1) Notwithstanding any provision herein to the contrary, if the Employee's employment under this Agreement is terminated by the Bank, without the Employee's prior written consent and for a reason other than Just Cause, in connection with or within twelve (12) months after any Change in Control of the Bank, the Employee shall, subject to paragraph (2) of this Section 11(a), be paid an amount equal to the difference between (i) the product of 2.99 times his "base amount" as defined in Section 280G(b)(3) of the Code and regulations promulgated thereunder (the "Maximum Amount"), and (ii) the sum of any other parachute payments (as defined under Section 280G(b)(2) of the Code) that the Employee receives on account of the Change in Control. Said sum shall be paid in one lump sum within ten (10) days of such termination. This paragraph would not apply to a termination of employment due to death, disability or voluntary termination by the Employee. (2) In the event that the Employee and the Bank jointly determine and agree that the total parachute payments receivable under clauses (i) and (ii) of Section 11(a)(1) hereof exceed the Maximum Amount, notwithstanding the payment procedure set forth in Section 11(a)(1) hereof, the Employee shall determine which and how much, if any, of the parachute payments to which he is entitled shall be eliminated or reduced so that the total parachute payments to be received by the Employee do not exceed the Maximum Amount. If the Employee does not make his determination within ten business days after receiving a written request from the Bank, the Bank may make such determination, and shall notify the Employee promptly thereof. Within five business days of the earlier of the Bank's receipt of the Employee's determination pursuant to this paragraph or the Bank's determination in lieu of a determination by the Employee, the Bank shall pay to or distribute to or for the benefit of the Employee such amounts as are then due the Employee under this Agreement. (3) As a result of uncertainty in application of Section 280G of the Code at the time of payment hereunder, it is possible that such payments will have been made by the Bank which should not have been made ("Overpayment") or that additional payments will not have been made by the Bank which should have been made ("Underpayment"), in each case, consistent with the calculations required to be made under Section 11(a)(1) hereof. In the event that the Employee, based upon the assertion by the Internal Revenue Service against the Employee of a deficiency which the Employee believes has a high probability of success, determines that an Overpayment has been made, any such Overpayment paid or distributed by the Bank to or for the benefit of Employee shall be treated for all purposes as a loan ab initio which the Employee shall repay to the Bank together with interest at the applicable federal rate provided for in Section 7872(f)(2)(B) of the Code; provided, however, that no such loan shall be deemed to have been made and no amount shall be payable by the Employee to the Bank if and to the extent such deemed loan and payment would not either reduce the amount on which the Employee is subject to tax under Section 1 and Section 4999 of the Code or generate a refund of such taxes. In the event that the Employee and the Bank determine, based upon controlling precedent or other substantial authority, that an Underpayment has occurred, any such Underpayment shall be promptly paid by the Bank to or for the benefit of the Employee together with interest at the applicable federal rate provided for in Section 7872(f)(2)(B) of the Code. (4) A "Change in Control" shall be deemed to have occurred if: (i) as a result of, or in connection with, any public offering, tender offer or exchange offer, merger or other business combination, sale of assets or contested election, any combination of the foregoing transactions, or any similar transaction, the persons who were non-employee directors of the Bank or a holding company controlling the Bank before such transaction cease to constitute a majority of the Board of Directors of the Bank or such holding company or any successor thereof; (ii) the Bank or a holding company controlling the Bank transfers substantially all of its assets to another corporation which is not a wholly owned subsidiary of the Bank or such holding company; (iii) the Bank or a holding company controlling the Bank sells substantially all of the assets of a subsidiary or affiliate which, at the time of such sale, is the principal employer of the Employee; or (iv) the Bank or a holding company controlling the Bank is merged or consolidated with another corporation and, as a result of the merger or consolidation, less than fifty one percent (51%) of the outstanding voting securities of the surviving or resulting corporation is owned in the aggregate by the former stockholders of the Bank or of such holding company controlling the Bank. Notwithstanding the foregoing, but only to the extent required under federal banking law, the amount payable under Subsection(a) of this Section 11 shall be reduced to the extent that on the date of the Employee's termination of employment, the amount payable under Subsection(a) of this Section 11 exceeds the limitation on severance benefits that is set forth in Regulatory Bulletin 27a of the Office of Thrift Supervision, as in effect on the Effective Date. (b) Change in Control; Voluntary Termination: Notwithstanding any other provision of this Agreement to the contrary, but subject to Section 11(a)(2) hereof, the Employee may voluntarily terminate his employment under this Agreement within twelve (12) months following a Change in Control of the Bank, as defined in paragraph (a)(4) of this Section 11, and the Employee shall thereupon be entitled to receive the payment described in Section 11(a)(1) of this Agreement, within ninety (90) days following the occurrence of any of the following events, which has not been consented to in advance by the Employee in writing; (i) the requirement that the Employee perform his principal executive functions more than thirty (30) miles from his primary office as of the date of the Change in Control; (ii) a material reduction in the Employee's base compensation as in effect on the date of the Change in Control or as the same may be changed by mutual agreement from time to time, unless part of an institution-wide reduction; (iii) the failure by the Bank to continue to provide the Employee with compensation and benefits provided for under this Agreement, as the same may be increased from time to time, or with benefits substantially similar to those provided to him under any employee benefit in which the Employee is a participant at the time of the Change in Control, or the taking of any action which would materially reduce any of such benefits or deprive the Employee of any material fringe benefit enjoyed by him at the time of the Change in Control, unless part of an institution-wide reduction; (iv) the assignment to the Employee of duties and responsibilities materially different from those normally associated with his position as referenced at Section 1; (v) a failure to elect or re-elect the Employee to the Board of Directors of the Bank, if the Employee is serving on the Board on the date of the Change in Control; or (vi) a material diminution or reduction in the Employee's responsibilities or authority (including reporting responsibilities) in connection with his employment with the Bank. (c) Compliance with 12 U.S.C. Section 1828(k): Any payments made to the Employee pursuant to this Agreement, or otherwise, are subject to and conditioned upon their compliance with 12 U.S.C. Section 1828(k) and any regulations promulgated thereunder. (d) Trust: (1) Within five business days before or after a Change in Control as defined in Section 11(a) of this Agreement which was not approved in advance by a resolution of a majority of the Continuing Directors of the Bank, the Bank shall (i) deposit, or cause to be deposited, in a grantor trust (the "Trust"), designed to conform with Revenue Procedure 93-64 (or any successor) and having a trustee independent of the Bank, an amount equal to 2.99 times the Employee's "base amount" as defined in Section 280G(b)(3) of the Code, and (ii) provide the trustee of the Trust with a written direction to hold said amount and any investment return thereon in a segregated account for the benefit of the Employee, and to follow the procedures set forth in the next paragraph as to the payment of such amounts from the Trust. (2) During the twelve (12) consecutive month period following the date on which the Bank makes the deposit referred to in the preceding paragraph, the Employee may provide the trustee of the Trust with a written notice requesting that the trustee pay to the Employee an amount designated in the notice as being payable pursuant to Section 11(a) or (b). Within three business days after receiving said notice, the trustee of the Trust shall send a copy of the notice to the Bank via overnight and registered mail, return receipt requested. On the tenth (10th) business day after mailing said notice to the association, the trustee of the Trust shall pay the Employee the amount designated therein in immediately available funds, unless prior thereto the Bank provides the trustee with a written notice directing the trustee to withhold such payment. In the latter event, the trustee shall submit the dispute to non-appealable binding arbitration for a determination of the amount payable to the Employee pursuant to Section 11(a) or (b) hereof, and the party responsible for the payment of the costs of such arbitration (which may include any reasonable legal fees and expenses incurred by the Employee) shall be determined by the arbitrator. The trustee shall choose the arbitrator to settle the dispute, and such arbitrator shall be bound by the rules of the American Arbitration Association in making his or her determination. The parties and the trustee shall be bound by the results of the arbitration and, within 3 days of the determination by the arbitrator, the trustee shall pay from the Trust the amounts required to be paid to the Employee and/or the Bank, and in no event shall the trustee be liable to either party for making the payments as determined by the arbitrator. (3) Upon the earlier of (i) any payment from the Trust to the Employee, or (ii) the date twelve (12) months after the date on which the Bank makes the deposit referred to in the first paragraph of this subsection (d)(1), the trustee of the Trust shall pay to the Bank the entire balance remaining in the segregated account maintained for the benefit of the Employee. The Employee shall thereafter have no further interest in the Trust pursuant to this Agreement. (e) In the event that any dispute arises between the Employee and the Bank as to the terms or interpretation of this Agreement, including this Section 11, whether instituted by formal legal proceedings or otherwise, including any action that the Employee takes to enforce the terms of this Section 11 or to defend against any action taken by the Bank, the Employee shall be reimbursed for all costs and expenses, including reasonable attorneys' fees, arising from such dispute, proceedings or actions, provided that the Employee shall obtain a final judgment by a court of competent jurisdiction in favor of the Employee. Such reimbursement shall be paid within ten (10) days of Employee's furnishing to the Bank written evidence, which may be in the form, among other things, of a canceled check or receipt, of any costs or expenses incurred by the Employee. Should the Employee fail to obtain a final judgment in favor of the Employee and a final judgment is entered in favor of the Bank, then the Bank shall be reimbursed for all costs and expenses, including reasonable Attorneys' fees arising from such dispute, proceedings or actions. Such reimbursement shall be paid within ten (10) days of the Bank furnishing to the Employee written evidence, which may be in the form, among other things, of a canceled check or receipt, of any costs or expenses incurred by the Bank. 12. Employer will permit Employee or his personal representative(s) or heirs, during a period of three months following Employee's termination of employment by Employer for the reasons set forth in Subsections 9(d) or 11(a), if such termination follows a Change of Control, to require Employer, upon written request, to purchase all outstanding stock options previously granted to Employee under any stock option plan then in effect to the extent the options are vested at a cash purchase price equal to the amount by which the aggregate "fair market value" of the shares subject to such options exceeds the aggregate option price for such shares. For purposes of this Agreement, the term "fair market value" shall mean the higher of (1) the average of the highest asked prices for shares in the over-the-counter market as reported on the NASDAQ system or other exchange if the shares are traded on such system for the 30 business days preceding such termination, or (2) the average per share price actually paid for the most highly priced 1% of the shares acquired in connection with the Change of Control by any person or group acquiring such control. 13. Federal Income Tax Withholding: The Bank may withhold all federal and state income or other taxes from any benefit payable under this Agreement as shall be required pursuant to any law or government regulation or ruling. 14. Successors and Assigns: (a) Bank. This Agreement shall not be assignable by the Bank, provided that this Agreement shall inure to the benefit of and be binding upon any corporate or other successor of the Bank which shall acquire, directly or indirectly, by merger, consolidation, purchase or otherwise, all or substantially all of the assets or stock of the Bank. (b) Employee. Since the Bank is contracting for the unique and personal skills of the Employee, the Employee shall be precluded from assigning or delegating his rights or duties hereunder without first obtaining the written consent of the Bank; provided, however, that nothing in this paragraph shall preclude (i) the Employee from designating a beneficiary to receive any benefit payable hereunder upon his death, or (ii) the executors, administrators, or other legal representatives of the Employee or his estate from assigning any rights hereunder to the person or persons entitled thereunto. (c) Attachment. Except as required by law, no right to receive payments under this Agreement shall be subject to anticipation, commutation, alienation, sale, assignment, encumbrance, charge, pledge, or hypothecation or to exclusion, attachment, levy or similar process or assignment by operation of law, and any attempt, voluntary or involuntary, to effect any such action shall be null, void and of no effect. 15. Amendments. No amendments or additions to this Agreement shall be binding unless made in writing and signed by all of the parties, except as herein otherwise specifically provided. 16. Applicable Law. Except to the extent preempted by federal law, the laws of the State of Indiana shall govern this Agreement in all respects, whether as to its validity, construction, capacity, performance or otherwise. 17. Severability. The provisions of this Agreement shall be deemed severable and the invalidity or unenforceability of any provision shall not affect the validity or enforceability of the other provisions hereof. 18. Entire Agreement. This Agreement, together with any understanding or modifications thereof as agreed to in writing by the parties, shall constitute the entire agreement between the parties hereto and supersedes any other agreement between the parties hereto relating to the employment of the Employee IN WITNESS WHEREOF, the parties have executed this Agreement on the day and year first hereinabove written. ATTEST: RIVER VALLEY FINANCIAL BANK /s/ Lonnie D. Collins By: /s/ Fred W. Koehler - ---------------------------------- -------------------------------------- Lonnie D. Collins, Secretary Fred W. Koehler, Chairman of the Board /s/ Matthew P. Forrester -------------------------------------- Matthew P. Forrester The undersigned, River Valley Bancorp, sole shareholder of Bank, agrees that if it shall be determined for any reason that any obligation on the part of Bank to continue to make any payments due under this Agreement to Employee is unenforceable for any reason, River Valley Bancorp agrees to honor the terms of this Agreement and continue to make any such payments due hereunder to Employee or to satisfy any such obligation pursuant to the terms of this Agreement, as though it were the Bank hereunder. RIVER VALLEY BANCORP By: /s/ Fred W. Koehler ------------------------------------- Fred W. Koehler, Chairman EX-10.8 4 ex108_0322.txt RECOGNITION AND RETENTION PLAN AND TRUST EXHIBIT 10(8) RIVER VALLEY BANCORP RECOGNITION AND RETENTION PLAN AND TRUST ARTICLE I ESTABLISHMENT OF THE PLAN AND TRUST 1.01 River Valley Bancorp hereby establishes the Recognition and Retention Plan (the "Plan") and Trust (the "Trust") upon the terms and conditions hereinafter stated in this Recognition and Retention Plan and Trust Agreement (the "Agreement"). 1.02 The Trustee, which initially shall be First Bankers Trust Company, hereby accepts this Trust and agrees to hold the Trust assets existing on the date of this Agreement and all additions and accretions thereto upon the terms and conditions hereinafter stated. ARTICLE II PURPOSE OF THE PLAN 2.01 The purpose of the Plan is to retain directors and executive officers in key positions by providing such persons with a proprietary interest in the Holding Company (as hereinafter defined) as compensation for their contributions to the Holding Company and to the Affiliates (as hereinafter defined) and as an incentive to make such contributions and to promote the Holding Company's and the Affiliates' growth and profitability in the future. ARTICLE III DEFINITIONS The following words and phrases when used in this Plan with an initial capital letter, unless the context clearly indicates otherwise, shall have the meanings set forth below. Wherever appropriate, the masculine pronoun shall include the feminine pronoun and the singular shall include the plural. 3.01 "Affiliate" means the Thrift and Bank and such other subsidiaries or affiliates of the Holding Company which, with the consent of the Board, agree to participate in this Plan. 3.02 "Bank" shall mean Citizens National Bank of Madison. 3.03 "Beneficiary" means the person or persons designated by a Recipient to receive any benefits payable under the Plan in the event of such Recipient's death. Such person or persons shall be designated in writing on forms provided for this purpose by the Committee and may be changed from time to time by similar written notice to the Committee. In the absence of a written designation, the Beneficiary shall be the Recipient's surviving spouse, if any, or, if none, his estate. 3.04 "Board" means the Board of Directors of the Holding Company or of an Affiliate. 3.05 "Committee" means the Stock Compensation Committee of the Board of Directors of the Holding Company. At all times during its administration of this Plan, the Committee shall consist of two or more directors of the Holding Company, each of whom shall be a "Non-Employee Director" within the meaning of the definition of that term contained in Regulation 16b-3 ("Rule 16b-3") promulgated under the Securities Exchange Act of 1934, as amended (the "1934 Act"). 3.06 "Common Stock" means shares of the common stock, without par value, of the Holding Company. 3.07 "Conversion" shall mean the conversion of the Thrift from the mutual to stock form of organization and the simultaneous acquisition of the Thrift by the Holding Company. 3.08 "Director" means a member of the Board of Directors of an Affiliate or the Holding Company. 3.09 "Director Emeritus" shall mean an honorary non-voting member of the Board of Directors of an Affiliate or the Holding Company. 3.10 "Disability" means any physical or mental impairment which qualifies an Employee for disability benefits under the applicable long-term disability plan maintained by an Affiliate. 3.11 "Employee" means any person, including officers, who is currently employed by the the Holding Company or an Affiliate and shall also include the Secretary of the Thrift. 3.12 "Holding Company" shall mean River Valley Bancorp. 3.13 "Outside Director" means a member of the Board of Directors of the Holding Company, who is not also an Employee. 3.14 "Plan Shares" means shares of Common Stock held in the Trust and issued or issuable to a Recipient pursuant to the Plan. 3.15 "Plan Share Award" or "Award" means a right granted under this Plan to earn Plan Shares. 3.16 "Plan Share Reserve" means the shares of Common Stock held by the Trustee pursuant to Sections 5.03 and 5.04. 3.17 "Recipient" means an Employee or Director who receives a Plan Share Award under the Plan. 3.18 "Retirement" as to an Employee, means a termination of employment which constitutes a "retirement" under any applicable qualified pension benefit plan maintained by the Affiliate which employs the Recipient, or, if such plan is not applicable, which would constitute "retirement" under such plan were the Recipient covered by such plan and, as to a Director, means a retirement from service on the Board after attaining age 70. 3.19 "Subsidiary Director" shall mean a non-employee director of an Affiliate who is not an Outside Director. 3.20 "Thrift" shall mean Madison First Federal Savings and Loan Association. 3.21 "Trustee" means that person(s) or entity nominated by the Committee and approved by the Board pursuant to Sections 4.01 and 4.02 to hold legal title to the Plan assets for the purposes set forth herein. ARTICLE IV ADMINISTRATION OF THE PLAN 4.01 Role of the Committee. The Plan shall be administered and interpreted by the Committee, which shall have all of the powers allocated to it in this and other Sections of the Plan. The interpretation and construction by the Committee of any provisions of the Plan or of any Plan Share Award granted hereunder shall be final and binding. The Committee shall act by vote or written consent of a majority of its members. Subject to the express provisions and limitations of the Plan, the Committee may adopt such rules, regulations and procedures as it deems appropriate for the conduct of its affairs. If permitted by applicable law, the Committee, with the consent of Recipients may change the vesting schedule for Awards after the date of grant thereof. The Committee shall recommend to the Board one or more persons or entities to act as Trustee in accordance with the provisions of this Plan and Trust and the terms of Article VIII hereof. 4.02 Role of the Board. The members of the Committee and the Trustee shall be appointed or approved by, and will serve at the pleasure of, the Board of Directors of the Holding Company. The Board of Directors of the Holding Company may in its discretion from time to time remove members from, or add members to, the Committee, and may remove, replace or add Trustees. 4.03 Limitation on Liability. Neither a Director nor the Committee nor the Trustee shall be liable for any determination made in good faith with respect to the Plan or any Plan Shares or Plan Share Awards granted under it. If a Director or the Committee or any Trustee is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of anything done or not done by him in such capacity under or with respect to the Plan, the Holding Company shall indemnify such person against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in the best interests of the Holding Company and its Affiliates and, with respect to any criminal action or proceeding, if he had no reasonable cause to believe his conduct was unlawful. The indemnification of officers and directors of the Thrift pursuant to this Section 4.03 shall be subject to 12 C.F.R ss. 545.121. ARTICLE V CONTRIBUTION; PLAN SHARE RESERVE 5.01 Amount and Timing of Contributions. The Affiliates shall be permitted to contribute to the Trust an amount sufficient to purchase up to 4% of the shares of Common Stock issued by the Holding Company in connection with the Conversion. Such amounts shall be paid to the Trustee no later than the date required to purchase shares of Common Stock for Awards made under this Plan. No contributions by Employees or Directors shall be permitted. 5.02 Initial Investment. Any amounts held by the Trust until such amounts are invested in accordance with Section 5.03, shall be invested by the Trustee in such interest-bearing account or accounts at the Affiliates as the Trustee shall determine to be appropriate. 5.03 Investment of Trust Assets; Creation of Plan Share Reserve. As soon as practicable following the first shareholder meeting of the Holding Company following the Conversion, which shall be held no earlier than six (6) months following the Conversion ("First Shareholder Meeting Date"), the Trustee shall invest all of the Trust's assets exclusively in the number of shares of Common Stock designated by the Holding Company and the Affilitates as subject to Awards made under this Plan, which may be purchased directly from the Holding Company, on the open market, or from any other source; provided, however, that the Trust shall not invest in an amount of Common Stock greater than 4.0% of the shares of the Common Stock sold in the Conversion, which shall constitute the "Plan Share Reserve" and provided, further that if the Trustee is required to purchase such shares on the open market or from the Holding Company for an amount per share greater than the price per share at which shares were trading on the date the contributions therefor were made to the Trust, the Holding Company shall have the discretion to reduce the number of shares to be awarded and purchased. The Trust may hold cash in interest-bearing accounts pending investment in Common Stock for periods of not more than one year after deposit. The Trustee, in accordance with applicable rules and regulations and Section 5.01 hereof, shall purchase shares of Common Stock in the open market and/or shall purchase authorized but unissued shares of the Common Stock from the Holding Company sufficient to acquire the requisite percentage of shares. Any earnings received or distributions paid with respect to Common Stock held in the Plan Share Reserve shall be held in an interest-bearing account. Any earnings received or distributions paid with respect to Common Stock subject to a Plan Share Award shall be held in an interest-bearing account on behalf of the individual Recipient. 5.04 Effect of Allocations, Returns and Forfeitures Upon Plan Share Reserves. Upon the allocation of Plan Share Awards under Sections 6.02 and 6.03 after acquisition by the Trustee of such shares, or the decision of the Committee to return Plan Shares to the Holding Company, the Plan Share Reserve shall be reduced by the number of Plan Shares so allocated or returned. Any shares subject to an Award which may not be earned because of a forfeiture by the Recipient pursuant to Section 7.01 shall be returned (added) to the Plan Share Reserve. ARTICLE VI ELIGIBILITY; ALLOCATIONS 6.01 Eligibility. Employees and Subsidiary Directors are eligible to receive Plan Share Awards provided in Section 6.02. Outside Directors are eligible to receive Plan Share Awards provided for in Section 6.03. 6.02 Allocations. The Committee may determine which of the Employees and Subsidiary Directors referenced in Section 6.01 above will be granted Plan Share Awards and the number of Plan Shares covered by each Award, including grants effective upon the First Shareholder Meeting Date, provided, however, that the number of Plan Shares covered by such Awards may not exceed the number of Plan Shares in the Plan Share Reserve immediately prior to the grant of such Awards, and provided further, that in no event shall any Awards be made which will violate the Articles of Incorporation, Articles of Association, Charter, Bylaws or Plan of Conversion of the Holding Company or the Affiliates or any applicable federal or state law or regulation and provided further that Awards may not be granted at any time in which the Affiliates fail to meet their applicable minimum capital requirements. In the event Plan Shares are forfeited for any reason and unless the Committee decides to return the Plan Shares to the Holding Company, the Committee may, from time to time, determine which of the Employees or Subsidiary Directors referenced in Section 6.01 above will be granted additional Plan Share Awards to be awarded from forfeited Plan Shares. In selecting those Employees or Subsidiary Directors to whom Plan Share Awards will be granted and the number of Plan Shares covered by such Awards, the Committee shall consider the position and responsibilities of the eligible Employees and Subsidiary Directors, the length and value of their services to the Affiliates, the compensation paid to such Employees and Subsidiary Directors, and any other factors the Committee may deem relevant. 6.03 Allocations - Outside Directors. The following Outside Directors shall be awarded a Plan Share Award on the First Shareholder Meeting Date, assuming he or she is still serving as an Outside Director on such date, equal to the number of whole shares rounded to the nearest whole number constituting the following percentage of the number of shares of Common Stock issued in the Conversion (the "Fixed Award"); provided, however, that the Affiliates shall have the discretion to reduce such percentages if the Trustee is required to purchase shares on the open market or from the Holding Company for an amount per share greater than the price per share at which shares are sold in the Conversion: Percentage of Shares Outside Director Issued in Conversion ---------------- -------------------- Fred W. Koehler .1923% Michael J. Hensley .1731% Cecil L. Dorten .1731% Earl W. Johann .1731% Jonnie L. Davis .11535% 6.04 Form of Allocation. As promptly as practicable after a determination is made pursuant to Section 6.02 or 6.03 that a Plan Share Award is to be made, the Committee shall notify the Recipient in writing of the grant of the Award, the number of Plan Shares covered by the Award, and the terms upon which the Plan Shares subject to the Award may be earned. The stock certificates for Plan Share Awards shall be registered in the name of the Recipient until forfeited or transferred by the Recipient after such Award has been earned. The Committee shall maintain records as to all grants of Plan Share Awards under the Plan. 6.05 Allocations Not Required. Notwithstanding anything to the contrary in Sections 6.01 and 6.02, no Employee or Subsidiary Director shall have any right or entitlement to receive a Plan Share Award hereunder, such Awards being at the total discretion of the Committee, nor shall the Employees or Subsidiary Directors as a group have such a right. No Outside Director shall have any right or entitlement to reserve a Plan Share Award hereunder, except as provided for in Section 6.03 hereof. The Committee may, with the approval of the Board (or, if so directed by the Board, shall) return all Common Stock in the Plan Share Reserve not yet allocated to the Holding Company at any time, and cease issuing Plan Share Awards. 6.06. Distribution Election Before Plan Shares Are Earned. Notwithstanding anything contained in the Plan to the contrary, an Employee or a Director who has received an allocation of Plan Shares in accordance with Article VI may request in writing that the Committee authorize the distribution to him or her of all or a portion of the Plan Shares awarded before the date on which the Plan Shares become earned in accordance with Article VII. The decision as to whether to distribute to any Employee or Director who requests distribution shall be made by the Committee, in its sole discretion. In addition, the distribution shall be subject to the following parameters: (a) The Committee shall be required to make a separate determination for each request received by an Employee or Director for distribution. (b) Any Plan Shares awarded shall be required to have a legend on the Plan Shares confirming that the Plan Shares are subject to restriction and transfer in accordance with the terms set forth in the Plan. This legend may not be removed until the date that the Plan Shares become earned in accordance with Article VII. (c) The Plan Shares distributed shall be voted by the Trustee in accordance with Section 7.04 until the date that the Plan Shares are earned. (d) Any cash dividends or other cash distributions paid with respect to the Plan Shares before the date that the Plan Shares are earned shall be paid to the Trustee to be held for the Employee or Director, whichever is applicable, until the date that the Plan Shares are earned. (e) At the date on which the Plan Shares are earned, the Trustee may withhold from any cash dividends or other cash distributions held on behalf of such Employee or Director the amount needed to cover any applicable withholding and employment taxes arising at the time that the Plan Shares are earned. If the amount of such cash dividends or distributions is insufficient, the Trustee may require the Employee or Director to pay to the Trustee the amount required to be withheld as a condition of removing the legend on the Plan Shares. ARTICLE VII EARNING AND DISTRIBUTION OF PLAN SHARES; VOTING RIGHTS 7.01 Earning Plan Shares; Forfeitures. (a) General Rules. Plan Shares subject to an Award shall be earned by a Recipient at the rate of twenty percent (20%) of the aggregate number of Shares covered by the Award at the end of each full twelve months of consecutive service with the Holding Company or the Affiliate after the date of grant of the Award. If the term of service of a Recipient terminates as an Employee, as a Director, and as a Director Emeritus prior to the fifth anniversary (or such later date as the Committee shall determine) of the date of grant of an Award for any reason (except as specifically provided in Subsection (b) below or in Section 4.01 hereof), the Recipient shall forfeit the right to earn any Shares subject to the Award which have not theretofore been earned. In determining the number of Plan Shares which are earned, fractional shares shall be rounded down to the nearest whole number, provided that such fractional shares shall be aggregated and earned, on the fifth anniversary of the date of grant. (b) Exception for Terminations due to Death and Disability. Notwithstanding the general rule contained in Section 7.01(a) above, all Plan Shares subject to a Plan Share Award held by a Recipient whose term of service as an Employee and as a Director or Director Emeritus with the Holding Company and the Affiliates terminates due to death or Disability shall be deemed earned as of the Recipient's last day of service with the Holding Company and the Affiliates as a result of such death or Disability. If the recipient's service as an Employee and as a Director or Director Emeritus terminates due to Disability within one year of the effective date of the Conversion, the Shares earned by the Receipent may not be disposed of by the Recipient during the one-year period following the Conversion, and stock certificate legends to that effect may be placed on the stock certificates for any such shares. (c) Revocation for Misconduct. Notwithstanding anything hereinafter to the contrary, the Board may by resolution immediately revoke, rescind and terminate any Plan Share Award, or portion thereof, previously awarded under this Plan, to the extent Plan Shares have not been delivered thereunder to the Recipient, whether or not yet earned, in the case of an Employee who is discharged from the employ of the Holding Company or an Affiliate for cause (as hereinafter defined), or who is discovered after termination of employment to have engaged in conduct that would have justified termination for cause or, in the case of an Outside Director, Director Emeritus, or Subsidiary Director, who is removed from the Board of Directors of the Holding Company or an Affiliate for cause (as hereinafter defined), or who is discovered after termination of service as an Outside Director, Director Emeritus, or Subsidiary Director to have engaged in conduct which would have justified removal for cause. "Cause" is defined as personal dishonesty, willful misconduct, any breach of fiduciary duty involving personal profit, intentional failure to perform stated duties, or the willful violation of any law, rule, regulation (other than traffic violations or similar offenses) or order which results in a loss to the Holding Company or any Affiliate or in a final cease and desist order. 7.02 Accrual of Dividends. Whenever Plan Shares are paid to a Recipient or Beneficiary under Section 7.03, such Recipient or Beneficiary shall also be entitled to receive, with respect to each Plan Share paid, an amount equal to any cash dividends or cash distributions and a number of shares of Common Stock equal to any stock dividends, and any other asset distributions declared and paid with respect to a share of Common Stock between the date the Plan Shares are being distributed and the date the Plan Shares were granted. There shall also be distributed an appropriate amount of net earnings, if any, of the Trust with respect to any cash dividends or cash distributions so paid out. Until the Plan Shares are vested and distributed to any such Recipient or Beneficiary, such dividends, distributions and net earnings thereon, if any, shall be retained by the Trust. 7.03 Distribution of Plan Shares. (a) Timing of Distributions: General Rule. Except as provided in Subsection (b) below, Plan Shares shall be distributed to the Recipient or his Beneficiary, as the case may be, as soon as practicable after they have been earned. (b) Timing: Exception for 10% Stockholders. Notwithstanding Subsection (a) above, no Plan Shares may be distributed prior to the date which is five (5) years from the effective date of the Conversion to the extent the Recipient or Beneficiary, as the case may be, would after receipt of such shares own in excess of ten (10) percent of the issued and outstanding shares of Common Stock. Any Plan Shares remaining unpaid solely by reason of the operation of this Subsection (b) shall be paid to the Recipient or his Beneficiary on the date which is five (5) years from the effective date of the Conversion. (c) Form of Distribution. All Plan Shares, together with any shares representing stock dividends, shall be distributed in the form of Common Stock. One share of Common Stock shall be given for each Plan Share earned and payable. Payments representing accumulated cash dividends and cash or other distributions (and earnings thereon) shall be made in cash or in the form of such non-cash distributions. (d) Withholding. The Trustee may withhold from any payment or distribution made under this Plan sufficient amounts of cash or shares of Common Stock to cover any applicable withholding and employment taxes, and if the amount of such payment is insufficient, the Trustee may require the Recipient or Beneficiary to pay to the Trustee the amount required to be withheld as a condition of delivering the Plan Shares. Alternatively, a Recipient may pay to the Trustee that amount of cash necessary to be withheld in taxes in lieu of any withholding of payments or distribution under the Plan. The Trustee shall pay over to the Holding Company, or the Affiliate which employs or employed such Recipient any such amount withheld from or paid by the Recipient or Beneficiary. (e) Cessation of Payment. The Trustee shall cease payment of benefits to Recipients or, if applicable, their Beneficiaries in the event of the Bank's or Thrift's insolvency. The Bank or Thrift shall be considered insolvent for purposes of this RRP if the Bank or Thrift is unable to pay its debts as they become due or if a receiver is appointed for the Bank or Thrift under applicable law. If payments cease by reason of this subsection, payments will be resumed, with appropriate make-up payments, once the Bank or Thrift ceases to be insolvent but only to the extent the payments were not made directly by the Bank, the Thrift or their Affiliates. 7.04 Voting of Plan Shares. All shares of Common Stock held by the Trust shall be voted by the Trustee, taking into account the best interests of the Plan Share Award recipients. ARTICLE VIII TRUST 8.01 Trust. The Trustee shall receive, hold, administer, invest and make distributions and disbursements from the Trust in accordance with the provisions of the Plan and Trust and the applicable directions, rules, regulations, procedures and policies established by the Committee pursuant to the Plan. 8.02 Management of Trust. It is the intent of this Plan and Trust that, subject to the provisions of this Plan, the Trustee shall have complete authority and discretion with respect to the management, control and investment of the Trust, and that the Trustee shall invest all assets of the Trust, except those attributable to cash dividends paid with respect to Plan Shares, in Common Stock to the fullest extent practicable, and except to the extent that the Trustee determines that the holding of monies in cash or cash equivalents is necessary to meet the obligation of the Trust. Neither the Holding Company nor any Affiliate shall exercise any direct or indirect control or influence over the time when, or the prices at which, the Trustee may purchase such shares, the number of shares to be purchased, the manner in which the shares are to be purchased, or the broker (if any) through whom the purchases may be executed. In performing its duties, the Trustee shall have the power to do all things and execute such instruments as may be deemed necessary or proper, including the following powers: (a) To invest up to one hundred percent (100%) of all Trust assets in Common Stock without regard to any law now or hereafter in force limiting investments for Trustees or other fiduciaries. The investment authorized herein and in paragraph (b) constitutes the only investment of the Trust, and in making such investment, the Trustee is authorized to purchase Common Stock from the Holding Company or an Affiliate or from any other source, and such Common Stock so purchased may be outstanding, newly issued, or treasury shares. (b) To invest any Trust assets not otherwise invested in accordance with (a) above in such deposit accounts, and certificates of deposit (including those issued by an Affiliate), securities of any open-end or closed-end management investment company or investment trust registered under the Investment Company Act of 1940, whether or not the Trustee or any affiliate of the Trustee is being compensated for providing services to the investment company or trust as investment advisor or otherwise, obligations of the United States government or its agencies or such other investments as shall be considered the equivalent of cash. (c) To sell, exchange or otherwise dispose of any property at any time held or acquired by the Trust. (d) To cause stocks, bonds or other securities to be registered in the name of a nominee, without the addition of words indicating that such security is an asset of the Trust (but accurate records shall be maintained showing that such security is an asset of the Trust). (e) To hold cash without interest in such amounts as may be in the opinion of the Trustee reasonable for the proper operation of the Plan and Trust and to hold cash pending investment. (f) To employ brokers, agents, custodians, consultants and accountants. (g) To hire counsel to render advice with respect to their rights, duties and obligations hereunder, and such other legal services or representation as they may deem desirable. (h) To hold funds and securities representing the amounts to be distributed to a Recipient or his or her Beneficiary as a consequence of a dispute as to the disposition thereof, whether in a segregated account or held in common with other assets of the Trust. Notwithstanding anything herein contained to the contrary, the Trustee shall not be required to make any inventory, appraisal or settlement or report to any court, or to secure any order of court for the exercise of any power herein contained, or give bond. 8.03 Records and Accounts. The Trustee shall maintain accurate and detailed records and accounts of all transactions of the Trust, which shall be available at all reasonable times for inspection by any legally entitled person or entity to the extent required by applicable law, or any other person determined by the Committee. 8.04 Earnings. All earnings, gains and losses with respect to Trust assets shall be allocated, in accordance with a reasonable procedure adopted by the Committee, to bookkeeping accounts for Recipients or to the general account of the Trust, depending on the nature and allocation of the assets generating such earnings, gains and losses. In particular, any earnings on cash dividends or distributions received with respect to shares of Common Stock shall be allocated to accounts for Recipients, if such shares are the subject of outstanding Plan Share Awards, or otherwise to the Plan Share Reserve. Recipients (or their Beneficiaries) shall not be entitled to any such allocations until the Plan Share Awards to which they relate are vested and distributed to those Recipients (or their Beneficiaries). 8.05 Expenses. All costs and expenses incurred in the operation and administration of this Plan, including those incurred by the Trustee, shall be borne by the Affiliates or the Holding Company. 8.06 Indemnification. The Holding Company shall indemnify, defend and hold the Trustee harmless against all claims, expenses and liabilities arising out of or related to the exercise of the Trustee's powers and the discharge of its duties hereunder, unless the same shall be due to its negligence or willful misconduct. ARTICLE IX MISCELLANEOUS 9.01 Adjustments for Capital Changes. The aggregate number of Plan Shares available for issuance pursuant to the Plan Share Awards (which, as of the effective date of this Plan, shall not exceed, 4% of the shares of the Holding Company's Common Stock issued in the Conversion), and the number of shares to which any Plan Share Award relates shall be proportionately adjusted for any increase or decrease in the total number of outstanding shares of Common Stock issued subsequent to the effective date of the Plan resulting from any stock dividend or split, recapitalization, merger, consolidation, spin-off, reorganization, combination or exchange of shares, or other similar capital adjustment, or other increase or decrease in such shares effected without receipt or payment of consideration, by the Committee. 9.02 Amendment and Termination of Plan. The Board may, by resolution, at any time amend or terminate the Plan. The power to amend or terminate shall include the power to direct the Trustee to return to the Holding Company all or any part of the assets of the Trust, including shares of Common Stock held in the Plan Share Reserve, as well as shares of Common Stock and other assets subject to Plan Share Awards but not yet earned by the Employees or Outside Directors or Subsidiary Directors to whom they are allocated. However, the termination of the Trust shall not affect a Recipient's right to the distribution of Common Stock relating to Plan Share Awards already earned, including earnings thereon, in accordance with the terms of this Plan and the grant by the Committee. 9.03 Nontransferable. Plan Share Awards and rights to Plan Shares shall not be transferable by a Recipient other than by will or the laws of descent and distribution or pursuant to a qualified domestic relations order as defined by the Internal Revenue Code of 1986, as amended, or Title I of the Employee Retirement Income Security Act, or the rules thereunder, and during the lifetime of the Recipient, Plan Shares may only be earned by and paid to the Recipient who was notified in writing of the Award by the Committee pursuant to Section 6.04. The assets of the RRP, prior to the distribution of Plan Shares to a Recipient or his or her Beneficiary, shall be subject to the claims of creditors of the Bank and/or the Thrift. Unless Plan Shares are distributed in accordance with Section 6.06 or 7.03 to a Recipient or his or her Beneficiary, such Recipient or, if applicable, Beneficiary shall not have any right in or claim to any specific assets of the RRP or Trust and shall only be an unsecured creditor of the Bank and/or the Thrift, nor shall any Affiliate be subject to any claim for benefits hereunder. 9.04 Employment Rights. Neither the Plan nor any grant of a Plan Share Award or Plan Shares hereunder nor any action taken by the Trustee, the Committee or the Board in connection with the Plan shall create any right on the part of any Employee to continue in the employ of, or of any Director to continue in the service of, the Holding Company or any Affiliate thereof. 9.05 Voting and Dividend Rights. No Recipient shall have any voting or dividend rights or other rights of a stockholder in respect of any Plan Shares covered by a Plan Share Award, except as expressly provided in Sections 7.02 and 7.04 above, prior to the time said Plan Shares are actually distributed to him. 9.06 Governing Laws. The Plan and Trust shall be governed by the laws of the State of Indiana, except to the extent governed by federal law, including regulations of the Office of Thrift Supervision. In particular, grants of Plan Share Awards under the Plan shall comply with the requirements of 12 C.F.R. ss.563b.3(g)(4)(vi) as long as those requirements are in effect. That regulation currently requires that no individual shall receive more than 25% of the Plan Share Awards available for grant under the Plan and Outside Directors shall not receive Plan Share Awards for more than 5% individually, or 30% in the aggregate, of the Plan Share Awards available for grant under the Plan. 9.07 Effective Date. This Plan shall be effective as of the date of its approval by the shareholders of the Holding Company. 9.08 Term of Plan. This Plan shall remain in effect until the earlier of (1) 21 years from its effective date, (2) termination by the Board, or (3) the distribution of all assets of the Trust. Termination of the Plan shall not affect any Plan Share Awards previously granted, and such Awards shall remain valid and in effect until they have been earned and paid, or by their terms expire or are forfeited. 9.09 Tax Status of Trust. It is intended that the trust established hereby be treated as a grantor trust of the Holding Company and the Affiliates under the provisions of Section 671, et seq., of the Internal Revenue Code of 1986, as amended. 9.10. Compensation. The Trustee shall be entitled to receive fair and reasonable compensation for its services hereunder, as agreed to by the Trustee and the Holding Company, and shall also be entitled to be reimbursed for all reasonable out-of-pocket expenses, including, but not by way of limitation, legal, actuarial and accounting expenses and all costs and expenses incurred in prosecuting or defending any action concerning the Plan or the Trust or the rights or responsibilities of any person hereunder, brought by or against the Trustee. Such reasonable compensation and expenses shall be paid by the Holding Company or the Affiliates. 9.11. Resignation of Trustee. The Trustee may resign at any time by giving sixty (60) calendar days' prior written notice to the Holding Company, and the Trustee may be removed, with or without cause, by the Holding Company on sixty (60) calendar days' prior written notice to the Trustee. Such prior written notice may be waived by the party entitled to receive it. Upon any such resignation or removal becoming effective, the Trustee shall render to the Holding Company a written account of its administration of the Plan and the Trust for the period since the last written accounting and shall do all necessary acts to transfer the assets of the Trust to the successor Trustee or Trustees. EX-10.9 5 ex109_0322.txt STOCK OPTION PLAN EXHIBIT 10(9) RIVER VALLEY BANCORP STOCK OPTION PLAN 1. Purpose. The purpose of the River Valley Bancorp Stock Option Plan (the "Plan") is to provide to directors, officers and other key employees of River Valley Bancorp (the "Holding Company") and its majority-owned and wholly-owned subsidiaries (individually a "Subsidiary" and collectively the "Subsidiaries"), including, but not limited to, Madison First Federal Savings and Loan Association ("Madison First Federal") and Citizens National Bank of Madison ("Citizens"), who are materially responsible for the management or operation of the business of the Holding Company or a Subsidiary and have provided valuable services to the Holding Company or a Subsidiary, a favorable opportunity to acquire Common Stock, without par value ("Common Stock"), of the Holding Company, thereby providing them with an increased incentive to work for the success of the Holding Company and its Subsidiaries and better enabling each such entity to attract and retain capable directors and executive personnel. 2. Administration of the Plan. The Plan shall be administered, construed and interpreted by a committee (the "Committee") consisting of at least two members of the Board of Directors of the Holding Company, each of whom is a "Non-Employee Director" within the meaning of the definition of that term contained in Reg. ss. 16b-3 promulgated under the Securities Exchange Act of 1934, as amended (the "1934 Act"). The members of the Committee shall be designated from time to time by the Board of Directors of the Holding Company. The decision of a majority of the members of the Committee shall constitute the decision of the Committee, and the Committee may act either at a meeting at which a majority of the members of the Committee is present or by a written consent signed by all members of the Committee. The Committee shall have the sole, final and conclusive authority to determine, consistent with and subject to the provisions of the Plan: (a) the individuals (the "Optionees") to whom options or successive options shall be granted under the Plan; (b) the time when options shall be granted hereunder; (c) the number of shares of Common Stock to be covered under each option; (d) the option price to be paid upon the exercise of each option; (e) the period within which each such option may be exercised; (f) the extent to which an option is an incentive stock option or a non-qualified stock option; and (g) the terms and conditions of the respective agreements by which options granted shall be evidenced. The Committee shall also have authority to prescribe, amend, waive, and rescind rules and regulations relating to the Plan, to accelerate the vesting of any stock options granted hereunder (subject to Office of Thrift Supervision regulations), to make amendments or modifications in the terms and conditions (including exercisability) of the options relating to the effect of termination of employment of the optionee (subject to the last sentence of Section 9 hereof), to waive any restrictions or conditions applicable to any option or the exercise thereof, and to make all other determinations necessary or advisable in the administration of the Plan. 3. Eligibility. The Committee may, consistent with the purposes of the Plan, grant options to officers and other key employees of the Holding Company or of a Subsidiary and to directors of a Subsidiary (other than non-employee directors of the Holding Company) who in the opinion of the Committee are from time to time materially responsible for the management or operation of the business of the Holding Company or of a Subsidiary and have provided valuable services to the Holding Company or a Subsidiary; provided, however, that in no event may any employee who owns (after application of the ownership rules in ss. 425(d) of the Internal Revenue Code of 1986, as amended (the "Code")) shares of stock possessing more than 10 percent of the total combined voting power of all classes of stock of the Holding Company or any of its Subsidiaries be granted an incentive stock option hereunder unless at the time such option is granted the option price is at least 110% of the fair market value of the stock subject to the option and such option by its terms is not exercisable after the expiration of five (5) years from the date such option is granted. Directors of the Holding Company who are not employees of the Holding Company ("Outside Directors") who were serving as such on the date Madison First Federal converted (the "Conversion") from mutual to stock form (the "Conversion Date") or were added to the Board of Directors following such Conversion shall each be granted on the date of the Holding Company's first Shareholder Meeting following the Conversion which shall be held no earlier than six (6) months following the Conversion (the "First Shareholder Meeting Date"), assuming he or she is serving as an Outside Director on such date, a non-qualified option to purchase the number of whole shares of Common Stock of the Holding Company determined by multiplying the total number of shares issued by the Holding Company on the Conversion Date by the following percentages, and rounding to the nearest whole share: Percentage of Shares Outside Director Issued In Conversion Fred W. Koehler .50% Michael J. Hensley .45% Cecil L. Dorten .45% Earl W. Johann .45% Jonnie L. Davis .30% Such options shall have an exercise price per share equal to the fair market value of a share of such Common Stock, as determined by the Committee, consistent with Treas. Req. ss. 20.2031-2, on the First Shareholder Meeting Date. Outside Directors are not entitled to receive any other awards under this Plan. Subject to the foregoing and the provisions of Section 7 hereof, an individual who has been granted an option under the Plan (an "Optionee"), if he is otherwise eligible, may be granted an additional option or options if the Committee shall so determine. 4. Stock Subject to the Plan. There shall be reserved for issuance upon the exercise of options granted under the Plan, shares of Common Stock of the Holding Company equal to 10% of the total number of shares of Common Stock issued by the Holding Company upon the conversion of Madison First Federal from mutual to stock form, which may be authorized but unissued shares or treasury shares of the Holding Company. Subject to Section 7 hereof, the shares for which options may be granted under the Plan shall not exceed that number. If any option shall expire or terminate or be surrendered for any reason without having been exercised in full, the unpurchased shares subject thereto shall (unless the Plan shall have terminated) become available for other options under the Plan. 5. Terms of Options. Each option granted under the Plan shall be subject to the following terms and conditions and to such other terms and conditions not inconsistent therewith as the Committee may deem appropriate in each case: (a) Option Price. The price to be paid for shares of stock upon the exercise of each option shall be determined by the Committee at the time such option is granted, but such price in no event shall be less than the fair market value, as determined by the Committee consistent with Treas. Reg. ss. 20.2031-2 and any requirements of ss. 422A of the Code, of such stock on the date on which such option is granted. (b) Period for Exercise of Option. An option shall not be exercisable after the expiration of such period as shall be fixed by the Committee at the time of the grant thereof, but such period in no event shall exceed ten (10) years and one day from the date on which such option is granted; provided, that incentive stock options granted hereunder shall have terms not in excess of ten (10) years and options issued to Outside Directors shall be for a period of ten (10) years and one day from the date of grant thereof. Options shall be subject to earlier termination as hereinafter provided. (c) Exercise of Options. The option price of each share of stock purchased upon exercise of an option shall be paid in full at the time of such exercise. Payment may be in (i) cash, (ii) if the Optionee may do so in conformity with Regulation T (12 C.F.R. ss. 220.3(e)(4)) without violating ss. 16(b) or ss. 16(c)of the 1934 Act, pursuant to a broker's cashless exercise procedure, by delivering a properly executed exercise notice together with irrevocable instructions to a broker to promptly deliver to the Holding Company the total option price in cash and, if desired, the amount of any taxes to be withheld from the Optionee's compensation as a result of any withholding tax obligation of the Holding Company or any of its Subsidiaries, as specified in such notice, or (iii) beginning on a date which is three years following Madison First Federal's conversion from mutual to stock form and with the approval of the Committee, by tendering whole shares of the Holding Company's Common Stock owned by the Optionee and cash having a fair market value equal to the cash exercise price of the shares with respect to which the option is being exercised. For this purpose, any shares so tendered by an Optionee shall be deemed to have a fair market value equal to the mean between the highest and lowest quoted selling prices for the shares on the date of exercise of the option (or if there were no sales on such date the weighted average of the means between the highest and lowest quoted selling prices for the shares on the nearest date before and the nearest date after the date of exercise of the option as prescribed by Treas. Reg. ss. 20.2031-2), as reported in The Wall Street Journal or a similar publication selected by the Committee. The Committee shall have the authority to grant options exercisable in full at any time during their term, or exercisable in such installments at such times during their term as the Committee may determine; provided, however, that options shall not be exercisable during the first six (6) months of their term, and provided further that, subject to the foregoing restriction, options shall become exercisable at the rate of 20% per year beginning on the anniversary of the date of grant of such options. Installments not purchased in earlier periods shall be cumulated and be available for purchase in later periods. Subject to the other provisions of this Plan, an option may be exercised at any time or from time to time during the term of the option as to any or all whole shares which have become subject to purchase pursuant to the terms of the option or the Plan, but not at any time as to fewer than one hundred (100) shares unless the remaining shares which have become subject to purchase are fewer than one hundred (100) shares. An option may be exercised only by written notice to the Holding Company, mailed to the attention of its Secretary, signed by the Optionee (or such other person or persons as shall demonstrate to the Holding Company his or their right to exercise the option), specifying the number of shares in respect of which it is being exercised, and accompanied by payment in full in either cash or by check in the amount of the aggregate purchase price therefor, by delivery of the irrevocable broker instructions referred to above, or, if the Committee has approved the use of the stock swap feature provided for above, followed as soon as practicable by the delivery of the option price for such shares. (d) Certificates. The certificate or certificates for the shares issuable upon an exercise of an option shall be issued as promptly as practicable after such exercise. An Optionee shall not have any rights of a shareholder in respect to the shares of stock subject to an option until the date of issuance of a stock certificate to him for such shares. In no case may a fraction of a share be purchased or issued under the Plan, but if, upon the exercise of an option, a fractional share would otherwise be issuable, the Holding Company shall pay cash in lieu thereof. (e) Termination of Option. If an Optionee (other than an Outside Director or a non-employee director of a Subsidiary ("Subsidiary Director")) ceases to be an employee of the Holding Company and the Subsidiaries for any reason other than retirement, permanent and total disability (within the meaning of ss. 22(e)(3) of the Code), or death, any option granted to him shall forthwith terminate. Leave of absence approved by the Committee shall not constitute cessation of employment. If an Optionee (other than an Outside Director or a Subsidiary Director) ceases to be an employee of the Holding Company and the Subsidiaries by reason of retirement, any option granted to him may be exercised by him in whole or in part within three (3) years after the date of his retirement, to the extent the option was otherwise exercisable at the date of his retirement; provided, however, that if such employee remains a director or director emeritus of the Holding Company, the option granted to him may be exercised by him in whole or in part until the later of (a) three (3) years after the date of his retirement, or (b) six (6) months after his service as a director or director emeritus of the Holding Company terminates. (The term "retirement" as used herein means such termination of employment as shall entitle such individual to early or normal retirement benefits under any then existing pension plan of the Holding Company or a Subsidiary.) If an Optionee (other than an Outside Director or Subsidiary Director) ceases to be an employee of the Holding Company and the Subsidiaries by reason of permanent and total disability (within the meaning of ss. 22(e)(3) of the Code), any option granted to him may be exercised by him in whole or in part within one (1) year after the date of his termination of employment by reason of such disability whether or not the option was otherwise exercisable at the date of such termination. Options granted to Outside Directors or to Subsidiary Directors shall cease to be exercisable six (6) months after the date such Outside Director or Subsidiary Director is no longer a director or director emeritus of the Holding Company and the Subsidiaries for any reason other than death or disability. If an Optionee who is an Outside Director or Subsidiary Director ceases to be a director or director emeritus of the Holding Company and the Subsidiaries by reason of disability, any option granted to him may be exercised in whole or in part within one (1) year after the date the Optionee ceases to be a director or director emeritus by reason of such disability, whether or not the option was otherwise exercisable at such date. In the event of the death of an Optionee while in the employ or service as a director or director emeritus of the Holding Company or a Subsidiary, or, if the Optionee is not an Outside Director or Subsidiary Director, within three (3) years after the date of his retirement (or, if later, six months following his termination of service as a director or director emeritus of the Holding Company) or within one (1) year after the termination of his employment by reason of permanent and total disability (within the meaning of ss. 22(e)(3) of the Code), or, if the Optionee is an Outside Director or Subsidiary Director, within six (6) months after he is no longer a director or director emeritus of the Holding Company or the Subsidiaries for reasons other than disability or, within one (1) year after the termination of his service as such a director by reason of disability, any option granted to him may be exercised in whole or in part at any time within one (1) year after the date of such death by the executor or administrator of his estate or by the person or persons entitled to the option by will or by applicable laws of descent and distribution until the expiration of the option term as fixed by the Committee, whether or not the option was otherwise exercisable at the date of his death. Notwithstanding the foregoing provisions of this subsection (e), no option shall in any event be exercisable after the expiration of the period fixed by the Committee in accordance with subsection (b) above. (f) Nontransferability of Option. No option may be transferred by the Optionee otherwise than by will or the laws of descent and distribution or pursuant to a qualified domestic relations order as defined by the Code or Title I of the Employee Retirement Income Security Act, or the rules thereunder, and during the lifetime of the Optionee options shall be exercisable only by the Optionee or his guardian or legal representative. (g) No Right to Continued Service. Nothing in this Plan or in any agreement entered into pursuant hereto shall confer on any person any right to continue in the employ or service of the Holding Company or its Subsidiaries or affect any rights the Holding Company, a Subsidiary, or the shareholders of the Holding Company may have to terminate his service at any time. (h) Maximum Incentive Stock Options. The aggregate fair market value of stock with respect to which incentive stock options (within the meaning of ss. 422A of the Code) are exercisable for the first time by an Optionee during any calendar year under the Plan or any other plan of the Holding Company or its Subsidiaries shall not exceed $100,000. For this purpose, the fair market value of such shares shall be determined as of the date the option is granted and shall be computed in such manner as shall be determined by the Committee, consistent with the requirements of ss. 422A of the Code. (i) Agreement. Each option shall be evidenced by an agreement between the Optionee and the Holding Company which shall provide, among other things, that, with respect to incentive stock options, the Optionee will advise the Holding Company immediately upon any sale or transfer of the shares of Common Stock received upon exercise of the option to the extent such sale or transfer takes place prior to the later of (a) two (2) years from the date of grant or (b) one (1) year from the date of exercise. (j) Investment Representations. Unless the shares subject to an option are registered under applicable federal and state securities laws, each Optionee by accepting an option shall be deemed to agree for himself and his legal representatives that any option granted to him and any and all shares of Common Stock purchased upon the exercise of the option shall be acquired for investment and not with a view to, or for the sale in connection with, any distribution thereof, and each notice of the exercise of any portion of an option shall be accompanied by a representation in writing, signed by the Optionee or his legal representatives, as the case may be, that the shares of Common Stock are being acquired in good faith for investment and not with a view to, or for sale in connection with, any distribution thereof (except in case of the Optionee's legal representatives for distribution, but not for sale, to his legal heirs, legatees and other testamentary beneficiaries). Any shares issued pursuant to an exercise of an option may bear a legend evidencing such representations and restrictions. 6. Incentive Stock Options and Non-Qualified Stock Options. Options granted under the Plan may be incentive stock options under ss. 422A of the Code or non-qualified stock options, provided, however, that Outside Directors shall be granted only non-qualified stock options. All options granted hereunder will be clearly identified as either incentive stock options or non-qualified stock options. In no event will the exercise of an incentive stock option affect the right to exercise any non-qualified stock option, nor shall the exercise of any non-qualified stock option affect the right to exercise any incentive stock option. Nothing in this Plan shall be construed to prohibit the grant of incentive stock options and non-qualified stock options to the same person, provided, further, that incentive stock options and non-qualified stock options shall not be granted in a manner whereby the exercise of one non-qualified stock option or incentive stock option affects the exercisability of the other. 7. Adjustment of Shares. In the event of any change after the effective date of the Plan in the outstanding stock of the Holding Company by reason of any reorganization, recapitalization, stock split, stock dividend, combination of shares, exchange of shares, merger or consolidation, liquidation, or any other change after the effective date of the Plan in the nature of the shares of stock of the Holding Company, the Committee shall determine what changes, if any, are appropriate in the number and kind of shares reserved under the Plan, and the Committee shall determine what changes, if any, are appropriate in the option price under and the number and kind of shares covered by outstanding options granted under the Plan. Any determination of the Committee hereunder shall be conclusive. 8. Tax Withholding. Whenever the Holding Company proposes or is required to issue or transfer shares of Common Stock under the Plan, the Holding Company shall have the right to require the Optionee or his or her legal representative to remit to the Holding Company an amount sufficient to satisfy any federal, state and/or local withholding tax requirements prior to the delivery of any certificate or certificates for such shares, and whenever under the Plan payments are to be made in cash, such payments shall be net of an amount sufficient to satisfy any federal, state and/or local withholding tax requirements. If permitted by the Committee and pursuant to procedures established by the Committee, an Optionee who is not an Outside Director may make a written election to have shares of Common Stock having an aggregate fair market value, as determined by the Committee, consistent with the requirements of Treas. Reg. ss. 20.2031-2, sufficient to satisfy the applicable withholding taxes, withheld from the shares otherwise to be received upon the exercise of a non-qualified option. 9. Amendment. Subject to ss. 13 hereof, the Board of Directors of the Holding Company may amend the Plan from time to time and, with the consent of the Optionee, the terms and provisions of his option, except that without the approval of the holders of at least a majority of the shares of the Holding Company voting in person or by proxy at a duly constituted meeting or adjournment thereof: (a) the number of shares of stock which may be reserved for issuance under the Plan may not be increased except as provided in Section 7 hereof; (b) the period during which an option may be exercised may not be extended beyond ten (10) years and one day from the date on which such option was granted; and (c) the class of persons to whom options may be granted under the Plan shall not be modified materially. No amendment of the Plan, however, may, without the consent of the Optionees, make any changes in any outstanding options theretofore granted under the Plan which would adversely affect the rights of such Optionees. 10. Termination. The Board of Directors of the Holding Company may terminate the Plan at any time and no option shall be granted thereafter. Such termination, however, shall not affect the validity of any option theretofore granted under the Plan. In any event, no incentive stock option may be granted under the Plan after the date which is ten (10) years from the effective date of the Plan. 11. Successors. This Plan shall be binding upon the successors and assigns of the Holding Company. 12. Governing Law. The terms of any options granted hereunder and the rights and obligations hereunder of the Holding Company, the Optionees and their successors in interest shall, except to the extent governed by federal law, be governed by Indiana law. 13. Government and Other Regulations. The obligations of the Holding Company to issue or transfer and deliver shares under options granted under the Plan shall be subject to compliance with all applicable laws, governmental rules and regulations (including Office of Thrift Supervision regulations), and administrative action. In particular, grants of stock options under the Plan shall comply with the requirements of 12 C.F.R. ss.563b.3(g)(4)(vi) as long as those requirements are in effect. That regulation currently requires that no individual shall receive stock options for more than 25% of the shares reserved for issuance under the Plan and Outside Directors shall not receive stock options for more than 5% individually, or 30% in the aggregate, of the shares reserved for issuance under the Plan. 14. Effective Date. The Plan shall become effective on the date it is approved by the holders of at least a majority of the shares of the Holding Company entitled to vote at a duly constituted meeting or adjournment thereof. The options granted pursuant to the Plan may not be exercised until the Board of Directors of the Holding Company has been advised by counsel that such approval has been obtained and all other applicable legal requirements have been met. EX-10.12 6 ex1012_0322.txt EMPLOYEE INCENTIVE STOCK OPTION AGREEMENT Exhibit 10(12) --------------, ---- EMPLOYEE INCENTIVE STOCK OPTION AGREEMENT UNDER THE RIVER VALLEY BANCORP STOCK OPTION PLAN - ----------------------: You are hereby granted the option to purchase a total of ___ shares of the Common Stock, without par value ("Common Stock"), of River Valley Bancorp ("RVB") over the next ten years pursuant to RVB's Stock Option Plan (the "Plan"), on the following terms and conditions: 1. The purchase price of the shares of Common Stock subject to this option is $___ per share. You must pay this purchase price in cash at the time this option is exercised; provided, however that, with the approval of RVB's Stock Compensation Committee (the "Committee"), beginning on and after three years following the date hereof, you may exercise your option by tendering to RVB whole shares of RVB's Common Stock owned by you, or any combination of whole shares of RVB's Common Stock owned by you and cash, having a fair market value equal to the cash exercise price of the shares with respect to which the option is exercised by you. For this purpose, any shares so tendered shall be deemed to have a fair market value equal to the mean between the highest and lowest quoted selling prices for the shares on the date of exercise of the option (or if there were no sales on such date the weighted average of the means between the highest and lowest quoted selling prices on the nearest date before and the nearest date after the date of exercise of the option), as reported in The Wall Street Journal or a similar publication selected by the Committee. To exercise this option, you must send written notice to the RVB's Secretary at the address noted in Section 12 hereof. Such notice shall state the number of shares in respect of which the option is being exercised, shall identify the option exercised as an incentive stock option, and shall be signed by the person or persons so exercising the option. Such notice shall be accompanied by payment of the full cash option price for such shares or, if the Committee has authorized the use of the stock swap feature provided for above, such notice shall be followed as soon as practicable by the delivery of the option price for such shares. Certificates evidencing shares of Common Stock will not be delivered to you until payment has been made. Under certain circumstances, the Plan permits you to deliver a notice to your broker to deliver the cash to RVB upon the receipt of such cash from the sale of RVB Common Stock. Contact the Secretary of RVB for further information about this procedure if you are interested in it. 2. The term of this option (the "Option Term") shall be for a period of ten years from the date of this letter, subject to earlier termination as provided in paragraphs 3 and 4 hereof. Except as otherwise provided below, the option shall become exercisable with respect to the first 20% of the total number of shares covered hereby on the first anniversary of the date of this letter, and the option shall become exercisable with respect to the second, third, fourth and fifth 20% of such shares on the second, third, fourth and fifth anniversaries, respectively, of the date of this letter. When the option becomes exercisable with respect to any shares of Common Stock, those shares may be purchased at any time, or from time to time, in whole or in part, until the Option Term expires, but in no case may fewer than 100 such shares be purchased at any one time, except to purchase a residue of fewer than 100 shares. Notwithstanding the foregoing or any other provision herein, the option may not be exercised during the first six months of the Option Term. 3. If you cease to be an employee of RVB or any of its subsidiaries for any reason other than retirement, permanent and total disability, or death, this option shall forthwith terminate. If your employment by RVB or any of its subsidiaries is terminated by reason of retirement (which means such termination of employment as shall entitle you to early or normal retirement benefits under any then existing pension plan of RVB or one of its subsidiaries), you may exercise this option to the extent it was exercisable at the date of your retirement in whole or in part within three years after such retirement, but not later than the date upon which this option would otherwise expire; provided, however, that if you are a director or a director emeritus of RVB at the time of your retirement, you may exercise this option in whole or in part until the later of (a) three years after your date of retirement or (b) six months after you service as a director or director emeritus terminates, but not later than the date upon which this option would otherwise expire. If you cease to be an employee of RVB or any of its subsidiaries because of your permanent and total disability, you may exercise this option in whole or in part at any time within one year after such termination of employment by reason of such disability, but not later than the date upon which this option would otherwise expire. 4. If you die while employed by RVB or any of its subsidiaries, within three years after the termination of your employment because of retirement (of, if later, six months following your termination of service as a director or director emeritus of RVB), or within one year after the termination of your employment because of permanent and total disability, this option may be exercised in whole or in part by your executor, administrator, or estate beneficiaries at any time within one (1) year after the date of your death but not later than the date upon which this option would otherwise expire. 5. This option is non-transferable otherwise than by will or the laws of descent and distribution or pursuant to a qualified domestic relations order. It may be exercised only by you or your guardian, if any, or, if you die, by your executor, administrator, or beneficiaries of your estate who are entitled to your option. 6. All rights to exercise this option will expire, in any event, ten years from the date of this letter. 7. Certificates evidencing shares issued upon exercise of this option may bear a legend setting forth among other things such restrictions on the disposition or transfer of the shares of RVB as RVB may deem consistent with applicable federal and state laws. 8. Nothing in this option shall restrict the right of RVB or its subsidiaries to terminate your employment at any time with or without cause. 9. This option is subject to all the terms, provisions and conditions of the Plan, which is incorporated herein by reference, and to such regulations as may from time to time be adopted by the Committee. A copy of the Plan has been furnished to you and an additional copy may be obtained from RVB. In the event of any conflict between the provisions of the Plan and the provisions of this letter, the terms, conditions and provisions of the Plan shall control, and this letter shall be deemed to be modified accordingly. 10. This Stock Option Agreement is intended to grant an option which meets all of the requirements of incentive stock options as defined in Section 422A of the Internal Revenue Code. Subject to and upon the terms, conditions and provisions of the Plan, each and every provision of this Agreement shall be administered, construed and interpreted so that the option granted herein shall so qualify as an incentive stock option. Each provision of this Stock Option Agreement which would prevent this option from qualifying as an incentive stock option, if any, shall be void. 11. You agree to advise RVB immediately upon any sale or transfer of any shares of Common Stock received upon exercise of this option to the extent such sale or transfer takes place prior to the later of (a) two years from the date of grant or (b) one year from the date of exercise of this option. 12. All notices by you to RVB and your exercise of the option herein granted, shall be addressed to River Valley Bancorp, 430 Clifty Drive, Madison, Indiana 47250, Attention: Secretary, or such other address as RVB may, from time to time, specify. 13. This option may not be exercised until RVB has been advised by counsel that all other applicable legal requirements have been met. Very truly yours, RIVER VALLEY BANCORP By: ---------------------------------------- Matthew P. Forrester, President and Chief Executive Officer Accepted on the date above written - ------------------------------ EX-10.13 7 ex1013_0322.txt DIRECTOR NON-QUALIFIED STOCK OPTION AGREEMENT Exhibit 10(13) -----------, ---- DIRECTOR NON-QUALIFIED STOCK OPTION AGREEMENT - ---------------: You are hereby granted the option to purchase a total of ________ shares of the Common Stock, without par value ("Common Stock"), of River Valley Bancorp ("RVB") over the next ten years , on the following terms and conditions: 1. The purchase price of the shares of Common Stock subject to this option is $_____ per share. You must pay this purchase price in cash at the time this option is exercised; provided, however that , with the approval of RVB's Stock Compensation Committee (the "Committee"), you may exercise your option by tendering to RVB whole shares of RVB's Common Stock owned by you or any combination of whole shares of RVB's Common Stock owned by you and cash, having a fair market value equal to the cash exercise price of the shares with respect to which the option is exercised by you. For this purpose, any shares so tendered shall be deemed to have a fair market value equal to the mean between the highest and lowest quoted selling prices for the shares on the date of exercise of the option (or if there were no sales on such date the weighted average of the means between the highest and lowest quoted selling prices on the nearest date before and the nearest date after the date of exercise of the option), as reported in The Wall Street Journal or a similar publication selected by the Committee. To exercise this option, you must send written notice to the RVB's Secretary at the address noted in Section 9 hereof. Such notice shall state the number of shares in respect of which the option is being exercised, shall identify the option exercised as a non-qualified stock option, and shall be signed by the person or persons so exercising the option. Such notice shall be accompanied by payment of the full cash option price for such shares or, if the Committee has authorized the use of the stock swap feature provided for above, such notice shall be followed as soon as practicable by the delivery of the option price for such shares. Certificates evidencing shares of Common Stock will not be delivered to you until payment has been made. To the extent permitted by the Committee, you may deliver a notice to your broker to deliver the cash to RVB upon the receipt of such cash from the sale of RVB Common Stock. Contact the Secretary of RVB for further information about this procedure if you are interested in it. 2. The term of this option (the "Option Term") shall be for a period of ten years from the date of this letter, subject to earlier termination as provided in paragraphs 3 and 4 hereof. These shares may be purchased at any time, or from time to time, in whole or in part, until the Option Term expires, but in no case may fewer than 100 such shares be purchased at any one time, except to purchase a residue of fewer than 100 shares. Notwithstanding the foregoing or any other provision herein, the option may not be exercised during the first six months of the Option term. 3. If you cease to be a director of RVB for any reason other than death, you may exercise this option in whole or in part at any time within six months after the date you cease to be a director, but not later than the date upon which this option would otherwise expire. 4. If you die while serving as a director of RVB, or within six months after you cease to be a director, this option may be exercised in whole or in part by your executor, administrator, or estate beneficiaries at any time within one (1) year after the date of your death but not later than the date upon which this option would otherwise expire. 5. This option is non-transferable otherwise than by will or the laws of descent and distribution or pursuant to a qualified domestic relations order. It may be exercised only by you or your guardian, if any, or, if you die, by your executor, administrator, or beneficiaries of your estate who are entitled to your option. 6. All rights to exercise this option will expire, in any event, ten years from the date of this letter. 7. Certificates evidencing shares issued upon exercise of this option may bear a legend setting forth among other things such restrictions on the disposition or transfer of the shares of RVB as RVB may deem consistent with applicable federal and state laws. 8. Nothing in this option shall restrict the right of RVB or its subsidiaries to terminate your service at any time with or without cause. 9. All notices by you to RVB and your exercise of the option herein granted, shall be addressed to River Valley Bancorp, 430 Clifty Drive-P.O. Box 1590, Madison, Indiana 47250, Attention: Secretary or such other address as RVB may, from time to time, specify. 10. This option may not be exercised until RVB has been advised by counsel that all other applicable legal requirements have been met. Very truly yours, RIVER VALLEY BANCORP By: -------------------------------------- Matthew P. Forrester, President/CEO Accepted on the date above written - -------------------------- EX-10.14 8 ex1014_0322.txt AWARD NOTIFICATION Exhibit 10(14) --------------, ------ AWARD NOTIFICATION UNDER THE RIVER VALLEY BANCORP RECOGNITION AND RETENTION PLAN AND TRUST - -------------------: You are hereby awarded a total of ____ shares of the Common Stock, without par value ("Common Stock"), of River Valley Bancorp ("RVB") pursuant to the River Valley Bancorp Recognition and Retention Plan and Trust (the "Plan"), on the following terms and conditions: 1. The shares of Common Stock subject to award vest at the rate of twenty percent (20%) of the aggregate number of shares covered by the award at the end of each full twelve months of consecutive service with River Valley Financial Bank, or an affiliate thereof (collectively, the "Financial Institution") after the date of grant. If your service as an employee, director and/or director emeritus with the Financial Institution terminates prior to _______, ____, for any reason (except as discussed below), then you will forfeit the right to earn any shares of Common Stock subject to this award which have not previously been earned. In determining the number of shares of Common Stock which are earned, fractional shares will be rounded down to the nearest whole number, provided that such fractional shares will be aggregated and earned, on the fifth anniversary of the date of grant. 2. Notwithstanding the general rule contained in paragraph 1, above, all shares of Common Stock subject to this award held by you will be deemed earned as of your last day of service for the Financial Institution as a result of your death or disability. 3. Notwithstanding anything herein to the contrary, the Board of Directors of the Financial Institution may immediately revoke, rescind and terminate any award, or portion thereof, previously awarded under the Plan, to the extent shares of Common Stock have not been delivered to you, whether or not the shares have been earned, if you are discharged from the employ of the Financial Institution for cause, if you are removed from the Board for cause or it is discovered after your service terminates that you have engaged in conduct which would have justified discharge or removal for cause. 4. Whenever shares of Common Stock awarded under the Plan are paid to you, or to the beneficiary you designate, such person will be entitled to receive, with respect to each share of Common Stock paid, an amount equal to any cash dividends or cash distributions and a number of shares of Common Stock equal to any stock dividends, and any other asset distributions declared and paid with respect to a share of Common Stock between the date the shares are distributed and the date such shares were granted, along with any net earnings thereon. 5. Shares of Common Stock will be distributed to you, or to the beneficiary you designate, as the case may be, as soon as practicable after they have been earned; provided, however, no shares of Common Stock will be distributed prior to _________, ____, to the extent you or the beneficiary you designate would after the receipt of such shares own in excess of ten percent (10%) of the issued and outstanding shares of Common Stock. If any shares of Common Stock remain unpaid solely by reason of the foregoing limitation, then such shares will be paid to you, or to the beneficiary you designate, on _________, _____. 6. All shares of Common Stock, together with any shares representing stock dividends thereon, will be distributed in the form of Common Stock. One share of Common Stock will be paid for each share earned and payable. Payments representing accumulated cash dividends or cash distributions (and earnings thereon) will be made in cash. Other asset distributions payable on the shares of Common Stock awarded will be paid in the form of such distributions, to the extent feasible. The trustee of the Plan may withhold from any payment or distribution made under the Plan sufficient amounts of cash or shares of Common Stock to cover any applicable withholding and employment taxes, and if the amount of such payment is insufficient, the trustee may require you or the beneficiary you designate to pay to the trustee the amount required to be withheld as a condition of delivering the shares earned and payable under the Plan. Alternatively, you may pay to the trustee that amount of cash necessary to be withheld in taxes in lieu of any withholding of payments or distribution under the Plan. If you elect to have such taxes withheld, then the election must be made in compliance with Rule 16b-3, to the extent applicable. 7. This award is subject to all the terms, provisions and conditions of the Plan, which is incorporated herein by reference, and to such regulations as may from time to time be adopted by the Committee. A copy of the Plan has been furnished to you and an additional copy may be obtained from the Financial Institution. In the event of any conflict between the provisions of the Plan and the provisions of this letter, the terms, conditions and provisions of the Plan will control, and this letter will be deemed to be modified accordingly. Very truly yours, RIVER VALLEY BANCORP By: ----------------------------------------- Matthew P. Forrester, President and Chief Executive Officer I acknowledge Receipt of a copy of this Award Notification - ------------------------------------ Dated: ------------------------------ EX-13 9 rvb_ars.htm ANNUAL REPORT


Business of River Valley		1
Market Price of the Corporation's Common Shares and Related Shareholder Matters		2
Selected Consolidated Financial Information and Other Data		3
Management's Discussion and Analysis of Financial Condition and Results of Operations		5
Report of Independent Registered Public Accounting Firm		18
Consolidated Balance Sheets		19
Consolidated Statements of Income		20
Consolidated Statements of Comprehensive Income		21
Consolidated Statements of Stockholders' Equity		22
Consolidated Statements of Cash Flows		23
Notes To Consolidated Financial Statements		24
General Information for Shareholders		43
Directors and Officers		44

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. 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”), and River Valley Financial and Citizens merged on November 20, 1997.

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 four full-service office locations in Jefferson County 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 1,584,377 common shares of River Valley Bancorp outstanding at February 25, 2005, held of record by approximately 359 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 1996, the Corporation’s common shares have been listed on The Nasdaq SmallCap Market (“Nasdaq”), under the symbol “RIVR”. On December 26, 2003, the shares of River Valley underwent a 2-for-1 stock split in order to create a more liquid market for the stock.

Presented below are the high and low sale prices for the Corporation’s common shares, as well as cash distributions paid thereon since December 2001. Such sales prices do not include retail financial markups, markdowns or commissions. Information relating to sales prices has been obtained from Nasdaq.

Quarter Ended	High		Low		Cash Distributions
2004
December 31	$23	.50	$21	.10	$0	.190
September 30	24	.00	21	.04	0	.180
June 30	23	.50	20	.75	0	.180
March 31	30	.25	22	.00	0	.170

2003
December 31	$30	.25	$29	.43	$0	.170
September 30	20	.33	19	.88	0	.150
June 30	20	.75	20	.13	0	.150
March 31	16	.08	15	.62	0	.125

2002
December 31	$15	.88	$13	.18	$0	.125
September 30	14	.13	11	.87	0	.100
June 30	13	.85	11	.90	0	.100
March 31	13	.00	10	.10	0	.075

The high and low sales prices for River Valley’s common shares between December 31, 2004 and February 25, 2005 were $24.30 and $20.06, 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 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 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 Bank and 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.

	At December 31,
	2004	2003	2002	2001	2000
Selected consolidated financial condition data:	(In thousands)
Total amount of:
Assets	$289,427	$255,076	$224,020	$191,618	$162,130
Loans receivable - net (1)	231,373	192,266	165,957	157,972	140,970
Cash and cash equivalents (2)	12,437	12,512	18,610	5,641	6,382
Investment securities	26,964	34,557	28,174	17,653	8,300
Deposits	170,538	179,954	161,829	145,571	130,225
FHLB advances and other borrowings	94,600	50,000	40,000	26,500	13,450
Shareholders' equity - net	22,393	22,855	20,633	17,971	17,184

	Year Ended December 31,
	2004	2003	2002	2001	2000
Summary of consolidated earnings data:	(In thousands, except share data)
Total interest income	$13,545	$12,653	$12,755	$13,084	$11,118
Total interest expense	5,617	5,348	5,638	6,617	5,637
Net interest income	7,928	7,305	7,117	6,467	5,481
Provision for losses on loans	338	508	570	450	227
Net interest income after provision for
losses on loans	7,590	6,797	6,547	6,017	5,254
Other income	2,518	3,354	3,094	1,922	1,053
General, administrative and other expense	6,342	5,831	5,455	4,706	3,764
Earnings before income tax expense	3,766	4,320	4,186	3,233	2,543
Income tax expense	1,419	1,665	1,628	1,257	933
Net earnings	$ 2,347	$ 2,655	$ 2,558	$ 1,976	$ 1,610
Basic earnings per share	$ 1.48	$ 1.67	$ 1.64	$ 1.25	$ .94
Diluted earnings per share	$ 1.42	$ 1.59	$ 1.58	$ 1.22	$ .94

(1) Includes loans held for sale.
(2) Includes certificates of deposit in other financial institutions.

SELECTED CONSOLIDATED FINANCIAL INFORMATION AND
OTHER DATA (CONTINUED)

	Year ended December 31,
Selected financial ratios and other data:	2004		2003		2002		2001		2000
Interest rate spread during period	3	.13%	3	.21%	3	.39%	3	.58%	3	.47%
Net yield on interest-earning assets (1)	3	.19	3	.28	3	.56	3	.80	3	.79
Return on assets (2)		.88	1	.11	1	.22	1	.09	1	.05
Return on equity (3)	10	.46	12	.22	13	.21	11	.27	9	.45
Equity to assets (4)	7	.73	8	.96	9	.21	9	.38	10	.60
Average interest-earning assets to
average interest-bearing liabilities	102	.51	102	.86	106	.18	105	.94	108	.02
Non-performing assets to total assets (4)	0	.76	0	.18	0	.48	0	.36	0	.38
Allowance for loan losses to total
loans outstanding (4)	1	.01	1	.07	1	.27	1	.25	1	.21
Allowance for loan losses to
non-performing loans (4)	107	.41	399	.70	194	.54	285	.80	274	.07
Net charge-offs to average total
loans outstanding	0	.01	0	.31	0	.27	0	.12	0	.04
General, administrative and other expense
to average assets (5)	2	.38	2	.43	2	.60	2	.60	2	.47
Dividend payout ratio	50	.70	37	.74	25	.40	20	.49	18	.45
Number of full service offices (4)	6		5		4		4		5

(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.

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, 2004 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:

Management’s determination as to the amount and adequacy of the loan loss allowance;

The effect of changes in interest rates on financial condition and results of operations;

The effects of proposed legislation that would eliminate the federal thrift charter and the separate federal regulation of thrifts; and

Management’s opinion as to the effect of recent accounting pronouncements on River Valley’s consolidated financial position and results of operations.

Critical Accounting Policies

Note 1 to the consolidated financial statements thereto presented on pages 24 through 27 contains a summary of the Corporation’s significant accounting policies for the year ended December 31, 2004. Certain of these policies are important to the portrayal of the Corporation’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 economic and business conditions, among other factors. Management reviews the adequacy of the allowance for loan losses at least on a quarterly basis. The evaluation by management includes consideration of past loss experience, changes in the composition of the loan portfolio, the current economic condition, the amount of loans outstanding, certain identified problem loans, and the probability of collecting all amounts due.

The allowance for loan losses represents management’s estimate of probable losses inherent in the Corporation’s loan portfolios. In determining the appropriate amount of the allowance for loan losses, management makes numerous assumptions, estimates and assessments.

The Corporation’s strategy for credit risk management includes conservative, centralized credit policies, and uniform underwriting criteria for all loans as well as an overall credit limit for each customer significantly below legal lending limits. The strategy also emphasizes diversification on a geographic, industry and customer level,

regular credit quality reviews and quarterly management reviews of large credit exposures and loans experiencing deterioration of credit quality.

The Corporation’s allowance consists of three components: probable losses estimated from individual reviews of specific loans, probable losses estimated from historical loss rates, and probable losses resulting from economic or other deterioration above and beyond what is reflected in the first two components of the allowance.

Larger commercial loans that exhibit probable or observed credit weaknesses are subject to individual review. Where appropriate, reserves are allocated to individual loans based on management’s estimate of the borrower’s ability to repay the loan given the availability of collateral, other sources of cash flow and legal options available to the Corporation. Included in the review of individual loans are those that are impaired as provided in Statement of Financial Accounting Standards (“SFAS”) No. 114, Accounting by Creditors for Impairment of a Loan. Any allowances for impaired loans are measured based on the present value of expected future cash flows discounted at the loan’s effective interest rate or fair value of the underlying collateral. The Corporation evaluates the collectibility of both principal and interest when assessing the need for a loss accrual. Historical loss rates are applied to other commercial loans not subject to specific reserve allocations.

Homogenous loans, such as consumer installment and residential mortgage loans are not individually risk graded. Rather, standard credit scoring systems are used to assess credit risks. Reserves are established for each pool of loans based on the expected net charge-offs for one year. Loss rates are based on the average net charge-off history by loan category.

Historical loss rates for commercial and consumer loans may be adjusted for significant factors that, in management’s judgment, reflect the impact of any current conditions on loss recognition. Factors which management considers in the analysis include the effects of the national and local economies, trends in the nature and volume of loans (delinquencies, charge-offs and nonaccrual loans), changes in mix, credit score migration comparisons, asset quality trends, risk management and loan administration, changes in the internal lending policies and credit standards, collection practices and examination results from bank regulatory agencies and the Corporation’s internal loan review.

An unallocated reserve is maintained to recognize the imprecision in estimating and measuring loss when evaluating reserves for individual loans or pools of loans. Allowances on individual loans and historical loss rates are reviewed quarterly and adjusted as necessary based on changing borrower and/or collateral conditions and actual collection and charge-off experience.

The Corporation’s primary market area for lending is southeastern Indiana. When evaluating the adequacy of allowance, consideration is given to this regional geographic concentration and the closely associated effect changing economic conditions have on the Corporation’s customers.

The Corporation has not substantively changed any aspect to its overall approach in the determination of the allowance for loan losses. There have been no material changes in assumptions or estimation techniques as compared to prior periods that impacted the determination of the current period allowance.

Mortgage Servicing Rights

The Corporation recognizes the rights 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 amounts recorded in the consolidated income statement.

Discussion of Changes in Financial Condition from December 31, 2003 to December 31, 2004

At December 31, 2004, River Valley’s consolidated assets totaled $289.4 million, representing an increase of $34.4 million over the December 31, 2003 total. This increase in assets was funded by a $44.6 million increase in borrowings. Borrowings increased from $50.0 million as of December 31, 2003 to $94.6 million as of December 31, 2004. Increased borrowings were the result of the advantageous rates that were available. Shareholders’ equity was $22.4 million as December 31, 2004, a net decrease of $0.5 million from $22.9 million as of December 31, 2003.

Liquid assets (i.e., cash, federal funds sold, interest-earning deposits and certificates of deposit) decreased by $0.1 million from December 31, 2003 levels to a total of $12.4 million at December 31, 2004. Investment securities totaled $26.9 million at December 31, 2004, a decrease of $7.6 million from December 31, 2003.

Loans receivable, including loans held for sale, totaled $231.4 million at December 31, 2004, an increase of $39.1 million over the $192.3 million total at December 31, 2003. The increase resulted primarily from loan originations during 2004 of $140.6 million, which were partially offset by principal repayments of $62.3 million and sales of $18.3 million. There were increases in all types of lending with the exception of consumer loans. The volume of loan sales into the secondary mortgage market decreased during 2004 from the 2003 volume by $51.2 million, due in large part to the increase in rates. Loan sales made the turn this year.

River Valley’s consolidated allowance for loan losses totaled approximately $2.4 for the year ended December 31, 2004, which represented 1.01% of total loans at that date. The allowance for loan losses totaled $2.1 million, or 1.07% of total loans for the period ended December 31, 2003. Non-performing loans (defined as loans delinquent greater than 90 days and loans on nonaccrual status) totaled $2.2 million and $514,000 at December 31, 2004 and 2003, respectively. The consolidated allowance for loan losses represented 107% and 400% of non-performing loans at December 31, 2004 and 2003, respectively. Non-performing loans show a large increase at December 31, 2004, but the accounts causing the increase were in the main, solid customers. Outstanding consumer loan balances historically have been a source of both delinquency and losses. The Corporation has de-emphasized consumer lending because of risk/reward opportunities.

Although management believes that its allowance for loan losses at December 31, 2004 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 decreased by $9.4 million, or 5.2%, to a total of $170.5 million at December 31, 2004. Savings and demand deposits decreased by $5.5 million, or 6.4%, during 2004, while certificates of deposit decreased by $3.9 million, or 4.4%. These fluctuations in balances were attributed to competitive rates.

Advances from the Federal Home Loan Bank (“FHLB”) and other borrowed money increased by $44.6 million from the total at December 31, 2003, as current borrowings of $94.6 million were used in part to fund loan growth. The low interest rate environment has allowed for prudent long term funding.

Shareholders’ equity totaled $22.4 million at December 31, 2004, a decrease of $462,000 from the $22.9 million total at December 31, 2003. The decrease resulted primarily from stock repurchases totaling $1.9 million, cash dividends of $1.1 million, which was in part offset by net income of $2.3 million.

Comparison of Results of Operations for the Years Ended December 31, 2004 and 2003

General

River Valley’s net income for the year ended December 31, 2004, totaled $2.35 million, a decrease of $308,000, or 11.6%, from net income reported in 2003. The decrease in net income in the 2004 period was primarily attributable to a decrease of $1,250,000 in gain on loan sales and an increase in general, administrative and other

expenses of $511,000 which were in part offset by an increase in net interest income of $623,000, an increase in service fees and charges of $289,000, a decrease in the provision for income taxes of $246,000, and a decrease in the provision for loan losses of $170,000.

Net Interest Income

Total interest income for the year ended December 31, 2004, amounted to $13.5 million, an increase of $892,000, or 7.0%, from the 2003 total, reflecting higher average balances of interest earning assets offset by lower interest rates. The average balance of interest-earning assets outstanding year-to-year increased by $25.7 million, however, the yield on those assets decreased from an average yield of 5.68% in 2003 to 5.45% in 2004. Interest income on loans totaled $12.5 million for 2004, an increase of approximately $1,100,000, or 9.3%, from 2003. Interest income on investments, FHLB stock and interest-earning deposits decreased by $170,000, or 13.5%, due to lower average balances on those investments.

Interest expense on deposits decreased by $442,000, or 13.6%, to a total of $2.8 million for the year ended December 31, 2004, due primarily to lower costs of funding higher average balances. The cost of deposits decreased from 1.9% in 2003 to 1.6% in fiscal 2004. Interest expense on borrowings totaled $2.8 million for the year ended December 31, 2004, an increase of $711,000 from 2003. The increase resulted primarily from higher average borrowings year-to-year, offset by a 43 basis point decrease in average cost.

As a result of the foregoing changes in interest income and interest expense, net interest income increased during 2004 by $623,000, or 8.5%, compared to 2003. The interest rate spread decreased by 8 basis points for 2004, to 3.13% from 3.21% in the 2003 period, while the net interest margin amounted to 3.19% in 2004 and 3.28% in 2003.

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 $338,000 provision for losses on loans in 2004, a decrease of $170,000, or 33.5%, compared to the $508,000 provision recorded in 2003. The current period provision generally reflects growth in the loan portfolio, coupled with a change in the loan mix, that is more 1-4 family residential loans and less consumer loans.

Non-performing loans for the period ended December 31, 2004 were $2.2 million, an increase of approximately $1.7 million from the $0.5 million recorded as of fiscal year ended 2003. Net charge-offs amounted to $30,000 in 2004, compared to $553,000 in 2003. While management believes that the allowance for losses on loans is adequate at December 31, 2004, 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 $2.5 million for the year ended December 31, 2004, a decrease of $836,000, or 24.9%, compared to 2003, due primarily to a decrease in net gains on loan sales from $1,644,000 in 2003 to $394,000 in 2004, a decrease of $1,250,000 or 76.0%. The volume of loan sales decreased from $70.5 million in 2003 to $18.3 million in 2004. The decline in other income due to the decline loan sales was partially offset by an increase in service fees and charges of $289,000 resulting from new programs and services introduced in late 2003.

General, Administrative and Other Expense

General, administrative and other expense totaled $6.3 million for the year ended December 31, 2004, an increase of $511,000 over the 2003 total. Employee compensation and benefits increased by $490,000 in fiscal 2004 as compared to 2003 primarily from additional staffing, cost of living and benefit expense. Occupancy and

equipment expense increased by $157,000 in 2004 as compared to 2003 due to higher depreciation costs and equipment maintenance expenses. These increases in other operating expenses were in part offset by a decrease in amortization of mortgage servicing rights of $215,000 which are adjusted each quarter based on valuation results.

Income Taxes

The provision for income taxes decreased by $246,000, or 14.8%, for the year ended December 31, 2004, as compared to 2003. The effective tax rates were 37.7% and 38.5% for the years ended December 31, 2004 and 2003, respectively.

Comparison of Results of Operations for the Years Ended December 31, 2003 and 2002

General

River Valley’s net earnings for the year ended December 31, 2003, totaled $2.66 million, an increase of $97,000, or 3.8%, from net earnings reported in 2002. The increase in net earnings in the 2003 period was primarily attributable to an increase of $260,000 in other income, while net interest income increased by $188,000, while general, administrative and other expense were $376,000 higher in the current period. The provision for federal income taxes was $37,000 more in fiscal year 2003 as compared to the same period in 2002. The provision for loan losses in 2003 was $508,000 as compared to $570,000 in 2002.

Net Interest Income

Total interest income for the year ended December 31, 2003, amounted to $12.7 million, a decrease of $102,000, or 0.8%, from the 2002 total, reflecting the effects of lower interest rates offset by higher average balances of interest earning assets. The average balance of interest-earning assets outstanding year-to-year increased by $22.9 million, however, the yield on those assets decreased from an average yield of 6.38% in 2002 to 5.68% in 2003. Interest income on loans and mortgage-backed securities totaled $11.4 million for 2003, a decrease of approximately $230,000, or 2.0%, from 2002. Interest income on investments, FHLB stock and interest-earning deposits increased by $127,000, or 11.3%, due to higher average balances on those investments.

Interest expense on deposits decreased by $0.8 million, or 19.6%, to a total of $3.3 million for the year ended December 31, 2003, due primarily to lower costs of funding higher average balances. The cost of deposits decreased from 2.6% in 2002 to 1.9% in fiscal 2003. Interest expense on borrowings totaled $2.1 million for the year ended December 31, 2003, an increase of $504,000 from 2002. The increase resulted primarily from higher average borrowings year-to-year, offset by a 30 basis point decrease in average cost.

As a result of the foregoing changes in interest income and interest expense, net interest income increased during 2003 by $188,000, or 2.6%, compared to 2002. The interest rate spread decreased by 18 basis points for 2003, to 3.21% from 3.39% in the 2002 period, while the net interest margin amounted to 3.28% in 2003 and 3.56% 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 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 $508,000 provision for losses on loans in 2003, a decrease of $62,000, or 10.9%, compared to the $570,000 provision recorded in 2002. The current period provision generally reflects growth in the loan portfolio, coupled with a change in the loan mix, that is more 1-4 family residential loans and less consumer loans.

Non-performing loans for the period ended December 31, 2003 were $0.5 million, a decrease of approximately $600,000 from the $1.1 million recorded as of fiscal year ended 2002. Net charge-offs amounted to $553,000 in 2003, compared to $441,000 in 2002. While management believes that the allowance for losses on loans is adequate

at December 31, 2003, 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 $3.4 million for the year ended December 31, 2003, an increase of $260,000, or 8.4%, compared to 2002, due primarily to an increase in service fees and charges of $117,000. Net gains on loan sales increased from $1.2 million in 2002 to $1.6 million in 2003, an increase of $418,000. The volume of loan sales increased from $67.6 million in 2002 to $70.5 million in 2003.

General, Administrative and Other Expense

General, administrative and other expense totaled $5.8 million for the year ended December 31, 2003, an increase of $376,000 over the 2002 total. Employee compensation and benefits increased by $296,000 in fiscal 2003 as compared to 2002 primarily from additional staffing, cost of living, benefit expense and increase in Employee Stock Ownership Plan (“ESOP”) expenses. Occupancy and equipment expense increased by $45,000 in fiscal 2003 as compared to 2002 due to higher depreciation costs and equipment maintenance expenses. Other operating expenses increased by $35,000 primarily from increases in office supplies, data processing, charitable contributions and mortgage servicing.

Income Taxes

The provision for income taxes increased by $37,000, or 2.3%, for the year ended December 31, 2003, as compared to 2002. The effective tax rates were 38.5% and 38.9% for the years ended December 31, 2003 and 2002, 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 daily balance of interest-earning assets or interest-bearing liabilities, respectively, for the years presented. Average balances are derived from daily balances, which include nonaccruing loans in the loan portfolio.

	Year ended December 31,
	2004				2003				2002
	Average outstanding balance	Interest earned/ paid	Yield/ rate		Average outstanding balance	Interest earned/ paid	Yield/ rate		Average outstanding balance	Interest earned/ paid	Yield/ rate
	(Dollars in thousands)
Assets
Interest-earning assets:
Interest-earning deposits	$ 6,224	$ 112	1	.80%	$ 8,774	$ 112	1	.28%	$10,186	$ 158	1	.55%
Investment securities (1)	26,497	854	3	.22	33,007	1,039	3	.15	23,866	898	3	.76
Loans receivable (2)	213,000	12,457	5	.85	179,026	11,395	6	.36	164,306	11,604	7	.06
FHLB stock	2,840	122	4	.30	2,053	107	5	.21	1,623	95	5	.85
Total interest-earning assets	248,561	13,545	5	.45	222,860	12,653	5	.68	199,981	12,755	6	.38
Non-interest earning assets, net of allowance for loan losses	17,901				17,067				9,786
Total assets	$266,462				$239,927				$209,767
Liabilities/shareholder equity
Interest-bearing liabilities:
Savings deposits	$ 48,237	$ 485	1	.01	$ 43,454	468	1	.08	$ 35,878	698	1	.95
Interest bearing demand (5)	34,405	110	0	.32	32,018	129		.40	30,475	233	0	.76
Certificates of deposit	92,347	2,223	2	.41	95,559	2,663	2	.79	89,514	3,123	3	.49
FHLB advances and other borrowings	67,491	2,799	4	.15	45,636	2,088	4	.58	32,475	1,584	4	.88
Total interest-bearing liabilities	242,480	5,617	2	.32	216,667	5,348	2	.47	188,342	5,638	2	.99
Other liabilities	1,545				1,528				2,052
Total liabilities	244,025				218,195				190,394
Total equity	22,437				21,732				19,373
Total liabilities and equity	$266,462				$239,927				$209,767
Net interest earning assets	$ 6,081				$ 6,193				$ 11,639
Net interest income		$ 7,928				$ 7,305				$ 7,117
Interest rate spread (3)			3	.13%			3	.21%			3	.39%
Net yield on weighted average interest-earning assets (4)			3	.19%			3	.28%			3	.56%
Average interest-earning assets to
average bearing liabilities			102	.51%			102	.86%			106	.18%

(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.

(5)

Includes Non-Interest Demand Deposit Accounts of $15,066, $13,021 and $9,985.

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,
	Volume		2004 vs. 2003 Increase (decrease) due to Rate		Total		Volume	2003 vs. 2002 Increase (decrease) due to Rate		Total
	(In thousands)
Interest-earning assets:
Interest-earning deposits and other	$ (2	)	$ 17		$ 15		$ 3	$ (37	)	$ (34	)
Investment securities	(209	)	24		(185	)	303	(162	)	141
Loans receivable, net	2,040		(978	)	1,062		991	(1,200	)	(209	)
Total	1,829		(937	)	892		1,297	(1,399	)	(102	)
Interest-bearing liabilities:
Deposits	(29	)	(413	)	(442	)	337	(1,131	)	(794	)
FHLB advances and other borrowings	922		(211	)	711		607	(103	)	504
Total	893		(624	)	269		944	(1,234	)	(290	)
Net change in interest income	$ 936		$(313	)	$ 623		$ 353	$ (165	)	$ 188

Asset and Liability Management

Like other financial institutions, River Valley Financial is subject to interest rate risk to the extent that interest-earning assets reprice 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, 2004 (the latest information available) and December 31, 2003, as measured by changes in NPV for an instantaneous and sustained parallel shift of 100 through 300 basis points in market interest rates.

Generally, NPV is more sensitive to rising rates than declining rates. Such difference in sensitivity occurs principally because, as rates rise, a bank’s assets reprice slower than the deposits that fund them. As a result, in a rising interest rate environment, the amount of interest a bank would receive on loans would increase as loans are slowly prepaid and new loans at higher rates are made. Moreover, the interest the bank would pay on deposits would increase, but generally slower than the bank’s ability to reprice its interest-earning assets. However, River Valley Financial Bank has addressed some of these issues, which has generally reduced its overall exposure to interest rate risk.

Change in Interest Rates (basis points)		Estimated NPV	Amount of Change		Percent
As of December 31, 2004 (Dollars in thousands)
+300		$37,924	$ 1,412		4	%
+200		38,152	1,639		4	%
+100		37,743	1,231		3	%
--		36,512	--		--
-100		34,410	(2,103	)	-6	%
-200	(1)	--	--		--
-300	(1)	--	--		--

Change in Interest Rates (basis points)		Estimated NPV	Amount of Change		Percent
As of December 31, 2003 (Dollars in thousands)
+300		$33,347	$ 650		2	%
+200		33,819	1,123		3	%
+100		33,640	943		3	%
--		32,697	--
-100		31,122	(1,575	)	-5	%
-200	(1)	--	--		--
-300	(1)	--	--		--

(1)

At December 31, 2004 and 2003, the OTS did not provide information as to interest rate risk for 200 and 300 point decreases.

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.

The Financial Regulatory Relief and Economic Efficiency Act of 2000, which was signed into law on December 27, 2000, repealed the former statutory requirement that all savings associations maintain an average daily balance of liquid assets in a minimum amount of not less than 4% or more than 10% of their withdrawable

accounts plus short-term borrowings. The OTS adopted an interim final rule in March 2001 that implemented this revised statutory requirement, although savings associations remain subject to the OTS regulation that requires them to maintain sufficient liquidity to ensure their safe and sound operation. At December 31, 2004, River Valley Financial Bank had commitments to originate loans totaling $4.9 million and in addition, had undisbursed loans in process, unused lines of credit and standby letters of credit totaling $28.9 million. At such date, River Valley Financial bank had $2.2 million in commitments to sell loans and no outstanding commitment to purchase loans. The Corporation considers River Valley Financial Bank’s liquidity and capital resources sufficient to meet outstanding short and long term needs.

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, 2004, 2003 and 2002:

	Year ended December 31,
	2004		2003		2002
	(In thousands)
Cash flows from operating activities	$ 2,374		$ 5,043		$ 5,348
Cash flows from investing activities:
Purchase of securities	(14,133	)	(17,151	)	(22,161	)
Proceeds from maturities of securities	7,221		5,387		4,217
Proceeds from sales of securities	14,034		5,095		7,951
Net loan originations	(39,119	)	(27,287	)	(10,385	)
Other	(2,390	)	(4,383	)	(1,163	)

Cash flows from financing activities:
Net increase (decrease) in deposits	(9,416	)	18,125		16,258
Net increase in borrowings	44,383		10,000		13,500
Purchase of stock	(1,895	)	(366	)	(140	)
Other	(1,134	)	(561	)	(456	)
Net increase (decrease) in cash and cash equivalents	$ (75	)	$(6,098	)	$ 12,969

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.

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 $2.4 million at December 31, 2004.

River Valley Financial exceeded all of its regulatory capital requirements at December 31, 2004. The following table summarizes River Valley Financial’s regulatory capital requirements and regulatory capital at December 31, 2004:

	OTS Requirement			Actual Amount
	Percent of Assets		Amount	Percent of Assets (1)		Amount	Amount of Excess
	(Dollars in thousands)
Tangible capital	1	.50%	$ 4,315	9	.5%	$27,352	$23,037
Core capital (2)	4	.00%	11,506	9	.5	27,352	15,846
Risk-based capital	8	.00%	18,496	12	.7	29,407	10,911

(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 Office of the Comptroller of the Currency 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.

Impact of Accounting Changes

In December, 2004, the Financial Accounting Standards Board (FASB) issued an amendment to SFAS 123 (SFAS 123R) which eliminates the ability to account for share-based compensation transactions using Accounting Principles Board Opinion No. 25 and generally requires that such transactions be accounted for using a fair value-based method. SFAS 123R will be effective for the Corporation beginning July 1, 2005. SFAS123R applies to all awards granted after the required effective date and to awards modified, repurchased, or cancelled after that date. The cumulative effect of initially applying this Statement, if any, is recognized as of the required effective date.

As of the required effective date, the Corporation will apply SFAS 123R using either the modified version of prospective application or the modified version of retrospective application. Under prospective transition method, compensation cost is recognized on or after the required effective date for the portion of outstanding awards for which the requisite service has not yet been rendered, based on the grant-date fair value of those awards calculated under SFAS 123 for either recognition or pro forma disclosures. For periods before the required effective date, a Corporation may elect to apply a modified version of retrospective application under which financial statements for prior periods are adjusted on a basis consistent with the pro forma disclosures required for those periods by SFAS 123.

The Corporation is currently evaluating the effect of the recognition and measurement provisions of SFAS 123R but believes the adoption of SFAS 123R will not result in a material impact on the Corporation’s results of operations or financial condition.

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.

River Valley Bancorp

Accountants’ Report and Consolidated Financial Statements

December 31, 2004 and 2003

River Valley Bancorp

December 31, 2004, 2003 and 2002


Report of Independent Registered Public Accounting Firm		18

Consolidated Financial Statements
Balance Sheets		19
Statements of Income		20
Statements of Comprehensive Income		21
Statements of Stockholders' Equity		22
Statements of Cash Flows		23
Notes to Financial Statements		24

Report of Independent Registered Public Accounting Firm

Audit Committee, Board of Directors and Shareholders
River Valley Bancorp
Madison, Indiana

We have audited the accompanying consolidated balance sheets of River Valley Bancorp as of December 31, 2004 and 2003, and the related consolidated statements of income, comprehensive income, stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2004. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). 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 audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of River Valley Bancorp as of December 31, 2004 and 2003, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2004, in conformity with accounting principles generally accepted in the United States of America.

Indianapolis, Indiana
January 21, 2005

River Valley Bancorp
Consolidated Balance Sheets
December 31, 2004 and 2003

	2004		2003
	(In Thousands, Except Share Amounts)
Assets
Cash and due from banks	$ 4,911		$ 4,443
Interest-bearing demand deposits	7,526		8,069
Cash and cash equivalents	12,437		12,512
Investment securities available for sale	26,964		34,557
Loans held for sale	337		100
Loans, net of allowance for loan losses of
$2,364 and $2,056	231,036		192,166
Premises and equipment	6,798		5,980
Federal Home Loan Bank stock	3,281		2,176
Interest receivable	1,599		1,489
Cash value of life insurance	5,302		5,093
Other assets	1,673		1,003
Total assets	$ 289,427		$ 255,076

Liabilities
Deposits
Noninterest-bearing	$ 15,066		$ 11,828
Interest-bearing	155,472		168,126
Total deposits	170,538		179,954
Borrowings	94,600		50,000
Interest payable	382		381
Other liabilities	1,514		1,886
Total liabilities	267,034		232,221

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 and outstanding - 1,584,377 and
1,646,680 shares	8,843		8,705
Retained earnings	13,800		14,088
Shares acquired by stock benefit plans	(215	)	(193	)
Accumulated other comprehensive income (loss)	(35	)	255
Total stockholders' equity	22,393		22,855
Total liabilities and stockholders' equity	$ 289,427		$ 255,076

See Notes to Consolidated Financial Statements

River Valley Bancorp
Consolidated Statements of Income
Years Ended December 31, 2004, 2003 and 2002

	2004	2003	2002
	(In Thousands, Except Per Share Amounts)

Interest Income
Loans receivable	$12,457	$11,395	$11,604
Investment securities	854	1,039	898
Interest-earning deposits and other	234	219	253
Total interest income	13,545	12,653	12,755

Interest Expense
Deposits	2,818	3,260	4,054
Borrowings	2,799	2,088	1,584
Total interest expense	5,617	5,348	5,638

Net Interest Income	7,928	7,305	7,117
Provision for loan losses	338	508	570

Net Interest Income After Provision for Loan Losses	7,590	6,797	6,547

Other Income
Service fees and charges	1,761	1,472	1,355
Net realized gains on sales of
available-for-sale securities	24	4	3
Net gains on loan sales	394	1,644	1,226
Increase in cash value of life insurance	208	133	98
Gain on sale of premises and equipment	--	--	352
Other income	131	101	26
Total other income	2,518	3,354	3,094

Other Expenses
Salaries and employee benefits	3,405	2,915	2,619
Net occupancy and equipment expenses	976	819	774
Data processing fees	144	163	228
Advertising	221	242	209
Mortgage servicing rights	192	407	345
Office supplies	168	161	159
Professional fees	204	131	63
Other expenses	1,032	993	1,058
Total other expenses	6,342	5,831	5,455

Income Before Income Tax	3,766	4,320	4,186
Income tax expense	1,419	1,665	1,628

Net Income	$ 2,347	$ 2,655	$ 2,558

Basic Earnings per Share	$ 1.48	$ 1.67	$ 1.64

Diluted Earnings per Share	$ 1.42	$ 1.59	$ 1.58

See Notes to Consolidated Financial Statements

River Valley Bancorp
Consolidated Statements of Comprehensive Income
Years Ended December 31, 2004, 2003 and 2002

	2004		2003		2002
	(In Thousands)
Net Income	$ 2,347		$ 2,655		$2,558
Other comprehensive income (loss), 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 $(179), $(68) and $220	(276	)	(104	)	336
Less: Reclassification adjustment for gains
included in net income, net of tax expense
of $10, $2 and $15	14		2		22
	(290	)	(106	)	314
Comprehensive Income	$ 2,057		$ 2,549		$2,872

See Notes to Consolidated Financial Statements

River Valley Bancorp
Consolidated Statements of Stockholders' Equity
Years Ended December 31, 2004, 2003 and 2002

	Shares		Common Stock		Retained Earnings		Shares Acquired by Stock Benefit Plans		Accumulated Other Comprehensive Income (Loss)		Total
Balances, January 1, 2002	1,618,502		$ 7,654		$ 10,802		$ (532	)	$ 47		$17,971
Net income					2,558						2,558
Unrealized gains on securities, net of
reclassification adjustment									314		314
Cash dividends ($.40 per share)					(619	)					(619	)
Exercise of stock options	13,754		99								99
Tax benefit of stock options exercised
and RRP			51								51
Contribution to stock benefit plans							(22	)			(22	)
Amortization of expense related to stock
benefit plans			206				215				421
Purchase of stock	(10,568	)	(53	)	(87	)					(140	)

Balances, December 31, 2002	1,621,688		7,957		12,654		(339	)	361		20,633
Net income					2,655						2,655
Unrealized losses on securities, net of
reclassification adjustment									(106	)	(106	)
Cash dividends ($.595 per share)					(955	)					(955	)
Exercise of stock options	44,992		313								313
Tax benefit of stock options exercised
and RRP			236								236
Amortization of expense related to stock
benefit plans			299				146				445
Purchase of stock	(20,000	)	(100	)	(266	)					(366	)

Balances, December 31, 2003	1,646,680		8,705		14,088		(193	)	255		22,855
Net income					2,347						2,347
Unrealized losses on securities, net of
reclassification adjustment									(290	)	(290	)
Cash dividends ($.72 per share)					(1,130	)					(1,130	)
Exercise of stock options	15,846		118								118
Tax benefit of stock options exercised
and RRP			117								117
Contribution to stock benefit plans							(129	)			(129	)
Amortization of expense related to stock
benefit plans			293				107				400
Purchase of stock	(78,149	)	(390	)	(1,505	)					(1,895	)

Balances, December 31, 2004	1,584,377		$ 8,843		$ 13,800		$ (215	)	$ (35	)	$22,393

See Notes to Consolidated Financial Statements

River Valley Bancorp

Consolidated Statements of Cash Flows
Years Ended December 31, 2004, 2003 and 2002

	2004		2003		2002
	(In Thousands)
Operating Activities
Net income	$ 2,347		$ 2,655		$ 2,558
Items not requiring (providing) cash
Provision for loan losses	338		508		570
Depreciation and amortization	580		507		502
Deferred income tax	3		517		31
Investment securities gains	(24	)	(4	)	(37	)
Loans originated for sale in the secondary market	(18,346	)	(68,536	)	(65,339	)
Proceeds from sale of loans in the secondary market	18,305		70,512		67,589
Gain on sale of loans	(394	)	(1,644	)	(1,226	)
Amortization of deferred loan origination cost	109		138		175
Amortization of expense related to stock benefit plans	400		445		421
(Gain) loss on sale of premises and equipment	—		—		(352	)
Net change in
Interest receivable	(110	)	(22	)	8
Interest payable	1		(78	)	(154	)
Other adjustments	(835	)	45		602
Net cash provided by operating activities	2,374		5,043		5,348

Investing Activities
Purchase of FHLB stock	(992	)	(48	)	(750	)
Purchases of securities available for sale	(14,133	)	(17,151	)	(22,161	)
Proceeds from maturities of securities available for sale	7,221		5,387		4,217
Proceeds from sales of securities available for sale	14,034		5,095		7,951
Net change in loans	(39,119	)	(27,287	)	(10,385	)
Purchases of premises and equipment	(1,398	)	(749	)	(1,141	)
Proceeds from sale of premises and equipment	—		1		630
Proceeds from sale of real estate acquired through foreclosure	—		48		98
Premiums paid on life insurance	—		(3,635	)	—
Net cash used in investing activities	(34,387	)	(38,339	)	(21,541	)

Financing Activities
Net change in
Noninterest-bearing, interest-bearing demand and savings deposits	(5,472	)	19,051		3,891
Certificates of deposit	(3,944	)	(926	)	12,367
Short-term borrowings	22,383
Proceeds from borrowings	35,000		16,000		50,000
Repayment of borrowings	(13,000	)	(6,000	)	(36,500	)
Cash dividends	(1,110	)	(878	)	(543	)
Purchase of stock	(1,895	)	(366	)	(140	)
Proceeds from exercise of stock options	118		313		99
Advances by borrowers for taxes and insurance	(13	)	4		10
Acquisition of stock for stock benefit plans	(129	)	—		(22	)
Net cash provided by financing activities	31,938		27,198		29,162

Net Change in Cash and Cash Equivalents	(75	)	(6,098	)	12,969

Cash and Cash Equivalents, Beginning of Year	12,512		18,610		5,641

Cash and Cash Equivalents, End of Year	$ 12,437		$ 12,512		$ 18,610

Additional Cash Flows Information
Interest paid	$ 5,616		$ 5,426		$ 5,792
Income tax paid	833		1,435		1,480

See Notes to Consolidated Financial Statements

River Valley Bancorp
Notes to Consolidated Financial Statements
December 31, 2004, 2003 and 2002
(Table Dollar Amounts in Thousands
Except Per Share Amounts)

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 accounting principles generally accepted in the United States of America 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 accounting principles generally accepted in the United States of America 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.

Cash Equivalents — The Company considers all liquid investments with original maturities of three months or less to be cash equivalents.

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.

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 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

River Valley Bancorp
Notes to Consolidated Financial Statements
December 31, 2004, 2003 and 2002
(Table Dollar Amounts in Thousands
Except Per Share Amounts)

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. Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance.

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, 2004, the allowance for loan losses is adequate based on information currently available. A worsening or protracted economic decline in the areas within which the Company 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 stockis 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.

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.

Stock options — The Company has a stock-based employee compensation plan, which is described more fully in Note 16. 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 those plans 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

River Valley Bancorp
Notes to Consolidated Financial Statements
December 31, 2004, 2003 and 2002
(Table Dollar Amounts in Thousands
Except Per Share Amounts)

of Financial Accounting Standards (SFAS) No. 123, Accounting for Stock-Based Compensation, to stock-based employee compensation.

	2004		2003		2002
Net income, as reported	$ 2,347		$ 2,655		$ 2,558
Less: Total stock-based employee compensation cost
determined under the fair value based method, net of
income taxes	(23	)	(25	)	(54	)
Pro forma net income	$ 2,324		$ 2,630		$ 2,504
Earnings per share
Basic - as reported	$ 1.48		$ 1.67		$ 1.64
Basic - pro forma	$ 1.46		$ 1.65		$ 1.61
Diluted - as reported	$ 1.42		$ 1.59		$ 1.58
Diluted - pro forma	$ 1.40		$ 1.57		$ 1.54

In December 2004, the Financial Accounting Standards Board (FASB) issued an amendment to SFAS 123 (SFAS 123R) which eliminates the ability to account for share-based compensation transactions using Accounting Principles Board Opinion No. 25 and generally requires that such transactions be accounted for using a fair value-based method. SFAS 123R will be effective for the Company beginning July 1, 2005. SFAS 123R applies to all awards granted after the required effective date and to awards modified, repurchased, or cancelled after that date. The cumulative effect of initially applying this Statement, if any, is recognized as of the required effective date.

As of the required effective date, the Company will apply SFAS 123R using either the modified version of prospective application or the modified version of retrospective application. Under prospective transition method, compensation cost is recognized on or after the required effective date for the portion of outstanding awards for which the requisite service has not yet been rendered, based on the grant-date fair value of those awards calculated under SFAS 123 for either recognition or pro forma disclosures. For periods before the required effective date, a company may elect to apply a modified version of retrospective application under which financial statements for prior periods are adjusted on a basis consistent with the pro forma disclosures required for those periods by SFAS 123.

The Company is currently evaluating the effect of the recognition and measurement provisions of SFAS 123R but believes the adoption of SFAS 123R will not result in a material impact on the Company’s results of operations or financial condition.

Income tax in the consolidated statements 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 and have been restated to give effect to a 2-for-1 stock split on the Company’s outstanding shares announced on December 9, 2003. Unearned ESOP shares have been excluded from the computation of average shares outstanding.

River Valley Bancorp
Notes to Consolidated Financial Statements
December 31, 2004, 2003 and 2002
(Table Dollar Amounts in Thousands
Except Per Share Amounts)

Reclassifications of certain amounts in the 2003 and 2002 consolidated financial statements have been made to conform to the 2004 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, 2004 was $935,000.

Note 3: Investment Securities

	2004
	Amortized Cost	Gross Unrealized Gains	Gross Unrealized Losses	Fair Value
Available for sale
Federal agencies	$25,478	$ 42	$107	$25,413
State and municipal	1,430	10	2	1,438
Mortgage and other asset-backed securities	113	—	—	113
Total investment securities	$27,021	$ 52	$109	$26,964

	2003
	Amortized Cost	Gross Unrealized Gains	Gross Unrealized Losses	Fair Value
Available for sale
Federal agencies	$33,483	$438	$ 24	$33,897
State and municipal	475	10	—	485
Mortgage and other asset-backed securities	177	—	2	175
Total investment securities	$34,135	$448	$ 26	$34,557

The amortized cost and fair value of securities available for sale at December 31, 2004, 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 Cost	Fair Value
Less than one year	$ 9,508	$ 9,528
One to five years	16,585	16,503
Five to ten years	815	819
	26,908	26,850
Mortgage and other asset-backed securities	113	114
Totals	$27,021	$26,964

River Valley Bancorp
Notes to Consolidated Financial Statements
December 31, 2004, 2003 and 2002
(Table Dollar Amounts in Thousands
Except Per Share Amounts)

Securities with a carrying value of $11,912,000 were pledged at December 31, 2004 to secure repurchase agreements. On January 6, 2005, additional securities were pledged to adequately secure the repurchase agreements outstanding. Securities with a carrying value of $10,475,000 and $7,157,000 were pledged at December 31, 2004 and 2003 to secure FHLB advances. Securities with a carrying value of $3,021,000 and $3,268,000 were pledged at December 31, 2004 and 2003 to secure certain deposits and for other purposes as permitted or required by law.

Proceeds from sales of securities available for sale during 2004, 2003 and 2002 were $14,034,000, $5,095,000 and $7,951,000. Gross gains of $29,000, $10,000 and $103,000 and gross losses of $5,000, $6,000 and $66,000 were realized on those sales.

Certain investment securities are reported in the financial statements at an amount less than their historical cost. Total fair value of these investments at December 31, 2004 and 2003, were $20,080,000 and $4,131,000, which is approximately 74.5 percent and 12.0 percent of the Company’s investment portfolio. These declines primarily resulted from recent increases in market interest rates.

Based on evaluation of available evidence, including recent changes in market interest rates, management believes the declines in fair value for these securities are temporary.

Should the impairment of any of these securities become other than temporary, the cost basis of the investment will be reduced and the resulting loss recognized in net income in the period the other-than-temporary impairment is identified.

The following table shows our investments’ gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at December 31, 2004 and December 31, 2003:

	2004
	Less than 12 Months		12 Months or More		Total
Description of Securities	Fair Value	Unrealized Losses	Fair Value	Unrealized Losses	Fair Value	Unrealized Losses

U. S. Government agencies	$18,857	$107	$—	$—	$18,857	$107
State and Municipal	1,223	2	—	—	1,223	2
Total temporarily impaired securities	$20,080	$109	$—	$—	$20,080	$109

	2003
	Less than 12 Months		12 Months or More		Total
Description of Securities	Fair Value	Unrealized Losses	Fair Value	Unrealized Losses	Fair Value	Unrealized Losses

U. S. Government agencies	$ 3,954	$ 24	$—	$—	$ 3,954	$ 24
Mortgage and Other Asset-backed securities	173	1	2	1	175	2
Total temporarily impaired securities	$ 4,127	$ 25	$2	$1	$ 4,129	$ 26

River Valley Bancorp
Notes to Consolidated Financial Statements
December 31, 2004, 2003 and 2002
(Table Dollar Amounts in Thousands
Except Per Share Amounts)

Note 4: Loans and Allowance

	2004		2003
Residential real estate
One-to-four family residential	$ 104,466		$ 90,492
Multi-family residential	8,100		5,009
Construction	20,046		8,689
Nonresidential real estate and land	67,635		56,388
Commercial	32,581		26,764
Consumer and other	8,888		10,287
	241,716		197,629
Unamortized deferred loan costs	496		461
Undisbursed loans in process	(8,812	)	(3,868	)
Allowance for loan losses	(2,364	)	(2,056	)
Total loans	$ 231,036		$ 192,166

	2004		2003		2002
Allowance for loan losses
Balances, January 1	$ 2,056		$ 2,101		$ 1,972
Provision for losses	338		508		570
Recoveries on loans	144		190		60
Loans charged off	(174	)	(743	)	(501	)
Balances, December 31	$ 2,364		$ 2,056		$ 2,101

Information on impaired loans is summarized below.

	2004	2003
Impaired loans with an allowance	$ 867	$ —
Impaired loans for which the discounted cash flows or collateral value
exceeds the carrying value of the loan	1,959	1,100
	$2,826	$1,100

Allowance for impairment loans (included in the Company's allowance
for loan losses)	$ 136	—

	2004	2003	2002
Average balance of impaired loans	$2,058	$1,242	$663
Interest income recognized on impaired loans	139	107	34
Cash-basis interest included above	133	97	35

At December 31, 2004 and 2003, the Company had non-accruing loans totaling $2,201,000 and $514,000, respectively. At December 31, 2004 and 2003, there were no accruing loans delinquent 90 days or more.

River Valley Bancorp
Notes to Consolidated Financial Statements
December 31, 2004, 2003 and 2002
(Table Dollar Amounts in Thousands
Except Per Share Amounts)

Note 5: Premises and Equipment

	2004		2003
Land	$ 1,499		$ 1,450
Buildings	3,967		3,577
Equipment	3,422		3,148
Construction in progress	772		90
Total cost	9,660		8,265
Accumulated depreciation and amortization	(2,862	)	(2,285	)
Net	$ 6,798		$ 5,980

At December 31, 2004, the Company’s estimated costs to complete construction of a branch facility totaled approximately $1,377,000.

Note 6: Deposits

	2004	2003
Demand deposits	$ 51,055	$ 58,874
Savings deposits	28,825	26,478
Certificates and other time deposits of $100,000 or more	35,153	38,609
Other certificates and time deposits	55,505	55,993
Total deposits	$170,538	$179,954

Certificates and other time deposits maturing in
2005		$12,242
2006		46,722
2007		8,633
2008		3,490
2009		19,155
Thereafter		416
		$90,658

Note 7: Borrowings

	2004	2003
Repurchase agreements	$22,383	—
Federal Home Loan Bank advances	65,000	43,000
Subordinated debentures	7,217	7,000
Total borrowings	$94,600	$50,000

Securities sold under agreements to repurchase consist of obligations of the Bank to other parties. The obligations are secured by investment securities, which collateral is held by a safekeeping agent. The maximum amount of outstanding agreements at any month end during 2004 totaled $22,383,000, and the daily average of such agreements totaled $2,628,000. Repurchase agreements have a term of one business day.

River Valley Bancorp
Notes to Consolidated Financial Statements
December 31, 2004, 2003 and 2002
(Table Dollar Amounts in Thousands
Except Per Share Amounts)

Maturities by year for advances at December 31, 2004 are $11,000,000 in 2005, $7,000,000 in 2006, $10,000,000 in 2007, $10,000,000 in 2008, $7,000,000 in 2009 and $20,000,000 thereafter. The weighted-average interest rate at December 31, 2004 and 2003 was 4.10% and 4.08%.

The Federal Home Loan Bank advances are secured by first-mortgage loans and investment securities totaling $144,807,000 at December 31, 2004. Advances are subject to restrictions or penalties in the event of prepayment.

On March 13, 2003, the Company formed RIVR Statutory Trust I (Trust). On March 26, 2003, the Trust 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 Company for $217,000. The aggregate proceeds of $7,217,000 were used by the Trust to purchase $7,217,000 in Fixed/Floating Rate Junior Subordinated Deferrable Interest Debentures from the Company. 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 Company has guaranteed payment of amounts owed by the Trust to holders of the Capital Securities.

In the 2003 financial statements, the Company had consolidated the Trust through which it has issued trust preferred securities (TPS) and reported the TPS as “guaranteed preferred beneficial interests in the Company’s subordinated debentures” in the consolidated balance sheets. The Financial Accounting Standards Board (FASB) had previously issued FASB Interpretation No. 46 (FIN 46) and, in December 2003, issued a revision to FIN 46 to clarify certain provisions which affected the accounting for TPS. As a result of the provisions in FIN 46, the Trust was deconsolidated in 2004, with the Company accounting for its investment in the Trust as assets, its subordinated debentures as debt, and the interest paid thereon as interest expense. During 2003, the Company classified the TPS as debt and the dividends as interest but eliminated its common stock investment and dividends received from the Trust. The prior period financial information has not been adjusted to give effect to the revised provisions of FIN 46 as the changes are not material to the financial statements and would have had no effect on previously reported net interest margin, net income or earnings per share.

Note 8: Loan Servicing

Loans serviced for others are not included in the accompanying consolidated balance sheets. The unpaid principal balances of loans serviced for others totaled $88,696,000, $91,639,000 and $76,544,000 at December 31, 2004, 2003 and 2002.

The Company uses comparable market values and a valuation model that calculates the present value of future cash flows were used to estimate fair value of its mortgage servicing rights. For purposes of measuring impairment, risk characteristics including product type, investor type, and interest rates, were used to stratify the originated mortgage servicing rights.

River Valley Bancorp
Notes to Consolidated Financial Statements
December 31, 2004, 2003 and 2002
(Table Dollar Amounts in Thousands
Except Per Share Amounts)

	2004		2003		2002
Mortgage Servicing Rights
Balances, January 1	$ 1,209		$ 881		$ 540
Servicing rights capitalized	198		630		546
Amortization of servicing rights	(360	)	(302	)	(205	)
	1,047		1,209		881
Valuation allowance	(187	)	(355	)	(250	)
Balances, December 31	$ 860		$ 854		$ 631

Activity in the valuation allowance for mortgage servicing rights was as follows:

	2004		2003	2002
Balance, beginning of year	$ 355		$250	$110
Additions	—		105	140
Reduction	(168	)	—	—
Balance, end of year	$ 187		$355	$250

Note 9: Income Tax

	2004		2003		2002
Income tax expense (benefit)
Currently payable
Federal	$ 1,159		$ 878		$ 1,318
State	257		269		279
Deferred
Federal	7		459		(23	)
State	(4	)	59		54
Total income tax expense	$ 1,419		$ 1,665		$ 1,628
Reconciliation of federal statutory to actual tax
expense (benefit)
Federal statutory income tax at 34%	$ 1,280		$ 1,469		$ 1,423
Effect of state income taxes	167		217		220
Qualified Zone Academy credit	(62	)	(65	)	—
Cash value of life insurance	(71	)	(45	)	—
ESOP expense in excess of cost	100		102		—
Other	5		(13	)	(15	)
Actual tax expense	$ 1,419		$ 1,665		$ 1,628
Effective tax rate	37.7%		38.5%		38.9%

River Valley Bancorp
Notes to Consolidated Financial Statements
December 31, 2004, 2003 and 2002
(Table Dollar Amounts in Thousands
Except Per Share Amounts)

A cumulative net deferred tax asset (liability) is included in the balance sheets. The components of the asset (liability) are as follows:

	2004		2003
Assets
Allowance for loan losses	$ 909		$ 794
Deferred compensation	188		125
Pensions and employee benefits	17		15
Purchase accounting adjustments	61		66
Securities available for sale	22		—
Investment valuation allowance	102		102
Qualified Zone Academy credit	—		11
Total assets	1,299		1,113

Liabilities
Depreciation and amortization	(437	)	(409	)
Loan fees	(191	)	(178	)
Mortgage servicing rights	(331	)	(330	)
Federal Home Loan Bank stock dividends	(74	)	(58	)
Prepaid expenses	(100	)
Securities available for sale	—		(167	)
Other	(10	)	(1	)
Total liabilities	(1,143	)	(1,143	)
	$ 156		$ (30	)

Income tax expense attributable to securities gains was $10,000, $2,000 and $15,000 for the years ended December 31, 2004, 2003 and 2002.

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 sheets.

River Valley Bancorp
Notes to Consolidated Financial Statements
December 31, 2004, 2003 and 2002
(Table Dollar Amounts in Thousands
Except Per Share Amounts)

Financial instruments whose contract amount represents credit risk as of December 31 were as follows:

		2004		2003
Commitments to extend credit		$24,739		$27,353
Standby letters of credit		210		339

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 Bank 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.

In 2004, the Bank entered into an agreement (Agreement) with the Office of Thrift Supervision (OTS) that it would correct various regulatory compliance deficiencies and certain other matters noted by the OTS in its February 4, 2004 examination of the Bank. At December 31, 2004, the Bank believes it has met all the requirements of the Agreement.

Note 11: Stockholders’ Equity

On December 9, 2003, the Company announced a 2-for-1 stock split, under which each share of its common stock outstanding at the close of business on December 26, 2003 was converted into two shares of common stock. The additional certificates were distributed to stockholders on January 9, 2004. As a result of the stock split, the number of shares outstanding increased from 823,340 to 1,646,680 shares. Unless otherwise noted, all share and per share data have been restated for the 2-for-1 split.

Note 12: 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, 2004, the stockholder’s equity of the Bank was $28,378,000, of which approximately $23,848,000 was restricted from dividend distribution to the Company.

Note 13: 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

River Valley Bancorp
Notes to Consolidated Financial Statements
December 31, 2004, 2003 and 2002
(Table Dollar Amounts in Thousands
Except Per Share Amounts)

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, 2004 and 2003, the Bank is categorized as well capitalized and met all subject capital adequacy requirements. There are no conditions or events since December 31, 2004 that management believes have changed the Bank’s classification.

	Actual			Required for Adequate Capital			To Be Well Capitalized
	Amount	Ratio		Amount	Ratio		Amount	Ratio
2004
Total risk-based capital
(to risk-weighted assets)	$29,407	12	.7%	$18,496	8	.0%	$23,120	10	.0%
Tier 1 capital
(to risk-weighted assets)	27,352	11	.8%	9,248	4	.0%	13,872	6	.0%
Core capital
(to adjusted total assets)	27,352	9	.5%	11,506	4	.0%	14,383	5	.0%
Core capital
(to adjusted tangible assets)	27,352	9	.5%	5,753	2	.0%	—	N/A
Tangible capital
(to adjusted total assets)	27,352	9	.5%	4,315	1	.5%	—	N/A

2003
Total risk-based capital
(to risk-weighted assets)	$26,970	14	.5%	$14,917	8	.0%	$18,646	10	.0%
Tier 1 capital
(to risk-weighted assets)	24,968	13	.4%	7,458	4	.0%	11,187	6	.0%
Core capital
(to adjusted total assets)	24,968	10	.0%	10,021	4	.0%	12,527	5	.0%
Core capital
(to adjusted tangible assets)	24,968	10	.0%	5,011	2	.0%	—	N/A
Tangible capital
(to adjusted total assets)	24,968	10	.0%	3,758	1	.5%	—	N/A

Note 14: 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. Pension expense related to this plan was $45,000 for the

River Valley Bancorp
Notes to Consolidated Financial Statements
December 31, 2004, 2003 and 2002
(Table Dollar Amounts in Thousands
Except Per Share Amounts)

year ended December 31, 2004. There was no pension expense or benefit related to this plan for the years ended December 31, 2003 and 2002.

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 $45,000, $43,000 and $31,000 for the years ended December 31, 2004, 2003 and 2002.

The Bank has a supplemental retirement plan which provides retirement benefits to all directors. The Bank’s obligations under the plan have been funded by the purchase of key man life insurance policies, of which the Bank is the beneficiary. Expense recognized under the supplemental retirement plan totaled approximately $64,000, $51,000 and $41,000 for the years ended December 31, 2004, 2003 and 2002.

The Company has an ESOP covering substantially all employees of the Company and Bank. The ESOP acquired 190,440 shares of the Company’s common stock at $10 per share with funds provided by a loan from the Company. Unearned ESOP shares totaled 13,102 and 29,044 at December 31, 2004 and 2003 and had a fair value of $295,000 and $855,000 at those dates. 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, 2004, 2003 and 2002 was $373,000, $410,000 and $331,000. At December 31, 2004, the ESOP had 177,338 allocated shares, 13,102 suspense shares and no committed-to-be released shares. At December 31, 2003, the ESOP had 161,396 allocated shares, 29,044 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 95,220 shares of the Company’s stock to members of the Board of Directors and management. The RRP has purchased 73,190 shares of the Company’s common stock in the open market. At December 31, 2004, 72,366 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 $50,000, $35,000 and $53,000 for the years ended December 31, 2004, 2003 and 2002.

Note 15: 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.

River Valley Bancorp
Notes to Consolidated Financial Statements
December 31, 2004, 2003 and 2002
(Table Dollar Amounts in Thousands
Except Per Share Amounts)

The aggregate amount of loans, as defined, to such related parties were as follows:

Balances, January 1, 2004	$ 1,132
Change in composition	727
New loans, including renewals	958
Payments, etc., including renewals	(866	)
Balances, December 31, 2004	$ 1,951

Deposits from related parties held by the Bank at December 31, 2004 and 2003 totaled $2,789,000 and $2,198,000.

Note 16: Stock Option Plan

Under the Company’s incentive stock option plan, which is accounted for under the recognition and measurement principles of 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 238,050 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 is 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:

	2004		2003
Risk-free interest rates	2	.4%	3	.5%
Dividend yields	2	.9%	3	.1%
Volatility factors of expected market price of common stock	12	.4%	11	.2%
Weighted-average expected life of the options	7 ye	ars	10 y	ears

The pro forma effect on net income is disclosed in Note 1.

River Valley Bancorp
Notes to Consolidated Financial Statements
December 31, 2004, 2003 and 2002
(Table Dollar Amounts in Thousands
Except Per Share Amounts)

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, 2004, 2003 and 2002.

	2004				2003				2002
Options	Shares		Weighted- Average Exercise Price		Shares		Weighted- Average Exercise Price		Shares		Weighted- Average Exercise Price
Outstanding,
beginning of year	125,276		$7	.63	170,268		$7	.58	172,166		$7	.08
Granted	5,000		22	.67	—			—	14,000		13	.25
Exercised	(16,154	)	7	.76	(44,992	)	7	.36	(13,754	)	7	.20
Forfeited/expired	(3,200	)	13	.25	—			—	(2,144	)	7	.39
Outstanding,
end of year	110,922		$8	.13	125,276		$7	.63	170,268		$7	.58
Options exercisable at
year end	89,922				94,076				124,668
Weighted-average fair value
of options granted during
the year			$2	.13			$	—			$1	.52

As of December 31, 2004, options totaling 25,048 have exercise prices ranging from $5.38 to $6.32 and a weighted-average remaining contractual life of 5.0 years, options totaling 70,874 have exercise prices ranging from $6.99 to $7.39 and a weighted-average remaining contractual life of 3.5 years, options totaling 1,600 have an exercise price of $8.95 and a weighted-average remaining contractual life of 6.5 years, and options totaling 8,400 have an exercise price of $13.25 and a weighted-average remaining contractual life of 7.7 years and options totaling 5,000 have an exercise price of $22.67 and a weighted-average remaining contractual life of 9.3 years.

River Valley Bancorp
Notes to Consolidated Financial Statements
December 31, 2004, 2003 and 2002
(Table Dollar Amounts in Thousands
Except Per Share Amounts)

Note 17: Earnings Per Share

	2004				2003				2002
	Income	Weighted- Average Shares	Per Shares Amount		Income	Weighted- Average Shares	Per Shares Amount		Income	Weighted- Average Shares	Per Shares Amount
Basic Earnings Per Share
Income available to
common stockholders	$ 2,347	1,586,889	$1	.48	$2,655	1,590,732	$1	.67	$2,558	1,557,286	$1	.64
Effect of Dilutive
Stock Options		70,015				79,418				64,890
Diluted Earnings
Per Share
Income available to
common stockholders
and assumed
conversions	$ 2,347	1,656,904	$1	.42	$2,655	1,670,150	$1	.59	$2,558	1,622,176	$1	.58

Options to purchase 5,000 shares of common stock at $22.67 per share were outstanding at December 31, 2004, but were not included in the computation of 2004 diluted EPS because the option price was greater than the average market price of the common shares.

Note 18: 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.

Investment Securities —Fair values are based on quoted market prices.

Loans Held for Sale —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.

Cash Value of Life Insurance —The fair value of cash surrender value of life insurance approximates carrying value.

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.

River Valley Bancorp
Notes to Consolidated Financial Statements
December 31, 2004, 2003 and 2002
(Table Dollar Amounts in Thousands
Except Per Share Amounts)

Short-Term Borrowings —The fair value of short-term borrowings approximates carrying value.

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.

Other Borrowings — The fair value of these borrowings are estimated using a discounted cash flow calculation, based on current rates for similar debt.

Advance Payment by Borrowers for Taxes and Insurance — The fair value approximates carrying value.

Off-Balance Sheet Commitments— Commitments include commitments to originate mortgage and consumer loans and standby letters of credit and are generally of a short-term nature. The fair value of such commitments are based on fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the counterparties’ credit standing. The carrying amounts of these commitments, which are immaterial, are reasonable estimates of the fair value of these financial instruments.

The estimated fair values of the Company’s financial instruments are as follows:

	2004		2003
	Carrying Amount	Fair Value	Carrying Amount	Fair Value
Assets
Cash and cash equivalents	$ 12,437	$ 12,437	$ 12,512	$ 12,512
Investment securities available for sale	26,964	26,964	34,557	34,557
Loans including loans held for sale, net	231,373	233,190	192,266	195,278
Interest receivable	1,599	1,599	1,489	1,489
Stock in FHLB	3,281	3,281	2,176	2,176
Cash value of life insurance	5,302	5,302	5,093	5,093

Liabilities
Deposits	170,538	170,624	179,954	181,170
Short-term borrowings	22,383	22,383	—	—
FHLB advances	65,000	65,092	43,000	44,372
Other borrowings	7,217	7,345	7,000	7,000
Interest payable	382	382	381	381
Advance payments by borrowers for taxes
and insurance	50	50	63	63

River Valley Bancorp
Notes to Consolidated Financial Statements
December 31, 2004, 2003 and 2002
(Table Dollar Amounts in Thousands
Except Per Share Amounts)

Note 19: 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 Sheets

	2004	2003
Assets
Cash and due from banks	$ 529	$ 3,060
Investment in common stock of the Bank	28,378	26,280
Investment in RVB Trust I	217	217
Other assets	786	795
Total assets	$29,910	$30,352

Liabilities
Borrowings	$ 7,217	$ 7,217
Dividends payable	300	280
Total liabilities	7,517	7,497

Stockholders' Equity	22,393	22,855
Total liabilities and stockholders' equity	$29,910	$30,352

Condensed Statements of Income

	2004		2003	2002
Income
Dividends from the Bank	$ 500		$ 632	$2,601
Other income	32		63	35
Total income	532		695	2,636
Expenses
Interest expense	462		346	23
Other expenses	148		232	142
Total expenses	610		578	165
Income (loss) before income tax and equity in
undistributed income of subsidiary	(78	)	117	2,471
Income tax benefit	(229	)	204	51
Income before equity in undistributed income
of subsidiary	151		321	2,522
Equity in undistributed income of the Bank	2,196		2,334	36
Net Income	$ 2,347		$2,655	$2,558

River Valley Bancorp
Notes to Consolidated Financial Statements
December 31, 2004, 2003 and 2002
(Table Dollar Amounts in Thousands
Except Per Share Amounts)

Condensed Statements of Cash Flows

	2004		2003		2002
Operating Activities
Net income	$ 2,347		$ 2,655		$ 2,558
Items not requiring (providing) cash	(1,991	)	(2,625	)	87
Net cash provided by operating activities	356		30		2,645

Financing Activities
Purchase of stock	(1,895	)	(366	)	(140	)
Proceeds from exercise of stock options	118		313		99
Proceeds from borrowings	—		7,000		—
Repayment of borrowings	—		—		(1,500	)
Capital contribution to subsidiary	—		(4,000	)	—
Cash dividends	(1,110	)	(878	)	(543	)
Net cash provided by (used in) financing activities	(2,887	)	2,069		(2,084	)
Net Change in Cash and Cash Equivalents	(2,531	)	2,099		561

Cash and Cash Equivalents at Beginning of Year	3,060		961		400
Cash and Cash Equivalents at End of Year	$ 529		$ 3,060		$ 961

GENERAL INFORMATION FOR SHAREHOLDERS

Transfer Agent and Registrar: Registrar and Transfer Company 10 Commerce Drive Cranford, NJ 07016-3572 Tel: 1-800-368-5948 www.rtco.com		Shareholder and General Inquiries: River Valley Bancorp Attn: Matthew P. Forrester 430 Clifty Drive, P.O. Box 1590 Madison, Indiana 47250 Tel: (812) 273-4949 Fax: (812) 273-4944

Corporate Counsel: Lonnie D.Collins, Attorney 307 Jefferson Street Madison, Indiana 47250 Tel: (812) 265-3616 Fax: (812) 273-3143		Special Counsel: Barnes & Thornburg LLP 11 S. Meridian Street Indianapolis, Indiana 46204 Tel: (317) 236-1313 Fax: (317) 231-7433

Annual and Other Reports:

Additional copies of this Annual Report to Shareholders and copies of the most recent Form 10-K may be obtained without charge by contacting the Corporation.

Offices of River Valley Financial Bank:

Hilltop:		430 Clifty Drive
Downtown:		233 East Main Street
Drive thru:		401 East Main Street
Wal-Mart:		567 Ivy Tech Drive
Hanover:		10 Medical Plaza
Charlestown:		1025 Highway 62

Internet and E-MAIL Address: rvfbank.com

Annual Meeting:

The Annual Meeting of Shareholders of River Valley Bancorp will be held on Wednesday, April 20, 2005, at 3:00 PM, at 430 Clifty Drive, Madison, IN 47250.

DIRECTORS OF THE CORPORATION AND THE BANK

Fred W. Koehler Chairman	Matthew P. Forrester Director & President	Charles J. McKay Director

Robert W. Anger Director	Michael J. Hensley Director	***************

Jonnie L. Davis Director	L. Sue Livers Director	Lonnie D. Collins Secretary

EXECUTIVE OFFICERS OF RIVER VALLEY FINANCIAL BANK

Matthew P. Forrester President, CEO	Barbara J. Eades Vice President of Retail Banking	Loy M. Skirvin Vice President of Human Resources

Mark A. Goley Vice President of Lending	Larry C. Fouse Vice President of Finance	Vickie Grimes Internal Auditor

Anthony D. Brandon Vice President of Loan Administration	Deanna J. Liter Vice President of Data Services	John Muessel Vice President Trust Officer

	Gregory T. Siegrist Vice President Business Development

OFFICERS AND MANAGERS OF RIVER VALLEY FINANCIAL BANK

Loan Officers
Theresa A. Dryden
Sherri Furnish
Natasha Jenkins
Rick T. Nelson
Robert J. Schoenstein – AVP
Don Bennett

Customer Service Managers
Melissa Shelton
Debbie R. Finnegan
Rachael A. Goble
Sandy Stilwell
Jason Maxwell
Lacey Kelly

Other Managers

Rebecca Cole – Collection Officer
Laura Denning – Loan Processing Manager
Luann Nay – Loan Administrator
Teresa J. Smith – Data Processing Manager
Mary Ellen Wehner – Commercial Loan Operations Manager

Amy Straub – Compliance Manager

Amelia Melton – Accounting Manager

Mary Ellen McClelland – Executive Secretary

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M7I<>*&'V&]GQX5<$Y]FZ?)D!&X)R3A*9([S*W9Q?\P?^<4?R'_,J^O\`6=?\ MIQ6OF'4(IHY=8TJ6;3IQ/.TDANFC@=8);CG(7,L\,A8T#\E%,[1FSJNW/9SV M?[?TGY/MSLG1=J8`>(8=;@AGA&55Q1$Q+AEW2&X>J[<]G/9_M_2?D^W.R=%V MI@!XAAUN"&>$957%$3$N&7=(;A\4>9/^?;7YKP0V_H8LT(7YT_,#_HG%^=__5_\J?\`29J/_>.SH'_1,O\`\RC_`-R#_O99 M[_S9I=#_`,LG_P#`2TWB>-V'J=;Q\/#^8U^ICP5=\/@SP_5>_%?+:M[TNA_Y M9/\`^`EIO$\;L/4ZWCX>'\QK]3'@J[X?!GA^J]^*^6U;WX@\_?\`.$&N:?\` M\X^6?Y8+GS1=R:A-)I=K>>K8M;&"WM4:6$2D16R1-,Z1LC,HJ?=^;-X/^6=/^!?#VG[']H<79V?%E['Q:7'H]+',9 M::/Y.O`G.,Q+)DG&A9GD/%6[O!_RSI_P+X>T_8_M#B[.SXLO8^+2X]'I8YC+ M31_)UX$YQF)9,DXT+,\AXJW=FS9L]S? EX-23 11 rvb_10kex23.txt CONSENT OF BKD Exhibit 23 Consent of Independent Registered Public Accounting Firm We hereby consent to the incorporation by reference in the Registration Statement of River Valley Bancorp on Form S-8, File Number 333-58190, of our report, dated January 21, 2005, on our audits of the consolidated financial statements of River Valley Bancorp as of December 31, 2004 and 2003 and for each of the years in the three-year period ended December 31, 2004, which report is incorporated by reference in River Valley Bancorp's Annual Report on Form 10-KSB for the fiscal year ended December 31, 2004. /s/ BKD, LLP BKD, LLP Indianapolis, Indiana March 29, 2005 EX-31.1 12 rvb_10kex311.txt CEO CERTIFICATION Exhibit 31(1) CERTIFICATION I, Matthew P. Forrester, certify that: 1. I have reviewed this annual report on Form 10-KSB 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. Dated: March 30, 2005 /s/ Matthew P. Forrester ---------------------------------------- Matthew P. Forrester President and Chief Executive Officer EX-31.2 13 rvb_10kex312.txt CFO CERTIFICATION Exhibit 31(2) CERTIFICATION I, Larry C. Fouse, certify that: 1. I have reviewed this annual report on Form 10-KSB 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. Dated: March 30, 2005 /s/ Larry C. Fouse --------------------------------------- Larry C. Fouse Vice President of Finance EX-32 14 rvb_10kex32.txt 906 CERTIFICATION 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 30th day of March, 2005. /s/ Matthew P. Forrester /s/ Larry C. Fouse - ------------------------------------- ---------------------------------------- Matthew P. Forrester Larry C. Fouse President and Chief Executive Officer Vice President of Finance 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-----

TABLE OF CONTENTS

BUSINESS OF RIVER VALLEY

SELECTED CONSOLIDATED FINANCIAL INFORMATION AND OTHER DATA

SELECTED CONSOLIDATED FINANCIAL INFORMATION ANDOTHER DATA (CONTINUED)

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIALCONDITION AND RESULTS OF OPERATIONS

AVERAGE BALANCE, YIELD, RATE AND VOLUME DATA

River Valley Bancorp

River Valley Bancorp

December 31, 2004, 2003 and 2002

Contents

Report of Independent Registered Public Accounting Firm

River Valley BancorpConsolidated Balance SheetsDecember 31, 2004 and 2003

River Valley BancorpConsolidated Statements of IncomeYears Ended December 31, 2004, 2003 and 2002

River Valley BancorpConsolidated Statements of Comprehensive IncomeYears Ended December 31, 2004, 2003 and 2002

River Valley BancorpConsolidated Statements of Stockholders' EquityYears Ended December 31, 2004, 2003 and 2002

River Valley Bancorp

Consolidated Statements of Cash FlowsYears Ended December 31, 2004, 2003 and 2002

Note 1: Nature of Operations and Summary of Significant Accounting Policies

Note 2: Restriction on Cash and Due From Banks

Note 3: Investment Securities

Note 4: Loans and Allowance

Note 5: Premises and Equipment

Note 6: Deposits

Note 7: Borrowings

Note 8: Loan Servicing

Note 9: Income Tax

Note 10: Commitments and Contingent Liabilities

Note 11: Stockholders’ Equity

Note 12: Dividend and Capital Restrictions

Note 13: Regulatory Capital

Note 14: Employee Benefits

Note 15: Related Party Transactions

Note 16: Stock Option Plan

Note 17: Earnings Per Share

Note 18: Fair Values of Financial Instruments

Note 19: Condensed Financial Information (Parent Company Only)

Condensed Balance Sheets

Condensed Statements of Income

Condensed Statements of Cash Flows

GENERAL INFORMATION FOR SHAREHOLDERS

Annual and Other Reports:

Offices of River Valley Financial Bank:

Annual Meeting:

DIRECTORS OF THE CORPORATION AND THE BANK

EXECUTIVE OFFICERS OF RIVER VALLEY FINANCIAL BANK

OFFICERS AND MANAGERS OF RIVER VALLEY FINANCIAL BANK

SELECTED CONSOLIDATED FINANCIAL INFORMATION AND
OTHER DATA (CONTINUED)

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

River Valley Bancorp
Consolidated Balance Sheets
December 31, 2004 and 2003

River Valley Bancorp
Consolidated Statements of Income
Years Ended December 31, 2004, 2003 and 2002

River Valley Bancorp
Consolidated Statements of Comprehensive Income
Years Ended December 31, 2004, 2003 and 2002

River Valley Bancorp
Consolidated Statements of Stockholders' Equity
Years Ended December 31, 2004, 2003 and 2002

Consolidated Statements of Cash Flows
Years Ended December 31, 2004, 2003 and 2002