FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
---------------------------------
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 2-47541
RIVER VALLEY BANCORP
(Exact name of registrant as specified in its charter)
Indiana 35-1984567
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
303 Clifty Drive
Madison, Indiana 47250
(Address of principal (Zip Code)
executive office)
Registrant's telephone number, including area code: (812) 265-3421
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 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 filing requirements for the past 90
days.
Yes X No
As of May 11, 1998, the latest practicable date 1,190,250 shares of the
registrant's common stock, without par value, were issued and outstanding.
Page 1 of 16 pages
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River Valley Bancorp
INDEX
Page
PART I - FINANCIAL INFORMATION
Consolidated Statements of Financial Condition 3
Consolidated Statements of Earnings 4
Consolidated Statements of Comprehensive Income 5
Consolidated Statements of Cash Flows 6
Notes to Consolidated Financial Statements 8
Management's Discussion and Analysis of
Financial Condition and Results of
Operations 11
PART II - OTHER INFORMATION 15
SIGNATURES 16
2
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River Valley Bancorp
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(In thousands, except share data)
March 31, December 31,
ASSETS 1998 1997
<S> <C> <C>
Cash and due from banks $ 2,967 $ 3,542
Federal funds sold 1,100 300
Interest earning deposits in other financial institutions 1,331 1,026
------- -------
Cash and cash equivalents 5,398 4,868
Certificates of deposit in other financial institutions 598 897
Investment securities designated as available for sale - at market 775 772
Investment securities - at amortized cost, approximate market value of
$3,457 and $3,444 as of March 31, 1998 and December 31, 1997 3,500 3,500
Mortgage-backed securities designated as available for sale - at market 3,479 3,604
Mortgage-backed and related securities - at cost, approximate market
value of $4,820 and $5,432 as of March 31, 1998 and December 31, 1997 5,203 5,374
Loans receivable - net 107,827 111,319
Loans held for sale - at lower of cost or market 832 684
Office premises and equipment - at depreciated cost 2,113 2,065
Real estate acquired through foreclosure 82 82
Federal Home Loan Bank stock - at cost 943 943
Accrued interest receivable on loans 898 916
Accrued interest receivable on mortgage-backed and related securities 179 117
Accrued interest receivable on investments and interest-earning deposits 75 65
Goodwill, net of accumulated amortization 239 245
Cash surrender value of life insurance 791 776
Prepaid expenses and other assets 186 141
Prepaid federal income taxes 197 -
Deferred tax asset 533 681
------- -------
Total assets $133,848 $137,049
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits $113,621 $114,955
Advances from the Federal Home Loan Bank - 2,000
Advances by borrowers for taxes and insurance 64 53
Accrued interest payable 402 463
Other liabilities 1,440 1,524
Dividends payable 60 60
Accrued federal income taxes - 5
------- --------
Total liabilities 115,587 119,060
Stockholders' equity
Preferred stock - 2,000,000 shares without par value
authorized; no shares issued - -
Common stock - 5,000,000 shares without par value authorized;
1,190,250 shares issued and outstanding - -
Additional paid in capital 11,229 11,229
Retained earnings - substantially restricted 8,058 7,797
Shares acquired by stock benefit plans (1,005) (1,005)
Unrealized losses on securities designated as available for sale,
net of related tax effects (21) (32)
------- -------
Total stockholders' equity 18,261 17,989
------- -------
Total liabilities and stockholders' equity $133,848 $137,049
======= =======
</TABLE>
3
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River Valley Bancorp
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF EARNINGS
For the three months ended March 31,
(In thousands, except share data)
1998 1997
<S> <C> <C>
Interest income
Loans $2,280 $2,201
Mortgage-backed and related securities 128 206
Investment securities 56 87
Interest-earning deposits and other 66 117
----- -----
Total interest income 2,530 2,611
Interest expense
Deposits 1,194 1,250
Borrowings 34 4
----- -----
Total interest expense 1,228 1,254
----- -----
Net interest income 1,302 1,357
Provision for losses on loans 75 96
----- -----
Net interest income after provision for losses on loans 1,227 1,261
Other income
Insurance commissions - 12
Gain on sale of investment securities - 2
Gain (loss) on sale of loans 96 (4)
Gain on sale of office premises and equipment - 203
Service fees, charges and other operating 208 198
----- -----
Total other income 304 411
General, administrative and other expense
Employee compensation and benefits 585 561
Occupancy and equipment 94 128
Federal deposit insurance premiums 11 10
Amortization of goodwill 6 6
Data processing 32 70
Other operating 288 313
----- -----
Total general, administrative and other expense 1,016 1,088
----- -----
Earnings before income taxes 515 584
Income taxes
Current 52 250
Deferred 142 (7)
----- -----
Total income taxes 194 243
----- -----
NET EARNINGS $ 321 $ 341
===== =====
EARNINGS PER SHARE
Basic $.29 $.31
=== ===
Diluted $.28 $.31
=== ===
</TABLE>
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River Valley Bancorp
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the three months ended March 31,
(In thousands)
1998 1997
<S> <C> <C>
Net earnings $321 $341
Unrealized gains (losses) during the period 11 (47)
---- ----
Comprehensive income $332 $294
=== ===
</TABLE>
5
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River Valley Bancorp
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the three months ended March 31,
(In thousands)
1998 1997
<S> <C> <C>
Cash flows from operating activities:
Net earnings for the period $ 321 $ 341
Adjustments to reconcile net earnings to net cash
provided by (used in) operating activities:
Amortization of premiums and discounts on
investments and mortgage-backed securities - net 23 1
Gain on sale of investment securities designated as available for sale - (2)
Loans originated for sale in the secondary market (5,676) (944)
Proceeds from sale of loans in the secondary market 5,562 1,072
(Gain) loss on sale of loans (34) 4
Amortization of deferred loan origination costs 24 20
Provision for losses on loans 75 96
Depreciation and amortization 55 49
Amortization of goodwill 6 6
Proceeds from sale of office premises and equipment - 407
Gain on sale of office premises and equipment - (203)
Increase (decrease) in cash due to changes in:
Accrued interest receivable on loans 18 49
Accrued interest receivable on mortgage-backed and related securities (62) (8)
Accrued interest receivable on investments and interest-
earning deposits (10) 113
Prepaid expenses and other assets (45) (26)
Accrued interest payable (61) (39)
Other liabilities (84) 14
Income taxes
Current (202) 95
Deferred 142 (7)
------- -----
Net cash provided by operating activities 52 1,038
Cash flows provided by (used in) investing activities:
Proceeds from maturity of investment securities - 2,000
Proceeds from sale of investment securities designated as available for sale - 2,002
Purchase of mortgage-backed securities - (67)
Principal repayments on mortgage-backed securities 287 650
Loan principal repayments 12,105 7,251
Loan disbursements (8,712) (7,225)
Purchase of office equipment (103) (9)
(Increase) decrease in certificates of deposit in other financial institutions - net 299 (199)
Increase in cash surrender value of life insurance (15) (11)
------- -----
Net cash provided by investing activities 3,861 4,392
------- -----
Net cash provided by operating and investing
activities (subtotal carried forward) 3,913 5,430
------- -----
</TABLE>
6
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River Valley Bancorp
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
For the three months ended March 31,
(In thousands)
1998 1997
<S> <C> <C>
Net cash provided by operating and investing
activities (subtotal brought forward) $3,913 $5,430
Cash flows provided by (used in) financing activities:
Decrease in deposit accounts (1,334) (6,995)
Proceeds from Federal Home Loan Bank advances 1,000 -
Repayment of Federal Home Loan Bank advances (3,000) (600)
Dividends paid on common stock (60) -
Advances by borrowers for taxes and insurance 11 14
----- -----
Net cash used in financing activities (3,383) (7,581)
----- -----
Net increase (decrease) in cash and cash equivalents 530 (2,151)
Cash and cash equivalents at beginning of period 4,868 8,685
----- -----
Cash and cash equivalents at end of period $5,398 $6,534
===== =====
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Federal income taxes $ - $ 108
===== =====
Interest on deposits and borrowings $1,289 $1,293
===== =====
Supplemental disclosure of noncash investing activities:
Transfers from loans to real estate acquired through foreclosure $ - $ 82
===== =====
Unrealized gains (losses) on securities designated as available
for sale, net of related tax effects $ 11 $ (47)
===== =====
Recognition of mortgage servicing rights in accordance with
SFAS No. 125 $ 62 $ -
===== ====
</TABLE>
7
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River Valley Bancorp
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the three month periods ended March 31, 1998 and 1997
River Valley Bancorp (the "Corporation") is a financial institution holding
company whose activities are primarily limited to holding the stock of River
Valley Financial Bank ("River Valley Financial" or the "Bank"). The Bank
conducts a general banking business in southeastern Indiana which consists of
attracting deposits from the general public and applying those funds to the
origination of loans for consumer, residential and commercial purposes. River
Valley Financial's profitability is significantly dependent on net interest
income, which is the difference between interest income generated from
interest-earning assets (i.e. loans and investments) and the interest expense
paid on interest-bearing liabilities (i.e. customer deposits and borrowed
funds). Net interest income is affected by the relative amount of
interest-earning assets and interest-bearing liabilities and the interest
received or paid on these balances. The level of interest rates paid or received
by the Bank can be significantly influenced by a number of competitive factors,
such as governmental monetary policy, that are outside of management's control.
1. Basis of Presentation
The accompanying unaudited consolidated financial statements were prepared in
accordance with instructions for Form 10-QSB and, therefore, do not include
information or footnotes necessary for a complete presentation of financial
position, results of operations and cash flows in conformity with generally
accepted accounting principles. Accordingly, these financial statements should
be read in conjunction with the consolidated financial statements and notes
thereto of the Corporation included in the Annual Report on Form 10-KSB for the
year ended December 31, 1997. However, in the opinion of management, all
adjustments (consisting of only normal recurring accruals) which are necessary
for a fair presentation of the financial statements have been included. The
results of operations for the three month period ended March 31, 1998 are not
necessarily indicative of the results which may be expected for the entire year.
2. Principles of Consolidation
The consolidated financial statements include the accounts of the Corporation
and its subsidiary, the Bank and the Bank's subsidiary, Madison First Service
Corporation ("First Service"). All significant intercompany balances and
transactions have been eliminated in the accompanying consolidated financial
statements.
8
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River Valley Bancorp
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the three month periods ended March 31, 1998 and 1997
3. Effect of Recent Accounting Pronouncements
In June 1996, the Financial Accounting Standards Board (the "FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 125, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of Liabilities",
that provides accounting guidance on transfers of financial assets, servicing of
financial assets, and extinguishment of liabilities. SFAS No. 125 introduces an
approach to accounting for transfers of financial assets that provides a means
of dealing with more complex transactions in which the seller disposes of only a
partial interest in the assets, retains rights or obligations, makes use of
special purpose entities in the transaction, or otherwise has continuing
involvement with the transferred assets. The new accounting method, referred to
as the financial components approach, provides that the carrying amount of the
financial assets transferred be allocated to components of the transaction based
on their relative fair values. SFAS No. 125 provides criteria for determining
whether control of assets has been relinquished and whether a sale has occurred.
If the transfer does not qualify as a sale, it is accounted for as a secured
borrowing. Transactions subject to the provisions of SFAS No. 125 include, among
others, transfers involving repurchase agreements, securitizations of financial
assets, loan participations, factoring arrangements, and transfers of
receivables with recourse.
An entity that undertakes an obligation to service financial assets recognizes
either a servicing asset or liability for the servicing contract (unless related
to a securitization of assets, and all the securitized assets are retained and
classified as held-to-maturity). A servicing asset or liability that is
purchased or assumed is initially recognized at its fair value. Servicing assets
and liabilities are amortized in proportion to and over the period of estimated
net servicing income or net servicing loss and are subject to subsequent
assessments for impairment based on fair value.
SFAS No. 125 provides that a liability is removed from the balance sheet only if
the debtor either pays the creditor and is relieved of its obligation for the
liability or is legally released from being the primary obligor.
SFAS No. 125 is effective for transfers and servicing of financial assets and
extinguishment of liabilities occurring after December 31, 1997, and is to be
applied prospectively. Earlier or retroactive application is not permitted.
Management adopted SFAS No. 125 effective January 1, 1998, as required, without
material effect on River Valley's consolidated financial position or results of
operations.
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income."
SFAS No. 130 establishes standards for reporting and display of comprehensive
income and its components (revenues, expenses, gains and losses) in a full set
of general-purpose financial statements. SFAS No. 130 requires that all items
that are required to be recognized under accounting standards as components of
comprehensive income be reported in a financial statement that is displayed with
the same prominence as other financial statements. It does not require a
specific format for that financial statement but requires that an enterprise
display an amount representing total comprehensive income for the period in that
financial statement.
9
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River Valley Bancorp
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. Effect of Recent Accounting Pronouncements (continued)
SFAS No. 130 requires that an enterprise (a) classify items of other
comprehensive income by their nature in a financial statement and (b) display
the accumulated balance of other comprehensive income separately from retained
earnings and additional paid-in capital in the equity section of a statement of
financial position. SFAS No. 130 is effective for fiscal years beginning after
December 15, 1997. Reclassification of financial statements for earlier periods
provided for comparative purposes is required. Management adopted SFAS No. 130
effective January 1, 1998, as required, without material adverse effect on the
Corporation's financial statements.
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information." SFAS No. 131 significantly changes the way
that public business enterprises report information about operating segments in
annual financial statements and requires that those enterprises report selected
information about reportable segments in interim financial reports issued to
shareholders. It also establishes standards for related disclosures about
products and services, geographic areas and major customers. SFAS No. 131 uses a
"management approach" to disclose financial and descriptive information about
the way that management organizes the segments within the enterprise for making
operating decisions and assessing performance. For many enterprises, the
management approach will likely result in more segments being reported. In
addition, SFAS No. 131 requires significantly more information to be disclosed
for each reportable segment than is presently being reported in annual financial
statements and also requires that selected information be reported in interim
financial statements. SFAS No. 131 is effective for fiscal years beginning after
December 15, 1997. SFAS No. 131 is not expected to have a material impact on the
Corporation's financial statements.
4. Earnings Per Share
Basic earnings per share is computed based upon the weighted-average shares
outstanding during the period, less shares in the ESOP that are unallocated and
not committed to be released. Weighted-average common shares outstanding, which
gives effect to 83,124 and 95,220 unallocated ESOP shares at March 31, 1998 and
1997, respectively, totaled 1,107,126 and 1,095,030 for the three month periods
ended March 31, 1998 and 1997, respectively.
Diluted earnings per share is computed taking into consideration common shares
outstanding and dilutive potential common shares to be issued under the
Corporation's stock option plan. Weighted-average common shares deemed
outstanding for purposes of computing diluted earnings per share totaled
1,131,340 and 1,095,030 for the three month periods ended March 31, 1998 and
1997, respectively.
5. Reclassifications
Certain reclassifications have been made to the 1997 consolidated financial
statements to conform to the March 31, 1998 presentation.
10
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River Valley Bancorp
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
For the three month periods ended March 31, 1998 and 1997
Forward-Looking Statements
In addition to historical information contained herein, the following discussion
contains forward-looking statements that involve risks and uncertainties.
Economic circumstances, the Corporation's operations and the Corporation'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 changes in the economy
and interest rates in the nation and the Corporation's market area generally.
Some of the forward-looking statements included herein are the statements
regarding management's determination of the amount and adequacy of the allowance
for losses on loans, the effect of the year 2000 on information technology
systems and the effect of certain recent accounting pronouncements.
Discussion of Financial Condition Changes from December 31, 1997 to March 31,
1998
At March 31, 1998, River Valley's consolidated assets totaled $133.8 million, a
decrease of $3.2 million, or 2.3%, from the December 31, 1997 total of $137.0
million. The decrease in assets resulted primarily from a decrease in the
deposit portfolio of $1.3 million and a decrease in advances from the Federal
Home Loan Bank of $2.0 million, which were partially offset by an increase in
undistributed net earnings of $261,000.
Liquid assets (i.e., cash, federal funds sold, interest-earning deposits and
certificates of deposit) increased by $231,000 from December 31, 1997 levels, to
a total of $6.0 million at March 31, 1998. Mortgage-backed securities decreased
by $296,000, or 3.3%, to a total of $8.7 million at March 31, 1998, primarily
due to principal repayments of $287,000.
Loans receivable, including loans held for sale, totaled $108.7 million at March
31, 1998, a decrease of $3.3 million, or 3.0%, from the $112.0 million total at
December 31, 1997. The decrease resulted primarily from principal repayments of
$11.9 million and sales of $5.5 million, which were partially offset by loan
originations during the period of $14.4 million. Loan origination volume during
the current quarter exceeded that of the 1997 quarter by $6.2 million, or 72.2%.
The Corporation's consolidated allowance for loan losses totaled $1.1 million
and $1.2 million at March 31, 1998 and December 31, 1997, respectively, which
represented 1.0% of total loans at those dates. Nonperforming loans (defined as
loans delinquent greater than 90 days and loans on nonaccrual status) totaled
$745,000 and $718,000 at March 31, 1998 and December 31, 1997, respectively.
Although management believes that its allowance for loan losses at March 31,
1998, 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.
11
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River Valley Bancorp
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
For the three month periods ended March 31, 1998 and 1997
Discussion of Financial Condition Changes from December 31, 1997 to March 31,
1998 (continued)
Deposits decreased by $1.3 million, or 1.2%, to a total of $113.6 million,
compared to the $115.0 million total at December 31, 1997. The decrease is
primarily attributed to increased competition from other local institutions.
There were no advances from the Federal Home Loan Bank outstanding at March 31,
1998, a decrease of $2.0 million, or 100%, from the December 31, 1997 balance.
The decrease was due to current period repayments of $3.0 million, offset by
borrowings of $1.0 million. Management decided to utilize loan repayments to
repay borrowings.
Stockholders' equity totaled $18.3 million at March 31, 1998, an increase of
$272,000, or 1.5%, over the $18.0 million total at December 31, 1997. The
increase resulted primarily from current period earnings of $321,000 and an
$11,000 decrease in the unrealized losses on securities designated as available
for sale, partially offset by the declaration and payment of dividends totaling
$60,000. The Bank is required to maintain minimum regulatory capital pursuant to
federal regulations. At March 31, 1998, the Bank's regulatory capital exceeded
all applicable regulatory capital requirements.
Comparison of Results of Operations for the Three Months Ended March 31, 1998
and 1997
General
River Valley's net earnings for the three months ended March 31, 1998, totaled
$321,000, a decrease of $20,000, from the $341,000 net earnings reported in the
comparable 1997 period. The decrease in earnings in the 1998 period is primarily
attributable to a decrease in the gain on sale of office premises and equipment
of $203,000, which was partially offset by an increase of $100,000 in the gain
on sale of loans, a decrease of $72,000 in general, administrative and other
expense, a $49,000 decrease in the provision for federal income taxes and a
$21,000 decrease in the provision for losses on loans.
Net Interest Income
Total interest income for the three months ended March 31, 1998, amounted to
$2.5 million, a decrease of $81,000, or 3.1%, from the comparable period in
1997, reflecting the effects of decline in average interest-earning assets
outstanding, partially offset by an increase in yield year-to-year. Interest
income on loans and mortgage-backed securities totaled $2.4 million for each of
the three months ended March 31, 1998 and 1997. Interest income on investments
and interest-earning deposits decreased by $82,000, or 40.2%, due to a decrease
in the average balance outstanding of $4.4 million and an approximate 75 basis
point decrease in yield from the comparable 1997 period.
12
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River Valley Bancorp
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
For the three month periods ended March 31, 1998 and 1997
Comparison of Results of Operations for the Three Months Ended March 31, 1998
and 1997 (continued)
Net Interest Income (continued)
Interest expense on deposits decreased by $56,000, or 4.5%, to a total of $1.2
million for the three months ended March 31, 1998, due primarily to a $8.8
million decrease in the average balance of deposits outstanding, which was
partially offset by an increase in the weighted-average cost of deposits of 11
basis points, to 4.15% in 1998. Interest expense on borrowings totaled $34,000
for the three months ended March 31, 1998, an increase of $30,000 over the
comparable period in 1997. The increase resulted primarily from an increase in
average borrowings outstanding year-to-year, coupled with an increase in average
cost.
As a result of the foregoing changes in interest income and interest expense,
net interest income decreased by $55,000, or 4.1%, for the three months ended
March 31, 1998, compared to the comparable period in 1997. The interest rate
spread increased by approximately 17 basis points for the three months ended
March 31, 1998, to 4.20% from 4.03% in the 1997 period, while the net interest
margin remained virtually unchanged at 4.03%.
Provision for Losses on Loans
A provision for losses on loans is charged to earnings to bring the total
allowance for loan losses to a level considered appropriate by management based
upon historical experience, the volume and type of lending conducted by the
Bank, the status of past due principal and interest payments, general economic
conditions, particularly as such conditions relate to the Bank's market area,
and other factors related to the collectibility of the Bank's loan portfolio. As
a result of such analysis, management recorded a $75,000 provision for losses on
loans for the three months ended March 31, 1998. While management believes that
the allowance for losses on loans is adequate at March 31, 1998, based upon the
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 decreased by $107,000, or 26.0%, for the three months ended March
31, 1998, as compared to the same period in 1997, due primarily to a $203,000
gain on sale of office premises and equipment recorded during the three months
ended March 31, 1997, coupled with a $12,000 decrease in insurance commissions,
which were partially offset by a $100,000 increase on gain on sale of loans and
a $10,000 increase from service fees, charges, and other operating income. The
gain on sale of office premises resulted from River Valley's sale of a branch
office facility, located in Hanover, Indiana, which was consummated on February
28, 1997, as required in accordance with the terms of regulatory approval of the
acquisition of Citizens. The decline in insurance commissions resulted from
River Valley's sale of its insurance agency subsidiary.
13
<PAGE>
River Valley Bancorp
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
For the three month periods ended March 31, 1998 and 1997
Comparison of Results of Operations for the Three Months Ended March 31, 1998
and 1997 (continued)
General, Administrative and Other Expense
General, administrative and other expense decreased by $72,000, or 6.6%, during
the three months ended March 31, 1998, compared to the same period in 1997. This
decrease resulted primarily from a $38,000, or 54.3%, decrease in data
processing expense, a $34,000, or 26.6%, decrease in occupancy and equipment
expense and a $25,000, or 8.0%, decrease in other operating expense, which were
partially offset by a $24,000, or 4.3%, increase in employee compensation and
benefits. The decrease in general, administrative and other expense can be
partially attributed to the economies recognized from the merger of the two
institutions in November 1997 and the sale of the Hanover branch during February
1997.
Income Taxes
The provision for income taxes decreased by $49,000, or 20.2%, for the three
months ended March 31, 1998, as compared to the same period in 1997. This
decrease resulted primarily from a decrease in net earnings before tax of
$69,000, or 11.8%. The effective tax rates were 37.7% and 41.6% for the three
months ended March 31, 1998 and 1997, respectively.
Other Matters
As with all providers of financial services, the Bank's operations are heavily
dependent on information technology systems. The Bank is addressing the
potential problems associated with the possibility that the computers that
control or operate the Bank's information technology system and infrastructure
may not be programmed to read four-digit date codes and, upon arrival of the
year 2000, may recognize the two-digit code "00" as the year 1900, causing
systems to fail to function or to generate erroneous data. The Bank is working
with the companies that supply or service its information technology systems to
identify and remedy any year 2000 related problems.
As of the date of this Form 10-QSB, the Bank has not identified any specific
expenses that are reasonably likely to be incurred by the Bank in connection
with this issue and does not expect to incur significant expense to implement
the necessary corrective measures. No assurance can be given, however, that
significant expense will not be incurred in future periods. In the event that
the Bank is ultimately required to purchase replacement computer systems,
programs and equipment, or incur substantial expense to make the Bank's current
systems, programs and equipment year 2000 compliant, the Bank's net earnings and
financial condition could be adversely affected.
In addition to possible expense related to its own systems, the Bank could incur
losses if loan payments are delayed due to year 2000 problems affecting any
major borrowers in the Bank's primary market area. Because the Bank's loan
portfolio is highly diversified with regard to individual borrowers and types of
businesses and the Bank's primary market area is not significantly dependent
upon one employer or industry, the Bank does not expect any significant or
prolonged difficulties that will affect net earnings or cash flow.
14
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River Valley Bancorp
PART II
ITEM 1. Legal Proceedings
Not applicable
ITEM 2. Changes in Securities
None
ITEM 3. Defaults Upon Senior Securities
Not applicable
ITEM 4. Submission of Matters to a Vote of Security Holders
None.
ITEM 5. Other Information
None.
ITEM 6. Exhibits and Reports on Form 8-K
Reports on Form 8-K: None
Exhibit 27: Financial Data Schedule for the three
month period ended March 31, 1998
15
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: May 11, 1998 By: /s/James E. Fritz
----------------------------- -----------------
James E. Fritz
CEO/President
Date: May 11, 1998 By: /s/Larry C. Fouse
----------------------------- -----------------
Larry C. Fouse
Chief Financial Officer
16
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 2,967
<INT-BEARING-DEPOSITS> 1,929
<FED-FUNDS-SOLD> 1,100
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 4,254
<INVESTMENTS-CARRYING> 8,703
<INVESTMENTS-MARKET> 8,277
<LOANS> 108,659
<ALLOWANCE> 1,103
<TOTAL-ASSETS> 133,848
<DEPOSITS> 113,621
<SHORT-TERM> 0
<LIABILITIES-OTHER> 1,966
<LONG-TERM> 0
0
0
<COMMON> 0
<OTHER-SE> 18,261
<TOTAL-LIABILITIES-AND-EQUITY> 133,848
<INTEREST-LOAN> 2,280
<INTEREST-INVEST> 184
<INTEREST-OTHER> 66
<INTEREST-TOTAL> 2,530
<INTEREST-DEPOSIT> 1,194
<INTEREST-EXPENSE> 1,228
<INTEREST-INCOME-NET> 1,302
<LOAN-LOSSES> 75
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1,016
<INCOME-PRETAX> 515
<INCOME-PRE-EXTRAORDINARY> 515
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 321
<EPS-PRIMARY> .29
<EPS-DILUTED> .28
<YIELD-ACTUAL> 4.15
<LOANS-NON> 745
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,160
<CHARGE-OFFS> 171
<RECOVERIES> 39
<ALLOWANCE-CLOSE> 1,103
<ALLOWANCE-DOMESTIC> 23
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 1,080
</TABLE>
