River Valley Bancorp

  P.O. Box 1590 Madison, Indiana 47250-0590 (812) 273-4949 Fax - (812) 273-2883

To Our Shareholders, Customers, and Friends:

It is my pleasure to present to you River Valley  Bancorp's fourth Annual Report
to Shareholders covering the year ending December 31, 1999.

The world was  enamored  in 1999 as we waited,  watched and  anticipated  change
associated  with the  passing of a century.  In 1999,  the impetus for change at
River Valley Bancorp came from new management  and management  philosophy.  Many
will regard the passing of a century as a defining  moment in time;  history too
will decide if 1999 was a  redefining  moment in the life of this  organization.
While our  Corporation has its origins dating back nearly 125 years, we are very
mindful  that our  commitment  to the  future,  not the past,  will  define  our
successes  in this new  century.  We are very  proud  of our  heritage,  but are
confident  that we are using our past as an agent for change rather than a focus
for the future.

If 1999 is a defining  moment for the future,  it also marked the culmination of
an evolution in merging the cultures of two former  banking  organizations  into
one. River Valley  Bancorp  reflects the strengths of what had been two distinct
entities.  Today the  organization  is recognized in our communities as the only
locally  owned  and   controlled   bank.   The  Bank  has  developed  a  service
promise...Expect A Difference!..that reinforces our organization's commitment to
customer service and community  involvement.  Our employees are dedicated to the
premise that service is much more than a slogan,  it's a commitment  that stands
the test of time.

Operationally  1999 was a year of  transitions as well, as net earnings for 1999
totaled  $1,039,000,   or  basic  earnings  per  share  of  $1.03,  compared  to
$1,253,000,  or $1.13 basic earnings per share,  reported in 1998.  Current year
earnings were negatively  impacted by decreased  secondary market activity which
resulted  in $74,000 in gains on sale of loans,  compared  to  $339,000 in gains
recorded in 1998. The current year reflects a modest decrease in total operating
expenses while including a $150,000 pre-tax expense  associated with a severance
agreement.   During  the  fourth  quarter  of  1999,  management  implemented  a
comprehensive plan to control operating expenses.

During 1999, and primarily in the last six months of the year,  the  Corporation
aggressively  repurchased  shares to be held as treasury shares.  For the period
ended December 31, 1999, we repurchased a total of 202,943 shares for a total of
$2.7  million,  or an  average  price  of  $13.42.  The  current  book  value of
outstanding  shares as of December 31, 1999 was $17.33  compared to $15.86 as of
December 31, 1998. The Board of Directors declared dividends totaling $0.265 per
share during the year, an increase from the $0.22 recorded the year prior.

Additionally,  during 1999, your Corporation  diligently worked on nonperforming
assets. As of December 31, 1999, nonperforming assets totaled $857,000, or 0.62%
of total  assets  compared to $1.9  million,  or 1.47% of total  assets from the
prior  year-end.  The Corporation  was able to reduce its  nonperforming  assets
without  significantly  raising  its loan  losses.  Net losses  for fiscal  1999
totaled  $95,000 as compared to $74,000 in fiscal 1998. As a result of improving
trends and collection  efforts,  the Corporation was able to lower its provision
for losses on loans from $275,000 in fiscal 1998 to $140,000 in 1999.

While 1999 was a year marked by transitions  and changes,  we believe that these
changes have laid the foundation for  significant  improvements  in the years to
come.

Respectfully,

/s/ Matthew P. Forrester
Matthew P. Forrester
President, CEO


<PAGE>

                              River Valley Bancorp

                            BUSINESS OF RIVER VALLEY

River  Valley  Bancorp  ("River  Valley"  or  the  "Corporation"),   an  Indiana
corporation, was formed in 1996 for the primary purpose of purchasing all of the
issued and  outstanding  common  stock of River  Valley  Financial  Bank ("River
Valley  Financial" or the "Bank") in its  conversion  from mutual to stock form.
The conversion  offering  culminated with the sale of 1,190,250 common shares at
an initial offering price of $10.00 per share. In 1996, the Corporation utilized
approximately  $3.0 million of the net conversion  proceeds to purchase 95.6% of
the outstanding common shares of Citizens National Bank of Madison  ("Citizens")
in a transaction that was accounted for using the purchase method of accounting.
River Valley Financial and Citizens merged in 1997.  Future  references to River
Valley,  River Valley Financial and Citizens are utilized herein, as the context
requires.

The activities of River Valley have been limited  primarily to holding the stock
of the Bank.  River Valley Financial was organized in 1875 under the laws of the
United States of America.  River Valley Financial  conducts  operations from its
five  full-service  office locations in Jefferson County 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 921,972 common shares of River Valley Bancorp outstanding at February
21, 2000, held of record by 402  shareholders.  The number of shareholders  does
not reflect  the number of persons or entities  who may hold stock in nominee or
"street name." The Corporation's common shares are listed on The Nasdaq SmallCap
Market ("Nasdaq"), under the symbol "RIVR".

Presented  below are the high and low sale prices for the  Corporation's  common
shares,  as well as cash  distributions  paid  thereon for each quarter of 1999,
1998 and 1997.  Such  sales  prices do not  include  retail  financial  markups,
markdowns or commissions. Information relating to sales prices has been obtained
from Nasdaq.


<PAGE>


                 MARKET PRICE OF THE CORPORATION'S COMMON SHARES
                   AND RELATED SHAREHOLDER MATTERS (CONTINUED)

Quarter Ended                High        Low         Cash Distributions (1)

1999

  December 31, 1999          $12.63      $11.50                  $0.075
  September 30, 1999          14.38       13.00                   0.065
  June 30, 1999               14.75       12.25                   0.065
  March 31, 1999              15.75       13.13                   0.060

1998

  December 31, 1998          $16.00      $13.25                  $0.060
  September 30, 1998          19.00       13.75                   0.055
  June 30, 1998               20.75       18.38                   0.055
  March 31, 1998              19.75       18.50                   0.050

1997

  December 31, 1997          $19.00      $16.25                  $0.050
  September 30, 1997          17.25       14.75                   0.040
  June 30, 1997               15.00       13.63                   0.040
  March 31, 1997              15.50       13.00                     -




(1)  River  Valley  Financial  had filed a  request  with the  Internal  Revenue
     Service ("IRS") in 1995 to deconsolidate the Bank's  subsidiaries in future
     federal  income  tax  return  filings.  In  August  1998,  the  Corporation
     finalized a closing agreement with the IRS that enabled the Corporation and
     each of its subsidiaries to file separate returns. By definition,  the 1998
     and 1997 cash distributions have been deemed a tax-free return of capital.

The high and low sales prices for River Valley's common shares between  December
31, 1999 and February 21, 2000 were $12.63 and $12.00, 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 became effective on April 1, 1999.
Because the Bank is a subsidiary  of a savings and loan holding  company,  it is
required  to file a  notice  with  the OTS 30 days  before  making  any  capital
distributions  to the Holding  Company.  It may also have to file an application
for approval of a proposed capital  distribution with the OTS if the Bank is not
eligible for expedited  treatment under the OTS's application  processing rules,
or the total amount of all capital distributions, including the proposed capital
distribution,  for the applicable  calendar year would exceed an amount equal to
the  Bank's net  earnings  for that year to date plus the  Bank's  retained  net
earnings for the preceding two years. The Bank must also file an application for
approval  of  a  proposed  capital   distribution  if,  following  the  proposed
distribution,  the Bank would not be at least adequately  capitalized  under the
OTS prompt corrective action regulations,  or if the proposed distribution would
violate a  prohibition  contained  in any  applicable  statute,  regulation,  or
agreement between the OTS or the FDIC.


<PAGE>

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.  All financial  information  prior to 1996
relates to River Valley Financial as a mutual savings association.
<TABLE>
<CAPTION>


Selected consolidated financial condition data:  (1)                              At December 31,
                                                 1999            1998         1997           1996           1995
<S>                                          <C>             <C>          <C>            <C>             <C>
Total amount of:                                                          (In thousands)

  Assets                                     $138,695        $138,369     $136,933       $145,541        $86,604
  Loans receivable - net (2)                  115,131         112,385      111,887        108,994         57,945
  Cash and cash equivalents (3)                 8,052          12,307        5,765          8,785          2,689
  Mortgage-backed and related securities (4)    4,209           5,986        8,978         12,846          9,917
  Investment securities (4)                     5,230           1,283        4,272          8,948         13,018
  Deposits                                    114,251         118,151      114,955        125,656         75,233
  FHLB advances and other borrowings            6,500             270        2,000          1,100          4,471
  Shareholders' equity- net (5)                16,866          18,613       17,989         16,805          6,574


Summary of consolidated earnings data: (1)                               Year ended December 31,
                                                 1999            1998         1997           1996           1995
                                                                     (In thousands, except share data)

Total interest income                          $9,734         $10,108      $10,362     $    5,875       $  5,794
Total interest expense                          4,617           4,842        5,049          3,412          3,594
                                                -----         -------      -------      ---------        -------
     Net interest income                        5,117           5,266        5,313          2,463          2,200

Provision for losses on loans                     140             275          304             22            150
                                               ------        --------     --------    -----------       --------
Net interest income after provision for
  losses on loans                               4,977           4,991        5,009          2,441          2,050

Other income                                      844           1,188        1,134            578            362
General, administrative and other expense       4,080           4,093        4,003          2,870          1,966
                                                -----         -------    ---------      ---------        -------

Earnings before income tax expense              1,741           2,086        2,140            149            446
Income tax expense                                702             833          830             76            188
                                               ------        --------     --------    -----------       --------

     Net earnings                              $1,039        $  1,253     $  1,310   $         73      $     258
                                                =====         =======      =======    ===========       ========

     Basic earnings per share (6)               $1.03          $1.13        $1.20             N/A            N/A
                                                 ====           ====         ====             ===            ===
     Diluted earnings per share (6)             $1.03          $1.12        $1.18             N/A            N/A
                                                 ====           ====         ====             ===            ===
</TABLE>




(1)  River Valley acquired  Citizens  National Bank as of December 20, 1996. The
     acquisition  was accounted for using the purchase method of accounting and,
     therefore,  the 1996  financial  statements  reflect  only  eleven  days of
     activity with respect to the acquisition.
(2)  Includes loans held for sale.
(3)  Includes certificates of deposit in other financial institutions.
(4)  Includes securities designated as available for sale.
(5)  Consists solely of retained earnings at December 31, 1995.
(6)  Earnings per share is not  applicable for the years ended December 31, 1996
     and 1995 as River Valley converted to stock form in 1996.


<PAGE>

                 SELECTED CONSOLIDATED FINANCIAL INFORMATION AND
                             OTHER DATA (CONTINUED)

Selected financial ratios and other data:
<TABLE>
<CAPTION>

                                                                          Year ended December 31,

                                                 1999            1998           1997             1996            1995

<S>                                             <C>            <C>             <C>              <C>            <C>
Interest rate spread during period              3.63%          3.66%           3.64%            2.79%          2.36%
Net yield on interest-earning assets (1)        3.94           4.08            4.00             2.98           2.61
Return on assets (2)                            0.76           0.92            0.99             0.08           0.30
Return on equity (3)                            5.87           6.85            7.53             1.05           4.01
Equity to assets (4)                           12.16          13.45           13.12            11.55           7.59
Average interest-earning assets to
  average interest-bearing liabilities        108.81         111.07          109.56           104.64         105.62
Nonperforming assets to total assets (4)        0.62           1.47            0.58             0.56           0.01
Allowance for loan losses to total
  loans outstanding (4)                         1.28           1.33            1.13             1.06           0.70
Allowance for loan losses to
  nonperforming loans (4)                     164.41          75.78          177.72           145.30       5,087.50
Net charge-offs to average total
  loans outstanding                             0.08           0.06            0.20             0.01           0.01
General, administrative and other
  expense to average assets (5) (6)             2.97           3.01            2.83             3.33           2.26
Dividends as percent of net earnings           26.66          20.33           11.83              N/A            N/A
Numbers of full service offices                 5              5               6                6              3
</TABLE>


(1)  Net interest income divided by average interest-earning assets.
(2)  Net earnings divided by average total assets.
(3)  Net earnings divided by average total equity.
(4)  At end of period.
(5)  General, administrative and other expense divided by average total assets.
(6)  Includes a $503,000  charge  (or .94% of  weighted-average  assets) in 1996
     related to the SAIF recapitalization assessment.



<PAGE>

                              River Valley Bancorp

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

General

As discussed  previously,  River Valley was incorporated for the primary purpose
of owning all of the outstanding shares of River Valley Financial.  As a result,
the  discussion  that  follows  focuses on River  Valley  Financial's  financial
condition and results of  operations  for the periods  presented.  The following
discussion  and analysis of the financial  condition as of December 31, 1999 and
River  Valley's  results of operations  for periods prior to that date should be
read in conjunction  with the  consolidated  financial  statements and the notes
thereto, included elsewhere in this Annual Report.

In  addition to the  historical  information  contained  herein,  the  following
discussion   contains   forward-looking   statements   that  involve  risks  and
uncertainties. River Valley's operations and River Valley's actual results could
differ  significantly  from those discussed in the  forward-looking  statements.
Some of the  factors  that could cause or  contribute  to such  differences  are
discussed  herein  but also  include,  but are not  limited  to,  changes in the
economy and interest rates in the nation and River Valley's general market area.
The  forward-looking  statements  contained herein include those with respect to
the following matters:

1.   Management's  determination  as to the amount and adequacy of the loan loss
     allowance;

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

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

Discussion of Changes in Financial  Condition from December 31, 1998 to December
31, 1999

At December 31, 1999, River Valley's consolidated assets totaled $138.7 million,
representing an increase of $326,000,  or .2%, over the December 31, 1998 total.
The modest increase in assets was funded primarily by a $6.2 million increase in
borrowings.  Deposits  decreased  by $3.9  million  from  $118.2  million  as of
December 31,  1998,  to $114.3  million as of December  31, 1999.  Shareholders'
equity  totaled  $16.9  million at December  31,  1999,  a net  decrease of $1.7
million from the $18.6  million  total as of December 31, 1998.  The decrease in
equity was attributed primarily to the repurchase of approximately $2.7 million,
or 202,943 shares of common stock held as treasury shares.

Liquid assets (i.e.,  cash,  federal funds sold,  interest-earning  deposits and
certificates  of deposit)  decreased  by $4.2  million  from  December  31, 1998
levels, to a total of $8.1 million at December 31, 1999.  Investment  securities
totaled  $5.2  million at December  31,  1999,  an increase of $3.9 million over
December  31, 1998 levels.  The  increase  was due to  purchases  of  investment
securities  totaling $21.5 million during 1999,  which were partially  offset by
maturities  of  $17.7  million.  Mortgage-backed  securities  decreased  by $1.8
million,  or 29.7%,  to a total of $4.2 million at December 31, 1999,  primarily
due to principal repayments.


<PAGE>

                              River Valley Bancorp

                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                 CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

Discussion of Changes in Financial  Condition from December 31, 1998 to December
31, 1999 (continued)

Loans  receivable,  including  loans held for sale,  totaled  $115.1  million at
December 31, 1999, an increase of $2.7 million, or 2.4%, over the $112.4 million
total  at  December  31,  1998.  The  increase  resulted   primarily  from  loan
originations  during  1999 of $56.9  million,  which  were  partially  offset by
principal repayments of $39.6 million and sales of $14.2 million.  Growth in the
loan portfolio was comprised primarily of a $7.4 million, or 11.9%,  increase in
loans secured by one-to-four family residential real estate and an $8.9 million,
or 64.2%,  increase  in loans  secured  by  nonresidential  real  estate,  while
commercial  and  consumer  loans  declined  by $2.7  million  and $3.1  million,
respectively,  year to year. Loan  origination  volume for 1998 exceeded that of
1999 by $12.7  million,  or 18.2%.  The volume of loan sales into the  secondary
mortgage  market  decreased  during 1999 by $3.0  million,  or 17.3%,  from 1998
volume.

River Valley's consolidated allowance for loan losses totaled approximately $1.5
million at both December 31, 1999 and 1998, which  represented  1.28% and 1.33%,
respectively,  of total loans at those dates.  Nonperforming  loans  (defined as
loans  delinquent  greater than 90 days and loans on nonaccrual  status) totaled
$857,000  and $1.9  million at  December  31, 1999 and 1998,  respectively.  The
consolidated allowance for loan losses represented 178% and 76% of nonperforming
loans at December 31, 1999 and 1998, respectively.

Although  management believes that its allowance for loan losses at December 31,
1999 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 $3.9 million,  or 3.3%,  to a total of $114.3  million at
December 31, 1999,  compared to the $118.2  million  total at December 31, 1998.
Savings and demand  deposits  increased by $3.6 million,  or 6.9%,  during 1999,
while  certificates  of  deposit  decreased  by $7.5  million,  or 11.4%.  These
fluctuations in balances were  attributed to  management's  efforts to lower its
funding costs for deposits.

Advances from the Federal Home Loan Bank and other borrowed  money  increased by
$6.2 million from the total at December 31, 1998, as current  period  borrowings
of $9.1 million were  partially  offset by repayments of $2.9 million.  Proceeds
from advances were used to fund net deposit outflows and loan originations.

Shareholders'  equity  totaled $16.9 million at December 31, 1999, a decrease of
$1.7 million,  or 9.1%,  from the $18.6 million total at December 31, 1998.  The
decrease resulted primarily from repurchases of shares totaling $2.7 million and
cash dividends of $277,000, which were partially offset by net earnings of $1.04
million and a net increase in shares for stock benefit plans of $232,000.


<PAGE>
                              River Valley Bancorp

                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                 CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

Comparison  of Results of Operations  for the Years Ended  December 31, 1999 and
1998

General

River  Valley's net earnings for the year ended  December 31, 1999 totaled $1.04
million,  a decrease of $214,000,  or 17.1%, from net earnings reported in 1998.
The decrease in net earnings in the 1999 period was primarily  attributable to a
decrease in net interest  income of $149,000 and a decrease of $344,000 in other
income,  including  a decrease  of $265,000 in the gain on sale of loans year to
year.  General,  administrative  and other  expense for the year was  marginally
lower, but included $150,000 in non-recurring expenses associated with severance
agreements. The provision for federal income taxes decreased by $131,000 in 1999
as compared to the same period in 1998.  The  provision  for loan losses in 1999
was $140,000 as compared to $275,000 in 1998.

Net Interest Income

Total  interest  income for the year ended  December 31, 1999,  amounted to $9.7
million,  a decrease of $374,000,  or 3.7%, from the 1998 total,  reflecting the
effects of a lower yield on average assets. While the average balance of average
interest-earning  assets  outstanding  year-to-year  increased by $823,000,  the
yield on those assets  decreased from an average yield of 7.82% in 1998 to 7.49%
in 1999.  Interest income on loans and  mortgage-backed  securities totaled $9.0
million for 1999,  a decrease of  approximately  $684,000,  or 7.0%,  from 1998.
Interest  income on  investments  and  interest-earning  deposits  increased  by
$310,000,  or 80.9%,  due to an increase in the average  balance  outstanding of
$6.0  million  associated  with a  modest  decrease  in  the  average  yield  of
approximately 4 basis points from the comparable 1998 period.

Interest expense on deposits decreased by $208,000,  or 4.4%, to a total of $4.5
million for the year ended  December 31, 1999, due primarily to a 30 basis point
decrease in the weighted  average cost of  deposits.  The cost of deposits  fell
from  4.12% in 1998 to 3.82% in 1999.  Interest  expense on  borrowings  totaled
$143,000 for the year ended December 31, 1999, a decrease of $17,000,  or 10.6%,
from  1998.  The  decrease  resulted  primarily  from lower  average  borrowings
year-to-year, partially offset by a 15 basis point increase in average cost.

As a result of the foregoing  changes in interest  income and interest  expense,
net interest  income  decreased  during 1999 by $149,000,  or 2.8%,  compared to
1998. The interest rate spread decreased by three basis points for 1999 to 3.63%
from 3.66% in the 1998 period,  while the net interest  margin amounted to 3.94%
in 1999 and 4.08% in 1998.

Provision for Losses on Loans

A  provision  for  losses on loans is  charged  to  earnings  to bring the total
allowance for loan losses to a level considered  appropriate by management based
upon historical  experience,  the volume and type of lending  conducted by River
Valley  Financial,  the  status of past due  principal  and  interest  payments,
general  economic  conditions,  particularly  as such  conditions  relate to the
primary market area, and other factors related to the collectibility of the loan
portfolio.  As a  result  of  such  analysis,  management  recorded  a  $140,000
provision  for  losses  on loans in 1999,  a  decrease  of  $135,000,  or 49.1%,
compared  to the  $275,000  provision  recorded  in  1998.  The  current  period
provision  generally  reflects  growth  in the loan  portfolio,  coupled  with a
decrease in the level of nonperforming loans  year-to-year.  Nonperforming loans
for  the  period  ended  December  31,  1999,  were  $857,000,  a  reduction  of
approximately  $1.0 million  from the $1.9  million at December  31,  1998.  Net
charge-offs  amounted  to $95,000 in 1999,  compared  to $74,000 in 1998.  While
management  believes  that the  allowance  for  losses on loans is  adequate  at
December 31, 1999, based upon available facts and circumstances, there can be no
assurance  that the loan loss  allowance  will be  adequate  to cover  losses on
nonperforming assets in the future.


<PAGE>

                              River Valley Bancorp

                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                 CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

Comparison  of Results of Operations  for the Years Ended  December 31, 1999 and
1998 (continued)

Other Income

Other  income  amounted to $844,000  for the year ended  December  31,  1999,  a
decrease of $344,000,  or 29.0%,  compared to 1998, due primarily to a $265,000,
or 78.2%,  decrease  in gain on sale of loans and a $33,000  decrease in service
fees, charges and other operating income.

General, Administrative and Other Expense

General,  administrative  and other  expense  totaled  $4.1 million for the year
ended  December 31, 1999,  a decrease of $13,000,  or .3%,  from the 1998 total.
Employee  compensation and benefits  decreased by $147,000,  or 6.4%, in 1999 as
compared to 1998,  primarily from the effects of a decrease in the Corporation's
stock  price used to record  expense  for various  stock  compensation  programs
coupled  with a decrease in staffing  levels.  The current  year's  compensation
expense included $150,000 in non-recurring  charges  associated with a severance
agreement in a managerial restructuring completed in the third quarter of fiscal
1999.  Occupancy and equipment expense increased by $80,000,  or 16.5%, in 1999,
primarily  from  charges   associated  with  equipment   upgrades  and  expenses
associated  with Year 2000  compliance.  Other operating  expenses  increased by
$76,000, or 6.9%, due primarily to increases in advertising, office supplies and
educational expenses of staff.

Income Taxes

The provision  for income taxes  decreased by $131,000,  or 15.7%,  for the year
ended  December 31, 1999, as compared to 1998. The decrease was due primarily to
a decrease in pretax  earnings of $345,000,  or 16.5%.  The  effective tax rates
were  40.3%  and  39.9%  for  the  years  ended  December  31,  1999  and  1998,
respectively.

Comparison  of Results of Operations  for the Years Ended  December 31, 1998 and
1997

General

River Valley's net earnings for the year ended  December 31, 1998,  totaled $1.3
million, a decrease of $57,000, or 4.4%, from net earnings reported in 1997. The
decrease  in net  earnings in the 1998 period was  primarily  attributable  to a
decrease  in  net   interest   income  of  $47,000,   an  increase  in  general,
administrative and other expense of $90,000 and an increase in the provision for
federal income taxes of $3,000, which were partially offset by a decrease in the
provision  for losses on loans of $29,000  and an  increase  in other  income of
$54,000.


<PAGE>
                              River Valley Bancorp

                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                 CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

Comparison  of Results of Operations  for the Years Ended  December 31, 1998 and
1997 (continued)

Net Interest Income

Total interest  income for the year ended  December 31, 1998,  amounted to $10.1
million,  a decrease of $254,000,  or 2.5%, from the 1997 total,  reflecting the
effects  of a  $3.5  million,  or  2.6%,  decline  in  the  balance  of  average
interest-earning assets outstanding  year-to-year.  Interest income on loans and
mortgage-backed securities totaled $9.7 million for 1998, a decrease of $38,000,
or .4%, from 1997.  The decrease  resulted  primarily  from a $315,000,  or .3%,
decrease  in  the  average  balance  of  loans  and  mortgage-backed  securities
outstanding  year-to-year,  coupled with a one basis point  decrease in yield to
7.97% in 1998.  Interest  income on investments  and  interest-earning  deposits
decreased  by  $216,000,  or 36.1%,  due to a decrease  in the  average  balance
outstanding of $3.2 million, coupled with an approximate 45 basis point decrease
in yield from the comparable 1997 period.

Interest expense on deposits decreased by $232,000,  or 4.7%, to a total of $4.7
million for the year ended  December 31, 1998,  due  primarily to a $5.1 million
decrease in the  average  balance of deposits  outstanding,  coupled  with a one
basis point decline in the  weighted-average  cost of deposits to 4.12% in 1998.
Interest expense on borrowings  totaled $160,000 for the year ended December 31,
1998,  an  increase of  $25,000,  or 18.5%,  over 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 during 1998 by $47,000,  or .9%, compared to 1997.
The interest  rate spread  increased by two basis points for 1998, to 3.66% from
3.64% in the 1997  period,  while the net interest  margin  amounted to 4.08% in
1998 and 4.00% in 1997.

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  $275,000
provision for losses on loans in 1998, a decrease of $29,000,  or 9.5%, compared
to the  $304,000  provision  recorded  in 1997.  The  current  period  provision
generally reflects growth in the loan portfolio, coupled with an increase in the
level of nonperforming loans year-to-year.  Net charge-offs  amounted to $74,000
in 1998, compared to $218,000 in 1997.


<PAGE>

                              River Valley Bancorp

                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                 CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

Comparison  of Results of Operations  for the Years Ended  December 31, 1998 and
1997 (continued)

Other Income

Other income  amounted to $1.2 million for the year ended  December 31, 1998, an
increase of $54,000, or 4.8%, compared to 1997, due primarily to a $212,000,  or
166.9%,  increase in gain on sale of loans and a $57,000  gain on sale of office
premises and equipment,  which were partially  offset by a nonrecurring  gain on
sale of branch office and related deposits in 1997 totaling  $206,000.  The 1997
gain on sale of office premises  resulted from River Valley  Financial's sale of
the Hanover branch facility,  which was consummated in accordance with the terms
of regulatory approval of the Citizens acquisition.

General, Administrative and Other Expense

General,  administrative  and other  expense  totaled  $4.1 million for the year
ended December 31, 1998, an increase of $90,000,  or 2.2%,  over the 1997 total.
This increase resulted primarily from a $144,000,  or 6.7%, increase in employee
compensation and benefits,  and a $94,000,  or 9.3%, increase in other operating
expense,  which  were  partially  offset  by a  $43,000,  or 8.2%,  decrease  in
occupancy  and  equipment  expense  and a $97,000,  or 43.3%,  decrease  in data
processing.   The  increase  in  employee  compensation  and  benefits  resulted
primarily  from  normal  merit  increases  coupled  with an increase in staffing
levels year to year.  The  increase in other  operating  expense  resulted  from
increases in advertising,  office  supplies and pro-rata  increases in operating
expenses due to the Corporation's  overall growth  year-to-year.  The decline in
occupancy  and equipment  resulted from reduced costs  following the sale of the
Hanover branch  location in 1997. The decrease in data processing was due to the
conversion to the in-house  data  processing  system used by Citizens  after the
merger in November 1997.

Income Taxes

The provision for income taxes  increased by $3,000,  or .4%, for the year ended
December 31, 1998,  as compared to 1997.  The effective tax rates were 39.9% and
38.8% for the years ended December 31, 1998 and 1997, respectively.


<PAGE>

                  AVERAGE BALANCE, YIELD, RATE AND VOLUME DATA

The following  table  presents  certain  information  relating to River Valley's
average balance sheet and reflects the average yield on interest-earning  assets
and the average cost of interest-bearing  liabilities for the periods indicated.
Such yields and costs are derived by  dividing  annual  income or expense by the
average  monthly  balance  of   interest-earning   assets  or   interest-bearing
liabilities, respectively, for the years presented. Average balances are derived
from month-end balances, which include nonaccruing loans in the loan portfolio.

<TABLE>
<CAPTION>
                                                                             Year ended December 31,
                                                      1999                            1998                           1997
                                          Average  Interest               Average  Interest               Average   Interest
                                      outstanding   earned/   Yield/  outstanding   earned/   Yield/  outstanding    earned/  Yield/
                                          balance      paid   rate        balance      paid   rate        balance      paid   rate
                                                                            (Dollars in thousands)
<S>                                       <C>       <C>       <C>     <C>         <C>          <C>     <C>         <C>         <C>
Interest-earning assets:
  Interest-earning deposits and other     $ 7,821   $   417   5.34%   $  4,337    $     233    5.37%   $    5,351  $     322   6.02%
  Investment securities (1)                 5,347       276   5.17       2,871          150    5.22         5,043        277   5.49
  Mortgage-backed and
        related securities (1)              5,051       301   5.97       7,542          462    6.13        10,874        733   6.74
  Loans receivable, net (2)               111,794     8,740   7.82     114,440        9,263    8.09       111,423      9,030   8.10
                                          -------     -----   ----     -------      ------- -------       -------    ------- ------

         Total interest-earning
                assets                   $130,013     9,735   7.49    $129,190       10,108    7.82      $132,691     10,362   7.81
                                          =======                      =======                            =======

Interest-bearing liabilities:
  Deposits                               $117,258    $4,474   3.82    $113,770        4,682    4.12      $118,872      4,914   4.13
  FHLB advances and other borrowings        2,228       143   6.43       2,549          160    6.28         2,244        135   6.02
                                        ---------    ------   ----   ---------     -------- -------     ---------   -------- ------

         Total interest-bearing
                liabilities              $119,486     4,617   3.86    $116,319        4,842    4.16      $121,116      5,049   4.17
                                          =======     -----   ----     =======      ------- -------       =======    ------- ------

Net interest income                                  $5,118                        $  5,266                         $  5,313
                                                     ======                         =======                          =======
Interest rate spread (3)                                      3.63%                            3.66%                           3.64%
                                                              ====                            =====                            =====
Net yield on weighted average                                 3.94%                            4.08%                           4.00%
  interest-earning assets (4)                                 ====                            =====                            =====

Average interest-earning
        assets to average                                   108.81%                          111.07%                         109.56%
                                                            ======                           ======                          ======

</TABLE>

(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.



<PAGE>


                              River Valley Bancorp

                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                 CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

Rate/Volume Table

The following  table describes the extent to which changes in interest rates and
changes in volume of interest-related assets and liabilities have affected River
Valley's  interest  income  and  expense  during the years  indicated.  For each
category   of   interest-earning   assets  and   interest-bearing   liabilities,
information is provided on changes attributable to (i) changes in volume (change
in volume  multiplied by prior year rate),  (ii) changes in rate (change in rate
multiplied  by prior year  volume),  and (iii) total changes in rate and volume.
The  combined  effects  of  changes in both  volume  and rate,  which  cannot be
separately identified,  have been allocated proportionately to the change due to
volume and the change due to rate:
<TABLE>
<CAPTION>

                                                                        Year ended December 31,
                                                        1999 vs. 1998                        1998 vs. 1997
                                                             Increase                             Increase
                                                          (decrease)                            (decrease)
                                                              due to                                due to

                                                 Volume        Rate      Total          Volume       Rate     Total
                                                                                 (In thousands)
<S>                                              <C>       <C>         <C>             <C>        <C>        <C>
Interest-earning assets:
  Interest-earning deposits and other            $  186    $    (2)    $  184          $  (57)    $  (32)    $  (89)
  Investment securities                             128         (2)       126            (114)       (13)      (127)
  Mortgage-backed and related securities           (149)       (11)      (160)           (210)       (61)      (271)
  Loans receivable, net                            (211)      (312)      (523)            244        (11)       233
                                                   ----       -----      -----           ----      -----       ----
     Total                                          (46)      (327)      (373)           (137)      (117)      (254)

Interest-bearing liabilities:
  Deposits                                          151       (359)      (208)           (210)       (22)      (232)
  FHLB advances and other borrowings                (21)         4        (17)             19          6         25
                                                  -----    -------      -----            ----     ------      -----
     Total                                          130       (355)      (225)           (191)       (16)      (207)
                                                  -----       ----       ----             ---      -----       ----

Net change in interest income                   $  (176)    $   28      $(148)         $   54      $(101)    $  (47)
                                                 ======      =====       ====           =====       ====      =====
</TABLE>

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.

The following is an analysis of River Valley Financial's  interest rate risk, as
of September 30, 1999 (the latest information  available) and December 31, 1998,
as measured by changes in NPV for an instantaneous and sustained  parallel shift
of 100 through 400 basis points in market interest rates.


<PAGE>

                              River Valley Bancorp

                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                 CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

Asset and Liability Management (continued)

As  illustrated  below,  River  Valley  Financial's  NPV is  more  sensitive  to
declining rates than rising rates in 1999. Such difference in sensitivity occurs
principally due to the Bank's  preponderance of adjustable rate mortgage ("ARM")
loans in its loan portfolio.  Generally, as rates decline, the interest rates on
ARM loans will adjust  downward.  Moreover,  the interest River Valley Financial
would pay on deposits would decrease because the Bank's deposits  generally have
shorter periods of repricing.

                            As of September 30, 1999
                             (Dollars in thousands)

Change in
Interest Rates        Estimated             Amount
(basis points)              NPV          of Change          Percent

+300                    $18,220            $(1,741)          (9)%
+200                     19,579               (382)          (2)
+100                     19,943                 18             -
   -                     19,961                 -              -
-100                     19,553               (408)          (2)
-200                     18,801             (1,160)          (6)
-300                     18,065             (1,896)          (9)



                             As of December 31, 1998
                             (Dollars in thousands)

Change in
Interest Rates       Estimated                Amount
(basis points)             NPV             of Change          Percent

+300                   $18,081              $   (405)          (2)%
+200                    18,690                   204           (1)
+100                    18,717                   231           (1)
   -                    18,486                    -             -
-100                    17,916                  (570)          (3)
-200                    17,343                (1,143)          (6)
-300                    17,034                (1,452)          (8)






<PAGE>



                              River Valley Bancorp

                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                 CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

Asset and Liability Management (continued)

As with any method of measuring  interest rate risk,  certain  shortcomings  are
inherent  in  the  NPV  approach.  For  example,  although  certain  assets  and
liabilities may have similar maturities or periods of repricing,  they may react
in different  degrees to changes in market  interest  rates.  Also, the interest
rates on certain  types of assets and  liabilities  may  fluctuate in advance of
changes in market  interest  rates,  while interest rates on other types may lag
behind  changes in market rates.  Further,  in the event of a change in interest
rates, expected rates of prepayment on loans and mortgage-backed  securities and
early  withdrawal  levels from  certificates  of deposit  would  likely  deviate
significantly from those assumed in making the risk calculations.

Liquidity and Capital Resources

The   Corporation's   principal   sources  of  funds  are  deposits,   loan  and
mortgage-backed securities repayments,  maturities of securities, borrowings and
other funds provided by operations. While scheduled loan repayments and maturing
investments   are   relatively   predictable,   deposit   flows   and  loan  and
mortgage-backed  securities  prepayments  are more influenced by interest rates,
general  economic   conditions  and  competition.   The  Corporation   maintains
investments in liquid assets based upon management's  assessment of (1) the need
for funds,  (2) expected  deposit flows,  (3) the yield  available on short-term
liquid assets and (4) the objectives of the asset/liability management program.

OTS regulations  presently require River Valley Financial to maintain an average
daily  balance  of cash,  investments  in United  States  government  and agency
securities  and other  investments  in an amount equal to 4% of the sum of River
Valley Financial's  average daily balance of net withdrawable  deposit accounts.
The liquidity requirement,  which may be changed from time to time by the OTS to
reflect  changing  economic  conditions,  is  intended  to  provide  a source of
relatively  liquid funds upon which River Valley Financial may rely if necessary
to fund deposit  withdrawals or other short-term  funding needs. At December 31,
1999,  River Valley  Financial's  regulatory  liquidity ratio was 28.2%. At such
date,  River Valley  Financial had  commitments to originate loans totaling $2.2
million  and, in addition,  had  undisbursed  loans in process,  unused lines of
credit and standby  letters of credit  totaling  $9.6  million.  At December 31,
1999, River Valley Financial had no commitments to sell loans and no outstanding
commitments  to  purchase  loans.   The   Corporation   considers  River  Valley
Financial's  liquidity  and capital  resources  sufficient  to meet  outstanding
short- and  long-term  needs.  At December  31,  1999,  the  Corporation  had no
material commitments for capital expenditures.


<PAGE>

                              River Valley Bancorp

                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                 CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

Liquidity and Capital Resources (continued)

The Corporation's liquidity, primarily represented by cash and cash equivalents,
is a result of the funds  provided  by or used in the  Corporation's  operating,
investing and financing  activities.  These  activities are summarized below for
the years ended December 31, 1999, 1998 and 1997:
<TABLE>
<CAPTION>


                                                              Year ended December 31,
                                                    1999              1998             1997
                                                                (In thousands)

<S>                                             <C>                <C>             <C>
Cash flows from operating activities            $  5,382           $(1,913)        $  2,395

Cash flows from investing activities:

  Investment maturities/sales                     (3,847)            3,000            4,698
  Mortgage-backed securities purchases             -                    -            (1,350)
  Mortgage-backed securities repayments            1,709             2,970            3,072
  Net loan (originations) repayments              (6,673)            2,145           (3,859)
  Other                                             (157)              731            1,374

Cash flows from financing activities:

  Net increase (decrease) in deposits             (3,900)            3,196          (10,701)
  Net increase (decrease) in borrowings            6,000            (1,730)             900
  Other                                           (2,769)             (960)            (346)
                                                  -------          -------         --------

Net increase (decrease) in cash and cash
  equivalents                                    $(4,255)          $ 7,439         $ (3,817)
                                                  ======            ======           ======
</TABLE>


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.


<PAGE>



                              River Valley Bancorp

                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                 CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

Liquidity and Capital Resources (continued)

OTS regulations require that savings associations  maintain "risk-based capital"
in an amount not less than 8% of "risk-weighted  assets."  Risk-based capital is
defined as core capital plus certain  additional items of capital,  which in the
case of River Valley  Financial  includes a general loan loss  allowance of $1.4
million at December 31, 1999.

River Valley Financial  exceeded all of its regulatory  capital  requirements at
December 31, 1999.  The  following  table  summarizes  River Valley  Financial's
regulatory capital requirements and regulatory capital at December 31, 1999:
<TABLE>
<CAPTION>


                                  OTS Requirement                        Actual Amount
                     Percent of                        Percent of                              Amount
                         Assets         Amount          Assets (1)          Amount          of Excess
                                                    (Dollars in thousands)

<S>                      <C>            <C>               <C>               <C>               <C>
Tangible capital         1.5%           $2,086            12.1%             $16,850           $14,764
Core capital (2)         4.0             5,563            12.1               16,850            11,287
Risk-based capital       8.0             7,615            19.0               18,040            10,425

</TABLE>

(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 adopted a core  capital  requirement  for savings  associations
     comparable to that required by the OCC for national  banks.  The regulation
     requires core capital of at least 3% of total  adjusted  assets for savings
     associations  that  receive the highest  supervisory  rating for safety and
     soundness,  and 4% to 5% for all other savings  associations.  River Valley
     Financial is in compliance with this requirement.

Effect of Recent Accounting Pronouncements

In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial  Accounting  Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging  Activities,"  which requires  entities to recognize all
derivatives  in their  financial  statements  as either  assets  or  liabilities
measured at fair value.  SFAS No. 133 also  specifies  new methods of accounting
for hedging  transactions,  prescribes  the items and  transactions  that may be
hedged,  and  specifies  detailed  criteria  to be  met  to  qualify  for  hedge
accounting.

The definition of a derivative  financial instrument is complex, but in general,
it is an instrument  with one or more  underlyings,  such as an interest rate or
foreign exchange rate, that is applied to a notional  amount,  such as an amount
of currency,  to determine the settlement  amount(s).  It generally  requires no
significant initial investment and can be settled net or by delivery of an asset
that is  readily  convertible  to cash.  SFAS No.  133  applies  to  derivatives
embedded in other contracts, unless the underlying of the embedded derivative is
clearly and closely related to the host contract.


<PAGE>



                              River Valley Bancorp

                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                 CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

Effect of Recent Accounting Pronouncements (continued)

SFAS No.  133,  as amended  by SFAS No.  137,  is  effective  for  fiscal  years
beginning  after June 15, 2000. On adoption,  entities are permitted to transfer
held-to-maturity  debt securities to the  available-for-sale or trading category
without  calling into  question  their intent to hold other debt  securities  to
maturity in the future.  SFAS No. 133 is not expected to have a material  impact
on the Corporation's consolidated financial statements.

Year 2000 Compliance Matters

As with all providers of financial  services,  the Bank's operations are heavily
dependent  on  information  technology  systems.  During the three  year  period
leading up to  January  1,  2000,  the Bank  addressed  the  potential  problems
associated with the  possibility  that the computers that control or operate the
Bank's  information  technology  system  and  infrastructure  may not have  been
programmed to read four-digit date codes and, upon arrival of the year 2000, may
have  recognized  the two-digit code "00" as the year 1900,  causing  systems to
fail to function or to generate erroneous data.

The Bank's core data processing  relative to customer loan and deposit accounts,
as well as the general ledger, is performed  in-house through use of a purchased
software  product.  Management  had been advised,  and certain  testing had been
performed to verify,  that the system would continue to function upon arrival of
the year 2000. The Bank  experienced  no  technology-related  difficulties  upon
arrival of January 1, 2000,  nor was there any  interruption  of services to its
customers.

Financial  institutions  may  experience  increases in problem  loans and credit
losses in the event that  borrowers  failed to prepare  properly  for Year 2000.
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,  and  to  date  has  not  experienced,   any  significant  or  prolonged
difficulties that will affect net earnings or cash flow.

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.


<PAGE>

               Report of Independent Certified Public Accountants

Board of Directors
River Valley Bancorp

We have audited the accompanying  consolidated statements of financial condition
of River  Valley  Bancorp as of  December  31,  1999 and 1998,  and the  related
consolidated statements of earnings, comprehensive income, shareholders' equity,
and cash flows for each of the three  years in the  period  ended  December  31,
1999. These  consolidated  financial  statements are the  responsibility  of the
Corporation's  management.  Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all  material  respects,  the  consolidated  financial  position of River Valley
Bancorp as of December 31, 1999 and 1998,  and the  consolidated  results of its
operations  and its cash flows for each of the three  years in the period  ended
December 31, 1999, in conformity with generally accepted accounting principles.


/s/ Grant Thornton
Cincinnati, Ohio
February 16, 2000


<PAGE>



                              River Valley Bancorp

                 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

                                  December 31,
                        (In thousands, except share data)
<TABLE>
<CAPTION>



         ASSETS                                                                                  1999                1998

<S>                                                                                         <C>                <C>
Cash and due from banks                                                                     $   3,648          $    4,014
Federal funds sold                                                                              1,550                 825
Interest-earning deposits in other financial institutions                                       2,854               7,468
                                                                                             --------           ---------
         Cash and cash equivalents                                                              8,052              12,307

Investment securities designated as available for sale - at market                              4,230                 283
Investment securities held to maturity - at amortized cost, approximate
  market value of $995 and $980 as of December 31, 1999 and 1998                                1,000               1,000
Mortgage-backed and related securities designated as available
  for sale - at market                                                                          2,071               2,796
Mortgage-backed and related securities held to maturity - at cost, approximate
  market value of $2,147 and $3,220 as of December 31, 1999 and 1998                            2,138               3,190
Loans receivable - net                                                                        115,131             108,684
Loans held for sale - at lower of cost or market                                                 -                  3,701
Real estate acquired through foreclosure                                                         -                     82
Office premises and equipment - at depreciated cost                                             1,980               2,023
Federal Home Loan Bank stock - at cost                                                            943                 943
Accrued interest receivable on loans                                                              970                 987
Accrued interest receivable on mortgage-backed and related securities                              26                  40
Accrued interest receivable on investments and interest-earning deposits                           47                  29
Goodwill - net of accumulated amortization                                                         44                  50
Cash surrender value of life insurance                                                            854                 818
Prepaid expenses and other assets                                                                 210                 373
Prepaid federal income taxes                                                                      359                 405
Deferred tax asset                                                                                640                 658
                                                                                            ---------          ----------

         Total assets                                                                        $138,695            $138,369
                                                                                              =======             =======
</TABLE>



<PAGE>
<TABLE>
<CAPTION>

         LIABILITIES AND SHAREHOLDERS' EQUITY                                                  1999                1998

<S>                                                                                        <C>                 <C>
Deposits                                                                                   $114,251            $118,151
Advances from the Federal Home Loan Bank                                                      6,000                  -
Other borrowed money                                                                            500                 270
Advances by borrowers for taxes and insurance                                                    36                  34
Accrued interest payable                                                                        330                 468
Other liabilities                                                                               641                 763
Dividends payable                                                                                71                  70
                                                                                         ----------          ----------
         Total liabilities                                                                  121,829             119,756


Commitments                                                                                  -                       -


Shareholders' 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                                                                   -                      -
  Additional paid in capital                                                                 11,314              11,288
  Retained earnings - substantially restricted                                                9,551               8,789
  Shares acquired by stock benefit plans                                                       (967)             (1,199)
  Less 219,753 and 16,810 treasury shares - at cost                                          (2,976)               (252)
  Accumulated comprehensive loss, unrealized losses on
    securities designated as available for sale, net of related tax benefits                    (56)                (13)
                                                                                         ----------         -----------
         Total shareholders' equity                                                          16,866              18,613
                                                                                            -------            --------

         Total liabilities and shareholders' equity                                        $138,695            $138,369
                                                                                            =======             =======
</TABLE>


The accompanying notes are an integral part of these statements.


<PAGE>

                              River Valley Bancorp

                       CONSOLIDATED STATEMENTS OF EARNINGS

                             Year ended December 31,
                       (In thousands, except share data)
<TABLE>
<CAPTION>


                                                                                      1999            1998           1997
Interest income
<S>                                                                                 <C>           <C>            <C>
  Loans                                                                             $8,740        $  9,263       $  9,030
  Mortgage-backed and related securities                                               301             462            733
  Investment securities                                                                276             150            277
  Interest-earning deposits and other                                                  417             233            322
                                                                                    ------        --------       --------
         Total interest income                                                       9,734          10,108         10,362

Interest expense

  Deposits                                                                           4,474           4,682          4,914
  Borrowings                                                                           143             160            135
                                                                                    ------        --------       --------
         Total interest expense                                                      4,617           4,842          5,049
                                                                                     -----         -------        -------

         Net interest income                                                         5,117           5,266          5,313

Provision for losses on loans                                                          140             275            304
                                                                                     -----        --------       --------

         Net interest income after provision for losses on loans                     4,977           4,991          5,009

Other income

  Gain on sale of loans                                                                 74             339            127
  Gain on sale of Hanover branch and related deposits                                    -               -            206
  Loss on sale of investment, mortgage-backed and related securities                     -               -             (6)
  Gain on sale of office premises                                                       11              57             -
  Service fees, charges and other operating                                            759             792            807
                                                                                     -----        --------       --------
         Total other income                                                            844           1,188          1,134

General, administrative and other expense
  Employee compensation and benefits                                                 2,162           2,309          2,165
  Occupancy and equipment                                                              564             484            527
  Federal deposit insurance premiums                                                    42              42             50
  Amortization of goodwill                                                               6              27             27
  Data processing                                                                      126             127            224
  Other operating                                                                    1,180           1,104          1,010
                                                                                     -----         -------        -------
         Total general, administrative and other expense                             4,080           4,093          4,003
                                                                                     -----         -------        -------

         Earnings before income taxes                                                1,741           2,086          2,140

Income taxes

  Current                                                                              664             819            893
  Deferred                                                                              38              14            (63)
                                                                                    ------       ---------      ---------
         Total income taxes                                                            702             833            830
                                                                                     -----        --------       --------

         NET EARNINGS                                                               $1,039        $  1,253       $  1,310
                                                                                     =====         =======        =======

         EARNINGS PER SHARE
           Basic                                                                     $1.03           $1.13          $1.20
                                                                                      ====            ====           ====

           Diluted                                                                   $1.03           $1.12          $1.18
                                                                                      ====            ====           ====
</TABLE>



The accompanying notes are an integral part of these statements.


<PAGE>
                              River Valley Bancorp

                 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

                             Year ended December 31,
                                 (In thousands)
<TABLE>
<CAPTION>


                                                                                         1999         1998         1997

<S>                                                                                    <C>          <C>          <C>
Net earnings                                                                           $1,039       $1,253       $1,310

Other comprehensive income, net of tax:
  Unrealized holding gains (losses) on securities
    during the period, net of tax benefits of $22, $10 and $8
    in 1999, 1998 and 1997, respectively                                                  (43)          19           15
  Reclassification adjustment for realized losses
    included in earnings, net of tax benefit of $2 for the
    year ended December 31, 1997                                                           -            -             4
                                                                                        -----        -----     --------

Comprehensive income                                                                   $  996       $1,272       $1,329
                                                                                       ======        =====        =====

Accumulated comprehensive loss                                                         $  (56)     $   (13)     $   (32)
                                                                                        =====       ======       ======
</TABLE>









The accompanying notes are an integral part of these statements.


<PAGE>
                             River Valley Bancorp

                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

                  Years ended December 31, 1999, 1998 and 1997
                        (In thousands, except share data)
<TABLE>
<CAPTION>

                                                                                     Unrealized
                                                                         Shares  gains (losses)
                                                                       acquired   on securities
                                                        Additional     by stock      designated
                                               Common      paid-in      benefit    as available    Retained     Treasury
                                                stock      capital        plans        for sale    earnings        stock      Total

<S>                                             <C>        <C>        <C>               <C>          <C>         <C>        <C>
Balance at January 1, 1997                       $ -       $11,173    $   (952)        $  (51)       $6,635   $    -        $16,805

Purchase of shares for stock benefit plans         -            -         (174)            -             -         -           (174)
Amortization of expense
        related to stock benefit plans             -            56         121             -              7        -            184
Cash dividends of $0.13 per common share           -            -           -              -           (155)       -           (155)
Net earnings for the year
        ended December 31, 1997                    -            -           -              -          1,310        -          1,310
Unrealized gains on securities designated as
        available for sale,
        net of related tax effects                 -            -           -              -             -         -             19
                                                  ---      -------      ------           ----         -----      -------    -------

Balance at December 31, 1997                       -        11,229      (1,005)           (32)        7,797        -         17,989

Purchase of treasury shares                        -            -           -              -             -          (270)      (270)
Issuance of shares under stock option plan         -            -           -              -             -            18         18
Purchase of shares for stock benefit plans         -            -         (428)            -             -         -           (428)
Amortization of expense related
        to stock benefit plans                     -            59         234             -             -         -            293
Cash dividends of $0.22 per common share           -            -           -              -           (261)       -           (261)
Net earnings for the year
        ended December 31, 1998                    -            -           -              -          1,253        -          1,253
Unrealized gains on securities designated as
        available for sale,
        net of related tax effects                 -            -           -              19            -         -             19
                                                   --      -------      ------           ----         -----   ----------    -------

Balance at December 31, 1998                       -        11,288      (1,199)           (13)        8,789         (252)    18,613

Purchase of treasury shares                        -            -           -              -             -        (2,724)    (2,724)
Amortization of expense related
        to stock benefit plans                     -            26         232             -             -         -            258
Cash dividends of $0.265 per common share          -            -           -              -           (277)       -           (277)
Net earnings for the year ended
        December 31, 1999                          -            -           -              -          1,039        -          1,039
Unrealized losses on securities designated as
        available for sale,
        net of related tax effects                 -            -           -             (43)           -         -            (43)
                                                  ---         ----      ------            ---         -----    ---------    -------

Balance at December 31, 1999                    $  -       $11,314    $   (967)         $ (56)       $9,551      $(2,976)   $16,866
                                                 ====       ======     ========           ===         =====       ======     ======
</TABLE>


The accompanying notes are an integral part of these statements.


<PAGE>

                              River Valley Bancorp
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                             Year ended December 31,
                                 (In thousands)
<TABLE>
<CAPTION>


                                                                                    1999            1998           1997
Cash flows from operating activities:
<S>                                                                            <C>              <C>            <C>
  Net earnings for the year                                                    $   1,039        $  1,253       $  1,310
  Adjustments to reconcile net earnings to net cash provided
  by (used in) operating activities:
    Amortization (accretion) of premiums and discounts
      on investments, mortgage-backed and related securities - net                   (95)             39              1
    Loss on sale of investment, mortgage-backed and related securities
      designated as available for sale                                                 -               -              6
    Depreciation and amortization                                                    250             223            223
    Gain on sale of office premises                                                  (11)            (57)            -
    Gain on sale of Hanover branch and related deposits                                -               -           (206)
    Loans originated for sale in the secondary market                            (10,552)        (20,042)        (6,538)
    Proceeds from sale of loans in the secondary market                           14,226          17,194          6,996
    (Gain) loss on sale of loans in the secondary market                              27            (169)           (66)
    Amortization of deferred loan origination costs                                   93              99             73
    Provision for losses on loans                                                    140             275            304
    Amortization of goodwill                                                           6              27             27
    Amortization expense of stock benefit plans                                      258             293            184
    Increase (decrease) in cash due to changes in:
      Accrued interest receivable on loans                                            17             (71)           (97)
      Accrued interest receivable on mortgage-backed and related securities           14              77            (39)
      Accrued interest receivable on investments and interest-earning deposits       (18)             36            106
      Prepaid expenses and other assets                                              163            (232)            28
      Accrued interest payable                                                      (138)              5            184
      Other liabilities                                                             (121)           (467)           (47)
      Income taxes
        Current                                                                       46            (410)             9
        Deferred                                                                      38              14            (63)
                                                                               ---------      ----------      ---------
         Net cash provided by (used in) operating activities                       5,382          (1,913)         2,395

Cash flows provided by (used in) investing activities:

  Purchase of investment securities designated as available for sale             (21,537)              -              -
  Proceeds from maturity of investment securities                                 17,690           3,000          2,000
  Proceeds from sales of investment securities designated as available for sale        -               -          2,698
  Purchase of mortgage-backed and related securities designated as available
    for sale                                                                           -               -         (1,350)
  Principal repayments on mortgage-backed and related securities                   1,709           2,970          3,072
  Proceeds from sale of mortgage-backed and related securities designated as
   available for sale                                                                 -                -          2,146
  Loan principal repayments                                                       39,640          51,624         43,220
  Loan disbursements                                                             (46,313)        (49,479)       (47,079)
  Proceeds from sale of real estate acquired through foreclosure                      75               -              -
  Additions to real estate acquired through foreclosure                                -               -             (1)
  Proceeds from sale of office premises and equipment                                 49              67            405
  Purchase of office premises and equipment                                         (245)           (191)          (430)
  (Increase) decrease in certificates of deposit in other financial institutions       -             897           (797)
  Purchase of Federal Reserve Bank stock                                               -               -            (64)
  Proceeds from sale of Federal Reserve Bank stock                                     -               -            144
  Increase in cash surrender value of life insurance                                 (36)            (42)           (29)
                                                                                    ----            ----           ----
         Net cash provided by (used in) investing activities                      (8,968)          8,846          3,935
                                                                               ---------         -------        -------

         Net cash provided by (used in) operating and investing
           activities (subtotal carried forward)                                  (3,586)          6,933          6,330
                                                                               ---------         -------        -------
</TABLE>



<PAGE>



                              River Valley Bancorp
                CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
                             Year ended December 31,
                                 (In thousands)
<TABLE>
<CAPTION>


                                                                                    1999            1998           1997
<S>                                                                            <C>              <C>            <C>
         Net cash provided by (used in) operating and investing
           activities (subtotal brought forward)                               $  (3,586)       $  6,933       $  6,330

Cash flows provided by (used in) financing activities:

  Increase (decrease) in deposit accounts                                         (3,900)          3,196         (3,913)
  Decrease in deposit accounts due to the sale of a branch                          -                 -          (6,788)
  Proceeds from Federal Home Loan Bank advances                                    6,000           6,000          7,000
  Repayment of Federal Home Loan Bank advances                                      -             (8,000)        (6,100)
  Proceeds from other borrowed money                                               3,131             270             -
  Repayment of other borrowed money                                               (2,901)              -             -
  Advances by borrowers for taxes and insurance                                        2             (19)           (17)
  Purchase of shares                                                              (2,724)           (270)            -
  Stock options exercised                                                           -                 18             -
  Acquisition of common stock for stock benefit plans                               -               (428)          (174)
  Dividends on common stock                                                         (277)           (261)          (155)
                                                                                 --------       --------       --------
         Net cash provided by (used in) financing activities                        (669)            506        (10,147)
                                                                                 --------      ---------         ------

Net increase (decrease) in cash and cash equivalents                              (4,255)          7,439         (3,817)

Cash and cash equivalents at beginning of year                                    12,307           4,868          8,685
                                                                                  ------         -------        -------

Cash and cash equivalents at end of year                                        $  8,052         $12,307       $  4,868
                                                                                 =======          ======        =======


Supplemental disclosure of cash flow information:
Cash paid during the year for:
    Federal income taxes                                                        $    469        $  1,014      $     618
                                                                                  ======         =======       ========

    Interest on deposits and borrowings                                          $ 4,755        $  4,837       $  4,865
                                                                                   =====         =======        =======


Supplemental disclosure of noncash investing activities:

  Transfers from loans to real estate acquired through foreclosure               $    -         $     -      $       81
                                                                                  ======         =======      =========

  Unrealized gains (losses) on securities designated as available
    for sale, net of related tax effects                                        $    (43)     $       19     $       19
                                                                                 =======       =========      =========

  Recognition of mortgage servicing rights in accordance with
    SFAS No. 125                                                                $    101       $     170     $       61
                                                                                 =======        ========      =========

  Exchange of office premises and equipment for similar assets                  $    103     $      -          $    -
                                                                                 =======      ==========        ======
</TABLE>



The accompanying notes are an integral part of these statements.


<PAGE>



                              River Valley Bancorp

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                        December 31, 1999, 1998 and 1997

NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

    River  Valley  Bancorp  (the  "Corporation")  is a savings and loan  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 residential,  consumer and commercial purposes.
    River Valley Financial's profitability is significantly dependent on its 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.

    The consolidated financial information presented herein has been prepared in
    accordance  with  generally  accepted  accounting  principles  ("GAAP")  and
    general  accounting  practices within the financial  services  industry.  In
    preparing  financial  statements  in  accordance  with GAAP,  management  is
    required to make estimates and assumptions  that affect the reported amounts
    of assets  and  liabilities  and the  disclosure  of  contingent  assets and
    liabilities  at the  date  of the  financial  statements  and  revenues  and
    expenses during the reporting period.  Actual results could differ from such
    estimates.

    The following is a summary of significant  accounting  policies,  which have
    been   consistently   applied  in  the   preparation  of  the   accompanying
    consolidated financial statements.

    1.  Principles of Consolidation

    The  consolidated   financial   statements   include  the  accounts  of  the
    Corporation and its subsidiary,  the Bank and its subsidiary,  Madison First
    Service Corporation ("First Service"). All significant intercompany balances
    and  transactions  have been  eliminated  in the  accompanying  consolidated
    financial statements.

    2.  Investment Securities and Mortgage-Backed and Related Securities

    The Corporation  accounts for investment  securities and mortgage-backed and
    related  securities in  accordance  with  Statement of Financial  Accounting
    Standards ("SFAS") No. 115,  "Accounting for Certain Investments in Debt and
    Equity Securities." SFAS No. 115 requires that investments be categorized as
    held-to-maturity,  trading, or available for sale.  Securities classified as
    held-to-maturity  are  carried  at  cost  only  if the  Corporation  has the
    positive  intent and ability to hold these  securities to maturity.  Trading
    securities and securities  available for sale are carried at fair value with
    resulting unrealized gains or losses recorded to operations or shareholders'
    equity,  respectively.  At  December  31, 1999 and 1998,  the  Corporation's
    shareholders' equity included unrealized losses on securities  designated as
    available  for sale,  net of related tax  effects,  of $56,000 and  $13,000,
    respectively.   Realized  gains  and  losses  on  sales  of  investment  and
    mortgage-backed  and related  securities are  recognized  using the specific
    identification method.


<PAGE>



                              River Valley Bancorp

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        December 31, 1999, 1998 and 1997

NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

    3.  Loans Receivable

    Loans held in  portfolio  are stated at the  principal  amount  outstanding,
    adjusted  for  unamortized  yield   adjustments,   including  deferred  loan
    origination  costs  and  capitalized  mortgage  servicing  rights,  and  the
    allowance for loan losses.  The yield adjustments are amortized and accreted
    to  operations  using  the  interest  method  over the  average  life of the
    underlying loans.

    Interest is accrued as earned  unless the  collectibility  of the loan is in
    doubt.  Uncollectible  interest on loans that are contractually  past due is
    charged off, or an allowance is established  based on management's  periodic
    evaluation.  The  allowance is  established  by a charge to interest  income
    equal  to all  interest  previously  accrued,  and  income  is  subsequently
    recognized  only to the extent that cash  payments  are received  until,  in
    management's  judgment, the borrower's ability to make periodic interest and
    principal  payments  has  returned  to  normal,  in  which  case the loan is
    returned to accrual status.

    Loans  held for sale  are  carried  at the  lower  of cost  (less  principal
    payments received) or fair value (market value),  calculated on an aggregate
    basis. At December 31, 1999, the Corporation had not identified any loans as
    held for sale.  At December  31,  1998,  loans held for sale were carried at
    cost, which approximated fair value.

    At December 31, 1999 and 1998,  the Bank was servicing  approximately  $40.2
    million and $34.3  million,  respectively,  of mortgage loans that have been
    sold to the Federal Home Loan Mortgage Corporation.

    The Bank  retains  the  servicing  on loans  sold and agrees to remit to the
    investor loan principal and interest at agreed-upon rates. The Bank accounts
    for mortgage  servicing  rights  pursuant to the provisions of SFAS No. 125,
    "Accounting   for   Transfers   and   Servicing  of  Financial   Assets  and
    Extinguishments  of Liabilities,"  which requires that the Bank recognize as
    separate assets, rights to service mortgage loans for others,  regardless of
    how those  servicing  rights are  acquired.  An  institution  that  acquires
    mortgage  servicing  rights  through  either the purchase or  origination of
    mortgage  loans and sells those loans with  servicing  rights  retained must
    allocate some of the cost of the loans to the mortgage servicing rights.

    SFAS No.  125  requires  that  capitalized  mortgage  servicing  rights  and
    capitalized  excess  servicing   receivables  be  assessed  for  impairment.
    Impairment is measured based on fair value.  The mortgage  servicing  rights
    recorded by the Bank,  calculated in accordance  with the provisions of SFAS
    No. 125, were segregated into pools for valuation purposes, using as pooling
    criteria the loan term and coupon rate. Once pooled,  each grouping of loans
    was evaluated on a discounted  earnings basis to determine the present value
    of future  earnings  that a  purchaser  could  expect to  realize  from each
    portfolio.  Earnings were projected from a variety of sources including loan
    servicing fees,  interest  earned on float,  net interest earned on escrows,
    miscellaneous  income,  and costs to service the loans. The present value of
    future  earnings  is the  "economic"  value  for  the  pool,  i.e.,  the net
    realizable present value to an acquirer of the acquired servicing.


<PAGE>



                              River Valley Bancorp

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        December 31, 1999, 1998 and 1997

NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

    3.  Loans Receivable (continued)

    The Bank recorded amortization related to mortgage servicing rights totaling
    approximately $99,000,  $34,000 and $18,000 for the years ended December 31,
    1999, 1998 and 1997, respectively.  At December 31, 1999, the carrying value
    of  the  Corporation's   mortgage  servicing  rights  totaled  approximately
    $225,000 and the fair value totaled approximately  $286,000. At December 31,
    1998,  the  carrying  value  and fair  value of the  Corporation's  mortgage
    servicing rights totaled approximately $222,000.

    4.  Loan Origination Fees and Costs

    The Corporation  accounts for loan  origination fees and costs in accordance
    with SFAS No. 91,  "Accounting for  Nonrefundable  Fees and Costs Associated
    with  Originating  or Acquiring  Loans and Initial  Direct Costs of Leases."
    Pursuant  to the  provisions  of SFAS  No.  91,  all loan  origination  fees
    received,  net of  certain  direct  origination  costs,  are  deferred  on a
    loan-by-loan  basis and  amortized  to interest  income  using the  interest
    method, giving effect to actual loan prepayments.  Additionally, SFAS No. 91
    generally  limits the  definition  of loan  origination  costs to the direct
    costs attributable to originating a loan, i.e., principally actual personnel
    costs.

    Fees received for loan commitments that are expected to be drawn upon, based
    on the Corporation's  experience with similar commitments,  are deferred and
    amortized over the life of the related loan using the interest method.  Fees
    for  other  loan  commitments  are  deferred  and  amortized  over  the loan
    commitment period on a straight-line basis.

    5.  Allowance for Losses on Loans

    It is the Corporation's policy to provide valuation allowances for estimated
    losses  on loans  based on past  loss  experience,  trends  in the  level of
    delinquent  and  specific  problem  loans,  loan  concentrations  to  single
    borrowers,  changes  in the  composition  of  the  loan  portfolio,  adverse
    situations  that may affect the borrower's  ability to repay,  the estimated
    value of any  underlying  collateral  and current and  anticipated  economic
    conditions  in its  primary  lending  area.  When the  collection  of a loan
    becomes doubtful, or otherwise troubled, the Corporation records a loan loss
    provision  equal to the  difference  between the fair value of the  property
    securing the loan and the loan's  carrying  value.  Such  provision is based
    upon management's  estimate of the fair value of the underlying  collateral,
    taking  into  consideration  the current and  currently  anticipated  future
    operating or sales conditions.  As a result, such estimates are particularly
    susceptible to changes that could result in a material adjustment to results
    of operations in the near term.

    The Corporation accounts for impaired loans in accordance with SFAS No. 114,
    "Accounting  by Creditors  for  Impairment of a Loan." SFAS No. 114 requires
    that  impaired  loans be measured  based upon the present  value of expected
    future cash flows discounted at the loan's effective interest rate or, as an
    alternative,  at the  loan's  observable  market  price or fair value of the
    collateral.


<PAGE>



                              River Valley Bancorp

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        December 31, 1999, 1998 and 1997

NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

    5.  Allowance for Losses on Loans (continued)

    Under SFAS No.  114, a loan is defined as  impaired  when,  based on current
    information  and events,  it is probable  that a creditor  will be unable to
    collect all  amounts  due  according  to the  contractual  terms of the loan
    agreement.  In applying  the  provisions  of SFAS No. 114,  the  Corporation
    considers  its  investment  in  one-to-four  family  residential  loans  and
    consumer  installment  loans to be homogeneous  and therefore  excluded from
    separate  identification  for evaluation of impairment.  With respect to the
    Corporation's  investment in  nonresidential,  commercial,  and  multifamily
    residential  real estate loans,  and its  evaluation of impairment  thereof,
    such loans are generally  collateral dependent and, as a result, are carried
    as a practical expedient at the lower of cost or fair value.

    It is generally the  Corporation's  policy to charge off  unsecured  credits
    that are more than ninety days delinquent.  Similarly,  collateral dependent
    loans  which  are  more  than  ninety  days  delinquent  are  considered  to
    constitute  more than a minimum  delay in repayment  and are  evaluated  for
    impairment under SFAS No. 114 at that time.

    At December 31, 1999 and 1998, the  Corporation had  approximately  $600,000
    and $1.3 million,  respectively, of loans defined as impaired under SFAS No.
    114.

    6.  Real Estate Acquired through Foreclosure

    Real  estate  acquired  through  foreclosure  is carried at the lower of the
    loan's unpaid principal  balance (cost) or fair value less estimated selling
    expenses  at the  date of  acquisition.  Real  estate  loss  provisions  are
    recorded if the property's fair value subsequently  declines below the value
    determined at the recording  date. In determining  the lower of cost or fair
    value at  acquisition,  costs  relating to  development  and  improvement of
    property are  considered.  Costs  relating to holding  real estate  acquired
    through  foreclosure,  net of rental income, are charged against earnings as
    incurred.

    7.  Office Premises and Equipment

    Depreciation  of  office  premises  and  equipment  is  computed  using  the
    straight-line  method  over  the  estimated  useful  lives  of  the  assets,
    estimated to be thirty to forty-five years for buildings, three to ten years
    for furniture and equipment, and three years for automobiles.

    8.  Amortization of Goodwill

    Amortization  of  goodwill,  resulting  from  the  acquisition  of  Citizens
    National Bank of Madison  ("Citizens"),  is provided using the straight-line
    method  over an  estimated  life of ten years.  During  1998,  goodwill  was
    reduced by  approximately  $168,000 for the favorable  resolution of certain
    pre-acquisition  contingencies,  and for the  purchase of minority  interest
    shares at a price below the assigned value at acquisition.

    Management periodically evaluates the carrying value of goodwill in relation
    to the  continuing  earnings  capacity  of the  acquired  assets and assumed
    liabilities.


<PAGE>

                              River Valley Bancorp

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        December 31, 1999, 1998 and 1997


NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

    9.  Income Taxes

    The  Corporation  accounts  for  income  taxes  pursuant  to SFAS  No.  109,
    "Accounting for Income Taxes." Pursuant to the provisions of SFAS No. 109, a
    deferred  tax  liability  or deferred  tax asset is computed by applying the
    current  statutory  tax  rates  to  net  taxable  or  deductible   temporary
    differences  between the tax basis of an asset or liability and its reported
    amount in the  consolidated  financial  statements  that will  result in net
    taxable or  deductible  amounts in future  periods.  Deferred tax assets are
    recorded  only to the  extent  that the amount of net  deductible  temporary
    differences  or  carryforward  attributes  may be utilized  against  current
    period earnings,  carried back against prior years' earnings, offset against
    taxable temporary  differences  reversing in future periods,  or utilized to
    the extent of management's  estimate of future taxable  income.  A valuation
    allowance  is provided  for deferred tax assets to the extent that the value
    of net deductible temporary differences and carryforward  attributes exceeds
    management's  estimates of taxes payable on future taxable income.  Deferred
    tax   liabilities  are  provided  on  the  total  amount  of  net  temporary
    differences taxable in the future.

    The Corporation's  principal temporary  differences between pretax financial
    income  and  taxable  income  result  primarily  from  different  methods of
    accounting for deferred loan origination  costs, the allowance for valuation
    decline on mortgage-related securities,  mortgage servicing rights, purchase
    accounting adjustments,  the general loan loss allowance,  the percentage of
    earnings bad debt deduction and certain components of retirement and benefit
    plan expense.  A temporary  difference is also  recognized for  depreciation
    expense computed using accelerated methods for federal income tax purposes.

    10.  Retirement and Incentive Plans

    The  Bank's  employees  are  covered by a defined  benefit  non-contributory
    pension plan  administered by the Pentegra  Group,  previously the Financial
    Institutions  Retirement Fund (the "Fund").  Contributions are determined to
    cover  the  normal  cost  of  pension  benefits,  the  one-year  cost of the
    pre-retirement  death and disability  benefits and the  amortization  of any
    unfunded accrued liabilities.

    The Fund had  previously  advised the Bank that the  pension  plan meets the
    criteria  of a  multi-employer  pension  plan as  defined  in SFAS  No.  87,
    "Employers'  Accounting for  Pensions." In accordance  with SFAS No. 87, net
    pension cost is recognized for any required  contribution  for the period. A
    liability is recognized for any contributions due and unpaid. Because of the
    continuing  overfunded status of the Fund, no contributions were made to the
    pension plan during the years ended  December 31, 1999,  1998, and 1997. The
    provision for pension expense was computed by the Fund's actuaries utilizing
    the  projected  unit credit  cost method and  assuming a 7.5% return on Fund
    assets.

    During 1997, the Corporation implemented a contributory 401(k) plan covering
    all employees who have attained the age of 21 and have completed one year of
    service. Contributions to the plan are voluntary and are subject to matching
    by the employer.  The Bank's contributions to the plan totaled approximately
    $24,000,  $28,000 and $48,000 for the years ended  December 31, 1999,  1998,
    and 1997, respectively.


<PAGE>

                              River Valley Bancorp

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        December 31, 1999, 1998 and 1997


NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

    10.  Retirement and Incentive Plans (continued)

    The  Bank has a  supplemental  retirement  plan  which  provides  retirement
    benefits to all directors.  The Bank's  obligations under the plan have been
    funded via the  purchase of key man life  insurance  policies,  of which the
    Bank  is  the  beneficiary.   Expense   recognized  under  the  supplemental
    retirement plan totaled  approximately  $32,000,  $22,000 and $3,000 for the
    years ended December 31, 1999, 1998 and 1997, respectively.

    The  Corporation  has an  Employee  Stock  Ownership  Plan  ("ESOP"),  which
    provides  retirement  benefits  for  substantially  all  employees  who have
    completed  one  year  of  service  and  have  attained  the  age of 21.  The
    Corporation  accounts for the ESOP in accordance  with Statement of Position
    (SOP) 93-6,  "Employers' Accounting for Employee Stock Ownership Plans." SOP
    93-6 requires the measure of compensation  expense  recorded by employers to
    equal the fair value of ESOP shares  allocated  to  participants  during the
    year. Expense related to the ESOP totaled approximately  $147,000,  $200,000
    and  $200,000  for the  years  ended  December  31,  1999,  1998  and  1997,
    respectively.

    The  Corporation  also has a Recognition  and  Retention  Plan ("RRP") which
    provides  for  the  award  and  issuance  of  up to  47,610  shares  of  the
    Corporation's  stock to members of the Board of  Directors  and  management.
    During 1998 and 1997, the RRP purchased  32,316 shares of the  Corporation's
    common stock in the open market.  At December  31, 1999,  31,271  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 $113,000,  $113,000 and $61,000 for
    the years ended December 31, 1999, 1998, and 1997, respectively.

    11.  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 71,730,  83,124 and 95,220  unallocated
    ESOP shares, totaled 1,007,087,  1,105,930 and 1,095,030 for the years ended
    December 31, 1999, 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
    1,007,087,  1,121,986 and  1,106,858 for the years ended  December 31, 1999,
    1998,  and 1997,  respectively.  There were  16,056  and 11,828  incremental
    shares  related to the  assumed  exercise of stock  options  included in the
    computation  of diluted  earnings per share for the years ended December 31,
    1998 and 1997,  respectively.  Options to purchase  93,959  shares of common
    stock with a  weighted-average  exercise price of $14.70 were outstanding at
    December 31, 1999,  but were excluded from the  computation  of common share
    equivalents  because  their  exercise  prices were  greater than the average
    market price of the common shares.


<PAGE>



                              River Valley Bancorp

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        December 31, 1999, 1998 and 1997


NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)


    12.  Cash and Cash Equivalents

    For purposes of reporting  cash flows,  cash and cash  equivalents  includes
    cash and due from banks, federal funds sold, and  interest-earning  deposits
    in other financial institutions with original maturities of less than ninety
    days.

    13.  Fair Value of Financial Instruments

    SFAS No.  107,  "Disclosures  About  Fair Value of  Financial  Instruments",
    requires disclosure of the fair value of financial instruments,  both assets
    and liabilities  whether or not recognized in the consolidated  statement of
    financial condition,  for which it is practicable to estimate that value. In
    cases where quoted market prices are not available, fair values are based on
    estimates  using  present  value  or  other  valuation   techniques.   Those
    techniques are significantly affected by the assumptions used, including the
    discount  rate and  estimates  of future cash  flows.  In that  regard,  the
    derived  fair value  estimates  cannot be  substantiated  by  comparison  to
    independent  markets and, in many cases,  could not be realized in immediate
    settlement  of the  instrument.  SFAS No.  107  excludes  certain  financial
    instruments   and  all   non-financial   instruments   from  the  disclosure
    requirements. Accordingly, the aggregate fair value amounts presented do not
    represent the underlying value of the Corporation.

    The  following  methods  and  assumptions  were used by the  Corporation  in
    estimating its fair value disclosures for financial instruments.  The use of
    different market  assumptions  and/or  estimation  methodologies  may have a
    material effect on the estimated fair value amounts.

                  Cash and cash  equivalents:  The carrying amounts presented in
                  the  consolidated  statements of financial  condition for cash
                  and cash equivalents are deemed to approximate fair value.

                  Investment and mortgage-backed  and related  securities:  Fair
                  values  for   investment  and   mortgage-backed   and  related
                  securities  are  based on  quoted  market  prices  and  dealer
                  quotes.

                  Loans receivable:  The loan portfolio has been segregated into
                  categories with similar  characteristics,  such as one-to-four
                  family    residential,     multi-family     residential    and
                  nonresidential  real  estate.  These  categories  were further
                  delineated into fixed-rate and adjustable-rate loans. The fair
                  values  for  the  resultant   categories   were  computed  via
                  discounted  cash flow analysis,  using current  interest rates
                  offered for loans with  similar  terms to borrowers of similar
                  credit quality.  For loans on deposit  accounts,  and consumer
                  and other loans, fair values were deemed to equal the historic
                  carrying values.


<PAGE>



                              River Valley Bancorp

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        December 31, 1999, 1998 and 1997


NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

    13.  Fair Value of Financial Instruments (continued)

                  Federal Home Loan Bank stock: The carrying amount presented in
                  the consolidated  statements of financial  condition is deemed
                  to approximate fair value.

                  Deposits: The fair values of deposits with no stated maturity,
                  such as NOW and  super NOW  accounts,  passbook  accounts  and
                  money market  demand  accounts are deemed to  approximate  the
                  amount payable on demand as of December 31, 1999 and 1998. The
                  fair values for fixed-rate  certificates  of deposit are based
                  on  the  discounted  value  of  contractual  cash  flows.  The
                  discount rate is estimated using the rates  currently  offered
                  for deposits of similar remaining maturities.

                  Advances  from the Federal  Home Loan Bank:  The fair value of
                  these advances is estimated using the rates currently  offered
                  for similar advances of similar remaining  maturities or, when
                  available, quoted market prices.

                  Other  borrowed  money:  The carrying value for these variable
                  rate borrowings is deemed to approximate fair value.

                  Advances by borrowers  for taxes and  insurance:  The carrying
                  amount of advances by  borrowers  for taxes and  insurance  is
                  deemed to approximate fair value.

                  Commitments   to   extend    credit:    For   fixed-rate   and
                  adjustable-rate  loan  commitments,  the fair  value  estimate
                  considers the  difference  between  current levels of interest
                  rates and committed  rates.  The  difference  between the fair
                  value and notional amount of outstanding  loan  commitments at
                  December 31, 1999 and 1998, was not material.

    Based on the foregoing methods and assumptions,  the carrying value and fair
    value of the Corporation's  financial instruments are as follows at December
    31:
<TABLE>
<CAPTION>

                                                                            1999                              1998
                                                               Carrying           Fair            Carrying         Fair
                                                                  value          value               value        value
                                                                                      (In thousands)
    Financial assets
<S>                                                          <C>            <C>                  <C>          <C>
      Cash and cash equivalents                              $    8,052     $    8,052           $  12,307    $  12,307
      Investment securities designated as available for sale      4,230          4,230                 283          283
      Investment securities held to maturity                      1,000            995               1,000          980
      Mortgage-backed and related securities designated
        as available for sale                                     2,071          2,071               2,796        2,796
      Mortgage-backed and related securities held to
        maturity                                                  2,138          2,147               3,190        3,220
      Loans receivable - net                                    115,131        112,633             112,385      120,163
      Federal Home Loan Bank stock                                  943            943                 943          943
                                                               --------       --------            --------     --------
                                                               $133,565       $131,071            $132,904     $140,692
                                                                =======        =======             =======      =======

    Financial liabilities

      Deposits                                                 $114,251       $114,527            $118,151     $118,496
      Advances from the Federal Home Loan Bank                    6,000          6,000                  -            -
      Other borrowed money                                          500            500                 270          270
      Advances by borrowers for taxes and insurance                  36             36                  34           34
                                                               --------       --------            --------     --------
                                                               $120,787       $121,063            $118,455     $118,800
                                                                =======        =======             =======      =======
</TABLE>




<PAGE>



                              River Valley Bancorp

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        December 31, 1999, 1998 and 1997


NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

    14.  Advertising

    Advertising costs are expensed when incurred.

    15.  Reclassifications

        Certain prior year amounts have been reclassified to conform to the 1999
        consolidated financial statement presentation.

NOTE B - INVESTMENTS AND MORTGAGE-BACKED SECURITIES

        Amortized  cost and estimated  fair values of  investment  securities at
        December 31 are summarized as follows:

<TABLE>
<CAPTION>
                                                              1999                             1998
                                                                    Estimated                        Estimated
                                                     Amortized           fair         Amortized           fair
                                                          cost          value              cost          value
                                                                            (In thousands)
<S>                                                     <C>          <C>                 <C>           <C>
    Held to maturity:
      U.S. Government agency obligations                $1,000       $    995            $1,000        $   980

    Available for sale:

      Commercial paper                                   2,972          2,957           -               -
      Corporate bonds                                    1,000          1,000           -               -
      Municipal obligations                                276            273               276            283
                                                        ------         ------            ------         ------
         Total securities available for sale             4,248          4,230               276            283
                                                         -----          -----            ------         ------

         Total investment securities                    $5,248         $5,225            $1,276         $1,263
                                                         =====          =====             =====          =====
</TABLE>


    At December 31, 1999 and 1998, the cost carrying value of the  Corporation's
    investment  securities  held to maturity  exceeded  fair value by $5,000 and
    $20,000, respectively, comprised solely of gross unrealized losses.


<PAGE>



                              River Valley Bancorp

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        December 31, 1999, 1998 and 1997


NOTE B - INVESTMENTS AND MORTGAGE-BACKED SECURITIES (continued)

    The  amortized  cost and  estimated  fair value of U. S.  Government  agency
    obligations  designated  as  held  to  maturity  at  December  31 by term to
    maturity  are shown  below.  Maturity  dates do not reflect  effects of call
    provisions inherent in the bonds' contractual terms.

<TABLE>
<CAPTION>
                                                  1999                                1998
                                                       Estimated                            Estimated
                                       Amortized            fair             Amortized           fair
                                            cost           value                  cost          value
                                                                (In thousands)
<S>                                       <C>               <C>              <C>              <C>
    Due in one year or less               $1,000            $995             $  -             $ -
    Due in one to three years                 -             -                    1,000            980
                                           -----           -----                 -----           ----

                                          $1,000            $995                $1,000           $980
                                           =====             ===                 =====            ===
</TABLE>


    The amortized cost and estimated fair value of commercial  paper,  corporate
    bonds and municipal obligations designated as available for sale at December
    31, 1999 and 1998, by term to maturity are shown below.
<TABLE>
<CAPTION>


                                                1999                                1998
                                                     Estimated                            Estimated
                                     Amortized            fair             Amortized           fair
                                          cost           value                  cost          value
                                                               (In thousands)
<S>                                     <C>             <C>                     <C>            <C>
    Due in three to five years          $4,072          $4,056                  $100           $102
    Due in five to ten years               176             174                   176            181
                                         -----           -----                   ---            ---

                                        $4,248          $4,230                  $276           $283
                                         =====           =====                   ===            ===
</TABLE>


    The amortized cost, gross  unrealized  gains,  gross  unrealized  losses and
    estimated fair values of mortgage-backed  and related securities  designated
    as held to maturity at December 31, 1999 and 1998 are shown below.
<TABLE>
<CAPTION>


                                                                                            1999

                                                                                   Gross           Gross      Estimated
                                                                Amortized     unrealized      unrealized           fair
                                                                     cost          gains          losses          value
                                                                                       (In thousands)
<S>                                                               <C>               <C>               <C>       <C>
    Federal Home Loan Mortgage Corporation
      participation certificates                                  $   856           $-                $5        $   851
    Government National Mortgage Association
      participation certificates                                      900             14               -            914
    Federal National Mortgage Association
      participation certificates                                      367            -                 1            366
      Interest-only certificates                                       15              1               -             16
                                                                  -------            ---              --        -------
                                                                   $2,138            $15              $6         $2,147
                                                                    =====             ==               =          =====
</TABLE>





<PAGE>



                              River Valley Bancorp

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        December 31, 1999, 1998 and 1997


NOTE B - INVESTMENTS AND MORTGAGE-BACKED SECURITIES (continued)
<TABLE>
<CAPTION>


                                                                                  1998

                                                                           Gross          Gross      Estimated
                                                       Amortized      unrealized     unrealized           fair
                                                            cost           gains         losses          value
                                                                            (In thousands)
<S>                                                     <C>               <C>               <C>       <C>
    Federal Home Loan Mortgage Corporation
      participation certificates                          $1,343             $-              $2         $1,341
    Government National Mortgage Association

      participation certificates                           1,190              22              -          1,212
    Federal National Mortgage Association

      participation certificates                             639              10              -            649
      Interest-only certificates                              18              -               -             18
                                                         -------              --             --        -------

                                                          $3,190           $  32             $2         $3,220
                                                           =====            ====              =          =====
</TABLE>


    The  amortized  cost  of  mortgage-backed  and  related  securities  held to
    maturity at December 31, 1999,  by  contractual  terms to maturity are shown
    below.  Expected maturities will differ from contractual  maturities because
    borrowers may generally prepay obligations without prepayment penalties.

                                                                Amortized cost
                                                                (In thousands)

    Due within one year                                                $   857
    Due after one to three years                                             2
    Due after three to five years                                            1
    Due after ten to twenty years                                          746
    Due after twenty years                                                 532
                                                                       -------

                                                                        $2,138
                                                                        ======

    The amortized cost, gross  unrealized  gains,  gross  unrealized  losses and
    estimated fair values of mortgage-backed  and related securities  designated
    as available for sale at December 31, 1999 and 1998 are shown below.
<TABLE>
<CAPTION>


                                                                                    1999

                                                                           Gross          Gross      Estimated
                                                       Amortized      unrealized     unrealized           fair
                                                            cost           gains         losses          value
                                                                               (In thousands)
<S>                                                      <C>             <C>               <C>         <C>
    Federal Home Loan Mortgage Corporation
      participation certificates                         $   330         $  -              $  5        $   325
    Government National Mortgage Association
      participation certificates                             186            -                 4            182
    Federal National Mortgage Association
      participation certificates                             995            -                36            959
    Collateralized mortgage obligations                      627              -              22            605
                                                          ------             ---            ---         ------

                                                          $2,138          $ -               $67         $2,071
                                                           =====           =====             ==          =====
</TABLE>





<PAGE>



                              River Valley Bancorp

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        December 31, 1999, 1998 and 1997


NOTE B - INVESTMENTS AND MORTGAGE-BACKED SECURITIES (continued)
<TABLE>
<CAPTION>


                                                                                    1998

                                                                           Gross          Gross      Estimated
                                                       Amortized      unrealized     unrealized           fair
                                                            cost           gains         losses          value
                                                                               (In thousands)
<S>                                                      <C>             <C>               <C>         <C>
    Federal Home Loan Mortgage Corporation
      participation certificates                         $   644          $    7         $   -         $   651
    Government National Mortgage Association
      participation certificates                             277               1              1            277
    Federal National Mortgage Association
      participation certificates                           1,275               3             29          1,249
    Collateralized mortgage obligations                      627              -               8            619
                                                          ------              --           ----         ------

                                                          $2,823           $  11           $ 38         $2,796
                                                           =====            ====            ===          =====
</TABLE>


    The amortized cost of mortgage-backed  and related securities  designated as
    available  for sale at December 31, 1999, by  contractual  terms to maturity
    are shown below. Expected maturities will differ from contractual maturities
    because  borrowers  may  generally  prepay  obligations  without  prepayment
    penalties.

                                                               Amortized cost
                                                               (In thousands)

    Due in one year or less                                         $       8
    Due after one to three years                                          235
    Due after five to ten years                                           286
    Due after ten to twenty years                                         343
    Due after twenty years                                              1,266
                                                                        -----

                                                                       $2,138
                                                                       ======

NOTE C - LOANS RECEIVABLE

    The composition of the loan portfolio at December 31 is as follows:

                                                          1999             1998
                                                               (In thousands)
    Residential real estate

      One-to-four family residential                 $  69,588        $  62,206
      Multi-family residential                           2,918            1,775
      Construction                                       4,163            8,126
    Nonresidential real estate and land                 22,837           13,904
    Commercial                                           9,780           12,461
    Consumer and other                                   9,544           12,640
    Deferred loan origination costs                        245              200
                                                     ---------       ----------

                                                       119,075          111,312
    Less:
      Undisbursed portion of loans in process            2,422            1,151
      Allowance for loan losses                          1,522            1,477
                                                      --------        ---------

                                                      $115,131         $108,684
                                                      ========         ========


<PAGE>



                              River Valley Bancorp

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        December 31, 1999, 1998 and 1997

NOTE C - LOANS RECEIVABLE (continued)

    As depicted above, the Bank's lending efforts have  historically  focused on
    one-to-four family residential real estate loans,  multi-family  residential
    real  estate  loans and  construction  real  estate  loans,  which  comprise
    approximately $74.3 million, or 64%, of the total loan portfolio at December
    31,  1999  and  approximately  $71.0  million,  or 65%,  of the  total  loan
    portfolio at December 31, 1998. Generally, such loans have been underwritten
    on  the  basis  of no  more  than  an 80%  loan-to-value  ratio,  which  has
    historically  provided  the Bank with  adequate  collateral  coverage in the
    event of default.  Nevertheless,  the Bank, as with any lending institution,
    is subject to the risk that residential real estate values could deteriorate
    in its  primary  lending  areas of  southeastern  Indiana  and  northwestern
    Kentucky, thereby impairing collateral values. However, management is of the
    belief that  residential  real estate values in the Bank's  primary  lending
    areas are presently stable.

    In the ordinary  course of business,  the Bank has granted  loans to some of
    its officers, directors and their related business interests. In the opinion
    of management,  such loans are consistent  with sound lending  practices and
    are in  accordance  with  applicable  regulatory  lending  limitations.  The
    aggregate  dollar  amount  of  loans  outstanding  to  related  parties  was
    approximately   $893,000  and  $781,000  at  December  31,  1999  and  1998,
    respectively.

NOTE D - ALLOWANCE FOR LOAN LOSSES

    The activity in the  allowance  for loan losses is summarized as follows for
    the years ended December 31:

                                            1999           1998           1997
                                                     (In thousands)

    Balance at beginning of year          $1,477         $1,276         $1,190
    Provision for losses on loans            140            275            304
    Charge-offs of loans                    (123)          (223)          (269)
    Recoveries of loan losses                 28            149             51
                                         -------         ------        -------

    Balance at end of year                $1,522         $1,477         $1,276
                                           =====          =====          =====

    As of December 31, 1999,  the  Corporation's  allowance  for loan losses was
    comprised of a general loan loss  allowance of  approximately  $1.4 million,
    which is includible as a component of regulatory  risk-based capital,  and a
    specific loan loss allowance of $113,000.

    The Corporation had nonperforming loans totaling $857,000,  $1.9 million and
    $718,000 at December 31, 1999, 1998 and 1997, respectively.

    The  Corporation  would have recognized  approximately  $6,000 and $9,000 of
    additional  interest  income related to such  nonperforming  loans had these
    loans  performed  pursuant  to  contractual  terms  during  the years  ended
    December 31, 1999 and 1998,  respectively.  The  Corporation had no material
    loss of interest income related to nonperforming loans during the year ended
    December 31, 1997.


<PAGE>



                              River Valley Bancorp

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        December 31, 1999, 1998 and 1997

NOTE E - OFFICE PREMISES AND EQUIPMENT

    Office premises and equipment at December 31 are comprised of the following:

                                                      1999                1998
                                                            (In thousands)

    Land and improvements                          $   792             $   675
    Office buildings and improvements                1,724               1,758
    Leasehold improvements                             117                 117
    Furniture, fixtures and equipment                2,183               2,113
    Automobiles                                         18                  18
                                                   -------             -------
                                                     4,834               4,681
    Less accumulated depreciation                    2,854               2,658
                                                     -----               -----

                                                    $1,980              $2,023
                                                     =====               =====


<PAGE>



                              River Valley Bancorp

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        December 31, 1999, 1998 and 1997

NOTE F - DEPOSITS

    Deposits consist of the following major classifications at December 31:
<TABLE>
<CAPTION>


    Deposit type and                                                           1999                      1998
    weighted-average interest rate                                     Amount         %             Amount        %
                                                                                 (Dollars in thousands)
<S>                                                                <C>               <C>        <C>                 <C>
    Non-interest bearing accounts                                  $    7,903        6.9%       $    8,365          7.0%
    NOW accounts
      1999 - 2.62%                                                     14,329       12.6
      1998 - 2.60%                                                                                  14,417        12.2
    Money market demand accounts
      1999 - 4.10%                                                      6,886        6.0
      1998 - 2.92%                                                                                   6,984          5.9
    Savings accounts
      1999 - 3.52%                                                     26,640       23.3
      1998 - 3.70%                                                                                  22,378        19.0
                                                                -------------      --------       --------      ------
    Total demand, transaction and
      savings deposits                                                 55,758       48.8            52,144        44.1

    Certificates of deposit
      3.01% to 5.00%
        4.39% in 1999                                                  36,591       32.0
        4.78% in 1998                                                                               23,200        19.6
      5.01% to 6.00%
        5.45% in 1999                                                  14,250       12.5
        5.34% in 1998                                                                               31,364        26.6
      6.01% to 7.00%
        6.14% in 1999                                                   7,445        6.5
        6.18% in 1998                                                                               11,229         9.5
      7.01% to 8.00%
        7.85% in 1999                                                     207         .2
        7.86% in 1998                                                                                  214          .2
                                                                 ------------      --------      ---------      ------

    Total certificates of deposit                                      58,493       51.2            66,007        55.9
                                                                     --------      -----          --------      ------

    Total deposit accounts                                           $114,251      100.0%         $118,151       100.0%
                                                                      =======      =====           =======      ======
</TABLE>


    The aggregate amount of certificates of deposit with a minimum  denomination
    of  $100,000  totaled  approximately  $11.2  million  and $15.1  million  at
    December 31, 1999 and 1998, respectively.


<PAGE>



                              River Valley Bancorp

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        December 31, 1999, 1998 and 1997

NOTE F - DEPOSITS (continued)

    Interest  expense on deposits for the years ended  December 31 is summarized
    as follows:

                                         1999           1998           1997
                                                  (In thousands)

    Savings                            $1,028        $   768        $   708
    NOW accounts                          351            344            435
    Money market deposit accounts         195            211            480
    Certificates of deposit             2,900          3,359          3,291
                                        -----          -----          -----

                                       $4,474         $4,682         $4,914
                                        =====          =====          =====

    Maturities of outstanding  certificates of deposit are summarized as follows
    at December 31:

                                                     1999             1998
                                                        (In thousands)

    Less than one year                            $45,784          $53,931
    One year to three years                        10,934           10,880
    More than three years                           1,775            1,196
                                                  -------          -------

                                                  $58,493          $66,007
                                                   ======           ======

    As a  result  of the  Corporation's  acquisition  of  Citizen's,  regulatory
    authorities  required  the  sale of one of the  Bank's  retail  branches.  A
    definitive  agreement was reached in 1996,  which provided for the purchaser
    to acquire the branch facility for a price  approximating  book value, while
    assuming the branch deposits,  which totaled $6.8 million,  for a premium on
    core deposits.  The  transaction  was consummated in 1997 and resulted in an
    approximate after-tax gain of $125,000.

NOTE G - ADVANCES FROM THE FEDERAL HOME LOAN BANK

    Federal Home Loan Bank  advances,  collateralized  at December 31, 1999,  by
    certain  residential  mortgage  loans  totaling  $9.6 million and the Bank's
    investment  in  Federal  Home Loan Bank  stock,  consist  of a $6.0  million
    advance,  bearing interest at a rate of 5.91%, which matures during the year
    ended December 31, 2000.

NOTE H - OTHER BORROWED MONEY

    Other  borrowed money  consists of a  variable-rate  two-year line of credit
    advance, bearing interest at December 31, 1999 of 8.00%, scheduled to mature
    in  November  2000.  The  advance  was  collateralized  by a  pledge  of the
    Corporation's stock of River Valley Financial.


<PAGE>



                              River Valley Bancorp

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        December 31, 1999, 1998 and 1997

NOTE I - INCOME TAXES

    The provision for income taxes on earnings differs from that computed at the
    expected  statutory  corporate  tax rate for the years ended  December 31 as
    follows:

                                                     1999      1998      1997
                                                      (Dollars in thousands)
    Federal income taxes computed at
      expected statutory rate                        $592      $709      $728
    State taxes, net of federal benefits              105       122       125
    Increase (decrease) in taxes resulting from:
      Amortization of goodwill                          2         9         9
      Other                                             3        (7)      (32)
                                                     ----     -----      ----
    Income tax provision per consolidated
      financial statements                           $702      $833      $830
                                                      ===       ===       ===

    Effective tax rate                               40.3%     39.9%     38.8%
                                                     ====      ====      ====

    The composition of the  Corporation's  net deferred tax asset at December 31
    is as follows:

    Taxes (payable) refundable on temporary                 1999           1998
    differences at statutory rate:                            (In thousands)

    Deferred tax liabilities:
      Deferred loan origination costs                   $    (83)      $    (68)
      Difference between book and tax depreciation           (93)           (93)
      Percentage of earnings bad debt deduction             (178)          (210)
      Mortgage servicing rights                              (86)           (85)
                                                         -------        -------
         Total deferred tax liabilities                     (440)          (456)

    Deferred tax assets:
      Deferred compensation                                  106             97
      Allowance for valuation decline on
        mortgage-related securities                           90             90
      General loan loss allowance                            647            628
      Benefit plan expense                                    66             65
      Unrealized loss on securities designated as
        available for sale                                    29              7
      Purchase accounting adjustments related to asset
        valuation adjustments                                142            227
                                                         -------         ------

         Total deferred tax assets                         1,080          1,114
                                                          ------          -----

         Net deferred tax asset                          $   640        $   658
                                                          ======         ======



<PAGE>



                              River Valley Bancorp

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        December 31, 1999, 1998 and 1997

NOTE I - INCOME TAXES (continued)

    The Bank was allowed a special bad debt  deduction  based on a percentage of
    earnings  generally limited to 8% of otherwise taxable income, or the amount
    of qualifying and nonqualifying  loans  outstanding,  and subject to certain
    limitations based on aggregate loans and savings account balances at the end
    of the year. Retained earnings at December 31, 1999, includes  approximately
    $2.4 million for which federal income taxes have not been  provided.  If the
    amounts that qualify as deductions for federal income tax purposes are later
    used for purposes other than for bad debt losses, including distributions in
    liquidation,  such  distributions will be subject to federal income taxes at
    the then  current  corporate  income  tax rate.  The  approximate  amount of
    unrecognized  deferred tax  liability  relating to the  cumulative  bad debt
    deduction  was  approximately  $705,000 at December  31,  1999.  The Bank is
    required to recapture as taxable  income  approximately  $600,000 of its bad
    debt reserve,  which represents the post-1987 additions to the reserve,  and
    is unable to utilize  the  percentage  of  earnings  method to  compute  the
    reserve in the future.  The Bank has provided deferred taxes for this amount
    and  commencing  in 1998,  began  amortizing  the  recapture of the bad debt
    reserve into taxable income over a six year period.

NOTE J - LOAN COMMITMENTS

    The Bank is a party to financial instruments with  off-balance-sheet risk in
    the normal course of business to meet the financing  needs of its customers,
    including commitments to extend credit. Such commitments involve, to varying
    degrees,  elements of credit and interest-rate  risk in excess of the amount
    recognized in the consolidated statements of financial condition.

    The Bank's  exposure  to credit loss in the event of  nonperformance  by the
    other party to the financial  instrument for commitments to extend credit is
    represented by the  contractual  notional amount of those  instruments.  The
    Bank uses the same credit  policies in making  commitments  and  conditional
    obligations as those utilized for on-balance-sheet instruments.

    At December 31, 1999, the Bank had outstanding  commitments of approximately
    $366,000 to originate  residential  one-to-four  family  variable-rate  real
    estate  loans at  interest  rates  ranging  from 6.5% to 8.0%.  The Bank had
    outstanding  commitments of approximately  $244,000 to originate residential
    one-to-four  family  fixed-rate  real estate loans at interest rates ranging
    from  7.75%  to 8.25%  at  December  31,  1999.  Additionally,  the Bank had
    commitments  to originate  loans secured by other real estate  totaling $1.6
    million as of December  31,  1999.  The Bank also had unused lines of credit
    under home equity loans and commercial loans of  approximately  $2.7 million
    and $4.4 million, respectively, at December 31, 1999, and standby letters of
    credit totaling $97,000 at that date. In the opinion of management, all loan
    commitments  equaled  or  exceeded  prevalent  market  interest  rates as of
    December 31, 1999, and such commitments  have been  underwritten on the same
    basis as that of the existing loan portfolio.  Management  believes that all
    loan  commitments  are able to be funded through cash flows from  operations
    and  existing  excess  liquidity.  Fees  received in  connection  with these
    commitments have not been recognized in earnings.


<PAGE>



                              River Valley Bancorp

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        December 31, 1999, 1998 and 1997


NOTE J - LOAN COMMITMENTS (continued)

    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 may
    expire  without  being  drawn  upon,  the total  commitment  amounts  do not
    necessarily  represent  future cash  requirements.  The Bank  evaluates each
    customer's   creditworthiness   on  a  case-by-case  basis.  The  amount  of
    collateral  obtained,  if it is deemed necessary by the Bank, upon extension
    of credit,  is based on management's  credit evaluation of the counterparty.
    Collateral  on  loans  may  vary  but the  preponderance  of  loans  granted
    generally include a mortgage interest in real estate as security.

NOTE K - LEASES

    The  Corporation  leases a banking  facility in the Wal-Mart  Supercenter in
    Madison,   which  required  the   Corporation  to  make  payments   totaling
    approximately  $23,000 in 1999. The original lease expired in September 1999
    and the  Corporation  exercised the first of two five year renewal  options.
    The lease  agreement for this option period requires the Corporation to make
    payments of approximately $27,000 per year.

NOTE L - STOCK OPTION PLAN

    In June  1997,  the  Corporation  adopted  the 1997 Stock  Option  Plan that
    provided  for the  issuance of 119,025  shares of common  stock.  Options to
    purchase  117,648 shares were granted during 1997 at an exercise price equal
    to the fair value at the date of grant.

    The  Corporation  accounts for its stock option plan in accordance with SFAS
    No. 123,  "Accounting for Stock-Based  Compensation,"  which contains a fair
    value-based  method for valuing  stock-based  compensation that entities may
    use,  which measures  compensation  cost at the grant date based on the fair
    value of the award. Compensation is then recognized over the service period,
    which is usually the  vesting  period.  Alternatively,  SFAS No. 123 permits
    entities  to  continue  to account  for stock  options  and  similar  equity
    instruments  under  Accounting  Principles  Board  ("APB")  Opinion  No. 25,
    "Accounting  for Stock  Issued to  Employees."  Entities  that  continue  to
    account for stock  options using APB Opinion No. 25 are required to make pro
    forma  disclosures  of net earnings  and earnings per share,  as if the fair
    value-based method of accounting defined in SFAS No. 123 had been applied.


<PAGE>



                              River Valley Bancorp

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        December 31, 1999, 1998 and 1997


NOTE L - STOCK OPTION PLAN (continued)

    The Corporation  applies APB Opinion No. 25 and related  Interpretations  in
    accounting for its stock option plan. Accordingly,  no compensation cost has
    been recognized for the plan. Had  compensation  cost for the  Corporation's
    stock option plan been determined based on the fair value at the grant dates
    for awards under the plan consistent with the accounting  method utilized in
    SFAS No. 123,  the  Corporation's  net earnings and earnings per share would
    have been reduced to the pro forma amounts indicated below:
<TABLE>
<CAPTION>


                                                                            1999             1998             1997

<S>                                                                       <C>              <C>              <C>
    Net earnings (in thousands)             As reported                   $1,039           $1,253           $1,310
                                                                           =====            =====            =====

                                              Pro-forma                   $1,038           $1,253           $1,269
                                                                           =====            =====            =====

    Earnings per share

      Basic                                 As reported                   $1.03             $1.13           $1.20
                                                                           ====              ====            ====

                                              Pro-forma                   $1.02             $1.13           $1.16
                                                                           ====              ====            ====

      Diluted                               As reported                   $1.03             $1.12           $1.18
                                                                           ====              ====            ====

                                              Pro-forma                   $1.02             $1.12           $1.15
                                                                          =====              ====            ====
</TABLE>


    The fair value of each option  grant is estimated on the date of grant using
    the  modified   Black-Scholes   options-pricing  model  with  the  following
    weighted-average  assumptions  used for  grants in 1999:  dividend  yield of
    2.18%,  expected  volatility of 10.0%, a risk-free interest rate of 5.5% and
    expected lives of ten years. Similar assumptions were used for the grants in
    1997, with the exception of a 1.013% dividend yield.

    A  summary  of the  status  of the  Corporation's  stock  option  plan as of
    December 31, 1999,  1998 and 1997, and changes during the periods then ended
    is presented below:
<TABLE>
<CAPTION>


                                                       1999                     1998                    1997
                                                            Weighted-               Weighted-                 Weighted-
                                                              average                 average                   average
                                                             exercise                exercise                  exercise
                                                 Shares         price       Shares      price         Shares      price

<S>                                             <C>            <C>         <C>         <C>                     <C>
    Outstanding at beginning of year            103,959        $14.81      105,149     $14.81             -    $    -
    Granted                                      10,000         13.75           -        -           117,648       14.81
    Exercised                                     -              -          (1,190)     14.78             -         -
    Forfeited                                   (20,000)        14.78           -        -           (12,499)      14.81
                                                -------         -----    ---------    -------       --------       -----

    Outstanding at end of year                   93,959        $14.70      103,959     $14.81        105,149      $14.81
                                                =======         =====      =======      =====        =======       =====

    Options exercisable at year-end              39,787                     19,834                        -
                                                 ======                   ========                   =======
    Weighted-average fair value of
      options granted during the year                         $  2.79                   N/A                      $  4.85
                                                               ======                   ===                        =====
</TABLE>




<PAGE>



                              River Valley Bancorp

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        December 31, 1999, 1998 and 1997


NOTE L - STOCK OPTION PLAN (continued)

    The following  information  applies to options  outstanding  at December 31,
1999:

    Number outstanding                                                 93,959
    Range of exercise prices                                   $13.75-$17.875
    Weighted-average exercise price                                    $14.70
    Weighted-average remaining contractual life                     7.7 years


NOTE M - CONDENSED FINANCIAL STATEMENTS OF RIVER VALLEY BANCORP

    The  following  condensed  financial   statements  summarize  the  financial
    position  of River  Valley  Bancorp at December  31, 1999 and 1998,  and the
    results of its  operations  and its cash flows for the years ended  December
    31, 1999, 1998 and 1997.



                              River Valley Bancorp

                        STATEMENTS OF FINANCIAL CONDITION

                                  December 31,
                                 (In thousands)
<TABLE>
<CAPTION>


         ASSETS                                                                            1999               1998

<S>                                                                                   <C>                <C>
    Cash and interest-earning deposits                                                $     371          $     198
    Investment in River Valley Financial Bank                                            16,861             18,788
    Prepaid expenses and other assets                                                       134                 84
                                                                                       --------          ---------

         Total assets                                                                   $17,366            $19,070
                                                                                         ======             ======
         LIABILITIES AND SHAREHOLDERS' EQUITY

    Other borrowed money                                                               $    500          $     270
    Other liabilities                                                                        -                 187
                                                                                      ---------           --------

         Total liabilities                                                                  500                457

    Shareholders' equity

      Preferred stock                                                                        -                  -
      Common stock                                                                           -                  -
      Additional paid in capital                                                         11,314             11,288
      Retained earnings                                                                   9,551              8,789
      Shares acquired by stock benefit plans                                               (967)            (1,199)
      Treasury shares                                                                    (2,976)              (252)
      Accumulated comprehensive loss, unrealized losses on
        securities designated as available for sale, net of related tax effects             (56)               (13)
                                                                                       --------          ---------
             Total shareholders' equity                                                  16,866             18,613
                                                                                         ------             ------

             Total liabilities and shareholders' equity                                 $17,366            $19,070
                                                                                         ======             ======
</TABLE>




<PAGE>



                              River Valley Bancorp

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        December 31, 1999, 1998 and 1997


NOTE M - CONDENSED FINANCIAL STATEMENTS OF RIVER VALLEY BANCORP (continued)

                              River Valley Bancorp

                             STATEMENTS OF EARNINGS

                            Years ended December 31,

                                 (In thousands)

<TABLE>
<CAPTION>
                                                                                1999             1998              1997
    Revenue

<S>                                                                         <C>              <C>                <C>
      Interest income                                                       $     62         $     71           $    81
      Equity in earnings of subsidiaries                                       1,125            1,274             1,390
                                                                               -----            -----             -----
                                                                               1,187            1,345             1,471

    Expense

      Interest expense                                                           101                3                 -
      General, administrative and other expense                                  105              102               243
                                                                                ----           ------             -----
                                                                                 206              105               243
                                                                                ----             ----             -----

         Earnings before income tax credits                                      981            1,240             1,228

    Income tax credits                                                            58               13                82
                                                                              ------          -------            ------

         NET EARNINGS                                                         $1,039           $1,253            $1,310
                                                                               =====            =====             =====
</TABLE>



                              River Valley Bancorp

                            STATEMENTS OF CASH FLOWS

                            Years ended December 31,
                                 (In thousands)
<TABLE>
<CAPTION>
                                                                                1999             1998              1997
    Cash flows from operating activities:
<S>                                                                        <C>                 <C>               <C>
      Net earnings for the year                                            $   1,039           $1,253            $1,310
      Excess distributions from (undistributed earnings of)
        subsidiary                                                             2,033           (1,274)           (1,390)
      Amortization expense of stock benefit plans                                109              114               128
      Decrease in cash due to changes in:
        Prepaid expenses and other assets                                        (50)             (19)              (65)
        Other liabilities                                                       (187)              (7)             (109)
                                                                             -------         --------             -----
         Net cash provided by (used in) operating activities                   2,944               67              (126)

    Cash flows from financing activities:
      Purchase of shares                                                      (2,724)            (270)               -
      Stock options exercised                                                   -                  18                -
      Proceeds from other borrowed money                                       3,131              270                -
      Repayments of other borrowed money                                      (2,901)              -                 -
      Dividends paid on common stock                                            (277)            (261)             (155)
                                                                             -------           ------            ------
         Net cash used in financing activities                                (2,771)            (243)             (155)
                                                                              ------           ------            ------

    Net increase (decrease) in cash and cash equivalents                         173             (176)             (281)

    Cash and cash equivalents at beginning of year                               198              374               655
                                                                              ------           ------            ------

    Cash and cash equivalents at end of year                                $    371          $   198           $   374
                                                                             =======           ======            ======
</TABLE>



<PAGE>



                              River Valley Bancorp

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        December 31, 1999, 1998 and 1997


NOTE N - REGULATORY CAPITAL

    The Bank is subject to minimum regulatory  capital standards  promulgated by
    the  Office of Thrift  Supervision  (the  "OTS").  Failure  to meet  minimum
    capital   requirements  can  initiate  certain  mandatory  --  and  possibly
    additional discretionary -- actions by regulators that, if undertaken, could
    have a direct  material  effect on the Bank's  financial  statements.  Under
    capital  adequacy  guidelines  and  the  regulatory   framework  for  prompt
    corrective  action,   financial  institutions  must  meet  specific  capital
    guidelines that involve quantitative  measures of assets,  liabilities,  and
    certain  off-balance-sheet  items as calculated under regulatory  accounting
    practices. The Bank's capital amounts and classification are also subject to
    qualitative  judgments by the regulators about components,  risk weightings,
    and other factors. The OTS's minimum capital standards generally require the
    maintenance  of regulatory  capital  sufficient to meet each of three tests,
    hereinafter described as the tangible capital requirement,  the core capital
    requirement and the risk-based  capital  requirement.  The tangible  capital
    requirement  provides for minimum tangible capital (defined as shareholders'
    equity less all  intangible  assets) equal to 1.5% of adjusted total assets.
    The core capital  requirement  provides  for minimum core capital  (tangible
    capital  plus certain  forms of  supervisory  goodwill and other  qualifying
    intangible  assets)  generally equal to 4.0% of adjusted total assets except
    for those  associations with the highest  examination  rating and acceptable
    levels of risk. The risk-based  capital  requirement  currently provides for
    the maintenance of core capital plus general loss  allowances  equal to 8.0%
    of  risk-weighted  assets.  In  computing  risk-weighted  assets,  the  Bank
    multiplies  the value of each asset on its statement of financial  condition
    by a defined  risk-weighting  factor,  e.g.,  one-to-four family residential
    loans carry a risk-weighted factor of 50%.

    During the calendar  year,  the Bank was notified from its regulator that it
    was  categorized as  "well-capitalized"  under the regulatory  framework for
    prompt corrective action. To be categorized as  "well-capitalized"  the Bank
    must maintain minimum capital ratios as set forth in the following table.

    At December  31, 1999 and 1998,  management  believes  that the Bank met all
    capital adequacy requirements to which it was subject.
<TABLE>
<CAPTION>


    1999:                                                                                        To be "well-
                                                                                              capitalized" under
                                                                     For capital               prompt corrective
                                             Actual                adequacy purposes          action provisions
                                         Amount    Ratio           Amount    Ratio             Amount     Ratio
                                                                  (Dollars in thousands)

<S>                                     <C>        <C>             <C>         <C>             <C>            <C>
    Tangible capital                    $16,850    12.1%         =>$2,086    =>1.5%          =>$6,954     =>  5.0%

    Core capital                        $16,850    12.1%         =>$5,563    =>4.0%          =>$8,345     =>  6.0%

    Risk-based capital                  $18,040    19.0%         =>$7,615    =>8.0%          =>$9,518     => 10.0%
</TABLE>




<PAGE>



                              River Valley Bancorp

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        December 31, 1999, 1998 and 1997

NOTE N - REGULATORY CAPITAL (continued)

<TABLE>
<CAPTION>

    1998:                                                                                        To be "well-
                                                                                              capitalized" under
                                                                     For capital               prompt corrective
                                             Actual                adequacy purposes          action provisions
                                         Amount    Ratio           Amount    Ratio             Amount     Ratio
                                                                  (Dollars in thousands)

<S>                                     <C>        <C>             <C>         <C>             <C>            <C>
    Tangible capital                    $18,729    13.5%         =>$2,079    =>1.5%          =>$6,931     =>  5.0%

    Core capital                        $18,729    13.5%         =>$5,545    =>4.0%          =>$8,318     =>  6.0%

    Risk-based capital                  $19,947    20.5%         =>$7,793    =>8.0%          =>$9,741     => 10.0%
</TABLE>


    The Bank's management  believes that, under the current  regulatory  capital
    regulations, the Bank will continue to meet its minimum capital requirements
    in the foreseeable future.  However,  events beyond the control of the Bank,
    such as increased interest rates or a downturn in the economy in the primary
    market areas, could adversely affect future earnings and, consequently,  the
    ability to meet future minimum regulatory capital requirements.

    The Bank is subject to  regulations  imposed by the OTS regarding the amount
    of capital distributions payable to the Corporation.  Generally,  the Bank's
    payment of dividends is limited, without prior OTS approval, to net earnings
    for the current  calendar year plus the two preceding  calendar years,  less
    capital  distributions  paid  over  the  comparable  time  period.   Insured
    institutions  are required to file an  application  with the OTS for capital
    distributions in excess of this limitation.


<PAGE>



                      GENERAL INFORMATION FOR SHAREHOLDERS

Transfer Agent and Registrar:

Corporate Trust Services
Fifth Third Center
38 Fountain Square Plaza
Cincinnati, Ohio  45263
Tel: (513) 579-5417   Fax: (513) 744-6785


Corporate Counsel:

Lonnie D. Collins, Attorney
426 E. Main Street
Madison, Indiana  47250
Tel: (812) 265-3616   Fax: (812) 273-3143


Shareholder and General Inquiries:

River Valley Bancorp
Attn: Matthew P. Forrester, President
430 Clifty Drive, P.O. Box 1590
Madison, Indiana  47250
Tel: (812) 273-4949   Fax: (812) 273-2883


Special Counsel:

Barnes & Thornburg
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:          303 Clifty Drive
                  430 Clifty Drive

Downtown:         233 East Main Street
Drive thru:       401 East Main Street
Wal-Mart:         567 Ivy Tech Drive
Hanover:          10 Medical Plaza

E-MAIL Address:   rivervalleyfinancial.com


Annual Meeting:

The Annual  Meeting of  Shareholders  of River  Valley  Bancorp  will be held on
Wednesday, April 19, 2000, at 3:00 PM, at 430 Clifty Drive, Madison, IN 47250.

Memoriam

Director  Cecil L. Dorten  passed away on February 17, 2000.  Cecil Dorten was a
valuable member of this  organization,  a major general (retired) in the Indiana
National Guard, and an outstanding civic citizen. His counsel and business savvy
will be greatly missed.


<PAGE>



                               BOARD OF DIRECTORS


Fred W. Koehler
Chairman

Cecil L. Dorten
Vice Chairman

Earl W. Johann
Director

Michael J. Hensley
Director

Jonnie L. Davis
Director

Matthew P. Forrester
Director & President

Robert W. Anger
Director

********************

Lonnie D. Collins
Secretary


<PAGE>




                EXECUTIVE OFFICERS OF RIVER VALLEY FINANCIAL BANK



Matthew P. Forrester
Director & President

Mark A. Goley
Vice President of Lending

Robyne J. Hart
Vice President of Operations

Larry C. Fouse
Vice President of Finance

Deanna J. Liter
Vice President of Data Services

Loy M. Skirvin
Director of Human Resources


<PAGE>



                     OFFICERS OF RIVER VALLEY FINANCIAL BANK


Barbara J. Eades
Assistant Vice President
Branch Manager

Robert J. Schoenstein, Jr.
Assistant Vice President
Loan Officer

Angela D. Adams
Branch Manager

James B. Allen
Branch Manager

Kenneth L. Cull
Loan Officer

Theresa A. Dryden
Loan Officer

V. Kay Kimmel
Loan Officer

Linda L. Ralston
Branch Manager

Rhonda E. Wingham
Branch Manager


<PAGE>

                             ADVISORY BOARD MEMBERS


Burton P. Chambers
Advisory Director

Van E. Shelton
Advisory Director

Ralph E. Storm
Advisory Director