FORM 10-KSB
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

(Mark One)

[X]  Annual Report  Pursuant to Section 13 or 15(d) of the  Securities  Exchange
     Act of 1934 For the fiscal year ended December 31, 2003

or

[ ]  Transition  Report  Pursuant  to  Section  13  or  15(d) of the  Securities
     Exchange  Act of 1934  For the  transition  period  from  _____________  to
     _______________

Commission File Number 000-21765

                              RIVER VALLEY BANCORP
                         (Name of small business issuer)


                 INDIANA                                 35-1984567
      (State or other Jurisdiction             (I.R.S. Employer Identification
    of Incorporation or Organization)                      Number)


            430 Clifty Drive
              P.O. Box 1590
            Madison, Indiana                             47250-0590
(Address of Principal Executive Offices)                 (Zip Code)


                           Issuer's telephone number:
                                 (812) 273-4949

           Securities Registered Pursuant to Section 12(b) of the Act:

                                      None


           Securities Registered Pursuant to Section 12(g) of the Act:

                         Common Stock, without par value
                                (Title of Class)


Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the  Exchange  Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports),  and (2) has been
subject  to such  requirements  for the past 90 days.  YES [ X ] NO [ ]

Check if there is no disclosure of delinquent  filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure  will be contained,  to
the  best  of  Registrant's   knowledge,  in  definitive  proxy  or  information
statements  incorporated  by  reference  in Part III of this Form  10-KSB or any
amendment to this Form 10-KSB. [ ]

The issuer had  $15,992,000  in revenues for the fiscal year ended  December 31,
2003.

As of February 25, 2004,  there were issued and outstanding  1,654,198 shares of
the issuer's Common Stock.  The aggregate  market value of the voting stock held
by non-affiliates of the issuer, computed by reference to the average sale price
of such stock as of February 25, 2004 was $35,583,650.

                       DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Annual Report to  Shareholders  for the year ended  December 31,
2003 are incorporated into Part II. Portions of the Proxy Statement for the 2004
Annual Meeting of Shareholders are incorporated in Part I and Part III.

Transitional Small Business Disclosure Format (check one):  YES [ ]    NO [X]

                            Exhibit Index on Page E-1
                               Page 1 of 37 pages
<PAGE>

                              RIVER VALLEY BANCORP

                                   Form 10-KSB

                                      INDEX

                                                                      Page

FORWARD LOOKING STATEMENT  ..................................................  3

PART I
   Item 1.   Description of Business ........................................  3
   Item 2.   Description of Properties ...................................... 30
   Item 3.   Legal Proceedings .............................................. 31
   Item 4.   Submission of Matters to a Vote of Security Holders ............ 31
   Item 4.5. Executive Officers of the Registrant ........................... 31

PART II
   Item 5.   Market for Common Equity, Related Stockholder Matters and
                Small Business Issuer Purchases of Equity Securities ........ 32
   Item 5.5. Selected Consolidated Financial Data ........................... 32
   Item 6.   Management's Discussion and Analysis or Plan of Operation ...... 32
   Item 6A.  Quantitative and Qualitative Disclosures About Market Risk ..... 33
   Item 7.   Financial Statements ........................................... 33
   Item 8.   Changes in and Disagreements with Accountants on Accounting
                and Financial Disclosure .................................... 33
   Item 8A.  Controls and Procedures  ....................................... 33

PART III
   Item 9.   Directors, Executive Officers, Promoters and Control Persons,
                Compliance with Section 16(a) of the Exchange Act ........... 33
   Item 10.  Executive Compensation ......................................... 33
   Item 11.  Security Ownership of Certain Beneficial Owners and Management . 34
   Item 12.  Certain Relationships and Related Transactions ................. 34
   Item 13.  Exhibits and Reports on Form 8-K  .............................. 35
   Item 14.  Principal Accountant Fees and Services ......................... 35

SIGNATURES .................................................................. 36
<PAGE>

                            FORWARD LOOKING STATEMENT

     This Annual Report on Form 10-KSB ("Form 10-KSB") contains statements which
constitute  forward  looking  statements  within  the  meaning  of  the  Private
Securities Litigation Reform Act of 1995. These statements appear in a number of
places in this Form 10-KSB and include statements regarding the intent,  belief,
outlook,  estimates or  expectations  of the Holding Company (as defined below),
its directors,  or its officers  primarily with respect to future events and the
future financial performance of the Holding Company. Readers of this Form 10-KSB
are cautioned  that any such forward  looking  statements  are not guarantees of
future  events or  performance  and involve  risks and  uncertainties,  and that
actual  results  may  differ  materially  from  those  in  the  forward  looking
statements  as  a  result  of  various  factors.  The  accompanying  information
contained in this Form 10-KSB identifies important factors that could cause such
differences.  These  factors  include but are not limited to changes in interest
rates;  loss of  deposits  and  loan  demand  to  other  savings  and  financial
institutions;  substantial changes in financial markets;  changes in real estate
values and the real estate market;  regulatory changes; or unanticipated results
in pending legal proceedings.


Item 1.    Description of Business.

General

     River Valley  Bancorp (the "Holding  Company" and together with the "Bank,"
the  "Company"),  an Indiana  corporation,  was  formed in 1996 for the  primary
purpose of purchasing  all of the issued and  outstanding  common stock of River
Valley  Financial  Bank  (formerly   Madison  First  Federal  Savings  and  Loan
Association;  hereinafter  "River  Valley  Financial"  or  the  "Bank")  in  its
conversion  from mutual to stock form. The conversion  offering was completed on
December 20, 1996. On December 23, 1996, the Corporation utilized  approximately
$3.0 million of the net conversion proceeds to purchase 95.6% of the outstanding
common  shares of  Citizens  National  Bank of Madison  ("Citizens"),  and River
Valley Financial and Citizens merged on November 20, 1997.

     The  activities  of the Holding  Company  have been  limited  primarily  to
holding the stock of the Bank.  River  Valley  Financial  was  organized in 1875
under the laws of the United States of America.  River Valley Financial conducts
operations from its four  full-service  office locations in Jefferson County and
offers a variety of deposit and lending  services  to  consumer  and  commercial
customers  in  Jefferson  and  surrounding  counties.  The Company is subject to
regulation,  supervision and examination by the Office of Thrift  Supervision of
the U.S.  Department of Treasury (the "OTS").  River Valley Financial is subject
to regulation,  supervision  and  examination by the OTS and the Federal Deposit
Insurance  Corporation  (the  "FDIC").  Deposits in River Valley  Financial  are
insured  up to  applicable  limits by the  Savings  Association  Insurance  Fund
("SAIF") of the FDIC.

     The Bank  historically  has  concentrated  its  lending  activities  on the
origination  of  loans  secured  by  first  mortgage  liens  for  the  purchase,
construction,  or refinancing of one- to four- family residential real property.
One- to four-family residential mortgage loans continue to be the major focus of
the Bank's loan origination  activities,  representing 45.9% of the Bank's total
loan portfolio at December 31, 2003. The Bank  identified  $99,880 in loans held
for sale at December 31, 2003. The Bank also offers multi-family mortgage loans,
non-residential real estate loans, land loans,  construction loans,  nonmortgage
commercial  loans and consumer  loans.  Its  principal  market area is Jefferson
County, Indiana and adjoining counties.
<PAGE>

     Loan Portfolio  Data. The following table sets forth the composition of the
Bank's loan  portfolio,  including loans held for sale, as of December 31, 2003,
2002,  2001, 2000 and 1999 by loan type as of the dates  indicated,  including a
reconciliation  of gross loans receivable  after  consideration of the allowance
for loan losses, deferred loan origination costs and loans in process.
<TABLE>
<CAPTION>

                                                                                At December 31,
------------------------------------------------------------------------------------------------------------------------------------
                                                   2003              2002              2001             2000              1999
                                                      Percent           Percent          Percent           Percent          Percent
                                             Amount   of Total  Amount  of  Total Amount of Total  Amount  of Total  Amount of Total
                                             ------   --------  ------  --------- ------ --------  ------  --------  ------ --------
TYPE OF LOAN                                                                    (Dollars in thousands)
Residential real estate:
<S>                                         <C>        <C>    <C>        <C>    <C>        <C>    <C>        <C>    <C>        <C>
   One-to four-family ..................... $ 90,492   45.9%  $ 73,197   43.4%  $ 73,431   45.1%  $ 77,304   52.0%  $ 69,588   58.6%
   Multi-family ...........................    5,009    2.5      4,396    2.6      3,932    2.4      3,319    2.2      2,918    2.5
   Construction ...........................    8,689    4.4      4,866    2.9      6,874    4.2      6,827    4.6      4,163    3.5
Nonresidential real estate ................   50,995   25.8     42,672   25.3     36,898   22.7     25,944   17.4     12,758   10.7
Land loans ................................    5,393    2.7      3,364    2.0      4,994    3.1      4,269    2.9     10,079    8.5
Consumer loans:
   Automobile loans .......................    6,347    3.2      9,494    5.6     12,320    7.6     11,118    7.5      6,922    5.8
   Loans secured by deposits ..............      427     .2        401     .2        537     .3        574     .4        548     .5
   Home improvement loans .................       --     --         --     --         --     --          6     --         34     --
   Other ..................................    3,513    1.8      4,171    2.5      4,549    2.8      2,988    2.0      2,040    1.7
Commercial loans ..........................   26,764   13.5     26,203   15.5     19,216   11.8     16,361   11.0      9,780    8.2
                                            --------  -----    -------  -----   --------  -----   --------  -----   --------  -----
Gross loans receivable ....................  197,629  100.0    168,764  100.0    162,751  100.0    148,710  100.0    118,830  100.0
Add/(Deduct):
   Deferred loan origination costs ........      461     .2        379     .2        356     .2        324     .2        245     .2
   Undisbursed portions of loans in process   (3,868)  (2.0)    (2,147)  (1.3)    (3,163)  (2.0)    (6,362)  (4.3)    (2,422)  (2.0)
   Allowance for loan losses ..............   (2,056)  (1.1)    (2,101)  (1.3)    (1,972)  (1.3)    (1,702)  (1.1)    (1,522)  (1.3)
                                            --------  -----    -------  -----   --------  -----   --------  -----   --------  -----
Net loans receivable ...................... $192,166   97.1%  $164,895   97.6%  $157,972   96.9%  $140,970   94.8%  $115,131   96.9%
                                            ========  =====   ========  =====   ========  =====   ========  =====   ========  =====
</TABLE>

     The  following  table sets forth certain  information  at December 31, 2003
regarding the dollar amount of loans maturing in the Bank's loan portfolio based
on the  contractual  terms to  maturity.  Demand  loans,  loans having no stated
schedule of repayments and no stated maturity and overdrafts are reported as due
in one year or less.  This  schedule  does not  reflect  the effects of possible
prepayments  or  enforcement  of   due-on-sale   clauses.   Management   expects
prepayments will cause actual maturities to be shorter.
<TABLE>
<CAPTION>

                                                           Due During Years Ended December 31,
                                  Balance      ------------------------------------------------------------------------
                               Outstanding at                                   2007       2009     2014        2019
                                December 31,                                     to         to       to          and
                                   2003        2004      2005        2006       2008       2013     2018      following
                               --------------  ----      ----        ----       ----       ----     ----      ---------
                                                                  (In thousands)

Residential real estate loans:
<S>                              <C>        <C>        <C>        <C>        <C>        <C>        <C>        <C>
   One-to four-family ........   $ 90,492   $  5,492   $    225   $    340   $    978   $  5,432   $ 14,066   $ 63,959
   Multi-family ..............      5,009         --         --         --         --        360        823      3,826
   Construction ..............      8,689      8,689         --         --         --         --         --         --
Nonresidential
   Real estate loans .........     50,995      1,007        137        348        186      2,686     11,211     35,404
Land loans ...................      5,393         --         --          9         36      2,337        665      2,362
Consumer loans:
   Loans secured by deposits .        427        175         65         71        107          7         --          2
   Other loans ...............      9,860      2,297      1,696      2,614      2,873        225        155         --
Commercial loans .............     26,764     17,073      1,846      1,256      2,610      2,847      1,132         --
                                 --------   --------   --------   --------   --------   --------   --------   --------
      Total ..................   $197,629   $ 34,733   $  3,969   $  4,638   $  6,790   $ 13,894   $ 28,052   $105,553
                                 ========   ========   ========   ========   ========   ========   ========   ========
</TABLE>
<PAGE>

The following  table sets forth,  as of December 31, 2003,  the dollar amount of
all loans due after one year that have  fixed  interest  rates and  floating  or
adjustable interest rates.

                                      Due After December 31, 2004
                                   ---------------------------------
                                   Fixed Rates Variable Rates  Total
                                   ----------- --------------  ------
                                             (In thousands)

Residential real estate loans:
   One-to four-family ...........     $ 9,262    $ 75,738    $ 85,000
   Multi-family .................         622       4,387       5,009
   Construction .................          --          --          --
Non-residential real estate loans       6,113      43,859      49,972
Land loans ......................         419       4,990       5,409
Consumer loans:
   Loans secured by deposits ....         252          --         252
   Other loans ..................       7,444         119       7,563
Commercial loans ................       6,424       3,267       9,691
                                      -------    --------    --------
      Total .....................     $30,536    $132,360    $162,896
                                      =======    ========    ========

Residential  Loans.  Residential  loans consist primarily of one- to four-family
loans.  Approximately  $90.5 million, or 45.9% of the Bank's portfolio of loans,
at December 31, 2003,  consisted of one- to four-family  residential  loans,  of
which approximately 89.1% had adjustable rates.

The Bank  currently  offers  adjustable  rate  one- to  four-family  residential
mortgage loans  ("ARMs")  which adjust  annually and are indexed to the one-year
U.S. Treasury securities yields adjusted to a constant maturity,  although until
late 1995, the Bank's ARMs were indexed to the 11th District Cost of Funds. Some
of the Bank's  residential  ARMs are  originated  at a discount or "teaser" rate
which is generally 150 to 175 basis points below the "fully indexed" rate. These
ARMs then  adjust  annually  to maintain a margin  above the  applicable  index,
subject to maximum  rate  adjustments  discussed  below.  The Bank's ARMs have a
current margin above such index of 2.5% for  owner-occupied  properties and 3.0%
for  non-owner-occupied  properties.  A  substantial  portion of the ARMs in the
Bank's  portfolio at December 31, 2003 provide for maximum rate  adjustments per
year and over the life of the loan of 1% and 4%, respectively, although the Bank
also originates  residential ARMs which provide for maximum rate adjustments per
year and over the life of the loan of 1.5% and 6%, respectively. The Bank's ARMs
generally  provide for interest rate minimums of 1% below the origination  rate.
The Bank's residential ARMs are amortized for terms up to 30 years.

Adjustable  rate loans  decrease  the risk  associated  with changes in interest
rates but involve other risks,  primarily  because as interest  rates rise,  the
payments by the borrowers  may rise to the extent  permitted by the terms of the
loan, thereby increasing the potential for default.  Also, adjustable rate loans
have features which restrict changes in interest rates on a short-term basis and
over the life of the loan. At the same time,  the market value of the underlying
property may be adversely affected by higher interest rates.

The Bank currently  offers fixed rate one- to four-family  residential  mortgage
loans which provide for the payment of principal and interest over periods of 10
to 30 years.  At December  31, 2003,  approximately  10.9% of the Bank's one- to
four-family  residential  mortgage  loans had fixed  rates.  The Bank  currently
underwrites its fixed-rate  residential mortgage loans for potential sale to the
Federal  Home Loan  Mortgage  Corporation  (the  "FHLMC").  The Bank retains all
servicing  rights  on the  residential  mortgage  loans  sold to the  FHLMC.  At
December  31,  2003,  the Bank had  approximately  $91.6  million  of fixed rate
residential  mortgage  loans which were sold to the FHLMC and for which the Bank
provides servicing.

The Bank generally does not originate one- to four-family  residential  mortgage
loans if the ratio of the loan  amount  to the  lesser  of the  current  cost or
appraised  value of the property  (the  "Loan-to-Value  Ratio")  exceeds 95% and
generally  does  not  originate  one-  to  four-family  residential  ARMs if the
Loan-to-Value  Ratio exceeds 80%. The Bank generally  requires  private mortgage
insurance  on all  conventional  one- to  four-family  residential  real  estate
mortgage  loans  with  Loan-to-Value  Ratios in excess of 80%.  The cost of such
insurance is factored into the annual percentage yield on such loans, and is not
automatically  eliminated when the principal balance is reduced over the term of
the loan.
<PAGE>

Substantially all of the one- to four-family residential mortgage loans that the
Bank originates include "due-on-sale"  clauses, which give the Bank the right to
declare a loan  immediately  due and  payable  in the event  that,  among  other
things, the borrower sells or otherwise disposes of the real property subject to
the mortgage and the loan is not repaid.

At December 31, 2003,  the Bank had  outstanding  approximately  $7.4 million of
home equity  loans,  with unused lines of credit  totaling  approximately  $10.1
million. One home equity loan was included in non-performing assets on that date
in the amount of $7,500.  The Bank's home equity lines of credit are  adjustable
rate lines of credit tied to the prime rate and are amortized  based on a 10- to
20-year maturity.  The Bank generally allows a maximum 90%  Loan-to-Value  Ratio
for its home  equity  loans  (taking  into  account any other  mortgages  on the
property).  Payments  on such home equity  loans  equal 1.5% of the  outstanding
principal balance per month.

     The Bank also offers indemnification  mortgage loans ("ID Mortgage Loans"),
which are typically  written as fixed rate second mortgage loans.  The Bank's ID
Mortgage  Loans are written for terms of five years and  generally  have maximum
Loan-to-Value Ratios of 80%.

     The Bank also offers standard  second mortgage loans,  which are adjustable
rate loans tied to the U.S.  Treasury  securities  yields adjusted to a constant
maturity  with a current  margin  above  such  index of 3%.  The  Bank's  second
mortgage loans have maximum rate  adjustments per year and over the terms of the
loans equal to 1% and 4%,  respectively.  The Bank's second  mortgage loans have
terms of 10 to 30 years.

At December 31, 2003, $248,000 of one- to four-family residential mortgage loan,
or 0.1% of total  loans,  were  included  in the Bank's  non-performing  assets.

Construction   Loans.  The  Bank  offers  construction  loans  with  respect  to
residential and nonresidential real estate and, in certain cases, to builders or
developers constructing such properties on a speculative basis (i.e., before the
builder/developer obtains a commitment from a buyer).

Generally,  construction  loans are  written as  12-month  fixed rate loans with
interest  calculated  on the amount  disbursed  under the loan and  payable on a
semi-annual or monthly basis. The Bank generally  requires an 80%  Loan-to-Value
Ratio  for  its  construction  loans,  although  the  Bank  may  permit  an  85%
Loan-to-Value  Ratio for one- to  four-family  residential  construction  loans.
Inspections  are generally made prior to any  disbursement  under a construction
loan, and the Bank does not charge commitment fees for its construction loans.

At December 31, 2003, $8.7 million,  or 4.4% of the Bank's total loan portfolio,
consisted of construction  loans. The largest  construction loan at December 31,
2003 totaled  $1,021,000.  Construction loans in the amount of $33,000, or 0.02%
of total loans, were included in non-performing assets on that date.

While providing the Bank with a comparable, and in some cases higher, yield than
a conventional mortgage loan, construction loans involve a higher level of risk.
For example,  if a project is not completed and the borrower defaults,  the Bank
may have to hire  another  contractor  to complete the project at a higher cost.
Also,  a project may be  completed,  but may not be  saleable,  resulting in the
borrower defaulting and the Bank taking title to the project.
<PAGE>

Nonresidential  Real Estate Loans. At December 31, 2003, $51.0 million, or 25.8%
of  the  Bank's  portfolio,  consisted  of  nonresidential  real  estate  loans.
Nonresidential  real estate loans are  primarily  secured by real estate such as
churches,  farms and small business  properties.  The Bank generally  originates
nonresidential  real estate loans as one-year  adjustable  rate loans indexed to
the one-year U.S. Treasury  securities  yields adjusted to a constant  maturity,
written for maximum terms of 30 years. The Bank's adjustable rate nonresidential
real estate  loans have  maximum  adjustments  per year and over the life of the
loan of 1% and 4%,  respectively,  and  interest  rate  minimums of 1% below the
origination  rate. The Bank generally  requires a  Loan-to-Value  Ratio of up to
80%, depending on the nature of the real estate collateral.

The Bank  underwrites  its  nonresidential  real estate loans on a  case-by-case
basis and,  in  addition  to its normal  underwriting  criteria,  evaluates  the
borrower's  ability to  service  the debt from the net  operating  income of the
property. As of December 31, 2003, the Bank's largest nonresidential real estate
loan,  which is a participation  loan, was $4,980,000.  No  nonresidential  real
estate loans were included in non-performing assets at December 31, 2003.

Loans secured by  nonresidential  real estate  generally are larger than one- to
four-family   residential   loans  and   involve  a  greater   degree  of  risk.
Nonresidential  real estate loans often  involve  large loan  balances to single
borrowers  or groups of related  borrowers.  Payments on these loans depend to a
large degree on results of operations  and  management of the properties and may
be affected to a greater extent by adverse  conditions in the real estate market
or the economy in general.  Accordingly, the nature of the loans makes them more
difficult for management to monitor and evaluate.

Multi-family Loans. At December 31, 2003, approximately $5.0 million, or 2.5% of
the  Bank's  total  loan  portfolio,  consisted  of  mortgage  loans  secured by
multi-family  dwellings  (those  consisting  of more than four units).  The Bank
writes  multi-family loans on terms and conditions similar to its nonresidential
real estate loans. The largest  multi-family  loan in the Bank's portfolio as of
December 31, 2003 was $1,405,000 and was secured by a 46-unit  apartment complex
in Hanover,  Indiana.  No  multi-family  loans were  included in  non-performing
assets on that date.

Multi-family  loans, like  nonresidential  real estate loans,  involve a greater
risk than residential loans. See "Nonresidential Real Estate Loans" above. Also,
the loan-to-one  borrower  limitations  restrict the ability of the Bank to make
loans to developers of apartment complexes and other multi-family units.

Land Loans.  At December 31, 2003,  approximately  $5.4 million,  or 2.7% of the
Bank's total loan portfolio,  consisted of mortgage loans secured by undeveloped
real estate. The Bank's land loans are generally written on terms and conditions
similar to its  nonresidential  real estate loans. Some of the Bank's land loans
are land  development  loans;  i.e.,  the  proceeds  of the  loans  are used for
improvements  to the real estate such as streets  and  sewers.  At December  31,
2003, the Bank's largest land loan totaled $1,571,000.

No land loans were  included in  non-performing  assets as of December 31, 2003.
Such  loans are more  risky  than  conventional  loans  since  land  development
borrowers  who are over budget may divert the loan funds to cover  cost-overruns
rather than  direct  them toward the purpose for which such loans were made.  In
addition,  those loans are more difficult to monitor than conventional  mortgage
loans.  As such,  a  defaulting  borrower  could cause the Bank to take title to
partially improved land that is unmarketable without further capital investment.

Commercial  Loans. At December 31, 2003,  $26.8 million,  or 13.5% of the Bank's
total loan  portfolio,  consisted of nonmortgage  commercial  loans.  The Bank's
commercial  loans are written on either a fixed rate or an adjustable rate basis
with terms that vary depending on the type of security,  if any. At December 31,
2003, approximately $22.1 million, or 82.5%, of the Bank's commercial loans were
secured by  collateral,  such as  equipment,  inventory  and  crops.  The Bank's
adjustable  rate commercial  loans are generally  indexed to the prime rate with
varying margins and terms depending on the type of collateral securing the loans
and the credit  quality of the  borrowers.  At December  31,  2003,  the largest
commercial loan was $1,500,000.  As of the same date,  commercial loans totaling
$182,000 were included in non-performing assets.
<PAGE>

Commercial loans tend to bear somewhat  greater risk than  residential  mortgage
loans,  depending on the ability of the underlying enterprise to repay the loan.
Further,   they  are  frequently  larger  in  amount  than  the  Bank's  average
residential   mortgage  loans.

Consumer Loans. The Bank's consumer loans,  consisting  primarily of auto loans,
home improvement loans,  unsecured  installment loans, loans secured by deposits
and mobile home loans,  aggregated  approximately  $10.3 million at December 31,
2003,  or 5.2%  of the  Bank's  total  loan  portfolio.  The  Bank  consistently
originates  consumer  loans to meet the needs of its  customers and to assist in
meeting its asset/liability  management goals. All of the Bank's consumer loans,
except loans secured by deposits, are fixed rate loans with terms that vary from
six months (for unsecured  installment loans) to 60 months (for home improvement
loans and loans secured by new automobiles).  At December 31, 2003, 86.7% of the
Bank's consumer loans were secured by collateral.

The Bank's loans secured by deposits are made in amounts
up to 90% of the  current  account  balance  and accrue at a rate of 2% over the
underlying passbook or certificate of deposit rate.

The Bank offers  both direct and  indirect  automobile  loans.  Under the Bank's
indirect  automobile  program,  participating  automobile  dealers  receive loan
applications from prospective purchasers of automobiles at the point of sale and
deliver them to the Bank for  processing.  The dealer  receives a portion of the
interest payable on approved loans.

Consumer  loans  may  entail  greater  risk  than  residential  mortgage  loans,
particularly in the case of consumer loans which are unsecured or are secured by
rapidly  depreciable  assets,  such as  automobiles.  Further,  any  repossessed
collateral for a defaulted  consumer loan may not provide an adequate  source of
repayment  of  the  outstanding  loan  balance.   In  addition,   consumer  loan
collections depend upon the borrower's continuing financial stability,  and thus
are more likely to be affected by adverse personal  circumstances.  Furthermore,
the  application  of various  federal and state laws,  including  bankruptcy and
insolvency  laws, may limit the amount which can be recovered on such loans.  At
December  31,  2003,  consumer  loans  amounting  to $30,000  were  included  in
non-performing assets.

Origination,  Purchase and Sale of Loans. The Bank  historically  originated its
ARMs pursuant to its own  underwriting  standards which did not conform with the
standard  criteria  of  the  FHLMC  or  Federal  National  Mortgage  Association
("FNMA").  The Bank's ARMs varied from secondary market criteria because,  among
other things,  the Bank did not require current  property  surveys in most cases
and did not  permit  the  conversion  of those  loans to fixed rate loans in the
first three years of its term.  If the Bank  desired to sell its  non-conforming
ARMs,  it may have  experienced  difficulty in selling such loans quickly in the
secondary  market.

In 1996, the Bank began underwriting  fixed rate residential  mortgage loans for
potential sale to the FHLMC on a servicing-retained  basis. Loans originated for
sale to the FHLMC in the secondary  market are originated in accordance with the
guidelines  established  by the  FHLMC  and are  sold  promptly  after  they are
originated.  The  Bank  receives  a  servicing  fee of  one-fourth  of 1% of the
principal balance of all loans serviced. At December 31, 2003, the Bank serviced
$91.6 million in loans sold to the FHLMC.

The Bank confines its loan origination  activities primarily to Jefferson County
and  surrounding  counties.  At December 31, 2003,  the Bank held loans totaling
approximately  $11.6  million that were secured by property  located  outside of
Indiana. The Bank's loan originations are generated from referrals from existing
customers,  real estate brokers and newspaper and periodical  advertising.  Loan
applications are taken at any of the Bank's five full-service offices.
<PAGE>

The Bank's loan approval processes are intended to assess the borrower's ability
to repay the loan,  the  viability  of the loan and the adequacy of the value of
the  property  that will secure the loan.  To assess the  borrower's  ability to
repay,  the Bank evaluates the employment and credit history and  information on
the  historical and projected  income and expenses of its  borrowers.

Under the Bank's lending policy, a loan officer may approve mortgage loans up to
$175,000,  a Senior Loan Officer may approve  mortgage  loans up to $250,000 and
the  President may approve  mortgage  loans up to $322,700.  All other  mortgage
loans  must be  approved  by at  least  four  members  of the  Bank's  Board  of
Directors.  The lending  policy  further  provides that loans secured by readily
marketable  collateral,  such as stock, bonds and certificates of deposit may be
approved by a Loan Officer for up to $75,000, by a Senior Loan Officer for up to
$200,000 and by the President up to $300,000.  Loans  secured by other  non-real
estate  collateral  may be  approved by a Loan  Officer for up to $25,000,  by a
Senior Loan Officer up to $75,000 and by the President up to $175,000.  Finally,
the  lending  policy  provides  that  unsecured  loans may be approved by a Loan
Officer  up to  $10,000  or up to  $25,000  by a  Senior  Loan  Officer  or  the
President.  All  other  unsecured  loans or loans  secured  by  non-real  estate
collateral  must be  approved  by at least four  members of the Bank's  Board of
Directors.

The Bank generally  requires  appraisals on all real property securing its loans
and requires an  attorney's  opinion or title  insurance and a valid lien on the
mortgaged real estate.  Appraisals for all real property securing mortgage loans
are  performed  by  independent  appraisers  who are  state-licensed.  The  Bank
requires fire and extended  coverage  insurance in amounts at least equal to the
principal  amount of the loan and also requires  flood  insurance to protect the
property  securing the loan if the  property is in a flood plain.  The Bank also
generally requires private mortgage insurance for all residential mortgage loans
with Loan-to-Value  Ratios of greater than 80%. The Bank does not require escrow
accounts for insurance premiums or taxes.

The Bank's underwriting standards for consumer and commercial loans are intended
to protect  against  some of the risks  inherent in making such loans.  Borrower
character,  paying habits and financial strengths are important  considerations.

The  Bank   occasionally   purchases   participations   in   commercial   loans,
nonresidential   real  estate  and  multi-family   loans  from  other  financial
institutions.  At  December  31,  2003,  the  Bank  held in its  loan  portfolio
participations  in these types of loans aggregating  approximately  $2.4 million
that it had purchased,  all of which were serviced by others. The Bank generally
does not sell participations in any loans that it originates.
<PAGE>

The following table shows loan  origination and repayment  activity for the Bank
during the periods indicated:

                                                     Year Ended December 31,
                                               ---------------------------------
                                                  2003         2002        2001
                                               --------     --------   ---------
                                                        (In thousands)

Loans Originated:
   Residential real estate loans (1) .....     $108,782     $ 98,791    $ 76,409
   Multi-family loans ....................          811          864         730
   Construction loans ....................       17,183       16,980      12,638
   Non-residential real estate loans .....        9,066       17,988      21,486
   Land loans ............................        3,805        4,537       2,363
   Consumer and other loans ..............        4,924        6,758      14,610
   Commercial loans ......................       38,214       25,505      19,626
                                               --------     --------   ---------
      Total loans originated .............      182,785      171,423     147,862
Reductions:
   Sales .................................       69,498       67,915      45,790
   Principal loan repayments and other (2)       86,016       96,585      85,070
                                               --------     --------   ---------
      Total reductions ...................      155,514      164,500     130,860
                                               --------     --------   ---------
   Net increase ..........................     $ 27,271     $  6,923    $ 17,002
                                               ========     ========   =========
----------------------

(1)  Includes loans originated for sale in the secondary market.

(2)  Other items consist of amortization of deferred loan origination costs, the
     provision  for losses on loans and net  charges to the  allowance  for loan
     losses.

     Origination and Other Fees. The Bank realizes income from loan  origination
fees, loan servicing fees,  late charges,  checking  account service charges and
fees for other  miscellaneous  services.  Late charges are generally assessed if
payment is not received  within a specified  number of days after it is due. The
grace  period  depends on the  individual  loan  documents.


Non-Performing and Problem Assets

Mortgage  loans are reviewed by the Bank on a regular  basis and are placed on a
non-accrual  status when management  determines that the  collectibility  of the
interest is less than  probable or  collection  of any amount of principal is in
doubt.  Generally,  when loans are placed on non-accrual status,  unpaid accrued
interest is written off,  and further  income is  recognized  only to the extent
received.  The Bank  delivers  delinquency  notices with respect to all mortgage
loans  contractually  past due 5 to 10 days.  When loans are 30 days in default,
personal contact is made with the borrower to establish an acceptable  repayment
schedule.  Management is authorized to commence foreclosure  proceedings for any
loan upon making a  determination  that it is prudent to do so.

Commercial  and  consumer  loans  are  treated  similarly.  Interest  income  on
consumer, commercial and other nonmortgage loans is accrued over the term of the
loan except when serious  doubt exists as to the  collectibility  of a loan,  in
which case accrual of interest is discontinued  and the loan is written-off,  or
written down to the fair value of the  collateral  securing the loan.  It is the
Bank's  policy  to  recognize  losses  on  these  loans  as soon as they  become
apparent.

Non-performing  Assets. At December 31, 2003, $514,000,  or 0.2% of consolidated
total assets,  were  non-performing  loans compared to  $1,042,000,  or 0.47% of
consolidated total assets, at December 31, 2002. The Bank had no REO at December
31, 2003.
<PAGE>

The  table  below  sets  forth  the  amounts  and   categories   of  the  Bank's
non-performing assets (non-performing loans, foreclosed real estate and troubled
debt restructurings) for the last three years. It is the policy of the Bank that
all  earned  but  uncollected  interest  on all  loans be  reviewed  monthly  to
determine if any portion thereof should be classified as  uncollectible  for any
loan past due in excess of 90 days.

                                                     Year Ended December 31,
                                               ---------------------------------
                                                  2003         2002        2001
                                               --------     --------   ---------
                                                        (In thousands)

Non-performing assets:
   Non-performing loans .....................    $  514      $1,080      $  690
   Troubled debt restructurings .............     1,003         848       1,486
                                                 ------      ------      ------
      Total non-performing loans and troubled
         debt restructurings ................     1,517       1,928       2,176
                                                 ------      ------      ------
      Total non-performing assets ...........    $1,517      $1,928      $2,176
                                                 ======      ======      ======
Total non-performing loans and troubled debt
   restructurings to total loans ............       .77%       1.14%       1.34%
                                                 ======      ======      ======
Total non-performing assets to total assets .       .59%        .86%       1.14%
                                                 ======      ======      ======

At December 31, 2003, the Bank held loans delinquent from 30 to 89 days totaling
$746,000.  Other than in connection with these loans and other  delinquent loans
disclosed in this section,  management was not aware of any other  borrowers who
were  experiencing  financial  difficulties.  In  addition,  there were no other
assets that would need to be  disclosed  as  non-performing  assets.

Delinquent Loans. The following table sets forth certain information at December
31,  2003,  2002 and 2001  relating to  delinquencies  in the Bank's  portfolio.
Delinquent loans that are 90 days or more past due are considered non-performing
assets.

<TABLE>
<CAPTION>

                              At December 31, 2003                   At December 31, 2002              At  December 31, 2001
                        -----------------------------------  ----------------------------------- -----------------------------------
                             30-89 Days    90 Days or More       30-89 Days     90 Days or More    30-89 Days       90 Days or More
                        ----------------- -----------------  ----------------- ----------------- ---------------- ------------------
                                 Principal         Principal          Principal         Principal         Principal        Principal
                         Number   Balance  Number   Balance   Number   Balance  Number   Balance  Number  Balance  Number   Balance
                        of Loans of Loans of Loans of Loans  of Loans of Loans of Loans of Loans of Loans of Loans of Loans of Loans
                        -------- -------- -------- --------  -------- -------- -------- -------- -------- -------- -------- --------
                                                                    (Dollars in thousands)
Residential real
<S>                          <C>  <C>         <C>     <C>         <C> <C>           <C> <C>           <C> <C>           <C> <C>
  estate loans ......        16   $  512      6       $248        9   $  105        5   $  499        5   $  110        1   $   37
Construction loans...        --       --      1         33        2      100        1      113       --       --       --       --
Land loans ..........        --       --     --         --       --       --        1       82        1       52        1       18
Non-residential
  real estate loans..        --       --     --         --       --       --        2      252       --       --        1      164
Consumer loans ......        33      204      8         51       42      270       10       55       44      333       19      125
Commercial loans ....         3       31      2        182        2       30        4       79        8      352       15      346
                             --   ------     --       ----       --   ------       --   ------       --   ------       --   ------
    Total ...........        52   $  747     17       $514       55   $  505       23   $1,080       58   $  847       37   $  690
                             ==   ======     ==       ====       ==   ======       ==   ======       ==   ======       ==   ======
Delinquent loans to
  total loans........                                 0.64%                               0.94%                               0.94%
                                                      ====                                ====                                ====
</TABLE>

Classified  Assets.  Federal  regulations  and the Bank's  Asset  Classification
Policy provide for the classification of loans and other assets such as debt and
equity  securities  to be of lesser  quality as  "substandard,"  "doubtful,"  or
"loss"  assets.  An  asset is  considered  "substandard"  if it is  inadequately
protected by the current net worth and paying  capacity of the obligor or of the
collateral pledged, if any.  "Substandard" assets include those characterized by
the  "distinct  possibility"  that  the Bank  will  sustain  "some  loss" if the
deficiencies are not corrected.  Assets classified as "doubtful" have all of the
weaknesses   inherent  in  those  classified   "substandard,"   with  the  added
characteristic  that the weaknesses  present make  "collection or liquidation in
full," on the basis of currently existing facts, conditions, and values, "highly
questionable and improbable."  Assets  classified as "loss" are those considered
"uncollectible"  and of such  little  value  that  their  continuance  as assets
without the establishment of a specific loss reserve is not warranted.
<PAGE>

An insured  institution  is required to establish  general  allowances  for loan
losses  in  an  amount  deemed  prudent  by  management  for  loans   classified
substandard or doubtful,  as well as for other problem loans. General allowances
represent loss allowances  which have been established to recognize the inherent
risk associated with lending activities,  but which, unlike specific allowances,
have  not  been  allocated  to  particular  problem  assets.   When  an  insured
institution  classifies  problem  assets as  "loss,"  it is  required  either to
establish  a specific  allowance  for losses  equal to 100% of the amount of the
asset so classified or to charge off such amount. An institution's determination
as to  the  classification  of its  assets  and  the  amount  of  its  valuation
allowances is subject to review by the OTS, which can order the establishment of
additional general or specific loss allowances.

At December 31, 2003, the aggregate amount of the Bank's  classified  assets are
as follows:

                             At December 31, 2003
                             --------------------
                                (In thousands)

Substandard assets .......         $3,033
Doubtful assets ..........            173
Loss assets ..............              0
                                   ------
   Total classified assets         $3,206
                                   ======

The Bank  regularly  reviews its loan  portfolio to determine  whether any loans
require classification in accordance with applicable regulations. Not all of the
Bank's classified assets constitute non-performing assets.


Allowance for Loan Losses

The  allowance  for loan losses is  maintained  through the  provision  for loan
losses,  which  is  charged  to  earnings.  The  provision  for loan  losses  is
determined in  conjunction  with  management's  review and evaluation of current
economic conditions (including those of the Bank's lending area), changes in the
character and size of the loan portfolio,  loan delinquencies (current status as
well as past and  anticipated  trends) and adequacy of collateral  securing loan
delinquencies,  historical  and estimated net  charge-offs  and other  pertinent
information  derived  from a  review  of the  loan  portfolio.  In  management's
opinion,  the Bank's  allowance  for loan losses is adequate to absorb  probable
losses from loans at December 31, 2003. However,  there can be no assurance that
regulators,  when  reviewing the Bank's loan  portfolio in the future,  will not
require  increases in its allowances for loan losses or that changes in economic
conditions will not adversely affect the Bank's loan portfolio.
<PAGE>

Summary of Loan Loss  Experience.  The following  table analyzes  changes in the
allowance during the five years ended December 31, 2003.
<TABLE>
<CAPTION>

                                                                         Year Ended December 31,
                                                 -------------------------------------------------------------------
                                                   2003           2002           2001           2000           1999
                                                 -------       --------        -------        -------        -------
                                                                         (Dollars in thousands)

<S>                                              <C>            <C>            <C>            <C>            <C>
Balance at beginning of period ............      $ 2,101        $ 1,972        $ 1,702        $ 1,522        $ 1,477
Charge-offs:

     Single-family residential ............         (401)          (132)           (31)            (4)           (17)
     Consumer .............................         (242)          (258)          (107)           (71)           (86)
     Commercial ...........................         (100)          (111)           (73)            (9)           (20)
                                                 -------        -------        -------        -------        -------
       Total charge-offs ..................         (743)          (501)          (211)           (84)          (123)
Recoveries ................................          190             60             31             37             28
                                                 -------        -------        -------        -------        -------
   Net charge-offs ........................          553           (441)          (180)           (47)           (95)
Provision for losses on loans .............          508            570            450            227            140
                                                 -------        -------        -------        -------        -------
   Balance at end of period ...............      $ 2,056        $ 2,101        $ 1,972        $ 1,702        $ 1,522
                                                 =======        =======        =======        =======        =======
Allowance for loan losses as a percent of
   total loans outstanding before net items         1.04%          1.25%          1.21%          1.15%          1.28%
Ratio of net charge-offs to average loans
   outstanding before net items ...........         0.30%          0.27%          0.12%          0.03%          0.08%

</TABLE>

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

<TABLE>
<CAPTION>

                                                                     At December 31,
                                 ---------------------------------------------------------------------------------------------------
                                        2003                 2002               2001                2000                1999
                                 ------------------   -----------------    -----------------  ------------------  ------------------
                                           Percent             Percent              Percent             Percent           Percent
                                           of loans            of loans             of loans            of loans          of loans
                                           in each             in each              in each             in each           in each
                                           category            category             category            category          category
                                           to total            to total             to total            to total          to total
                                  Amount     loans     Amount    loans      Amount   loans     Amount    loans     Amount   loans
                                  ------   --------    ------  --------     ------  --------   ------   --------   ------ --------
                                                                    (Dollars in thousands)

Balance at end of
period applicable to:
<S>                                <C>        <C>      <C>         <C>      <C>       <C>      <C>       <C>      <C>        <C>
   Residential real estate ..      $1,007     52.8%    $  827      48.9%    $  610    51.7     $  346    58.8%    $    4     64.6%
   Nonresidential real estate         171     28.5        131      27.3        156    25.8         --    20.3         --     19.2
   Consumer loans ...........         246      5.2        452       8.3        626    10.7        403     9.9        109      8.0
   Commercial loans .........         512     13.5        458      15.5        365    11.8        106    11.0         --      8.2
   Unallocated ..............         120       --        233        --        215      --        847      --      1,409       --
                                   ------    -----     ------     -----     ------   -----     ------   -----     ------    -----
            Total ...........      $2,056    100.0%    $2,101     100.0%    $1,972   100.0%    $1,702   100.0%    $1,522    100.0%
                                   ======    =====     ======     =====     ======   =====     ======   =====     ======    =====
</TABLE>

Investments and Mortgage-Backed Securities

Investments.   The  Bank's  investment  portfolio   (excluding   mortgage-backed
securities) consists of U.S. government and agency obligations, corporate bonds,
municipal  securities and Federal Home Loan Bank ("FHLB") stock. At December 31,
2003, the  investments  in the portfolio had a carrying  value of  approximately
$35.6 million,  or 13.9%, of the consolidated  total assets.
<PAGE>

     The following  table sets forth the amortized  cost and the market value of
the Bank's investment portfolio at the dates indicated.

<TABLE>
<CAPTION>
                                                          At December 31,
                                 --------------------------------------------------------------------
                                        2003                     2002                     2001
                                 --------------------   ---------------------   ---------------------
                                 Amortized     Market   Amortized      Market   Amortized      Market
                                   Cost        Value      Cost         Value      Cost         Value
                                 ---------     ------   ---------      ------   ---------      ------
                                                             (In thousands)

Available for Sale:
   U.S. Government and agency
<S>                               <C>         <C>         <C>         <C>         <C>         <C>
      obligations ...........     $33,483     $33,897     $24,581     $25,148     $14,756     $14,835
   Corporate bonds ..........          --          --       2,090       2,091       1,645       1,640
   Municipal securities .....         475         485         335         352         335         347
                                  -------     -------     -------     -------     -------     -------
   Total available for sale .      33,958      34,382      27,006      27,591      16,736      16,822
FHLB stock ..................       2,176       2,176       2,000       2,000       1,250       1,250
                                  -------     -------     -------     -------     -------     -------
     Total investments ......     $36,134     $36,558     $29,006     $29,591     $17,986     $18,072
                                  =======     =======     =======     =======     =======     =======
</TABLE>

The following  table sets forth the amount of investment  securities  (excluding
FHLB stock) which mature  during each of the periods  indicated and the weighted
average yields for each range of maturities at December 31, 2003.
<TABLE>
<CAPTION>

                                                      Amount at December 31, 2003 which matures in
                                 -------------------------------------------------------------------------------------------
                                        One Year                One Year                   Five to              After
                                        or Less               to Five Years                Ten Years           Ten Years
                                 --------------------     ---------------------      --------------------   -----------------
                                 Amortized    Average     Amortized     Average      Amortized    Average   Amortized Average
                                   Cost        Yield         Cost        Yield          Cost       Yield       Cost    Yield
                                 ---------    -------     ---------     -------      ---------    -------   --------- -------
                                                                (Dollars in thousands)

U.S. Government and agency
<S>                              <C>           <C>         <C>           <C>           <C>         <C>         <C>
   obligations ...........       $ 9,014       3.48%       $23,475       3.29%         $ 994       3.52%       $--       --%
Municipal Securities .....            --         --            475       3.50             --         --         --       --
Corporate  Bonds .........            --         --             --         --             --         --         --       --

</TABLE>

Mortgage-Backed  Securities.  The Bank maintains a portfolio of  mortgage-backed
pass-through  securities  in the form of  FHLMC,  FNMA and  Government  National
Mortgage  Association  ("GNMA")  participation   certificates.   Mortgage-backed
pass-through  securities  generally entitle the Bank to receive a portion of the
cash flows from an  identified  pool of mortgages and gives the Bank an interest
in that pool of mortgages.  FHLMC,  FNMA and GNMA securities are each guaranteed
by its  respective  agencies as to principal and  interest.  Except for a $3,000
investment  in  interest-only  certificates,  the Bank  does not  invest  in any
derivative products.

Although  mortgage-backed  securities generally yield less than individual loans
originated by the Bank, they present less credit risk.  Because  mortgage-backed
securities  have a lower yield  relative to current  market rates,  retention of
such investments  could adversely affect the Bank's earnings,  particularly in a
rising interest rate environment.  The mortgage-backed  securities  portfolio is
generally considered to have very low credit risk because they are guaranteed as
to principal repayment by the issuing agency.

In addition,  the Bank has purchased adjustable rate mortgage-backed  securities
as part of its effort to reduce its interest rate risk. In a period of declining
interest  rates,  the Bank is subject to prepayment risk on such adjustable rate
mortgage-backed  securities.  The Bank attempts to mitigate this prepayment risk
by purchasing  mortgage-backed securities at or near par. If interest rates rise
in  general,  the  interest  rates  on the  loans  backing  the  mortgage-backed
securities  will also adjust  upward,  subject to the interest  rate caps in the
underlying mortgage loans.  However,  the Bank is still subject to interest rate
risk on such  securities  if  interest  rates rise  faster than 1% to 2% maximum
annual interest rate adjustments on the underlying loans.
<PAGE>

At December 31, 2003, the Bank had  mortgage-backed  securities  with a carrying
value of  approximately  $175,000 all of which were  classified as available for
sale. These mortgage-backed  securities may be used as collateral for borrowings
and, through repayments, as a source of liquidity.

The following table sets forth the amortized cost and market value of the Bank's
mortgage-backed securities at the dates indicated.
<TABLE>
<CAPTION>

                                                                   At December 31,
                                          ---------------------------------------------------------------
                                                  2003                  2002                 2001
                                          --------------------   ------------------   -------------------
                                          Amortized     Market   Amortized   Market   Amortized    Market
                                             Cost       Value      Cost      Value       Cost      Value
                                          ---------     ------   ---------   ------   ---------    ------
                                                                      (In thousands)

Available for Sale:
<S>                                          <C>        <C>        <C>        <C>        <C>        <C>
   Government agency securities ......       $  0       $  0       $120       $122       $204       $207
   Collateralized mortgage obligations        177        175        451        461        634        624
                                             ----       ----       ----       ----       ----       ----
      Total mortgage-backed securities       $177       $175       $571       $583       $838       $831
                                             ====       ====       ====       ====       ====       ====
</TABLE>


The following table sets forth the amount of  mortgage-backed  securities  which
mature during each of the periods  indicated and the weighted average yields for
each range of maturities at December 31, 2003.
<TABLE>
<CAPTION>

                                                   Amount at December 31, 2003 which matures in
                                        --------------------------------------------------------------------
                                               One Year                 One Year                After
                                               or Less                to Five Years           Five Years
                                        ---------------------     ---------------------     ----------------
                                        Amortized     Average     Amortized     Average     Amortized     Average
                                           Cost       Yield         Cost        Yield          Cost       Yield
                                        ---------     -------     ---------     -------     ---------     -------
                                                                    (Dollars in thousands)

Mortgage-backed securities available
<S>                                        <C>                      <C>                        <C>         <C>
   for sale ........................       $  0                     $  0                       $177        2.79%

</TABLE>

The  following  table  sets  forth the  changes  in the  Bank's  mortgage-backed
securities portfolio for the years ended December 31, 2003, 2002 and 2001.
<TABLE>
<CAPTION>

                                                                        Year Ended December 31,
                                                                 -------------------------------------
                                                                   2003           2002           2001
                                                                 -------        -------        -------
                                                                            (In thousands)

<S>                                                              <C>            <C>            <C>
Beginning balance ........................................       $   583        $   831        $ 1,918
Purchases ................................................            --             --             --
Sales proceeds ...........................................           (98)           (44)          (874)
Repayments ...............................................          (287)          (217)          (207)
Losses on sales ..........................................            (4)            --            (16)
Premium and discount amortization, net ...................            (5)            (6)            (6)
Unrealized gains (losses) on securities available for sale           (14)            19             16
                                                                 -------        -------        -------
Ending balance ...........................................       $   175        $   583        $   831
                                                                 =======        =======        =======
</TABLE>

Sources of Funds

General. Deposits have traditionally been the Bank's primary source of funds for
use in lending and  investment  activities.  In addition to  deposits,  the Bank
derives  funds  from  scheduled  loan  payments,   investment  maturities,  loan
prepayments,  retained earnings, income on earning assets and borrowings.  While
scheduled  loan  payments  and income on earning  assets are  relatively  stable
sources  of  funds,  deposit  inflows  and  outflows  can  vary  widely  and are
influenced  by  prevailing  interest  rates,  market  conditions  and  levels of
competition.  Borrowings  from  the  FHLB  of  Indianapolis  may be  used in the
short-term to compensate for  reductions in deposits or deposit  inflows at less
than projected levels.
<PAGE>

Deposits.  Deposits are attracted,  principally  from within  Jefferson  County,
through the offering of a broad selection of deposit instruments including fixed
rate  certificates  of  deposit,  NOW,  MMDAs  and other  transaction  accounts,
individual retirement accounts and savings accounts.  The Bank actively solicits
and advertises for deposits  outside of Jefferson  County.  Since the opening of
our branch in  Charlestown,  Indiana (Clark County),  and the  soon-to-be-opened
branch in  Carrollton,  Kentucky  (Carroll  County),  the Bank's market area has
expanded.  Deposits will come from all of our market area. Deposit account terms
vary, with the principal  differences  being the minimum balance  required,  the
amount of time the funds remain on deposit and the interest  rate. The Bank does
not pay a fee for any deposits it receives.

Interest rates paid, maturity terms,  service fees and withdrawal  penalties are
established by the Bank on a periodic  basis.  Determination  of rates and terms
are predicated on funds  acquisition and liquidity  requirements,  rates paid by
competitors,  growth goals and applicable regulations. The Bank relies, in part,
on customer service and  long-standing  relationships  with customers to attract
and retain its  deposits,  but also  closely  prices its deposits in relation to
rates  offered  by  its   competitors.

The flow of deposits is influenced significantly by general economic conditions,
changes in money  market and  prevailing  interest  rates and  competition.  The
variety of deposit accounts offered by the Bank has allowed it to be competitive
in  obtaining  funds and to respond  with  flexibility  to  changes in  consumer
demand.  The Bank has become more  susceptible  to  short-term  fluctuations  in
deposit flows as customers  have become more interest rate  conscious.  The Bank
manages  the  pricing  of its  deposits  in  keeping  with  its  asset/liability
management  and  profitability  objectives.  Based on its  experience,  the Bank
believes  that its NOW and MMDAs are  relatively  stable  sources  of  deposits.
However,  the  ability  of the Bank to  attract  and  maintain  certificates  of
deposit, and the rates paid on these deposits, have been and will continue to be
significantly affected by market conditions.
<PAGE>

     An analysis of the Company's deposit accounts by type, maturity and rate at
December 31, 2003 is as follows:
<TABLE>
<CAPTION>

                                      Minimum     Balance at                           Weighted
                                      Opening    December 31,             % of          Average
Type of Account                       Balance        2003               Deposits          Rate
---------------                       -------    ------------           --------       --------
                                                      (Dollars in thousands)

Withdrawable:
<S>                                   <C>         <C>                      <C>             <C>
   Non-interest bearing accounts      $   100     $ 11,828                 6.6%            .00%
   Savings accounts ............           50       26,478                14.7             .71
   MMDA ........................          100       26,357                14.6            1.24
   NOW accounts ................          100       20,689                11.5             .50
                                                  --------                ----
      Total withdrawable .......                    85,352                47.4             .72

Certificates (original terms):
   I.R.A .......................          250        7,093                 3.9            3.08
   3 months ....................        2,500           28                  .0            1.05
   6 months ....................        2,500        2,191                 1.2            1.35
   9 months ....................        2,500          217                  .1            1.25
   12 months ...................          500       18,223                10.1            1.72
   15 months ...................          500        9,380                 5.2            1.94
   18 months ...................          500        2,046                 1.1            2.18
   24 months ...................          500        4,594                 2.6            3.28
   30 months ...................          500        1,600                  .9            3.46
   36 months ...................          500        1,917                 1.1            4.08
   48 months ...................          500        1,175                  .7            4.28
   60 months ...................          500        7,529                 4.2            4.64
Jumbo certificates .............      100,000       38,609                21.5            2.72
                                                  --------               -----
Total certificates .............                    94,602                52.6            2.67
                                                  --------               -----
Total deposits .................                  $179,954               100.0%           1.75
                                                  ========               =====
</TABLE>


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

                              At December 31,
                    -----------------------------------
                      2003          2002          2001
                    -------       -------       -------
                              (In thousands)

0.00 to 3.00%       $67,726       $63,261       $10,647
3.01 to 5.00%        19,259        21,412        43,307
5.01 to 6.00%         5,489         8,187        11,417
6.01 to 7.00%            28         2,346        15,972
7.01 to 8.00%           100           322         1,818
                    -------       -------       -------
   Total ....       $94,602       $95,528       $83,161
                    =======       =======       =======
<PAGE>

The following table represents, by various interest rate categories, the amounts
of time deposits maturing during each of the three years following  December 31,
2003. Matured certificates, which have not been renewed as of December 31, 2003,
have been allocated based upon certain rollover assumptions.

                               Amounts at December 31, 2003
                    ----------------------------------------------------
                    One Year         Two          Three     Greater Than
                    or Less         Years         Years      Three Years
                    --------        -----         -----     ------------
                                   (In thousands)

0.00 to 3.00%       $60,597       $ 7,667       $   884       $   578
3.01 to 5.00%         8,078           973         1,003         9,205
5.01 to 6.00%         1,068           682           585         3,154
6.01 to 7.00%            13            15            --            --
7.01 to 8.00%            --           100            --            --
                    -------       -------       -------       -------
   Total ....       $69,756       $ 9,437       $ 2,472       $12,937
                    =======       =======       =======       =======


The  following  table  indicates  the  amount  of the  Bank's  jumbo  and  other
certificates  of deposit of $100,000 or more by time remaining until maturity as
of December 31, 2003.

                                                 At December 31, 2003
                                                 --------------------
Maturity Period                                     (In thousands)

   Three months or less ........................       $16,664
   Greater than three months through six months         11,562
   Greater than six months through twelve months         4,087
   Over twelve months ..........................         6,296
                                                       -------
      Total ....................................       $38,609
                                                       =======

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

                                 Balance                 Increase     Balance                   Increase     Balance
                                   at                   (Decrease)       at                    (Decrease)       at
                                December 31,   % of        from      December 31,    % of         from      December 31,     % of
                                   2003      Deposits      2002         2002        Deposits      2001          2001       Deposits
                                ------------ --------   ----------   ------------   --------    --------    ------------   --------
                                                                     (Dollars in thousands)
Withdrawable:
  Non-interest bearing
<S>                              <C>            <C>      <C>          <C>               <C>      <C>          <C>               <C>
    accounts .................   $ 11,828       6.6%     $    713     $ 11,115          6.9%     $   (291)    $ 11,406          7.9%
  Savings accounts ...........     26,478      14.7         1,940       24,538         15.2         4,449       20,089         13.8
  MMDA .......................     26,357      14.6        14,457       11,900          7.3        (1,524)      13,424          9.2
  NOW accounts ...............     20,689      11.5         1,941       18,748         11.6         1,257       17,491         12.0
                                 --------     -----      --------     --------        -----      --------     --------        -----
      Total withdrawable .....     85,352      47.4        19,051       66,301         41.0         3,891       62,410         42.9
Certificates (original terms):
  I.R.A ......................      7,093       3.9           432        6,661          4.1           716        5,945          4.1
  3 months ...................         28        .0          (556)         584           .4           520           64           --
  6 months ...................      2,191       1.2           896        1,295           .8        (1,564)       2,859          2.0
  9 months ...................        217        .1          (330)         547           .3          (323)         870           .6
  12 months ..................     18,223      10.1           908       17,315         10.7           133       17,182         11.8
  15 months ..................      9,380       5.2         2,177        7,203          4.4        (1,747)       8,950          6.1
  18 months ..................      2,046       1.1          (294)       2,340          1.4          (794)       3,134          2.2
  24 months ..................      4,594       2.6        (2,782)       7,376          4.6        (1,553)       8,929          6.1
  30 months ..................      1,600        .9          (214)       1,814          1.1           125        1,689          1.2
  36 months ..................      1,917       1.1           327        1,590          1.0           314        1,276           .9
  48 months ..................      1,175        .7           (97)       1,272           .8           709          563           .4
  60 months ..................      7,529       4.2         1,899        5,630          3.5         4,273        1,357           .9
Jumbo certificates ...........     38,609      21.5        (3,292)      41,901         25.9        11,558       30,343         20.8
                                 --------     -----      --------     --------        -----      --------     --------        -----
    Total certificates .......     94,602      52.6          (926)      95,528         59.0        12,367       83,161         57.1
                                 --------     -----      --------     --------        -----      --------     --------        -----
Total deposits ...............   $179,954     100.0%     $ 18,125     $161,829        100.0%     $ 16,258     $145,571        100.0%
                                 ========     =====      ========     ========        =====      ========     ========        ======
</TABLE>

<PAGE>

Borrowings. The Bank focuses on generating high quality loans and then seeks the
best source of funding from deposits,  investments,  or borrowings.  At December
31,  2003,  the  Bank  had $43  million  in FHLB  advances.  The  Bank  does not
anticipate  any  difficulty  in  obtaining  advances  appropriate  to  meet  its
requirements in the future.

     The following table presents  certain  information  relating to the Holding
Company's and the Bank's borrowings at or for the years ended December 31, 2003,
2002 and 2001.
<TABLE>
<CAPTION>

                                                                   At or for the Year
                                                                   Ended December 31,
                                                          -------------------------------------
                                                           2003            2002           2001
                                                          -------        -------        -------
                                                                      (In thousands)

FHLB Advances and Other Borrowed Money:
<S>                                                       <C>            <C>            <C>
   Outstanding at end of period ...................       $50,000        $40,000        $26,500
   Average balance outstanding for period .........        45,636         32,475         17,385
   Maximum amount outstanding at any
      month-end during the period .................        50,000         40,000         26,500
   Weighted average interest rate during the period          4.58%          4.88%          5.50%
   Weighted average interest rate at end of period           4.40%          4.48%          4.53%
</TABLE>


Service Corporation Subsidiaries

Office of Thrift Supervision  regulations permit federal savings associations to
invest in the capital stock,  obligations or other specified types of securities
of  subsidiaries  (referred to as "service  corporations")  and to make loans to
such subsidiaries and joint ventures in which such subsidiaries are participants
in an aggregate  amount not exceeding 2% of the  association's  assets,  plus an
additional 1% of assets if the amount over 2% is used for specified community or
inner-city  development  purposes.  In  addition,   federal  regulations  permit
associations to make specified types of loans to such  subsidiaries  (other than
special purpose finance  subsidiaries)  in which the association  owns more than
10% of the stock, in an aggregate amount not exceeding 50% of the  association's
regulatory capital if the association's regulatory capital is in compliance with
applicable  regulations.

A savings  association that acquires a non-savings  association  subsidiary,  or
that elects to conduct a new activity within a subsidiary, must give the Federal
Deposit  Insurance  Corporation,  the  Office  of  Thrift  Supervision  and  the
Department of Financial  Institutions  at least 30 days advance  written notice.
The Federal  Deposit  Insurance  Corporation  may, after  consultation  with the
Office of Thrift  Supervision,  prohibit  specified  activities if it determines
such activities pose a serious threat to the Savings Association Insurance Fund.
Moreover,  a savings  association  must deduct  from  capital,  for  purposes of
meeting the core capital,  tangible capital and risk-based capital requirements,
its entire  investment in and loans to a subsidiary  engaged in  activities  not
permissible for a national bank (other than  exclusively  agency  activities for
its customers or mortgage banking subsidiaries).

The Bank currently owns one subsidiary, Madison First Service Corporation, which
was incorporated under the laws of the State of Indiana on July 3, 1973. Madison
First Service Corporation  currently holds land but does not otherwise engage in
significant business activities.


Financing Subsidiary

On March 13, 2003, the Company formed the "RIVR  Statutory Trust I," a statutory
trust formed under  Connecticut  law, and filed a Certificate  of Trust with the
Secretary of State of the State of Connecticut. The sole purpose of the Trust is
to issue and sell certain securities representing undivided beneficial interests
in the  assets of the  Trust  and to invest  the  proceeds  thereof  in  certain
debentures of the Company.
<PAGE>

Employees

As of December 31, 2003,  the Bank employed 61 persons on a full-time  basis and
11 persons on a part-time  basis.  None of the  employees  is  represented  by a
collective  bargaining group.  Management considers its employee relations to be
good.


                                   COMPETITION

The Bank  originates  most of its loans to and accepts most of its deposits from
residents of Jefferson County,  Indiana. The Bank is subject to competition from
various financial  institutions,  including state and national banks,  state and
federal  savings  associations,  credit unions and certain  nonbanking  consumer
lenders  that  provide  similar  services  in  Jefferson  County  and which have
significantly  larger resources  available to them than does the Bank. In total,
there are 11  financial  institutions  located  in  Jefferson  County,  Indiana,
including the Bank.  The Bank also competes with money market funds with respect
to deposit  accounts and with  insurance  companies  with respect to  individual
retirement accounts.

The primary  factors  influencing  competition  for deposits are interest rates,
service  and  convenience  of  office  locations.  The  Bank  competes  for loan
originations  primarily  through the  efficiency  and  quality of services  they
provide borrowers and through interest rates and loan fees charged.  Competition
is affected by, among other things, the general  availability of lendable funds,
general and local economic  conditions,  current  interest rate levels and other
factors that are not readily predictable.


                                   REGULATION

General

As a federally chartered,  SAIF-insured savings association, the Bank is subject
to extensive  regulation  by the OTS and the FDIC.  For  example,  the Bank must
obtain OTS  approval  before it may engage in certain  activities  and must file
reports with the OTS regarding its activities and financial  condition.  The OTS
periodically  examines the Bank's books and records and, in conjunction with the
FDIC in  certain  situations,  has  examination  and  enforcement  powers.  This
supervision  and  regulation  are  intended  primarily  for  the  protection  of
depositors and the federal deposit  insurance funds. A savings  association must
pay a semi-annual  assessment to the OTS based upon a marginal  assessment  rate
that decreases as the asset size of the savings association increases, and which
includes a fixed-cost  component  that is assessed on all savings  associations.
The  assessment  rate that  applies to a savings  association  depends  upon the
institution's size,  condition and the complexity of its operations.  The Bank's
semi-annual assessment is approximately $32,000.

The Bank is also subject to federal and state  regulation  as to such matters as
loans to officers,  directors,  or principal  shareholders,  required  reserves,
limitations as to the nature and amount of its loans and investments, regulatory
approval  of any  merger  or  consolidation,  issuances  or  retirements  of its
securities,  and  limitations  upon  other  aspects of  banking  operations.  In
addition,  the  Bank's  activities  and  operations  are  subject to a number of
additional  detailed,  complex and sometimes  overlapping federal and state laws
and regulations.  These include state usury and consumer credit laws, state laws
relating to fiduciaries,  the Federal Truth-In-Lending Act and Regulation Z, the
Federal Equal Credit Opportunity Act and Regulation B, the Fair Credit Reporting
Act, the Community Reinvestment Act, anti-redlining legislation,  antitrust laws
and   regulations   protecting  the   confidentiality   of  consumer   financial
information.


Savings and Loan Holding Company Regulation

As the holding  company  for the Bank,  the Holding  Company is  regulated  as a
"non-diversified  savings and loan  holding  company"  within the meaning of the
Home  Owners'  Loan Act,  as amended  ("HOLA"),  and is  subject  to  regulatory
oversight by the Director of the OTS. As such, the Holding Company is registered
with  the  OTS  and  is  thereby  subject  to  OTS  regulations,   examinations,
supervision  and reporting  requirements.  As a subsidiary of a savings and loan
holding  company,  the Bank is subject to certain  restrictions  in its dealings
with the Holding  Company and with other  companies  affiliated with the Holding
Company.
<PAGE>

In general,  the HOLA  prohibits a savings and loan  holding  company,
without  obtaining the prior approval of the Director of the OTS, from acquiring
control of another  savings  association or savings and loan holding  company or
retaining  more than 5% of the  voting  shares of a  savings  association  or of
another holding  company which is not a subsidiary.  The HOLA also restricts the
ability of a director or officer of the Holding Company,  or any person who owns
more than 25% of the Holding  Company's stock, from acquiring control of another
savings  association or savings and loan holding company  without  obtaining the
prior approval of the Director of the OTS.

The Holding  Company  currently  operates as a unitary  savings and loan holding
company. Prior to the enactment of the Gramm-Leach-Bliley Act (the "GLB Act") in
1999,  there were no restrictions on the  permissible  business  activities of a
unitary savings and loan holding company.  The GLB Act included a provision that
prohibits any new unitary savings and loan holding company, defined as a company
that  acquires  a  thrift  after  May  4,  1999,  from  engaging  in  commercial
activities.  This provision also includes a grandfather  clause,  however,  that
permits a company that was a savings and loan holding company as of May 4, 1999,
or had an application to become a savings and loan holding  company on file with
the OTS as of that date,  to  acquire  and  continue  to control a thrift and to
continue  to  engage in  commercial  activities.  Because  the  Holding  Company
qualifies  under  this  grandfather  provision,  the GLB Act did not  affect the
Holding  Company's  authority  to engage  in  diversified  business  activities.


Notwithstanding the above rules as to permissible business activities of unitary
savings and loan holding  companies,  if the savings  association  subsidiary of
such a holding  company fails to meet the Qualified  Thrift Lender ("QTL") test,
then such unitary  holding  company would be deemed to be a bank holding company
subject to all of the  provisions  of the Bank  Holding  Company Act of 1956 and
other statutes  applicable to bank holding  companies,  to the same extent as if
the Holding  Company were a bank holding  company and the Bank were a bank.  See
"-Qualified  Thrift Lender." At December 31, 2003, the Bank's asset  composition
was in excess of that required to qualify as a Qualified Thrift Lender.

If the Holding Company were to acquire  control of another  savings  association
other than through a merger or other  business  combination  with the Bank,  the
Holding  Company  would  thereupon  become a multiple  savings and loan  holding
company.  Except where such  acquisition is pursuant to the authority to approve
emergency  thrift  acquisitions  and where each subsidiary  savings  association
meets  the QTL  test,  the  activities  of the  Holding  Company  and any of its
subsidiaries  (other  than the Bank or other  subsidiary  savings  associations)
would  thereafter be subject to further  restrictions.  The HOLA provides  that,
among other things,  no multiple  savings and loan holding company or subsidiary
thereof  which is not a savings  association  shall  commence or continue  for a
limited  period of time  after  becoming  a multiple  savings  and loan  holding
company or subsidiary  thereof,  any business activity other than (i) furnishing
or performing  management  services for a subsidiary savings  association,  (ii)
conducting an insurance agency or escrow business,  (iii) holding,  managing, or
liquidating assets owned by or acquired from a subsidiary  savings  association,
(iv) holding or managing  properties  used or occupied by a  subsidiary  savings
association,  (v) acting as trustee under deeds of trust,  (vi) those activities
in which  multiple  savings  and loan  holding  companies  were  authorized  (by
regulation)  to  directly  engage on March 5, 1987,  or (vii)  those  activities
authorized  by the FRB as  permissible  for bank holding  companies,  unless the
Director  of the OTS by  regulation  prohibits  or limits  such  activities  for
savings and loan holding companies.  Those activities  described in (viii) above
must also be approved by the  Director of the OTS before a multiple  savings and
loan holding company may engage in such activities.
<PAGE>

The Director of the OTS may also approve acquisitions resulting in the formation
of  a  multiple   savings  and  loan  holding  company  which  controls  savings
associations  in more than one state,  if the multiple  savings and loan holding
company involved controls a savings  association which operated a home or branch
office in the state of the association to be acquired as of March 5, 1987, or if
the  laws of the  state in which  the  association  to be  acquired  is  located
specifically permit associations to be acquired by state-chartered  associations
or savings and loan holding  companies  located in the state where the acquiring
entity is located (or by a holding  company that controls  such  state-chartered
savings associations).  Also, the Director of the OTS may approve an acquisition
resulting in a multiple  savings and loan holding  company  controlling  savings
associations  in more than one  state in the case of  certain  emergency  thrift
acquisitions.

Indiana law permits federal and state savings association holding companies with
their home offices located  outside of Indiana to acquire  savings  associations
whose home  offices  are  located in Indiana  and  savings  association  holding
companies with their  principal place of business in Indiana  ("Indiana  Savings
Association  Holding  Companies")  upon  receipt  of  approval  by  the  Indiana
Department of Financial  Institutions.  Moreover,  Indiana  Savings  Association
Holding  Companies  may acquire  savings  associations  with their home  offices
located outside of Indiana and savings  association holding companies with their
principal place of business  located outside of Indiana upon receipt of approval
by the Indiana Department of Financial Institutions.

No  subsidiary  savings  association  of a savings and loan holding  company may
declare or pay a dividend or make a capital  distribution  on its  permanent  or
nonwithdrawable  stock  unless it first  gives the  Director  of the OTS 30 days
advance notice of such  declaration  and payment.  Any dividend  declared during
such period or without  giving  notice shall be invalid.


Federal Home Loan Bank System

The Bank is a member of the FHLB system,  which  consists of 12 regional  banks.
The Federal Housing Finance Board ("FHFB"), an independent agency,  controls the
FHLB System  including  the FHLB of  Indianapolis.  The FHLB  System  provides a
central credit facility primarily for member financial institutions. At December
31, 2003, the Bank's  investment in stock of the FHLB of  Indianapolis  was $2.2
million.  For the fiscal year ended December 31, 2003, the FHLB of  Indianapolis
paid  approximately  $107,000 in  dividends  to the Bank,  for an annual rate of
5.2%.

All 12 FHLB's are  required to provide  funds to  establish  affordable  housing
programs through direct loans or interest subsidies on advances to members to be
used for  lending at  subsidized  interest  rates for  low-and  moderate-income,
owner-occupied  housing projects,  affordable rental housing,  and certain other
community  projects.  These contributions and obligations could adversely affect
the value of FHLB stock in the future.  A  reduction  in the value of such stock
may result in a corresponding reduction in the Bank's capital.

The FHLB of  Indianapolis  serves as a reserve  or  central  bank for its member
institutions.  It is funded  primarily  from  proceeds  derived from the sale of
consolidated  obligations  of the FHLB System.  It makes  advances to members in
accordance with policies and procedures established by the FHLB and the Board of
Directors of the FHLB of Indianapolis.

All FHLB advances  must be fully secured by sufficient  collateral as determined
by the FHLB.  Eligible collateral includes first mortgage loans not more than 90
days  delinquent  or  securities   evidencing   interests  therein,   securities
(including  mortgage-backed  securities)  issued,  insured or  guaranteed by the
federal government or any agency thereof,  cash or FHLB deposits,  certain small
business and  agricultural  loans of smaller  institutions  and real estate with
readily  ascertainable  value  in which a  perfected  security  interest  may be
obtained.  Other forms of collateral may be accepted as additional  security or,
under  certain  circumstances,  to renew  outstanding  advances.  All  long-term
advances are required to provide funds for  residential  home  financing and the
FHLB has  established  standards of community  service that members must meet to
maintain access to long-term advances.
<PAGE>

     Interest rates charged for advances vary depending upon maturity,  the cost
of funds to the FHLB of Indianapolis and the purpose of the borrowing.


Insurance of Deposits

Deposit  Insurance.  The FDIC is an independent  federal agency that insures the
deposits, up to prescribed statutory limits, of banks and thrifts and safeguards
the  safety  and  soundness  of the  banking  and  thrift  industries.  The FDIC
administers two separate insurance funds, the BIF for commercial banks and state
savings banks and the SAIF for savings  associations  such as the Bank,  and for
banks  that  have  acquired  deposits  from  savings  associations.  The FDIC is
required to maintain designated levels of reserves in each fund.

     Assessments. The FDIC is authorized to establish separate annual assessment
rates for deposit  insurance for members of the BIF and members of the SAIF. The
FDIC may increase  assessment  rates for either fund if necessary to restore the
fund's  ratio of  reserves  to insured  deposits  to the target  level  within a
reasonable  time and may decrease  these rates if the target level has been met.
The FDIC has  established a risk-based  assessment  system for both SAIF and BIF
members.  Under  this  system,  assessments  vary  depending  on  the  risk  the
institution poses to its deposit insurance fund. An institution's  risk level is
determined  based on its  capital  level  and the  FDIC's  level of  supervisory
concern about the institution.

     In addition to the assessment for deposit insurance,  savings  institutions
are  required  to  pay on  bonds  issued  in the  late  1980s  by the  Financing
Corporation  ("FICO"),  which  is a  federally-chartered  corporation  that  was
organized to provide some of the  financing to resolve the thrift  crisis in the
1980s.  Prior to 2000,  FICO payments for SAIF members  approximated  6.10 basis
points,  while BIF  members  paid 1.22 basis  points.  By law,  payments on FICO
obligations  have been shared equally between BIF members and SAIF members since
January  1,  2000.  From  time to time,  legislation  may be  introduced  before
Congress  that would  increase  the deposit  insurance  assessments  paid by all
financial institutions, including the Bank.

     Although Congress has considered  merging the SAIF and the BIF, until then,
savings  associations  with SAIF deposits may not transfer deposits into the BIF
system without  paying  various exit and entrance  fees.  Such exit and entrance
fees need not be paid if a SAIF institution converts to a bank charter or merges
with a bank, as long as the resulting bank continues to pay applicable insurance
assessments to the SAIF, and as long as certain other conditions are met.


Savings Association Regulatory Capital

     Currently,  savings  associations  are  subject to three  separate  minimum
capital-to-assets  requirements:  (i) a leverage limit,  (ii) a tangible capital
requirement,  and (iii) a risk-based  capital  requirement.  The leverage  limit
requires that savings  associations  maintain  "core  capital" of at least 3% of
total assets. Core capital is generally defined as common  shareholders'  equity
(including  retained  earnings),  noncumulative  perpetual  preferred  stock and
related surplus,  certain minority equity interests in subsidiaries,  qualifying
supervisory  goodwill,  purchased mortgage servicing rights and purchased credit
card relationships  (subject to certain limits) less nonqualifying  intangibles.
The OTS requires a core capital level of 3% of total adjusted assets for savings
associations  that  receive  the  highest  supervisory  rating  for  safety  and
soundness,  and no less than 4% for all other  savings  associations.  Under the
tangible  capital  requirement,  a savings  association  must maintain  tangible
capital  (core capital less all  intangible  assets  except  purchased  mortgage
servicing  rights which may be included after making the above-noted  adjustment
in an amount up to 100% of tangible  capital) of at least 1.5% of total  assets.
Under the risk-based capital  requirements,  a minimum amount of capital must be
maintained by a savings  association  to account for the relative risks inherent
in the type and amount of assets held by the savings association. The risk-based
capital requirement  requires a savings association to maintain capital (defined
generally for these purposes as core capital plus general  valuation  allowances
and  permanent  or maturing  capital  instruments  such as  preferred  stock and
subordinated  debt  less  assets  required  to be  deducted)  equal  to  8.0% of
risk-weighted  assets.  Assets are  ranked as to risk in one of four  categories
(0-100%).  A credit  risk-free  asset,  such as  cash,  requires  no  risk-based
capital,  while an asset with a significant  credit risk,  such as a non-accrual
loan,  requires a risk  factor of 100%.  Moreover,  a savings  association  must
deduct from capital, for purposes of meeting the core capital,  tangible capital
and risk-based  capital  requirements,  its entire  investment in and loans to a
subsidiary engaged in activities not permissible for a national bank (other than
exclusively   agency   activities   for  its   customers  or  mortgage   banking
subsidiaries). At December 31, 2003, the Bank was in compliance with all capital
requirements imposed by law.
<PAGE>

     The OTS issued a final rule in 1993  which  sets  forth a  methodology  for
calculating an interest rate risk  component to be used by savings  associations
in calculating  regulatory  capital.  The OTS delayed the implementation of this
rule,  however,  and in 2002 deleted this interest rate risk  component from the
capital requirements applicable to savings associations.

     If an association is not in compliance with the capital  requirements,  the
OTS is required to prohibit asset growth and to impose a capital  directive that
may  restrict,  among other  things,  the  payment of  dividends  and  officers'
compensation. In addition, the OTS and the FDIC generally are authorized to take
enforcement actions against a savings association that fails to meet its capital
requirements. These actions may include restricting the operations activities of
the association,  imposing a capital directive, cease and desist order, or civil
money  penalties,  or imposing harsher measures such as appointing a receiver or
conservator or forcing the association to merge into another institution.


Prompt Corrective Regulatory Action

     The  Federal  Deposit  Insurance   Corporation   Improvement  Act  of  1991
("FedICIA")   requires,   among  other  things,  that  federal  bank  regulatory
authorities take "prompt corrective action" with respect to institutions that do
not meet minimum capital requirements.  For these purposes,  FedICIA establishes
five capital tiers: well capitalized, adequately capitalized,  undercapitalized,
significantly undercapitalized and critically undercapitalized.  At December 31,
2003,  the Bank was  categorized as "well  capitalized,"  meaning that its total
risk-based  capital  ratio  exceeded  10%, its Tier I risk-based  capital  ratio
exceeded  6%,  its  leverage  ratio  exceeded  5%,  and it was not  subject to a
regulatory order, agreement or directive to meet and maintain a specific capital
level for any capital measure.

     The FDIC may order savings  associations which have insufficient capital to
take corrective actions. For example, a savings association which is categorized
as  "undercapitalized"  would be  subject  to  growth  limitations  and would be
required  to submit a capital  restoration  plan,  and a  holding  company  that
controls  such a savings  association  would be required to  guarantee  that the
savings   association   complies  with  the  restoration  plan.   "Significantly
undercapitalized"   savings   associations   would  be  subject  to   additional
restrictions.  Savings  associations  deemed  by  the  FDIC  to  be  "critically
undercapitalized"  would  be  subject  to  the  appointment  of  a  receiver  or
conservator.


Dividend Limitations

     The OTS also  restricts the amount of "capital  distributions"  that may be
made by  savings  associations.  The  applicable  regulation  defines  a capital
distribution  as  a  distribution  of  cash  or  other  property  to  a  savings
association's  owners,  made on  account  of their  ownership.  This  definition
includes a savings association's  payment of cash dividends to shareholders,  or
any payment by a savings association to repurchase, redeem, retire, or otherwise
acquire  any of its  shares  or debt  instruments  that  are  included  in total
capital,  and any extension of credit to finance an  affiliate's  acquisition of
those shares or interests.  The amended  regulation  does not apply to dividends
consisting  only of a savings  association's  shares or rights to purchase  such
shares.
<PAGE>

     The regulation  exempts certain savings  associations  from filing either a
notice or an  application  with the OTS before making any capital  distribution,
and  requires a savings  association  to file an  application  for approval of a
proposed  capital  distribution  with the OTS if the association is not eligible
for expedited  treatment under OTS's application  processing rules, or the total
amount  of  all  capital   distributions,   including   the   proposed   capital
distribution,  for the applicable  calendar year would exceed an amount equal to
the  savings  association's  net income  for that year to date plus the  savings
association's retained net income for the preceding two years (the "retained net
income  standard").  A savings  association  must also file an  application  for
approval  of  a  proposed  capital   distribution  if,  following  the  proposed
distribution, the association would not be at least adequately capitalized under
the OTS prompt corrective action  regulations,  or if the proposed  distribution
would violate a prohibition contained in any applicable statute,  regulation, or
agreement between the association and the OTS or the FDIC.

     The  regulation  requires  a  savings  association  to file a  notice  of a
proposed  capital  distribution  in lieu of an application if the association or
the proposed  capital  distribution do not meet the conditions  described above,
and:  (1) the  savings  association  will not be at least well  capitalized  (as
defined  under the OTS  prompt  corrective  action  regulations)  following  the
capital  distribution;  (2) the capital distribution would reduce the amount of,
or retire any part of the savings  association's  common or preferred  stock, or
retire any part of debt instruments such as notes or debentures  included in the
association's  capital  under the OTS  capital  regulation;  or (3) the  savings
association is a subsidiary of a savings and loan holding  company.  Because the
Bank is a  subsidiary  of a  savings  and  loan  holding  company,  this  latter
provision  requires,  at a minimum,  that the Bank file a notice with the OTS 30
days before making any capital distributions to the Holding Company.

     In addition to these regulatory restrictions, the Bank's Plan of Conversion
imposes  additional  limitations on the amount of capital  distributions  it may
make to the  Holding  Company.  The  Plan of  Conversion  requires  the  Bank to
establish and maintain a liquidation account for the benefit of Eligible Account
Holders and  Supplemental  Eligible  Account Holders and prohibits the Bank from
making capital  distributions  to the Holding  Company if its net worth would be
reduced below the amount  required for the liquidation  account.


Limitations on Rates Paid for Deposits

     Regulations  promulgated by the FDIC pursuant to FedICIA place  limitations
on the ability of insured depository  institutions to accept, renew or roll over
deposits by offering rates of interest which are  significantly  higher than the
prevailing  rates of interest on deposits  offered by other  insured  depository
institutions having the same type of charter in the institution's  normal market
area. Under these regulations,  "well-capitalized"  depository  institutions may
accept,  renew,  or roll such  deposits  over without  restriction,  "adequately
capitalized"  depository  institutions  may accept,  renew or roll such deposits
over with a waiver from the FDIC (subject to certain restrictions on payments of
rates) and "undercapitalized"  depository  institutions may not accept, renew or
roll such deposits over. The  regulations  contemplate  that the  definitions of
"well capitalized,"  "adequately capitalized" and "undercapitalized" will be the
same as the  definition  adopted by the  agencies to  implement  the  corrective
action provisions of FedICIA. Management does not believe that these regulations
will have a materially adverse effect on the Bank's current operations.


Liquidity

     The  Financial  Regulatory  Relief  and  Economic  Efficiency  Act of  2000
repealed the former statutory requirement that all savings associations maintain
an average daily  balance of liquid assets in a minimum  amount of not less than
4% or more than 10% of their withdrawable  accounts plus short-term  borrowings.
The OTS  adopted an  interim  final  rule in March  2001 that  implemented  this
revised statutory  requirement,  although savings associations remain subject to
the OTS regulation that requires them to maintain sufficient liquidity to ensure
their safe and sound operation.
<PAGE>

Safety and Soundness Standards

     The federal  banking  agencies  have  adopted  final  safety and  soundness
standards for all insured  depository  institutions.  The standards,  which were
issued in the form of  guidelines  rather than  regulations,  relate to internal
controls,  information  systems,  internal audit systems,  loan underwriting and
documentation,  compensation, interest rate exposure, asset quality and earnings
standards.  In general, the standards are designed to assist the federal banking
agencies  in  identifying   and  addressing   problems  at  insured   depository
institutions  before capital becomes  impaired.  If an institution fails to meet
these  standards,  the  appropriate  federal  banking  agency  may  require  the
institution to submit a compliance plan. Failure to submit a compliance plan may
result in enforcement proceedings.


Real Estate Lending Standards

     OTS  regulations  require  savings  associations  to establish and maintain
written  internal  real estate  lending  policies.  Each  association's  lending
policies  must be  consistent  with  safe and  sound  banking  practices  and be
appropriate  to the size of the  association  and the  nature  and  scope of its
operations.   The  policies  must  establish   loan  portfolio   diversification
standards;  establish prudent underwriting  standards,  including  loan-to-value
limits, that are clear and measurable;  establish loan administration procedures
for the  association's  real  estate  portfolio;  and  establish  documentation,
approval and reporting requirements to monitor compliance with the association's
real estate  lending  policies.  The  association's  written real estate lending
policies must be reviewed and approved by the  association's  Board of Directors
at least annually.  Further,  each association is expected to monitor conditions
in its real estate  market to ensure that its  lending  policies  continue to be
appropriate for current market conditions.


Loans to One Borrower

     Under OTS  regulations,  the Bank may not make a loan or extend credit to a
single or related group of borrowers in excess of 15% of its unimpaired  capital
and surplus.  Additional amounts may be lent, not in excess of 10% of unimpaired
capital and surplus,  if such loans or extensions of credit are fully secured by
readily marketable collateral,  including certain debt and equity securities but
not including real estate.  In some cases, a savings  association may lend up to
30 percent of  unimpaired  capital and surplus to one  borrower  for purposes of
developing domestic residential housing, provided that the association meets its
regulatory  capital  requirements  and the OTS authorizes the association to use
this expanded lending authority. At December 31, 2003, the Bank did not have any
loans or  extensions  of credit to a single or  related  group of  borrowers  in
excess  of  its  lending   limits.   Management   does  not  believe   that  the
loans-to-one-borrower  limits  will  have a  significant  impact  on the  Bank's
business operations or earnings.


Qualified Thrift Lender

     Savings  associations must meet a QTL test that requires the association to
maintain  an  appropriate  level  of  qualified  thrift   investments   ("QTIs")
(primarily  residential  mortgages and related  investments,  including  certain
mortgage-related  securities)  and  otherwise  to qualify as a QTL. The required
percentage  of QTIs is 65% of  portfolio  assets  (defined  as all assets  minus
intangible  assets,  property used by the association in conducting its business
and liquid assets equal to 10% of total assets). Certain assets are subject to a
percentage  limitation  of  20%  of  portfolio  assets.  In  addition,   savings
associations may include shares of stock of the FHLBs,  FNMA, and FHLMC as QTIs.
Compliance  with the QTL test is  determined  on a monthly  basis in nine out of
every twelve months.  As of December 31, 2003,  the Bank was in compliance  with
its QTL requirement,  with approximately  79.1% of its portfolio assets invested
in QTIs.

     A savings  association which fails to meet the QTL test must either convert
to a bank (but its deposit  insurance  assessments and payments will be those of
and paid to the SAIF) or be subject to the following  penalties:  (i) it may not
enter into any new activity except for those permissible for a national bank and
for a savings  association;  (ii) its branching  activities  shall be limited to
those of a national bank; and (iii) it shall be bound by regulations  applicable
to national banks respecting payment of dividends. Three years after failing the
QTL  test the  association  must  dispose  of any  investment  or  activity  not
permissible  for a national  bank and a savings  association.  If such a savings
association  is  controlled  by a savings and loan  holding  company,  then such
holding company must,  within a prescribed time period,  become  registered as a
bank holding company and become subject to all rules and regulations  applicable
to bank holding companies (including restrictions as to the scope of permissible
business activities).
<PAGE>

Acquisitions or Dispositions and Branching

     The  Bank  Holding  Company  Act  specifically  authorizes  a bank  holding
company, upon receipt of appropriate regulatory approvals, to acquire control of
any savings association or holding company thereof wherever located.  Similarly,
a savings and loan  holding  company may  acquire  control of a bank.  Moreover,
federal  savings  associations  may  acquire  or  be  acquired  by  any  insured
depository  institution.   Regulations  promulgated  by  the  FRB  restrict  the
branching authority of savings associations  acquired by bank holding companies.
Savings  associations  acquired by bank  holding  companies  may be converted to
banks if they continue to pay SAIF premiums,  but as such they become subject to
branching  and activity  restrictions  applicable  to banks.

     Subject  to  certain  exceptions,  commonly-controlled  banks  and  savings
associations  must reimburse the FDIC for any losses suffered in connection with
a failed  bank or  savings  association  affiliate.  Institutions  are  commonly
controlled  if one is owned by another or if both are owned by the same  holding
company.  Such claims by the FDIC under this provision are subordinate to claims
of depositors,  secured creditors,  and holders of subordinated debt, other than
affiliates.

     The OTS has adopted  regulations which permit  nationwide  branching to the
extent  permitted by federal  statute.  Federal  statutes permit federal savings
associations to branch outside of their home state if the association  meets the
domestic building and loan test in  Section7701(a)(19)  of the Code or the asset
composition test of Section7701(c)  of the Code.  Branching that would result in
the formation of a multiple savings and loan holding company controlling savings
associations  in more  than one  state is  permitted  if the law of the state in
which the savings association to be acquired is located specifically  authorizes
acquisitions of its state-chartered associations by state-chartered associations
or their  holding  companies  in the state where the  acquiring  association  or
holding company is located. Moreover, Indiana banks and savings associations are
permitted  to  acquire  other  Indiana  banks and  savings  associations  and to
establish branches throughout Indiana.

     Finally, The Riegle-Neal Interstate Banking and Branching Efficiency Act of
1994 (the "Riegle-Neal  Act") permits bank holding companies to acquire banks in
other states and, with state consent and subject to certain limitations,  allows
banks  to  acquire  out-of-state  branches  either  through  merger  or de  novo
expansion.  The State of Indiana  enacted  legislation  establishing  interstate
branching  provisions for Indiana  state-chartered  banks  consistent with those
established by the Riegle-Neal Act (the "Indiana  Branching  Law").  The Indiana
Branching  Law,  which became  effective in 1996,  authorizes  Indiana  banks to
branch   interstate  by  merger  or  de  novo  expansion,   provided  that  such
transactions  are not permitted to  out-of-state  banks unless the laws of their
home  states  permit  Indiana  banks to merge or  establish  de novo  banks on a
reciprocal basis.


Transactions with Affiliates

     The Bank is subject to Sections  22(h),  23A and 23B of the Federal Reserve
Act, which limits credit transactions  between a bank or savings association and
its executive officers and its affiliates. These provisions also prescribe terms
and conditions deemed to be consistent with safe and sound banking practices for
transactions  between a financial  institution and its affiliates,  and restrict
the types of  collateral  security  permitted  in  connection  with a  financial
institution's extension of credit to an affiliate.


Federal Securities Law

     The shares of Common Stock of the Holding Company have been registered with
the SEC under the 1934 Act. The Holding  Company is subject to the  information,
proxy solicitation,  insider trading  restrictions and other requirements of the
1934 Act and the rules of the SEC  thereunder.  After three years  following the
Bank's  conversion  to stock  form,  if the  Holding  Company has fewer than 300
shareholders,  it may  deregister  its shares under the 1934 Act and cease to be
subject to the  foregoing  requirements.
<PAGE>

     Shares of Common  Stock held by persons who are  affiliates  of the Holding
Company may not be resold without  registration  unless sold in accordance  with
the resale  restrictions  of Rule 144 under the 1933 Act. If the Holding Company
meets the current public information requirements under Rule 144, each affiliate
of the  Holding  Company  who  complies  with the other  conditions  of Rule 144
(including  those that require the affiliate's  sale to be aggregated with those
of certain other persons)  would be able to sell in the public  market,  without
registration,  a number of shares not to exceed, in any three-month  period, the
greater of (i) 1% of the  outstanding  shares of the Holding Company or (ii) the
average  weekly  volume of trading in such  shares  during  the  preceding  four
calendar weeks.


Sarbanes-Oxley Act of 2002

     On July 30, 2002,  President Bush signed into law the Sarbanes-Oxley Act of
2002  (the   "Sarbanes-Oxley   Act").  The   Sarbanes-Oxley   Act  represents  a
comprehensive  revision  of  laws  affecting  corporate  governance,  accounting
obligations and corporate reporting. The Sarbanes-Oxley Act is applicable to all
companies  with  equity  or debt  securities  registered  under  the  Securities
Exchange Act of 1934. In particular, the Sarbanes-Oxley Act establishes: (i) new
requirements  for  audit  committees,  including  independence,  expertise,  and
increased responsibilities; (ii) additional responsibilities regarding financial
statements for the Chief Executive  Officer and Chief  Financial  Officer of the
reporting  company;  (iii) new standards for auditors and  regulation of audits;
(iv) increased  disclosure and reporting  obligations for the reporting  company
and its directors and executive  officers;  and (v) new and increased  civil and
criminal  penalties for violation of the securities laws. Many of the provisions
became  effective  immediately  while other  provisions  become effective over a
period of 30 to 270 days and are subject to  rulemaking  by the  Securities  and
Exchange  Commission.   Although  the  Holding  Company  anticipates   incurring
additional  expense in complying with the provisions of the  Sarbanes-Oxley  Act
and the resulting  regulations,  management does not expect that such compliance
will have a material impact on its results of operations or financial condition.


Community Reinvestment Act Matters

     Federal law requires  that  ratings of  depository  institutions  under the
Community Reinvestment Act of 1977 ("CRA") be disclosed. The disclosure includes
both a  four-unit  descriptive  rating  -  outstanding,  satisfactory,  needs to
improve,  and  substantial  noncompliance  -  and  a  written  evaluation  of an
institution's  performance.  Each FHLB is required  to  establish  standards  of
community  investment  or service that its members must  maintain for  continued
access to long-term  advances from the FHLBs.  The standards take into account a
member's  performance under the CRA and its record of lending to first-time home
buyers.  The OTS has  designated the Bank's record of meeting  community  credit
needs as satisfactory.


Predatory Lending

     The Federal  Reserve  Board  issued a regulation  that became  effective on
October  1,  2002  that is  aimed  at  curbing  "predatory  lending."  The  term
"predatory lending"  encompasses a variety of practices,  but the term generally
is used to refer to abusive  lending  practices  involving  fraud,  deception or
unfairness.  Predatory lending typically  involves one or more of the following:
(i) making unaffordable loans based on the assets of the borrower rather than on
the  borrower's  ability to repay an obligation  ("asset-based  lending");  (ii)
inducing a borrower  to  refinance  a loan  repeatedly  in order to charge  high
points and fees each time the loan is  refinanced  ("loan  flipping");  or (iii)
engaging in fraud or deception to conceal the true nature of the loan obligation
from an  unsuspecting  or  unsophisticated  borrower.  The Federal Reserve Board
amended Regulation Z to broaden the scope of loans subject to the protections of
the Home  Ownership and Equity  Protection  Act of 1994  ("HOEPA").  Among other
things,  the  regulation  brings within the scope of HOEPA  first-lien  mortgage
loans with interest  rates that are at least 8 percentage  points above Treasury
securities having a comparable  maturity.  In addition,  the regulation requires
that the cost of optional insurance and similar debt protection products paid by
a borrower at closing be included in calculating  the finance charge paid by the
borrower.  HOEPA coverage is triggered if such finance  charges exceed 8 percent
of the total loan. Finally,  the regulation restricts creditors from engaging in
repeated refinancings of their own HOEPA loans over a short time period when the
transactions are not in the borrower's interest.  Lenders that violate the rules
face  cancellation of loans and penalties equal to the finance charges paid. The
Bank does not anticipate that these  provisions,  or any similar state predatory
lending  regulations,  will materially affect its financial condition or results
of operations.
<PAGE>

USA Patriot Act of 2001

     On October 26, 2001, President Bush signed the USA Patriot Act of 2001. The
Patriot  Act is  intended  is to  strengthen  U.S.  law  enforcement's  and  the
intelligence  communities' abilities to work cohesively to combat terrorism on a
variety of fronts. The potential impact of the Act on financial  institutions of
all kinds is significant and wide ranging.  The Act contains sweeping anti-money
laundering and financial transparency laws. The Treasury Department issued final
regulations that became  effective on June 9, 2003 that require  institutions to
incorporate into their written money laundering plans a board-approved  customer
identification program implementing reasonable procedures for: (i) verifying the
identity of any person seeking to open an account,  to the extent reasonable and
practicable;  (ii)  maintaining  records of the  information  used to verify the
person's identity;  and (iii) determining whether the person appears on any list
of known or suspected terrorists or terrorist  organizations.  The Bank does not
anticipate that these requirements will materially affect its operations.


                                    TAXATION

Federal Taxation

     Historically,  savings associations,  such as the Bank, have been permitted
to compute bad debt deductions  using either the bank  experience  method or the
percentage of taxable income method. However, for years beginning after December
31, 1995,  the Bank can no longer use the percentage of taxable income method of
computing  its  allowable  tax bad debt  deduction  and instead must compute its
allowable  deduction  using the  experience  method.  In addition,  the pre-1988
reserve,  for which no deferred  taxes have been  recorded,  will not have to be
recaptured  into income unless (i) the Bank no longer  qualifies as a bank under
the Code or (ii) excess dividends or  distributions  are paid out by the Bank or
the Bank redeems its own stock.

     Depending on the composition of its items of income and expense,  a savings
association may be subject to the alternative minimum tax. A savings association
must pay an alternative minimum tax equal to the amount (if any) by which 20% of
alternative minimum taxable income ("AMTI"),  as reduced by an exemption varying
with AMTI,  exceeds the regular tax due.  AMTI  equals  regular  taxable  income
increased or decreased by certain tax  preferences  and  adjustments,  including
depreciation  deductions in excess of that allowable for alternative minimum tax
purposes, tax-exempt interest on most private activity bonds issued after August
7, 1986  (reduced by any related  interest  expense  disallowed  for regular tax
purposes), the amount of the bad debt reserve deduction claimed in excess of the
deduction  based on the  experience  method  and 75% of the  excess of  adjusted
current  earnings over AMTI (before this  adjustment and before any  alternative
tax net  operating  loss).  AMTI may be reduced only up to 90% by net  operating
loss  carryovers,  but  alternative  minimum  tax paid can be  credited  against
regular tax due in later years.

     For federal income tax purposes,  the Company has been reporting its income
and expenses on the accrual method of accounting.  The Company's  federal income
tax returns have not been audited in recent years.
<PAGE>

State Taxation

     The Company is subject to Indiana's  Financial Bank Tax ("IFBT"),  which is
imposed at a flat rate of 8.5% on apportioned "adjusted gross income." "Adjusted
gross  income," for purposes of IFBT,  begins with taxable  income as defined by
Section 63 of the Code and,  thus,  incorporates  federal  tax law to the extent
that it affects the  computation of taxable  income.  Federal  taxable income is
then adjusted by several Indiana  modifications.  Other  applicable  state taxes
include generally applicable sales and use taxes plus real and personal property
taxes.  The  Company's  state income tax returns have not been audited in recent
years.


Item 2. Description of Properties.

     The following table provides certain information with respect to the Bank's
offices as of December 31, 2003.
<TABLE>
<CAPTION>

                                                                         Net Book Value
                                                                          of Property,
                                                   Year                    Furniture,                Approximate
                                                 Opened or                Fixtures and                 Square
Description and Address                          Acquired                   Equipment                  Footage
---------------------------------                ---------               --------------              -----------
                                                                     (Dollars in thousands)

Locations in Madison, Indiana:
  Downtown Office:
<S> <C>                                            <C>                       <C>                        <C>
    233 E. Main Street ..........                  1952                      $  416                     9,110
  Drive-Through Branch:
    401 E. Main Street ..........                  1984                         154                       375
  Hilltop Location:
    430 Clifty Drive ............                  1983                       3,848                    32,000
  Wal-mart Banking Center:
    567 Ivy Tech Drive ..........                  1995                          21                       517

Location in Hanover, Indiana:
  10 Medical Plaza Drive ........                  1995                         531                       656

Location in Charlestown, Indiana:
  1025 Highway 62 ...............                  2002                         658                     1,500

Location in Sellersburg, Indiana:
  Highway 311 ...................                  2002                         275                        --

Location in Carrollton, Kentucky:
  1501 Highland Avenue ..........                  2003                          77                     2,000
</TABLE>


     The Bank owns  computer  and data  processing  equipment  which is used for
transaction processing, loan origination,  and accounting. The net book value of
electronic data processing equipment owned by the Bank was approximately $357 at
December 31, 2003.

     The Bank operates eight  automated  teller machines  ("ATMs"),  one at each
office  location  (the main office has two),  one at Hanover  College,  one at a
Kroger supermarket, all in Madison, Indiana, and one in Carrolton, Kentucky. The
Bank's ATMs participate in the Shazam(R) network.

     The Bank performs its own data processing and reporting services.
<PAGE>

Item 3. Legal Proceedings.

     Neither  the Holding  Company nor the Bank is a party to any pending  legal
proceedings,  other than routine litigation  incidental to the Holding Company's
or the Bank's business.


Item 4. Submission of Matters to a Vote of Security Holders.

No matter was submitted to a vote of the Holding Company's  shareholders  during
the  quarter  ended  December  31,  2003.


Item 4.5. Executive Officers of the Registrant.

     The executive  officers of the Holding  Company are identified  below.  The
executive  officers  of the Bank are elected  annually by the Holding  Company's
Board of Directors.
<TABLE>
<CAPTION>

                           Position with the                    Position
         Name              Holding Company                      with the Bank
--------------------       -------------------------------      -------------------------------

<S>                        <C>                                  <C>
Matthew P. Forrester       President and Chief                  President and Chief
                           Executive Officer                    Executive Officer
Lonnie D. Collins          Secretary                            Secretary

Larry C. Fouse             Vice President of Finance            Vice President of Finance
Deanna Liter               Vice President of Data Services      Vice President of Data Services
Barbara Eades              Vice President of Retail Banking     Vice President of Retail Banking
Loy Skirvin                Vice President of Human              Vice President of Human
                           Resources                            Resources

Mark A. Goley              Vice President of Lending Vice       President of Lending
Anthony D. Brandon         Vice President of Loan               Vice President of Loan
                           Administration                       Administration

John Muessel               Vice President - Trust Officer       Vice President - Trust Officer

</TABLE>

     Matthew P.  Forrester  (age 47) has served as the Bank and Holding  Company
President and Chief  Executive  Officer since October 1999.  Prior to that,  Mr.
Forrester  served  as the  Chief  Financial  Officer  for Home Loan Bank in Fort
Wayne,  Indiana and Senior Vice President and Treasurer for its holding company,
Home Bancorp. Prior to joining Home Loan Bank, Mr. Forrester was an examiner for
the Indiana Department of Financial Institutions.

     Lonnie D.  Collins  (age 55) has  served  as  Secretary  of the Bank  since
September  1994 and as Secretary of the Holding  Company since 1996. Mr. Collins
has also  practiced law since October 1975 and has served as the Bank's  outside
counsel since 1980.

     Larry C.  Fouse  (age 58) has served as the  Holding  Company's  Controller
since  1997.  From 1993 to 1997,  he served as the Chief  Financial  Officer and
Controller of Citizens and from 1989 to 1993 served as Citizens'  Vice President
and  Operations  Officer.

     Deanna Liter (age 40) has served as Vice  President of Data Services  since
1999.  From 1986 to 1997,  she was  manager  of the  Citizens'  Data  Processing
Department.
<PAGE>

     Barbara Eades (age 54) has served as Vice President of Retail Banking since
2000.  From 1997 to 1999,  she was Branch  Manager of the downtown  branch.  She
served as Assistant  Vice President for Madison First Federal from 1990 to 1996.

     Loy Skirvin (age 55) has served as Vice President of Human  Resources since
1998.  From 1991 to 1997, she was Human  Resources  Manager for a  manufacturing
firm.

     Mark A. Goley (age 48) has served as Vice  President of Loan Services since
1997. From 1989 to 1997, he served as Senior Loan Officer for Citizens.

     Anthony  D.  Brandon  (age  32)  has  served  as  Vice  President  of  Loan
Administration  since September of 2001. Prior to joining the Bank, he served as
President of Republic Bank of Indiana.

     John Muessel (age 51) has served as Vice  President - Trust  Officer  since
April of 2002. Prior to joining the Bank, he served as Trust Officer of National
City Bank of Indiana.


                                     PART II

Item 5. Market for Common Equity, Related Stockholder Matters and Small Business
        Issuer Purchases of Equity Securities.

     The Holding Company's common stock,  without par value ("Common Stock"), is
quoted on the National  Association of Securities  Dealers  Automated  Quotation
System ("NASDAQ"),  Small Cap Market, under the symbol "RIVR." Since the Holding
Company has no independent  operation or other  subsidiaries to generate income,
its ability to  accumulate  earnings  for the payment of cash  dividends  to its
shareholders  directly  depends upon the ability of the Bank to pay dividends to
the Holding Company and upon the earnings on its investment securities.

     Any dividend  distributions by the Bank to the Holding Company in excess of
current or  accumulated  earnings and profits will be treated for federal income
tax purposes as a distribution  from the Bank's  accumulated  bad debt reserves,
which could  result in  increased  federal  income tax  liability  for the Bank.
Moreover,  the  Bank  may not  pay  dividends  to the  Holding  Company  if such
dividends would result in the impairment of the liquidation  account established
in  connection  with  the  Conversion.

     Generally,  there  is no  OTS  regulatory  restriction  on the  payment  of
dividends by the Holding Company unless there is a determination by the Director
of the OTS that  there  is  reasonable  cause to  believe  that the  payment  of
dividends  constitutes  a serious  risk to the  financial  safety,  soundness or
stability of the Bank. The FDIC also has authority under current law to prohibit
a bank from paying dividends if, in its opinion,  the payment of dividends would
constitute  an unsafe  or  unsound  practice  in light of the  Bank's  financial
condition.  Indiana law, however, would prohibit the Holding Company from paying
a dividend, if, after giving effect to the payment of that dividend, the Holding
Company  would  not be able to pay its  debts as they  become  due in the  usual
course of business or the Holding  Company's total assets would be less than the
sum of its total  liabilities plus  preferential  rights of holders of preferred
stock, if any.

     Other information required by this item is incorporated by reference to the
material under the heading "Market Price of the Corporation's  Common Shares and
Related  Shareholder  Matters"  on pages 1 and 2 of the Holding  Company's  2003
Shareholder Annual Report (the "Shareholder Annual Report").


Item 5.5. Selected Consolidated Financial Data.

     The  information  required by this item is incorporated by reference to the
material under the heading  "Selected  Consolidated  Financial  Information  and
Other  Data"  on  pages  3 and 4 of  the  Shareholder  Annual  Report.


Item 6. Management's Discussion and Analysis or Plan of Operation.

     The information required by this item is incorporated by reference to pages
5 through 16 of the Shareholder Annual Report.
<PAGE>

Item 6A. Quantitative and Qualitative Disclosures About Market Risk.

The  information  required by this item is incorporated by reference to pages 12
and 13 of the Shareholder Annual Report.

Item 7. Financial Statements.

     The Holding Company's  Consolidated  Financial Statements and Notes thereto
contained  on  pages  17  through  41  in  the  Shareholder  Annual  Report  are
incorporated herein by reference.

Item 8.  Changes  In  and  Disagreements  with  Accountants  on  Accounting  and
     Financial Disclosure.

     There are no such changes and disagreements to report during the applicable
period.


Item 8A. Controls and Procedures.

     (a)  Evaluation  of  disclosure  controls  and  procedures.  The  Company's
President and Vice President of Finance,  after evaluating the  effectiveness of
the  Company's  disclosure  controls  and  procedures  (as  defined in  Sections
13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended),  as
of the end of the most recent fiscal quarter  covered by this annual report (the
"Evaluation Date"), have concluded that as of the Evaluation Date, the Company's
disclosure controls and procedures were adequate and are designed to ensure that
material  information  relating  to the  Company  would  be made  known  to such
officers by others within the Company on a timely basis.

     (b) Changes in internal controls.  There were no significant changes in the
Company's  internal  control over financial  reporting  identified in connection
with the Company's  evaluation  of controls  that occurred  during the Company's
last fiscal quarter that has  materially  affected,  or is reasonably  likely to
materially affect, the Company's internal control over financial reporting.


                                    PART III

Item 9. Directors, Executive Officers, Promoters and Control Persons, Compliance
        with Section 16(a) of the Exchange Act.

     The  information  required  by this  item  with  respect  to  directors  is
incorporated  by  reference  to pages 2  through  6 and  page 10 of the  Holding
Company's Proxy Statement for its Annual Shareholder Meeting to be held on April
21, 2004 (the "2004 Proxy Statement").  Information  concerning the Registrant's
executive officers is included in Item 4.5 in Part I of this report.

     The Company has a separate Audit  Committee  established in accordance with
Section  3(a)(58)(A)  of the  Securities  Exchange Act of 1934.  Its members are
Robert W.  Anger  (Chairman),  Fred W.  Koehler,  Jonnie L.  Davis,  Michael  J.
Hensley, L. Sue Livers and Charles J. McKay.

     The Board of Directors of the Company has determined  that the Company does
not have an "audit  committee  financial  expert,"  as defined in 17 CFR Section
228.401(e)(2),  serving on its Audit  Committee.  The Board has  selected  Audit
Committee members based on the Board's  determination that they are qualified to
oversee the  accounting  and  financial  reporting  processes of the Company and
audits of the Company's financial statements.

     The Company has adopted a code of ethics that applies, among other persons,
to its principal  executive  officer,  principal  financial  officer,  principal
accounting officer or controller,  or persons  performing  similar functions.  A
copy of that Code of Ethics is filed as an exhibit to this Report.


Item 10. Executive Compensation.

     The   information   required  by  this  item  with   respect  to  executive
compensation  is  incorporated  by  reference to pages 6 and 7 of the 2004 Proxy
Statement.
<PAGE>

Item 11. Security Ownership of Certain Beneficial Owners and Management.

     The information required by this item is incorporated by reference to pages
1 and 2 of the 2004 Proxy  Statement.

     The following table sets forth certain information pertaining to the Bank's
equity compensation plans:
<TABLE>
<CAPTION>

                                        Equity Compensation Plan Information
                                                                                                Number of securities
                                Number of securities                                           remaining available for
                             to be issued upon exercise         Weighted-average                future issuance under
                              of outstanding options,            exercise price                 of equity compensation
                             warrants and rights as of          outstanding options,          plans (excluding securities
                                December 31, 2003               warrants and rights             reflected in Column (a))
Plan Category                           (a)                            (b)                                (c)
--------------------------   --------------------------        ---------------------          ---------------------------
Equity compensation plans
   approved by security
<S>                                 <C>     <C>                     <C>  <C>                            <C>    <C>
   holders ..............           125,276 (1)                     7.63 (1)                            42,308 (1)
                                      2,540 (2)                       -- (2)                            28,404 (2)

Equity compensation plans
   not approved by
   security holders .....                --                           --                                    --
                                    -------                         ----                                ------
Total ...................           127,816                         7.63 (3)                            70,712
                                    =======                         ====                                ======
</TABLE>

-------------------

(1)  River Valley Bancorp Stock Option Plan.

(2)  River Valley  Bancorp  Recognition  and Retention  Plan and Trust  ("RRP").
     Column (a) includes  2,540 shares granted to management but not yet vested.
     In addition,  64,276 shares  granted to management  have fully vested,  and
     shares have been issued to management in connection therewith.

(3)  The total in Column (b) includes only the  weighted-average  price of stock
     options,  as the  restricted  shares  awarded  under  the RRP plan  have no
     exercise price.


Item 12. Certain Relationships and Related Transactions.

     The information  required by this item is incorporated by reference to page
8 of the 2004 Proxy Statement.
<PAGE>

Item 13. Exhibits and Reports on Form 8-K.

(a) List the following documents filed as part of the report:

                                                                   Annual Report
Financial Statements                                                 Page No.
--------------------                                               -------------

Independent Accountants' Report ............................................. 19

Consolidated  Balance  Sheets  at  December 31, 2003 and 2002 ............... 20

Consolidated Statements  of Income for the Years Ended  December 31,
   2003, 2002 and 2001 ...................................................... 21

Consolidated Statements of Comprehensive Income for the Years
    Ended December 31, 2003, 2002 and 2001 .................................. 22

Consolidated  Statements of Stockholders' Equity for the Years
    Ended December 31, 2003, 2002 and 2001 .................................. 23

Consolidated  Statements of Cash Flows  for the  Years
    Ended  December 31, 2003,2002 and 2001 .................................. 24

Notes to Consolidated Financial Statements .................................. 25

     (b)  Reports on Form 8-K.

          During the quarter ended December 31, 2003, the Holding  Company filed
          two  reports on Form 8-K.  On October 14,  2003,  the Holding  Company
          filed a press release  containing third quarter earnings  information.
          On  December  9,  2003,  the  Holding  Company  filed a press  release
          informing the public of a 2-for-1  stock split for shares  outstanding
          as  of  December  26,  2003.

     (c)  The exhibits filed herewith or  incorporated  by reference  herein are
          set forth on the Exhibit Index on page E-1.

     (d)  All  schedules are omitted as the required  information  either is not
          applicable or is included in the Consolidated  Financial Statements or
          related notes.


Item 14. Principal Accountant Fees and Services.

     The information  required by this item with respect to principal accountant
fees and  services is  incorporated  by  reference to pages 9 and 10 of the 2004
Proxy Statement.
<PAGE>

                                   SIGNATURES

     In accordance  with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

                                        RIVER VALLEY BANCORP



Date: March 30, 2004                By: /s/ Matthew P. Forrester
                                        ----------------------------------------
                                        Matthew P. Forrester, President and
                                        Chief Executive Officer




     In  accordance  with the Exchange Act, this report has been signed below by
the following  persons on behalf of the  registrant and in the capacities and on
the dates indicated.

Signatures                              Title                        Date
----------                              -----                        ----
(1) Principal Executive Officer:

    /s/ Matthew P. Forrester
    ----------------------------------                         )
    Matthew P. Forrester                President and          )
                                        Chief Executive Officer)
                                                               )
                                                               )
(2) Principal Financial and Accounting                         )
    Officer:                                                   )
                                                               )
                                                               )
    /s/ Larry C. Fouse                  Treasurer              )
    -----------------------------------                        )
    Larry C. Fouse                                             )
                                                               )
                                                               ) March 30, 2004
                                                               )
(3) The Board of Directors:                                    )
                                                               )
    /s/ Robert W. Anger                                        )
    ------------------------------------  Director             )
    Robert W. Anger                                            )
                                                               )
    /s/ Jonnie L. Davis                                        )
    ------------------------------------  Director             )
    Jonnie L. Davis                                            )

<PAGE>

                                                               )
    /s/ Matthew P. Forrester                                   )
    ------------------------------------  Director             )
    Matthew P. Forrester                                       )
                                                               )
                                                               )
    ------------------------------------  Director             )
    Michael J. Hensley                                         )
                                                               ) March 30, 2004
    /s/ L. Sue Livers                                          )
    ------------------------------------  Director             )
    L. Sue Livers                                              )
                                                               )
    /s/ Fred W. Koehler                                        )
    ------------------------------------  Director             )
    Fred W. Koehler                                            )
                                                               )
    /s/ Charles J. McKay                                       )
    ------------------------------------  Director             )
    Charles J. McKay                                           )
                                                               )
<PAGE>


                                 EXHIBIT INDEX

Exhibit No.    Description
-----------    -----------------------------------------------------------------

    3 (1)      Registrant's   Articles  of  Incorporation  are  incorporated  by
               reference to Exhibit 3(1) to the  Registration  Statement on Form
               S-1 (Registration No. 333-05121) (the "Registration Statement")

      (2)      Registrant's   Amended  Code  of  By-Laws  are   incorporated  by
               reference to Exhibit 3(2) to the  Registrant's  Form 10-K for the
               fiscal year ending December 31, 1997


    10(1)      Employment  Agreement  between  River Valley  Financial  Bank and
               Matthew P.  Forrester  is  incorporated  by  reference to Exhibit
               10(1) of Registrant's Form 10-K for 1999

      (2)      Director Deferred  Compensation  Master Agreement is incorporated
               by reference to Exhibit 10(8) to the Registration Statement

      (3)      Director  Deferred  Compensation  Joinder  Agreement -- Robert W.
               Anger is  incorporated  by  reference  to  Exhibit  10(10) to the
               Registration Statement

      (4)      Director  Deferred  Compensation  Joinder  Agreement  --  Earl W.
               Johann is  incorporated  by  reference  to Exhibit  10(12) to the
               Registration Statement

      (5)      Director Deferred  Compensation Joinder Agreement -- Frederick W.
               Koehler is  incorporated  by reference  to Exhibit  10(13) to the
               Registration Statement

      (6)      Director  Deferred  Compensation  Joinder  Agreement  --  Michael
               Hensley is  incorporated  by reference  to Exhibit  10(15) to the
               Registration Statement

      (7)      Exempt  Loan and Share  Purchase  Agreement  between  Trust under
               River Valley  Bancorp  Employee  Stock  Ownership  Plan and Trust
               Agreement and River Valley Bancorp is  incorporated  by reference
               to Exhibit 10(22) to the Registration Statement

      (8)      River Valley Bancorp  Recognition and Retention Plan and Trust is
               incorporated by reference to Exhibit B of  Registrant's  Schedule
               14A filed May 12, 1997

      (9)      River  Valley  Bancorp  Stock  Option  Plan  is  incorporated  by
               reference to Exhibit A of Registrant's Schedule 14A filed May 12,
               1997

    13         Shareholder Annual Report

    14         Code of Ethics

    21         Subsidiaries of the Registrant

    23         Consent of BKD, LLP

    31(1)      CEO Certification

    31(2)      CFO Certification

    32         Section 906 Certification