Exhibit
      13






**Annual
        Report**











**EXHIBIT
        13**
 **Annual
          Report to Stockholders**
  **Table
            of Contents**
 
 
 
 President’s
                        Message
                    2Selected
                        Consolidated Financial Information
                    3Management’s
                        Discussion and Analysis of Financial Condition and Results
                        of
                        Operations
                    5Independent
                        Auditors’ Report
                    18Consolidated
                        Financial Statements
                    19Stockholder
                        Information
                    47Corporate
                        Information
                    48
  1
 
 President’s
            Message
 To
            Our
            Stockholders
  On
            behalf
            of AMB Financial Corporation (the Company), and its wholly owned subsidiary,
            American Savings, FSB (the Bank), I am pleased to present our 2005 annual
            financial report. We are pleased with our performance over the past twelve
            months, and the Board of Directors, Officers and Employees are optimistic
            regarding opportunities for improvement in the future.
 
 Our
            goal,
            after 95 years of serving the community in Northwest Indiana, is to increase
            shareholder value while serving the needs of all stakeholders. The Company
            intends to remain an independent, local community financial institution
            by
            focusing on our strength of personalized customer service.
  During
            the 2005 fiscal year total assets grew 8.51% to $170,465,876. The majority
            of
            this growth was realized in an 8.27% increase in loans receivable. Loans
            receivable increased $10,692,391 to $140,034,877. The growth in total
            assets was
            funded primarily through a 9.24% increase in deposits to
            $127,434,994.
 
 The
            Bank
            experienced a slight shift in deposits as customers moved funds from
            liquid
            accounts to higher yield time deposits. Balances in passbook, demand
            deposit and
            money market accounts experienced an aggregate decrease of 7.65% to $45,350,029.
            This decline in deposits was offset by a 10.18% increase in certificates
            of
            deposits to $127,434,994. The customer shift in deposit preference has
            caused a
            compression effect on the Bank’s interest rate margin. If the yield curve
            remains flat, we expect this trend to continue.
 
 Net
            income declined 2.37% from the previous year to $859,742. Net interest
            income
            after provision for loan losses dropped 2.44% to $4,160,410, and total
            non-interest expense increased 8.56% to $4,640,038. This activity was
            offset by
            a 35.74% increase in total non-interest income to $1,683,039. The gain
            in
            non-interest income is primarily attributed to the one time sale of stock
            for
            $345,166 in Intrieve Incorporated, the Bank’s data processing
            provider.
 
 At
            the
            end of 2005 the Bank’s Chief Financial Officer, Dan Poludniak, retired after 22
            years of service to the financial institution. Poludniak’s dedication to the
            Company will be sorely missed. He not only provided prudent financial
            guidance
            to the Company, but he also hallmarked his career with ethical decision-making
            and effective leadership that translated into a constructive work
            culture.
 
 Scott
            Gyure, the Bank’s new Chief Financial Officer, filled the void created by Dan
            Poludniak’s retirement. He brings over 20 years of experience as a CFO with his
            previous employer to his new position. Gyure received his undergraduate
            degree
            from Purdue University Calumet and his Masters of Business Administration
            degree
            from Indiana University Northwest.
 
 Our
            financial performance and stock performance are available on our website
            at http://www.ambfinancial.com .
            I urge
            you to visit our site to view this information and utilize its other
            services.
 The
            entire staff of the Bank and the Company appreciates your commitment
            and
            support, and we look forward to a long and profitable relationship.
  Sincerely,
  /s/
              Clement B. Knapp, Jr.
 President
 2
 
 SELECTED
                      CONSOLIDATED FINANCIAL INFORMATION(Dollars
                      in thousands)
  At
                      December 31,2005
                  
                  2004
                  
                  2003
                  
                  2002
                  
                  2001SELECTED
                      FINANCIAL DATA:Total
                      assets
                  
                  $
                  170,466
                  
                  $
                  157,094
                  
                  $
                  145,965
                  
                  $
                  149,672
                  
                  $
                  141,648Loans
                      receivable, net
                  
                  
                  140,035
                  
                  
                  129,342
                  
                  
                  120,209
                  
                  
                  114,318
                  
                  
                  112,513Investment
                      securities and interest bearing deposits
                  
                  
                  9,367
                  
                  
                  8,790
                  
                  
                  6,997
                  
                  
                  15,326
                  
                  
                  10,935Mortgage-backed
                      securities
                  
                  
                  1,664
                  
                  
                  2,286
                  
                  
                  3,155
                  
                  
                  2,643
                  
                  
                  3,023Trading
                      securities
                  
                  
                  329
                  
                  
                  515
                  
                  
                  498
                  
                  
                  566
                  
                  
                  583Deposits
                  
                  
                  127,435
                  
                  
                  115,659
                  
                  
                  108,334
                  
                  
                  109,331
                  
                  
                  102,210Borrowed
                      funds
                  
                  
                  21,012
                  
                  
                  18,954
                  
                  
                  16,130
                  
                  
                  20,297
                  
                  
                  25,042Guaranteed
                      preferred beneficial interest in junior subordinated
                      debentures
                  
                  
                  5,000
                  
                  
                  5,000
                  
                  
                  5,000
                  
                  
                  5,000
                  
                  
                  –Stockholders'
                      equity
                  
                  
                  14,145
                  
                  
                  13,409
                  
                  
                  12,520
                  
                  
                  11,846
                  
                  
                  11,717
  At
                      or for the Year Ended December 31,2005
                  
                  
                  2004
                  
                  
                  2003
                  
                  
                  2002
                  
                  
                  2001SELECTED
                      FINANCIAL RATIOS AND OTHER DATA:Return
                      on average assets
                  
                  
                  0.53
                  %
                  
                  0.58
                  %
                  
                  0.78
                  %
                  
                  0.68
                  %
                  
                  0.65
                  %Return
                      on average stockholders’ equity
                  
                  
                  6.20
                  
                  
                  6.78
                  
                  
                  9.72
                  
                  
                  8.36
                  
                  
                  7.99Average
                      stockholders’ equity to average assets
                  
                  
                  8.54
                  
                  
                  8.56
                  
                  
                  8.04
                  
                  
                  8.19
                  
                  
                  8.07Stockholders’
                      equity to total assets
                  
                  
                  8.30
                  
                  
                  8.54
                  
                  
                  8.58
                  
                  
                  7.91
                  
                  
                  8.27Interest
                      rate spread during period
                  
                  
                  3.02
                  
                  
                  3.24
                  
                  
                  3.26
                  
                  
                  3.20
                  
                  
                  2.51Net
                      interest margin
                  
                  
                  3.05
                  
                  
                  3.26
                  
                  
                  3.23
                  
                  
                  3.18
                  
                  
                  2.54Operating
                      expenses to average assets
                  
                  
                  2.86
                  
                  
                  2.81
                  
                  
                  2.67
                  
                  
                  2.54
                  
                  
                  2.40Efficiency
                      ratio (1)
                  
                  
                  80.22
                  
                  
                  75.42
                  
                  
                  68.62
                  
                  
                  67.77
                  
                  
                  72.65Non-performing
                      assets to total assets
                  
                  
                  1.24
                  
                  
                  1.02
                  
                  
                  1.13
                  
                  
                  0.79
                  
                  
                  1.02Allowance
                      for loan losses to non-performing loans
                  
                  
                  50.80
                  
                  
                  44.50
                  
                  
                  65.35
                  
                  
                  78.24
                  
                  
                  60.99Allowance
                      for loan losses to loans receivable, net (2)
                  
                  
                  0.53
                  
                  
                  0.55
                  
                  
                  0.85
                  
                  
                  0.73
                  
                  
                  0.68Ratio
                      of average interest-earning assets to average interest-bearing
                      liabilities
                  
                  
                  1.01x
                  
                  
                  1.01x
                  
                  
                  .99x
                  
                  
                  .99x
                  
                  
                  1.01xNumber
                      of full-service offices
                  
                  
                  3
                  
                  
                  3
                  
                  
                  3
                  
                  
                  3
                  
                  
                  3
 (1)
                    Non-interest
                        expense divided by net-interest income plus non-interest
                        income except for
                        gains and losses on investments available for sale and other
                        assets
 (2)
                    Loans
                        include loans, net, excluding the allowance for loan
                        losses
  3
 
 SELECTED
                      CONSOLIDATED FINANCIAL INFORMATION (cont.)(Dollars
                      in thousands except per share data)
  For
                      the Year Ended
                      December 312005
                  
                  2004
                  
                  2003
                  
                  2002
                  
                  2001SELECTED
                      OPERATING DATA:Total
                      interest income
                  
                  $
                  8,585
                  
                  $
                  7,887
                  
                  $
                  8,235
                  
                  $
                  8,847
                  
                  $
                  9,500Total
                      interest expense
                  
                  
                  4,149
                  
                  
                  3,433
                  
                  
                  3,904
                  
                  
                  4,693
                  
                  
                  6,293Net
                      interest income
                  
                  
                  4,436
                  
                  
                  4,454
                  
                  
                  4,331
                  
                  
                  4,154
                  
                  
                  3,207Provision
                      for loan losses
                  
                  
                  275
                  
                  
                  189
                  
                  
                  214
                  
                  
                  392
                  
                  
                  152Net
                      interest income after provision for loan losses
                  
                  
                  4,161
                  
                  
                  4,265
                  
                  
                  4,117
                  
                  
                  3,762
                  
                  
                  3,055Non-interest
                      income:Fees
                      and service charges
                  
                  
                  1,122
                  
                  
                  946
                  
                  
                  1,181
                  
                  
                  991
                  
                  
                  780Rental
                      income
                  
                  
                  138
                  
                  
                  137
                  
                  
                  77
                  
                  
                  145
                  
                  
                  290Gain
                      on sale of securities
                  
                  
                  32
                  
                  
                  7
                  
                  
                  50
                  
                  
                  22
                  
                  
                  85Unrealized
                      gain (loss) on trading securities
                  
                  
                  (51
                  )
                  
                  27
                  
                  
                  130
                  
                  
                  36
                  
                  
                  99Gain
                      on sale of other assets
                  
                  
                  345
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —Gain
                      (loss) on sale of real estate owned
                  
                  
                  (4
                  )
                  
                  14
                  
                  
                  24
                  
                  
                  (28
                  )
                  
                  —Loss
                      from investment in joint venture
                  
                  
                  (72
                  )
                  
                  (82
                  )
                  
                  (91
                  )
                  
                  (88
                  )
                  
                  (104
                  )Gain
                      from life insurance proceeds
                  
                  
                  —
                  
                  
                  27
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —Increase
                      in cash surrender value of life insurance
                  
                  
                  118
                  
                  
                  135
                  
                  
                  152
                  
                  
                  158
                  
                  
                  156Loan
                      loss settlement
                  
                  
                  —
                  
                  
                  —
                  
                  
                  92
                  
                  
                  —
                  
                  
                  —Other
                  
                  
                  55
                  
                  
                  29
                  
                  
                  57
                  
                  
                  99
                  
                  
                  108Total
                      non-interest income
                  
                  
                  1,683
                  
                  
                  1,240
                  
                  
                  1,672
                  
                  
                  1,335
                  
                  
                  1,414Non-interest
                      expense:Compensation
                      and benefits
                  
                  
                  2,348
                  
                  
                  2,185
                  
                  
                  1,959
                  
                  
                  1,799
                  
                  
                  1,554Advertising
                  
                  
                  180
                  
                  
                  133
                  
                  
                  110
                  
                  
                  94
                  
                  
                  57Office
                      occupancy and equipment expenses
                  
                  
                  428
                  
                  
                  411
                  
                  
                  471
                  
                  
                  441
                  
                  
                  465Data
                      processing
                  
                  
                  660
                  
                  
                  558
                  
                  
                  521
                  
                  
                  485
                  
                  
                  447Federal
                      deposit insurance premiums
                  
                  
                  16
                  
                  
                  17
                  
                  
                  18
                  
                  
                  18
                  
                  
                  18Professional
                      fees
                  
                  
                  243
                  
                  
                  251
                  
                  
                  248
                  
                  
                  231
                  
                  
                  210Other
                  
                  
                  765
                  
                  
                  719
                  
                  
                  709
                  
                  
                  652
                  
                  
                  594Total
                      non-interest expense
                  
                  
                  4,640
                  
                  
                  4,274
                  
                  
                  4,036
                  
                  
                  3,720
                  
                  
                  3,345Income
                      before income taxes
                  
                  
                  1,204
                  
                  
                  1,231
                  
                  
                  1,753
                  
                  
                  1,377
                  
                  
                  1,124Income
                      tax provision
                  
                  
                  344
                  
                  
                  350
                  
                  
                  571
                  
                  
                  376
                  
                  
                  223Net
                      income
                  
                  
                  860
                  
                  
                  881
                  
                  
                  1,182
                  
                  
                  1,001
                  
                  
                  901Basic
                      earnings per share
                  
                  $
                  0.90
                  
                  $
                  0.94
                  
                  $
                  1.31
                  
                  $
                  1.02
                  
                  $
                  0.89Diluted
                      earnings per share
                  
                  $
                  0.85
                  
                  $
                  0.87
                  
                  $
                  1.18
                  
                  $
                  0.97
                  
                  $
                  0.87
 
 4
  **MANAGEMENT'S
            DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION**  ****
 **AND
            RESULTS OF OPERATIONS**
 
 **General** AMB
            Financial Corp. (the "Company") is the thrift holding company for American
            Savings FSB, (the "Bank"), a federally chartered savings bank. Collectively,
            the
            Holding Company and the Bank are referred to herein as the "Company."
 
 The
            Company's primary market area consists of the northwest portion of Lake
            County,
            Indiana. Business is conducted from its main office at 8230 Hohman Avenue,
            Munster, Indiana, as well as two full-service banking offices located
            in Dyer,
            and Hammond, Indiana. The Bank is a community-oriented savings institution
            whose
            business primarily consists of accepting deposits from customers within
            its
            market area and investing those funds in mortgage loans secured by
            one-to-four-family residences. To a lesser extent, funds are invested
            in
            commercial real estate, multi-family, consumer, commercial business,
            land and
            construction loans. The Company also invests in mortgage-backed and other
            investment securities and to a lesser extent, leases and equity securities.
 
 The
            Company's results of operations are primarily dependent on net interest
            income,
            which is the difference between the interest income on its interest-earning
            assets, such as loans and securities, and the interest expense on its
            interest-bearing liabilities, such as deposits and borrowings and to
            a lesser
            degree, non-interest income and non-interest expense. Net interest income
            depends upon the volume of interest-earning assets and interest-bearing
            liabilities and the interest rate earned or paid on them, respectively.
            Non-interest income primarily consists of service charges, rental income,
            fees
            on deposits and loan products, increase in cash surrender value of life
            insurance, and securities gains or losses. The Company's non-interest
            expenses
            primarily consist of employee compensation and benefits, occupancy and
            equipment
            expenses, data processing service fees, federal deposit insurance premiums,
            and
            other operating expenses.
 
 The
            Company's results of operations are also affected by general economic
            conditions, the monetary and fiscal policies of Federal agencies and
            the
            policies of agencies that regulate financial institutions. Future changes
            in
            applicable laws, regulations or government policies may have a material
            impact
            on the Company. Lending activities are influenced by the demand for real
            estate
            loans and other types of loans, competition among lenders, the general
            level of
            real estate values, the level of interest rates and the availability
            of funds.
            Deposit flows and costs of funds are influenced by prevailing market
            interest
            rates (including rates on non-deposit investment alternatives), account
            maturities, and the levels of personal income and savings in the Company's
            market area.
 
 **Operating
            Strategy.** The
            Company's basic mission is to maintain its focus as an independent,
            community-oriented financial institution focused on serving customers
            in its
            primary market area. The Board of Directors has sought to accomplish
            this
            mission through an operating strategy designed to maintain capital in
            excess of
            regulatory requirements and manage, to the extent practical, the Company's
            loan
            delinquencies and vulnerability to changes in interest rates. The key
            components
            of the Company's operating strategy are to: (i) focus its lending operations
            on
            the origination of loans secured by one-to-four-family residential real
            estate;
            (ii) supplement its one-to-four-family residential lending activities
            with
            commercial real estate, multi-family, consumer, land, and construction,
            and
            commercial business loans; (iii) augment its lending activities with
            investments
            in purchased loans, leases, mortgage-backed and other securities; (iv)
            emphasize
            adjustable rate and/or short and medium duration assets when market conditions
            permit (v) build and maintain its regular savings, transaction, money
            market and
            club accounts; and (vi) increase, at a managed pace, to the extent practicable,
            the volume of the Company's assets and liabilities.
 
 Management
            and the Board of Directors of the Company have sought to enhance shareholder
            value by using excess capital to repurchase outstanding shares when business
            and
            market conditions warrant.
 
 **Forward-Looking
            Statements.** When
            used
            throughout this document, the words or phrases “will likely result,” “are
            expected to,” “will continue,” “is anticipated,” “estimated,” “projected,” or
            similar expressions are intended to identify “forward looking statements” within
            the meaning of the Private Securities Litigation Reform Act of 1995.
            Such
            statements are subject to certain risks and uncertainties including
            changes in economic conditions in the Bank’s market area, changes in policies by
            regulatory agencies, fluctuations in interest rates, demand for loans
            and real
            estate values in the Bank’s market area and competition, that could cause actual
            results to differ materially from historical earnings and those presently
            anticipated or projected. The factors listed above could affect the Company’s
            financial performance and could cause actual results for future periods
            to
            differ materially from any statements expressed with respect to future
            periods.
  5
  The
            Company does not undertake, and specifically disclaims any obligation
            to
            publicly revise any forward-looking statements to reflect events or
            circumstances after the date of such statements or to reflect the occurrence
            of
            anticipated or unanticipated events.
 
 
 **Financial
            Condition.** During
            the year ended December 31, 2005, the Company’s total assets increased by $13.4
            million to $170.5 million from $157.1 million at December 31, 2004. Asset
            growth
            was primarily attributable to a $10.7 million increase in net loans receivable,
            primarily single-family residential loans. The growth in loans receivable
            was
            funded primarily with an increase in deposit balances, and to a lesser
            extent
            with additional borrowed funds.
 
 Cash
            and
            short-term investments totaled a combined $9.0 million at December 31,
            2005, an
            increase of $0.7 million, from the combined balance of $8.3 million at
            December
            31, 2004. The Company continues to reinvest excess liquidity in overnight
            funds
            with the expectation that they will be readily available for investment
            in
            higher yielding assets as the upturn in the interest rate cycle
            continues.
 
 Investment
            securities, available for sale, increased by $587,000 to $3.2 million
            at
            December 31, 2005. The increase reflects the purchase of $2.0 million
            in
            securities, offset by $1.4 million of securities which were called or
            matured.
            The purchases during the period were primarily U.S. government agency
            obligations. At December 31, 2005, the Company had an unrealized loss,
            net of
            taxes, on available for sale investment securities of $7,000.
 
 Trading
            account securities decreased by $186,000 to $329,000 at December 31,
            2005. The
            decrease is attributable to realized and unrealized losses from the portfolio
            of
            $8,000 offset by sales activity of $135,000. The Company’s trading portfolio
            consists primarily of holdings in community bank and thrift stocks.
 
 Mortgage-backed
            securities, available for sale, totaled $1.7 million at December 31,
            2005
            compared to $2.3 million at December 31, 2004. There were no new purchases
            of
            mortgage-backed securities during the current year and as a result, the
            balance
            of mortgage-backed securities decreased by $622,000 due to amortization
            and
            prepayments. At December 31, 2005, the Company had an unrealized gain,
            net of
            taxes, on available for sale mortgage-backed securities of $11,000.
 
 Loans
            receivable increased $10.7 million, or 8.3%, to $140.0 million at December
            31,
            2005 from $129.3 million at December 31, 2004. The Bank originated loans
            of
            $41.8 million and purchased loans totaling $11.8 million during the year
            ended
            December 31, 2005, compared to $35.2 million of originations and $13.7
            million
            of purchases during the prior year. The purchased loans in the current
            year
            include $3.7 million in one-to-four family loans and $3.5 million in
            non-residential loans. Included in the one-to-four family purchases were
            $3.3
            million of adjustable rate loans. Offsetting the originations and purchases
            were
            amortization and prepayments of loans totaling $41.9 million and $39.1
            million
            for the years ended December 31, 2005 and 2004.
 
 The
            mortgage loan portfolio continues to consist primarily of one-to-four
            family
            mortgage loans. Our one-to-four family mortgage loans, which represented
            64.0%
            of the total loan portfolio at December 31, 2005, increased $5.2 million
            to
            $92.8 million at December 31, 2005 from $87.6 million at December 31,
            2004. This
            increase was primarily due to the purchase of $3.7 million of one-to-four
            family
            loans previously discussed. Approximately 33% of these loans are located
            within
            the Bank’s market area, with the remainder located throughout the country. While
            the Bank continues to be primarily a one-to-four family mortgage lender,
            an
            increased emphasis has been placed on multi-family and non-residential
            loans.
            Multi-family loans, which tend to be less susceptible to prepayment risk
            compared to one-to-four family loans, increased $1.6 million to $9.0
            million at
            December 31, 2005 from $7.3 million at December 31, 2004. Non-residential
            loans
            decreased $915,000 to $17.1 million at December 31, 2005 from the prior
            year.
  6
  The
            allowance for loan losses totaled $749,000, an increase of $33,000 from
            the
            $716,000 balance at December 31, 2004. The Bank’s allowance for loan losses to
            total loans outstanding was .53% at December 31, 2005, compared to .55%
            at
            December 31, 2004. Non-performing loans decreased $135,000 to $1.47 million,
            or
            1.05% of total loans receivable at December 31, 2005, compared to $1.61
            million,
            or 1.22% of total loans receivable at December 31, 2004. The ratio of
            allowance
            for loan losses to non-performing loans was 50.8% at December 31, 2005
            compared
            to 44.5% at December 31, 2004.
 
 As
            of
            December 31, 2005 the Bank had $584,000 in other real estate owned compared
            to
            no other real estate owned as of December 31, 2004. Included in other
            real
            estate owned on December 31, 2005, was a $408,000 single-family residence
            located in St. John, Indiana.
 
 Deposits
            increased $11.8 million, to $127.4 million at December 31, 2005 from
            $115.6
            million at December 31, 2004. The increase in deposits is due to an increase
            in
            certificates of deposit of $15.5 million as well as a decrease in
            non-certificate accounts, primarily money market accounts, of $3.8 million.
            At
            December 31, 2005, the Bank’s non-certificate accounts (passbook, checking and
            money market accounts) comprised $45.3 million, or 35.6% of deposits,
            compared
            to $49.1 million, or 42.5% of deposits at December 31, 2004. The increase
            in
            deposits during the current year were due to aggressive marketing efforts
            as
            well as several promotions for above-market-rate-short-term certificates
            of
            deposit which were offered to both increase market share and build customer
            relationships.
 
 Borrowed
            money, which consisted of FHLB of Indianapolis advances, increased by
            $2.1
            million to $21.0 million at December 31, 2005 compared to $18.9 million
            at
            December 31, 2004. The increase in borrowed money was used to partially
            fund the
            increased loan volumes during the current year. As of December 31, 2005,
            the
            weighted average rate and term to maturity of our FHLB of Indianapolis
            advances
            was 4.67% and 3.0 years, respectively, compared to a weighted average
            rate and
            term to maturity of 4.70% and 3.7 years, respectively, as of December
            31,
            2004.
 
 Total
            stockholders’ equity of the Company increased by $735,000 to $14.1 million, or
            8.30% of total assets, at December 31, 2005, compared to $13.4 million,
            or 8.54%
            of total assets at December 31, 2004. The increase in stockholders’ equity was
            the result of net income of $860,000, the exercise of non-qualified stock
            options net of the related tax benefit totaling $99,000, activities associated
            with our ESOP plan of $226,000 offset by the Company’s purchase of treasury
            stock for $166,000, the payment of $259,999 in cash dividends, and a
            decrease in
            unrealized holding gains on securities available for sale, net of tax,
            in the
            amount of $24,000.
 
 **Analysis
            of Net Interest Income.** Net
            interest income represents the difference between interest earned on
            interest-earning assets and interest paid on interest-bearing liabilities.
            Net
            interest income is affected by the relative amounts of interest-earning
            assets
            and interest-bearing liabilities, and the interest rates earned or paid
            on
            them.
 
 The
            following table presents, for the periods indicated, the total dollar
            amounts of
            interest income from average interest-earning assets and the resultant
            yields,
            as well as the interest expense on average interest-bearing liabilities,
            expressed both in dollars and rates. No tax equivalent adjustments were
            made.
            All average balances were calculated using average daily balances and
            include
            non-accruing loans.
  7
 
 **ANALYSIS
                      OF NET INTEREST INCOME
                      TABLE**
  For
                    the Year
                    Ended December 31(Dollars
                      in thousands)2005
                  
                  2004
                  
                  2003Average
                  
                  Interest
                  
                  
                  
                  Average
                  
                  Interest
                  
                  
                  
                  Average
                  
                  InterestOutstanding
                  
                  Earned/
                  
                  Yield/
                  
                  Outstanding
                  
                  Earned/
                  
                  Yield/
                  
                  Outstanding
                  
                  Earned/
                  
                  Yield/Balance
                  
                  Paid
                  
                  Rate
                  
                  Balance
                  
                  Paid
                  
                  Rate
                  
                  Balance
                  
                  Paid
                  
                  Rate**Assets**:Interest-Earning
                      AssetsLoans
                      receivable (1)
                  
                  
                  133,560
                  
                  
                  8,152
                  
                  
                  6.10
                  %
                  
                  124,523
                  
                  
                  7,541
                  
                  
                  6.06
                  %
                  
                  116,186
                  
                  
                  7,688
                  
                  
                  6.62
                  %Mortgage-backed
                      securities
                  
                  
                  1,989
                  
                  
                  90
                  
                  
                  4.52
                  %
                  
                  2,665
                  
                  
                  123
                  
                  
                  4.62
                  %
                  
                  3,181
                  
                  
                  174
                  
                  
                  5.46
                  %Investment
                      securities
                  
                  
                  3,439
                  
                  
                  115
                  
                  
                  3.34
                  %
                  
                  2,489
                  
                  
                  81
                  
                  
                  3.24
                  %
                  
                  5,054
                  
                  
                  201
                  
                  
                  3.97
                  %Interest-bearing
                      deposits
                  
                  
                  4,735
                  
                  
                  149
                  
                  
                  3.15
                  %
                  
                  5,199
                  
                  
                  67
                  
                  
                  1.30
                  %
                  
                  8,036
                  
                  
                  88
                  
                  
                  1.09
                  %FHLB
                      stock
                  
                  
                  1,795
                  
                  
                  79
                  
                  
                  4.40
                  %
                  
                  1,732
                  
                  
                  75
                  
                  
                  4.31
                  %
                  
                  1,652
                  
                  
                  84
                  
                  
                  5.12
                  %Total
                      interest-earning assets
                  
                  
                  145,518
                  
                  
                  8,585
                  
                  
                  5.90
                  %
                  
                  136,608
                  
                  
                  7,887
                  
                  
                  5.77
                  %
                  
                  134,109
                  
                  
                  8,235
                  
                  
                  6.14
                  %Non-interest
                      earning assets
                  
                  
                  16,736
                  
                  
                  
                  
                  
                  
                  
                  
                  15,247
                  
                  
                  
                  
                  
                  
                  
                  
                  17,024Total
                      Assets
                  
                  
                  162,254
                  
                  
                  
                  
                  
                  
                  
                  
                  151,855
                  
                  
                  
                  
                  
                  
                  
                  
                  151,133**Liabilities
                      and stockholders equity:**Interest-Bearing
                      LiabilitiesPassbook
                      accounts
                  
                  
                  20,203
                  
                  
                  252
                  
                  
                  1.25
                  %
                  
                  20,934
                  
                  
                  262
                  
                  
                  1.25
                  %
                  
                  19,533
                  
                  
                  280
                  
                  
                  1.43
                  %Demand
                      and NOW accounts
                  
                  
                  25,652
                  
                  
                  432
                  
                  
                  1.68
                  %
                  
                  26,564
                  
                  
                  425
                  
                  
                  1.60
                  %
                  
                  23,269
                  
                  
                  370
                  
                  
                  1.59
                  %Certificate
                      accounts
                  
                  
                  72,437
                  
                  
                  2,116
                  
                  
                  2.92
                  %
                  
                  65,220
                  
                  
                  1,582
                  
                  
                  2.43
                  %
                  
                  69,395
                  
                  
                  2,015
                  
                  
                  2.90
                  %Total
                      deposits
                  
                  
                  118,292
                  
                  
                  2,800
                  
                  
                  2.37
                  %
                  
                  112,718
                  
                  
                  2,269
                  
                  
                  2.01
                  %
                  
                  112,197
                  
                  
                  2,665
                  
                  
                  2.38
                  %Borrowings
                  
                  
                  20,738
                  
                  
                  990
                  
                  
                  4.77
                  %
                  
                  18,117
                  
                  
                  899
                  
                  
                  4.96
                  %
                  
                  18,154
                  
                  
                  988
                  
                  
                  5.44
                  %Junior
                      subordinated debentures
                  
                  
                  5,000
                  
                  
                  359
                  
                  
                  7.18
                  %
                  
                  5,000
                  
                  
                  265
                  
                  
                  5.30
                  %
                  
                  5,000
                  
                  
                  251
                  
                  
                  5.02
                  %Total
                      interest-bearing liabilities
                  
                  
                  144,030
                  
                  
                  4,149
                  
                  
                  2.88
                  %
                  
                  135,835
                  
                  
                  3,433
                  
                  
                  2.53
                  %
                  
                  135,351
                  
                  
                  3,904
                  
                  
                  2.88
                  %Non-interest
                      liabilities
                  
                  
                  4,367
                  
                  
                  
                  
                  
                  
                  
                  
                  3,025
                  
                  
                  
                  
                  
                  
                  
                  
                  3,624Total
                      liabilities
                  
                  
                  148,397
                  
                  
                  
                  
                  
                  
                  
                  
                  138,860
                  
                  
                  
                  
                  
                  
                  
                  
                  138,975Stockholders
                      equity
                  
                  
                  13,857
                  
                  
                  
                  
                  
                  
                  
                  
                  12,995
                  
                  
                  
                  
                  
                  
                  
                  
                  12,158Total
                      liabilities and stockholders equity
                  
                  
                  162,254
                  
                  
                  
                  
                  
                  
                  
                  
                  151,855
                  
                  
                  
                  
                  
                  
                  
                  
                  151,133Net
                        interest income / net
                        interest rate spread
                  
                  
                  
                  
                  
                  4,436
                  
                  
                  3.02
                  %
                  
                  
                  
                  
                  4,454
                  
                  
                  3.24
                  %
                  
                  
                  
                  
                  4,331
                  
                  
                  3.26
                  %Net
                        interest-earning assets / Net
                        interest margin
                  
                  
                  1,488
                  
                  
                  
                  
                  
                  3.05
                  %
                  
                  773
                  
                  
                  
                  
                  
                  3.26
                  %
                  
                  (1,242
                  )
                  
                  
                  
                  
                  3.23
                  %Ratio
                        of interest-earning assets to
                        interest bearing liabilities
                  
                  
                  1.01x
                  
                  
                  
                  
                  
                  
                  
                  
                  1.01x
                  
                  
                  
                  
                  
                  
                  
                  
                  .99x(1)
                      Calculated net of loans in process, deferred yield adjustments
                      and
                      allowance for loan losses.
 
 8
 
 The
            table
            below presents the extent to which changes in interest rates and changes
            in the
            volume of interest-earning assets and interest bearing liabilities have
            affected
            the Company’s interest income and interest expense during the period indicated.
            Information is provided in each category with respect to (i) changes
            attributable to changes in rate (changes in rate multiplied by prior
            volume),
            (ii) changes attributable to changes in volume (changes in volume multiplied
            by
            prior rate), (iii) changes attributable to the combined impact of volume
            and
            rate (changes in the rate multiplied by the changes in the volume), and
            (iv) the
            net change. The changes attributable to the combined impact of volume
            and rate
            have been allocated proportionately to the changes due to volume and
            the changes
            due to rate.
  For
                      the Year Ended December 31,2005
                      Compared to 2004
                  
                  
                  
                  2004
                      Compared to 2003Increase
                      (Decrease) Due to
                  
                  
                  
                  Increase
                      (Decrease) Due toRate/
                  
                  
                  
                  
                  
                  
                  
                  Rate/Rate
                  
                  Volume
                  
                  Volume
                  
                  Net
                  
                  Rate
                  
                  Volume
                  
                  Volume
                  
                  Net(Dollars
                      in thousands)Interest-earning
                      assets:Loans
                      receivable, net
                  
                  $
                  60
                  
                  
                  547
                  
                  
                  4
                  
                  
                  611
                  
                  
                  (652
                  )
                  
                  552
                  
                  
                  (47
                  )
                  
                  (147
                  )Mortgage-backed
                      securities
                  
                  
                  (2
                  )
                  
                  (31
                  )
                  
                  —
                  
                  
                  (33
                  )
                  
                  (27
                  )
                  
                  (28
                  )
                  
                  4
                  
                  
                  (51
                  )Investment
                      securities
                  
                  
                  2
                  
                  
                  31
                  
                  
                  1
                  
                  
                  34
                  
                  
                  (37
                  )
                  
                  (102
                  )
                  
                  19
                  
                  
                  (120
                  )Interest-bearing
                      deposit
                  
                  
                  97
                  
                  
                  (6
                  )
                  
                  (9
                  )
                  
                  82
                  
                  
                  16
                  
                  
                  (31
                  )
                  
                  (6
                  )
                  
                  (21
                  )FHLB
                      Stock
                  
                  
                  1
                  
                  
                  3
                  
                  
                  —
                  
                  
                  4
                  
                  
                  (13
                  )
                  
                  4
                  
                  
                  —
                  
                  
                  (9
                  )Totals
                  
                  $
                  158
                  
                  
                  544
                  
                  
                  (4
                  )
                  
                  698
                  
                  
                  (713
                  )
                  
                  395
                  
                  
                  (30
                  )
                  
                  (348
                  )Interest-bearing
                      liabilities:Passbook
                      accounts
                  
                  $
                  (1
                  )
                  
                  (9
                  )
                  
                  —
                  
                  
                  (10
                  )
                  
                  (35
                  )
                  
                  20
                  
                  
                  (3
                  )
                  
                  (18
                  )Demand
                      and Now accounts
                  
                  
                  22
                  
                  
                  (15
                  )
                  
                  —
                  
                  
                  7
                  
                  
                  3
                  
                  
                  52
                  
                  
                  —
                  
                  
                  55Certificate
                      accounts
                  
                  
                  323
                  
                  
                  175
                  
                  
                  36
                  
                  
                  534
                  
                  
                  (332
                  )
                  
                  (121
                  )
                  
                  20
                  
                  
                  (433
                  )Borrowed
                      funds
                  
                  
                  (34
                  )
                  
                  130
                  
                  
                  (5
                  )
                  
                  91
                  
                  
                  (87
                  )
                  
                  (2
                  )
                  
                  —
                  
                  
                  (89
                  )Junior
                      subordinated debentures
                  
                  
                  94
                  
                  
                  —
                  
                  
                  —
                  
                  
                  94
                  
                  
                  14
                  
                  
                  —
                  
                  
                  —
                  
                  
                  14Totals
                  
                  $
                  404
                  
                  
                  281
                  
                  
                  31
                  
                  
                  716
                  
                  
                  (437
                  )
                  
                  (51
                  )
                  
                  17
                  
                  
                  (471
                  )Net
                      change in net interest income
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  $
                  (18
                  )
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  $
                  123
  9
  **Comparison
            of the Results of Operations for the Years Ended December 31, 2005 and
            2004** .
  **General.** Net
            income for the year ended December 31, 2005 decreased $21,000 to $860,000,
            from
            $881,000 million for the year ended December 31, 2004. Diluted earnings
            per
            share totaled $.85 per share for the year ended December 31, 2005 and
            $.87 per
            share for the year ended December 31, 2004. Return on average stockholders’
equity decreased to 6.20% for the year ended December 31, 2005, from
            6.78% for
            the year ended December 31, 2004. Return on average assets decreased
            to .53% for
            the year ended December 31, 2005, from .58% for the year ended December
            31,
            2004. The decreases in net income and the related return ratios for the
            year
            ended December 31, 2005 were primarily the result of a decrease in net-interest
            income and increases in non-interest expense discussed below.
 
 **Interest
            Income.** Total
            interest income increased by $697,000, or 8.8%, for the year ended December
            31,
            2005 compared to the year ended December 31, 2004. This increase was
            the result
            of an increase in the average yield on interest-earning assets to 5.90%
            for the
            year ended December 31, 2005, from 5.77% for the year ended December
            31, 2004,
            as well as an increase of $8.9 million in the average balance of
            interest-earning assets to $145.5 million for the year ended December
            31, 2005,
            from $136.6 million for the year ended December 31, 2004. The increase
            in the
            average yield on interest-earning assets was primarily the impact of
            economic
            conditions that resulted in a steady increase in rates throughout the
            year,
            particularly for short and medium term instruments, resulting in the
            reinvestment of prepaid or matured assets at higher rates. Net premium
            amortization on the mortgage-backed securities and mortgage loan portfolio
            decreased $12,000 to $88,000 for the year ended December 31, 2005, from
            $100,000
            for the year ended December 31, 2004 generating a year-over-year improvement
            in
            interest income. The increase in the average balance of interest-earning
            assets
            was primarily due to increases in the average balance of loans receivable.
 
 Interest
            income on loans receivable increased $611,000 to $8.2 million compared
            to the
            prior year. The increase in interest income on loans was the result of
            an
            increase in the average yield to 6.10% for the year ended December 31,
            2005,
            from 6.06% for the year ended December 31, 2004, as well as by a $9.0
            million
            increase in the average balance of loans. The increase in the average
            yield on
            loans receivable reflects the impact of a steadily increasing interest
            rate
            environment as lower rate loans were repaid and replaced with higher
            yielding
            new originations and purchases. Interest income on mortgage-backed securities
            decreased due to a decrease in the average balance in the MBS portfolio.
            Interest income on investment securities increased as a result of an
            increase in
            the balance of the portfolio and as a benefit of an increase in rates
            paid on
            investments into this portfolio. The interest income on interest-bearing
            deposits rose due to the overall increase in rates on this floating rate
            asset.
 
 **Interest
            Expense** .
            Total
            interest expense rose by $716,000, or 20.86%, for the year ended December
            31,
            2005 compared to the year ended December 31, 2004. The cost of interest
            bearing
            liabilities increased 35 basis points to 2.88% for the year ended December
            31,
            2005, compared to 2.53% for the year ended December 31, 2004, as higher
            interest
            rates moved management to raise its cost of repricing certificates of
            deposit
            and, to a lesser extent, to increase the rates offered on non-certificate
            accounts compared to the prior year. Although the movement in interest
            rates
            appears to be upward in the near term, some moderation in rates is expected
            to
            occur later in the year.
 
 Interest
            expense on borrowings increased by $185,000 as a result of a 20 basis
            point lift
            in the average cost of borrowed funds. Maturities of lower costing fixed
            rate
            FHLB advances refinanced into higher cost borrowings and the rate increased
            on
            the Company’s LIBOR-based trust preferred securities.
 
 **Provision
            for Loan Losses.** The
            Company establishes provisions for losses on loans, which are charged
            to
            operations, in order to maintain the allowance for losses on loans at
            a level
            which is deemed appropriate to absorb losses inherent in the portfolio.
            In
            determining the appropriate level of the allowance for loan losses, management
            considers past and anticipated loss experience, evaluations of real estate
            collateral, current and anticipated economic conditions, volume and type
            of
            lending, and the levels of non-performing and other classified loans.
            The amount
            of the allowance is based on estimates, and ultimate losses may vary
            from such
            estimates. Management assesses the allowance for losses on loans on a
            periodic
            basis and makes appropriate provisions to maintain the adequacy of the
            allowance
            to cover probable accrued losses in the loan portfolio. The actual determination
            of the total provision is the combination of specific reserves, which
            may be
            established from time to time on individual classified assets, and a
            general
            reserve that is based in part on certain ratios applied to various loan
            pools as
            stratified by the Company, considering historical charge-offs and delinquency
            levels.
  10
  Based
            on
            management’s assessment of the adequacy of the loan loss reserve, the Company
            recorded a provision for loan losses of $275,000 for the year ended December
            31,
            2005 compared to $189,000 in the prior year. There were no changes in
            estimation
            method or assumptions that impacted the provision for loan losses during
            the
            year. Net charge-offs were $242,000 and $506,000 during the years ended
            December
            31, 2005 and 2004, respectively.
 
 The
            allowance for loan losses totaled $749,000 at December 31, 2005, and
            $716,000 at
            December 31, 2004. Non-performing loans were $2.11 million at December
            31, 2005
            compared to $1.61 million at December 31, 2004. The allowance for loan
            losses as
            a percentage of non-performing loans decreased to 35.6% at December 31,
            2005,
            from 44.5% at December 31, 2004, primarily due to an increase in non-performing
            loans from December 31, 2004 to December 31, 2005. The allowance for
            loan losses
            as a percentage of total loans decreased to .53% at December 31, 2005
            from .55%
            at December 31, 2004.
 
 **Non-Interest
            Income** .
            Non-interest income for the year ended December 31, 2005 increased $443,000
            to
            $1.7 million from $1.2 million for the year ended December 31, 2004.
            The most
            significant contribution to this increase was a $345,166 gain on sale
            of
            Intrieve stock, the bank’s data processing provider. An improvement of $156,000
            to non-interest income came from a change in the bank’s overdraft handling
            procedures. This change provided additional benefit to the bank’s customers and
            should be an ongoing source of additional revenue to the bank. Service
            charges
            on deposit accounts generated an increase of $14,000 for the year. Detracting
            from the overall increase in fee income was a decrease in ATM surcharge
            fees of
            $65,000, primarily due to the Company’s closing of two casino ATMs and a slight
            reduction in loan fees and charges due to lower bank refinance and modification
            activity.
 
 In
            addition, the Company also recorded a loss of $72,000 and $82,000 for
            the years
            ended December 31, 2005 and 2004, respectively, related to an investment
            in a
            low-income housing joint venture. As a result of this investment, the
            Company
            recorded an offsetting $140,000 in federal income tax credits during
            both years
            which resulted in the reduction of the Company’s effective income tax
            rate.
 
 **Non-Interest
            Expense** .
            The
            Company’s non-interest expense increased $366,000 to $4.6 million for the year
            ended December 31, 2005 compared to $4.3 million for the year ended December
            31,
            2004. The increase in non-interest expense resulted primarily from increased
            staffing costs of $163,000, due to normal salary and benefit increases
            of
            $119,000, increased pension expense of $95,000 and a decrease of $38,000
            in ESOP
            expense. An additional increase in non-interest expense came from Data
            processing costs, rising $102,000 to $660,000. This increase was due
            to an
            increase in the volume of transactions processed, additional services
            requested
            by the company, and the Company’s decision to convert all ATM and debit card
            processing services from a third party vendor to the Company’s data processing
            provider. Advertising expense rose from $47,000 from year-to-year as
            the
            organization was able to more fully utilize the bank’s new marketing
            director.
  **Income
            Taxes** .
            The
            Company recorded a provision for income taxes of $344,000, or an effective
            tax
            rate of 28.6% for the year ended December 31, 2005 compared to $350,000,
            or an
            effective tax rate of 28.4% for the year ended December 31, 2004. Both
            periods
            were positively impacted by the recognition of approximately $140,000
            in
            low-income housing tax credits which have a greater impact on the effective
            tax
            rate in a lower earnings period compared to a higher earnings
            period.
 
 11
  **Comparison
            of the Results of Operations for the Years Ended December 31, 2004 and
            2003** .
  **General.** Net
            income for the year ended December 31, 2004 decreased $301,000 to $881,000,
            from
            $1.2 million for the year ended December 31, 2003. Diluted earnings per
            share
            totaled $.87 per share for the year ended December 31, 2004 and $1.18
            per share
            for the year ended December 31, 2003. Return on average stockholders’ equity
            decreased to 6.78% for the year ended December 31, 2004, from 9.72% for
            the year
            ended December 31, 2003. Return on average assets decreased to .58% for
            the year
            ended December 31, 2004, from .78% for the year ended December 31, 2003.
            The
            decreases in net income and the related return ratios for the year ended
            December 31, 2004 were primarily the result of the decreases in non-interest
            income and increases in non-interest expense discussed below.
 
 **Interest
            Income.** Total
            interest income decreased by $348,000, or 4.2%, for the year ended December
            31,
            2004 compared to the year ended December 31, 2003. This decrease was
            the result
            of a decrease in the average yield on interest-earning assets to 5.77%
            for the
            year ended December 31, 2004, from 6.14% for the year ended December
            31, 2003,
            offset by an increase of $2.5 million in the average balance of interest-earning
            assets to $136.6 million for the year ended December 31, 2004, from $134.1
            million for the year ended December 31, 2003. The decrease in the average
            yield
            on interest-earning assets was primarily the result of the extended low
            interest
            rate environment, particularly for medium and long-term instruments,
            resulting
            in the reinvestment of prepaid or matured assets at lower rates. The
            high levels
            of repayments have also resulted in accelerated premium amortization,
            which has
            further contributed to the decline in the yields on these portfolios.
            Net
            premium amortization on the mortgage-backed securities and mortgage loan
            portfolio increased $48,000 to $100,000 for the year ended December 31,
            2004,
            from $52,000 for the year ended December 31, 2003. The increase in the
            average
            balance of interest-earning assets was primarily due to increases in
            the average
            balance of loans receivable.
 
 Interest
            income on loans receivable decreased $147,000 to $7.5 million compared
            to the
            prior year. The decline in interest income on loans was the result of
            a decrease
            in the average yield to 6.06% for the year ended December 31, 2004, from
            6.62%
            for the year ended December 31, 2003, offset by a $8.3 million increase
            in the
            average balance of loans. The decrease in the average yield on loans
            receivable
            reflects the impact of the extended low interest rate environment as
            higher rate
            loans were repaid and replaced with lower yielding new originations and
            purchases. Additionally, the yield has been negatively impacted by accelerated
            loan premium amortization as a result of refinance activity, which is
            expected
            to slow significantly in the coming year. Interest income on mortgage-backed
            securities, investment securities and interest-bearing deposits all declined
            modestly between the years as a result of a decrease in the average balance
            of
            the portfolio and, to a lesser extent, the general decline in interest
            rates.
 
 **Interest
            Expense** .
            Total
            interest expense decreased by $471,000, or 12.1%, for the year ended
            December
            31, 2004 compared to the year ended December 31, 2003. The cost of interest
            bearing liabilities declined 35 basis points to 2.53% for the year ended
            December 31, 2004, compared to 2.88% for the year ended December 31,
            2003, as
            lower interest rates led management to lower its cost of repricing certificates
            of deposit and, to a lesser extent, a decrease in some rates offered
            on core
            deposits compared to the prior year. However, with the rise in short-term
            interest rates, the Company expects its cost of deposits to begin to
            increase in
            the near future as it is currently offering certificates of deposit at
            higher
            rates.
 
 Interest
            expense on borrowings decreased by $75,000 as a result of a 31 basis
            point
            decline in the average cost of borrowed funds. Maturities of higher costing
            fixed rate FHLB advances refinanced into lower cost borrowings were partially
            offset by increased interest paid on the Company’s LIBOR-based trust preferred
            securities.
 
 **Provision
            for Loan Losses.** The
            Company establishes provisions for losses on loans, which are charged
            to
            operations, in order to maintain the allowance for losses on loans at
            a level
            which is deemed appropriate to absorb losses inherent in the portfolio.
            In
            determining the appropriate level of the allowance for loan losses, management
            considers past and anticipated loss experience, evaluations of real estate
            collateral, current and anticipated economic conditions, volume and type
            of
            lending, and the levels of non-performing and other classified loans.
            The amount
            of the allowance is based on estimates, and ultimate losses may vary
            from such
            estimates. Management assesses the allowance for losses on loans on a
            periodic
            basis and makes appropriate provisions to maintain the adequacy of the
            allowance. The actual determination of the total provision is the combination
            of
            specific reserves, which may be established from time to time on individual
            classified assets, and a general reserve that is based in part on certain
            ratios
            applied to various loan pools as stratified by the Company, considering
            historical charge-offs and delinquency levels.
  12
  Based
            on
            management’s assessment of the adequacy of the loan loss reserve, the Company
            recorded a provision for loan losses of $189,000 for the year ended December
            31,
            2004 compared to $214,000 in the prior year. There were no changes in
            estimation
            method or assumptions that impacted the provision for loan losses during
            the
            year. Net charge-offs were $506,000 and $19,000 during the years ended
            December
            31, 2004 and 2003, respectively. The current year charge-offs include
            $377,000
            related to a non-residential participation loan, which had been in the
            process
            of foreclosure since 2001 and $91,000 of commercial business loans to
            the same
            borrower.
 
 The
            allowance for loan losses totaled $716,000 at December 31, 2004, and
            $1.0
            million at December 31, 2003. Non-performing loans were $1.61 million
            at
            December 31, 2004 compared to $1.58 million at December 31, 2003. The
            allowance
            for loan losses as a percentage of non-performing loans decreased to
            44.50% at
            December 31, 2004, from 65.35% at December 31, 2003, primarily due to
            increased
            charge-offs as well as an increase in non-performing loans from December
            31,
            2003 to December 31, 2004. The allowance for loan losses as a percentage
            of
            total loans decreased to .55% at December 31, 2004 from .86% at December
            31,
            2003.
 
 **Non-Interest
            Income** .
            Non-interest income for the year ended December 31, 2004 decreased $432,000
            to
            $1.2 million from $1.7 million for the year ended December 31, 2003.
            The
            decrease in non-interest income was due, in part, to decreases in fee
            income of
            $235,000, primarily ATM surcharge fees due to the Company’s closing of two
            casino ATMs, a reduction in service fee income related to the Company’s accounts
            receivable, serviced by others which declined due to substantially lower
            volumes
            and reduced loans fees and charges due to lower bank refinance and modification
            activity. Non-interest income was also reduced due to a decline in income
            from
            trading account securities of $117,000 as the market price of the Company’s
            portfolio of small thrift and community bank stocks did not increase
            at the same
            pace as during the prior year. The prior year also included a loan loss
            settlement of $92,000 regarding losses on medical lease loans previously
            charged-off. These decreases in non-interest income were offset by increased
            rental income from the Dyer office location in the amount of $60,000.
            The Dyer
            office location is currently fully leased.
 
 In
            addition, the Company also recorded a loss of $82,000 and $90,000 for
            the years
            ended December 31, 2004 and 2003, respectively, related to an investment
            in a
            low-income housing joint venture. As a result of this investment, the
            Company
            recorded an offsetting $140,000 in federal income tax credits during
            both years
            which resulted in the reduction of the Company’s effective income tax
            rate.
 
 **Non-Interest
            Expense** .
            The
            Company’s non-interest expense increased $238,000 to $4.3 million for the year
            ended December 31, 2004 compared to $4.0 million for the year ended December
            31,
            2003. The increase in non-interest expense resulted primarily from increased
            staffing costs of $226,000, due to normal salary and benefit increases
            of
            $112,000, increased pension expense of $84,000 and increased ESOP expense
            of
            $45,000 as a result of the increase in the price of the Company’s stock between
            the periods and increased data processing costs of $37,000 due to increased
            processing charges and internet banking expense. Offsetting these increases
            was
            reduction in occupancy and equipment expenses of $60,000 due to a decrease
            in
            real estate and personal property tax expense.
 
 **Income
            Taxes** .
            The
            Company recorded a provision for income taxes of $350,000, or an effective
            tax
            rate of 28.4% for the year ended December 31, 2004 compared to $571,000,
            or an
            effective tax rate of 32.6% for the year ended December 31, 2003. Both
            periods
            were positively impacted by the recognition of approximately $140,000
            in
            low-income housing tax credits which have a greater impact on the effective
            tax
            rate in a lower earnings period compared to a higher earnings
            period.
 
 13
  **Qualitative
            and Quantitative Disclosure of Market Risk**
 
 The
            principal objectives of the Company's interest rate risk management activities
            are to: (i) define an acceptable level of risk based on the Company's
            business
            focus, operating environment, capital and liquidity requirements, and
            performance objectives; (ii) quantify and monitor the amount of interest
            rate
            risk inherent in the asset/liability structure; and (iii) modify the
            Company's
            asset/liability structure, as necessary, to manage interest rate risk
            and net
            interest margins ** in
            changing rate environments. Management seeks to achieve these objectives
            through
            an analysis of the value of the Company’s net portfolio value (“NPV”) under
            different interest rate scenarios and the ratio of interest rate sensitive
            assets to interest rate sensitive liabilities within specified maturities
            or
            repricing periods. The Company does not currently engage in the use of
            off-balance sheet derivative instruments to control ** interest
            rate risk and management does not intend to engage in such activity in
            the
            immediate future.
 
 Notwithstanding
            the Company's interest rate risk management activities, the potential
            for
            changing interest rates is an uncertainty that could have an adverse
            effect on
            the earnings and net asset value of the Company. When interest-bearing
            liabilities mature or reprice more quickly than interest-earning assets
            in a
            given period, a significant increase in market interest rates could adversely
            affect net interest income. Similarly, when interest-earning assets mature
            or
            reprice which can occur through the prepayment of long-term loans more
            quickly
            than interest-bearing liabilities and net asset value, falling interest
            rates
            could result in a decrease in net interest income and net asset value.
            Also,
            changes in interest rates usually have an impact on the value of the
            Company’s
            financial assets. Finally, a flattening of the "yield curve" (i.e., a
            narrowing
            of the spread between long- and short-term interest rates), could adversely
            impact net interest income to the extent that the Company's assets have
            a longer
            average term than its liabilities.
 
 In
            managing the Company's asset/liability position, the Board and management
            attempt to manage the Company's interest rate risk while enhancing net
            interest
            margins. However, the Board of Directors generally believes that the
            increased
            net interest income resulting ** from
            a
            mismatch in the maturity of the Company's asset and liability portfolios
            can,
            during periods of declining or stable interest rates and periods in which
            there
            is a substantial positive difference between long- and short-term interest
            rates
            (i. *e.,* a
“positively sloped yield curve”), can provide high enough returns to justify the
            increased exposure to sudden and unexpected increases in interest rates.
            As a
            result, the Company's results of ** operations
            and net portfolio values remain significantly vulnerable to increases
            in
            interest rates and to fluctuations in the difference between long- and
            short-term interest rates.
 
 Consistent
            with its asset/liability management ** philosophy,
            the Company has taken several steps to manage its interest rate risk.
            First, the
            Company maintains a portfolio of interest rate sensitive loans. At December
            31,
            2005, adjustable-rate or short-term (three years or less) loans represented
            $53.2 million *,* or 38.0%
            of the total loan portfolio. Second, the Company has a substantial amount
            of
            regular savings, transaction, money market and club accounts, which may
            be less
            sensitive to changes in interest rates than certificate accounts. At
            December
            31, 2005 the Company had $19.5 million of regular savings accounts, $13.0
            million of money market accounts and $12.9 million of NOW, checking and
            club
            accounts. Overall, these accounts comprised 35.6% of the Company's total
            deposit
            base. Finally, a portion of the Company’s recent borrowings have terms to
            maturity or call of three years or more. At December 31, 2005, $2.8 million
            or
            13.7% of the Company’s borrowings had remaining terms to maturity or call of
            three years or more.
 
 One
            approach used by management to monitor its exposure to interest rate
            risk is the
            NPV analysis. The NPV represents the excess of the present value of expected
            cash flows from assets over the present value of expected cash flows
            from
            liabilities. The NPV model estimates the sensitivity of the Bank’s NPV over a
            series of instantaneous and sustained parallel shifts in interest
            rates.
 
 Presented
            below, as of December 31, 2005 and 2004, is an analysis of the Bank’s interest
            rate risk as measured by changes in NPV for instantaneous and sustained
            parallel
            shifts in the yield curve in 100 basis point (1%) increments, up to 300
            basis
            points and down 100 basis points in 2005 and 2004 in accordance with
            OTS
            regulations. As illustrated in the table, the Bank’s NPV is more sensitive to
            rising rates than declining rates. From an overall perspective, such
            difference
            in sensitivity occurs principally because, as rates rise, borrowers do
            not
            prepay fixed rate loans as quickly as they do when interest rates are
            declining.
            Also, the interest the Bank would pay on its deposits in the event of
            a rate
            increase would increase more rapidly than the yield on its assets because
            the
            Bank’s deposits generally have shorter periods to repricing.
  14
 **NET
                      PORTFOLIO BALANCES****Year
                      Ended December 31,**
  **Assumed****Change
                      in Interest Rates**
                  
                  **2005**
                  
                  **2004****(Basis
                      Points)**
                  
                  **$
                      Amount**
                  
                  **$
                      Change**
                  
                  **%
                      Change**
                  
                  **$
                      Amount**
                  
                  **$
                      Change**
                  
                  **%
                      Change**(dollars
                      in thousands)+300
                  
                  
                  11,106
                  
                  
                  (6,885
                  )
                  
                  (38
                  )
                  
                  12,739
                  
                  
                  (5,814
                  )
                  
                  (31
                  )+200
                  
                  
                  13,504
                  
                  
                  (4,487
                  )
                  
                  (25
                  )
                  
                  14,937
                  
                  
                  (3,616
                  )
                  
                  (19
                  )+100
                  
                  
                  15,843
                  
                  
                  (2,148
                  )
                  
                  (12
                  )
                  
                  17,002
                  
                  
                  (1,550
                  )
                  
                  (8
                  )17,991
                  
                  
                  
                  
                  
                  
                  
                  
                  18,553-100
                  
                  
                  19,465
                  
                  
                  1,474
                  
                  
                  8
                  
                  
                  19,317
                  
                  
                  764
                  
                  
                  4
 
 Certain
            assumptions utilized by the OTS in assessing the interest rate risk of
            thrift
            institutions were employed in preparing the preceding table. These assumptions
            relate to interest rates, loan prepayment rates, deposit decay rates,
            and the
            market values of certain assets under the various interest rate scenarios.
            It
            was also assumed that delinquency rates would not change as a result
            of changes
            in interest rates although there can be no assurance that this will be
            the case.
            Even if interest rates change in the designated amounts, there can be
            no
            assurance that the Bank's assets and liabilities would perform as set
            forth
            above. In addition, a change in U.S. Treasury rates in the designated
            amounts
            accompanied by a change in the shape of the Treasury yield curve would
            cause
            significantly different changes to the NPVs indicated above.
 
 Other
            types of market risk, such as foreign currency exchange risk and commodity
            price
            risk, do not arise in the normal course of the Company’s business
            activities.
 
 
 **Liquidity
            and Capital Resources.** The
            Company's primary sources of funds are deposits, principal and interest
            payments
            on loans and securities and, to a lesser extent, borrowings and proceeds
            from
            the sale of loans and securities. While maturities and scheduled amortization
            of
            loans and securities provide a relatively predictable flow of funds,
            other
            sources of funds such as loan prepayments and deposit inflows are less
            predictable due to the effects of changes in interest rates, economic
            conditions
            and competition.
 
 The
            primary investing activity of the Company is the origination and purchase
            of
            real estate and other loans. During the years ended December 31, 2005,
            and 2004,
            the Company's disbursements for loan originations totaled $41.8 million,
            and
            $35.2 million, respectively, and loan purchases totaled $11.8 million
            and $13.7
            million, respectively.
 
 For
            the
            year ended December 31, 2005, the Company experienced a net increase
            in deposits
            (including the effect of interest credited) of $11.8 million as compared
            to a
            net increase in deposits of $7.3 million during 2004. New FHLB advances
            in
            fiscal 2005 totaled $5.0 million, compared to $5.0 million in fiscal
            2004. FHLB
            advances of $3.0 million and $2.2 million were repaid in fiscal 2005
            and 2004,
            respectively.
 
 The
            Company may borrow funds from the FHLB of Indianapolis subject to certain
            limitations. Based on the level of qualifying collateral available to
            secure
            advances, at December 31, 2005, the Company's borrowing limit from the
            FHLB of
            Indianapolis was approximately $60.9 million, with unused borrowing capacity
            of
            $40.1 million at that date.
  15
  The
            Company's most liquid assets are cash and cash equivalents, which include
            highly
            liquid short-term investments (such as money market mutual funds) that
            are
            readily convertible to known amounts of cash. The level of these assets
            is
            dependent on the Company's operating, financing and investing activities
            during
            any given period. At December 31, 2005 and 2004, cash and cash equivalents
            totaled $9.0 million and $8.4 million, respectively.
 
 At
            December 31, 2005, the Company had outstanding loan origination commitments
            of
            $1.2 million on 1 to 4 family residential real estate loans and $265,000
            for
            non-residential real estate loans. Undisbursed loans in process totaled
            $1.4
            million at year-end and approved but unused lines of credit were $9.5
            million.
            The Company anticipates that it will have sufficient funds available
            to meet its
            current loan origination and other commitments. Certificates of deposit
            scheduled to mature in one year or less from December 31, 2005 totaled
            $62.6
            million. Based on the Company's most recent experience and pricing strategy,
            management believes that a significant portion of such deposits will
            remain with
            the Company.
 
 The
            OTS
            capital regulations require savings institutions to meet two minimum
            capital
            standards: a 3% leverage (core capital) ratio and an 8% risk-based capital
            ratio. The Bank satisfied these minimum capital standards at December
            31, 2005
            with a leverage capital ratio of 9.26% and a total risk-based capital
            ratio of
            15.85%. In determining the amount of risk-weighted assets for purposes
            of the
            risk-based capital requirement, a savings institution must compute its
            risk-based assets by multiplying its assets and certain off-balance sheet
            items
            by risk-weights, which range from 0% for cash and obligations issued
            by the
            United States Government or its agencies to 100% for consumer and commercial
            loans, as assigned by the OTS capital regulations. These capital requirements,
            which are applicable to the Bank only, do not consider additional capital
            held
            at the Company level, and require certain adjustments to stockholder's
            equity to
            arrive at the various regulatory capital amounts.
 
 The
            Bank
            may not declare or pay cash dividends on or repurchase any of its shares
            of
            common stock if the effect thereof would cause equity to be reduced below
            applicable regulatory capital requirements or the amount required to
            be
            maintained for the liquidation account established in connection with
            the
            Conversion. The Bank did not pay a dividend to the Company during the
            years
            ended December 31, 2005, 2004, and 2003. Unlike the Bank, the Company
            is not
            subject to OTS regulatory restrictions on the payment of dividends to
            its
            shareholders; however, it is subject to the requirements of Delaware
            law.
            Delaware law generally limits dividends to an amount equal to the excess
            of the
            net assets of the Company (the amount by which total assets exceed total
            liabilities) over its statutory capital, or if there is no such excess,
            to its
            profits for the current and/or immediately preceding fiscal year.
 
 **Impact
            of Inflation and Changing Prices.**
 
 The
            consolidated financial statements and related data presented herein have
            been
            prepared in accordance with GAAP, which require the measurement of financial
            position and operating results in terms of historical dollars without
            considering the changes in the relative purchasing power of money over
            time due
            to inflation. The impact of inflation is reflected in the increased cost
            of the
            Company's operations. Unlike industrial companies, nearly all of the
            assets and
            liabilities of the Company are monetary in nature. As a result, interest
            rates
            have a greater impact on the Company's performance than do the effects
            of
            general levels of inflation. Interest rates do not necessarily move in
            the same
            direction or to the same extent as the price of goods and services.
 
 16
  **Impact
            of New Accounting Standards**
 
 The
            following does not constitute a comprehensive summary of all material
            changes or
            developments affecting the manner in which the Company keeps its books
            and
            records and performs its financial accounting responsibilities. It is
            intended
            only as a summary of some of the recent pronouncements made by the Financial
            Accounting Standards Board (“FASB”), which are of particular interest to
            financial institutions.
 
 **Stock
            Based Compensation.** In
            December 2004, the FASB issued Statement No. 123 (revised 2004), “Share-Based
            Payment” (“SFAS No. 123R”). SFAS No. 123R is a revision of SFAS No. 123,
“Accounting for Stock Based Compensation”, supersedes APB 25 and amends FASB
            Statement No. 95, “Statement of Cash Flows.” SFAS No. 123R establishes standards
            for the accounting of transactions in which an entity (i) exchanges its
            equity
            instruments for goods or services, or (ii) incurs liabilities in exchange
            for
            goods or services that are based on the fair value of the entity’s equity
            instruments or that may be settled by the issuance of the equity instruments.
            SFAS No. 123R eliminates the ability to account for stock-based compensation
            using APB 25 and required that such transactions be recognized as compensation
            cost in the income statement based on their fair values on the date of
            the
            grant. The effective date of SFAS No. 123R is the beginning of the Company’s
            next fiscal year that begins after December 15, 2005. SFAS No. 123R permits
            companies to adopt the recognition requirements using either a “modified
            prospective” method or a “modified retrospective” method. Under the “modified
            prospective” method, compensation cost is recognized in the financial statements
            beginning with the effective date, based on the requirements of SFAS
            No. 123R
            for all shared-based payments granted after that date, and based on the
            requirements of SFAS No. 123R for all unvested awards granted prior to
            the
            effective date of SFAS No. 123R. Under the “modified retrospective” method, the
            requirements are the same as under the “modified prospective” method, but also
            permits entities to restate financial statements of previous periods
            based on
            pro forma disclosures made in accordance with SFAS No. 123R.
 
 The
            company currently expects to adopt SFAS No. 123R effective January 1,
            2006. The
            Company currently uses the intrinsic value method as permitted by APB
            25 to
            account for its share based payments to employees, and as such, generally
            recognizes no compensation expense for employee stock options. Accordingly,
            adopting SFAS No. 123R will result in the Company recording compensation
            cost
            for employee stock options. Future levels of compensation cost recognized
            related to share-based compensation awards may be impacted by new awards
            and/or
            modification, repurchases and cancellations of existing awards before
            and after
            the adoption of this standard.
 
 **Accounting
            Changes and Error Corrections** .
            In May
            2005, the FASB issued Statement No. 154, “Accounting Changes and Error
            Corrections,” which provides guidance on the accounting for and reporting of
            accounting changes and error corrections. It established, unless impracticable,
            retrospective application as the required method for reporting a change
            in
            accounting principle in the absence of explicit transition requirements
            specific
            to the newly adopted accounting principle. The reporting of a correction
            of an
            error by restating previously issued financial statements is also addressed
            by
            this Statement. This statement is effective on a prospective basis, for
            fiscal
            years beginning after December 15, 2005.
  17
  
 Consolidated
            Financial Statements
  **INDEPENDENT
            AUDITORS' REPORT**
 
 
 The
            Board
            of Directors
 AMB
            Financial Corp.
 
 We
            have
            audited the consolidated statements of financial condition of AMB Financial
            Corp. and subsidiaries as of December 31, 2005 and 2004, and the related
            consolidated statements of income, changes in stockholders' equity and
            cash
            flows for each of the three years in the period ending December 31, 2005.
            These
            consolidated financial statements are the responsibility of the Company's
            management. Our responsibility is to express an opinion on these consolidated
            financial statements based on our audits.
 
 We
            conducted our audits in accordance with standards of the Public Company
            Accounting Oversight Board (United States). Those standards require that
            we plan
            and perform the audit to obtain reasonable assurance about whether the
            consolidated financial statements are free of material misstatements.
            An audit
            includes examining, on a test basis, evidence supporting the amounts
            and
            disclosures in the consolidated financial statements. An audit also includes
            assessing the accounting principles used and significant estimates made
            by
            management, as well as evaluating the overall consolidated financial
            statement
            presentation. We believe that our audits provide a reason-able basis
            for our
            opinion.
 
 In
            our
            opinion, the consolidated financial statements referred to above present
            fairly,
            in all material respects, the financial position of AMB Financial Corp.
            and
            subsidiaries at December 31, 2005 and 2004, and the results of their
            operations
            and their cash flows for each of the three years in the period ending
            December
            31, 2005, in conformity with accounting principles generally accepted
            in the
            United States of America.
 
 /s/
              Cobitz, VandenBerg & Fennessy
 January
            13, 2006
  Palos
            Hills, Illinois
 
 18
 
 AMB
            FINANCIAL CORP.
 AND
            SUBSIDIARIES
 
 Consolidated
            Statements of Financial Condition
  December
                        31,2005
                    
                    2004AssetsCash
                        and amounts due from depository institutions
                    
                    $
                    4,662,586
                    
                    
                    3,928,798Interest-bearing
                        deposits
                    
                    
                    4,376,425
                    
                    
                    4,423,977Total
                        cash and cash equivalents
                    
                    
                    9,039,011
                    
                    
                    8,352,775Investment
                        securities, available for sale, at fair value (note 2)
                    
                    
                    3,188,251
                    
                    
                    2,600,835Trading
                        securities (note 3)
                    
                    
                    329,045
                    
                    
                    514,953Mortgage-backed
                        securities, available for sale, at fair value (note 4)
                    
                    
                    1,664,278
                    
                    
                    2,286,235Loans
                        receivable (net of allowance for loan losses:2005
                        - $748,859; 2004 - $715,979) (note 5)
                    
                    
                    140,034,877
                    
                    
                    129,342,486Real
                        estate owned
                    
                    
                    584,206
                    
                    
                    -Investment
                        in limited partnership (note 6)
                    
                    
                    797,948
                    
                    
                    869,698Stock
                        in Federal Home Loan Bank of Indianapolis, at cost
                    
                    
                    1,802,600
                    
                    
                    1,765,200Accrued
                        interest receivable (note 7)
                    
                    
                    706,561
                    
                    
                    632,612Office
                        properties and equipment - net (note 8)
                    
                    
                    2,391,489
                    
                    
                    2,432,409Real
                        estate held for development (note 9)
                    
                    
                    1,352,611
                    
                    
                    -Bank
                        owned life insurance
                    
                    
                    3,491,606
                    
                    
                    3,373,112Prepaid
                        expenses and other assets (note 10)
                    
                    
                    5,083,393
                    
                    
                    4,923,360Total
                        assets
                    
                    
                    170,465,876
                    
                    
                    157,093,675Liabilities
                        and Stockholders' EquityLiabilities:Deposits
                        (note 11)
                    
                    
                    127,434,994
                    
                    
                    115,658,741Borrowed
                        money (note 12)
                    
                    
                    21,011,756
                    
                    
                    18,953,995Junior
                        subordinated debentures (note 13)
                    
                    
                    5,000,000
                    
                    
                    5,000,000Note
                        payable
                    
                    
                    480,476
                    
                    
                    620,910Advance
                        payments by borrowers for taxes and insurance
                    
                    
                    -
                    
                    
                    1,309,515Other
                        liabilities (note 14)
                    
                    
                    2,394,018
                    
                    
                    2,141,097Total
                        liabilities
                    
                    
                    156,321,244
                    
                    
                    143,684,258Stockholders'
                        Equity:Preferred
                          stock, $.01 par value: authorized 100,000
                          shares; none outstanding
                    
                    
                    -
                    
                    
                    -Common
                        stock, $.01 par value: authorized 1,900,000 shares;1,686,169
                          shares issued and 984,648 shares outstanding at December
                          31, 2005 and 985,761 shares outstanding at December 31,
                          2004
                    
                    
                    16,862
                    
                    
                    16,862Additional
                        paid-in capital
                    
                    
                    11,391,083
                    
                    
                    11,227,535Retained
                        earnings, substantially restricted
                    
                    
                    10,021,965
                    
                    
                    9,458,798Accumulated
                        other comprehensive income, net of income taxes
                    
                    
                    (18,870
                    )
                    
                    5,185Treasury
                          stock, at cost (701,521 and 700,408 shares at December
                          31, 2005 and 2004)
                    
                    
                    (7,266,408
                    )
                    
                    (7,209,033
                    )Common
                        stock acquired by Employee Stock Ownership Plan
                    
                    
                    —
                    
                    
                    (89,930
                    )Total
                        stockholders' equlity (notes 18 and 19)
                    
                    
                    14,144,632
                    
                    
                    13,409,417Commitments
                        and contingencies (notes 20 and 21)Total
                        liabilities and stockholders' equity
                    
                    $
                    170,465,876
                    
                    
                    157,093,675
  See
            accompanying notes to consolidated financial statements.
 
 19
 
 AMB
            FINANCIAL CORP.
 AND
            SUBSIDIARIES
 
 Consolidated
            Statements of Income
  Years
                        Ended December 31,2005
                    
                    2004
                    
                    2003Interest
                        income:Interest
                        on loans
                    
                    $
                    8,152,121
                    
                    
                    7,541,266
                    
                    
                    7,687,977Interest
                        on mortgage-backed securities
                    
                    
                    90,049
                    
                    
                    123,039
                    
                    
                    173,820Interest
                        on investment securities
                    
                    
                    114,952
                    
                    
                    80,687
                    
                    
                    200,850Interest
                        on interest-bearing deposits
                    
                    
                    148,977
                    
                    
                    67,644
                    
                    
                    87,700Dividends
                        on Federal Home Loan Bank stock
                    
                    
                    78,545
                    
                    
                    74,646
                    
                    
                    84,646Total
                        interest income
                    
                    
                    8,584,644
                    
                    
                    7,887,282
                    
                    
                    8,234,993Interest
                        expense:Interest
                        on deposits
                    
                    
                    2,800,411
                    
                    
                    2,269,027
                    
                    
                    2,664,347Interest
                        on borrowings
                    
                    
                    1,348,978
                    
                    
                    1,164,386
                    
                    
                    1,239,182Total
                        interest expense
                    
                    
                    4,149,389
                    
                    
                    3,433,413
                    
                    
                    3,903,529Net
                        interest income
                    
                    
                    4,435,255
                    
                    
                    4,453,869
                    
                    
                    4,331,464Provision
                        for loan losses (note 5)
                    
                    
                    274,845
                    
                    
                    189,198
                    
                    
                    213,604Net
                        interest income after provision for loan losses
                    
                    
                    4,160,410
                    
                    
                    4,264,671
                    
                    
                    4,117,860Non-interest
                        income:Loan
                        fees and service charges
                    
                    
                    173,487
                    
                    
                    178,609
                    
                    
                    243,964Deposit
                        related fees
                    
                    
                    574,782
                    
                    
                    474,634
                    
                    
                    567,039Other
                        fee income
                    
                    
                    374,052
                    
                    
                    293,140
                    
                    
                    369,931Rental
                        income
                    
                    
                    138,413
                    
                    
                    137,053
                    
                    
                    76,822Unrealized
                        (loss) gain on trading securities - net
                    
                    
                    (50,993
                    )
                    
                    27,494
                    
                    
                    130,209Gain
                        on sale of trading securities
                    
                    
                    42,821
                    
                    
                    6,876
                    
                    
                    21,082(Loss)
                        gain on sale of investment securities
                    
                    
                    (11,269
                    )
                    
                    -
                    
                    
                    28,937Gain
                        on sale of other assets (note 10)
                    
                    
                    345,166
                    
                    
                    -
                    
                    
                    -Gain
                        from life insurance proceeds
                    
                    
                    -
                    
                    
                    26,678
                    
                    
                    -(Loss)
                        gain on sale of real estate owned
                    
                    
                    (4,189
                    )
                    
                    14,445
                    
                    
                    24,047Loss
                        from limited partnership (note 6)
                    
                    
                    (71,750
                    )
                    
                    (82,300
                    )
                    
                    (90,602
                    )Increase
                        in cash surrender value of life insurance
                    
                    
                    118,494
                    
                    
                    134,608
                    
                    
                    151,427Loan
                        loss settlement
                    
                    
                    -
                    
                    
                    -
                    
                    
                    92,261Other
                        income
                    
                    
                    54,025
                    
                    
                    28,637
                    
                    
                    56,544Total
                        non-interest income
                    
                    
                    1,683,039
                    
                    
                    1,239,874
                    
                    
                    1,671,661Non-interest
                        expense:Staffing
                        costs (notes 15 and 16)
                    
                    
                    2,348,057
                    
                    
                    2,184,709
                    
                    
                    1,959,331Advertising
                    
                    
                    180,168
                    
                    
                    133,286
                    
                    
                    109,688Occupancy
                        and equipment expenses (note 8)
                    
                    
                    427,937
                    
                    
                    411,421
                    
                    
                    471,210Data
                        processing
                    
                    
                    659,849
                    
                    
                    558,225
                    
                    
                    520,771Professional
                        fees
                    
                    
                    242,779
                    
                    
                    250,856
                    
                    
                    248,002Federal
                        deposit insurance premiums
                    
                    
                    16,331
                    
                    
                    17,261
                    
                    
                    18,119Other
                    
                    
                    764,917
                    
                    
                    718,304
                    
                    
                    709,103Total
                        non-interest expense
                    
                    
                    4,640,038
                    
                    
                    4,274,062
                    
                    
                    4,036,224Income
                        before income taxes
                    
                    
                    1,203,411
                    
                    
                    1,230,483
                    
                    
                    1,753,297Income
                        taxes (note 17)
                    
                    
                    343,669
                    
                    
                    349,849
                    
                    
                    571,042Net
                        income
                    
                    $
                    859,742
                    
                    
                    880,634
                    
                    
                    1,182,255Earnings
                        per share -Basic
                    
                    $
                    .90
                    
                    
                    .94
                    
                    
                    1.31Diluted
                    
                    $
                    .85
                    
                    
                    .87
                    
                    
                    1.18
  See
            accompanying notes to consolidated financial statements.
 
 20
 
 AMB
            FINANCIAL CORP.
 AND
            SUBSIDIARIES
 
 Consolidated
            Statements of Changes in Stockholders' Equity
 
 Three
            Years Ended December 31, 2005
 
 Accumulated
                    
                    
                    
                    CommonAdditional
                    
                    
                    
                    Other
                    
                    
                    
                    StockCommon
                    
                    Paid-in
                    
                    Retained
                    
                    Comprehensive
                    
                    Treasury
                    
                    AcquiredStock
                    
                    Capital
                    
                    Earnings
                    
                    Income
                    
                    Stock
                    
                    by
                          ESOP
                    
                    TotalBalance
                        at December 31, 2002
                    
                    $
                    16,862
                    
                    
                    10,932,458
                    
                    
                    9,922,705
                    
                    
                    149,543
                    
                    
                    (8,905,958
                    )
                    
                    (269,790
                    )
                    
                    11,845,820Comprehensive
                        income:Net
                        income
                    
                    
                    
                    
                    
                    
                    
                    
                    1,182,255
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    1,182,255Other
                        comprehensive income, net of tax:Unrealized
                        holding loss during the year
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    (60,894
                    )
                    
                    
                    
                    
                    
                    
                    
                    (60,894
                    )Less:
                        Reclassification adjustment of
                      gains
                        included in net income
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    (34,582
                    )
                    
                    
                    
                    
                    
                    
                    
                    (34,582
                    )Total
                        comprehensive income
                    
                    
                    
                    
                    
                    
                    
                    
                    1,182,255
                    
                    
                    (95,476
                    )
                    
                    
                    
                    
                    
                    
                    
                    1,086,779Purchase
                        of treasury stock (37,625 shares)
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    (457,240
                    )
                    
                    
                    
                    
                    (457,240
                    )Appreciation
                          in fair value of sharescharged to expense for ESOP plan
                    
                    
                    
                    
                    
                    132,525
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    132,525Contribution
                        to fund ESOP loan
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    89,930
                    
                    
                    89,930Dividends
                        declared on
                      common
                        stock ($.196 per share)
                    
                    
                    
                    
                    
                    
                    
                    
                    (177,153
                    )
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    (177,153
                    )25%
                            stock dividend, includingimpact of fractional
                        shares
                    
                    
                    
                    
                    
                    1,899
                    
                    
                    (1,921,017
                    )
                    
                    
                    
                    
                    1,918,066
                    
                    
                    
                    
                    
                    (1,052
                    )Balance
                        at December 31, 2003
                    
                    
                    16,862
                    
                    
                    11,066,882
                    
                    
                    9,006,790
                    
                    
                    54,067
                    
                    
                    (7,445,132
                    )
                    
                    (179,860
                    )
                    
                    12,519,609Comprehensive
                        income:Net
                        income
                    
                    
                    
                    
                    
                    
                    
                    
                    880,634
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    880,634Other
                        comprehensive income, net of tax:Unrealized
                        holding loss during the year
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    (48,882
                    )
                    
                    
                    
                    
                    
                    
                    
                    (48,882
                    )Total
                        comprehensive income
                    
                    
                    
                    
                    
                    880,634
                    
                    
                    (48,882
                    )
                    
                    
                    
                    
                    
                    
                    
                    831,752Purchase
                        of treasury stock (5,100 shares)
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    (74,269
                    )
                    
                    
                    
                    
                    (74,269
                    )Exercise
                          of 60,179 stock options,
                        and
                          reissuance of treasury stock
                    
                    
                    
                    
                    
                    
                    
                    
                    (204,454
                    )
                    
                    
                    
                    
                    310,368
                    
                    
                    
                    
                    
                    105,914Repurchase
                        of 10,537 stock options
                    
                    
                    
                    
                    
                    (108,215
                    )
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    (108,215
                    )Tax
                        benefit related to stock options exercised
                    
                    
                    
                    
                    
                    91,568
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    91,568Appreciation
                        in fair value of sharescharged
                        to expense for ESOP plan
                    
                    
                    
                    
                    
                    177,300
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    177,300Contribution
                        to fund ESOP loan
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    89,930
                    
                    
                    89,930Dividends
                          declared oncommon stock ($.24 per share)
                    
                    
                    
                    
                    
                    
                    
                    
                    (224,172
                    )
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    (224,172
                    )Balance
                        at December 31, 2004
                    
                    
                    16,862
                    
                    
                    11,227,535
                    
                    
                    9,458,798
                    
                    
                    5,185
                    
                    
                    (7,209,033
                    )
                    
                    (89,930
                    )
                    
                    13,409,417Comprehensive
                        income:Net
                        income
                    
                    
                    
                    
                    
                    
                    
                    
                    859,742
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    859,742Other
                        comprehensive income, net of tax:Unrealized
                        holding loss during the year
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    (30,816
                    )
                    
                    
                    
                    
                    
                    
                    
                    (30,816
                    )Add:
                        Reclassification adjustment of
                      losses
                        included in net income
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    6,761
                    
                    
                    
                    
                    
                    
                    
                    
                    6,761Total
                        comprehensive income
                    
                    
                    
                    
                    
                    
                    
                    
                    859,742
                    
                    
                    (24,055
                    )
                    
                    
                    
                    
                    
                    
                    
                    835,687Purchase
                        of treasury stock (11,618 shares)
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    (166,187
                    )
                    
                    
                    
                    
                    (166,187
                    )Exercise
                          of 10,505 stock options, and reissuance of treasury
                        stock
                    
                    
                    
                    
                    
                    
                    
                    
                    (37,378
                    )
                    
                    
                    
                    
                    108,812
                    
                    
                    
                    
                    
                    71,434Tax
                        benefit related to stock options exercised
                    
                    
                    
                    
                    
                    27,839
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    27,839Appreciation
                          in fair value of sharescharged to expense for ESOP
                        plan
                    
                    
                    
                    
                    
                    135,709
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    135,709Contribution
                        to fund ESOP loan
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    89,930
                    
                    
                    89,930Dividends
                          declared oncommon stock ($.27 per share)
                    
                    
                    
                    
                    
                    
                    
                    
                    (259,197
                    )
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    (259,197
                    )Balance
                        at December 31, 2005
                    
                    $
                    16,862
                    
                    
                    11,391,083
                    
                    
                    10,021,965
                    
                    
                    (18,870
                    )
                    
                    (7,266,408
                    )
                    
                    —
                    
                    
                    14,144,632
 
 See
            accompanying notes to consolidated financial statements.
 
 21
 
 AMB
            FINANCIAL CORP.
 AND
            SUBSIDIARIES
 
 Consolidated
            Statements of Cash Flows
 
 Years
                        Ended December 31,2005
                    
                    2004
                    
                    2003Cash
                        flows from operating activities:Net
                        income
                    
                    $
                    859,742
                    
                    
                    880,634
                    
                    
                    1,182,255Items
                        not requiring (providing) cash:Depreciation
                    
                    
                    204,650
                    
                    
                    229,479
                    
                    
                    210,455Amortization
                        of cost of stock benefit plans
                    
                    
                    89,930
                    
                    
                    89,930
                    
                    
                    89,930Amortization
                        of premiums and accretion of discounts
                    
                    
                    22,193
                    
                    
                    26,291
                    
                    
                    29,962Federal
                        Home Loan Bank stock dividend
                    
                    
                    (37,400
                    )
                    
                    (78,000
                    )
                    
                    (62,800
                    )Net
                        gains on sale of securities
                    
                    
                    (31,552
                    )
                    
                    (6,876
                    )
                    
                    (50,019
                    )Gain
                        on sale of other assets
                    
                    
                    (345,166
                    )
                    
                    —
                    
                    
                    —Net
                        loss (gain) on sale of real estate owned
                    
                    
                    4,189
                    
                    
                    (14,445
                    )
                    
                    (24,047
                    )Provision
                        for loan losses
                    
                    
                    274,845
                    
                    
                    189,198
                    
                    
                    213,604Loss
                        from limited partnership
                    
                    
                    71,750
                    
                    
                    82,300
                    
                    
                    90,602Increase
                        in cash surrender value of life insurance
                    
                    
                    (118,494
                    )
                    
                    (134,608
                    )
                    
                    (151,427
                    )Gain
                        from life insurance proceeds
                    
                    
                    —
                    
                    
                    (26,678
                    )
                    
                    —Unrealized
                        loss (gain) on trading securities
                    
                    
                    50,993
                    
                    
                    (27,494
                    )
                    
                    (130,209
                    )Proceeds
                        from sale or redemption of trading securities
                    
                    
                    177,736
                    
                    
                    17,845
                    
                    
                    219,957Purchase
                        of trading account securities
                    
                    
                    —
                    
                    
                    —
                    
                    
                    (1,166
                    )Decrease
                        in net deferred yield adjustments on loans
                    
                    
                    59,656
                    
                    
                    62,280
                    
                    
                    74,997(Increase)
                        decrease in prepaid and deferred taxes
                    
                    
                    343,669
                    
                    
                    (381,511
                    )
                    
                    211,834(Increase)
                        decrease in accrued interest receivable
                    
                    
                    (73,949
                    )
                    
                    (11,545
                    )
                    
                    82,860Increase
                        (decrease) in accrued interest payable
                    
                    
                    5,567
                    
                    
                    2,410
                    
                    
                    (19,124
                    )(Increase)
                        decrease in purchased accounts receivable
                    
                    
                    (432,120
                    )
                    
                    (1,000,483
                    )
                    
                    1,515,128Increase
                        (decrease) in deferred compensation
                    
                    
                    70,666
                    
                    
                    (3,677
                    )
                    
                    82,029Other,
                        net
                    
                    
                    247,672
                    
                    
                    (67,974
                    )
                    
                    416,346Net
                        cash provided by (for) operating activities
                    
                    
                    1,444,577
                    
                    
                    (172,924
                    )
                    
                    3,981,167Cash
                        flows from investing activities:Proceeds
                        from sales of investment securities
                    
                    
                    988,800
                    
                    
                    —
                    
                    
                    1,198,074Proceeds
                        from maturities of investment securities
                    
                    
                    400,000
                    
                    
                    1,950,000
                    
                    
                    4,500,000Purchase
                        of investment securities
                    
                    
                    (2,011,304
                    )
                    
                    (2,444,433
                    )
                    
                    (2,185,124
                    )Proceeds
                        from sales of mortgage-backed securities
                    
                    
                    2,316
                    
                    
                    —
                    
                    
                    —Proceeds
                        from repayments of mortgage-backed securities
                    
                    
                    581,176
                    
                    
                    802,409
                    
                    
                    1,732,082Purchase
                        of mortgage-backed securities
                    
                    
                    —
                    
                    
                    —
                    
                    
                    (2,300,651
                    )Purchase
                        of loans
                    
                    
                    (11,843,519
                    )
                    
                    (13,655,632
                    )
                    
                    (11,133,952
                    )Loan
                        disbursements
                    
                    
                    (41,755,779
                    )
                    
                    (35,221,104
                    )
                    
                    (40,863,047
                    )Loan
                        repayments
                    
                    
                    41,927,037
                    
                    
                    39,057,564
                    
                    
                    45,755,092Proceeds
                        from sale of real estate owned
                    
                    
                    104,248
                    
                    
                    508,516
                    
                    
                    191,055Purchase
                        of real estate held for development
                    
                    
                    (1,352,611
                    )
                    
                    —
                    
                    
                    —Proceeds
                        from sale of other assets
                    
                    
                    360,166
                    
                    
                    —
                    
                    
                    —Proceeds
                        from life insurance policy
                    
                    
                    —
                    
                    
                    102,321
                    
                    
                    —Property
                        and equipment expenditures, net
                    
                    
                    (163,730
                    )
                    
                    (108,004
                    )
                    
                    (338,814
                    )Net
                        cash provided for investing activities
                    
                    $
                    (12,763,200
                    )
                    
                    (9,008,363
                    )
                    
                    (3,445,285
                    )
 
 (Continued)
 
 22
 
 AMB
            FINANCIAL CORP.
 AND
            SUBSIDIARIES
 
 Consolidated
            Statements of Cash Flows
 
   Years
                          Ended December 31,2005
                      
                      2004
                      
                      2003Cash
                          flows from financing activities:Net
                          increase (decrease) in deposits
                      
                      $
                      11,776,253
                      
                      
                      7,324,417
                      
                      
                      (996,657
                      )Proceeds
                          from borrowed money
                      
                      
                      5,242,761
                      
                      
                      5,000,000
                      
                      
                      1,000,000Repayment
                          of borrowed money
                      
                      
                      (3,185,000
                      )
                      
                      (2,175,719
                      )
                      
                      (5,167,185
                      )Repayment
                          of notes payable
                      
                      
                      (140,434
                      )
                      
                      (148,683
                      )
                      
                      (157,450
                      )(Decrease)
                          increase in advance payments by borrowers for taxes and
                          insurance
                      
                      
                      (1,334,771
                      )
                      
                      600,000
                      
                      
                      303,142Proceeds
                          from exercise of stock options
                      
                      
                      71,434
                      
                      
                      105,914
                      
                      
                      —Repurchase
                          of stock options
                      
                      
                      —
                      
                      
                      (108,215
                      )
                      
                      —Purchase
                          of treasury stock
                      
                      
                      (166,187
                      )
                      
                      (74,269
                      )
                      
                      (457,240
                      )Dividends
                          paid on common stock
                      
                      
                      (259,197
                      )
                      
                      (224,172
                      )
                      
                      (178,205
                      )Net
                          cash provided by (for) financing activities
                      
                      
                      12,004,859
                      
                      
                      10,299,273
                      
                      
                      (5,653,595
                      )Net
                          change in cash and cash equivalents
                      
                      
                      686,236
                      
                      
                      1,117,986
                      
                      
                      (5,117,713
                      )Cash
                          and cash equivalents at beginning of year
                      
                      
                      8,352,775
                      
                      
                      7,234,789
                      
                      
                      12,352,502Cash
                          and cash equivalents at end of year
                      
                      $
                      9,039,011
                      
                      
                      8,352,775
                      
                      
                      7,234,789Supplemental
                          disclosure of cash flow information:Cash
                          paid during the year for:Interest
                      
                      $
                      4,143,822
                      
                      
                      3,431,003
                      
                      
                      3,922,653Income
                          taxes
                      
                      
                      —
                      
                      
                      731,000
                      
                      
                      359,208Non-cash
                          investing activities:Transfer
                          of loans to real estate owned
                      
                      $
                      687,334
                      
                      
                      434,034
                      
                      
                      62,811
 
 See
            accompanying notes to consolidated financial statements.
 
 23
 
 AMB
            FINANCIAL CORP.
 AND
            SUBSIDIARIES
 
 Notes
            to
            Consolidated Financial Statements
 
 1)
                  Summary
                      of Significant Accounting
                      Policies
 
 AMB
            Financial Corp. (the "Company") is a Delaware corporation incorporated
            on
            November 23, 1993 for the purpose of becoming the savings and loan holding
            company for American Savings, FSB (the "Bank"). On March 29, 1996, the
            Bank
            converted from a mutual to a stock form of ownership, and the Company
            completed
            its initial public offering, and, with a portion of the net proceeds
            acquired
            all of the issued and outstanding capital stock of the Bank (the
            "Conversion").
 
 Principles
            of Consolidation
 
 The
            accompanying consolidated financial statements include the accounts of
            the
            Company, and its wholly owned subsidiary, American Savings FSB, the Bank's
            wholly owned subsidiary, NIFCO, Inc. and the wholly owned subsidiary
            of NIFCO,
            Inc., Ridge Management, Inc. Significant intercompany balances and transactions
            have been eliminated in consolidation.
 
 Use
            of
            Estimates
 
 The
            preparation of financial statements in conformity with accounting principles
            generally accepted in the United States of America requires management
            to make
            estimates and assumptions that affect the reported amounts of assets
            and
            liabilities and disclosure of contingent assets and liabilities at the
            date of
            the financial statements and the reported amounts of revenue and expenses
            during
            the reporting period. Actual results could differ from those
            estimates.
 
 Statement
            of Cash Flows
 
 For
            purposes of reporting cash flows, the Company has defined cash and cash
            equivalents to include cash on hand, amounts due from depository institutions,
            interest-bearing deposits in other financial institutions and federal
            funds
            sold.
 
 Industry
            Segments
 
 The
            Company operates principally in the banking industry through its subsidiary
            bank. As such, substantially all of the Company's revenues, net income,
            identifiable assets and capital expenditures are related to banking operations.
 
 Investment
            Securities and Mortgage-Backed Securities, Available for Sale
 
 Investment
            securities and mortgage-backed securities available for sale are recorded
            in
            accordance with Statement of Financial Accounting Standards ("SFAS")
            No. 115
            "Accounting for Certain Investments in Debt and Equity Securities". SFAS
            No. 115
            requires the use of fair value accounting for securities available for
            sale or
            trading and retains the use of the amortized cost method for investments
            the
            Company has the positive intent and ability to hold to maturity.
 
 SFAS
            No.
            115 requires the classification of debt and equity securities into one
            of three
            categories: held to maturity, available for sale, or trading. Held to
            maturity
            securities are measured at amortized cost. Unrealized gains and losses
            on
            trading securities are included in income. Unrealized gains and losses
            on
            available for sale securities are excluded from income and reported net
            of taxes
            as a separate component of stockholders' equity.
 
 The
            Company has currently designated all of its investment securities and
            mortgage-backed securities as available for sale and has recorded these
            investments at their current fair values. Unrealized gains and losses
            are
            recorded in a valuation account which is included, net of income taxes,
            as a
            separate component of stockholders' equity. Gains and losses on the sale
            of
            securities are determined using the specific identification method and
            are
            reflected in earnings when realized.
 
 24
 
 1)
                  Summary
                      of Significant Accounting Policies
                      (continued)
 
 Trading
            Securities
 
 Trading
            account securities are recorded at fair value. Realized and unrealized
            gains and
            losses on trading account securities are reflected in non-interest income
            in the
            consolidated statements of income.
 
 Loans
            Receivable and Related Fees
 
 Loans
            are
            stated at the principal amount outstanding, net of loans in process,
            deferred
            yield adjustment and the allowance for losses. Interest on loans is credited
            to
            income as earned and accrued only if deemed collectible. Loans are placed
            on
            nonaccrual status when, in the opinion of management, the full timely
            collection
            of principal or interest is in doubt. As a general rule, the accrual
            of interest
            is discontinued when principal or interest payments become 90 days past
            due or
            earlier if conditions warrant. When a loan is placed on nonaccrual status,
            previously accrued but unpaid interest is charged against current
            income.
 
 Loan
            origination fees and certain direct loan origination costs are being
            deferred in
            accordance with SFAS No. 91 "Accounting for Nonrefundable Fees and Costs
            Associated with Originating or Acquiring Loans and Initial Direct Costs
            of
            Leases". This statement requires that loan origination fees and direct
            loan
            origination costs for a completed loan be netted and then deferred and
            amortized
            into interest income as an adjustment of yield over the contractual life
            of the
            loan.
 
 The
            Company has adopted the provisions of SFAS No. 114 "Accounting by Creditors
            for
            Impairment of a Loan" and SFAS No. 118 "Accounting by Creditors for Impairment
            of a Loan - Income Recognition and Disclosures". These statements apply
            to all
            loans that are identified for evaluation except for large groups of
            smaller-balance homogeneous loans that are collectively evaluated for
            impairment. These loans include, but are not limited to, credit card,
            residential mortgage and consumer installment loans. Of the remaining
            loans
            which are evaluated for impairment, management has determined that there
            were no
            material amounts of loans which met the definition of an impaired loan
            during
            the years ended December 31, 2005 and 2004 and no loans to be evaluated
            for
            impairment at December 31, 2005.
 
 Allowance
            for Loan Losses
 
 The
            determination of the allowance for loan losses involves material estimates
            that
            are susceptible to significant change in the near term. The allowance
            for loan
            losses is maintained at a level adequate to provide for losses through
            charges
            to operating expense. The allowance is based upon past loss experience
            and other
            factors which, in management's judgement, deserve current recognition
            in
            estimating losses. Such other factors considered by management include
            growth
            and composition of the loan portfolio, the relationship of the allowance
            for
            losses to outstanding loans and economic conditions.
 
 Management
            believes that the allowance is adequate. While management uses available
            information to recognize losses on loans, future additions to the allowance
            may
            be necessary based on changes in economic conditions. In addition, various
            regulatory agencies, as an integral part of their examination process,
            periodically review the Bank's allowance for losses. Such agencies may
            require
            the Bank to recognize additions to the allowance based on their judgements
            about
            information available to them at the time of their examination.
 
 Real
            Estate Owned
 
 Real
            estate acquired through foreclosure or deed in lieu of foreclosure is
            carried at
            the lower of fair value minus estimated costs to sell or the related
            loan
            balance at the date of foreclosure. Valuations are periodically performed
            by
            management and an allowance for loss is established by a charge to operations
            if
            the carrying value of a property exceeds its fair value minus estimated
            costs to
            sell.
 
 Real
            Estate Held for Development
 
 Real
            estate properties held for development are carried at the lower of cost,
            including capitalized construction costs, or net realizable value. Gains
            and
            losses on individual properties are based on cash received less the cost
            of each
            individual lot.
 
 25
 
 1)
                  Summary
                      of Significant Accounting Policies
                      (continued)
 
 Office
            Properties and Equipment
 
 Land
            is
            carried at cost. Depreciation of office properties and equipment is accumulated
            on the straight line basis over estimated lives of the various assets.
            Useful
            lives are 25 to 40 years for office properties and 3 to 10 years for
            furniture,
            fixtures and equipment.
 
 Investment
            in Limited Partnership
 
 The
            investment in limited partnership is recorded using the equity method
            of
            accounting. The operations of the property tends to generate an aggregate
            net
            loss before income taxes, but contribute income tax credits, which lowers
            the
            Company’s effective tax rate. The Company evaluates the recoverability of the
            carrying value on a regular basis. Losses due to impairment are recorded
            when it
            is determined that the investment no longer has the ability to recover
            its
            carrying amount.
 
 Income
            Taxes
 
 The
            Company files a consolidated federal income tax return with the Bank.
            The
            provision for federal and state taxes on income is based on earnings
            reported in
            the financial statements. Deferred income taxes arise from the recognition
            of
            certain items of income and expense for tax purposes in years different
            from
            those in which they are recognized in the consolidated financial statements.
            Deferred tax assets and liabilities are recognized for the estimated
            future tax
            consequences attributable to differences between the financial statement
            carrying amount of existing assets and liabilities and their respective
            tax
            bases. Deferred tax assets and liabilities are measured using tax rates
            in
            effect for the year in which those temporary differences are expected
            to be
            recovered or settled. The effect on deferred tax assets and liabilities
            of a
            change in tax rates is recognized in income for the period that includes
            the
            enactment date.
 
 Earnings
                      Per Share
 
 Basic
            earnings per share is computed by dividing net income by the weighted
            average
            number of shares outstanding for the period. ESOP shares not committed
            to be
            released are not considered to be outstanding. Stock options are regarded
            as
            future common stock and are considered in the earnings per share calculations
            and are the only other adjustments made in computing diluted earnings
            per share.
 
 Weighted
            average shares used in calculating earnings per share are summarized
            below.
 
 Years
                        Ended December 31,2005
                    
                    2004
                    
                    2003Weighted
                        average number of common shares outstanding used in basic
                        EPS calculation
                    
                    
                    976,570
                    
                    
                    974,218
                    
                    
                    954,485Reduction
                        for common shares not yet released by Employee Stock Ownership
                        Plan
                    
                    
                    (16,734
                    )
                    
                    (33,470
                    )
                    
                    (50,202
                    )Total
                        weighted average common shares outstanding for basic
                        computation
                    
                    
                    959,836
                    
                    
                    940,748
                    
                    
                    904,283Add
                        common stock equivalents for shares issuable under Stock
                        Option Plans
                    
                    
                    53,168
                    
                    
                    66,960
                    
                    
                    100,611Weighted
                        average number of shares outstanding adjusted for common
                        stock
                        equivalents
                    
                    
                    1,013,004
                    
                    
                    1,007,708
                    
                    
                    1,004,894Net
                        income
                    
                    $
                    859,742
                    
                    
                    880,634
                    
                    
                    1,182,255Basic
                        earnings per share
                    
                    $
                    .90
                    
                    
                    .94
                    
                    
                    1.31Diluted
                        earnings per share
                    
                    $
                    .85
                    
                    
                    .87
                    
                    
                    1.18
  26
 
 1)
                  Summary
                      of Significant Accounting Policies
                      (continued)
 
 Stock
            Option Plans
 
 The
            Company accounts for stock options using the intrinsic value method under
            the
            provisions of Accounting Principles Board (“APB”) Opinion No. 25 and provides
            pro forma net income and pro forma earnings per share disclosures for
            employee
            stock option grants as if the fair value based method, defined in SFAS
            No. 123,
“Accounting for Stock Based Compensation”, had been applied. Had the Company
            determined compensation cost based on the fair value at the grant date
            for its
            stock options under SFAS No. 123, the Company’s net income would have been
            reduced to the pro forma amounts indicated below:
 Years
                        Ended December 31,2005
                    
                    2004
                    
                    2003Net
                        income, as reported
                    
                    $
                    859,742
                    
                    
                    880,634
                    
                    
                    1,182,255Deduct:
                        Total stock based employee compensation expense determined
                        under the fair
                        value based method, net of related tax effects
                    
                    
                    73,792
                    
                    
                    -
                    
                    
                    -Pro
                        forma net income
                    
                    $
                    785,950
                    
                    
                    880,634
                    
                    
                    1,182,255Diluted
                        earnings per share, as reported
                    
                    
                    .85
                    
                    
                    .87
                    
                    
                    1.18Pro
                        forma diluted earnings per share
                    
                    
                    .78
                    
                    
                    .87
                    
                    
                    1.18
  In
              December 2004, the FASB issued SFAS 123(R), “Share-Based Payment”, which is a
              revision of SFAS No. 123, supersedes APB 25 and amends SFAS No. 95
“Statement of
              Cash Flows”. SFAS No. 123(R) requires that stock option awards, as well as other
              equity based compensation, be recognized as compensation expense in
              the income
              statement based on their fair values determined at the date of grant.
              The
              Company will adopt the fair value method of expense recognition as
              of January 1,
              2006, in accordance with SFAS No. 123(R). The Company intends to use
              the
“modified prospective” method, which recognizes compensation cost (a) based on
              the requirements of SFAS No. 123(R) for all share-based payments granted
              after
              the effective date, and (b) based on the requirements of SFAS No. 123
              for all
              awards granted to employees prior to the effective date of SFAS No.
              123(R) that
              remain unvested on the effective date.
  27
 
 2)
                  Investment
                      Securities, Available for Sale
 
 The
            amortized cost and fair value of investment securities available for
            sale are as
            follows:
 Gross
                    
                    
                    
                    GrossAmortized
                    
                    Unrealized
                    
                    Unrealized
                    
                    FairCost
                    
                    Gains
                    
                    Losses
                    
                    ValueDecember
                        31, 2005United
                        States Government and agency obligations
                    
                    $
                    3,022,871
                    
                    
                    2,995
                    
                    
                    21,341
                    
                    
                    3,004,525Marketable
                        equity securities
                    
                    
                    177,988
                    
                    
                    5,738
                    
                    
                    —
                    
                    
                    183,726$
                    3,200,859
                    
                    
                    8,733
                    
                    
                    21,341
                    
                    
                    3,188,251Weighted
                        average interest rate on debt securities
                    
                    
                    4.81
                    %December
                        31, 2004United
                        States Government and agency obligations
                    
                    $
                    2,433,460
                    
                    
                    2,491
                    
                    
                    17,263
                    
                    
                    2,418,688Marketable
                        equity securities
                    
                    
                    171,010
                    
                    
                    11,137
                    
                    
                    —
                    
                    
                    182,147$
                    2,604,470
                    
                    
                    13,628
                    
                    
                    17,263
                    
                    
                    2,600,835Weighted
                        average interest rate on debt securities
                    
                    
                    3.10
                    %
 
 The
            contractual maturity of the above investments is summarized as
            follows:
 
 December
                        31, 2005
                    
                    December
                        31, 2004Amortized
                    
                    Fair
                    
                    Amortized
                    
                    FairTerm
                        to Maturity
                    
                    Cost
                    
                    Value
                    
                    Cost
                    
                    ValueDue
                        in one year or less
                    
                    $
                    500,000
                    
                    
                    493,863
                    
                    
                    398,201
                    
                    
                    396,938Due
                        after one year through five years
                    
                    
                    2,000,889
                    
                    
                    1,998,000
                    
                    
                    1,500,000
                    
                    
                    1,484,000Due
                        after five years through ten years
                    
                    
                    521,982
                    
                    
                    512,662
                    
                    
                    535,259
                    
                    
                    537,750Marketable
                        equity securities
                    
                    
                    177,988
                    
                    
                    183,726
                    
                    
                    171,010
                    
                    
                    182,147$
                    3,200,859
                    
                    
                    3,188,251
                    
                    
                    2,604,470
                    
                    
                    2,600,835
 
 Proceeds
            from sales of investment securities, available for sale during the year
            ended
            December 31, 2005 were $988,800 with gross losses of $11,200 realized
            on those
            sales. There were no sales of investment securities, available for sale
            during
            the year ended December 31, 2004. Proceeds from sales of investment securities,
            available for sale during the year ended December 31, 2003 were $1,198,074
            with
            gross gains of $29,697 and gross losses of $760 realized on those sales.
            The
            change in net unrealized gains and losses during the current year of
            $8,973, net
            of the tax effect of $3,589, resulted in a $5,384 charge to stockholders'
            equity.
 
 28
 
 3)
                  Trading
                      Securities
 
 Trading
            securities are accounted for at their current fair values. Trading securities
            at
            December 31, 2005 consists of equity securities (common stock with a
            carrying
            value of $329,045). Approximately $327,000 of the common stock investment
            at
            December 31, 2005 is pledged as collateral for a revolving line of credit
            as
            discussed in Note 12. Trading securities at December 31, 2004 also consists
            of
            equity securities (common stock with a carrying value of $514,953). The
            adjustment of these securities to their current fair values has resulted
            in a
            net unrealized loss of $50,993 for the year ended December 31, 2005 and
            a net
            unrealized gain of $27,494 and $130,209 for the years ended December
            31, 2004
            and 2003. Proceeds from sales of trading securities during the years
            ended
            December 31, 2005, 2004 and 2003 were $177,736, $17,845 and $119,957
            with gross
            gains of $42,821, $6,876 and $21,082 realized on those sales.
 
 4)
                  Mortgage-Backed
                      Securities, Available for Sale
 
 The
            amortized cost and fair value of mortgage-backed securities available
            for sale
            are as follows:
 Gross
                    
                    
                    
                    GrossAmortized
                    
                    Unrealized
                    
                    Unrealized
                    
                    FairCost
                    
                    Gains
                    
                    Losses
                    
                    ValueDecember
                        31, 2005Participation
                        Certificates:FHLMC
                        - Fixed rate
                    
                    $
                    764,552
                    
                    
                    10,222
                    
                    
                    18,784
                    
                    
                    755,990FNMA
                        - Adjustable rate
                    
                    
                    15,277
                    
                    
                    —
                    
                    
                    41
                    
                    
                    15,236FNMA
                        - Fixed rate
                    
                    
                    607,221
                    
                    
                    —
                    
                    
                    15,503
                    
                    
                    591,718GNMA
                        - Fixed rate
                    
                    
                    49,586
                    
                    
                    4,501
                    
                    
                    —
                    
                    
                    54,087Collateralized
                        Mortgage Obligations:FNMA
                        - Fixed rate
                    
                    
                    246,484
                    
                    
                    763
                    
                    
                    —
                    
                    
                    247,247$
                    1,683,120
                    
                    
                    15,486
                    
                    
                    34,328
                    
                    
                    1,664,278Weighted
                        average interest rate
                    
                    
                    4.92
                    %
 December
                        31, 2004Participation
                        Certificates:FHLMC
                        - Fixed rate
                    
                    $
                    1,052,104
                    
                    
                    22,507
                    
                    
                    10,550
                    
                    
                    1,064,061FNMA
                        - Adjustable rate
                    
                    
                    17,429
                    
                    
                    -
                    
                    
                    29
                    
                    
                    17,400FNMA
                        - Fixed rate
                    
                    
                    874,397
                    
                    
                    153
                    
                    
                    11,648
                    
                    
                    862,902GNMA
                        - Fixed rate
                    
                    
                    83,545
                    
                    
                    8,723
                    
                    
                    —
                    
                    
                    92,268Collateralized
                        Mortgage Obligations:FNMA
                        - Fixed rate
                    
                    
                    246,484
                    
                    
                    3,120
                    
                    
                    —
                    
                    
                    249,604$
                    2,273,959
                    
                    
                    34,503
                    
                    
                    22,227
                    
                    
                    2,286,235Weighted
                        average interest rate
                    
                    
                    5.02
                    %
 
 Proceeds
            from the sale of mortgage-backed securities, available for sale during
            the year
            ended December 31, 2005 were $2,316 with gross losses of $69 realized
            on those
            sales. There were no sales of mortgage-backed securities available for
            sale
            during the years ended December 31, 2004 and 2003. The change in net
            unrealized
            gains and losses during the current year of $31,118, net of the tax effect
            of
            $12,447, resulted in a $18,671 charge to stockholders' equity.
 
 29
 
 5)
                  Loans
                      Receivable
 
 Loans
            receivable are summarized as follows:
 December
                        31,2005
                    
                    2004Mortgage
                        loans:One-to-four
                        family
                    
                    $
                    92,809,163
                    
                    
                    87,606,849Multi-family
                    
                    
                    8,956,007
                    
                    
                    7,319,556Nonresidential
                    
                    
                    17,110,976
                    
                    
                    18,026,178Construction
                    
                    
                    6,736,993
                    
                    
                    3,576,293Land
                    
                    
                    6,891,401
                    
                    
                    5,197,171Total
                        mortgage loans
                    
                    
                    132,504,540
                    
                    
                    121,726,047Other
                        loans:Loans
                        on deposit accounts
                    
                    
                    90,984
                    
                    
                    159,563Equity
                        lines of credit
                    
                    
                    6,208,239
                    
                    
                    5,330,182Other
                        consumer
                    
                    
                    2,706,919
                    
                    
                    1,779,097Total
                        other loans
                    
                    
                    9,006,142
                    
                    
                    7,268,842Commercial
                        business loans
                    
                    
                    3,464,586
                    
                    
                    2,444,349Total
                        loans receivable
                    
                    
                    144,975,268
                    
                    
                    131,439,238Less:Loans
                        in process
                    
                    
                    4,182,195
                    
                    
                    1,412,577Net
                        deferred yield adjustments
                    
                    
                    9,337
                    
                    
                    (31,804
                    )Allowance
                        for loan losses
                    
                    
                    748,859
                    
                    
                    715,979Loans
                        receivable, net
                    
                    $
                    140,034,877
                    
                    
                    129,342,486Weighted
                        average interest rate
                    
                    
                    6.34
                    %
                    
                    6.03
                    %
 Activity
            in the allowance for loan losses is summarized as follows:
 Years
                        Ended December 31,2005
                    
                    2004
                    
                    2003Balance,
                        beginning of year
                    
                    $
                    715,979
                    
                    
                    1,033,226
                    
                    
                    837,859Provision
                        for loan losses
                    
                    
                    274,845
                    
                    
                    189,198
                    
                    
                    213,604Charge-offs
                    
                    
                    (249,265
                    )
                    
                    (541,315
                    )
                    
                    (22,976
                    )Recoveries
                    
                    
                    7,300
                    
                    
                    34,870
                    
                    
                    4,739Balance,
                        end of year
                    
                    $
                    748,859
                    
                    
                    715,979
                    
                    
                    1,033,226
 Delinquent
            loans (loans having monthly payments past due ninety days or more and
            non-accruing) at December 31, 2005 and 2004 amounted to approximately
            $1,474,000
            and $1,609,000, respectively. As of December 31, 2005 and 2004, the total
            investment in impaired loans was $-0- and $213,000, respectively. The
            impaired
            loans at these dates were subject to an allowance for credit losses of
            $-0- and
            $108,000, respectively, which is included in the above loan loss allowance.
 
 For
            the
            years ended December 31, 2005 and 2004, gross interest income which would
            have
            been recorded had the non-accruing loans been current in accordance with
            their
            original terms amounted to approximately $97,000 and $81,000,
            respectively.
 
 Loans
            to
            directors and executive officers aggregated approximately $810,000 and
            $767,000
            at December 31, 2005 and 2004, respectively. Such loans are made on
            substantially the same terms as those for other loan customers.
 
 30
 6)
                    Investment
                        in Limited Partnership
 
 The
            investment in limited partnership of $797,948 and $869,698 at December
            31, 2005
            and 2004 represents a 39.60% equity in Pedcor Investments 1997 - XXXI
            ("Pedcor"), a limited partnership organized to build, own and operate
            a 56 unit
            apartment complex. The Bank has recorded its equity in the losses of
            Pedcor in
            the amount of $71,750, $82,300 and $90,602 for the years ended December
            31,
            2005, 2004 and 2003. Condensed financial statements for Pedcor are as
            follows:
 
 
 Condensed
            Statements of Financial Condition
 
 December
                        31,2005
                    
                    2004AssetsCash
                    
                    $
                    10,540
                    
                    
                    3,118Property
                        and equipment
                    
                    
                    3,431,638
                    
                    
                    3,532,134Land
                    
                    
                    112,000
                    
                    
                    112,000Other
                    
                    
                    55,278
                    
                    
                    45,119Total
                        assets
                    
                    
                    3,609,456
                    
                    
                    3,692,371LiabilitiesNotes
                        payable - Bank
                    
                    
                    421,016
                    
                    
                    529,608Notes
                        payable - Other
                    
                    
                    2,104,324
                    
                    
                    2,254,352Other
                        liabilities
                    
                    
                    303,849
                    
                    
                    262,505Total
                        liabilities
                    
                    
                    2,829,189
                    
                    
                    3,046,465Partners'
                        capital
                    
                    
                    780,267
                    
                    
                    645,906Total
                        liabilities and partners' capital
                    
                    $
                    3,609,456
                    
                    
                    3,692,371Years
                        Ended December 31,2005
                    
                    
                    2004
                    
                    
                    2003Condensed
                        statement of operationsTotal
                        revenues
                    
                    $
                    242,033
                    
                    
                    223,089
                    
                    
                    254,475Total
                        expenses
                    
                    
                    423,219
                    
                    
                    432,133
                    
                    
                    479,677Net
                        loss
                    
                    $
                    (181,186
                    )
                    
                    (209,044
                    )
                    
                    (225,202
                    )
  31
 
 7)
                  Accrued
                      Interest Receivable
 
 Accrued
            interest receivable is summarized as follows:
 
 December
                        31,2005
                    
                    2004Investment
                        securities
                    
                    $
                    52,215
                    
                    
                    37,138Mortgage-backed
                        securities
                    
                    
                    6,895
                    
                    
                    9,507Loans
                        receivable
                    
                    
                    808,167
                    
                    
                    699,643Allowance
                        for uncollected interest
                    
                    
                    (160,716
                    )
                    
                    (113,676
                    )$
                    706,561
                    
                    
                    632,612
 8)
                  Office
                      Properties and Equipment
 
 Office
            properties and equipment are summarized as follows:
 December
                        31,2005
                    
                    2004Cost:Land
                    -
                    
                    Munster
                    
                    
                    
                    
                    $
                    40,669
                    
                    
                    40,669Hammond
                    
                    
                    
                    
                    
                    33,300
                    
                    
                    33,300Dyer
                    
                    
                    
                    
                    
                    300,000
                    
                    
                    300,000Building
                    -
                    
                    Munster
                    
                    
                    
                    
                    
                    457,773
                    
                    
                    457,773Hammond
                    
                    
                    
                    
                    
                    319,985
                    
                    
                    317,828Dyer
                    
                    
                    
                    
                    
                    1,796,151
                    
                    
                    1,762,802Furniture
                        and equipment
                    
                    
                    
                    
                    
                    
                    
                    
                    1,981,176
                    
                    
                    1,914,8174,929,054
                    
                    
                    4,827,189Less
                        accumulated depreciation:Building
                    -
                    
                    Munster
                    
                    
                    
                    
                    
                    427,476
                    
                    
                    424,008Hammond
                    
                    
                    
                    
                    
                    275,904
                    
                    
                    268,040Dyer
                    
                    
                    
                    
                    
                    347,379
                    
                    
                    288,057Furniture
                        and equipment
                    
                    
                    
                    
                    
                    
                    
                    
                    1,486,806
                    
                    
                    1,414,6752,537,565
                    
                    
                    2,394,780Net
                        book value
                    
                    
                    
                    
                    
                    
                    
                    $
                    2,391,489
                    
                    
                    2,432,409
 Depreciation
            of office properties and equipment for the years ended December 31, 2005,
            2004
            and 2003 amounted to $204,650, $229,479 and $210,455, respectively.
 
 The
            Bank
            owns a three story office building in Dyer, Indiana, which is one-third
            utilized
            by the Bank as its branch office location. An additional one-third of
            the
            building is leased to a third party at a current annual lease rent of
            $69,628.
            This lease commenced on June 1, 2002 and terminates May 31, 2007 subject
            to two
            five-year lease renewal options. One half of the remaining third of the
            building
            is being leased to a third-party at a current annual lease rent of $32,460.
            This
            lease commenced on October 1, 2003 and terminates September 30, 2009
            subject to
            two six-year lease renewal options. The remainder of the building is
            being
            leased to a third-party at a current annual lease rent of $36,441. This
            lease
            commenced on January 1, 2004 and terminates December 31, 2008 subject
            to two
            five-year lease renewal options.
 
 9)
                  Real
                      Estate Held for Development
 
 The
            Company has entered into an agreement with a local builder to acquire
            vacant
            lots and construct single family residences. Costs incurred as of December
            31,
            2005 to acquire eight land parcels and to begin construction on two lots
            amounted to $1,352,611. Upon sale of each completed residence, before
            any profit
            distribution, the Company will receive a stipulated amount as interest
            on the
            funds that have been advanced. After payment of this amount, the Company
            is
            entitled to receive 30% of any remaining profit. There were no sales
            of any
            properties during the year ended December 31, 2005.
 
 32
 
 10)
                  Prepaid
                      Expenses and Other Assets
 
 Prepaid
                      expenses and other assets consist of the
                      following:
 December
                        31,2005
                    
                    2004Prepaid
                        insurance premiums
                    
                    $
                    80,502
                    
                    
                    64,279Prepaid
                        pension cost
                    
                    
                    300,957
                    
                    
                    267,349Prepaid
                        statutory trust preferred fees
                    
                    
                    167,200
                    
                    
                    173,621Prepaid
                        income taxes
                    
                    
                    90,509
                    
                    
                    444,533Other
                        prepaid expenses
                    
                    
                    120,500
                    
                    
                    97,922Deferred
                        federal and state income tax asset - net (a)
                    
                    
                    368,170
                    
                    
                    313,939Purchased
                        accounts receivable (b)
                    
                    
                    2,790,117
                    
                    
                    2,607,997Purchased
                        accounts receivable, serviced by others
                    
                    
                    1,000,000
                    
                    
                    750,000Miscellaneous
                        (c)
                    
                    
                    165,438
                    
                    
                    203,720$
                    5,083,393
                    
                    
                    4,923,360
 
 (a)
                  Significant
                      components of the deferred tax assets and liabilities are as
                      follows:
 
 December
                        31,2005
                    
                    2004Deferred
                        tax assets:Deferred
                        compensation
                    
                    $
                    345,524
                    
                    
                    317,258Nondeductible
                        incentive plan expense
                    
                    
                    6,957
                    
                    
                    6,957Book
                        allowance for loan losses
                    
                    
                    299,544
                    
                    
                    286,392Allowance
                        for uncollected interest
                    
                    
                    64,286
                    
                    
                    45,470Unrealized
                        loss on securities available for sale
                    
                    
                    12,580
                    
                    
                    -Total
                        deferred tax assets
                    
                    
                    728,891
                    
                    
                    656,077Deferred
                        tax liabilities:Accelerated
                        tax depreciation
                    
                    
                    44,552
                    
                    
                    40,613Federal
                        Home Loan Bank stock dividend
                    
                    
                    71,280
                    
                    
                    63,840Pension
                        expense
                    
                    
                    120,383
                    
                    
                    106,940Unrealized
                        gain on securities available for sale
                    
                    
                    —
                    
                    
                    3,456Unrealized
                        gain on trading account securities
                    
                    
                    48,283
                    
                    
                    68,680Other
                    
                    
                    76,223
                    
                    
                    58,609Total
                        deferred tax liabilities
                    
                    
                    360,721
                    
                    
                    342,138Net
                        deferred tax benefit
                    
                    $
                    368,170
                    
                    
                    313,939
 
 (b)
                  The
                      Bank has entered into a program to purchase and manage the
                      accounts
                      receivable of credit-worthy merchants with required repurchase
                      of
                      delinquent accounts and with the merchant's repurchase obligation
                      supported by a cash collateral reserve account. For each merchant,
                      the
                      Bank establishes a maximum amount of purchased receivables
                      allowed to be
                      outstanding at any one time. At December 31, 2005 and 2004,
                      the unused
                      amount was $2,460,000 and $2,567,000,
                      respectively.
  (1)
                  In
                      March 2005, the shareholders of Intrieve Incorporated, the
                      Bank’s data
                      processing provider, approved the sale and merger of Intrieve
                      into Harland
                      Financial Solutions Inc., a wholly owned subsidiary of John
                      H. Harland
                      Company. This transaction closed in April 2005. As a shareholder
                      of
                      Intrieve, the Bank received $360,166 in cash on its $15,000
                      investment,
                      resulting in a gain of $345,166.
 33
 
 11)
                  Deposits
 
 Deposit
                      accounts are summarized as follows:
  December
                        31,2005
                    
                    2004Passbook
                        accounts
                    
                    $
                    19,515,031
                    
                    
                    21,604,225Demand
                        deposits and NOW accounts
                    
                    
                    12,876,076
                    
                    
                    12,621,433Money
                        market accounts
                    
                    
                    12,958,922
                    
                    
                    14,879,62645,350,029
                    
                    
                    49,105,284Certificates
                        of deposit by interest rate:0.76
                        - 1.00%
                    
                    
                    —
                    
                    
                    773,9491.01
                        - 2.00
                    
                    
                    1,183,986
                    
                    
                    14,249,1742.01
                        - 3.00
                    
                    
                    21,223,717
                    
                    
                    37,430,4453.01
                        - 4.00
                    
                    
                    41,254,761
                    
                    
                    9,870,7844.01
                        - 5.00
                    
                    
                    18,422,501
                    
                    
                    3,934,2635.01
                        - 6.00
                    
                    
                    —
                    
                    
                    252,9536.01
                        - 7.00
                    
                    
                    —
                    
                    
                    41,88982,084,965
                    
                    
                    66,553,457$
                    127,434,994
                    
                    
                    115,658,741
 
 The
            weighted average rate on deposit accounts at December 31, 2005 and 2004
            was
            2.79% and 2.03%, respectively.
 
 The
            aggregate amount of certificates of deposit with a minimum denomination
            of
            $100,000 was $20,293,000 and $14,228,000 at December 31, 2005 and 2004,
            respectively.
 
 A
            summary
            of certificates of deposit by maturity is as follows:
 December
                        31,2005
                    
                    2004Within
                        12 months
                    
                    $
                    62,649,330
                    
                    
                    44,894,33012
                        months to 24 months
                    
                    
                    17,361,757
                    
                    
                    17,949,31024
                        months to 36 months
                    
                    
                    1,072,797
                    
                    
                    3,246,64936
                        months to 48 months
                    
                    
                    1,001,081
                    
                    
                    404,556Over
                        48 months
                    
                    
                    —
                    
                    
                    58,612Total
                    
                    $
                    82,084,965
                    
                    
                    66,553,457
 Interest
            expense on deposits consists of the following:
 
 Years
                        Ended December 31,2005
                    
                    2004
                    
                    2003Passbook
                        accounts
                    
                    $
                    252,244
                    
                    
                    261,513
                    
                    
                    279,357NOW
                        accounts
                    
                    
                    61,160
                    
                    
                    60,788
                    
                    
                    67,798Money
                        market accounts
                    
                    
                    370,977
                    
                    
                    364,548
                    
                    
                    301,881Certificates
                        of deposit
                    
                    
                    2,116,030
                    
                    
                    1,582,178
                    
                    
                    2,015,311Total
                    
                    $
                    2,800,411
                    
                    
                    2,269,027
                    
                    
                    2,664,347
 34
 
 12)
                  Borrowed
                      Money
 
 Borrowed
            money consists of advances from the Federal Home Loan Bank of Indianapolis
            and
            is summarized as follows:
 
 Interest
                    
                    December
                        31,Maturity
                        Date
                    
                    Rate
                    
                    2005
                    
                    2004April
                        13, 2005
                    
                    
                    1.90
                    %
                    $
                    —
                    
                    
                    1,000,000August
                        24, 2005
                    
                    
                    5.11
                    
                    
                    —
                    
                    
                    2,000,000January
                        23, 2006
                    
                    
                    4.73
                    
                    
                    2,000,000
                    
                    
                    2,000,000May
                        1, 2006
                    
                    
                    2.83
                    
                    
                    2,000,000
                    
                    
                    2,000,000August
                        23, 2006
                    
                    
                    5.32
                    
                    
                    1,000,000
                    
                    
                    1,000,000December
                        18, 2006
                    
                    
                    2.93
                    
                    
                    1,000,000
                    
                    
                    1,000,000March
                        28, 2007
                    
                    
                    4.37
                    
                    
                    2,000,000
                    
                    
                    —April
                        13, 2007
                    
                    
                    4.18
                    
                    
                    1,000,000
                    
                    
                    —July
                        1, 2008
                    
                    
                    4.13
                    
                    
                    2,000,000
                    
                    
                    —August
                        25, 2008
                    
                    
                    3.84
                    
                    
                    2,000,000
                    
                    
                    2,000,000May
                        15, 2009
                    
                    
                    5.93
                    
                    
                    421,016
                    
                    
                    529,608August
                        16, 2010
                    
                    
                    5.99
                    
                    
                    1,500,000
                    
                    
                    1,500,000September
                        20, 2010
                    
                    
                    5.95
                    
                    
                    1,000,000
                    
                    
                    1,000,000December
                        20, 2010
                    
                    
                    4.98
                    
                    
                    2,000,000
                    
                    
                    2,000,000March
                        22, 2011
                    
                    
                    4.09
                    
                    
                    500,000
                    
                    
                    500,000July
                        15, 2015
                    
                    
                    5.91
                    
                    
                    635,869
                    
                    
                    646,989November
                        16, 2020
                    
                    
                    6.71
                    
                    
                    1,712,110
                    
                    
                    1,777,398$
                    20,768,995
                    
                    
                    18,953,995Weighted
                        average interest rate
                    
                    
                    
                    
                    
                    4.67
                    %
                    
                    4.70
                    %
 
 The
            Bank
            is required to maintain qualifying collateral for the Federal Home Loan
            Bank of
            Indianapolis representing approximately 170 percent of current Bank credit.
            At
            December 31, 2005, the Bank met this requirement. Assets which are eligible
            collateral for meeting the 170% coverage requirement include one—to-four family
            whole mortgage loans, government and agency securities including mortgage-backed
            securities insured or guaranteed by FHLMC, FNMA and GNMA, and high rated
            private
            mortgage-backed securities. The mortgage loans must not include participations,
            construction loans, loans which are not in the clear title of the institution,
            conventional mortgages with more than 30 years remaining to maturity,
            loans for
            more than 90% of the appraised value unless there is private or federal
            insurance, mortgages which are more than 60 days delinquent, or loans
            upon which
            any employee of the institution or the FHLB is personally liable.
 
 Interest
            expense on FHLB advances amounted to $987,546, $899,497 and $987,723
            for the
            years ended December 31, 2005, 2004 and 2003, respectively.
 
 The
            Company has entered into a revolving line of credit in the maximum amount
            of
            $300,000. The loan will bear interest at one half percent under the Wall
            Street
            Journal prime rate. The Company may borrow up to 75% of the market value
            of the
            collateral security. At December 31, 2005, the Company pledged common
            stock with
            a market value of approximately $327,000 as collateral securing this
            line of
            credit. The Company did borrow against this line of credit during the
            current
            year and at December 31, 2005 had an outstanding balance against this
            line of
            credit of $242,761. Interest expense incurred on this advance amounted
            to $2,397
            for the year ended December 31, 2005.
  In
            connection with the Company's initial public offering, the Bank established
            an
            Employee Stock Ownership Plan (ESOP). The ESOP was funded by the proceeds
            from a
            loan from the Company. The loan carried an interest rate of 6.07% and
            was
            secured by the shares of the Company purchased with the loan proceeds.
            The Bank
            had committed to make contributions to the ESOP sufficient to allow the
            ESOP to
            fund the debt service requirements of the loan. At December 31, 2005,
            the
            balance of this loan had been fully repaid.
 
 35
 
 13)
                  Guaranteed
                      Preferred Beneficial Interest in Junior Subordinated
                      Debentures
 
 In
            March
            of 2002, the Company formed AMB Financial Statutory Trust I ("Trust").
            The Trust
            is a statutory business trust and is wholly owned by the Company. The
            Trust
            issued $5.0 million of Trust Preferred Capital Securities (the "Capital
            Securities") as a participant in a pooled trust preferred securities
            offering
            concurrent with the issuance of the Capital Securities, the Trust issued
            trust
            common securities to the Company in the aggregate liquidation value of
            $155,000.
            The proceeds of the issuance of the Capital Securities and trust common
            securities were invested in the Company's junior subordinated debentures.
            The
            junior subordinated debentures are the sole assets of the Trust. The
            junior
            subordinated debentures and the trust preferred securities pay interest
            on a
            quarterly basis. The junior subordinated debentures and the securities
            bear
            interest at a rate of 3-month LIBOR plus 3.60%, mature on March 27, 2032
            and are
            non-callable for five years and, after that period, the securities may
            be called
            at any quarterly interest payment date at par. Distributions on the Capital
            Securities are payable quarterly. Interest expense for the years ended
            December
            31, 2005, 2004 and 2003 amounted to $359,035, $264,849 and $251,338,
            respectively. The costs associated with the Capital Securities issuance
            have
            been capitalized and are being amortized over the estimated life of the
            securities.
 
 14)
                  Other
                      Liabilities
 
 Other
            liabilities include the following:
 December
                        31,2005
                    
                    2004Accrued
                        interest on deposits
                    
                    $
                    8,942
                    
                    
                    6,891Accrued
                        interest on borrowings
                    
                    
                    43,072
                    
                    
                    39,556Accrued
                        bonus
                    
                    
                    96,475
                    
                    
                    110,065Accrued
                        audit and accounting fees
                    
                    
                    36,555
                    
                    
                    35,173Accrued
                        real estate and personal property taxes
                    
                    
                    84,991
                    
                    
                    166,513Deferred
                        compensation (see note 15)
                    
                    
                    863,810
                    
                    
                    793,144Outstanding
                        bank drafts
                    
                    
                    919,828
                    
                    
                    807,319Miscellaneous
                        accounts payable
                    
                    
                    340,345
                    
                    
                    182,436$
                    2,394,018
                    
                    
                    2,141,097
 15)
                  Benefit
                      Plans
 
 The
            Bank
            participates in an industry-wide, multi-employer, defined-benefit pension
            plan,
            which covers all full-time employees who have attained at least 21 years
            of age
            and completed one year of service. The Plan is administered by the Financial
            Institutions Retirement Fund. Calculations to determine full-funding
            status are
            made annually as of June 30. Contributions to the Plan for the Plan years
            ended
            June 30, 2005, 2004 and 2003 amounted to $380,900, $264,569 and $190,459,
            respectively. Pension expense for the years ended December 31, 2005,
            2004 and
            2003 amounted to $350,037, $254,946 and $171,324, respectively. Information
            regarding the Bank's share of assets and liabilities and plan benefit
            information of this plan is not available on an individual basis.
 
 The
            Bank
            participates in the Financial Institutions Thrift Plan, which qualifies
            under
            Section 401(k) of the Internal Revenue Code and which covers substantially
            all
            employees. This plan calls for a discretionary contribution within specified
            limits and a matching Bank contribution equal to 25% of the first 6%
            of the
            employee contributions. Plan expense for the years ended December 31,
            2005, 2004
            and 2003 amounted to $15,919, $15,286 and $13,632, respectively.
 
 The
            Bank
            also has established two non-qualified 401(k) Plan for officers of the
            Bank.
            Both Plans provide participating officers the opportunity to defer up
            to 6% of
            their salary into a tax deferred accumulation for future retirement.
            In
            addition, the Bank has also established a Director Deferral Plan which
            provides
            participating directors with the opportunity to defer all or a portion
            of their
            fees over a predetermined period. All deferred non-qualified 401(k) Plan
            contributions and deferred director fees are credited with interest from
            the
            Bank at the rate of 10% per year. Interest credited by the Bank to the
            non-qualified plans and deferred director fees on accumulated funds was
            $82,583,
            $77,227 and $75,499 for the years ended December 31, 2005, 2004 and 2003,
            respectively.
 
 36
 
 16)
                  Director,
                      Officer and Employee Plans
 
 Stock
            Option Plan .
            In
            conjunction with the Conversion, the stockholders of the Company approved
            the
            AMB Financial Corp. 1996 Stock Option and Incentive Plan. This is an
            incentive
            stock option plan for the benefit of the directors, officers and employees
            of
            the Company and its affiliates. This Plan authorized grants of options
            to
            purchase 210,767 shares of common stock after adjustments of stock dividends
            and
            stock splits (original authorized number of shares was 112,412, equal
            to 10% of
            the total number of shares issued in the Conversion). On October 23,
            1996,
            187,573 options (after adjusting for the stock dividends) were granted
            at $6.80
            per share, exercisable at a rate of 20% per year commencing October 23,
            1997,
            and expiring ten years from the date of grant.
 
 At
            the
            shareholders’ meeting on April 27, 2005, the shareholders approved the AMB
            Financial Corp. 2005 Stock Option Plan, which authorized 40,000 stock
            options to
            become available for grant. During 2005, options for 43,120 shares were
            granted
            (23,194 options from the 1996 Plan and 19,926 from the 2005 Plan) at
            $13.25 per
            share exercisable over four years and expiring ten years from the date
            of grant.
            The per share weighted average fair value of stock options granted during
            2005
            was $ 3.51 on the date of grant, using a Black-Scholes option pricing
            model with
            the following historical weighted average assumptions: expected dividend
            yield
            of 2.0%, risk-free interest rate of 3.85%, expected life of 10 years
            and
            volatility of 27%.
 
 The
            following is an analysis of the stock option activity for each of the
            years in
            the three year period ended December 31, 2005 and the stock options outstanding
            at the end of the respective periods.
 Number
                    
                    Exercise
                        PriceOptions
                    
                    of
                        Options
                    
                    Per
                        Share
                    
                    TotalOutstanding
                        at December 31, 2002
                    
                    
                    187,573
                    
                    
                    6.80
                    
                    
                    1,275,496Granted
                    
                    
                    0Exercised
                    
                    
                    0Forfeited
                    
                    
                    0Outstanding
                        at December 31, 2003
                    
                    
                    187,573
                    
                    
                    6.80
                    
                    
                    1,275,496Granted
                    
                    
                    0Exercised
                    
                    
                    (70,716
                    )
                    
                    6.80
                    
                    
                    (480,869
                    )Forfeited
                    
                    
                    0Outstanding
                        at December 31, 2004
                    
                    
                    116,857
                    
                    
                    6.80
                    
                    
                    794,627Granted
                    
                    
                    43,120
                    
                    
                    13.25
                    
                    
                    571,340Exercised
                    
                    
                    (10,505
                    )
                    
                    6.80
                    
                    
                    (71,434
                    )Forfeited
                    
                    
                    0Outstanding
                        at December 31, 2005
                    
                    
                    149,472
                    
                    $
                    6.80-13.25
                    
                    $
                    1,294,533Exercisable
                        at December 31, 2005
                    
                    
                    125,496
                    
                    $
                    6.80-13.25
                    
                    $
                    976,852Options
                        available for future grants at December 31, 2005
                    
                    
                    20,074
 
 As
            of
            December 31, 2005, the weighted average exercise price for options outstanding
            was $8.66 with a weighted average remaining contractual life of 3.25
            years.
 
 37
 
 16)
                  Director,
                      Officer and Employee Plans
                      (continued)
 
 Employee
            Stock Ownership Plan .
            In
            conjunction with the Conversion, the Bank formed an Employee Stock Ownership
            Plan ("ESOP"). The ESOP covers substantially all employees with more
            than one
            year of employment and who have attained the age of 18. The ESOP borrowed
            $899,300 from the Company and purchased 168,618 common shares issued
            in the
            Conversion. The Bank will make scheduled discretionary cash contributions
            to the
            ESOP sufficient to service the amount borrowed. In accordance with generally
            accepted accounting principles, the unpaid balance of the ESOP loan,
            which is
            comparable to unearned compensation, is reported as a reduction of stockholders'
            equity. Total contributions by the Bank to the ESOP which were used to
            fund
            principal and interest payments on the ESOP debt totaled $90,946, $92,997
            and
            $96,694 for the years ended December 31, 2005, 2004 and 2003,
            respectively.
 
 Statement
            of Position No. 93-6, "Employers' Accounting for Employee Stock Ownership
            Plans"
            ("SOP 93-6") provides guidance for accounting for all ESOPs. SOP 93-6
            requires that the issuance or sale of treasury shares to the ESOP be
            reported
            when the issuance or sale occurs and that compensation expense be recognized
            for
            shares committed to be released to directly compensate employees equal
            to the
            fair value of the shares committed. In addition, SOP 93-6 requires that
            leveraged ESOP debt and related interest expense be reflected in the
            employer's
            financial statements. Prior practice was to recognize compensation expense
            based
            on the amount of the employer's contributions to the ESOP. The application
            of
            SOP 93-6 results in fluctuations in compensation expense as a result
            of changes
            in the fair value of the Company's common stock; however, any such compensation
            expense fluctuations will result in an offsetting adjustment to additional
            paid-in capital. For the years ended December 31, 2005, 2004 and 2003,
            additional compensation expense of $135,709, $177,300 and $132,525 was
            recognized as a result of implementation of this accounting
            principle.
 
 38
 
 17)
                  Income
                      Taxes
 
 The
            Bank
            had qualified under provisions of the Internal Revenue Code, which permitted
            it
            to deduct from taxable income an allowance for bad debt, which differed
            from the
            provision for such losses charged to income. Accordingly, retained earnings
            at
            December 31, 2005 includes approximately $1,950,000, for which no provision
            for
            income taxes has been made. If in the future this portion of retained
            earnings
            is distributed, or the Bank no longer qualifies as a bank for tax purposes,
            income taxes may be imposed at the then applicable rates.
 
 The
            provision for income taxes consists of the following:
 Years
                        Ended December 31,2005
                    
                    2004
                    
                    2003Current
                    
                    $
                    381,864
                    
                    
                    135,887
                    
                    
                    520,942Deferred
                    
                    
                    (38,195
                    )
                    
                    213,962
                    
                    
                    50,100$
                    343,669
                    
                    
                    349,849
                    
                    
                    571,042
 
 A
            reconciliation of the statutory federal income tax rate to effective
            income tax
            rate is as follows:
 Years
                        Ended December 31,2005
                    
                    2004
                    
                    2003Statutory
                        federal income tax rate
                    
                    
                    34.0
                    %
                    
                    34.0
                    %
                    
                    34.0
                    %State
                        income taxes
                    
                    
                    5.8
                    
                    
                    5.6
                    
                    
                    5.3Low
                        income housing credit
                    
                    
                    (11.6
                    )
                    
                    (11.4
                    )
                    
                    (7.9
                    )Cash
                        surrender value of life insurance
                    
                    
                    (4.0
                    )
                    
                    (5.2
                    )
                    
                    (3.4
                    )ESOP
                        expense
                    
                    
                    4.5
                    
                    
                    5.7
                    
                    
                    3.0Other
                    
                    
                    (.1
                    )
                    
                    (.3
                    )
                    
                    1.6Effective
                        income tax rate
                    
                    
                    28.6
                    %
                    
                    28.4
                    %
                    
                    32.6
                    %
 
 Deferred
            income tax expense consists of the following tax effects of timing
            differences:
 Years
                        Ended December 31,2005
                    
                    2004
                    
                    2003Loan
                        fees
                    
                    $
                    —
                    
                    
                    10,058
                    
                    
                    (6,655
                    )Federal
                        Home Loan Bank stock dividend
                    
                    
                    7,440
                    
                    
                    30,240
                    
                    
                    33,600Depreciation
                    
                    
                    3,939
                    
                    
                    9,415
                    
                    
                    53,077Deferred
                        compensation
                    
                    
                    (28,266
                    )
                    
                    1,470
                    
                    
                    (32,811
                    )Pension
                    
                    
                    13,443
                    
                    
                    5,000
                    
                    
                    8,142Book
                        loan loss provision (in excess of) less
                        than tax deduction
                    
                    
                    (13,152
                    )
                    
                    126,898
                    
                    
                    (78,146
                    )Recapture
                        of bad debt reserve
                    
                    
                    —
                    
                    
                    —
                    
                    
                    (19,082
                    )Unrealized
                        gain on trading account securities
                    
                    
                    (20,397
                    )
                    
                    10,998
                    
                    
                    52,083Other,
                        net
                    
                    
                    (1,202
                    )
                    
                    19,883
                    
                    
                    39,892$
                    (38,195
                    )
                    
                    213,962
                    
                    
                    50,100
  39
 18)
                  Regulatory
                      Capital Requirements
 
 The
            Bank
            is subject to various regulatory capital requirements administered by
            the
            federal banking agencies. Failure to meet minimum total requirements
            can
            initiate certain mandatory and possible additional discretionary actions
            by
            regulators that, if undertaken, could have a direct material effect on
            the
            Bank's financial statements. Under capital adequacy guidelines and the
            regulatory framework for prompt correction action, the Bank must meet
            specific
            capital guidelines that involve quantitative measures of the Bank's assets,
            liabilities, and certain off-balance-sheet items as calculated under
            regulatory
            accounting practices. The Bank's capital amounts and classification are
            also
            subject to quantitative judgments by the regulators about components,
            risk
            weightings, and other factors.
 
 Quantitative
            measures established by regulation to ensure capital adequacy require
            the Bank
            to maintain minimum amounts and ratios, set forth in the table below
            of the
            total risk-based, tangible and core capital, as defined in the regulations.
            Management believes, as of December 31, 2005, that the Bank meets all
            capital
            adequacy requirements to which it is subject.
 
 The
            Bank,
            according to federal regulatory standards, is well-capitalized under
            the
            regulatory framework for prompt corrective action. To be categorized
            as
            adequately capitalized, the Bank must maintain minimum total risk-based,
            tangible, and core ratios as set forth in the table. There are no conditions
            or
            events since that notification that management believes have changed
            the
            institution's category.
 
 At
            December 31, 2005 and 2004, the Bank's actual capital amounts and ratios,
            minimum amounts and ratios required for capital adequacy purposes and
            minimum
            amounts and ratios to meet the well-capitalized criteria under prompt
            corrective
            action provision, are as follows:
 To
                        Be Well-Capitalized
                        UnderFor
                        Capital
                    
                    Prompt
                        CorrectiveActual
                    
                    Adequacy
                        Purposes
                    
                    Action
                        ProvisionsAmount
                    
                    Ratio
                    
                    Amount
                    
                    Ratio
                    
                    Amount
                    
                    RatioDecember
                        31, 2005Tangible
                    
                    $
                    15,427,834
                    
                    
                    9.26
                    %
                    $
                    2,498,000
                    
                    
                    1.50
                    %
                    $
                    N/A
                    
                    
                    N/A
                    %Core
                    
                    
                    15,427,834
                    
                    
                    9.26
                    
                    
                    4,996,000
                    
                    
                    3.00
                    
                    
                    8,327,000
                    
                    
                    5.00Risk-based
                    
                    
                    16,176,693
                    
                    
                    15.85
                    
                    
                    8,165,000
                    
                    
                    8.00
                    
                    
                    10,206,000
                    
                    
                    10.00December
                        31, 2004Tangible
                    
                    $
                    14,030,787
                    
                    
                    9.02
                    %
                    $
                    2,334,000
                    
                    
                    1.50
                    %
                    $
                    N/A
                    
                    
                    N/A
                    %Core
                    
                    
                    14,030,787
                    
                    
                    9.02
                    
                    
                    4,667,000
                    
                    
                    3.00
                    
                    
                    7,779,000
                    
                    
                    5.00Risk-based
                    
                    
                    14,623,766
                    
                    
                    15.44
                    
                    
                    7,580,000
                    
                    
                    8.00
                    
                    
                    9,474,000
                    
                    
                    10.00
 
 Tangible
                    
                    Core
                    
                    Risk-basedCapital
                    
                    Capital
                    
                    CapitalDecember
                        31, 2005Stockholders'
                        equity
                    
                    $
                    15,408,964
                    
                    
                    15,408,964
                    
                    
                    15,408,964Unrealized
                        loss on securitiesavailable
                        for sale, net of taxes
                    
                    
                    18,870
                    
                    
                    18,870
                    
                    
                    18,870General
                        loss allowances
                    
                    
                    —
                    
                    
                    —
                    
                    
                    748,859Regulatory
                        capital computed
                    
                    $
                    15,427,834
                    
                    
                    15,427,834
                    
                    
                    16,176,693December
                        31, 2004Stockholders'
                        equity
                    
                    $
                    14,035,972
                    
                    
                    14,035,972
                    
                    
                    14,035,972Unrealized
                        gain on securitiesavailable
                        for sale, net of taxes
                    
                    
                    (5,185
                    )
                    
                    (5,185
                    )
                    
                    (5,185
                    )General
                        loss allowances
                    
                    
                    —
                    
                    
                    —
                    
                    
                    607,979Direct
                        equity investments
                    
                    
                    —
                    
                    
                    —
                    
                    
                    (15,000
                    )Regulatory
                        capital computed
                    
                    $
                    14,030,787
                    
                    
                    14,030,787
                    
                    
                    14,623,766
 40
 
 19)
                  Stockholders'
                      Equity
 
 As
            part
            of the Conversion, the Bank established a liquidation account for the
            benefit of
            all eligible depositors who continue to maintain their deposit accounts
            in the
            Bank after conversion. In the unlikely event of a complete liquidation
            of the
            Bank, each eligible depositor will be entitled to receive a liquidation
            distribution from the liquidation account, in the proportionate amount
            of the
            then current adjusted balance for deposit accounts held, before distribution
            may
            be made with respect to the Bank's capital stock. The Bank may not declare
            or
            pay a cash dividend to the Company on, or repurchase any of, its capital
            stock
            if the effect thereof would cause the retained earnings of the Bank to
            be
            reduced below the amount required for the liquidation account. Except
            for such
            restrictions, the existence of the liquidation account does not restrict
            the use
            or application of retained earnings.
 
 In
            addition, the Bank may not declare or pay cash dividends on or repurchase
            any of
            its shares of common stock if the effect thereof would cause stockholders'
            equity to be reduced below applicable regulatory capital maintenance
            requirements or if such declaration and payment would otherwise violate
            regulatory requirements.
 
 Unlike
            the Bank, the Company is not subject to these regulatory restrictions
            on the
            payment of dividends to its stockholders. However, the Company's source
            of funds
            for future dividends may depend upon dividends received by the Company
            from the
            Bank.
 
 20)
                  Financial
                      Instruments with Off-Balance Sheet
                      Risk
 
 The
            Bank
            is a party to various transactions with off-balance sheet risk in the
            normal
            course of business. These transactions are primarily commitments to originate
            loans and to extend credit on previously approved unused lines of credit.
            These
            financial instruments carry varying degrees of credit and interest-rate
            risk in
            excess of amounts recorded in the consolidated financial
            statements.
 
 Commitments
            to originate mortgage loans of $1,507,900 at December 31, 2005 represent
            amounts
            which the Bank plans to fund within the normal commitment period of 60
            to 90
            days. Of this amount $1,142,900 are fixed rate commitments with rates
            ranging
            from 5.75% to 7.125% and $365,000 are in adjustable rate commitments.
            Because
            the credit worthiness of each customer is reviewed prior to extension
            of the
            commitment, the Bank adequately controls its credit risk on these commitments,
            as it does for loans recorded on the balance sheet. The Bank conducts
            all of its
            lending activities in the Northwest Indiana area. Management believes
            the Bank
            has a diversified loan portfolio and the concentration of lending activities
            in
            these local communities does not result in an acute dependency upon economic
            conditions of the lending region.
 
 The
            Bank
            has approved, but unused, home equity lines of credit of approximately
            $5,124,000 at December 31, 2005. Approval of lines of credit is based
            upon
            underwriting standards that generally do not allow total borrowings,
            including
            the line of credit, to exceed 75% of the estimated fair value of the
            customer's
            home. In addition, the Bank has approved but unused equity lines of credit
            on
            various construction and commercial projects of approximately $1,439,000
            at
            December 31, 2005. The Bank also has approved but unused credit card
            lines of
            credit of approximately $1,448,000.
 
 The
            Bank
            is currently participating with several local financial institutions
            in credit
            enhancement agreements with in-state municipalities to guarantee the
            repayment
            on municipal revenue bonds. The Bank has accepted credit risk on these
            various
            municipal projects in the amount of approximately $960,000. These credit
            enhancements are in cooperation with the Federal Home Loan Bank of Indianapolis
            ("FHLB") and have pledging requirements as part of the qualifying collateral
            agreement with FHLB. Additionally, at December 31, 2005, the Bank had
            issued
            standby letters of credit totaling approximately $382,000 to guarantee
            the
            performance of a customer to a third party.
 
 21)
                  Contingencies
  The
            Bank
            is, from time to time, a party to certain lawsuits in the ordinary course
            of its
            business, wherein it enforces its security interest. Management, based
            upon
            discussions with legal counsel, believes that the Company and the Bank
            are not
            engaged in any legal proceedings of a material nature at the present
            time.
 
 22)
                  Subsequent
                      Event
 
 On
            January 25, 2006, the Company declared a quarterly cash dividend of $.07
            per
            share, totaling $68,925, payable February 17, 2006 to shareholders of
            record as
            of February 3, 2006.
 
 41
 
 23)
                  Disclosures
                      About the Fair Value of Financial
                      Instruments
 
 The
            following methods and assumptions were used to estimate the fair value
            of each
            class of financial instruments for which it is practicable to estimate
            that
            value:
 
 Cash
            and cash equivalents :
            For
            cash and interest-bearing deposits, the carrying amount is a reasonable
            estimate
            of fair value.
 
 Investment
            securities :
            Fair
            values for securities held to maturity, available for sale or held for
            trade are
            based on quoted market prices as published in financial publications
            or on
            quotes from third-party brokers.
 
 Mortgage-backed
            securities :
            Fair
            values for mortgage-backed securities are based on the lower of quotes
            received
            from various third-party brokers.
 
 Loans
            receivable :
            The
            fair values of fixed-rate one-to-four family residential mortgage loans
            are
            based on quoted market prices of similar loans sold in conjunction with
            securitization transactions. The fair values for other fixed and adjustable
            rate
            mortgage loans are estimated using discounted cash flow analyses, using
            interest
            rates currently being offered for loans with similar terms and collateral
            to
            borrowers of similar credit quality.
 
 Accrued
            interest receivable and payable :
            The
            carrying value of accrued interest receivable, net of the allowance for
            uncollected interest, and accrued interest payable approximates fair
            value due
            to the relatively short period of time between accrual and expected
            realization.
 
 Deposit
            liabilities :
            The
            fair value of demand deposits, savings accounts and money market deposits
            is the
            amount payable on demand at the reporting date. The fair value of fixed
            maturity
            certificates of deposit is estimated by discounting the future cash flows
            using
            the rates currently offered for deposits of similar original maturities.
 
 Borrowed
            money :
            Rates
            currently available to the Company for debt with similar terms and remaining
            maturities are used to estimate fair value of existing debt.
 
 The
            estimated fair value of the Company's financial instruments as of December
            31,
            2005 and 2004 are as follows:
 
 December
                        31, 2005Carrying
                        Amount
                    
                    Fair
                        ValueFinancial
                        assets:Cash
                        and cash equivalents
                    
                    $
                    9,039,011
                    
                    
                    9,039,011Investment securities, available for sale
                    
                    
                    3,188,251
                    
                    
                    3,188,251Trading securities
                    
                    
                    329,045
                    
                    
                    329,045Mortgage-backed securities, available for sale
                    
                    
                    1,664,278
                    
                    
                    1,664,278Loans receivable
                    
                    
                    140,034,877
                    
                    
                    139,251,000Accrued
                        interest receivable
                    
                    
                    706,561
                    
                    
                    706,561Financial
                        liabilities:Deposits
                    
                    $
                    127,434,994
                    
                    
                    127,018,000Borrowed
                        money
                    
                    
                    21,011,756
                    
                    
                    21,115,000Accrued
                        interest payable
                    
                    
                    52,014
                    
                    
                    52,014December
                        31, 2004Carrying
                        Amount
                    
                    
                    Fair
                        ValueFinancial
                        assets:Cash
                        and cash equivalents
                    
                    $
                    8,352,775
                    
                    
                    8,352,775Investment securities, available for sale
                    
                    
                    2,600,835
                    
                    
                    2,600,835Trading securities
                    
                    
                    514,953
                    
                    
                    514,953Mortgage-backed securities, available for sale
                    
                    
                    2,286,235
                    
                    
                    2,286,235Loans receivable
                    
                    
                    129,342,486
                    
                    
                    132,419,000Accrued
                        interest receivable
                    
                    
                    632,612
                    
                    
                    632,612Financial
                        liabilities:Deposits
                    
                    $
                    115,658,741
                    
                    
                    115,523,000Borrowed
                        money
                    
                    
                    18,953,995
                    
                    
                    19,458,000Accrued
                        interest payable
                    
                    
                    46,447
                    
                    
                    46,447
  42
  24)
                  Condensed
                      Parent Company Only Financial
                      Statements
 
 The
            following condensed statement of financial condition, as of December
            31, 2005
            and 2004 and condensed statements of income and cash flows for the years
            ended
            December 31, 2005, 2004 and 2003 for AMB Financial Corp. should be read
            in
            conjunction with the consolidated financial statements and the notes
            thereto.
 
 Condensed
            Statements of Financial Condition
 
 December
                        31,2005
                    
                    2004AssetsCash
                        and cash equivalents
                    
                    $
                    183,122
                    
                    
                    3,263,077Trading
                        securities
                    
                    
                    329,045
                    
                    
                    514,953Loans
                        receivable
                    
                    
                    1,758,261
                    
                    
                    89,930Real
                        estate held for development
                    
                    
                    1,352,611
                    
                    
                    -Investment
                        in American Savings, FSB
                    
                    
                    14,694,221
                    
                    
                    13,522,813Investment
                        in AMB Financial Statutory Trust I
                    
                    
                    155,000
                    
                    
                    155,000Prepaid
                        expenses and other assets
                    
                    
                    611,509
                    
                    
                    557,965Total
                        assets
                    
                    
                    19,083,769
                    
                    
                    18,103,738Liabilities
                        and Stockholders' EquityLiabilities:Borrowed
                        money
                    
                    
                    442,761
                    
                    
                    -Junior
                        subordinated debentures
                    
                    
                    5,155,000
                    
                    
                    5,155,000Accrued
                        taxes and other liabilities
                    
                    
                    56,119
                    
                    
                    52,480Total
                        liabilities
                    
                    
                    5,653,880
                    
                    
                    5,207,480Stockholders'
                        Equity:Common
                        stock
                    
                    
                    16,862
                    
                    
                    16,862Additional
                        paid-in capital
                    
                    
                    10,657,470
                    
                    
                    10,629,631Retained
                        earnings
                    
                    
                    10,021,965
                    
                    
                    9,458,798Treasury
                        stock
                    
                    
                    (7,266,408
                    )
                    
                    (7,209,033
                    )Total
                        stockholders' equity
                    
                    
                    13,429,889
                    
                    
                    12,896,258$
                    19,083,769
                    
                    
                    18,103,738
 Condensed
            Statements of Income
 
 Years
                        Ended December 31,2005
                    
                    2004
                    
                    2003Net
                        interest expense
                    
                    $
                    (227,881
                    )
                    
                    (136,372
                    )
                    
                    (96,122
                    )Gain
                        on sale of trading securities
                    
                    
                    42,821
                    
                    
                    6,876
                    
                    
                    21,082Unrealized
                        (loss) gain on trading securities
                    
                    
                    (50,993
                    )
                    
                    27,494
                    
                    
                    130,209Other
                        non-interest income
                    
                    
                    9,017
                    
                    
                    4,359
                    
                    
                    43,667Non-interest
                        expense
                    
                    
                    (294,181
                    )
                    
                    (280,999
                    )
                    
                    (330,545
                    )Net
                          loss before income taxes and equity in earnings of subsidiaries
                    
                    
                    (521,217
                    )
                    
                    (378,642
                    )
                    
                    (231,709
                    )Benefit
                        from income taxes
                    
                    
                    209,551
                    
                    
                    153,442
                    
                    
                    87,882Net
                        loss before equity in earnings of subsidiaries
                    
                    
                    (311,666
                    )
                    
                    (225,200
                    )
                    
                    (143,827
                    )Equity
                        in earnings of subsidiaries
                    
                    
                    1,171,408
                    
                    
                    1,105,834
                    
                    
                    1,326,082Net
                        income
                    
                    $
                    859,742
                    
                    
                    880,634
                    
                    
                    1,182,255
  43
  24)
                  Condensed
                      Parent Company Only Financial Statements
                      (continued)
 
 
 Condensed
            Statements of Cash Flows
 
 Years
                        Ended December 31,2005
                    
                    2004
                    
                    2003Operating
                        activities:Net
                        income
                    
                    $
                    859,742
                    
                    
                    880,634
                    
                    
                    1,182,255Equity
                        in earnings of subsidiaries
                    
                    
                    (1,171,408
                    )
                    
                    (1,105,834
                    )
                    
                    (1,326,082
                    )Amortization
                        of premiums and accretion of discounts
                    
                    
                    —
                    
                    
                    11
                    
                    
                    2,018Gain
                        on sale of trading securities
                    
                    
                    (42,821
                    )
                    
                    (6,876
                    )
                    
                    (21,082
                    )Unrealized
                          loss (gain) on trading securities
                          held for trade
                    
                    
                    50,993
                    
                    
                    (27,494
                    )
                    
                    (130,209
                    )Proceeds
                        from sale of trading securities
                    
                    
                    177,736
                    
                    
                    17,845
                    
                    
                    119,957Proceeds
                        from redemption of trading securities
                    
                    
                    —
                    
                    
                    —
                    
                    
                    100,000Purchase
                        of trading securities
                    
                    
                    —
                    
                    
                    —
                    
                    
                    (1,166
                    )Increase
                        in deferred income on loans
                    
                    
                    9,512
                    
                    
                    —
                    
                    
                    —(Increase)
                        decrease in prepaid taxes and other assets
                    
                    
                    (25,705
                    )
                    
                    80,226
                    
                    
                    82,147Increase
                        in other liabilities
                    
                    
                    3,639
                    
                    
                    6,883
                    
                    
                    1,870Net
                        cash provided (for) by operating activities
                    
                    
                    (138,312
                    )
                    
                    (154,605
                    )
                    
                    9,708Investing
                        activities:Proceeds
                        from maturities of investment securities
                    
                    
                    —
                    
                    
                    200,000
                    
                    
                    1,500,000Purchase
                        of investment securities
                    
                    
                    —
                    
                    
                    —
                    
                    
                    (700,063
                    )Loan
                        disbursements
                    
                    
                    (1,767,773
                    )
                    
                    —
                    
                    
                    —Loan
                        repayments
                    
                    
                    89,930
                    
                    
                    89,930
                    
                    
                    89,930Real
                        estate held for development expenditures
                    
                    
                    (1,352,611
                    )
                    
                    —
                    
                    
                    —Net
                        cash provided (for) by investing activities
                    
                    
                    (3,030,454
                    )
                    
                    289,930
                    
                    
                    889,867Financing
                        activities:Proceeds
                        from borrowed money
                    
                    
                    442,761
                    
                    
                    —
                    
                    
                    —Proceeds
                        from exercise of stock options
                    
                    
                    71,434
                    
                    
                    105,914
                    
                    
                    —Repurchase
                        of stock options
                    
                    
                    —
                    
                    
                    (108,215
                    )
                    
                    —Purchase
                        of treasury stock
                    
                    
                    (166,187
                    )
                    
                    (74,269
                    )
                    
                    (457,240
                    )Dividends
                        paid on common stock
                    
                    
                    (259,197
                    )
                    
                    (224,172
                    )
                    
                    (178,205
                    )Net
                        cash provided by (for) investing activities
                    
                    
                    88,811
                    
                    
                    (300,742
                    )
                    
                    (635,445
                    )Net
                        (decrease) increase in cash and cash equivalents
                    
                    
                    (3,079,955
                    )
                    
                    (165,417
                    )
                    
                    264,130Cash
                        and cash equivalents at beginning of year
                    
                    
                    3,263,077
                    
                    
                    3,428,494
                    
                    
                    3,164,364Cash
                        and cash equivalents at end of year
                    
                    $
                    183,122
                    
                    
                    3,263,077
                    
                    
                    3,428,494
 
 44
 
 **AMB
            Financial Corp.**
 **Stockholder
            Information**
 
 **Annual
            Meeting**
 
 The
            annual meeting of stockholders will be held at 10:30 a.m., on April 26,
            2006, at
            the Company’s corporate office, located at 8230 Hohman Avenue, Munster,
            Indiana.
 
 **Stock
            Listing**
 
 The
            Company’s stock is traded on the OTC Bulletin Board under the symbol
“AMFC.OB”.
 
 Price
            Range of Common Stock and Dividends
 
 The
            table
            below shows the range of high and low sale prices and dividends paid
            in fiscal
            2005.
 Quarter
                        Ended
                    
                    High
                    
                    Low
                    
                    DividendsMarch
                        31, 2005
                    
                    
                    14.900
                    
                    
                    13.140
                    
                    $
                    0.060June
                        30, 2005
                    
                    
                    14.500
                    
                    
                    13.080
                    
                    $
                    0.070September
                        30, 2005
                    
                    
                    13.500
                    
                    
                    13.000
                    
                    $
                    0.070December
                        31, 2005
                    
                    
                    13.950
                    
                    
                    13.050
                    
                    $
                    0.070
 The
            Board
            of Directors will consider the payment of future cash dividends and the
            amount
            of such dividends based on the results of operations and the financial
            condition
            of the Company, tax considerations, industry standards, economic conditions,
            regulatory restrictions, general business practices and other factors.
            See Note
            19 of the Notes to the Consolidated Financial Statements for information
            regarding limitations of the Bank’s ability to pay dividends to the
            Company.
 
 As
            of
            December 31, 2005, the Company had 331 stockholders of record and 984,648
            outstanding shares of common stock.
 
 **Shareholder
            General Inquiries Transfer Agent**
 **Shareholder
                        General Inquiries**
                    **Transfer
                        Agent**Clement
                        B. Knapp, Jr., President
                    Registrar
                        & Transfer Co.AMB
                        Financial Corp.
                    10
                        Commerce Drive8230
                        Hohman Ave.
                    Cranford,
                        New Jersey 07016Munster,
                        Indiana 46321
                    (800)
                        456-0596(219)
                        836-5870
 
 45
  **AMB
            Financial Corp.**
 **Corporate
            Information**
 **Corporate
                          Office**AMB
                          Financial Corp.
                      Telephone
                          (219) 836-58708230
                          Hohman Avenue
                      Fax
                          (219) 836-5883Munster,
                          IN 46321
                      Web
                          site ambfinancial.com**Directors
                          of the Board**
                      **AMB
                          Financial Corp.****Officers**Clement
                          B. Knapp, Jr.
                      Clement
                          B. Knapp, Jr.President
                          since 1977.
                      Chairman
                          of the Board, Presidentand
                          Chief Executive OfficerRonald
                          W. Borto
                      Louis
                          A. GreenDirector
                          since 1986.
                      Senior
                          Vice-PresidentDonald
                          L. Harle
                      Scott
                          S. GyureDirector
                          since 1995.
                      Vice-President,
                          TreasurerChief
                          Financial OfficerPeter
                          KorellisDirector
                          since 2004.
                      Denise
                          L. KnappCorporate
                          SecretaryMichael
                          MellonDirector
                          since 2004.
                      Michael
                          MellonExecutive
                          Vice PresidentJohn
                          G. PastrickDirector
                          since 1979
                      Todd
                          WilliamsVice
                          PresidentRobert
                          E. TolleyDirector
                          since 1987**Independent
                          Auditors**
                      **Corporate
                          Counsel / Local**Cobitz,
                          VandenBerg & Fennessy
                      Abrahamson
                          & Reed9944
                          S. Roberts Road Suite 202
                      Attorneys
                          at LawPalos
                          Hills, IL 60465
                      200
                          Russell StreetHammond,
                          IN 46320**Corporate
                          Counsel / Washington DC**Luse,
                          Gorman, Pomerent & Schick, P.C.5335
                          Wisconsin Avenue, N.W.Washington,
                          D.C. 20015
  46
  Annual
            and Other Report
 The
            Company is required to file an annual report on Form 10-KSB with the
            Securities
            and Exchange Commission. Copies of the Form 10-KSB, annual report and
            the
            Company’s quarterly reports may be obtained without charge by
            contacting:
 
 Tricia
            Cassity
 AMB
            Financial Corp.
 8230
            Hohman Avenue
 Munster,
            Indiana 46321
 (219)
            836-5870
 
 
 47