UNITED
      STATES




SECURITIES
      AND EXCHANGE COMMISSION




Washington,
      D.C. 20549




**FORM
        10-KSB**
  x
              ANNUAL
                  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                  ACT OF
                  1934
                
                For
                  the fiscal year ended December 31,
                  2005
 OR
  o
              TRANSITION
                  REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
                  ACT OF
                  1934
                
                For
                  the transition period from ______________________ to
                  ________________________
  **Commission
        File Number 0-23182**


**AMB
                  FINANCIAL CORP.**(Exact
                  Name of Small Business Registrant as Specified in its
                  Charter)
  Delaware
              35-1905382(State
                  or other jurisdiction of incorporation or organization)
              (I.R.S.
                  Employer Identification No.)8230
                  Hohman Avenue, Munster, Indiana
              46321-1578(Address
                  of principal executive offices)
              (Zip
                  Code)




Registrant’s
      telephone number, including area code: (219)
      836-5870




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




None




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




Common
      Stock, par value $0.01 per share


(Title
      of
      class)




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




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




Indicate
      by check mark if the Registrant is a shell company. YES o NO x




The
      Registrant had $10.3 million in gross income for the year ended December 31,
      2005.




The
      aggregate market value of the voting stock held by non-affiliates of the
      Registrant, computed by reference to the average of the bid and asked price
      of
      such stock as of February 1, 2005 was $8.8 million. (The exclusion from such
      amount of the market value of the shares owned by any person shall not be deemed
      an admission by the Registrant that such person is an affiliate of the
      Registrant.)




As
      of
      March 24, 2006, there were issued and outstanding 995,186 shares of the
      Registrant’s Common Stock.




**DOCUMENTS
      INCORPORATED BY REFERENCE**




Parts
      II
      and IV of Form 10-KSB - Annual Report to Stockholders for the fiscal year ended
      December 31, 2005.


Part
      III
      of Form 10-KSB - Proxy Statement for the 2005 Annual Meeting of
      Stockholders.




Transitional
      Small Business Disclosure Format: Yes o; No x .





**FORWARD-LOOKING
      STATEMENTS**




AMB
      Financial Corp. (“AMB Financial”), and its wholly-owned subsidiary, American
      Savings, FSB (“American Savings”), may from time to time make written or oral
“forward-looking statements,” including statements contained in its filings with
      the Securities and Exchange Commission (the “SEC”). These forward-looking
      statements may be included in this Annual Report on Form 10-KSB and the exhibits
      attached to it, in AMB Financial’s reports to shareholders and in other
      communications, which are made in good faith by us pursuant to the “safe harbor”
provisions of the Private Securities Litigation Reform Act of 1995.




These
      forward-looking statements include statements about our beliefs, plans,
      objectives, goals, expectations, anticipations, estimates and intentions, that
      are subject to significant risks and uncertainties, and are subject to change
      based on various factors, some of which are beyond our control. The words “may,”
“could,” “should,” “would,” “believe,” “anticipate,” “estimate,” “expect,”
“intend,” “plan” and similar expressions are intended to identify
      forward-looking statements. The following factors, among others, could cause
      our
      financial performance to differ materially from the plans, objectives,
      expectations, estimates and intentions expressed in the forward-looking
      statements:




·
            the
                strength of the United States economy in general and the strength
                of the
                local economy and real estate market in which we conduct
                operations;


·
            the
                effects of, and changes in, trade, monetary and fiscal policies and
                laws,
                including interest rate policies of the Federal Reserve
                Board;


·
            inflation,
                interest rate, market and monetary
                fluctuations;


·
            the
                timely development of and acceptance of our new products and services
                and
                the perceived overall value of these products and services by users,
                including the features, pricing and quality compared to competitors’
                products and services;


·
            the
                willingness of users to substitute our products and services for
                products
                and services of our competitors;


·
            our
                success in gaining regulatory approval of our products and services,
                when
                required;


·
            the
                impact of changes in financial services’ laws and regulations (including
                laws concerning taxes, banking, securities and
                insurance);


·
            the
                impact of technological changes;


·
            competition
                from other financial service providers in the Company’s market
                area;


·
            changes
                in local real estate values;


·
            the
                success of our new executives in managing our business
                operations;


·
            the
                success, when applicable, of our loan restructuring and work out
                arrangements;


·
            changes
                in consumer spending and saving habits;
                and


·
            our
                success at managing the risks involved in the
                foregoing.




The
      list
      of important factors stated above is not exclusive. We do not undertake to
      update any forward-looking statement, whether written or oral, that may be
      made
      from time to time by or on behalf of AMB Financial or American
      Savings.  2


**PART
      I**




**Item
      1. Description of Business**




AMB
      Financial was formed in 1993 by American Savings under the laws of Delaware
      for
      the purpose of becoming a savings and loan holding company. American Savings,
      headquartered in Munster, Indiana, was founded in 1957 as a federally chartered
      institution. In March 1996, American Savings converted to the stock form of
      organization through the sale and issuance of 1,686,169 (split adjusted) shares
      of its common stock to AMB Financial. The principal asset of AMB Financial
      is
      the outstanding stock of American Savings. AMB Financial presently has no
      separate operations and its business consists only of the business of American
      Savings. All references to AMB Financial, unless otherwise indicated, at or
      before March 29, 1996 refer to American Savings. References in this Form 10-KSB
      to “we”, “us” and “our” refer to AMB Financial and/or American Savings as the
      context requires.




We
      are a
      community-based financial institution that offers a variety of selected
      financial services to meet the needs of the community we serve. We attract
      deposits from the general public and use such deposits to originate and purchase
      one- to four-family residential mortgages and, to a lesser extent,
      non-residential real estate, multi-family real estate, consumer, commercial
      business, land and construction loans. We also invest in mortgage-backed
      securities, investment securities consisting primarily of U.S. government
      obligations and various types of short-term liquid assets. See “- Lending
      Activities” and “- Investment Activities.”




We
      serve
      the financial needs of families and local businesses in our primary market
      area,
      northwest Lake County, Indiana, through our main office located in Munster,
      Indiana and two branch offices located in the communities of Dyer and Hammond,
      Indiana. Our deposits are insured up to applicable limits by the Federal Deposit
      Insurance Corporation (the “FDIC”). At December 31, 2005, we had total assets of
      $170.5 million, deposits of $127.4 million and stockholders’ equity of $14.1
      million or 8.30% of total assets.




Our
      executive office is located at 8230 Hohman Avenue, Munster, Indiana 46321-1578
      and our telephone number at that address is (219) 836-5870.




**Lending
      Activities**




Our
      principal lending activity is originating and, to a lesser extent, purchasing
      first mortgage loans secured by owner-occupied one- to four-family residential
      properties located in our primary market areas. We also originate and purchase
      non-residential real estate, multi-family real estate, consumer, commercial
      business, land and construction loans. In addition to increasing the yield
      and/or the interest rate sensitivity of our portfolio, these non-one- to four
      family loans allow us to provide more comprehensive financial services to
      families and community businesses in our primary market area.




3


*Loan
      Portfolio Composition* .
      The
      following table sets forth information concerning the composition of our loan
      portfolio in dollar amounts and in percentages (before deductions for loans
      in
      process, net deferred yield adjustments and allowances for losses) as of the
      dates indicated.




December
                  31,2005
              
              
              2004
              
              
              2003
              
              
              2002
              
              
              2001Amount
              
              Percent
              
              
              Amount
              
              Percent
              
              
              Amount
              
              Percent
              
              
              Amount
              
              Percent
              
              
              Amount
              
              Percent(Dollars
                  in Thousands)Real
                  Estate Loans:One-to
                  four-family
              
              $
              92,809
              
              
              64.02
              %
              
              $
              87,607
              
              
              66.65
              %
              
              $
              78,948
              
              
              64.43
              %
              
              $
              81,827
              
              
              69.64
              %
              
              $
              82,584
              
              
              71.87
              %Multi-family
              
              
              8,956
              
              
              6.18
              
              
              
              7,320
              
              
              5.57
              
              
              
              11,128
              
              
              9.08
              
              
              
              4,196
              
              
              3.57
              
              
              
              3,433
              
              
              2.99Non-residential
              
              
              17,111
              
              
              11.80
              
              
              
              18,026
              
              
              13.71
              
              
              
              14,711
              
              
              12.01
              
              
              
              11,002
              
              
              9.36
              
              
              
              10,095
              
              
              8.78Construction
              
              
              6,737
              
              
              4.65
              
              
              
              3,576
              
              
              2.72
              
              
              
              2,053
              
              
              1.68
              
              
              
              2,771
              
              
              2.36
              
              
              
              3,090
              
              
              2.69Land
              
              
              6,891
              
              
              4.75
              
              
              
              5,197
              
              
              3.96
              
              
              
              4,544
              
              
              3.71
              
              
              
              5,015
              
              
              4.27
              
              
              
              1,352
              
              
              1.18Total
                  real estate loans
              
              
              132,504
              
              
              91.40
              
              
              
              121,726
              
              
              92.61
              
              
              
              111,384
              
              
              90.91
              
              
              
              104,811
              
              
              89.20
              
              
              
              100,554
              
              
              87.51Other
                  Loans:Consumer
                  Loans:Deposit
                  account
              
              
              91
              
              
              0.06
              
              
              
              160
              
              
              0.12
              
              
              
              180
              
              
              0.15
              
              
              
              183
              
              
              0.15
              
              
              
              123
              
              
              0.11Credit
                  Card
              
              
              421
              
              
              0.29
              
              
              
              365
              
              
              0.28
              
              
              
              408
              
              
              0.33
              
              
              
              443
              
              
              0.38
              
              
              
              448
              
              
              0.39Line
                  of credit(1)
              
              
              6,208
              
              
              4.28
              
              
              
              5,330
              
              
              4.05
              
              
              
              5,004
              
              
              4.08
              
              
              
              4,499
              
              
              3.83
              
              
              
              3,711
              
              
              3.23Other
              
              
              2,286
              
              
              1.58
              
              
              
              1,414
              
              
              1.08
              
              
              
              1,389
              
              
              1.13
              
              
              
              1,026
              
              
              0.87
              
              
              
              1,122
              
              
              0.97Total
                  consumer loans
              
              
              9,006
              
              
              6.21
              
              
              
              7,269
              
              
              5.53
              
              
              
              6,981
              
              
              5.69
              
              
              
              6,151
              
              
              5.23
              
              
              
              5,404
              
              
              4.70Commercial
                  business loans
              
              
              3,465
              
              
              2.39
              
              
              
              2,444
              
              
              1.86
              
              
              
              4,158
              
              
              3.40
              
              
              
              6,546
              
              
              5.57
              
              
              
              8,951
              
              
              7.79Total
                  loans receivable
              
              
              144,975
              
              
              100.00
              %
              
              
              131,439
              
              
              100.00
              %
              
              
              122,523
              
              
              100.00
              %
              
              
              117,508
              
              
              100.00
              %
              
              
              114,909
              
              
              100.00
              %Less:Loans
                  in process
              
              
              4,182
              
              
              
              
              
              
              1,413
              
              
              
              
              
              
              1,359
              
              
              
              
              
              
              2,505
              
              
              
              
              
              
              1,698Net
                  deferred yield adjustments
              
              
              9
              
              
              
              
              
              
              (32
              )
              
              
              
              
              
              (78
              )
              
              
              
              
              
              (153
              )
              
              
              
              
              
              (68
              )Allowance
                  for losses
              
              
              749
              
              
              
              
              
              
              716
              
              
              
              
              
              
              1,033
              
              
              
              
              
              
              838
              
              
              
              
              
              
              766Total
                  loans receivable, net
              
              $
              140,335
              
              
              
              
              
              $
              129,342
              
              
              
              
              
              $
              120,209
              
              
              
              
              
              $
              114,318
              
              
              
              
              
              $
              112,513


(1)  Substantially
      all of which are secured by residential real estate




4


The
      following table shows the composition of our loan portfolios by fixed- and
      adjustable-rate at the dates indicated.




December
                31,2005
            
            
            2004
            
            
            2003
            
            
            2002
            
            
            2001Amount
            
            Percent
            
            
            Amount
            
            Percent
            
            
            Amount
            
            Percent
            
            
            Amount
            
            Percent
            
            
            Amount
            
            Percent(Dollars
                in Thousands)Fixed
                Rate Loans:Real
                estate:One-to
                four-family
            
            $
            73,461
            
            
            50.67
            %
            
            $
            73,666
            
            
            56.05
            %
            
            $
            68,081
            
            
            55.56
            %
            
            $
            63,647
            
            
            54.17
            %
            
            $
            60,844
            
            
            52.95
            %Multi-family
            
            
            8,374
            
            
            5.78
            
            
            
            5,752
            
            
            4.38
            
            
            
            6,454
            
            
            5.27
            
            
            
            2,718
            
            
            2.31
            
            
            
            1,877
            
            
            1.63Non-residential
            
            
            13,652
            
            
            9.42
            
            
            
            15,203
            
            
            11.56
            
            
            
            11,520
            
            
            9.40
            
            
            
            8,396
            
            
            7.14
            
            
            
            8,215
            
            
            7.15Construction
            
            
            —
            
            
            —
            
            
            
            2,016
            
            
            1.53
            
            
            
            1,576
            
            
            1.29
            
            
            
            1,247
            
            
            1.06
            
            
            
            1,048
            
            
            0.91Land
            
            
            877
            
            
            0.60
            
            
            
            974
            
            
            0.74
            
            
            
            545
            
            
            0.45
            
            
            
            339
            
            
            0.29
            
            
            
            416
            
            
            0.36Total
                real estate loans
            
            
            96,364
            
            
            66.47
            
            
            
            97,611
            
            
            74.26
            
            
            
            88,176
            
            
            71.97
            
            
            
            76,347
            
            
            64.97
            
            
            
            72,400
            
            
            63.00Consumer
            
            
            2,313
            
            
            1.59
            
            
            
            1,939
            
            
            1.48
            
            
            
            1,941
            
            
            1.58
            
            
            
            1,630
            
            
            1.39
            
            
            
            1,693
            
            
            1.47Commercial
                business
            
            
            2,739
            
            
            1.89
            
            
            
            1,469
            
            
            1.12
            
            
            
            2,436
            
            
            1.99
            
            
            
            4,313
            
            
            3.67
            
            
            
            5,784
            
            
            5.03Total
                fixed-rate loans
            
            
            101,416
            
            
            69.95
            
            
            
            101,019
            
            
            76.86
            
            
            
            92,553
            
            
            75.54
            
            
            
            82,290
            
            
            70.03
            
            
            
            79,877
            
            
            69.50Adjustable
                Rate Loans:Real
                estate:One-to
                four-family
            
            
            19,348
            
            
            13.35
            
            
            
            13,941
            
            
            10.60
            
            
            
            10,867
            
            
            8.87
            
            
            
            18,180
            
            
            15.47
            
            
            
            21,740
            
            
            18.92Multi-family
            
            
            582
            
            
            0.40
            
            
            
            1,568
            
            
            1.19
            
            
            
            4,674
            
            
            3.81
            
            
            
            1,478
            
            
            1.26
            
            
            
            1,556
            
            
            1.36Non-residential
            
            
            3,459
            
            
            2.38
            
            
            
            2,823
            
            
            2.15
            
            
            
            3,191
            
            
            2.61
            
            
            
            2,606
            
            
            2.22
            
            
            
            1,880
            
            
            1.63Construction
            
            
            6,737
            
            
            4.65
            
            
            
            1,560
            
            
            1.19
            
            
            
            477
            
            
            0.39
            
            
            
            1,524
            
            
            1.30
            
            
            
            2,042
            
            
            1.78Land
            
            
            6,014
            
            
            4.15
            
            
            
            4,223
            
            
            3.22
            
            
            
            3,999
            
            
            3.26
            
            
            
            4,676
            
            
            3.98
            
            
            
            936
            
            
            0.82Total
                real estate loans
            
            
            36,140
            
            
            24.93
            
            
            
            24,115
            
            
            18.35
            
            
            
            23,208
            
            
            18.94
            
            
            
            28,464
            
            
            24.23
            
            
            
            28,154
            
            
            24.51Consumer
            
            
            6,693
            
            
            4.62
            
            
            
            5,330
            
            
            4.05
            
            
            
            5,040
            
            
            4.11
            
            
            
            4,521
            
            
            3.84
            
            
            
            3,711
            
            
            3.23Commercial
                business
            
            
            726
            
            
            0.50
            
            
            
            975
            
            
            0.74
            
            
            
            1,722
            
            
            1.41
            
            
            
            2,233
            
            
            1.90
            
            
            
            3,167
            
            
            2.76Total
                adjustable-rate loans
            
            
            43,559
            
            
            30.05
            
            
            
            30,420
            
            
            23.14
            
            
            
            29,970
            
            
            24.46
            
            
            
            35,218
            
            
            29.97
            
            
            
            35,032
            
            
            30.50Total
                loans receivable
            
            
            144,975
            
            
            100.00
            %
            
            
            131,439
            
            
            100.00
            %
            
            
            122,523
            
            
            100.00
            %
            
            
            117,508
            
            
            100.00
            %
            
            
            114,909
            
            
            100.00
            %Less:Loans
                in process
            
            
            4,182
            
            
            
            
            
            
            1,413
            
            
            
            
            
            
            1,359
            
            
            
            
            
            
            2,505
            
            
            
            
            
            
            1,698Net
                deferred yield adjustments
            
            
            9
            
            
            
            
            
            
            (32
            )
            
            
            
            
            
            (78
            )
            
            
            
            
            
            (153
            )
            
            
            
            
            
            (68
            )Allowance
                for losses
            
            
            749
            
            
            
            
            
            
            716
            
            
            
            
            
            
            1,033
            
            
            
            
            
            
            838
            
            
            
            
            
            
            766Total
                loans receivable, net
            
            $
            140,035
            
            
            
            
            
            $
            129,342
            
            
            
            
            
            $
            120,209
            
            
            
            
            
            $
            114,318
            
            
            
            
            
            $
            112,513


5


The
      following table illustrates the interest rate sensitivity of the loan portfolio
      at December 31, 2005. Mortgages which have adjustable or renegotiable interest
      rates are shown as maturing in the period during which the contract requires
      the
      final payment to be made. This is shown without regard to interest rate
      adjustments. The table does not reflect the effects of possible prepayments
      or
      enforcement of due-on-sale clauses.




Real
                  EstateOne-to
                  Four Family
              
              
              Non-residential
                  and multi-family
              
              
              Construction
              
              
              LandAmount
              
              Weighted
                  Average Rate
              
              
              Amount
              
              Weighted
                  Average Rate
              
              
              Amount
              
              Weighted
                  Average Rate
              
              
              Amount
              
              Weighted
                  Average Rate(Dollars
                in Thousands)Due
                  During the Period Ending December 31,2006
              
              $
              4,294
              
              
              6.82
              %
              
              $
              4,699
              
              
              6.99
              %
              
              $
              6,737
              
              
              7.54
              %
              
              $
              4,324
              
              
              8.02
              %2007
                  to 2008
              
              
              5,570
              
              
              6.27
              
              
              
              4,969
              
              
              6.63
              
              
              
              —
              
              
              —
              
              
              
              2,087
              
              
              7.242009
                  to 2010
              
              
              6,975
              
              
              6.16
              
              
              
              8,377
              
              
              6.44
              
              
              
              —
              
              
              —
              
              
              
              303
              
              
              6.772011
                  to 2015
              
              
              12,909
              
              
              6.01
              
              
              
              5,884
              
              
              6.56
              
              
              
              —
              
              
              —
              
              
              
              35
              
              
              5.872016
                  and following
              
              
              62,881
              
              
              5.81
              
              
              
              2,138
              
              
              6.67
              
              
              
              —
              
              
              —
              
              
              
              132
              
              
              6.54Total
              
              $
              92,809
              
              
              5.94
              %
              
              $
              126,067
              
              
              6.62
              %
              
              $
              6,737
              
              
              7.54
              %
              
              $
              6,891
              
              
              7.69
              %
  Consumer
              
              
              Commercial
                  Business
              
              
              TotalAmount
              
              Weighted
                  Average Rate
              
              
              Amount
              
              Weighted
                  Average Rate
              
              
              Amount
              
              Weighted
                  Average Rate(Dollars
                in Thousands)Due
                  During the Period Ending December 31,2006
              
              $
              7,122
              
              
              8.36
              %
              
              $
              505
              
              
              8.13
              %
              
              $
              27,681
              
              
              7.63
              %2007
                  to 2008
              
              
              986
              
              
              6.87
              
              
              
              1,430
              
              
              5.57
              
              
              
              15,232
              
              
              6.492009
                  to 2010
              
              
              457
              
              
              6.07
              
              
              
              917
              
              
              7.74
              
              
              
              17,029
              
              
              6.392011
                  to 2015
              
              
              413
              
              
              6.15
              
              
              
              613
              
              
              7.74
              
              
              
              19,854
              
              
              6.232016
                  and following
              
              
              28
              
              
              9.00
              
              
              
              —
              
              
              —
              
              
              
              65,179
              
              
              5.84Total
              
              $
              9,006
              
              
              7.98
              %
              
              $
              3,465
              
              
              6.97
              %
              
              $
              144,975
              
              
              6.34
              %


As
      of
      December 31, 2005, the total amount of loans due after December 31, 2006 which
      had predetermined interest rates was $94.9 million. The total amount of loans
      due after such dates which have floating or adjustable interest rates is $22.4
      million.





6




Under
      federal law, the aggregate amount of loans that we are permitted to make to
      any
      one borrower is generally limited to 15% of unimpaired capital and surplus
      (25%
      if the security for such loan has a “readily marketable” value or 30% for
      certain residential development loans). At December 31, 2005, our regulatory
      loan-to-one borrower limit was approximately $2.3 million. On the same date,
      we
      had no borrowers with outstanding balances in excess of this amount. As of
      December 31, 2005, the largest dollar amount of indebtedness to one borrower
      or
      group of related borrowers was a $1.4 million loan on a restaurant located
      in
      Northern Illinois. On the same date, this loan was performing in accordance
      with
      its terms.




All
      of
      our lending is subject to our written underwriting standards and to loan
      origination procedures. Decisions on loan applications are made on the basis
      of
      detailed applications and property valuations by qualified independent
      appraisers.




Loans
      generated by the Bank are approved by Bank officers dependent on their
      individual level of approval authority and based on the type of collateral
      securing the loan under consideration. Officers may join together to approve
      individual loans in excess of their individual authority. Loans greater than
      $1
      million must be approved by the Board of Directors after review and preliminary
      approval by officers. The loan applications are designed primarily to determine
      the borrower’s ability to repay and the more significant items on the
      application are verified through use of credit reports, financial statements,
      tax returns and/or confirmations.




Generally,
      we require title insurance on our mortgage loans as well as fire and extended
      coverage casualty insurance in amounts at least equal to the principal amount
      of
      the loan or the value of improvements on the property, depending on the type
      of
      loan. We also require flood insurance to protect the property securing our
      interest when the property is located in a flood plain or otherwise deemed
      prudent by management.




*One-
      to Four-Family Residential Real Estate Lending* .
      The
      cornerstone of our lending program is the origination of long-term permanent
      loans secured by mortgages on owner-occupied one- to four-family residences.
      At
      December 31, 2005, $92.8 million, or 64.02% of our loan portfolio consisted
      of
      permanent loans on one- to four-family residences. At that date, the average
      outstanding residential loan balance was $103,000 and the largest outstanding
      residential loan had a principal balance of $876,000. Virtually all of the
      residential loans we originate are secured by properties located in our market
      area. However, we have purchased a number of one-to-four family residential
      loans secured by properties located out of our market area in the last three
      years. See “- Originations, Sales and Purchases of Loans.”




We
      originate 15-30-year fixed rate loans secured by one- to four-family residential
      real estate as a result of continued consumer demand. We monitor the volume
      and
      rate of our fixed rate loans to ensure compliance with our asset/liability
      management policy. At December 31, 2005, we had, exclusive of balloon loans,
      $9.3 million of fixed-rate residential loans with less than 10 years to
      contractual maturity, $19.9 million of fixed-rate residential loans with
      remaining contractual maturities between 10 and 20 years and $26.8 million
      of
      fixed-rate residential loans with remaining contractual maturities in excess
      of
      21 years in its portfolio. See “Management’s Discussion and Analysis of
      Financial Condition and Results of Operations - Asset/Liability Management” in
      our Annual Report to Stockholders for the year ended December 31, 2005 attached
      hereto as Exhibit 13 (the “Annual Report”).




In
      addition, we originate (subject to consumer demand) and acquire adjustable
      rate
      mortgage and balloon loans to reduce our exposure to changes in interest rates.
      We retain and service all adjustable rate mortgages and balloon loans we
      originate. We make such loans at rates, terms and points determined in
      accordance with market and competitive factors. Our current one- to four-family
      residential adjustable rate mortgages are fully amortizing loans with
      contractual maturities of up to 30 years. The interest rates on the adjustable
      rate mortgages we originate are generally subject to adjustment at three-year
      intervals based on a margin over the Three Year Treasury Securities Constant
      Maturity Index. Decreases or increases in the interest rate of our adjustable
      rate mortgages are generally limited to 5% above or below the initial interest
      rate over the life of the loan. Our adjustable rate mortgages are not
      convertible into fixed-rate loans, do not contain prepayment penalties and
      do
      not produce negative amortization. Adjustable rate mortgage loans may be assumed
      by other lenders provided home buyers meet our underwriting standards and the
      applicable fees are paid. At December 31, 2005, the total balance of one- to
      four-family adjustable rate mortgages was $19.3 million.




7


Our
      balloon loans generally carry three to five year terms and 25 year amortization
      schedules. On December 31, 2005, we had $17.5 million of one -to-four family
      balloon loans.




We
      evaluate both the borrower’s ability to make principal, interest and escrow
      payments and the value of the property that will secure the loan. We originate
      residential mortgage loans with loan-to-value ratios up to 95%. On mortgage
      loans exceeding an 80% loan-to-value ratio at the time of origination, we will
      generally require private mortgage insurance in an amount intended to reduce
      our
      exposure to 80% or less of the appraised value of the underlying
      property.




As
      of
      December 31, 2005, we had 17 one- to four-family residential mortgage loans
      having an aggregate balance of $9.6 million with current balances in excess
      of
      $417,000, the 2005 Freddie Mac maximum. Our delinquency experience on our loans
      in excess of this maximum has been similar to our experience on other
      residential loans.




Our
      residential mortgage loans customarily include due-on-sale clauses giving us
      the
      right to declare the loan immediately due and payable in the event that, among
      other things, the borrower sells or otherwise disposes of the property subject
      to the mortgage and the loan is not repaid.




*Non-Residential
      and Multi-Family Real Estate Lending* .
      We both
      originate and purchase permanent non-residential and multi-family real estate
      loans. We have increased these types of loans in recent years in accordance
      with
      our asset/liability management policy and favorable market conditions. Most
      of
      our originated non-residential and multi-family loans are located in our primary
      market area while our purchased loans are located throughout the United States.
      During fiscal 2005, we purchased $2.0 million of multi-family loans in our
      primary market area. See “Management’s Discussion and Analysis of Financial
      Condition and Results of Operations - Asset/Liability Management” in the Annual
      Report. At December 31, 2005, we had $26.1 million in non-residential and
      multi-family real estate loans, representing 17.98% of the gross loan
      portfolio **.**




The
      multi-family loan portfolio includes loans secured by five or more unit
      residential buildings located primarily in our primary market area. Our
      non-residential real estate loan portfolio consists of loans on a variety of
      non-residential properties including restaurants, hotel/motels, retail
      facilities, and small office buildings.




We
      originate and purchase both adjustable-and fixed-rate non-residential and
      multi-family real estate loans. Rates on our adjustable-rate non-residential
      and
      multi-family real estate loans generally adjust in a manner consistent with
      our
      one- to four-family residential adjustable rate mortgages. Non-residential
      and
      multi-family real estate loans are generally underwritten in amounts of up
      to
      80% of the appraised value of the underlying property and normally have terms
      up
      to 25 years.




Appraisals
      on properties securing non-residential and multi-family real estate loans
      originated by us are performed by a qualified independent appraiser at the
      time
      the loan is made. In addition, our underwriting procedures generally require
      verification of the borrower’s credit history, income and financial statements,
      banking relationships, accompanying analysis references and income/debt coverage
      projections for the property. Personal guarantees are generally obtained for
      non-residential and multi-family real estate loans.




8


The
      table
      below sets forth by type of security property the estimated number, loan amount
      and outstanding balance of our non-residential and multi-family real estate
      loans at December 31, 2005.




**Number
                of**
              **Loans**
            
            **Original**
              **Loan
                Amount**
            
            **Outstanding**
              **Principal**
              **Balance**(Dollars
                in Thousands)Multi-family
            
            
            23
            
            $
            9,664
            
            $
            8,956Office
            
            
            6
            
            
            2,408
            
            
            2,140Retail
            
            
            8
            
            
            4,650
            
            
            4,136Commercial
                building
            
            
            14
            
            
            3,775
            
            
            3,022Restaurants
            
            
            9
            
            
            3,567
            
            
            3,299Hotel
            
            
            6
            
            
            3,144
            
            
            2,438Other
            
            
            10
            
            
            2,296
            
            
            2,076Total
            
            
            76
            
            $
            29,504
            
            $
            26,067




At
      December 31, 2005, our largest non-residential and largest multi-family real
      estate loans totaled $1.0 million and $1.4 million, and consisted of a loan
      on a
      28 unit town home complex located in Northwest Indiana and a loan on a
      restaurant located in Northern Illinois, respectively. As of December 31, 2005,
      both these loans were performing in accordance with their terms.




Non-residential
      and multi-family real estate loans generally present a higher level of risk
      than
      loans secured by one- to four-family residences. This greater risk is due to
      several factors, including the concentration of principal in a limited number
      of
      loans and borrowers, the effects of general economic conditions on income
      producing properties and the increased difficulty of evaluating and monitoring
      these types of loans. Furthermore, the repayment of loans secured by
      non-residential and multi-family residential real estate is typically dependent
      upon the successful operation of the related real estate project. If the cash
      flow from the project is reduced (for example, if leases are not obtained or
      renewed), the borrower’s ability to repay the loan may be impaired. At December
      31, 2005, we had $707,000 of non-residential and multi-family loans which were
      90 days or more delinquent.




*Construction
      Lending* .
      We make
      construction loans to individuals for the construction of their primary or
      secondary residences and loans to builders or developers for the construction
      of
      single-family and multi-family properties.




Loans
      to
      individuals for the construction of their residences typically run for six
      months. The borrower pays interest only during the construction period.
      Residential construction loans are generally underwritten pursuant to the same
      guidelines used for originating permanent residential loans. Subject to future
      market conditions, we intend to continue construction lending activities to
      persons intending to be owner occupants.




We
      also
      make loans to builders and developers “on speculation” to finance the
      construction of residential property where an independent appraisal shows that
      a
      ready market exists for the property as completed. Such loans generally have
      adjustable interest rates based upon prime with terms from six months to one
      year. The proceeds of the loan are advanced during construction based upon
      the
      percentage of completion as determined by an inspection. The loan amount
      normally does not exceed 80% of projected completed value for homes that have
      been pre-sold to the ultimate occupant. For loans to builders for the
      construction of homes not pre-sold, which may carry a higher risk, the loan-to
      value ratio is generally limited to 75%. Whether we are willing to provide
      permanent takeout financing to the purchaser of the home is determined
      independently of the construction loan by a separate underwriting process.
      At
      December 31, 2005, we had construction loans with outstanding aggregate balances
      of $4.8 million secured by one- to four-family residential property built on
      speculation.




9


We
      also
      occasionally originate construction financing on non-residential and
      multi-family real estate. However, there were no loans of this type outstanding
      as of December 31, 2005. Additionally, we participate with other lenders in
      loans to developers and builders to finance multi-family housing and commercial
      property construction. At December 31, 2005, we were involved in no
      participation construction loans.




Construction
      lending generally affords us an opportunity to receive interest at rates higher
      than those obtainable from residential lending and to receive higher origination
      and other loan fees. In addition, such loans are generally made for relatively
      short terms. Nevertheless, construction lending to persons other than
      owner-occupants is generally considered to involve a higher level of credit
      risk
      than one- to four-family residential lending due to the concentration of
      principal in a limited number of loans and borrowers and the effects of general
      economic conditions on construction projects, real estate developers and
      managers. In addition, the nature of these loans is such that they are more
      difficult to evaluate and monitor. Our risk of loss on a construction loan
      is
      dependent largely upon the accuracy of the initial estimate of the property’s
      value upon completion of the project and the estimated cost (including interest)
      of the project. If the estimate of value proves to be inaccurate, we may be
      confronted, at or prior to the maturity of the loan, with a project with a
      value
      which is insufficient to assure full repayment and/or the possibility of having
      to make substantial investments to complete and sell the project. Because
      defaults in repayment may not occur during the construction period, it may
      be
      difficult to identify problem loans at an early stage. When loan payments become
      due, the cash flow from the property may not be adequate to service the debt.
      In
      such cases, we may be required to modify the terms of the loan.




*Land
      Lending* .
      Land
      loans, which include vacant land and developed lots, are made to various
      builders and developers with whom we have pre-existing relationships. All of
      such loans are secured by land zoned for residential developments and located
      within our market area. Disbursements related to acquisition and development
      land loans are typically based on the construction cost estimate of an
      independent architect or engineer who inspects the project in connection with
      significant disbursement requests. At December 31, 2005, we had $6.9 million
      in
      loans secured by land, representing 4.75% of our entire gross loan portfolio.




On
      occasion, we participate with other lenders in loans to developers and builders
      to finance land acquisition and development. At December 31, 2005, we were
      involved in two out of state land development participation loans with an
      outstanding balance of $2.5 million (includes $781,000 in undisbursed loan
      proceeds).




Land
      lending generally affords us an opportunity to receive interest at rates higher
      than those obtainable from residential lending. In addition, land loans are
      limited to a maximum 75% loan-to-value and are made with adjustable rates of
      interest and for relatively short terms. Nevertheless, land lending is generally
      considered to involve a higher level of credit risk due to the fact that funds
      are advanced upon the security of the land, which is of uncertain value prior
      to
      its development. Because of the uncertainties inherent in estimating land
      development costs as well as the market value on the completed project and
      the
      effects of governmental regulation of real property, it is relatively difficult
      to evaluate accurately the total funds required to complete a development
      project and the related loan-to-value ratio.




As
      of
      December 31, 2005, we had one non-performing land loan. See “Delinquencies and
      Non-Performing Assets.”




*Consumer
      Lending* .
      We
      believe that offering consumer loan products helps to expand the customer base
      and to create stronger ties to the existing customer base. In addition, because
      consumer loans generally have shorter terms to maturity and carry higher rates
      of interest than do residential mortgage loans, they can be valuable
      asset/liability management tools. For these reasons, we have been increasing
      our
      originations of consumer loans. We currently originate substantially all of
      our
      consumer loans in our market area. At December 31, 2005, our consumer loans
      totaled $9.0 million representing 6.21% of the gross loan portfolio.




10


We
      offer
      a variety of secured consumer loans, including home equity lines of credit,
      home
      improvement loans, loans secured by savings deposits and automobile loans.
      Although we primarily originate consumer loans secured by real estate, deposits
      or other collateral, we also make unsecured personal loans.




Our
      home
      equity lines of credit are generally limited to $100,000. We use the same
      underwriting standards for home equity lines of credit as we use for one- to
      four-family residential mortgage loans. Home equity lines of credit are
      originated in amounts which, together with the amount of the first mortgage,
      generally do not exceed 80% of the appraised value of the property securing
      the
      loan. The interest rate for all home equity loans floats at a stated margin
      over
      the prime rate. At December 31, 2005, we had $6.2 million of home equity lines
      of credit and $5.1 million of additional funds committed, but undrawn, under
      such lines.




We
      also
      offer a Visa credit card program. At December 31, 2005, approximately 384 credit
      cards had been issued, with an aggregate outstanding loan balance of $421,000
      and unused credit available of $1.4 million. We presently charge a fixed rate
      on
      interest on credit card loans and no annual membership fee.




The
      terms
      of other types of consumer loans vary according to the type of collateral,
      length of contract, and creditworthiness of the borrower. The underwriting
      standards employed for consumer loans include a determination of the applicant’s
      payment history on other debts and an assessment of the borrower’s ability to
      meet payments on the proposed loan along with his existing obligations. In
      addition to the creditworthiness of the applicant, the underwriting process
      also
      includes a comparison of the value of the security, if any, in relation to
      the
      proposed loan amount. Unsecured personal loans are available to credit worthy
      borrowers for a variety of personal needs.




Consumer
      loans may entail greater risk than residential mortgage loans, particularly
      in
      the case of consumer loans which are unsecured or secured by rapidly depreciable
      assets such as automobiles. In such cases, any repossessed collateral for
      defaulted consumer loans may not provide adequate sources of repayment for
      the
      outstanding loan balances as a result of the greater likelihood of damage,
      loss
      or depreciation. In addition, consumer loan collections are dependent on the
      borrower’s continuing financial stability, and thus are more likely to be
      affected by adverse personal circumstances. Furthermore, the application of
      various federal and state laws, including federal and state bankruptcy and
      insolvency laws, may limit the amount which can be recovered on such loans.
      At
      December 31, 2005, $177,000, or approximately 1.97% of the consumer loan
      portfolio, was 60 days or more delinquent. There can be no assurance that
      delinquencies will not increase in the future.




*Commercial
      Business Lending* .
      In
      order to increase the yield and interest rate sensitivity of our loan portfolio
      and to satisfy the demand for financial services in our primary market area,
      we
      actively originate and purchase commercial business loans.




During
      the past five years, we have originated commercial business loans to businesses
      such as small retail operations, small manufacturing concerns and professional
      firms. Also included in commercial business loans as of December 31, 2005 were
      $2.4 million of purchased loans all of which were made to borrowers located
      outside of our market area. Our commercial business loans almost always include
      personal guarantees and are usually, but not always, are at least partially
      secured by business assets, such as accounts receivable, equipment, inventory
      and real estate. However, the collateral securing the loans may depreciate
      over
      time, may be difficult to appraise and may fluctuate in value based on the
      success of the business.




Most
      of
      our commercial business loans have terms ranging from six months to five years
      and carry adjustable interest rates. The underwriting process for commercial
      business loans generally includes consideration of the borrower’s financial
      statements, tax returns, projections of future business operations and
      inspection of the subject collateral, if any.




11


Since
      1995, we have purchased seasoned commercial leases covering various types of
      office/commercial/medical equipment. As of December 31, 2005, the outstanding
      balance on these leases was $1.2 million. In general, the leases are full-payout
      finance leases in which the lease payments effectively repay the lessor for
      the
      purchase price of the equipment, plus an acceptable yield. The selling
      institution continues to service the leases for us and provides limited recourse
      in the event of a default by the lessor. We have purchased these leases because
      they carry relatively high yields and have relatively short terms, consistent
      with our asset/liability management strategy.




The
      following table sets forth the Company’s commercial business loans as of
      December 31, 2005.




TYPE
            
            AMOUNT
            
            PERCENT
                OF PORTFOLIO(Dollars
                in Thousands)Equipment
                leases
            
            $
            2,102
            
            
            60.66
            %Timeshare
                leases
            
            
            316
            
            
            9.12Accounts
                receivable
            
            
            274
            
            
            7.91Other
            
            $
            773
            
            
            22.31Total
            
            $
            3,465
            
            
            100.00
            %




Unlike
      residential mortgage loans, which generally are made on the basis of the
      borrower’s ability to make repayment, and which are secured by real property
      whose value tends to be more easily ascertainable, commercial business loans
      are
      generally of higher risk and typically are made on the basis of the borrower’s
      ability to make repayment from the cash flow of the borrower’s business. As a
      result, the availability of funds for the repayment of commercial business
      loans
      may be substantially dependent on the success of the business itself (which,
      in
      turn, may be dependent upon the general economic environment). For these
      reasons, commercial real estate loans generally carry a higher degree of credit
      risk than the residential loans. At December 31, 2005, the Company had no non
      performing commercial business loans.




The
      Bank
      also invests in commercial accounts receivables which possess similar investment
      characteristics to commercial business loans. See “Accounts Receivable
      Investments.”




**Originations,
      Purchases and Sales of Loans**




We
      originate real estate and other loans through marketing efforts, our customer
      base, walk-in customers and referrals from real estate brokers and builders.
      In
      addition, we occasionally utilize the services of mortgage brokers. We do not
      pay commission to employees for loan organizations. ****




We
      regularly purchase loans from third parties to supplement loan production.
      In
      particular, we may purchase loans of a type which are not available or available
      with as favorable terms in our own market area. We generally use the same
      underwriting standards in evaluating loan purchases as we do in originating
      loans. We will continue to evaluate loan purchase opportunities as they arise
      and make purchases in the future depending on market conditions. At December
      31,
      2005, approximately $36.2 million of our loan portfolio was serviced by others
      and we did not service any loans for others.




Our
      ability to originate large dollar volumes of real estate loans may be
      substantially reduced or restricted in periods of rising interest rates, with
      a
      resultant decrease in related fee income and operating earnings.




12


The
      following table shows our loan origination, purchase, sale and repayment
      activities for the periods indicated.




Year
                Ending December 31,2005
            
            2004
            
            2003(In
                Thousands)Originations
                by type:Adjustable
                rate:Real
                estate - one-to four-family
            
            $
            2,072
            
            $
            1,397
            
            $
            505-multi
                family
            
            
            —
            
            
            —
            
            
            395-non-residential
            
            
            568
            
            
            400
            
            
            735-construction
            
            
            5,021
            
            
            2,096
            
            
            727-land
            
            
            1,218
            
            
            1,697
            
            
            3,172Non-real
                estate-consumer
            
            
            9,073
            
            
            7,229
            
            
            6,200-commercial
                business
            
            
            980
            
            
            1,121
            
            
            245Total
                adjustable-rate
            
            
            18,932
            
            
            13,940
            
            
            11,979Fixed
                rate:Real
                estate - one-to four-family
            
            
            17,697
            
            
            12,458
            
            
            19,988-multi
                family
            
            
            3,464
            
            
            1,076
            
            
            1,527-non-residential
            
            
            682
            
            
            4,214
            
            
            2,620-construction
            
            
            386
            
            
            1,337
            
            
            872-land
            
            
            369
            
            
            524
            
            
            328Non-real
                estate-consumer
            
            
            1,693
            
            
            1,921
            
            
            2,576-commercial
                business
            
            
            872
            
            
            102
            
            
            1,214Total
                fixed-rate
            
            
            25,163
            
            
            21,632
            
            
            29,125Total
                loans originated
            
            
            44,095
            
            
            35,572
            
            
            41,104Purchases:Real
                estate - one-to four-family
            
            
            3,949
            
            
            11,576
            (1)
            
            1,484-multi
                family
            
            
            1,987
            
            
            —
            
            
            6,232
            (2)-non-residential
            
            
            —
            
            
            1,763
            
            
            1,282-construction
            
            
            1,118
            
            
            —
            
            
            750-land
            
            
            2,500Non-real
                estate--commercial business
            
            
            2,701
            
            
            —
            
            
            —Total
                loans purchased
            
            
            12,255
            
            
            13,339
            
            
            9,748Total
                additions
            
            
            56,350
            
            
            48,911
            
            
            50,852Principal
                repayments
            
            
            41,927
            
            
            39,058
            
            
            45,755Net
                before other items
            
            
            14,423
            
            
            9,853
            
            
            5,097Increase
                (decrease) in other items, net
            
            
            (3,730
            )
            
            (720
            )
            
            794Net
                increase
            
            $
            10,693
            
            $
            9,133
            
            $
            5,891







(1)  Includes
      $6.1 million of adjustable rate, one- to four- family mortgage
      loans.


(2)  Includes
      $6.1 million of out of state loans acquired from same lender.


13


**Delinquencies
      and Non-Performing Assets**




*Delinquency
      Procedures.* When a
      borrower fails to make a required payment on a loan, we attempt to cause the
      delinquency to be cured by contacting the borrower. In the case of loans, a
      late
      notice is sent on all loans over 30 days delinquent. Another late notice along
      with any required demand letters as set forth in the loan contract are sent
      60
      days after the due date. Additional written and verbal contacts are made with
      the borrower between 45 and 90 days after the due date.




If
      the
      delinquency is not cured by the 90th day, the customer is normally provided
      10
      days written notice that the account will be referred to counsel for collection
      and foreclosure, if necessary. A drive-by appraisal is normally obtained at
      this
      time and a title search is ordered. A good faith effort by the borrower at
      this
      time will defer foreclosure for a reasonable length of time depending on
      individual circumstances. We may agree to accept a deed in lieu of foreclosure.
      If it becomes necessary to foreclose, the property is sold at public sale and
      we
      may bid on the property to protect its interest. The decision to foreclose
      is
      made by the Senior Loan Officer after discussion with the members of the Loan
      Committee.




Consumer
      loans are charged off if they remain delinquent for 120 days unless the borrower
      and lender agree on a payment plan. If terms of the plan are not met, they
      are
      then subject to charge off. Our procedure for repossession and sale of consumer
      collateral are subject to various requirements under Indiana consumer protection
      laws.




When
      we
      acquire real estate as a result of foreclosure or by deed in lieu of foreclosure
      it is classified real estate owned until it is sold. The real estate is recorded
      at the lower of cost or estimated fair value, less estimated selling costs,
      at
      the date of acquisition, and any write-down resulting therefrom is charged
      to
      the allowance for loan losses. Subsequent decreases in the value of the property
      are charged to operations through the creation of a valuation allowance. After
      acquisition, all costs incurred in maintaining the property are expensed. Costs
      relating to the development and improvement of the property, however, are
      capitalized to the extent of estimated fair value less estimated costs to
      sell.




*Loan
      Delinquencies* .
      The
      following table sets forth loan delinquencies by type, by amount and by
      percentage of type at December 31, 2005.




Loans
                Delinquent For:60-89
                Days
            
            
            90
                Days and Over
            
            
            Total
                Delinquent LoansNumber
            
            Amount
            
            Percent
                of Loan Category
            
            
            Number
            
            Amount
            
            Percent
                of Loan Category
            
            
            Number
            
            Amount
            
            Percent
                of Loan Category(Dollars
                in Thousands)Real
                Estate:One-
                to four-family
            
            
            4
            
            $
            397
            
            
            0.43
            %
            
            
            8
            
            $
            527
            
            
            0.67
            %
            
            
            12
            
            $
            924
            
            
            1.00
            %Non-residential
            
            
            —
            
            
            —
            
            
            —
            
            
            
            2
            
            
            707
            
            
            4.13
            
            
            
            2
            
            
            707
            
            
            4.13Land
            
            
            1
            
            
            14
            
            
            0.20
            
            
            
            1
            
            
            144
            
            
            2.09
            
            
            
            2
            
            
            158
            
            
            2.29Consumer
            
            
            4
            
            
            81
            
            
            0.90
            
            
            
            13
            
            
            96
            
            
            1.07
            
            
            
            17
            
            
            177
            
            
            1.97Commercial
                business
            
            
            3
            
            
            63
            
            
            1.81
            
            
            
            —
            
            
            —
            
            
            —
            
            
            
            3
            
            
            63
            
            
            1.81Total
            
            
            12
            
            $
            555
            
            
            0.38
            %
            
            
            24
            
            $
            1,474
            
            
            1.02
            %
            
            
            36
            
            $
            2,029
            
            
            1.40
            %





14


*Classified
      Assets* .
      Federal
      regulations provide for the classification of loans and other assets, such
      as
      debt and equity securities considered by the Office of Thrift Supervision (the
      “OTS”) to be of lesser quality, as “substandard,” “doubtful” or “loss.” An asset
      is considered “substandard” if it is inadequately protected by the current net
      worth and paying capacity of the obligor or of the collateral pledged, if any.
      “Substandard” assets include those characterized by the “distinct possibility”
that the insured institution will sustain “some loss” if the deficiencies are
      not corrected. Assets classified as “doubtful” have all of the weaknesses
      inherent in those classified “substandard,” with the added characteristic that
      the weaknesses present make “collection or liquidation in full,” on the basis of
      currently existing facts, conditions, and values, “highly questionable and
      improbable.” Assets classified as “loss” are those considered “uncollectible”
and of such little value that their continuance as assets without the
      establishment of a specific loss reserve is not warranted. Assets which do
      not
      currently expose the insured institution to sufficient risk to warrant
      classification in one of the aforementioned categories but possess weaknesses
      are placed on a “watch list” by our management.




When
      an
      insured institution classifies problem assets as either substandard or doubtful,
      it may establish general allowances in an amount deemed prudent by management
      to
      cover probable accrued losses. General allowances represent loss allowances
      which have been established to cover probable accrued losses associated with
      lending activities, but which, unlike specific allowances, have not been
      allocated to particular problem assets. When an insured institution classifies
      problem assets as “loss,” it is required either to establish a specific
      allowance for losses equal to 100% of that portion of the asset so classified
      or
      to charge-off such amount. An institution’s determination as to the
      classification of its assets and the amount of its valuation allowances is
      subject to review by the regulatory authorities, who may order the establishment
      of additional general or specific loss allowances.




In
      connection with the filing of our periodic reports with the OTS and in
      accordance with our classification of assets policy, we regularly review the
      problem loans in our portfolio to determine whether any loans require
      classification in accordance with applicable regulations. On the basis of this
      review of our assets, at December 31, 2005, we had classified the following
      assets:




One-
                to Four-Family
            
            Non
                Residential
            
            Land
            
            Consumer
            
            Real
                Estate Owned One- to Four-Family
            
            Other
                Assets
            
            Total(In
                Thousands)Sub-Standard
            
            $
            706
            
            $
            1,467
            
            $
            144
            
            $
            96
            
            $
            584
            
            $
            48
            
            $
            3,045Doubtful
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —Loss
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —$
            706
            
            $
            1,467
            
            $
            144
            
            $
            96
            
            $
            584
            
            $
            48
            
            $
            3,045







Our
      classified assets consist of the (i) non-performing loans and (ii) loans and
      other assets of concern discussed herein. As of the date hereof, these asset
      classifications are consistent with those of the OTS and the FDIC.




*Non-Performing
      Assets* .
      The
      following table sets forth the amounts and categories of non-performing assets
      in our loan portfolio. Loans are reviewed quarterly and any loan whose
      collectibility is doubtful is placed on non-accrual status. Loans are placed
      on
      non-accrual status when either principal or interest is 90 days or more past
      due, unless, in the judgment of management, the loan is well collateralized
      and
      in the process of collection. Interest accrued and unpaid at the time a loan
      is
      placed on non-accrual status is charged against interest income. Subsequent
      payments are either applied to the outstanding principal balance or recorded
      as
      interest income, depending on the assessment of the ultimate collectibility
      of
      the loan. For all years presented, we have had no troubled debt restructurings
      (which involved forgiving a portion of interest or principal on any loans or
      making loans at a rate materially less than that of market rates). Foreclosed
      assets include assets acquired in settlement of loans. Except as noted, the
      loans and foreclosed asset amounts shown are stated without giving effect to
      the
      specific reserves which have been established against such assets. See “- Loan
      Loss Reserve Analysis.”




15


December
                31,2005
            
            
            2004
            
            
            2003
            
            
            2002
            
            
            2001(Dollars
                in Thousands)Non-accruing
                loans:One-
                to four family
            
            $
            527
            
            
            $
            474
            
            
            $
            544
            
            
            $
            534
            
            
            $
            743Multi-family
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —Non-residential
            
            
            707
            
            
            
            765
            
            
            
            546
            
            
            
            475
            
            
            
            463Land
            
            
            144
            
            
            
            140
            
            
            
            140
            
            
            
            —
            
            
            
            —Consumer
            
            
            96
            
            
            
            84
            
            
            
            105
            
            
            
            62
            
            
            
            49Commercial
                business
            
            
            —
            
            
            
            146
            
            
            
            246
            
            
            
            —
            
            
            
            —Total
            
            
            1,474
            
            
            
            1,609
            
            
            
            1,581
            
            
            
            1,071
            
            
            
            1,255Foreclosed
                assets:One-
                to four family
            
            
            584
            
            
            
            —
            
            
            
            —
            
            
            
            104
            
            
            
            191Multi-family
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —Non-residential
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —Construction
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —Consumer
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —Commercial
                business
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —Total
            
            
            584
            
            
            
            —
            
            
            
            —
            
            
            
            104
            
            
            
            191Other
                assets:Escrow
                advances on non-performing loans
            
            
            48
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —Total
            
            
            48
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —Total
                non-performing assets
            
            $
            2,106
            
            
            $
            1,609
            
            
            $
            1,581
            
            
            $
            1,175
            
            
            $
            1,446Total
                as a percentage of total assets
            
            
            1.24
            %
            
            
            1.02
            %
            
            
            1.08
            %
            
            
            0.79
            %
            
            
            1.02
            %




For
      the
      year ended December 31, 2005, gross interest income which would have been
      recorded had the non-accruing loans been current in accordance with their
      original terms amounted to $97,000.




At
      December 31, 2005, there were no other loans or other assets that are not
      disclosed on the table or discussed above, where known information about the
      possible credit problems of borrowers caused us to have serious doubts as to
      the
      ability of the borrowers to comply with present loan repayment terms and which
      may result in disclosure of such loans in the future.




*Allowance
      for Loan Losses* .
      The
      allowance for loan losses is established through a provision for loan losses
      based on our evaluation of probable losses in our loan portfolio and changes
      in
      the nature and volume of our loan activity. Such evaluation, which includes
      a
      review of all loans for which full collectibility may not be reasonably assured,
      considers among other matters, the estimated fair value of the underlying
      collateral, economic conditions, historical loan loss experience and other
      factors that warrant recognition in providing for an adequate loan allowance.
      Although we believe we use the best information available to make such
      determinations, future adjustments to the allowance may be necessary, and net
      income could be significantly affected if circumstances differ substantially
      from the assumptions used in making the initial determinations. At December
      31,
      2005, we had an allowance for loan losses of $749,000.




16


The
      following table sets forth an analysis of the allowance for loan
      losses.




December
                31,2005
            
            
            2004
            
            
            2003
            
            
            2002
            
            
            2001(Dollars
                in Thousands)Balance
                at beginning of period:
            
            $
            716
            
            
            $
            1,033
            
            
            $
            838
            
            
            $
            766
            
            
            $
            701Charge-offs:One-
                to four-family
            
            
            —
            
            
            
            35
            
            
            
            —
            
            
            
            —
            
            
            
            38Multi-family
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —Non-residential
            
            
            —
            
            
            
            377
            
            
            
            —
            
            
            
            —
            
            
            
            28Construction
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —Consumer
            
            
            36
            
            
            
            38
            
            
            
            18
            
            
            
            32
            
            
            
            29Commercial
                business
            
            
            213
            
            
            
            91
            
            
            
            5
            
            
            
            372
            
            
            
            —Total
                charge offs
            
            
            249
            
            
            
            541
            
            
            
            23
            
            
            
            404
            
            
            
            95Recoveries:One-
                to four family
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —Multi-family
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —Non-residential
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —Construction
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —Consumer
            
            
            7
            
            
            
            1
            
            
            
            4
            
            
            
            3
            
            
            
            8Commercial
                business
            
            
            —
            
            
            
            34
            
            
            
            —
            
            
            
            81
            
            
            
            —Total
                recoveries
            
            
            7
            
            
            
            35
            
            
            
            4
            
            
            
            84
            
            
            
            8Net
                charge-offs
            
            
            (242
            )
            
            
            (506
            )
            
            
            (19
            )
            
            
            (320
            )
            
            
            (87
            )Additions
                charged to operations
            
            
            275
            
            
            
            189
            
            
            
            214
            
            
            
            392
            
            
            
            152Balance
                at end of period
            
            $
            749
            
            
            $
            716
            
            
            $
            1,033
            
            
            $
            838
            
            
            $
            766Ratio
                of net charge-offs during the period to average loans outstanding
                during
                the period
            
            
            0.18
            %
            
            
            0.41
            %
            
            
            0.02
            %
            
            
            0.28
            %
            
            
            0.08
            %Ratio
                of net charge-offs during the period to average non-performing
                assets
            
            
            12.70
            %
            
            
            25.29
            %
            
            
            1.34
            %
            
            
            21.65
            %
            
            
            7.87
            %


17


The
      distribution of the allowance for losses on loans at the dates indicated is
      summarized as follows:




December
                    31,2005
                
                
                2004
                
                
                2003Amount
                    of Loan Loss Allowance
                
                Loan
                    Amounts by Category
                
                Percent
                    of Loans in Each Category to Total Loans
                
                
                Amount
                    of Loan Loss Allowance
                
                Loan
                    Amounts by Category
                
                Percent
                    of Loans in Each Category to Total Loans
                
                
                Amount
                    of Loan Loss Allowance
                
                Loan
                    Amounts by Category
                
                Percent
                    of Loans in Each Category to Total Loans(Dollars
                    in Thousands)One-
                    to four-family
                
                $
                198
                
                $
                92,809
                
                
                64.02
                %
                
                $
                158
                
                $
                87,607
                
                
                66.65
                %
                
                $
                160
                
                $
                78,948
                
                
                64.43
                %Multi-family
                
                
                27
                
                
                8,956
                
                
                6.18
                
                
                
                22
                
                
                7,320
                
                
                5.57
                
                
                
                33
                
                
                11,128
                
                
                9.08Non-residential
                
                
                267
                
                
                17,111
                
                
                11.80
                
                
                
                195
                
                
                18,026
                
                
                13.71
                
                
                
                429
                
                
                14,711
                
                
                12.01Construction
                    and land
                
                
                123
                
                
                13,628
                
                
                9.40
                
                
                
                89
                
                
                8,773
                
                
                6.68
                
                
                
                75
                
                
                6,597
                
                
                5.39Consumer
                
                
                77
                
                
                9,006
                
                
                6.21
                
                
                
                64
                
                
                7,269
                
                
                5.53
                
                
                
                68
                
                
                6,981
                
                
                5.69Commercial
                    business
                
                
                34
                
                
                3,465
                
                
                2.39
                
                
                
                109
                
                
                2,444
                
                
                1.86
                
                
                
                140
                
                
                4,158
                
                
                3.40Unallocated
                
                
                23
                
                
                —
                
                
                —
                
                
                
                79
                
                
                —
                
                
                —
                
                
                
                128
                
                
                —
                
                
                —Total
                
                $
                749
                
                $
                144,975
                
                
                100.00
                %
                
                $
                716
                
                $
                131,439
                
                
                100.00
                %
                
                $
                1,033
                
                $
                122,523
                
                
                100.00
                %
 December
                  31,2002
              
              
              
              2001Amount
                  of Loan Loss Allowance
              
              
              Loan
                  Amounts by Category
              
              
              Percent
                  of Loans in Each Category to Total Loans
              
              
              
              Amount
                  of Loan Loss Allowance
              
              
              Loan
                  Amounts by Category
              
              
              Percent
                  of Loans in Each Category to Total Loans(Dollars
                  in Thousands)One-
                  to four-family
              
              $
              161
              
              $
              81,827
              
              
              69.64
              %
              
              $
              195
              
              $
              82,584
              
              
              71.87
              %Multi-family
              
              
              13
              
              
              4,196
              
              
              3.57
              
              
              
              7
              
              
              3,433
              
              
              2.99Non-residential
              
              
              289
              
              
              11,002
              
              
              9.36
              
              
              
              160
              
              
              10,095
              
              
              8.78Construction
                  and land
              
              
              64
              
              
              7,786
              
              
              6.63
              
              
              
              11
              
              
              4,442
              
              
              3.87Consumer
              
              
              59
              
              
              6,151
              
              
              5.23
              
              
              
              54
              
              
              5,404
              
              
              4.70Commercial
                  business
              
              
              66
              
              
              6,546
              
              
              5.57
              
              
              
              114
              
              
              8,951
              
              
              7.79Unallocated
              
              
              186
              
              
              —
              
              
              —
              
              
              
              225
              
              
              —
              
              
              —Total
              
              $
              838
              
              $
              117,508
              
              
              100.00
              %
              
              $
              766
              
              $
              114,909
              
              
              100.00
              %


18
 **Accounts
      Receivable Investments**




The
      Company purchases through brokers accounts receivable on both a direct and
      indirect basis. These accounts receivable are secured by, among other
      activities, trucking, health care, government contracts, commercial, cleaning,
      architectural services and manufacturing. The Company purchases both individual
      receivables and, to a lesser extent, interests in pools of
      receivables.




The
      purchased accounts receivable are classified as “other assets” by the Company.
      Like commercial business loans, these assets are subject to the risk that the
      debtor is unable to obtain payment on the receivables. The Bank underwrites
      these assets both on the ability of the debtor to pay on the receivables as
      well
      as on the ability of the seller to repurchase the receivables although, under
      the terms of the purchase agreements, the sellers are in many cases not
      obligated to do so. In some cases, the Bank has acquired credit insurance on
      a
      portion of the receivables. See “Note 10 of the Notes to Consolidated Financial
      Statements.”




At
      December 31, 2005 and 2004, the Company owned $2.8 million and $1.0 million,
      respectively, of accounts receivable and interests in pools of receivables.
      In
      addition, on December 31, 2005, the Company had $292,000 of loans classified
      by
      the Bank as non-residential loans which resulted from the restructuring of
      a
      loan originally secured by accounts receivable which restructuring included
      the
      Bank acquiring additional collateral in the form of liens on
      both-non-residential and residential real estate in addition to those same
      receivables.




**Investment
      Activities**




In
      support of our asset/liability management policy, most of our investments have
      historically consisted of U.S. Government and agency securities with maturities
      of five years or less, mortgage backed securities and short term assets. We
      also
      invest, to a limited degree, in municipal securities, mutual funds and equity
      securities of other financial companies. At December 31, 2005, we did not own
      any securities of a single issuer which exceeded 10% of our retained earnings,
      other than U.S. government or federal agency obligations. See “Management’s
      Discussion and Analysis of Financial Condition and Results of Operations -
      Liquidity and Capital Resources” in the Annual Report.




*Investment
      Securities* .
      At
      December 31, 2005, investment securities totaled $5.3million, or 3.12% of total
      assets. Included in this amount is a $1.8 million investment in Federal Home
      Loan Bank (“FHLB”) stock which is required for membership in the FHLB of
      Indianapolis. It is our general policy to purchase securities which are U.S.
      Government securities or federal agency obligations or other issues that are
      rated investment grade or have credit enhancements. At December 31, 2005, the
      average term to maturity or repricing of the investment portfolio was 2.6 years.




19


The
      following table sets forth the composition of our investment securities at
      the
      dates indicated.





December
                  31,2005
              
              
              2004
              
              
              2003Carry
                  Value
              
              %
                  of Total
              
              
              Carry
                  Value
              
              %
                  of Total
              
              
              Carry
                  Value
              
              %
                  of Total(Dollars
                  in Thousands)Interest-bearing
                  deposits
              
              $
              4,376
              
              
              
              
              
              $
              4,424
              
              
              
              
              
              $
              3,660Investment
                  securities available for sale:U.S.
                  government securities
              
              
              3,004
              
              
              85.42
              %
              
              
              2,419
              
              
              77.63
              %
              
              
              1,265
              
              
              47.82
              %Municipal
                  obligations
              
              
              —
              
              
              —
              
              
              
              —
              
              
              —
              
              
              
              —
              
              
              —Corporate
                  debt securities
              
              
              —
              
              
              —
              
              
              
              —
              
              
              —
              
              
              
              703
              
              
              26.58Government
                  securities mutual fund
              
              
              184
              
              
              5.23
              
              
              
              182
              
              
              5.84
              
              
              
              179
              
              
              6.77Total
                  investments available for sale
              
              
              3,188
              
              
              90.65
              
              
              
              2,601
              
              
              83.47
              
              
              
              2,147
              
              
              81.17Trading
                  Securities:Common
                  stock of other financial institutions
              
              
              329
              
              
              9.35
              
              
              
              515
              
              
              16.53
              
              
              
              498
              
              
              18.83Corporate
                  debt securities
              
              
              —
              
              
              —
              
              
              
              —
              
              
              —
              
              
              
              —
              
              
              —Total
                  trading securities
              
              
              329
              
              
              9.35
              
              
              
              515
              
              
              16.53
              
              
              
              498
              
              
              18.83Total
                  investment securities
              
              $
              3,517
              
              
              100.00
              %
              
              $
              3,116
              
              
              100.00
              %
              
              $
              2,645
              
              
              100.00
              %Average
                  remaining life of debt investment Securities
              
              
              2.6
                  years
              
              
              
              2.7
                  years
              
              
              
              2.2
                  yearsStock
                  in FHLB of Indianapolis
              
              $
              1,803
              
              
              
              
              
              $
              1,765
              
              
              
              
              
              $
              1,687




The
      composition and maturities of the investment securities portfolio, excluding
      FHLB stock, as of December 31, 2005 are indicated in the following
      table.




Less
                Than
              1
                Year
            
            
            1
                to 5
              Years
            
            
            5
                to 10
              Years
            
            
            Over
              10
                Years
            
            
            Total
                Investment SecuritiesCarry
                Value
            
            
            Carry
                Value
            
            
            Carry
                Value
            
            
            Carry
                Value
            
            
            Carry
                Value
            
            
            Fair
                Value(Dollars
                in Thousands)U.S.
                government securities
            
            $
            494
            
            
            $
            1,998
            
            
            $
            512
            
            
            $
            —
            
            
            $
            3,004
            
            
            $
            3,004Marketable
                equity securities:Government
                securities mutual fund(1)
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            184
            
            
            
            184
            
            
            
            184Common
                stock of other financial
              institutions(1)
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            329
            
            
            
            329
            
            
            
            329Total
            
            $
            494
            
            
            $
            1,998
            
            
            $
            512
            
            
            $
            513
            
            
            $
            3,517
            
            
            $
            3,517Weighted
                average yield
            
            
            3.00
            %
            
            
            4.90
            %
            
            
            6.23
            %
            
            
            2.74
            %
            
            
            4.51
            %


_


(1)  Marketable
        equity securities with no stated maturity are included in the “over 10 years”
category.


20


*Mortgage-Backed
      Securities* .
      We
      purchase mortgage-backed securities from time to time to supplement residential
      loan production. The type of securities purchased is based upon our
      asset/liability management strategy and balance sheet objectives. See
“Management’s Discussion and Analysis of Financial Condition and Results of
      Operations - Asset/Liability Management” in our Annual Report to Shareholders.
      Our mortgage-backed securities are held in the available for sale portfolio
      in
      order to retain investment flexibility and accordingly are included in our
      financial statements at fair value.




All
      of
      our mortgage-backed securities at December 31, 2005, are backed by federal
      agencies or government corporations. Accordingly, we believe that the
      mortgage-backed securities are generally resistant to credit
      problems.




The
      following table sets forth the composition of our mortgage-backed securities
      at
      the dates indicated.




December
                31,2005
            
            
            2004
            
            
            2003Carry
                Value
            
            %
                of Total
            
            
            Carry
                Value
            
            %
                of Total
            
            
            Carry
                Value
            
            %
                of Total(Dollars
                in Thousands)Mortgage-backed
                securities available for sale:Ginnie
                Mae
            
            $
            54
            
            
            3.25
            %
            
            $
            92
            
            
            4.02
            %
            
            $
            174
            
            
            5.51
            %Fannie
                Mae
            
            
            607
            
            
            36.48
            
            
            
            880
            
            
            38.50
            
            
            
            1,234
            
            
            39.11Freddie
                Mae
            
            
            756
            
            
            45.43
            
            
            
            1,064
            
            
            46.54
            
            
            
            1,501
            
            
            47.58Collateralized
                mortgage obligation availablefor
                sale:FNMA
            
            $
            247
            
            
            14.84
            
            
            
            250
            
            
            10.94
            
            
            
            246
            
            
            7.80Total
                mortgage-backed securities
            
            $
            1,664
            
            
            100.00
            %
            
            $
            2,286
            
            
            100.00
            %
            
            $
            3,155
            
            
            100.00
            %




The
      following table shows mortgage-backed and related securities, purchase, sale
      and
      repayment activities for the periods indicated.




Year
                Ended December 31,2005
            
            2004
            
            2003(Dollars
                in Thousands)Purchases:Adjustable-rate
            
            $
            —
            
            $
            —
            
            $
            —Fixed-rate
            
            
            —
            
            
            —
            
            
            2,258Total
                purchases
            
            
            —
            
            
            —
            
            
            2,258Sales
                and Repayments:Total
                sales
            
            
            2
            
            
            —
            
            
            —Principal
                repayments
            
            
            581
            
            
            802
            
            
            1,732Total
                reductions
            
            
            (583
            )
            
            (802
            )
            
            (1,732
            )Increase
                (decrease) in other items, net
            
            
            (39
            )
            
            (67
            )
            
            (14
            )Net
                increase (decrease)
            
            $
            (622
            )
            $
            (869
            )
            $
            512


21


The
      following table sets forth the contractual maturities of our mortgage-backed
      securities at December 31, 2005. These securities are anticipated to be repaid
      well in advance of their contractual maturities as a result of mortgage loan
      payments. The amounts set forth below represent principal balances only and
      do
      not include premiums, discounts and fair value adjustments.




Due
                in
            
            December
                31, 2005
              Balance
                Outstanding1
                to 5 Years
            
            5
                to 10 Years
            
            10
                to 20 Years
            
            Over
                20 Years
            
            Fixed
            
            Adjustable(Dollars
                in Thousands)Ginnie
                Mae
            
            $
            —
            
            $
            —
            
            $
            —
            
            $
            52
            
            $
            52
            
            $
            —Fannie
                Mae
            
            
            —
            
            
            187
            
            
            16
            
            
            400
            
            
            587
            
            
            16Freddie
                Mae
            
            
            194
            
            
            143
            
            
            363
            
            
            64
            
            
            764
            
            
            —CMO
            
            
            —
            
            
            —
            
            
            —
            
            
            250
            
            
            250
            
            
            —Total
            
            $
            194
            
            $
            330
            
            $
            379
            
            $
            766
            
            $
            1,653
            
            $
            16




**Sources
      of Funds**




Our
      primary sources of funds are deposits, borrowings, amortization and prepayment
      of loan principal, maturities of investment securities, short-term investments
      and funds provided from operations.




*Deposits* .
      American Savings offers a variety of deposit accounts having a wide range of
      interest rates and terms. The deposits consist of passbook accounts, demand
      and
      NOW accounts, and money market and certificate accounts. We rely primarily
      on
      advertising, competitive pricing policies and customer service to attract and
      retain these deposits.




The
      flow
      of deposits is influenced significantly by general economic conditions, changes
      in money market and prevailing interest rates and competition. The variety
      of
      deposits we offer have allowed us to be competitive in obtaining funds and
      to
      respond with flexibility to changes in consumer demand. Like all depository
      institutions, we have become more susceptible to short-term fluctuations in
      deposit flows as customers have become more interest rate conscious. We manage
      the pricing of our deposits in keeping with our asset/liability management,
      profitability and growth objectives. Based on our experience, we believe that
      passbook, demand and NOW accounts are a somewhat more stable sources of deposits
      than certificate deposits. However, our ability to attract and maintain all
      deposits, and the rates paid on these deposits, has been and will continue
      to be
      significantly affected by market conditions.




The
      following table sets forth the savings flows during the periods
      indicated.




Year
                Ending December 31,2005
            
            2004
            
            2003(In
                Thousands)Opening
                balance
            
            $
            115,658
            
            $
            108,334
            
            $
            109,331Deposits
            
            
            274,007
            
            
            248,684
            
            
            233,130Withdrawals
            
            
            (264,429
            )
            
            (243,378
            )
            
            (236,479
            )Interest
                credited
            
            
            2,199
            
            
            2,018
            
            
            2,352Ending
                balance
            
            $
            127,435
            
            $
            115,658
            
            $
            108,334Net
                increase (decrease)
            
            $
            11,777
            
            $
            7,324
            
            $
            (997
            )Percent
                increase (decrease)
            
            
            10.18
            %
            
            6.76
            %
            
            (0.91
            )%




The
      following table sets forth the dollar amount of savings deposits in the various
      types of deposit programs we offer as of the dates indicated.




December
                31,2005
            
            
            2004
            
            
            2003Amount
            
            Percent
                of Total
            
            
            Amount
            
            Percent
                of Total
            
            
            Amount
            
            Percent
                of Total(Dollars
                in Thousands)Transactions
                and Savings Deposits:Commercial
                Demand (0.00%(1))
            
            $
            2,718
            
            
            2.13
            %
            
            $
            3,270
            
            
            2.83
            %
            
            $
            1,853
            
            
            1.71
            %Passbook
                Accounts (1.25%(1))
            
            
            19,515
            
            
            15.32
            
            
            
            21,604
            
            
            18.68
            
            
            
            19,850
            
            
            18.32NOW
                Accounts (0.75%(1))
            
            
            10,158
            
            
            7.97
            
            
            
            9,351
            
            
            8.08
            
            
            
            8,581
            
            
            7.92Money
                Market Accounts (tiered)
            
            
            12,959
            
            
            10.17
            
            
            
            14,880
            
            
            12.87
            
            
            
            14,107
            
            
            13.02Total
                Non-Certificates
            
            
            45,350
            
            
            35.59
            
            
            
            49,105
            
            
            42.46
            
            
            
            44,391
            
            
            40.97Certificates:0.76
                - 2.00%
            
            
            1,184
            
            
            0.93
            
            
            
            15,023
            
            
            12.99
            
            
            
            21,279
            
            
            19.642.01
                - 3.00%
            
            
            21,224
            
            
            16.65
            
            
            
            37,430
            
            
            32.36
            
            
            
            23,108
            
            
            21.333.01
                - 4.00%
            
            
            41,255
            
            
            32.37
            
            
            
            9,871
            
            
            8.53
            
            
            
            11,831
            
            
            10.924.01
                - 5.00%
            
            
            18,422
            
            
            14.46
            
            
            
            3,934
            
            
            3.40
            
            
            
            6,842
            
            
            6.325.01
                - 6.00%
            
            
            —
            
            
            —
            
            
            
            253
            
            
            0.22
            
            
            
            498
            
            
            0.466.01
                - 7.00%
            
            
            —
            
            
            —
            
            
            
            42
            
            
            0.04
            
            
            
            385
            
            
            0.36Total
                Certificates
            
            
            82,085
            
            
            64.41
            
            
            
            66,553
            
            
            57.54
            
            
            
            63,943
            
            
            59.03Total
                Deposits
            
            $
            127,435
            
            
            100.00
            %
            
            $
            115,658
            
            
            100.00
            %
            
            $
            108,334
            
            
            100.00
            %







(1)  Rates
      in
      effect at December 31, 2005.


22




The
      following table shows rate and maturity information for our certificates of
      deposit as of December 31, 2005.




0.76-2.00%
            
            
            2.01-3.00%
            
            
            3.01-4.00%
            
            
            4.01-5.00%
            
            
            5.01-7.00%
            
            
            Total
            
            
            Percent
              of
                Total(Dollars
                in Thousands)Certificate
                account maturing inquarter
                ending:March
                31, 2006
            
            $
            589
            
            
            $
            8,285
            
            
            $
            13,602
            
            
            $
            70
            
            
            $
            —
            
            
            $
            22,546
            
            
            
            27.46
            %June
                30, 2006
            
            
            534
            
            
            
            7,001
            
            
            
            9,829
            
            
            
            135
            
            
            
            —
            
            
            
            17,499
            
            
            
            21.32September
                30, 2006
            
            
            19
            
            
            
            3,566
            
            
            
            3,140
            
            
            
            6,629
            
            
            
            —
            
            
            
            13,354
            
            
            
            16.27December
                31, 2006
            
            
            42
            
            
            
            483
            
            
            
            5,614
            
            
            
            3,111
            
            
            
            —
            
            
            
            9,250
            
            
            
            11.27March
                31, 2007
            
            
            —
            
            
            
            430
            
            
            
            3,578
            
            
            
            5,849
            
            
            
            —
            
            
            
            9,857
            
            
            
            12.01June
                30, 2007
            
            
            —
            
            
            
            677
            
            
            
            3,194
            
            
            
            716
            
            
            
            —
            
            
            
            4,587
            
            
            
            5.59September
                30, 2007
            
            
            —
            
            
            
            509
            
            
            
            990
            
            
            
            1,091
            
            
            
            —
            
            
            
            2,590
            
            
            
            3.16December
                31, 2007
            
            
            —
            
            
            
            45
            
            
            
            160
            
            
            
            123
            
            
            
            —
            
            
            
            328
            
            
            
            0.40March
                31, 2008
            
            
            —
            
            
            
            62
            
            
            
            356
            
            
            
            5
            
            
            
            —
            
            
            
            423
            
            
            
            0.51June
                30, 2008
            
            
            —
            
            
            
            121
            
            
            
            124
            
            
            
            119
            
            
            
            —
            
            
            
            364
            
            
            
            0.44September
                30, 2008
            
            
            —
            
            
            
            —
            
            
            
            207
            
            
            
            —
            
            
            
            —
            
            
            
            207
            
            
            
            0.25December
                31, 2008
            
            
            —
            
            
            
            13
            
            
            
            66
            
            
            
            —
            
            
            
            —
            
            
            
            79
            
            
            
            0.10Thereafter
            
            
            —
            
            
            
            32
            
            
            
            395
            
            
            
            574
            
            
            
            —
            
            
            
            1,001
            
            
            
            1.22Total
            
            $
            1,844
            
            
            $
            21,224
            
            
            $
            41,255
            
            
            $
            18,422
            
            
            $
            —
            
            
            $
            82,805
            
            
            
            100.00
            %Percent
                of total
            
            
            1.44
            %
            
            
            25.86
            %
            
            
            50.26
            %
            
            
            22.44
            %
            
            
            —
            %
            
            
            100.00
            %




The
      following table indicates the amount of our certificates of deposit and other
      deposits by time remaining until maturity as of December 31, 2005.




Maturity3
                Months
              or
                Less
            
            Over
              3
                to 6
              Months
            
            Over
              6
                to 12 Months
            
            Over
              12
                Months
            
            Total(Dollars
                in Thousands)Certificates
                of deposit less than $100,000
            
            $
            17,646
            
            $
            12,803
            
            $
            16,176
            
            $
            15,167
            
            $
            61,792Certificates
                of deposit of $100,000 or more
            
            
            4,900
            
            
            4,696
            
            
            6,428
            
            
            4,269
            
            
            20,293Total
                certificates of deposit
            
            $
            22,546
            
            $
            17,499
            
            $
            22,604
            
            $
            19,436
            
            $
            82,085




*Borrowings* .
      We may
      obtain advances from the Federal Home Loan Bank of Indianapolis upon the
      security of our capital stock in the Federal Home Loan Bank of Indianapolis
      and
      certain of our mortgage loans and mortgage-backed securities. Such advances
      may
      be made pursuant to several different credit programs, each of which has its
      own
      interest rate and range of maturities. At December 31, 2005, we had $20.8
      million in Federal Home Loan Bank advances outstanding. From time to time during
      recent years we have utilized short-term borrowings, most of which had original
      maturities of 12 to 36 months, in order to fund loan demand. To the extent
      such
      borrowings are different than the average term to repricing of our deposits,
      they can change our interest rate risk profile. See “Management Discussion and
      Analysis - Asset/Liability Management” in the Annual Report.





23





The
      following table sets forth certain information as to our borrowings, all of
      which consisted of FHLB advances, during the period ending on the dates
      indicated.




December
                31,2005
            
            2004
            
            2003(Dollars
                in Thousands)Average
                balance outstanding
            
            $
            20,718
            
            $
            18,128
            
            $
            18,154Maximum
                amount outstanding at any month-end during the period
            
            
            22,845
            
            
            19,130
            
            
            19,297Balance
                outstanding at end of period
            
            
            20,769
            
            
            18,954
            
            
            16,130Weighted
                average interest rate during the period
            
            
            4.77
            %
            
            4.96
            %
            
            5.44
            %Weighted
                average interest at end of period
            
            
            4.67
            %
            
            4.70
            
            
            5.24




**Subsidiaries**




We
      have
      one wholly owned subsidiary service corporation, NIFCO, Inc., and one second
      tier subsidiary service corporation, Ridge Management, Inc. which is owned
      by
      NIFCO. Prior to the current year, NIFCO sold annuities and securities. As of
      December 31, 2003, the activities of NIFCO were effectively transferred to
      the
      Bank.




In
      the
      past, Ridge Management engaged in lending and investment activity, although
      it
      is currently essentially inactive. For the year ended December 31, 2005, Ridge
      Management had no activity.




We
      also
      own all of the common securities of AMB Financial Statutory Trust I which was
      created in connection with the issuance in March 2002 of $5.0 million of trust
      preferred securities.




**Regulation**




American
      Savings is a federally chartered savings and loan association, the deposits
      of
      which are federally insured by the FDIC and backed by the full faith and credit
      of the United States government. Accordingly, American Savings is subject to
      broad federal regulation and oversight extending to all of our operations.
      American Savings is a member of the Federal Home Loan Bank of Indianapolis
      and
      is subject to certain limited regulation by the Board of Governors of the
      Federal Reserve System. As the savings and loan holding company that has existed
      as a unitary savings and loan holding company prior to May 4, 1999, there is
      virtually no restriction on its activities.




*Federal
      Regulation of Savings Associations* .
      The
      Office of Thrift Supervision has extensive authority over the operations of
      savings associations. As part of this authority, we are required to file
      periodic reports with the Office of Thrift Supervision and are subject to
      periodic examinations by the Office of Thrift Supervision and the FDIC. When
      these examinations are conducted by the Office of Thrift Supervision and the
      FDIC, the examiners may require American Savings to provide for higher general
      or specific loan loss reserves.




The
      Office of Thrift Supervision also has extensive enforcement authority over
      all
      savings institutions and their holding companies, such as American Savings
      and
      AMB Financial, respectively. This enforcement authority includes, among other
      things, the ability to assess civil money penalties, to issue cease-and-desist
      or removal orders, and to initiate injunctive actions.




Our
      general permissible lending limit for loans-to-one-borrower is equal to the
      greater of $500,000 or 15% of capital and surplus (except for loans fully
      secured by certain readily marketable collateral, in which case this limit
      is
      increased to 25% of capital and surplus). At December 31, 2005, our lending
      limit under this restriction was approximately $2.3 million. At December 31,
      2005, we had no loans in excess of our loans-to-one-borrower limit.




24


*Insurance
      of Accounts and Regulation by the FDIC* .
      As
      insurer, the FDIC imposes deposit insurance premiums and is authorized to
      conduct examinations of, and to require reporting by, FDIC-insured institutions.
      It also may prohibit any FDIC-insured institution from engaging in any activity
      the FDIC determines by regulation or order to pose a serious risk to the Federal
      Home Loan Bank System or the Savings Association Insurance Fund. The FDIC also
      has the authority to initiate enforcement actions against savings associations,
      after giving the Office of Thrift Supervision an opportunity to take such
      action, and may terminate deposit insurance if it determines that the
      institution has engaged in unsafe or unsound practices, or is in an unsafe
      or
      unsound condition.




On
      February 15, 2006, federal legislation to reform federal deposit insurance
      was
      signed into law. This law requires, among other things, the merger of the
      Savings Association Insurance Fund and the Bank Insurance Fund into a unified
      insurance deposit fund, an increase in the amount of federal deposit insurance
      coverage from $100,000 to $130,000 (with a cost of living adjustment to become
      effective in five years), and the reserve ratio to be modified to provide for
      a
      range between 1.15% and 1.50% of estimated insured deposits. The law requires
      the FDIC to issue implementing regulations and the changes required by the
      law
      will not become effective until final regulations have been issued, which must
      be no later than 270 days from February 15, 2006.




The
      FDIC’s deposit insurance premiums are assessed through a risk-based system under
      which all insured depository institutions are placed into one of nine categories
      and assessed insurance premiums based upon their level of capital and
      supervisory evaluation. Under the system, institutions classified as well
      capitalized (i.e., a core capital ratio of at least 5%, a ratio of core capital
      to risk-weighted assets of at least 6% and a risk-based capital ratio of at
      least 10%) and considered healthy, pay the lowest premium while institutions
      that are less than adequately capitalized (i.e., core or risk-based capital
      ratios of less than 4% or a risk-based capital ratio of less than 8%) and
      considered of substantial supervisory concern pay the highest premium. Risk
      classification of all insured institutions is made by the FDIC semi-annually.
      At
      December 31, 2005, American Savings met the criteria for a well-capitalized
      institution.




The
      current premium schedule for Bank Insurance Fund and Savings Association
      Insurance Fund insured institutions range from 0 to 27 basis points. However,
      Savings Association Insurance Fund insured institutions and Bank Insurance
      Fund
      insured institutions are required to pay a Financing Corporation assessment
      in
      order to fund the interest on bonds issued to resolve thrift failures in the
      1980s. For the quarter ended December 31, 2005, this amount was equal to 1.34%
      for each $100 in domestic deposits for Savings Association Insurance Fund
      members and Bank Insurance Fund insured institutions. These assessments, which
      may be revised based upon the level of Bank Insurance Fund and Savings
      Association Insurance Fund deposits, will continue until the bonds mature in
      2017 through 2019.




*Regulatory
      Capital Requirements* .
      Federally insured savings associations, such as American Savings, are required
      to maintain a minimum level of regulatory capital. The Office of Thrift
      Supervision has established capital standards, including a tangible capital
      requirement, a leverage ratio (or core capital) requirement and a risk-based
      capital requirement applicable to such savings associations.




The
      capital regulations require tangible capital of at least 1.5% of adjusted total
      assets (as defined by regulation). At December 31, 2005, American Savings had
      tangible capital of $15.4 million, or 9.26% of adjusted total assets, which
      is
      approximately $12.9 million above the minimum requirement of 1.5% of adjusted
      total assets in effect on that date. At December 31, 2005, American Savings
      did
      not have any intangible assets.




The
      capital standards also require core capital equal to at least 3% to 4% of
      adjusted total assets, depending on an institution’s supervisory rating. Core
      capital generally consists of tangible capital. At December 31, 2005, we had
      core capital equal to $15.4 million, or 9.26% of adjusted total assets, which
      is
      $10.4 million above the minimum leverage ratio requirement of 3% as in effect
      on
      that date.




25


The
      Office of Thrift Supervision risk-based capital requirement requires savings
      associations to have total capital of at least 8% of risk-weighted assets.
      Total
      capital consists of core capital, as defined above, and supplementary capital.
      Supplementary capital consists of certain permanent and maturing capital
      instruments that do not qualify as core capital and general valuation loan
      and
      lease loss allowances up to a maximum of 1.25% of risk-weighted assets.
      Supplementary capital may be used to satisfy the risk-based requirement only
      to
      the extent of core capital.




In
      determining the amount of risk-weighted assets, all assets, including certain
      off-balance sheet items, will be multiplied by a risk weight, ranging from
      0% to
      100%, based on the risk inherent in the type of asset. For example, the Office
      of Thrift Supervision has assigned a risk weight of 50% for prudently
      underwritten permanent one- to four-family first lien mortgage loans not more
      than 90 days delinquent and having a loan-to-value ratio of not more than 80%
      at
      origination, unless insured to such ratio by an insurer approved by Fannie
      Mae
      or Freddie Mac.




On
      December 31, 2005, we had total risk-based capital of approximately $16.2
      million, including $15.4 million in core capital and $750,000 in qualifying
      supplementary capital, and risk-weighted assets of $102.1 million, or total
      capital of 15.85% of risk-weighted assets. This amount was $8.0 million above
      the 8% requirement in effect on that date.




The
      Office of Thrift Supervision is authorized to impose capital requirements in
      excess of these standards on individual associations on a case-by-case basis.
      The Office of Thrift Supervision and the FDIC are authorized and, under certain
      circumstances required, to take certain actions against savings associations
      that fail to meet their capital requirements. The Office of Thrift Supervision
      is generally required to take action to restrict the activities of an
“undercapitalized association” (generally defined to be one with less than
      either a 4% core capital ratio, a 4% core risked-based capital ratio or an
      8%
      risk-based capital ratio). Any such association must submit a capital
      restoration plan and until such plan is approved by the Office of Thrift
      Supervision may not increase its assets, acquire another institution, establish
      a branch or engage in any new activities, and generally may not make capital
      distributions. The Office of Thrift Supervision is authorized to impose the
      additional restrictions that are applicable to significantly undercapitalized
      associations.




The
      Office of Thrift Supervision is also generally authorized to reclassify an
      association into a lower capital category and impose the restrictions applicable
      to such category if the institution is engaged in unsafe or unsound practices
      or
      is in an unsafe or unsound condition.




The
      imposition by the Office of Thrift Supervision or the FDIC of any of these
      measures on AMB Financial or American Savings may have a substantial adverse
      effect on our operations and profitability.




*Limitations
      on Dividends and Other Capital Distributions* .
      The
      Office of Thrift Supervision imposes various restrictions on savings
      associations with respect to their ability to make distributions of capital,
      which include dividends, stock redemptions or repurchases, cash-out mergers
      and
      other transactions charged to the capital account. The Office of Thrift
      Supervision also prohibits a savings association from declaring or paying any
      dividends or from repurchasing any of its stock if, as a result of such action,
      the regulatory capital of the savings association would be reduced below the
      amount required to be maintained for the liquidation account established in
      connection with American Savings mutual to stock conversion.




American
      Savings may make a capital distribution without the prior approval of the Office
      of Thrift Supervision provided we notify the Office of Thrift Supervision at
      least 30 days before we declare the capital distribution and we meet the
      following requirements: (i) we have a regulatory rating in one of the two top
      examination categories, (ii) we are not of supervisory concern, and will remain
      adequately- or well-capitalized, as defined in the Office of Thrift Supervision
      prompt corrective action regulations, following the proposed distribution,
      and
      (iii) the distribution does not exceed our net income for the calendar
      year-to-date plus retained net income for the previous two calendar years (less
      any dividends previously paid). If we do not meet the above stated requirements,
      we must obtain the prior approval of the Office of Thrift Supervision before
      declaring any proposed distributions.




26


*Qualified
      Thrift Lender Test* .
      All
      savings institutions are required to meet a qualified thrift lender test to
      avoid certain restrictions on their operations. This test requires a savings
      institution to have at least 65% of its portfolio assets (as defined by
      regulation) in qualified thrift investments on a monthly average for nine out
      of
      every 12 months on a rolling basis. As an alternative, the savings institutions
      may maintain 60% of its assets in those assets specified in Section 7701(a)(19)
      of the Internal Revenue Code. Under either test, these assets primarily consist
      of residential housing related loans and investments. At December 31, 2005,
      American Savings met the test and has always met the test since its
      effectiveness. American Savings’ qualified thrift lender percentage was 79.23%
      at December 31, 2005.




Any
      savings institution that fails to meet the qualified thrift lender test must
      convert to a bank charter, unless it requalifies as a qualified thrift lender
      and remains a qualified thrift lender. If an institution does not requalify
      and
      converts to a national bank charter, it must remain Savings Association
      Insurance Fund-insured until the FDIC permits it to transfer to the Banking
      Insurance Fund. If an institution has not yet requalified or converted to a
      national bank, its new investments and activities are limited to those
      permissible for both a savings association and a national bank, and it is
      limited to national bank branching rights in its home state. In addition, the
      institution is immediately ineligible to receive any new Federal Home Loan
      Bank
      borrowings and is subject to national bank limits for payment of dividends.
      If
      the institution has not requalified or converted to a national bank within
      three
      years after the failure, it must sell all investments and stop all activities
      not permissible for a national bank. In addition, it must repay promptly any
      outstanding Federal Home Loan Bank borrowings, which may result in prepayment
      penalties. If any institution that fails the qualified thrift lender test is
      controlled by a holding company, then within one year after the failure, the
      holding company must register as a bank holding company and become subject
      to
      all restrictions on bank holding companies. See “- Holding Company
      Regulation.”




*Community
      Reinvestment Act* .
      Under
      the Community Reinvestment Act, every FDIC insured institution has a continuing
      and affirmative obligation, consistent with safe and sound banking practices,
      to
      help meet the credit needs of its entire community, including low- and moderate-
      income neighborhoods. The Community Reinvestment Act requires the Office of
      Thrift Supervision, in connection with its examination of American Savings,
      to
      assess the institution’s record of meeting the credit needs of our community and
      to take this record into account in our evaluation of certain applications,
      such
      as a merger or the establishment of a branch, by American Savings. An
      unsatisfactory rating may be used as the basis for the denial of an application
      by the Office of Thrift Supervision. American Savings was examined for Community
      Reinvestment Act compliance in May 2004 and received a rating of “satisfactory”.




*Transactions
      with Affiliates* .
      Generally, transactions between a savings association or its subsidiaries and
      its affiliates are required to be on terms as favorable to the association
      or
      subsidiary as transactions with non-affiliates. In addition, certain of these
      transactions, such as loans to an affiliate, are restricted to a percentage
      of
      the association’s capital. Affiliates of American Savings include AMB Financial
      and any company which is under common control with American Savings. In
      addition, a savings association may not lend to any affiliate engaged in
      activities not permissible for a bank holding company or acquire the securities
      of most affiliates. The Office of Thrift Supervision has the discretion to
      treat
      subsidiaries of savings associations as affiliates on a case by case
      basis.




27


Certain
      transactions with directors, officers or controlling persons are also subject
      to
      conflict of interest regulations enforced by the Office of Thrift Supervision.
      These conflict of interest regulations and other statutes also impose
      restrictions on loans to such persons and their related interests. Among other
      things, such loans must be made on terms substantially the same as for loans
      to
      unaffiliated individuals.




*Holding
      Company Regulation* .
      AMB
      Financial is a unitary savings and loan holding company subject to regulatory
      oversight by the Office of Thrift Supervision. AMB Financial is required to
      register and file reports with the Office of Thrift Supervision and are subject
      to regulation and examination by the Office of Thrift Supervision. In addition,
      the Office of Thrift Supervision has enforcement authority over AMB Financial
      and its non-savings association subsidiaries which also permits the Office
      of
      Thrift Supervision to restrict or prohibit activities that are determined to
      be
      a serious risk to the subsidiary savings association.




As
      a
      unitary savings and loan holding company, that has been in existence since
      before May 4, 1999, AMB Financial generally is not subject to activity
      restrictions. If AMB Financial acquires control of another savings association
      as a separate subsidiary, it would become a multiple savings and loan holding
      company and the activities of AMB Financial and any of our subsidiaries (other
      than American Savings or any other Savings Association Insurance Fund insured
      savings association) would generally become subject to certain restrictions.
      Additionally, if we fail the qualified thrift lender test, within one year
      AMB
      Financial must register as, and will become subject to, the significant activity
      restrictions applicable to bank holding companies.




*USA
      PATRIOT Act* .
      The USA
      PATRIOT Act was signed into law on October 26, 2001. The USA PATRIOT Act gives
      the federal government new powers to address terrorist threats through enhanced
      domestic security measures, expanded surveillance powers, increased information
      sharing and broadened anti-money laundering requirements. The USA PATRIOT Act
      also requires the federal banking agencies to take into consideration the
      effectiveness of controls designed to combat money laundering activities in
      determining whether to approve a merger or other acquisition application of
      a
      member institution. Accordingly, if we engage in a merger or other acquisition,
      our controls designed to combat money laundering would be considered as part
      of
      the application process. The Company has established policies, procedures and
      systems designed to comply with these regulations.




*Federal
      Securities Law* .
      The
      stock of AMB Financial is registered with the SEC under the Securities Exchange
      Act of 1934, as amended. AMB Financial is subject to the information, proxy
      solicitation, insider trading restrictions and other requirements of the SEC
      under the Securities Exchange Act of 1934.




AMB
      Financial stock held by persons who are affiliates (generally executive
      officers, directors and 10% shareholders) of AMB Financial may not be resold
      without registration or unless sold in accordance with certain resale
      restrictions. If AMB Financial meets specified current public information
      requirements, each affiliate of AMB Financial is able to sell in the public
      market, without registration, a limited number of shares in any three-month
      period.




*Sarbanes
      Oxley Act of 2002* .
      On July
      30, 2002, President Bush signed into law the Sarbanes-Oxley Act of 2002, which
      contains important new requirements for public companies in the area of
      financial disclosure and corporate governance. Among the requirements of the
      Sarbanes-Oxley Act of 2002 are written certifications by our Chief Executive
      Officer and Chief Financial Officer of our quarterly and annual reports filed
      with the SEC, as well as disclosures regarding our internal controls and
      procedures. In response to the Sarbanes-Oxley Act of 2002 and the related
      regulations, the Company has reviewed and amended its practices, policies and
      procedures to ensure our ability to comply with the requirements of the Act.




*Federal
      Reserve System* .
      The
      Federal Reserve Board requires all depository institutions to maintain
      noninterest bearing reserves at specified levels against their transaction
      accounts (primarily checking, NOW and Super NOW checking accounts). At December
      31, 2005, American Savings was in compliance with these reserve requirements.




28


Savings
      associations are authorized to borrow from the Federal Reserve Bank “discount
      window,” but Federal Reserve Board regulations require associations to exhaust
      other reasonable alternative sources of funds, including Federal Home Loan
      Bank
      borrowings, before borrowing from the Federal Reserve Bank.




*Federal
      Home Loan Bank System* .
      American Savings is a member of the Federal Home Loan Bank of Indianapolis,
      which is one of 12 regional Federal Home Loan Banks that administer the home
      financing credit function of savings associations. Each Federal Home Loan Bank
      serves as a reserve or central bank for its members within its assigned region.
      It makes loans to members (i.e., advances) in accordance with policies and
      procedures, established by the board of directors of the Federal Home Loan
      Bank,
      which are subject to the oversight of the Federal Housing Finance Board. All
      advances from the Federal Home Loan Bank are required to be fully secured by
      sufficient collateral as determined by the Federal Home Loan Bank. In addition,
      all long-term advances must be used for residential home financing.




As
      a
      member, American Savings is required to purchase and maintain a minimum amount
      of stock in the Federal Home Loan Bank of Indianapolis. At December 31, 2005,
      American Savings had $1.8 million in Federal Home Loan Bank stock, which was
      in
      compliance with this requirement. In past years, American Savings has received
      substantial dividends on our Federal Home Loan Bank stock. For the fiscal year
      ended December 31, 2005, dividends paid by the Federal Home Loan Bank of
      Indianapolis to American Savings totaled $79,000, which constituted a $4,000
      increase from the amount of dividends received in fiscal 2004. Over the past
      five fiscal years these dividends have averaged 5.45% and were 4.31% for fiscal
      2005.




**Federal
      and State Taxation**




*Federal
      Taxation* .
      Savings
      institutions that met certain definitional tests relating to the composition
      of
      assets and other conditions prescribed by the Internal Revenue Code of 1986,
      as
      amended, had been permitted to establish reserves for bad debts and to make
      annual additions which could, within specified formula limits, be taken as
      a
      deduction in computing taxable income for federal income tax purposes. The
      amount of the bad debt reserve deduction is now computed under the experience
      method.




In
      addition to the regular income tax, corporations, including savings
      institutions, generally are subject to a minimum tax. An alternative minimum
      tax
      is imposed at a minimum tax rate of 20% on alternative minimum taxable income,
      which is the sum of a corporation’s regular taxable income (with certain
      adjustments) and tax preference items, less any available exemption. The
      alternative minimum tax is imposed to the extent it exceeds the corporation’s
      regular income tax and net operating losses can offset no more than 90% of
      alternative minimum taxable income.




To
      the
      extent earnings appropriated to a savings institution’s bad debt reserves for
“qualifying real property loans” and deducted for federal income tax purposes
      exceed the allowable amount of such reserves computed under the experience
      method and to the extent of the institution’s supplemental reserves for losses
      on loans, such excess may not, without adverse tax consequences, be utilized
      for
      the payment of cash dividends or other distributions to a shareholder (including
      distributions on redemption, dissolution or liquidation) or for any other
      purpose (except to absorb bad debt losses). As of December 31, 2005, American
      Savings’ excess for tax purposes totaled approximately $1.9 million.




We
      file
      consolidated federal income tax returns on a fiscal year basis using the accrual
      method of accounting. Savings institutions that file federal income tax returns
      as part of a consolidated group are required by applicable Treasury regulations
      to reduce their taxable income for purposes of computing the percentage bad
      debt
      deduction for losses attributable to activities of the non-savings association
      members of the consolidated group that are functionally related to the
      activities of the savings association member.




29


Our
      federal income tax returns for the last three years are open to possible audit
      by the IRS. No returns are being audited by the IRS at the current time. In
      our
      opinion, any examination of still open returns would not result in a deficiency
      which could have a material adverse effect on our financial
      condition.




*Indiana
      Taxation* .
      The
      State of Indiana imposes an 8.5% financial institution tax on the net income
      of
      financial (including thrift) institutions. Taxable income for financial
      institution tax purposes will constitute federal taxable income before net
      operating loss deductions and special deductions, adjusted for certain items,
      including the addition of Indiana income taxes, property taxes, tax exempt
      interest and bad debts. Other applicable Indiana taxes include sales, use and
      property taxes.




*Delaware
      Taxation* .
      As a
      company incorporated under Delaware state law, AMB Financial is exempt from
      Delaware corporate income tax but is required to file an annual report with,
      and
      pay an annual fee to, the State of Delaware. The Holding Company is also subject
      to an annual franchise tax imposed by the State of Delaware.




**Competition**




We
      face
      strong competition both in originating real estate loans and in attracting
      deposits. Competition in originating loans comes primarily from other savings
      institutions, credit unions, commercial banks and mortgage bankers who also
      make
      loans secured by real estate located in our primary market area. We compete
      for
      loans principally on the basis of the interest rates and loan fees we charge,
      the types of loans we originate and the quality of services we provide to
      borrowers.




We
      attract all of our deposits through our branch offices, primarily from the
      communities in which those branch offices are located; therefore, competition
      for those deposits is principally from other savings institutions, commercial
      banks, securities firms, money market and mutual funds and credit unions located
      in the same communities. Our ability to attract and retain deposits depends
      on
      our ability to provide an investment opportunity that satisfies the requirements
      of investors. We compete for these deposits by offering a variety of deposit
      accounts at competitive rates, convenient business hours and a customer oriented
      staff. As of December 31, 2005, we estimate our market share of savings deposits
      in the Lake County, Indiana market area to be approximately 1.78%. The Company
      also experiences competition from online financial service
      providers.




**Employees**




At
      December 31, 2005, we had a total of 39 employees, including eight part-time
      employees. Our employees are not represented by any collective bargaining group.
      We consider employee relations to be good.




30


**Item
      2. Description of Property**




We
      conduct business at its main office located in Munster, Indiana. The following
      table sets forth information relating to each of our properties as of December
      31, 2005.




Location
            
            Year
                Acquired
            
            Owned
              Or
              Leased
            
            Total
              Approximate
              Square
                Footage
            
            Book
                Value at
              December
                31, 2005(Dollars
                in Thousands)**Main
                Office:**8230
                Hohman Avenue
              Munster,
                Indiana
            
            1963
            
            Owned
            
            8,400
            
            $
            71**Branch
                Offices:**1001
                Main Street
              Dyer,
                Indiana
            
            2000
            
            Owned(1)
            
            16,000
            
            $
            1,7494521
                Hohman Avenue
              Hammond,
                Indiana
            
            1983
            
            Owned
            
            1,600
            
            $
            77





(1)  Our
      branch office occupies 5,300 square feet of this building. The balance of the
      property is leased.




We
      believe that current facilities are adequate to meet our present and foreseeable
      needs, subject to possible future expansion.




We
      maintain an on-line data base with a service bureau servicing financial
      institutions. The net book value of the data processing and computer equipment
      utilized at December 31, 2005 was $37,000.




**Item
      3. Legal Proceedings**




We
      are
      involved from time to time as plaintiff or defendant in various legal actions
      arising in the normal course of business. While the ultimate outcome of these
      proceedings cannot be predicted with certainty, it is our opinion, after
      consultation with counsel representing us in the proceedings, that the
      resolution of these proceedings should not have a material effect on the results
      of operations.




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




No
      matters were submitted to a vote of security holders, through the solicitation
      of proxies, during the quarter ended December 31, 2005.




31


**PART
      II**




**Item
      5. Market for Common Equity and Related Stockholder
      Matters**




Page
      45
      of the Annual Report to Shareholders attached as Exhibit 13 is herein
      incorporated by reference.




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




Pages
      5
      through 17 of the Annual Report to Shareholders attached as Exhibit 13 are
      herein incorporated by reference.




**Item
      7. Financial Statements**




The
      following information appearing in the Annual Report is incorporated herein
      by
      reference.




Annual
                Report Section
            Pages
                in Annual ReportReport
                of Independent Auditors
            18Consolidated
                Statements of Financial Condition (December 31, 2005 and
                2004)
            19Consolidated
                Statements of Income (For the Years Ended December 31, 2005,2004
                and 2003)
            20Consolidated
                Statements of Changes in Stockholders’ Equity (For the Three Years Ended
                December 31, 2005, 2004 and 2003)
            21Consolidated
                Statements of Cash Flows (For the Years Ended December 31,
                2005,2004
                and 2003)
            22Notes
                to Consolidated Financial Statements
            23




With
      the
      exception of the aforementioned information in Part II of the Form 10-KSB,
      the
      Annual Report is not deemed filed as part of this annual report on Form
      10-KSB.




**Item
      8. Changes in and Disagreements With Accountants on Accounting and Financial
      Disclosure**




There
      has
      been no Current Report on Form 8-K filed within 24 months prior to the date
      of
      the most recent financial statements reporting a change in accountants and/or
      reporting disagreements on any matter of accounting principle or financial
      statement disclosure.




**Item
      8A. Controls and Procedures** **.**




The
      Company has adopted disclosure controls and procedures designed to facilitate
      the Company’s financial reporting. The disclosure controls currently consist of
      communications among the Chief Executive Officer, the Chief Financial Officer
      and each department head to identify any transactions, events, trends, risks
      or
      contingencies which may be material to the Company’s operations. The Company’s
      disclosure controls also contain certain elements of its internal controls
      adopted in connection with applicable accounting and regulatory guidelines.
      Finally, the Chief Executive Officer, Chief Financial Officer, the Audit
      Committee and the Company’s independent auditors also meet on a quarterly basis
      and discuss the Company’s material accounting policies. The Company’s Chief
      Executive Officer and Chief Financial Officer have evaluated the effectiveness
      of these interim disclosure controls as of the end of the period covered by
      this
      report and found them to be adequate.




The
      Company maintains internal control over financial reporting. There have not
      been
      any significant changes in such internal control over the financial reporting
      in
      the last quarter that has materially affected, or is reasonably likely to
      materially affect, the Company’s internal control over financial
      reporting.




**Item
      8B. Other Information** **.**




None.  32


**PART
      III**




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




Information
      concerning the directors, executive officers and Section 16(a) compliance is
      incorporated herein by reference from the definitive proxy statement for the
      annual meeting of stockholders to be held in 2006, a copy of which will be
      filed
      not later than 120 days after the close of fiscal year.




**Item
      10. Executive Compensation**




Information
      concerning executive compensation is incorporated herein by reference from
      the
      definitive proxy statement for the annual meeting of stockholders to be held
      in
      2006, a copy of which will be filed not later than 120 days after the close
      of
      the fiscal year.




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




Information
      concerning security ownership of certain beneficial owners and management is
      incorporated herein by reference from our definitive proxy statement for the
      annual meeting of stockholders to be held in 2006, a copy of which will be
      filed
      not later than 120 days after the close of the fiscal year.




The
      following table sets forth information with respect to securities to be issued
      under AMB Financial’s compensation plans as of December 31, 2005.




(a)
              
              (b)
              
              (c)Plan
                  Category
              
              Number
                  of securities to be issued upon exercise of outstanding options,
                  warrants
                  and rights
              
              Weighted-average
                  exercise price of outstanding options, warrants and rights
              
              Number
                  of securities remaining available for future issuance under equity
                  compensation plans [excluding securities reflected in column
                  (a)]Equity
                  compensation plans approved by security holders:1.
              Recognition
                  and Retention Plan
              
              1.
              N/A
              
              1.
              N/A
              
              1.
              2,5282.
              1996
                  Stock Option and Incentive Plan
              
              2.
              106,352
              
              2.
              $6.80
              
              2.
              —3.
              2005
                  Stock Option Plan
              
              3.
              43,120
              
              3.
              13.25
              
              3.
              20,074Equity
                  compensation plans not approved by security holders
              
              
              N/A
              
              
              N/A
              
              
              N/ATotal
              
              
              
              149,472
              
              
              $8.66
              
              
              22,602





**Item
      12. Certain Relationships and Related Transactions**




Information
      concerning certain relationships and transactions is incorporated herein by
      reference from our definitive proxy statement for the annual meeting of
      stockholders to be held in 2006, a copy of which will be filed not later than
      120 days after the close of the fiscal year.




33


**Item
      13. Exhibits**




Regulation
                S-B Exhibit Number
            Document
            Reference
                to Prior Filing or Exhibit Number Attached Hereto2
            Plan
                of acquisition, reorganization, arrangement, liquidation or
                succession
            None3.1
            Certificate
                of Incorporation
            *3.2
            Bylaws
            *4
            Instruments
                defining the rights of security holders, including
                indentures
            *9
            Voting
                trust agreement
            None10
            Material
                contracts:10.1
            1996
                Stock Options and Incentive Plan
            **10.2
            Recognition
                and Retention Plan
            **10.3
            Employee
                Stock Ownership Plan
            *10.4
            Employee
                Severance Compensation Plan
            *10.5
            Employment
                Agreements
            *10.6
            Second
                Executive Deferred Compensation Plan
            ***10.7
            Trust
                Agreement for the Compensation Agreement
            ***10.8
            2005
                Stock Option Plan..
            ******11
            Statement
                re: computation of per share earnings
            ****13
            Annual
                report to security holders
            1314
            Code
                of Ethics
            *****16
            Letter
                on change in certifying accountant
            None18
            Letter
                on change in accounting principles
            None21
            Subsidiaries
                of registrant
            2122
            Published
                report regarding matters submitted to vote
            None23
            Consent
                of experts and counsel
            2324
            Power
                of attorney
            Not
                required31.1
            Certification
                of Chief Executive Officer pursuant to Section 302
              of
                the Sarbanes-Oxley Act of 2002
            31.131.2
            Certification
                of Chief Financial Officer pursuant to Section 30
              of
                the Sarbanes-Oxley Act of 2002
            31.232.1
            Certification
                of Chief Executive Officer pursuant to Section 906
              of
                the Sarbanes-Oxley Act of 2002
            32.132.2
            Certification
                of Chief Financial Officer pursuant to Section 906
              of
                the Sarbanes-Oxley Act of 2002
            32.299
            Additional
                Exhibits
            None





*
            Filed
                on December 29, 1995 as an exhibit to the Registrant’s Registration
                Statement No. 33-80991 on Form S-1. All of such previously filed
                documents
                are hereby incorporated herein by reference in accordance with Item
                601 of
                Regulation S-B.


**
            Filed
                on September 12, 1996 under Schedule 14A as an appendix to the
                Registrant’s definitive proxy materials and incorporated herein by
                reference.


***
            Filed
                on March 31, 1999 as an exhibit to the Registrant’s Annual Report on Form
                10-KSB and incorporated herein by
                reference.


****
            See
                Note A of the Notes to the Consolidated Financial Statements in the
                Annual
                Report attached hereto as Exhibit
                13.


*****
            Filed
                on March 30, 2004 as an exhibit to Registrant’s Annual Report on Form
                10-KSB for the year ended December 31, 2003 and incorporated here
                by
                reference.


******
            Filed
                on May 6, 2005 under Schedule 14A as Appendix A to the Registrant’s
                definitive proxy materials and incorporated herein by
                reference.





**Item
      14. Principal Accountant Fees and Services**




Information
      concerning principal accountant fees and services is incorporated herein by
      reference from the definitive Proxy Statement for the Annual Meeting of
      Stockholders to be held in April, 2006, a copy of which will be filed not later
      than 120 days after the close of the fiscal year.




34


**SIGNATURES**




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




**AMB
              FINANCIAL CORPORATION**Date:March
              31, 2006
            By:
            /s/ Clement
              B. Knapp, Jr.Clement
                B. Knapp, Jr., Chairman of the Board,
              President
                and Chief Executive Officer
              *(Duly
                Authorized Representative)*




Pursuant
      to the requirements of the Securities Exchange Act of 1934, this Report has
      been
      signed below by the following persons on behalf of the Registrant and in the
      capacities and on the dates indicated.






By:
            /s/ Clement
              B. Knapp, Jr.
            
            By:
            /s/ Scott
              GyureClement
                B. Knapp, Jr., Chairman of the
              Board,
                President and Chief Executive Officer
              *(Principal
                Executive and Operating Officer)*
            
            
            Scott Gyure, Vice-President,
              Treasurer
                and Chief Financial Officer
              *(Principal
                Financial and Accounting Officer)*Date:March
              31, 2006
            
            Date:March
              31, 2006




By:
              /s/ Donald
                L.
                Harle
              
              By:
              /s/ Ronald
                W.
                BortoDonald
                L. Harle, Director
              
              
              Ronald
                W. Borto, DirectorDate:March
                31, 2006
              
              Date:March
                31, 2006
  By:
                /s/ John
                  G.
                  Pastrick
                
                By:
                /s/ Michael
                  MellonJohn
                  G. Pastrick, Director
                
                
                Michael
                  Mellon, DirectorDate:March
                  31, 2006
                
                Date:March
                  31, 2006
  By:
                  /s/ Robert
                    E.
                    TolleyRobert
                    E. Tolley, DirectorDate:March
                    31, 2006
  35


**Index
      to Exhibits**




Exhibit
                No.
            Document13
            Annual
                Report21
            Subsidiaries
                of the Registrant23
            Consent
                of Cobitz, VandenBerg & Fennessy31.1
            Certification
                of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
                Act of 200231.2
            Certification
                of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
                Act of 200232.1
            Certification
                of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley
                Act of 200232.2
            Certification
                of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley
                Act of 2002







36