**Exhibit
      13**




**Annual
      Report**






1













**Table
      of Contents**





President’s
                  Message
              2Selected
                  Consolidated Financial Information
              3Management’s
                  Discussion and Analysis of Financial
                Condition
                  and Results of Operations
              5Independent
                  Auditors’ Report
              20Consolidated
                  Financial Statements
              21Stockholder
                  Information
              48Corporate
                  Information
              49


1







President’s
      Message


To
      Our
      Stockholders





On
      behalf
      of AMB Financial Corporation (the “Company”), and its wholly owned subsidiary,
      American Savings, FSB (the “Bank”), I am pleased to present our 2006 annual
      financial report. The Board of Directors, Officers and Employees are optimistic
      regarding opportunities in the future.





Our
      goal,
      after 96 years of serving the community in Northwest Indiana, is to increase
      shareholder value while serving the needs of all stakeholders. The Company
      intends to remain an independent, local community financial institution by
      focusing on our strength of personalized customer service.




During
      the 2006 fiscal year total assets grew 6.93% to $182,282,477. The majority
      of
      this growth was due to a $10,666,203 (7.62%) increase in loans receivable to
      $150,701,080. The growth in total assets was funded primarily through a
      $13,305,833 increase in Federal Home Loan Bank borrowings to
      $34,317,589.





Net
      income declined $211,474 from the previous year to $648,268. The decline in
      net
      income reflects a $278,301 decline in non-interest income to $1,404,738. This
      decline in non-interest income is primarily attributed to a one time gain of
      $345,166 realized in 2005 due to the sale of Intrieve Incorporated
      stock.





The
      increase in interest rates has led to a compression of the Bank’s net interest
      margin. The inversion of the yield curve continues to apply pressure to the
      Bank’s margin. The weighted average rate on deposit accounts at December 31,
      2006 was 3.49%, a 70 basis point increase in comparison to the 2.79% figure
      as
      of December 31, 2005.





At
      the
      end of 2006 the Bank’s Senior Vice President of Lending, Lou Green, retired. Our
      Board of Directors, officers and employees wish to express their thanks for
      his
      40 years of dedication and service to the Bank. His presence with the
      organization and the community will be sorely missed.





Bob
      Rossa
      joins the Bank as Vice President of Lending attempting to fill the void created
      by Lou Green’s retirement. He brings over 35 years of experience and diverse
      knowledge as a lending officer to this new position.





Our
      financial performance and stock performance are available on our website at http://www.ambfinancial.com .
      I urge
      you to visit our site to view this information and utilize its other
      services.





The
      entire staff of the Bank and the Company appreciates your commitment and
      support, and we look forward to a long and profitable relationship.





Sincerely,





Clement
      B. Knapp, Jr.


President









2








**SELECTED
        CONSOLIDATED FINANCIAL INFORMATION**
 **(Dollars
          in thousands)**


**At
                  December 31,****2006**
              
              **2005**
              
              **2004**
              
              **2003**
              
              **2002****SELECTED
                  FINANCIAL DATA:**Total
                  assets
              
              
              182,282
              
              
              170,466
              
              
              157,094
              
              
              145,965
              
              
              149,672Loans
                  receivable, net
              
              
              150,701
              
              
              140,035
              
              
              129,342
              
              
              120,209
              
              
              114,318Investment
                  securities and interest bearing deposits
              
              
              10,433
              
              
              9,367
              
              
              8,790
              
              
              6,997
              
              
              15,326Mortgage
                  backed securities
              
              
              1,252
              
              
              1,664
              
              
              2,286
              
              
              3,155
              
              
              2,643Trading
                  securities
              
              
              339
              
              
              329
              
              
              515
              
              
              498
              
              
              566Deposits
              
              
              124,858
              
              
              127,435
              
              
              115,659
              
              
              108,334
              
              
              109,331Borrowed
                  funds
              
              
              34,318
              
              
              21,012
              
              
              18,954
              
              
              16,130
              
              
              20,297Guaranteed
                    preferred beneficial interest injunior
                    subordinated debt
              
              
              5,000
              
              
              5,000
              
              
              5,000
              
              
              5,000
              
              
              5,000Stockholders
                  equity
              
              
              14,661
              
              
              14,145
              
              
              13,409
              
              
              12,520
              
              
              11,846**At
                  or for the Year Ended December 31,****2006**
              
              
              **2005**
              
              
              **2004**
              
              
              **2003**
              
              
              **2002****SELECTED
                  FINANCIAL RATIOS AND OTHER DATA:**Return
                  on average assets
              
              
              0.37
              %
              
              0.53
              %
              
              0.58
              %
              
              0.78
              %
              
              0.68
              %Return
                  on average stockholders equity
              
              
              4.48
              
              
              6.20
              
              
              6.78
              
              
              9.72
              
              
              8.36Average
                    stockholders equity toaverage assets
              
              
              8.28
              
              
              8.54
              
              
              8.56
              
              
              8.04
              
              
              8.19Stockholders
                  equity to total assets
              
              
              8.04
              
              
              8.30
              
              
              8.54
              
              
              8.58
              
              
              7.91Interest
                  rate spread during the period
              
              
              2.69
              
              
              3.02
              
              
              3.24
              
              
              3.26
              
              
              3.20Net
                  interest margin
              
              
              2.69
              
              
              3.05
              
              
              3.26
              
              
              3.23
              
              
              3.18Operating
                  expenses to average assets
              
              
              2.63
              
              
              2.86
              
              
              2.81
              
              
              2.67
              
              
              2.54Efficiency
                  ratio (1)
              
              
              82.52
              
              
              80.22
              
              
              75.42
              
              
              68.62
              
              
              67.77Non-performing
                  assets to total assets
              
              
              2.06
              
              
              1.24
              
              
              1.02
              
              
              1.13
              
              
              0.79Allowance
                    for loan losses to non-performing loans
              
              
              25.65
              
              
              50.80
              
              
              44.50
              
              
              65.35
              
              
              78.24Allowance
                  for loan losses to loansReceivable,
                  net (2)
              
              
              0.45
              
              
              0.53
              
              
              0.55
              
              
              0.85
              
              
              0.73Ratio
                  of average interest-earning assets
                  to average interest-bearing liabilities
              
              
              1.00x
              
              
              1.01x
              
              
              1.01x
              
              
              .99x
              
              
              .99xNumber
                  of full servive offices
              
              
              3
              
              
              3
              
              
              3
              
              
              3
              
              
              3




(1)  Non-interest
        expense divided by net-interest income plus non-interest income except for
        gains
        and losses on investments available for sale and other assets.
 (2)  Loans
        include loans, net, excluding the allowance for loan losses.






3






**SELECTED
        CONSOLIDATED FINANCIAL INFORMATION (cont.)**
 **(Dollars
        in thousands except per share data)**





**For
                the Year Ended December 31,****2006**
            
            **2005**
            
            **2004**
            
            **2003**
            
            **2002****SELECTED
                OPERATING DATA:**Total
                interest income
            
            $
            10,027
            
            $
            8,585
            
            $
            7,887
            
            $
            8,235
            
            $
            8,847Total
                interest expense
            
            
            5,807
            
            
            4,149
            
            
            3,433
            
            
            3,904
            
            
            4,693Net
                interest income
            
            
            4,220
            
            
            4,436
            
            
            4,454
            
            
            4,331
            
            
            4,154Provision
                for loan losses
            
            
            248
            
            
            275
            
            
            189
            
            
            214
            
            
            392Net
                interest income after provision for loan losses
            
            
            3,972
            
            
            4,161
            
            
            4,265
            
            
            4,117
            
            
            3,762Non-interest
                income:Fees
                and service charges
            
            
            1,139
            
            
            1,122
            
            
            946
            
            
            1,181
            
            
            991Rental
                income
            
            
            139
            
            
            138
            
            
            137
            
            
            77
            
            
            145Gain
                on sale of securities
            
            
            ---
            
            
            32
            
            
            7
            
            
            50
            
            
            22Unrealized
                gain (loss) on trading securities
            
            
            10
            
            
            (51
            )
            
            27
            
            
            130
            
            
            36Gain
                on sale of other assets
            
            
            39
            
            
            345
            
            
            ---
            
            
            ---
            
            
            ---Gain
                (loss) on sale of other real estate owned
            
            
            (79
            )
            
            (4
            )
            
            14
            
            
            24
            
            
            (28
            )Loss
                from limited partnership
            
            
            (41
            )
            
            (72
            )
            
            (82
            )
            
            (91
            )
            
            (88
            )Income
                from real estate held for development
            
            
            51
            
            
            ---
            
            
            ---
            
            
            ---
            
            
            ---Gain
                from life inurance proceeds
            
            
            ---
            
            
            ---
            
            
            27
            
            
            ---
            
            
            ---Increase
                from cash surrender value of life insurance
            
            
            123
            
            
            118
            
            
            135
            
            
            152
            
            
            158Loan
                loss settlement
            
            
            ---
            
            
            ---
            
            
            ---
            
            
            92
            
            
            ---Other
            
            
            23
            
            
            55
            
            
            29
            
            
            57
            
            
            99Total
                non interest income
            
            
            1,404
            
            
            1,683
            
            
            1,240
            
            
            1,672
            
            
            1,335Non
                interest expense:Compensation
                and benefits
            
            
            2,327
            
            
            2,348
            
            
            2,185
            
            
            1,959
            
            
            1,799Advertising
            
            
            250
            
            
            180
            
            
            133
            
            
            110
            
            
            94Office
                occupancy and equipment expenses
            
            
            428
            
            
            428
            
            
            411
            
            
            471
            
            
            441Data
                processing
            
            
            476
            
            
            660
            
            
            558
            
            
            521
            
            
            485Federal
                deposit insurance premiums
            
            
            16
            
            
            16
            
            
            17
            
            
            18
            
            
            18Professional
                fees
            
            
            306
            
            
            243
            
            
            251
            
            
            248
            
            
            231Other
            
            
            806
            
            
            765
            
            
            719
            
            
            709
            
            
            652Total
                non-interest expense
            
            
            4,609
            
            
            4,640
            
            
            4,274
            
            
            4,036
            
            
            3,720Income
                before income taxes
            
            
            767
            
            
            1,204
            
            
            1,231
            
            
            1,753
            
            
            1,377Income
                tax provision
            
            
            119
            
            
            344
            
            
            350
            
            
            571
            
            
            376Net
                income
            
            
            648
            
            
            860
            
            
            881
            
            
            1,182
            
            
            1,001Basic
                earnings per share
            
            $
            0.64
            
            $
            0.90
            
            $
            0.94
            
            $
            1.31
            
            $
            1.02Diluted
                earnings per share
            
            $
            0.64
            
            $
            0.85
            
            $
            0.87
            
            $
            1.18
            
            $
            0.97









4







**MANAGEMENT'S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION**  ****


**AND
      RESULTS OF OPERATIONS**





**General** AMB
      Financial Corp. (the "Company") is the thrift holding company for American
      Savings FSB, (the "Bank"), a federally chartered savings bank. Collectively,
      the
      Holding Company and the Bank are referred to herein as the "Company."





The
      Company's primary market area consists of the northwest portion of Lake County,
      Indiana. Business is conducted from its main office at 8230 Hohman Avenue,
      Munster, Indiana, as well as two full-service banking offices located in Dyer,
      and Hammond, Indiana. The Bank is a community-oriented savings institution
      whose
      business primarily consists of accepting deposits from customers within its
      market area and investing those funds in mortgage loans secured by
      one-to-four-family residences. To a lesser extent, funds are invested in
      one-to-four-family residences, non-residential real estate, consumer,
      multi-family, land, construction, and commercial business loans. The Company
      also invests in mortgage-backed and other investment securities and to a lesser
      extent, leases, equity securities, and accounts receivable.





The
      Company's results of operations are primarily dependent on net interest income,
      which is the difference between the interest income on its interest-earning
      assets, such as loans and securities, and the interest expense on its
      interest-bearing liabilities, such as deposits and borrowings and to a lesser
      degree, non-interest income and non-interest expense. Net interest income
      depends upon the volume of interest-earning assets and interest-bearing
      liabilities and the interest rate earned or paid on them, respectively.
      Non-interest income primarily consists of fees on deposits and loan products,
      increase in cash surrender value of life insurance, rental income, and
      securities gains or losses. The Company's non-interest expenses primarily
      consist of employee compensation and benefits, occupancy and equipment expenses,
      data processing service fees, federal deposit insurance premiums, and other
      operating expenses.





The
      Company's results of operations are also affected by general economic
      conditions, the monetary and fiscal policies of Federal agencies and the
      policies of agencies that regulate financial institutions. Future changes in
      applicable laws, regulations or government policies may have a material impact
      on the Company. Lending activities are influenced by the demand for real estate
      loans and other types of loans, competition among lenders, the general level
      of
      real estate values, the level of interest rates and the availability of funds.
      Deposit flows and costs of funds are influenced by prevailing market interest
      rates (including rates on non-deposit investment alternatives), account
      maturities, and the levels of personal income and savings in the Company's
      market area.





**Operating
      Strategy.** The
      Company's basic mission is to maintain its focus as an independent,
      community-oriented financial institution focused on serving customers in its
      primary market area. The Board of Directors has sought to accomplish this
      mission through an operating strategy designed to maintain capital in excess
      of
      regulatory requirements and manage, to the extent practical, the Company's
      loan
      delinquencies and vulnerability to changes in interest rates. The key components
      of the Company's operating strategy are to: (i) focus its lending operations
      on
      the origination of loans secured by one-to-four-family residential real estate;
      (ii) supplement its one-to-four-family residential lending activities with
      non-residential, consumer, multi-family, land, construction, and business loans;
      (iii) augment its lending activities with investments in purchased loans,
      leases, mortgage-backed and other securities; (iv) emphasize adjustable rate
      and/or short and medium duration assets when market conditions permit (v) build
      and maintain its regular savings, transaction, money market and club accounts;
      and (vi) increase, at a managed pace, to the extent practicable, the volume
      of
      the Company's assets and liabilities.





Management
      and the Board of Directors of the Company have sought to enhance shareholder
      value by using excess capital to repurchase outstanding shares when business
      and
      market conditions warrant.





**Forward-Looking
      Statements.** When
      used
      throughout this document, the words or phrases “will likely result,” “are
      expected to,” “will continue,” “is anticipated,” “estimated,” “projected,” or
      similar expressions are intended to identify “forward looking statements” within
      the meaning of the section 27E of the Securities and Exchange Act of 1934.
      Such
      statements are subject to certain risks and uncertainties including changes
      in
      economic conditions in the Bank’s market area, changes in policies by regulatory
      agencies, fluctuations in interest rates, demand for loans and real estate
      values in the Bank’s market area and competition, that could cause actual
      results to differ materially from historical earnings and those presently
      anticipated or projected. The factors listed above could affect the Company’s
      financial performance and could cause actual results for future periods to
      differ materially from any statements expressed with respect to future
      periods.






5





The
      Company does not undertake, and specifically disclaims any obligation to
      publicly revise any forward-looking statements to reflect events or
      circumstances after the date of such statements or to reflect the occurrence
      of
      anticipated or unanticipated events.





**Financial
      Condition -** During
      the year December 31, 2006, the Company’s total assets increased by $11.8
      million to $182.3 million from $170.5 million at December 31, 2005. This asset
      growth was primarily attributable to a $10.7 million increase in net loans
      receivable, primarily single-family residential loans, which was funded with
      an
      increase in borrowed money.





Cash
      and
      short-term investments totaled a combined $9.7 million at December 31, 2006,
      an
      increase of $700,000 from the combined balance of $9.0 million at December
      31,
      2005. In view of the current inverted yield curves, the Company continues to
      reinvest excess liquidity in overnight funds with the expectation that they
      will
      be readily available for investment in higher yielding assets or to pay down
      borrowed funds as they mature. The allocation of these funds depends on future
      market conditions.





Investment
      securities, available for sale, decreased by $10,000 to $3.18 million at
      December 31, 2006. This portfolio consists primarily of U.S. government agency
      obligations. At December 31, 2006, the Company had an unrealized loss, net
      of
      taxes, on available for sale investment securities of $9,500 compared to an
      unrealized loss, net of taxes, of $7,000 at December 31, 2005.




Trading
      account securities increased by $10,000 to $339,000 at December 31, 2006. The
      increase is attributable to an increase in unrealized appreciation in the
      portfolio. There were no purchases or sales of trading securities during the
      current year. The trading account portfolio consists of holdings in small thrift
      and community bank stocks.





Mortgage-backed
      securities, available for sale, totaled $1.3 million at December 31, 2006
      compared to $1.7 million at December 31, 2005. There were no new purchases
      of
      mortgage-backed securities during the current year and as a result, the balance
      of mortgage-backed securities decreased by $412,000 due to amortization and
      prepayments. At December 31, 2006, the Company had an unrealized loss, net
      of
      taxes, on available for sale mortgage-backed securities of $15,000 compared
      to
      an unrealized loss, net of taxes, of $11,000 at December 31, 2005.




Loans
      receivable increased $10.7 million, or 7.6%, to $150.7 million at December
      31,
      2006 from $140.0 million at December 31, 2005. The Bank originated loans of
      $49.3 million and purchased loans totaling $7.3 million during the year ended
      December 31, 2006, compared to $41.8 million or originations and $11.8 million
      of purchases during the prior year. The purchased loans in the current year
      include $5.2 million in adjustable rate one-to-four family loans, $770,000
      in
      medical equipment loans and $1.3 million of disbursed participation loans on
      land development and new construction projects. Offsetting the originations
      and
      purchases were amortization and prepayments of loans totaling $44.5 million
      and
      $41.9 million for the years ended December 31, 2006 and 2005.





The
      mortgage loan portfolio continues to consist primarily of one-to-four family
      mortgage loans. Our one-to-four family mortgage loans, which represent 67.1%
      of
      the total loan portfolio at December 31, 2006, increased $12.4 million to $105.2
      million at December 31, 2006 from $92.8 million at December 31, 2005. While
      the
      Bank continues to be primarily a one-to-four family mortgage lender, intends
      to
      increase its emphasis on multi-family and non-residential loan originations.
      Multi-family loans, which tend to be less susceptible to prepayment risk
      compared to one-to-four family loans, decreased $637,000 to $8.3 million at
      December 31, 2006 from $8.9 million at December 31, 2005 while non-residential
      loans increased by $1.1 million to $18.2 million at December 31, 2006 from
      $17.1
      million at December 31, 2005.





The
      allowance for loan losses totaled $686,000, a decrease of $63,000 from the
      $749,000 balance at December 31, 2005. The Bank’s allowance for loan losses to
      total loans outstanding was .45% at December 31, 2006, compared to .53% at
      December 31, 2005. Non-performing loans increased $1.2 million to $2.68 million,
      or 1.71% of total loans receivable at December 31, 2006, compared to $1.47
      million, or 1.02% of total loans receivable at December 31, 2005. Included
      in
      non-performing loans at December 31, 2006, was a 12 unit townhouse construction
      loan located in Merrillville, Indiana totaling $1.1 million which is in the
      process of being renegotiated by the borrowers as well as a commercial office
      building located in the local market area totaling $340,000 in the process
      of
      foreclosure. The ratio of allowance for loan losses to non-performing loans
      was
      25.7% at December 31, 2006 compared to 50.8% at December 31, 2005.






6






The
      Company has acquired, in conjunction with an agreement with a local builder,
      nine vacant lots on which to construct single-family residences in St. John
      and
      Munster Indiana. During the year ended December 31, 2006, our investment in
      real
      estate held for development increased by $529,000 to $1.9 million from $1.4
      million at December 31, 2005 as additional expenditures of $1.4 million were
      offset by the proceeds from the sale of two properties totaling $882,000. Two
      additional properties are complete and listed for sale and two other properties
      are close to completion and are anticipated to be marketed in the first half
      of
      2007.





Deposits
      decreased $2.6 million to $124.8 million at December 31, 2006 from $127.4
      million at December 31, 2005. The decrease in deposits is due to a decrease
      in
      certificates of deposit of $1.2 million as well as a decrease in non-certificate
      accounts, primarily passbook and money market accounts, of $1.4 million. At
      December 31, 2006, the Bank’s non-certificate accounts (passbook, checking and
      money market accounts) comprised $43.9 million, or 35.2% of deposits, compared
      to $45.3 million, or 35.6% of deposits at December 31, 2005. The decrease in
      deposits during the current year is attributable in part to increased pricing
      competition in the current interest rate environment.





Borrowed
      money, which consisted primarily of FHLB of Indianapolis advances, increased
      by
      $13.3 million to $34.3 million at December 31, 2006 compared to $21.0 million
      at
      December 31, 2005. The increase in borrowed money was utilized to fund the
      current year loan originations as well as to fund the decrease in deposit
      balances. As of December 31, 2006, the weighted average rate and term to
      maturity for the FHLB of Indianapolis was 5.16% and 2.2 years, respectively,
      compared to a weighted average rate and term to maturity of 4.67% and 3.5 years,
      respectively, as of December 31, 2005.





Total
      stockholders’ equity of the Company increased by $516,000 to $14.7 million, or
      8.04% of total assets, at December 31, 2006, compared to $14.1 million, or
      8.30%
      of total assets at December 31, 2005. The increase in stockholders’ equity was
      the result of net income of $648,000, the exercise of non-qualified stock
      options, net of the related tax benefit, totaling $560,000 and stock option
      compensation of $50,000 offset by the Company’s repurchase of common stock for
      treasury in the amount of $421,000, the payment of $315,000 in cash dividends
      and a decrease in unrealized holding gains on securities available for sale,
      net
      of tax, in the amount of $6,000.





**Analysis
      of Net Interest Income.** Net
      interest income represents the difference between interest earned on
      interest-earning assets and interest paid on interest-bearing liabilities.
      Net
      interest income is affected by the relative amounts of interest-earning assets
      and interest-bearing liabilities, and the interest rates earned or paid on
      them.





The
      following table presents, for the periods indicated, the total dollar amounts
      of
      interest income from average interest-earning assets and the resultant yields,
      as well as the interest expense on average interest-bearing liabilities,
      expressed both in dollars and rates. No tax equivalent adjustments were made.
      All average balances were calculated using average daily balances and include
      non-accruing loans.






7





**ANALYSIS
        OF NET INTEREST INCOME TABLE**
 For
                    the Year Ended December 31(Dollars
                    in thousands)2006
                
                
                
                
                
                2005
                
                
                
                
                
                2004**Assets**:
                  Interest-Earning
                    Assets
                
                Average
                  Outstanding
                  Balance
                
                Interest
                  Earned/
                  Paid
                
                Yield/
                  Rate
                
                Average
                  Outstanding
                  Balance
                
                Interest
                  Earned/
                  Paid
                
                Yield/
                  Rate
                
                Average
                  Outstanding
                  Balance
                
                Interest
                  Earned/
                  Paid
                
                Yield/
                  RateLoans
                    receivable (1)
                
                
                146,688
                
                
                9,553
                
                
                6.51
                %
                
                133,560
                
                
                8,152
                
                
                6.10
                %
                
                124,523
                
                
                7,541
                
                
                6.06
                %Mortgage-backed
                    securities
                
                
                1,448
                
                
                70
                
                
                4.83
                %
                
                1,989
                
                
                90
                
                
                4.52
                %
                
                2,665
                
                
                123
                
                
                4.62
                %Investment
                    securities
                
                
                3,411
                
                
                166
                
                
                4.87
                %
                
                3,439
                
                
                115
                
                
                3.34
                %
                
                2,489
                
                
                81
                
                
                3.24
                %Interest-bearing
                    deposits
                
                
                3,290
                
                
                152
                
                
                4.62
                %
                
                4,735
                
                
                149
                
                
                3.15
                %
                
                5,199
                
                
                67
                
                
                1.30
                %FHLB
                    stock
                
                
                1,761
                
                
                86
                
                
                4.88
                %
                
                1,795
                
                
                79
                
                
                4.40
                %
                
                1,732
                
                
                75
                
                
                4.31
                %Total
                    interest-earning assets
                
                
                156,598
                
                
                10,027
                
                
                6.40
                %
                
                145,518
                
                
                8,585
                
                
                5.90
                %
                
                136,608
                
                
                7,887
                
                
                5.77
                %Non-interest
                    earning assets
                
                
                18,415
                
                
                
                
                
                
                
                
                16,736
                
                
                
                
                
                
                
                
                15,247Total
                    Assets
                
                
                175,013
                
                
                
                
                
                
                
                
                162,254
                
                
                
                
                
                
                
                
                151,855**Liabilities
                    and stockholders equity:**Interest-Bearing
                    LiabilitiesPassbook
                    accounts
                
                
                18,541
                
                
                232
                
                
                1.25
                %
                
                20,203
                
                
                252
                
                
                1.25
                %
                
                20,934
                
                
                262
                
                
                1.25
                %Demand
                    and NOW accounts
                
                
                24,687
                
                
                434
                
                
                1.76
                %
                
                25,652
                
                
                432
                
                
                1.68
                %
                
                26,564
                
                
                425
                
                
                1.60
                %Certificate
                    accounts
                
                
                80,834
                
                
                3,309
                
                
                4.09
                %
                
                72,437
                
                
                2,116
                
                
                2.92
                %
                
                65,220
                
                
                1,582
                
                
                2.43
                %Total
                    deposits
                
                
                124,062
                
                
                3,975
                
                
                3.20
                %
                
                118,292
                
                
                2,800
                
                
                2.37
                %
                
                112,718
                
                
                2,269
                
                
                2.01
                %Borrowings
                
                
                27,260
                
                
                1,378
                
                
                5.06
                %
                
                20,738
                
                
                990
                
                
                4.77
                %
                
                18,117
                
                
                899
                
                
                4.96
                %Junior
                    subordinated debentures
                
                
                5,000
                
                
                454
                
                
                9.08
                %
                
                25,738
                
                
                1,349
                
                
                5.24
                %
                
                23,117
                
                
                1,164
                
                
                5.04
                %Total
                    interest-bearing liabilities
                
                
                156,322
                
                
                5,807
                
                
                3.71
                %
                
                164,768
                
                
                5,139
                
                
                3.12
                %
                
                153,952
                
                
                4,332
                
                
                2.81
                %Non-interest
                    liabilities
                
                
                4,206
                
                
                
                
                
                
                
                
                4,367
                
                
                
                
                
                
                
                
                3,025Total
                    liabilities
                
                
                160,528
                
                
                
                
                
                
                
                
                169,135
                
                
                
                
                
                
                
                
                156,977Stockholders
                    equity
                
                
                14,485
                
                
                
                
                
                
                
                
                13,857
                
                
                
                
                
                
                
                
                12,995Total
                    liabilities and stockholders equity
                
                
                175,013
                
                
                
                
                
                
                
                
                182,992
                
                
                
                
                
                
                
                
                169,972Net
                    interest income / net interest rate spread
                
                
                
                
                
                4,220
                
                
                2.69
                %
                
                
                
                
                3,446
                
                
                3.02
                %
                
                
                
                
                3,555
                
                
                3.24
                %Net
                    interest-earning assets / net interest margin
                
                
                276
                
                
                
                
                
                2.69
                %
                
                1,488
                
                
                
                
                
                3.05
                %
                
                773
                
                
                
                
                
                3.26
                %Ratio
                    of interest-earning assets to interest bearing liabilities
                
                
                1.00x
                
                
                
                
                
                
                
                
                1.01x
                
                
                
                
                
                
                
                
                1.01x
 
  (1)
            Calculated net of loans in process, deferred yield adjustments and allowance
            for
            loan losses.


8








The
      table
      below presents the extent to which changes in interest rates and changes in
      the
      volume of interest-earning assets and interest bearing liabilities have affected
      the Company’s interest income and interest expense during the period indicated.
      Information is provided in each category with respect to (i) changes
      attributable to changes in rate (changes in rate multiplied by prior volume),
      (ii) changes attributable to changes in volume (changes in volume multiplied
      by
      prior rate), (iii) changes attributable to the combined impact of volume and
      rate (changes in the rate multiplied by the changes in the volume), and (iv)
      the
      net change. The changes attributable to the combined impact of volume and rate
      have been allocated proportionately to the changes due to volume and the changes
      due to rate.


For
                  the Year Ended December 31,2006
                    Compared to 2005
                Increase
                  (Decrease) Due to
              
              2005
                    Compared to 2004
                Increase
                  (Decrease) Due toRate
              
              Volume
              
              Rate/Volume
              
              Net
              
              Rate
              
              Volume
              
              Rate/Volume
              
              Net(Dollars
                  in thousands)
              
              (Dollars
                  in thousands)Interest-earning
                  assets:Loans
                  receivable, net
              
              $
              546
              
              
              801
              
              
              54
              
              
              1,401
              
              
              60
              
              
              547
              
              
              4
              
              
              611Mortgage-backed
                  securities
              
              
              6
              
              
              (24
              )
              
              (2
              )
              
              (20
              )
              
              (2
              )
              
              (31
              )
              
              -
              
              
              (33
              )Investment
                  securities
              
              
              52
              
              
              (1
              )
              
              -
              
              
              51
              
              
              2
              
              
              31
              
              
              1
              
              
              34Interest-bearing
                  deposit
              
              
              70
              
              
              (46
              )
              
              (21
              )
              
              3
              
              
              97
              
              
              (6
              )
              
              (9
              )
              
              82FHLB
                  Stock
              
              
              9
              
              
              (2
              )
              
              -
              
              
              7
              
              
              1
              
              
              3
              
              
              -
              
              
              4Totals
              
              $
              683
              
              
              728
              
              
              31
              
              
              1,442
              
              
              158
              
              
              544
              
              
              (4
              )
              
              698Interest-bearing
                  liabilities:Passbook
                  accounts
              
              $
              1
              
              
              (21
              )
              
              -
              
              
              (20
              )
              
              (1
              )
              
              (9
              )
              
              -
              
              
              (10
              )Demand
                  and Now accounts
              
              
              19
              
              
              (16
              )
              
              (1
              )
              
              2
              
              
              22
              
              
              (15
              )
              
              -
              
              
              7Certificate
                  accounts
              
              
              849
              
              
              245
              
              
              99
              
              
              1,193
              
              
              323
              
              
              175
              
              
              36
              
              
              534Borrowed
                  funds
              
              
              58
              
              
              312
              
              
              18
              
              
              388
              
              
              (34
              )
              
              130
              
              
              (5
              )
              
              91Junior
                  subordinated debentures
              
              
              95
              
              
              -
              
              
              -
              
              
              95
              
              
              94
              
              
              -
              
              
              -
              
              
              94Totals
              
              $
              1,022
              
              
              520
              
              
              116
              
              
              1,658
              
              
              404
              
              
              281
              
              
              31
              
              
              716Net
                  change in net interest income
              
              
              
              
              
              
              
              
              
              
              $
              (216
              )
              
              
              
              
              
              
              
              
              
              $
              (18
              )




9







**Comparison
      of the Results of Operations for the Years Ended December 31, 2006 and
      2005**





**General** - Net
      income for the year ended December 31, 2006 decreased $212,000 to $648,000,
      from
      $860,000 for the year ended December 31, 2005. Diluted earnings per share
      totaled $.64 per share for the year ended December 31, 2006 and $.85 per share
      for the year ended December 31, 2005. Return on average stockholders’ equity
      decreased to 4.48% for the year ended December 31, 2006, from 6.20% for the
      year
      ended December 31, 2005. Return on average assets decreased to .37% for the
      year
      ended December 31, 2006, from .53% for the year ended December 31, 2005. The
      decreases in net income and the related return ratios for the year ended
      December 31, 2005 were primarily the result of decreases in net interest income
      and non-interest income offset, in part, by a reduction in income tax expense.
      Management expects further margin compression to occur in 2007 unless the yield
      curve, which is currently inverted, assumes a more “positive”
shape.





**Interest
      income** - Total
      interest income increased by $1.4 million, or 16.8%, to $10.03 million for
      the
      year ended December 31, 2006 compared to the year ended December 31, 2005.
      This
      increase was the result of an increase of $11.1 million in the average balance
      of interest-earning assets to $156.6 million for the year ended December 31,
      2006, from $145.5 million for the year ended December 31, 2005 as well as an
      increase in the average yield on interest-earnings assets to 6.40% for the
      year
      ended December 31, 2006, from 5.90% for the year ended December 31, 2005. The
      increase in the average balance of interest-earnings assets was chiefly due to
      increases in the average balances of loans receivable. The increase in the
      average yield on interest-earning assets was primarily the impact of economic
      conditions that resulted in an increase in rates throughout the year,
      particularly for short and medium term instruments, resulting in the
      reinvestment of prepaid and matured asset at higher rates. In addition, net
      premium amortization on purchased mortgage loans decreased $35,000 to $45,000
      for the year ended December 31, 2006, from $80,000 for the year ended December
      31, 2005 generating a year-over-year improvement.





Interest
      income on loans receivable increased $1.4 million, or 17.2%, to $9.55 million
      compared to the prior year. The increase in interest income on loans was the
      result of a $13.1 million increase in the average balance of loans as well
      as an
      increase in the average yield to 6.51% for the year ended December 31, 2006,
      from 6.10% for the year ended December 31, 2005. The increase in the average
      yield on loans receivable reflects the impact of an increasing interest rate
      environment as lower rate loans were repaid and replaced with higher yield
      new
      originations and purchases. Interest income on mortgage-backed securities
      decreased due to a decrease in the average balance in the portfolio. Interest
      income on the investment portfolio and on interest-bearing deposits rose due
      to
      the overall increase in short-term rates between the periods.





**Interest
      Expense** - Total
      interest expense increased by $1.7 million, or 40.0%, to $5.81 million for
      the
      year ended December 31, 2006 compared to $4.15 million for the year ended
      December 31, 2005. The cost of interest-bearing liabilities increased 83 basis
      points to 3.71% for the year ended December 31, 2006, compared to 2.88% for
      the
      year ended December 31, 2005, as sharply higher short-term interest rates forced
      management to raise the rate on repricing certificates of deposits. The balance
      of interest-bearing liabilities also rose during the year by $12.3 million
      to
      $156.3 million for the year ended December 31, 2006 compared to $144.00 million
      for the year ended December 31, 2005.





Interest
      expense on borrowings increased by $483,000 to $1.83 million for the year ended
      December 31, 2006, compared with the prior year as a result of a $6.5 million
      increase in the average balance of borrowings to $27.2 million for the year
      ended December 31, 2006, from $20.7 million for the year ended December 31,
      2005, as well as an increase of 44 basis points in the average cost of borrowed
      funds. Maturities of lower costing fixed rate FHLB advances refinanced into
      higher cost borrowings and the rate increased on our LIBOR-based trust preferred
      securities.





**Provision
      for Loan Losses** - The
      Company establishes provisions for losses on loans, which are charged to
      operations, in order to maintain the allowance for losses on loans at a level
      which is deemed appropriate to absorb losses inherent in the portfolio. In
      determining the appropriate level of the allowance for loan losses, management
      considers past and anticipated loss experience, evaluations of real estate
      collateral current and anticipated economic conditions, volume and type of
      lending, and the levels of non-performing and other classified loans. The amount
      of the allowance is based on estimates, and ultimate losses may vary from such
      estimates. Management assesses the allowance for losses on loans on a periodic
      basis and makes appropriate provisions to maintain the adequacy of the
      allowance. The actual determination of the total provision is the combination
      of
      specific reserves, which may be established from time to time on individual
      classified assets, and a general reserve that is based in part on certain ratios
      applied to various loan pools as stratified by the Company, considering
      historical charge-offs and delinquency levels.






10





Based
      on
      management’s assessment of the adequacy of the loan loss reserve, the Company
      recorded a provision for loan losses of $248,000 for the year ended December
      31,
      2006 compared to $275,000 in the prior year. There were no changes in estimation
      method or assumptions that impacted the provision for loan losses during the
      year. Net charge-offs were $311,000 and $242,000 during the years ended December
      31, 2006 and 2005, respectively. The allowance for loan losses totaled $686,000
      at December 31, 2006, and $749,000 at December 31, 2005.





**Non-Interest
      Income** -
      Non-interest income for the year ended December 31, 2006 decreased $279,000,
      to
      $1.40 million from $1.68 million for the year ended December 31, 2005. The
      decrease in non-interest income was primarily due to a reduced gain on the
      sale
      of the stock in the Bank’s data processing provider to $39,000 in the current
      year compared to $345,000 recorded in the prior year. In addition, the Company
      recorded an increased loss of $75,000 from the sale and write-down of other
      real
      estate owned properties in the current year compared to the prior year.
      Offsetting these declines was $51,000 in income from real estate operations
      which began in 2006. Loan fee income increased by $54,000 during the year,
      primarily due to increased mortgage release fee income while deposit related
      fee
      income fell by $94,000 due to reduced ATM surcharge fees and to a lesser extent,
      reduced fee income from NOW account overdraft fees. Service fee income relating
      to the Company’s accounts receivable program increased by $56,000 due entirely
      to increased activity from those accounts serviced by the Bank.





In
      addition, the Company also recorded a loss of $41,000 and $72,000 for the years
      ended December 31, 2006 and 2005, respectively, related to an investment in
      a
      low-income housing join venture. As a result of this investment, the Company
      recorded an offsetting $140,000 in federal income tax credits during both years
      which resulted in the reduction of the Company’s effective income tax
      rate.





**Non-Interest
      Expense** - The
      Company’s non-interest expense decreased $31,000 to $4.61 million for the year
      ended December 31, 2006 compared to $4.64 million for the year ended December
      31, 2005. The decrease in non-interest expense resulted primarily from decreased
      data processing costs of $184,000, due to increased efficiencies which were
      undertaken during 2005 as well as significant costs incurred in the prior year
      to convert to a new ATM/debit card platform. In addition, staffing costs
      declined by $21,000, primarily related to $221,000 of ESOP expenses incurred
      in
      the prior year, which offset increases in compensation, pension and other
      benefit costs. Advertising costs increased by $70,000 as many new promotion
      campaigns were undertaken to promote the Bank’s products and image in the local
      community. Professional fees also increased by $63,000 as due in part to
      increased legal and audit fees as well as an extensive loan file review and
      several compliance reviews that occurred during the year.





**Income
      Taxes** - The
      Company recorded a provision for income taxes of $119,000, or an effective
      tax
      rate of 15.5% for the year ended December 31, 2006 compared to $344,000, or
      an
      effective tax rate of 28.6% for the year ended December 31, 2005. Both periods
      were positively impacted by the recognition of approximately $140,000 in
      low-income housing tax credits which have a greater impact on the effective
      tax
      rate in a lower earnings period compared to a higher earnings period. The
      current year’s tax provision was also impacted as a result of amending prior
      years’ state income tax returns which resulted in the Company receiving $25,000
      in refunds.







11






**Comparison
      of the Results of Operations for the Years Ended December 31, 2005 and
      2004** .




**General.** Net
      income for the year ended December 31, 2005 decreased $21,000 to $860,000,
      from
      $881,000 million for the year ended December 31, 2004. Diluted earnings per
      share totaled $.85 per share for the year ended December 31, 2005 and $.87
      per
      share for the year ended December 31, 2004. Return on average stockholders’
equity decreased to 6.20% for the year ended December 31, 2005, from 6.78%
      for
      the year ended December 31, 2004. Return on average assets decreased to .53%
      for
      the year ended December 31, 2005, from .58% for the year ended December 31,
      2004. The decreases in net income and the related return ratios for the year
      ended December 31, 2005 were primarily the result of a decrease in net-interest
      income and increases in non-interest expense discussed below.





**Interest
      Income.** Total
      interest income increased by $697,000, or 8.8%, for the year ended December
      31,
      2005 compared to the year ended December 31, 2004. This increase was the result
      of an increase in the average yield on interest-earning assets to 5.90% for
      the
      year ended December 31, 2005, from 5.77% for the year ended December 31, 2004,
      as well as an increase of $8.9 million in the average balance of
      interest-earning assets to $145.5 million for the year ended December 31, 2005,
      from $136.6 million for the year ended December 31, 2004. The increase in the
      average yield on interest-earning assets was primarily the impact of economic
      conditions that resulted in a steady increase in rates throughout the year,
      particularly for short and medium term instruments, resulting in the
      reinvestment of prepaid or matured assets at higher rates. Net premium
      amortization on the mortgage-backed securities and mortgage loan portfolio
      decreased $12,000 to $88,000 for the year ended December 31, 2005, from $100,000
      for the year ended December 31, 2004 generating a year-over-year improvement
      in
      interest income. The increase in the average balance of interest-earning assets
      was primarily due to increases in the average balance of loans receivable.





Interest
      income on loans receivable increased $611,000 to $8.2 million compared to the
      prior year. The increase in interest income on loans was the result of an
      increase in the average yield to 6.10% for the year ended December 31, 2005,
      from 6.06% for the year ended December 31, 2004, as well as by a $9.0 million
      increase in the average balance of loans. The increase in the average yield
      on
      loans receivable reflects the impact of a steadily increasing interest rate
      environment as lower rate loans were repaid and replaced with higher yielding
      new originations and purchases. Interest income on mortgage-backed securities
      decreased due to a decrease in the average balance in the MBS portfolio.
      Interest income on investment securities increased as a result of an increase
      in
      the balance of the portfolio and as a benefit of an increase in rates paid
      on
      investments into this portfolio. The interest income on interest-bearing
      deposits rose due to the overall increase in rates on this floating rate
      asset.





**Interest
      Expense** .
      Total
      interest expense rose by $716,000, or 20.86%, for the year ended December 31,
      2005 compared to the year ended December 31, 2004. The cost of interest bearing
      liabilities increased 35 basis points to 2.88% for the year ended December
      31,
      2005, compared to 2.53% for the year ended December 31, 2004, as higher interest
      rates moved management to raise its cost of repricing certificates of deposit
      and, to a lesser extent, to increase the rates offered on non-certificate
      accounts compared to the prior year. Although the movement in interest rates
      appears to be upward in the near term, some moderation in rates is expected
      to
      occur later in the year.





Interest
      expense on borrowings increased by $185,000 as a result of a 20 basis point
      lift
      in the average cost of borrowed funds. Maturities of lower costing fixed rate
      FHLB advances refinanced into higher cost borrowings and the rate increased
      on
      the Company’s LIBOR-based trust preferred securities.





**Provision
      for Loan Losses.** The
      Company establishes provisions for losses on loans, which are charged to
      operations, in order to maintain the allowance for losses on loans at a level
      which is deemed appropriate to absorb losses inherent in the portfolio. In
      determining the appropriate level of the allowance for loan losses, management
      considers past and anticipated loss experience, evaluations of real estate
      collateral, current and anticipated economic conditions, volume and type of
      lending, and the levels of non-performing and other classified loans. The amount
      of the allowance is based on estimates, and ultimate losses may vary from such
      estimates. Management assesses the allowance for losses on loans on a periodic
      basis and makes appropriate provisions to maintain the adequacy of the allowance
      to cover probable accrued losses in the loan portfolio. The actual determination
      of the total provision is the combination of specific reserves, which may be
      established from time to time on individual classified assets, and a general
      reserve that is based in part on certain ratios applied to various loan pools
      as
      stratified by the Company, considering historical charge-offs and delinquency
      levels.






12





Based
      on
      management’s assessment of the adequacy of the loan loss reserve, the Company
      recorded a provision for loan losses of $275,000 for the year ended December
      31,
      2005 compared to $189,000 in the prior year. There were no changes in estimation
      method or assumptions that impacted the provision for loan losses during the
      year. Net charge-offs were $242,000 and $506,000 during the years ended December
      31, 2005 and 2004, respectively.





The
      allowance for loan losses totaled $749,000 at December 31, 2005, and $716,000
      at
      December 31, 2004. Non-performing loans were $2.11 million at December 31,
      2005
      compared to $1.61 million at December 31, 2004. The allowance for loan losses
      as
      a percentage of non-performing loans decreased to 35.6% at December 31, 2005,
      from 44.5% at December 31, 2004, primarily due to an increase in non-performing
      loans from December 31, 2004 to December 31, 2005. The allowance for loan losses
      as a percentage of total loans decreased to .53% at December 31, 2005 from
      .55%
      at December 31, 2004.





**Non-Interest
      Income** .
      Non-interest income for the year ended December 31, 2005 increased $443,000
      to
      $1.7 million from $1.2 million for the year ended December 31, 2004. The most
      significant contribution to this increase was a $345,166 gain on sale of
      Intrieve stock, the bank’s data processing provider. An improvement of $156,000
      to non-interest income came from a change in the bank’s overdraft handling
      procedures. This change provided additional benefit to the bank’s customers and
      should be an ongoing source of additional revenue to the bank. Service charges
      on deposit accounts generated an increase of $14,000 for the year. Detracting
      from the overall increase in fee income was a decrease in ATM surcharge fees
      of
      $65,000, primarily due to the Company’s closing of two casino ATMs and a slight
      reduction in loan fees and charges due to lower bank refinance and modification
      activity.





In
      addition, the Company also recorded a loss of $72,000 and $82,000 for the years
      ended December 31, 2005 and 2004, respectively, related to an investment in
      a
      low-income housing joint venture. As a result of this investment, the Company
      recorded an offsetting $140,000 in federal income tax credits during both years
      which resulted in the reduction of the Company’s effective income tax
      rate.





**Non-Interest
      Expense** .
      The
      Company’s non-interest expense increased $366,000 to $4.6 million for the year
      ended December 31, 2005 compared to $4.3 million for the year ended December
      31,
      2004. The increase in non-interest expense resulted primarily from increased
      staffing costs of $163,000, due to normal salary and benefit increases of
      $119,000, increased pension expense of $95,000 and a decrease of $38,000 in
      ESOP
      expense. An additional increase in non-interest expense came from Data
      processing costs, rising $102,000 to $660,000. This increase was due to an
      increase in the volume of transactions processed, additional services requested
      by the company, and the Company’s decision to convert all ATM and debit card
      processing services from a third party vendor to the Company’s data processing
      provider. Advertising expense rose from $47,000 from year-to-year as the
      organization was able to more fully utilize the bank’s new marketing
      director.




**Income
      Taxes** .
      The
      Company recorded a provision for income taxes of $344,000, or an effective
      tax
      rate of 28.6% for the year ended December 31, 2005 compared to $350,000, or
      an
      effective tax rate of 28.4% for the year ended December 31, 2004. Both periods
      were positively impacted by the recognition of approximately $140,000 in
      low-income housing tax credits which have a greater impact on the effective
      tax
      rate in a lower earnings period compared to a higher earnings
      period.







13






**Qualitative
      and Quantitative Disclosure of Market Risk**





The
      principal objectives of the Company's interest rate risk management activities
      are to: (i) define an acceptable level of risk based on the Company's business
      focus, operating environment, capital and liquidity requirements, and
      performance objectives; (ii) quantify and monitor the amount of interest rate
      risk inherent in its asset/liability structure; and (iii) modify the Company's
      asset/liability structure, as necessary, to manage interest rate risk and net
      interest margins ** in
      changing rate environments. Management seeks to achieve these objectives through
      an analysis of the value of the Company’s net portfolio value (“NPV”) under
      different interest rate scenarios and the ratio of interest rate sensitive
      assets to interest rate sensitive liabilities within specified maturities or
      repricing periods. The Company does not currently engage in the use of
      off-balance sheet derivative instruments to control ** interest
      rate risk and management does not intend to engage in such activity in the
      immediate future.





Notwithstanding
      the Company's interest rate risk management activities, the potential for
      changing interest rates is an uncertainty that could have an adverse effect
      on
      the earnings and net asset value of the Company. When interest-bearing
      liabilities mature or reprice more quickly than interest-earning assets in
      a
      given period, a significant increase in market interest rates could adversely
      affect net interest income. Similarly, when interest-earning assets mature
      or
      reprice which can occur through the prepayment of long-term loans more quickly
      than interest-bearing liabilities and net asset value, falling interest rates
      could result in a decrease in net interest income and net asset value. Also,
      changes in interest rates usually have an impact on the value of the Company’s
      financial assets. Finally, a flattening or inversion of the "yield curve" (i.e.,
      a narrowing of the spread between long- and short-term interest rates), could
      adversely impact net interest income to the extent that the Company's assets
      have a longer average term than its liabilities.





In
      managing the Company's asset/liability position, the Board and management
      attempt to manage the Company's interest rate risk while enhancing net interest
      margins. However, the Board of Directors generally believes that the increased
      net interest income resulting ** from
      a
      mismatch in the maturity of the Company's asset and liability portfolios can,
      during periods of declining or stable interest rates and periods in which there
      is a substantial positive difference between long- and short-term interest
      rates
      (i. *e.,* a
“positively sloped yield curve”), can provide high enough returns to justify the
      increased exposure to sudden and unexpected increases in interest rates. As
      a
      result, the Company's results of ** operations
      and net portfolio values remain significantly vulnerable to increases in
      interest rates and to fluctuations in the difference between long- and
      short-term interest rates. In particular, our net interest margin has been
      adversely affected by the current inverted yield curve interest rate
      environment.





Consistent
      with its asset/liability management ** philosophy,
      the Company has taken several steps to manage its interest rate risk. First,
      the
      Company maintains a portfolio of interest rate sensitive loans. At December
      31,
      2006, adjustable-rate or short-term (three years or less) loans represented
      $58.7 million *,* or 38.9%
      of the total loan portfolio. Second, the Company has a substantial amount of
      regular savings, transaction, money market and club accounts, which may be
      less
      sensitive to changes in interest rates than certificate accounts. At December
      31, 2006 the Company had $17.6 million of regular savings accounts, $10.9
      million of money market accounts and $15.5 million of NOW, checking and club
      accounts. Overall, these accounts comprised 35.9% of the Company's total deposit
      base. Finally, a portion of the Company’s recent borrowings have terms to
      maturity or call of three years or more. At December 31, 2006, $9.8 million
      or
      28.7% of the Company’s borrowings had remaining terms to maturity or call of
      three years or more.





One
      approach used by management to monitor its exposure to interest rate risk is
      the
      NPV analysis. The NPV represents the excess of the present value of expected
      cash flows from assets over the present value of expected cash flows from
      liabilities. The NPV model estimates the sensitivity of the Bank’s NPV over a
      series of instantaneous and sustained parallel shifts in interest
      rates.





Presented
      below, as of December 31, 2006 and 2005, is an analysis of the Bank’s interest
      rate risk as measured by changes in NPV for instantaneous and sustained parallel
      shifts in the yield curve in 100 basis point (1%) increments, up to 300 basis
      points and down 100 basis points in 2005 and 2004 in accordance with OTS
      regulations. As illustrated in the table, the Bank’s NPV is more sensitive to
      rising rates than declining rates. From an overall perspective, such difference
      in sensitivity occurs principally because, as rates rise, borrowers do not
      prepay fixed rate loans as quickly as they do when interest rates are declining.
      Also, the interest the Bank would pay on its deposits in the event of a rate
      increase would increase more rapidly than the yield on its assets because the
      Bank’s deposits generally have shorter periods to repricing.






14





**NET
        PORTFOLIO BALANCES**


**Year
        Ended December 31,**





**Assumed**
                **Change
                  in Interest Rates**
              
              **2006**
              
              **2005****(Basis
                  Points)**
              
              **$
                  Amount**
              
              **$
                  Change**
              
              **%
                  Change**
              
              **$
                  Amount**
              
              **$
                  Change**
              
              **%
                  Change**(dollars
                  in thousands)+
                  300
              
              12,359
              
              (6,415)
              
              (34)
              
              11,106
              
              (6,885)
              
              (38)+
                  200
              
              14,738
              
              (4,036)
              
              (21)
              
              13,504
              
              (4,487)
              
              (25)+
                  100
              
              16,973
              
              (1,801)
              
              (10)
              
              15,843
              
              (2,148)
              
              (12)18,774
              
              
              
              
              
              17,991-
                  100
              
              19,916
              
              1,141
              
              6
              
              19,465
              
              1,474
              
              8


Certain
      assumptions utilized by the OTS in assessing the interest rate risk of thrift
      institutions were employed in preparing the preceding table. These assumptions
      relate to interest rates, loan prepayment rates, deposit decay rates, and the
      market values of certain assets under the various interest rate scenarios.
      It
      was also assumed that delinquency rates would not change as a result of changes
      in interest rates although there can be no assurance that this will be the
      case.
      Even if interest rates change in the designated amounts, there can be no
      assurance that the Bank's assets and liabilities would perform as set forth
      above. In addition, a change in U.S. Treasury rates in the designated amounts
      accompanied by a change in the shape of the Treasury yield curve would cause
      significantly different changes to the NPVs indicated above.





Other
      types of market risk, such as foreign currency exchange risk and commodity
      price
      risk, do not arise in the normal course of the Company’s business
      activities.








**Liquidity
      and Capital Resources.** The
      Company's primary sources of funds are deposits, borrowings, principal and
      interest payments on loans and securities and, to a lesser extent, proceeds
      from
      the sale of loans and securities. While maturities and scheduled amortization
      of
      loans and securities provide a relatively predictable flow of funds, other
      sources of funds such as loan prepayments and deposit inflows are less
      predictable due to the effects of changes in interest rates, economic conditions
      and competition.





The
      primary investing activity of the Company is the origination and purchase of
      real estate and other loans. During the years ended December 31, 2006, and
      2005,
      the Company's disbursements for loan originations totaled $49.3 million, and
      $41.8 million, respectively, and loan purchases totaled $7.3 million and $11.8
      million, respectively.





For
      the
      year ended December 31, 2006, the Company experienced a net decrease in deposits
      (including the effect of interest credited) of $2.6 million as compared to
      a net
      increase in deposits of $11.8 million during 2005. New FHLB advances in fiscal
      2006 totaled $20.0 million, compared to $5.0 million in fiscal 2005. FHLB
      advances of $6.7 million and $3.0 million were repaid in fiscal 2006 and 2005,
      respectively. The necessary liquidity needed during 2006 was obtained through
      the increased FHLB advances due to slightly more favorable advance rates, which
      required less dependence on deposits. The decline in deposits during 2006 was
      primarily attributable to increased competition or deposit accounts in the
      flat
      yield curve environment.





The
      Company may borrow funds from the FHLB of Indianapolis subject to certain
      limitations. Based on the level of qualifying collateral available to secure
      advances, at December 31, 2006, the Company's borrowing limit from the FHLB
      of
      Indianapolis was approximately $52.8 million, with unused borrowing capacity
      of
      $37.8 million at that date.





The
      Company's most liquid assets are cash and cash equivalents, which include highly
      liquid short-term investments (such as money market mutual funds) that are
      readily convertible to known amounts of cash. The level of these assets is
      dependent on the Company's operating, financing and investing activities during
      any given period. At December 31, 2005 and 2004, cash and cash equivalents
      totaled $9.7 million and $9.0 million, respectively.






15







At
      December 31, 2006, the Company had outstanding loan origination commitments
      of
      $2.7 million on 1 to 4 family residential real estate loans and $478,000 for
      non-residential real estate loans. Undisbursed loans in process totaled $1.4
      million at year-end and approved but unused lines of credit were $4.9 million.
      The Company anticipates that it will have sufficient funds available to meet
      its
      current loan origination and other commitments. Certificates of deposit
      scheduled to mature in one year or less from December 31, 2006 totaled $72.3
      million. Based on the Company's most recent experience and pricing strategy,
      management believes that a significant portion of such deposits will remain
      with
      the Company.





The
      OTS
      capital regulations require savings institutions to meet two minimum capital
      standards: a 3% leverage (core capital) ratio and an 8% risk-based capital
      ratio. The Bank satisfied these minimum capital standards at December 31, 2006
      with a leverage capital ratio of 8.74% and a total risk-based capital ratio
      of
      14.93%. In determining the amount of risk-weighted assets for purposes of the
      risk-based capital requirement, a savings institution must compute its
      risk-based assets by multiplying its assets and certain off-balance sheet items
      by risk-weights, which range from 0% for cash and obligations issued by the
      United States Government or its agencies to 100% for consumer and commercial
      loans, as assigned by the OTS capital regulations. These capital requirements,
      which are applicable to the Bank only, do not consider additional capital held
      at the Company level, and require certain adjustments to stockholder's equity
      to
      arrive at the various regulatory capital amounts.





The
      Bank
      may not declare or pay cash dividends on or repurchase any of its shares of
      common stock if the effect thereof would cause equity to be reduced below
      applicable regulatory capital requirements or the amount required to be
      maintained for the liquidation account established in connection with the
      Conversion. The Bank paid $800,000 in dividends to the Company for the year
      ending December 31, 2006 and paid no dividends for the years ending December
      31,
      2005 and 2004. Unlike the Bank, the Company is not subject to OTS regulatory
      restrictions on the payment of dividends to its shareholders; however, it is
      subject to the requirements of Delaware law. Delaware law generally limits
      dividends to an amount equal to the excess of the net assets of the Company
      (the
      amount by which total assets exceed total liabilities) over its statutory
      capital, or if there is no such excess, to its profits for the current and/or
      immediately preceding fiscal year.





**Impact
      of Inflation and Changing Prices.**





The
      consolidated financial statements and related data presented herein have been
      prepared in accordance with GAAP, which require the measurement of financial
      position and operating results in terms of historical dollars without
      considering the changes in the relative purchasing power of money over time
      due
      to inflation. The impact of inflation is reflected in the increased cost of
      the
      Company's operations. Unlike industrial companies, nearly all of the assets
      and
      liabilities of the Company are monetary in nature. As a result, interest rates
      have a greater impact on the Company's performance than do the effects of
      general levels of inflation. Interest rates do not necessarily move in the
      same
      direction or to the same extent as the price of goods and services.







16







**Impact
      of New Accounting Standards**





The
      following does not constitute a comprehensive summary of all material changes
      or
      developments affecting the manner in which the Company keeps its books and
      records and performs its financial accounting responsibilities. It is intended
      only as a summary of some of the recent pronouncements made by the Financial
      Accounting Standards Board (“FASB”), which are of particular interest to
      financial institutions.





**Accounting
      for Servicing of Financial Assets -** In
      March
      2006, the FASB issued Statement No. 156, “Accounting for Servicing of Financial
      Assets” (“SFAS No. 156"), which requires all separately recognized servicing
      assets and liabilities to be initially measured at fair value, if practical.
      An
      entity can elect either to (1) subsequently measure servicing rights at fair
      value and report changes in fair value in earnings, or (2) continue the current
      practice of amortizing servicing rights in proportion to and over the expected
      period of servicing income or loss. The statement also permits entities, at
      the
      date of adoption, a one-time option to reclassify certain available-for-sale
      (“AFS”) securities to trading securities, without calling into question the
      classification of other AFS securities under Statement No. 115, “Accounting for
      Certain Investments in Debt and Equity Securities,” provided that the AFS
      securities are identified as offsetting the entity’s exposure to changes in fair
      value of servicing assets or liabilities that the entity has elected to
      subsequently measure at fair value. This statement is effective for fiscal
      years
      beginning after September 15, 2006. The Company does not believe that adoption
      of this statement will have any significant impact on its financial position
      and
      results of operations.





**Accounting
      for Uncertainty in Income Taxes -** In
      July
      2006, the FASB issued FASB Interpretation No. 48, Accounting for Uncertainty
      in
      Income Taxes, an interpretation of SFAS 109 (FIN 48) which establishes a
      recognition threshold and measurement for income tax positions recognized in
      an
      enterprise’s financial statements in accordance with SFAS 109, Accounting for
      Income Taxes. FIN 48 also prescribes a two-step evaluation process for tax
      positions. The first step is recognition and the second is measurement. For
      recognition, an enterprise judgmentally determines whether it is
      more-likely-than-not that a tax position will be sustained upon examination,
      including resolution of related appeals or litigation processes, based on the
      technical merits of the position. If the tax position meets the
      more-likely-than-not recognition threshold, it is measured and recognized in
      the
      financial statements as the largest amount of tax benefit that is greater than
      50% likely of being realized. If a tax position does not meet the
      more-likely-than-not recognition threshold, the benefit of that position is
      not
      recognized in the financial statements.





Tax
      positions that meet the more-likely-than-not recognition threshold at the
      effective date of FIN 48 may be recognized or, continue to be recognized, upon
      adoption of this Interpretation. The cumulative effect of applying the
      provisions of FIN 48 shall be reported as an adjustment to the opening balance
      of retained earnings for that fiscal year. FIN 48 is effective for fiscal years
      beginning after December 15, 2006. Accordingly, the Company adopted FIN 48
      on
      January 1, 2007. The Company does not believe that adoption of FIN 48 will
      have
      any significant impact on its financial condition or results of operations.





**Fair
      Value Measurements -** In
      September 2006, the FASB issued Statement of Financial Accounting Standards
      No.
      157, Fair Value Measurements (SFAS 157), which defines fair value, establishes
      a
      framework for measuring fair value, and expands disclosures about fair value
      measurements required under other accounting pronouncements, but does not change
      existing guidance as to whether or not an instrument is carried at fair value.
      Additionally, it establishes a fair value hierarchy that prioritizes the
      information used to develop those assumptions. SFAS 157 is effective for
      financial statements issued for fiscal years beginning after November 15, 2007
      and interim periods within those fiscal years. Earlier application is encouraged
      provided that the reporting entity has not yet issued financial statements
      for
      that fiscal year, including financial statements for an interim period within
      that fiscal year. The Company does not expect the adoption of SFAS 157 to have
      a
      material impact on its financial condition or results of
      operations.






17





**Accounting
      for Deferred Benefit Pension and Other Postretirement Plans -** In
      October 2006, the FASB issued SFAS No. 158, Employers’ Accounting for Defined
      Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements
      No. 87,88, 106 and 132(R) (SFAS 158) which does not change the amount of net
      periodic benefit cost included in net income or address the various measurement
      issues associated with postretirement benefit plan accounting. SFAS 158 requires
      an entity to recognize in its statement of financial position an asset for
      a
      defined benefit postretirement plan’s overfunded status or a liability for a
      plan’s underfunded status, measure a defined benefit postretirement plan’s
      assets and obligations that determine its funded status as of the end of the
      employer’s fiscal year, and recognize changes in the funded status of a defined
      benefit postretirement plan in comprehensive income in the year in which the
      changes occur. SFAS 158 is effective for fiscal years ending after December
      15,
      2006. Adoption of SFAS 158 in the current year did not have a significant impact
      on the Company’s financial condition and results of operations since the Company
      participates in a multi-employer defined benefit pension plan.











18



















Consolidated
      Financial Statements










19






Cobitz,
        VandenBerg & Fennessy
 CERTIFIED
        PUBLIC ACCOUNTANTS
 9944
        S.
        Roberts Road · Suite 202
 Palos
        Hills, Illinois 60465
 —
 (708)
        430-4106 ·  FAX (708) 430-4499
 
 
 **INDEPENDENT
        AUDITORS' REPORT**
   The
        Board
        of Directors
 AMB
        Financial Corp.
 
 
 We
        have
        audited the consolidated statements of financial condition of AMB Financial
        Corp. and subsidiaries as of December 31, 2006 and 2005, and the related
        consolidated statements of income, changes in stockholders' equity and cash
        flows for each of the three years in the period ending December 31, 2006.
        These
        consolidated financial statements are the responsibility of the Company's
        management. Our responsibility is to express an opinion on these consolidated
        financial statements based on our audits.
 
 We
        conducted our audits in accordance with standards of the Public Company
        Accounting Oversight Board (United States). Those standards require that
        we plan
        and perform the audit to obtain reasonable assurance about whether the
        consolidated financial statements are free of material misstatements. An
        audit
        includes examining, on a test basis, evidence supporting the amounts and
        disclosures in the consolidated financial statements. An audit also includes
        assessing the accounting principles used and significant estimates made by
        management, as well as evaluating the overall consolidated financial statement
        presentation. We believe that our audits provide a reason-able basis for
        our
        opinion.
 
 In
        our
        opinion, the consolidated financial statements referred to above present
        fairly,
        in all material respects, the financial position of AMB Financial Corp. and
        subsidiaries at December 31, 2006 and 2005, and the results of their operations
        and their cash flows for each of the three years in the period ending December
        31, 2006, in conformity with accounting principles generally accepted in
        the
        United States of America.
 
  /s/
        Cobitz, VandenBerg & Fennessy
 
 January
        12, 2007
 Palos
        Hills, Illinois
 
 
 20
  AMB
        FINANCIAL CORP.
 AND
        SUBSIDIARIES
 
 Consolidated
        Statements of Financial Condition
  December
                    31,2006
                
                2005AssetsCash
                    and amounts due from depository institutions
                
                $
                4,224,462
                
                
                4,662,586Interest-bearing
                    deposits
                
                
                5,503,380
                
                
                4,376,425Total
                    cash and cash equivalents
                
                
                9,727,842
                
                
                9,039,011Investment
                    securities, available for sale, at fair value (note 2)
                
                
                3,178,431
                
                
                3,188,251Trading
                    securities (note 3)
                
                
                339,275
                
                
                329,045Mortgage-backed
                    securities, available for sale, at fair value (note 4)
                
                
                1,252,251
                
                
                1,664,278Loans
                    receivable (net of allowance for loan losses:2006
                    - $686,467; 2005 - $748,859) (note 5)
                
                
                150,701,080
                
                
                140,034,877Real
                    estate owned
                
                
                1,081,113
                
                
                584,206Investment
                    in limited partnership (note 6)
                
                
                757,129
                
                
                797,948Stock
                    in Federal Home Loan Bank of Indianapolis, at cost
                
                
                1,750,900
                
                
                1,802,600Accrued
                    interest receivable (note 7)
                
                
                796,354
                
                
                706,561Office
                    properties and equipment - net (note 8)
                
                
                2,856,432
                
                
                2,391,489Real
                    estate held for development (note 9)
                
                
                1,881,551
                
                
                1,352,611Bank
                    owned life insurance
                
                
                3,614,272
                
                
                3,491,606Prepaid
                    expenses and other assets (note 10)
                
                
                4,345,847
                
                
                5,083,393Total
                    assets
                
                
                182,282,477
                
                
                170,465,876Liabilities
                    and Stockholders' EquityLiabilities:Deposits
                    (note 11)
                
                
                124,858,001
                
                
                127,434,994Borrowed
                    money (note 12)
                
                
                34,317,589
                
                
                21,011,756Junior
                    subordinated debentures (note 13)
                
                
                5,000,000
                
                
                5,000,000Note
                    payable
                
                
                342,567
                
                
                480,476Advance
                    payments by borrowers for taxes and insurance
                
                
                -
                
                
                401,967Other
                    liabilities (note 14)
                
                
                2,701,185
                
                
                2,394,018Total
                    liabilities
                
                
                167,621,309
                
                
                156,321,244Stockholders'
                    Equity:Preferred
                    stock, $.01 par value: authorized100,000
                    shares; none outstanding
                
                
                -
                
                
                -Common
                    stock, $.01 par value: authorized 1,900,000 shares;1,686,169
                    shares issued and 1,046,350 shares outstanding atDecember
                    31, 2006 and 984,648 shares outstanding at December 31,
                    2005
                
                
                16,862
                
                
                16,862Additional
                    paid-in capital
                
                
                11,519,168
                
                
                11,391,083Retained
                    earnings, substantially restricted
                
                
                9,963,363
                
                
                10,021,965Accumulated
                    other comprehensive loss, net of tax
                
                
                (24,650
                )
                
                (18,870
                )Treasury
                    stock, at cost (639,819 and 701,521 shares atDecember
                    31, 2006 and 2005)
                
                
                (6,813,575
                )
                
                (7,266,408
                )Common
                    stock acquired by Employee Stock Ownership Plan
                
                
                -
                
                
                -Total
                    stockholders' equity (notes 18 and 19)
                
                
                14,661,168
                
                
                14,144,632Commitments
                    and contingencies (notes 20 and 21)Total
                    liabilities and stockholders' equity
                
                $
                182,282,477
                
                
                170,465,876
 See
        accompanying notes to consolidated financial statements.
 
 21
  AMB
        FINANCIAL CORP.
 AND
        SUBSIDIARIES
 
 Consolidated
        Statements of Income
  Years
                    Ended December 31,2006
                
                2005
                
                2004Interest
                    income:Interest
                    on loans
                
                $
                9,553,222
                
                
                8,152,121
                
                
                7,541,266Interest
                    on mortgage-backed securities
                
                
                69,566
                
                
                90,049
                
                
                123,039Interest
                    on investment securities
                
                
                166,546
                
                
                114,952
                
                
                80,687Interest
                    on interest-bearing deposits
                
                
                151,854
                
                
                148,977
                
                
                67,644Dividends
                    on Federal Home Loan Bank stock
                
                
                85,875
                
                
                78,545
                
                
                74,646Total
                    interest income
                
                
                10,027,063
                
                
                8,584,644
                
                
                7,887,282Interest
                    expense:Interest
                    on deposits
                
                
                3,974,567
                
                
                2,800,411
                
                
                2,269,027Interest
                    on borrowings
                
                
                1,832,504
                
                
                1,348,978
                
                
                1,164,386Total
                    interest expense
                
                
                5,807,071
                
                
                4,149,389
                
                
                3,433,413Net
                    interest income
                
                
                4,219,992
                
                
                4,435,255
                
                
                4,453,869Provision
                    for loan losses (note 5)
                
                
                248,146
                
                
                274,845
                
                
                189,198Net
                    interest income after provision for loan losses
                
                
                3,971,846
                
                
                4,160,410
                
                
                4,264,671Non-interest
                    income:Loan
                    fees and service charges
                
                
                227,514
                
                
                173,487
                
                
                178,609Deposit
                    related fees
                
                
                480,986
                
                
                574,782
                
                
                474,634Other
                    fee income
                
                
                430,821
                
                
                374,052
                
                
                293,140Rental
                    income
                
                
                139,086
                
                
                138,413
                
                
                137,053Unrealized
                    gain (loss) on trading securities - net
                
                
                10,230
                
                
                (50,993
                )
                
                27,494Gain
                    on sale of trading securities
                
                
                -
                
                
                42,821
                
                
                6,876Loss
                    on sale of investment securities
                
                
                -
                
                
                (11,269
                )
                
                -(Loss)
                    gain on sale of real estate owned - net
                
                
                (78,513
                )
                
                (4,189
                )
                
                14,445Loss
                    from limited partnership (note 6)
                
                
                (40,819
                )
                
                (71,750
                )
                
                (82,300
                )Income
                    from real estate held for development
                
                
                50,598
                
                
                -
                
                
                -Gain
                    on sale of other assets (note 10)
                
                
                38,851
                
                
                345,166
                
                
                -Gain
                    from life insurance proceeds
                
                
                -
                
                
                -
                
                
                26,678Increase
                    in cash surrender value of life insurance
                
                
                122,666
                
                
                118,494
                
                
                134,608Other
                    income
                
                
                23,318
                
                
                54,025
                
                
                28,637Total
                    non-interest income
                
                
                1,404,738
                
                
                1,683,039
                
                
                1,239,874Non-interest
                    expense:Staffing
                    costs (notes 15 and 16)
                
                
                2,327,335
                
                
                2,348,057
                
                
                2,184,709Advertising
                
                
                250,282
                
                
                180,168
                
                
                133,286Occupancy
                    and equipment expenses (note 8)
                
                
                428,362
                
                
                427,937
                
                
                411,421Data
                    processing
                
                
                475,599
                
                
                659,849
                
                
                558,225Professional
                    fees
                
                
                305,433
                
                
                242,779
                
                
                250,856Federal
                    deposit insurance premiums
                
                
                16,028
                
                
                16,331
                
                
                17,261Other
                
                
                806,205
                
                
                764,917
                
                
                718,304Total
                    non-interest expense
                
                
                4,609,244
                
                
                4,640,038
                
                
                4,274,062Income
                    before income taxes
                
                
                767,340
                
                
                1,203,411
                
                
                1,230,483Income
                    taxes (note 17)
                
                
                119,072
                
                
                343,669
                
                
                349,849Net
                    income
                
                $
                648,268
                
                
                859,742
                
                
                880,634Earnings
                    per share -Basic
                
                $
                .64
                
                
                .90
                
                
                .94Diluted
                
                $
                .64
                
                
                .85
                
                
                .87
 See
        accompanying notes to consolidated financial statements.
 
 22
  AMB
        FINANCIAL CORP.
 AND
        SUBSIDIARIES
 
 Consolidated
        Statements of Changes in Stockholders' Equity
 
 Three
        Years Ended December 31, 2006
 
 AccumulatedAdditional
              
              
              
              
              
              Other
              
              
              
              
              
              CommonCommon
              
              Paid-in
              
              Retained
              
              Income
              
              Comprehensive
              
              Treasury
              
              StockStock
              
              Capital
              
              Earnings
              
              (Loss)
              
              Stock
              
              by
                  ESOP
              
              Total
              
              AcquiredBalance
                  at December 31, 2003
              
              $
              16,862
              
              
              11,066,882
              
              
              9,006,790
              
              
              54,067
              
              
              (7,445,132
              )
              
              (179,860
              )
              
              12,519,609Comprehensive
                  income:Net
                  income
              
              
              
              
              
              
              
              
              
              
              
              880,634
              
              
              
              
              
              
              
              
              
              
              
              880,634Other
                  comprehensive loss, net of tax:Unrealized
                  holding loss during the year
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (48,882
              )
              
              
              
              
              (48,882
              )Total
                  comprehensive income
              
              
              
              
              
              
              
              
              
              
              
              880,634
              
              
              (48,882
              )
              
              
              
              
              
              
              
              831,752Purchase
                  of treasury stock (5,100 shares)
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (74,269
              )
              
              
              
              
              (74,269
              )Exercise
                  of 70,716 stock options and reissuance of treasury
                  stock
              
              
              
              
              
              
              
              
              (204,454
              )
              
              
              
              
              310,368
              
              
              
              
              
              105,914Repurchase
                  of 10,537 stock options
              
              
              
              
              
              
              
              
              (108,215
              )
              
              
              
              
              
              
              
              
              
              
              
              
              
              (108,215
              )Tax
                  benefit related to stock options exercised
              
              
              
              
              
              
              
              
              91,568
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              91,568Appreciation
                    in fair value of shares charged to expense for ESOP
                    plan
              
              
              
              
              
              
              
              
              177,300
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              177,300Contribution
                  to fund ESOP loan
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              89,930
              
              
              89,930Dividends
                    declared on common stock ($.24 per share)
              
              
              
              
              
              
              
              
              
              
              
              (224,172
              )
              
              
              
              
              
              
              
              
              
              
              (224,172
              )Balance
                  at December 31, 2004
              
              
              16,862
              
              
              11,227,535
              
              
              9,458,798
              
              
              5,185
              
              
              (7,209,033
              )
              
              (89,930
              )
              
              13,409,417Comprehensive
                  income:Net
                  income
              
              
              
              
              
              
              
              
              
              
              
              859,742
              
              
              
              
              
              
              
              
              
              
              
              859,742Other
                  comprehensive loss, net of tax:Unrealized
                  holding loss during the year
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (30,816
              )
              
              
              
              
              
              
              
              (30,816
              )Add:
                    Reclassification adjustment of losses included in net
                    income
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              6,761
              
              
              
              
              
              6,761Total
                  comprehensive income
              
              
              
              
              
              
              
              
              
              
              
              859,742
              
              
              (24,055
              )
              
              
              
              
              
              
              
              835,687Purchase
                  of treasury stock (11,618 shares)
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (166,187
              )
              
              
              
              
              (166,187
              )Exercise
                    of 10,505 stock options, and reissuance of treasury
                    stock
              
              
              
              
              
              
              
              
              
              
              
              (37,378
              )
              
              
              
              
              108,812
              
              
              
              
              
              71,434Tax
                  benefit related to stock options exercised
              
              
              
              
              
              
              
              
              27,839
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              27,839Appreciation
                    in fair value of sharescharged to expense
                  for ESOP plan
              
              
              
              
              
              
              
              
              135,709
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              135,709Contribution
                  to fund ESOP loan
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              89,930
              
              
              89,930Dividends
                    declared oncommon stock ($.27 per
                  share)
              
              
              
              
              
              
              
              
              (259,197
              )
              
              
              
              
              
              
              
              
              
              
              
              
              
              (259,197
              )Balance
                  at December 31, 2005
              
              
              16,862
              
              
              11,391,083
              
              
              10,021,965
              
              
              (18,870
              )
              
              (7,266,408
              )
              
              -
              
              
              14,144,632Comprehensive
                  income:Net
                  income
              
              
              
              
              
              
              
              
              
              
              
              648,268
              
              
              
              
              
              
              
              
              
              
              
              648,268Other
                  comprehensive loss, net of tax:Unrealized
                  holding loss during the year
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (5,780
              )
              
              
              
              
              
              
              
              (5,780
              )Total
                  comprehensive income
              
              
              
              
              
              
              
              
              
              
              
              648,268
              
              
              (5,780
              )
              
              
              
              
              
              
              
              642,488Purchase
                  of treasury stock (28,001 shares)
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (420,505
              )
              
              
              
              
              (420,505
              )Exercise
                    of 106,352 stock options,and reissuance of
                  treasury stock
              
              
              
              
              
              
              
              
              
              
              
              (391,555
              )
              
              
              
              
              873,338
              
              
              
              
              
              481,783Tax
                  benefit related to stock options exercised
              
              
              
              
              
              
              
              
              78,066
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              78,066Stock
                  option compensation
              
              
              
              
              
              50,019
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              50,019Dividends
                    declared oncommon stock ($.31 per
                  share)
              
              
              
              
              
              
              
              
              (315,315
              )
              
              
              
              
              
              
              
              
              
              
              
              
              
              (315,315
              )Balance
                  at December 31, 2006
              
              $
              16,862
              
              
              11,519,168
              
              
              9,963,363
              
              
              (24,650
              )
              
              (6,813,575
              )
              
              -
              
              
              14,661,168
 See
        accompanying notes to consolidated financial statements.
 
 23
  AMB
        FINANCIAL CORP.
 AND
        SUBSIDIARIES
 
 Consolidated
        Statements of Cash Flows
 
 
 Years
                  Ended December 31,2006
              
              2005
              
              2004Cash
                  flows from operating activities:Net
                  income
              
              $
              648,268
              
              
              859,742
              
              
              880,634Items
                  not requiring (providing) cash:Depreciation
              
              
              200,411
              
              
              204,650
              
              
              229,479Amortization
                  of cost of stock benefit plans
              
              
              -
              
              
              89,930
              
              
              89,930Stock
                  option compensation
              
              
              50,019
              
              
              -
              
              
              -Amortization
                  of premiums and accretion of discounts
              
              
              16,884
              
              
              22,193
              
              
              26,291Federal
                  Home Loan Bank stock dividend
              
              
              -
              
              
              (37,400
              )
              
              (78,000
              )Net
                  gains on sale of securities
              
              
              -
              
              
              (31,552
              )
              
              (6,876
              )Gain
                  on sale of other assets
              
              
              (38,851
              )
              
              (345,166
              )
              
              -Net
                  loss (gain) on sale of real estate owned
              
              
              78,513
              
              
              4,189
              
              
              (14,445
              )Provision
                  for loan losses
              
              
              248,146
              
              
              274,845
              
              
              189,198Loss
                  from limited partnership
              
              
              40,819
              
              
              71,750
              
              
              82,300Increase
                  in cash surrender value of life insurance
              
              
              (122,666
              )
              
              (118,494
              )
              
              (134,608
              )Income
                  from real estate held for development
              
              
              (50,598
              )
              
              -
              
              
              -Gain
                  from life insurance proceeds
              
              
              -
              
              
              -
              
              
              (26,678
              )Unrealized
                  (gain) loss on trading securities
              
              
              (10,230
              )
              
              50,993
              
              
              (27,494
              )Proceeds
                  from sale or redemption of trading securities
              
              
              -
              
              
              177,736
              
              
              17,845Decrease
                  in net deferred yield adjustments on loans
              
              
              101,303
              
              
              59,656
              
              
              62,280(Increase)
                  decrease in prepaid and deferred taxes
              
              
              (210,928
              )
              
              343,669
              
              
              (381,511
              )Increase
                  in accrued interest receivable
              
              
              (89,793
              )
              
              (73,949
              )
              
              (11,545
              )Increase
                  in accrued interest payable
              
              
              37,054
              
              
              5,567
              
              
              2,410Decrease
                  (increase) in purchased accounts receivable
              
              
              830,216
              
              
              (432,120
              )
              
              (1,000,483
              )Increase
                  (decrease) in deferred compensation
              
              
              71,671
              
              
              70,666
              
              
              (3,677
              )Other,
                  net
              
              
              371,803
              
              
              247,672
              
              
              (67,974
              )Net
                  cash provided by (for) operating activities
              
              
              2,172,041
              
              
              1,444,577
              
              
              (172,924
              )Cash
                  flows from investing activities:Proceeds
                  from sales of investment securities
              
              
              
              
              
              -
              
              
              988,800Proceeds
                  from maturities of investment securities
              
              
              500,000
              
              
              400,000
              
              
              1,950,000Purchase
                  of investment securities
              
              
              (507,965
              )
              
              (2,011,304
              )
              
              (2,444,433
              )Proceeds
                  from sales of mortgage-backed securities
              
              
              -
              
              
              2,316
              
              
              -Proceeds
                  from repayments of mortgage-backed securities
              
              
              403,294
              
              
              581,176
              
              
              802,409


Purchase
                  of loans
              
              
              (7,311,923
              )
              
              (11,843,519
              )
              
              (13,655,632
              )Loan
                  disbursements
              
              
              (49,271,721
              )
              
              (41,755,779
              )
              
              (35,221,104
              )
   24
  Loan
                  repayments
              
              
              44,504,736
              
              
              41,927,037
              
              
              39,057,564Proceeds
                  from sale of real estate owned
              
              
              489,396
              
              
              104,248
              
              
              508,516Proceeds
                  from redemption ofFederal
                  Home Loan Bank stock
              
              
              101,700
              
              
              -
              
              
              -Purchase
                  of Federal Home Loan Bank stock
              
              
              (50,000
              )
              
              -
              
              
              -Proceeds
                  from sale of real estate held for development
              
              
              881,679
              
              
              -
              
              
              -Purchase
                  of real estate held for development
              
              
              (1,360,021
              )
              
              (1,352,611
              )
              
              -Proceeds
                  from sale of other assets
              
              
              38,851
              
              
              360,166
              
              
              -Proceeds
                  from life insurance policy
              
              
              -
              
              
              -
              
              
              102,321Property
                  and equipment expenditures, net
              
              
              (665,354
              )
              
              (163,730
              )
              
              (108,004
              )Net
                  cash provided for investing activities
              
              $
              (12,247,328
              )
              
              (12,763,200
              )
              
              (9,008,363
              )





(Continued)





25





AMB
      FINANCIAL CORP.


AND
      SUBSIDIARIES





Consolidated
      Statements of Cash Flows





Years
                  Ended December 31,2006
              
              2005
              
              2004Cash
                  flows from financing activities:Net
                  (decrease) increase in deposits
              
              $
              (2,576,993
              )
              
              11,776,253
              
              
              7,324,417Proceeds
                  from borrowed money
              
              
              20,000,000
              
              
              5,242,761
              
              
              5,000,000Repayment
                  of borrowed money
              
              
              (6,694,167
              )
              
              (3,185,000
              )
              
              (2,175,719
              )Repayment
                  of notes payable
              
              
              (137,908
              )
              
              (140,434
              )
              
              (148,683
              )Increase
                  (decrease) in advance payments byborrowers
                  for taxes and insurance
              
              
              427,223
              
              
              (1,334,771
              )
              
              600,000Proceeds
                  from exercise of stock options
              
              
              481,783
              
              
              71,434
              
              
              105,914Repurchase
                  of stock options
              
              
              -
              
              
              -
              
              
              (108,215
              )Purchase
                  of treasury stock
              
              
              (420,505
              )
              
              (166,187
              )
              
              (74,269
              )Dividends
                  paid on common stock
              
              
              (315,315
              )
              
              (259,197
              )
              
              (224,172
              )Net
                  cash provided by financing activities
              
              
              10,764,118
              
              
              12,004,859
              
              
              10,299,273Net
                  change in cash and cash equivalents
              
              
              688,831
              
              
              686,236
              
              
              1,117,986Cash
                  and cash equivalents at beginning of year
              
              
              9,039,011
              
              
              8,352,775
              
              
              7,234,789Cash
                  and cash equivalents at end of year
              
              $
              9,727,842
              
              
              9,039,011
              
              
              8,352,775Supplemental
                  disclosure of cash flow information:Cash
                  paid during the year for:Interest
              
              $
              5,770,017
              
              
              4,143,822
              
              
              3,431,003Income
                  taxes
              
              
              330,000
              
              
              -
              
              
              731,000Non-cash
                  investing activities:Transfer
                  of loans to real estate owned
              
              $
              1,063,256
              
              
              687,334
              
              
              434,034


See
      accompanying notes to consolidated financial statements.





26





AMB
      FINANCIAL CORP.


AND
      SUBSIDIARIES





Notes
      to
      Consolidated Financial Statements








1)
            Summary
                of Significant Accounting
                Policies





AMB
      Financial Corp. (the "Company") is a Delaware corporation incorporated on
      November 23, 1993 for the purpose of becoming the savings and loan holding
      company for American Savings, FSB (the "Bank"). On March 29, 1996, the Bank
      converted from a mutual to a stock form of ownership, and the Company completed
      its initial public offering, and, with a portion of the net proceeds acquired
      all of the issued and outstanding capital stock of the Bank (the
      "Conversion").





Principles
      of Consolidation





The
      accompanying consolidated financial statements include the accounts of the
      Company, and its wholly owned subsidiary, American Savings, FSB, the Bank's
      wholly owned subsidiary, NIFCO, Inc. and the wholly owned subsidiary of NIFCO,
      Inc., Ridge Management, Inc. Significant intercompany balances and transactions
      have been eliminated in consolidation.





Use
      of
      Estimates





The
      preparation of financial statements in conformity with accounting principles
      generally accepted in the United States of America requires management to make
      estimates and assumptions that affect the reported amounts of assets and
      liabilities and disclosure of contingent assets and liabilities at the date
      of
      the financial statements and the reported amounts of revenue and expenses during
      the reporting period. Actual results could differ from those
      estimates.





Statement
      of Cash Flows





For
      purposes of reporting cash flows, the Company has defined cash and cash
      equivalents to include cash on hand, amounts due from depository institutions,
      interest-bearing deposits in other financial institutions and federal funds
      sold.





Industry
      Segments





The
      Company operates principally in the banking industry through its subsidiary
      bank. As such, substantially all of the Company's revenues, net income,
      identifiable assets and capital expenditures are related to banking operations.





Investment
      Securities and Mortgage-Backed Securities, Available for Sale





Investment
      securities and mortgage-backed securities available for sale are recorded in
      accordance with Statement of Financial Accounting Standards ("SFAS") No. 115
      "Accounting for Certain Investments in Debt and Equity Securities". SFAS No.
      115
      requires the use of fair value accounting for securities available for sale
      or
      trading and retains the use of the amortized cost method for investments the
      Company has the positive intent and ability to hold to maturity.





SFAS
      No.
      115 requires the classification of debt and equity securities into one of three
      categories: held to maturity, available for sale, or trading. Held to maturity
      securities are measured at amortized cost. Unrealized gains and losses on
      trading securities are included in income. Unrealized gains and losses on
      available for sale securities are excluded from income and reported net of
      taxes
      as a separate component of stockholders' equity.




The
      Company has currently designated all of its
      investment securities and mortgage-backed securities as available for sale
      and
      has recorded these investments at their current fair values. Unrealized gains
      and losses are recorded in a valuation account which is included, net of income
      taxes, as a separate component of stockholders' equity. Gains and losses on
      the
      sale of securities are determined using the specific identification method
      and
      are reflected in earnings when realized.





27







1)
            Summary
                of Significant Accounting Policies
                (continued)





Trading
      Securities





Trading
      account securities are recorded at fair value. Realized and unrealized gains
      and
      losses on trading account securities are reflected in non-interest income in
      the
      consolidated statements of income.





Loans
      Receivable and Related Fees





Loans
      are
      stated at the principal amount outstanding, net of loans in process, deferred
      yield adjustment and the allowance for losses. Interest on loans is credited
      to
      income as earned and accrued only if deemed collectible. Loans are placed on
      nonaccrual status when, in the opinion of management, the full timely collection
      of principal or interest is in doubt. As a general rule, the accrual of interest
      is discontinued when principal or interest payments become 90 days past due
      or
      earlier if conditions warrant. When a loan is placed on nonaccrual status,
      previously accrued but unpaid interest is charged against current
      income.





Loan
      origination fees and certain direct loan origination costs are being deferred
      in
      accordance with SFAS No. 91 "Accounting for Nonrefundable Fees and Costs
      Associated with Originating or Acquiring Loans and Initial Direct Costs of
      Leases". This statement requires that loan origination fees and direct loan
      origination costs for a completed loan be netted and then deferred and amortized
      into interest income as an adjustment of yield over the contractual life of
      the
      loan.





The
      Company has adopted the provisions of SFAS No. 114 "Accounting by Creditors
      for
      Impairment of a Loan" and SFAS No. 118 "Accounting by Creditors for Impairment
      of a Loan - Income Recognition and Disclosures". These statements apply to
      all
      loans that are identified for evaluation except for large groups of
      smaller-balance homogeneous loans that are collectively evaluated for
      impairment. These loans include, but are not limited to, credit card,
      residential mortgage and consumer installment loans. Of the remaining loans
      which are evaluated for impairment, management has determined that there were
      no
      material amounts of loans which met the definition of an impaired loan during
      the years ended December 31, 2006 and 2005 and no loans to be evaluated for
      impairment at December 31, 2006.





Allowance
      for Loan Losses





The
      determination of the allowance for loan losses involves material estimates
      that
      are susceptible to significant change in the near term. The allowance for loan
      losses is maintained at a level adequate to provide for losses through charges
      to operating expense. The allowance is based upon past loss experience and
      other
      factors which, in management's judgement, deserve current recognition in
      estimating losses. Such other factors considered by management include growth
      and composition of the loan portfolio, the relationship of the allowance for
      losses to outstanding loans and economic conditions.





Management
      believes that the allowance is adequate. While management uses available
      information to recognize losses on loans, future additions to the allowance
      may
      be necessary based on changes in economic conditions. In addition, various
      regulatory agencies, as an integral part of their examination process,
      periodically review the Bank's allowance for losses. Such agencies may require
      the Bank to recognize additions to the allowance based on their judgements
      about
      information available to them at the time of their examination.





Real
      Estate Owned





Real
      estate acquired through foreclosure or deed in lieu of foreclosure is carried
      at
      the lower of fair value minus estimated costs to sell or the related loan
      balance at the date of foreclosure. Valuations are periodically performed by
      management and an allowance for loss is established by a charge to operations
      if
      the carrying value of a property exceeds its fair value minus estimated costs
      to
      sell.





Real
      Estate Held for Development





Real
      estate properties held for development are carried at the lower of cost,
      including capitalized construction costs, or net realizable value. Gains and
      losses on individual properties are based on cash received less the cost of
      each
      individual lot.





28





1)
            Summary
                of Significant Accounting Policies
                (continued)





Office
      Properties and Equipment





Land
      is
      carried at cost. Depreciation of office properties and equipment is accumulated
      on the straight line basis over estimated lives of the various assets. Useful
      lives are 25 to 40 years for office properties and 3 to 10 years for furniture,
      fixtures and equipment.





Investment
      in Limited Partnership





The
      investment in limited partnership is recorded using the equity method of
      accounting. The operations of the property tends to generate an aggregate net
      loss before income taxes, but contribute income tax credits, which lowers the
      Company’s effective tax rate. The Company evaluates the recoverability of the
      carrying value on a regular basis. Losses due to impairment are recorded when
      it
      is determined that the investment no longer has the ability to recover its
      carrying amount.





Income
      Taxes





The
      Company files a consolidated federal income tax return with the Bank. The
      provision for federal and state taxes on income is based on earnings reported
      in
      the financial statements. Deferred income taxes arise from the recognition
      of
      certain items of income and expense for tax purposes in years different from
      those in which they are recognized in the consolidated financial statements.
      Deferred tax assets and liabilities are recognized for the estimated future
      tax
      consequences attributable to differences between the financial statement
      carrying amount of existing assets and liabilities and their respective tax
      bases. Deferred tax assets and liabilities are measured using tax rates in
      effect for the year in which those temporary differences are expected to be
      recovered or settled. The effect on deferred tax assets and liabilities of
      a
      change in tax rates is recognized in income for the period that includes the
      enactment date.





Earnings
                Per Share





Basic
      earnings per share is computed by dividing net income by the weighted average
      number of shares outstanding for the period. ESOP shares not committed to be
      released are not considered to be outstanding. Stock options are regarded as
      future common stock and are considered in the earnings per share calculations
      and are the only other adjustments made in computing diluted earnings per share.





Weighted
      average shares used in calculating earnings per share are summarized
      below.


Years
                  Ended December 31,2006
              
              2005
              
              2004Weighted
                    average number of common sharesoutstanding
                    used in basic EPS calculation
              
              
              1,011,735
              
              
              976,570
              
              
              974,218Reduction
                    for common shares not yetreleased
                    by Employee Stock Ownership Plan
              
              
              -
              
              
              (16,734
              )
              
              (33,470
              )Total
                    weighted average common sharesoutstanding
                    for basic computation
              
              
              1,011,735
              
              
              959,836
              
              
              940,748Add
                    common stock equivalents for sharesissuable
                    under Stock Option Plans
              
              
              3,394
              
              
              53,168
              
              
              66,960Weighted
                    average number of shares outstandingadjusted
                    for common stock equivalents
              
              
              1,015,129
              
              
              1,013,004
              
              
              1,007,708Net
                  income
              
              $
              648,268
              
              
              859,742
              
              
              880,634Basic
                  earnings per share
              
              $
              .64
              
              
              .90
              
              
              .94Diluted
                  earnings per share
              
              $
              .64
              
              
              .85
              
              
              .87






29







1)
            Summary
                of Significant Accounting Policies
                (continued)





Stock
      Option Plans





Prior
      to
      January 1, 2006 the Company elected to account for stock options using the
      intrinsic value method under the provisions of Accounting Principles Board
      (“APB”) Opinion No. 25 and provided pro forma net income and pro forma earnings
      per share disclosures for employee stock option grants as if the fair value
      based method, defined in SFAS No. 123, “Accounting for Stock Based
      Compensation”, had been applied. Pursuant to the guidance in these
      pronouncements, the Company did not record compensation expense related to
      stock
      options.





On
      January 1, 2006, the Company adopted Statement of Financial Standards No.
      123(R), “Share-Based Payments”. SFAS No. 123(R) requires that stock option
      awards, as well as other equity based compensation, be recognized as
      compensation expense in the income statement based on their fair values
      determined at the date of grant. The Company elected to apply SFAS No. 123(R)
      on
      a “modified prospective” method, which recognizes compensation cost (a) based on
      the requirements of SFAS No. 123(R) for all share-based payments granted after
      the effective date, and (b) based on the requirements of SFAS No. 123 for all
      awards granted to employees prior to the effective date of SFAS No. 123(R)
      that
      remain unvested on the effective date.





A
      summary
      of activity under the Company’s stock option plans for the three years ended
      December 31, 2006 is as follows:


Years
                  Ended December 31,2006
              
              2005
              
              2004Net
                  income, as reported
              
              $
              648,268
              
              
              859,742
              
              
              880,634Deduct:
                      Total stock based employee compensation expense
                      determined under the fair value basedmethod,
                      net of related tax effects
              
              
              -
              
              
              73,792
              
              
              -Pro
                  forma net income
              
              $
              648,268
              
              
              785,950
              
              
              880,634Diluted
                  earnings per share, as reported
              
              $
              .64
              
              
              .85
              
              
              .87Pro
                  forma diluted earnings per share
              
              $
              .64
              
              
              .78
              
              
              .87





30








2)
            Investment
                Securities, Available for Sale





The
      amortized cost and fair value of investment securities available for sale are
      as
      follows:





Gross
              
              GrossAmortized
              
              Unrealized
              
              Unrealized
              
              FairCost
              
              Gains
              
              Losses
              
              ValueDecember
                  31, 2006United
                    States Government and
                    agency obligations
              
              $
              3,008,385
              
              
              2,085
              
              
              21,900
              
              
              2,988,570Marketable
                  equity securities
              
              
              185,953
              
              
              3,908
              
              
              -
              
              
              189,861$
              3,194,338
              
              
              5,993
              
              
              21,900
              
              
              3,178,431Weighted
                    average interest rateon
                    debt securities
              
              
              5.16
              %December
                  31, 2005United
                    States Governmentand
                    agency obligations
              
              $
              3,022,871
              
              
              2,995
              
              
              21,341
              
              
              3,004,525Marketable
                  equity securities
              
              
              177,988
              
              
              5,738
              
              
              -
              
              
              183,726$
              3,200,859
              
              
              8,733
              
              
              21,341
              
              
              3,188,251Weighted
                    average interest rateon
                    debt securities
              
              
              4.81
              %





The
      contractual maturity of the above investments is summarized as
      follows:





December
                  31, 2006
              
              
              December
                  31, 2005Amortized
              
              
              Fair
              
              
              Amortized
              
              
              FairTerm
                  to Maturity
              
              
              Cost
              
              
              Value
              
              
              Cost
              
              
              ValueDue
                  in one year or less
              
              $
              -
              
              
              -
              
              
              500,000
              
              
              493,863Due
                  after one year through five years
              
              
              1,998,000
              
              
              2,508,385
              
              
              2,486,485
              
              
              2,000,889Due
                  after five years through ten years
              
              
              500,000
              
              
              502,085
              
              
              521,982
              
              
              512,662Marketable
                  equity securities
              
              
              185,953
              
              
              189,861
              
              
              177,988
              
              
              183,726$
              3,194,338
              
              
              3,178,431
              
              
              3,200,859
              
              
              3,188,251


There
      were no sales of investment securities, available for sale during the year
      ended
      December 31, 2006. Proceeds from sales of investment securities, available
      for
      sale during the year ended December 31, 2005 were $988,800 with gross losses
      of
      $11,200 realized on those sales. There were no sales of investment securities,
      available for sale during the year ended December 31, 2004. The change in net
      unrealized gains and losses during the current year of $3,299, net of the tax
      effect of $1,320, resulted in a $1,979 charge to stockholders'
      equity.




3)
            Trading
                Securities





Trading
      securities are accounted for at their current fair values. Trading securities
      at
      December 31, 2006 consists of equity securities (common stock with a carrying
      value of $339,275). These securities are pledged as collateral for a revolving
      line of credit as discussed in Note 12. Trading securities at December 31,
      2005
      also consists of equity securities (common stock with a carrying value of
      $329,045). The adjustment of these securities to their current fair values
      has
      resulted in a net unrealized gain of $10,230 for the year ended December 31,
      2006, a net unrealized loss of $50,993 for the year ended December 31, 2005
      and
      a net unrealized gain of $27,494 for the year ended December 31, 2004. There
      were no sales of trading securities during the year ended December 31, 2006.
      Proceeds from sales of trading securities during the years ended December 31,
      2005 and 2004 were $177,736 and $17,845 with gross gains of $42,821 and $6,876
      realized on those sales.









31







4) Mortgage-Backed
        Securities, Available for Sale


The
      amortized cost and fair value of mortgage-backed securities available for sale
      are as follows:


Gross
              
              GrossAmortized
              
              Unrealized
              
              Unrealized
              
              FairCost
              
              Gains
              
              Losses
              
              ValueDecember
                  31, 2006Participation
                  Certificates:FHLMC
                  - Fixed rate
              $
              609,560
              
              
              6,476
              
              
              21,565
              
              
              594,471FNMA
                  -
                  Adjustable rate
              
              
              
              
              
              10,051
              
              
              -
              
              
              27
              
              
              10,024FNMA
                  -
                  Fixed rate
              
              
              
              
              
              480,480
              
              
              -
              
              
              13,452
              
              
              467,028GNMA
                  - Fixed rate
              
              39,757
              
              
              2,960
              
              
              -
              
              
              42,717Collateralized
                  Mortgage Obligations:FNMA
                  -
                  Fixed rate
              
              
              
              
              
              137,580
              
              
              431
              
              
              -
              
              
              138,011$
              1,277,428
              
              
              9,867
              
              
              35,044
              
              
              1,252,251Weighted
                  average interest rate
              
              4.93
              %December
                  31, 2005Participation
                  Certificates:FHLMC
                  - Fixed rate
              $
              764,552
              
              
              10,222
              
              
              18,784
              
              
              755,990FNMA -
                  Adjustable rate
              
              
              
              
              
              15,277
              
              
              -
              
              
              41
              
              
              15,236FNMA -
                  Fixed rate
              
              
              
              
              
              607,221
              
              
              -
              
              
              15,503
              
              
              591,718GNMA - Fixed rate
              
              49,586
              
              
              4,501
              
              
              -
              
              
              54,087Collateralized
                  Mortgage Obligations:FNMA -
                  Fixed rate
              
              
              
              
              
              246,484
              
              
              763
              
              
              -
              
              
              247,247$
              1,683,120
              
              
              15,486
              
              
              34,328
              
              
              1,664,278Weighted
                  average interest rate
              
              4.92
              %


There
      were no sales of mortgage-backed securities, available for sale during the
      year
      ended December 31, 2006. Proceeds from the sale of mortgage-backed securities,
      available for sale during the year ended December 31, 2005 were $2,316 with
      gross losses of $69 realized on those sales. There were no sales of
      mortgage-backed securities available for sale during the year ended December
      31,
      2004. The change in net unrealized gains and losses during the current year
      of
      $6,335, net of the tax effect of $2,534, resulted in a $3,801 charge to
      stockholders' equity.






32







5)
            Loans
                Receivable




Loans
        receivable are summarized as
        follows:
 
 December
                  31,2006
              
              2005Mortgage
                  loans:One-to-four
                  family
              
              $
              105,222,934
              
              
              92,809,163Multi-family
              
              
              8,319,235
              
              
              8,956,007Nonresidential
              
              
              18,189,953
              
              
              17,110,976Construction
              
              
              6,424,014
              
              
              6,736,993Land
              
              
              8,480,119
              
              
              6,891,401Total
                  mortgage loans
              
              
              146,636,255
              
              
              132,504,540Other
                  loans:Loans on deposit accounts
              
              
              125,635
              
              
              90,984Equity lines of credit
              
              
              5,523,545
              
              
              6,208,239Other consumer
              
              
              1,638,576
              
              
              2,706,919Total other loans
              
              
              7,287,756
              
              
              9,006,142Commercial
                  business loans
              
              
              2,942,843
              
              
              3,464,586Total loans receivable
              
              
              156,866,854
              
              
              144,975,268Less:Loans in process
              
              
              5,394,345
              
              
              4,182,195Net deferred yield adjustments
              
              
              84,962
              
              
              9,337Allowance for loan losses
              
              
              686,467
              
              
              748,859Loans
                  receivable, net
              
              $
              150,701,080
              
              
              140,034,877Weighted
                  average interest rate
              
              
              6.66
              %
              
              6.34
              %
   Activity
        in the allowance for loan losses is summarized as follows:
 
 Years
                  Ended December 31,2006
              
              2005
              
              2004Balance,
                  beginning of year
              
              $
              748,859
              
              
              715,979
              
              
              1,033,226Provision
                  for loan losses
              
              
              248,146
              
              
              274,845
              
              
              189,198Charge-offs
              
              
              (342,411
              )
              
              (249,265
              )
              
              (541,315
              )Recoveries
              
              
              31,873
              
              
              7,300
              
              
              34,870Balance,
                  end of year
              
              $
              686,467
              
              
              748,859
              
              
              715,979


Delinquent
      loans (loans having monthly payments past due ninety days or more and
      non-accruing) at December 31, 2006 and 2005 amounted to approximately $2,676,000
      and $1,474,000, respectively.





For
      the
      years ended December 31, 2006 and 2005, gross interest income which would have
      been recorded had the non-accruing loans been current in accordance with their
      original terms amounted to approximately $111,000 and $97,000,
      respectively.





Loans
      to
      directors and executive officers aggregated approximately $817,000 and $810,000
      at December 31, 2006 and 2005, respectively. Such loans are made on
      substantially the same terms as those for other loan customers.









33







6)  Investment
      in Limited Partnership





The
      investment in limited partnership of $957,129 and $797,948 at December 31,
      2006
      and 2005 represents a 39.60% equity in Pedcor Investments 1997 - XXXI
      ("Pedcor"), a limited partnership organized to build, own and operate a 56
      unit
      apartment complex. The Bank has recorded its equity in the losses of Pedcor
      in
      the amount of $40,819, $71,750 and $82,300 for the years ended December 31,
      2006, 2005 and 2004. Condensed financial statements for Pedcor are as follows:




Condensed
        Statements of Financial Condition


December
                  31,2006
              
              2005AssetsCash
              
              $
              53,542
              
              
              10,540Property
                  and equipment
              
              
              3,331,236
              
              
              3,431,638Land
              
              
              112,000
              
              
              112,000Other
              
              
              166,730
              
              
              55,278Total
                  assets
              
              
              3,663,508
              
              
              3,609,456LiabilitiesNotes
                  payable - Bank
              
              
              308,419
              
              
              421,016Notes
                  payable - Other
              
              
              2,045,747
              
              
              2,104,324Other
                  liabilities
              
              
              323,477
              
              
              303,849Total liabilities
              
              
              2,677,643
              
              
              2,829,189Partners'
                  capital
              
              
              985,865
              
              
              780,267Total liabilities and partners' capital
              
              $
              3,663,508
              
              
              3,609,456
 
   Years
                  Ended December 31,2006
              
              2005
              
              2004Condensed
                  statement of operationsTotal
                  revenues
              
              $
              291,505
              
              
              242,033
              
              
              223,089Total
                  expenses
              
              
              394,582
              
              
              423,219
              
              
              432,133Net
                  loss
              
              $
              (103,077
              )
              
              (181,186
              )
              
              (209,044
              )




34








7)
            Accrued
                Interest Receivable





Accrued
      interest receivable is summarized as follows:


December
                  31,2006
              
              2005Investment
                  securities
              
              $
              56,904
              
              
              52,215Mortgage-backed
                  securities
              
              
              5,251
              
              
              6,895Loans
                  receivable
              
              
              869,709
              
              
              808,167Allowance
                  for uncollected interest
              
              
              (135,510
              )
              
              (160,716
              )$
              796,354
              
              
              706,561




8)
            Office
                Properties and Equipment





Office
      properties and equipment are summarized as follows:


December
                  31,2006
              
              2005Cost:Land
                  -      
                  Munster
              
              
              
              
              
              
              
              $
              40,669
              
              
              40,669Hammond
              
              
              
              
              
              
              
              
              33,300
              
              
              33,300Dyer
              
              
              
              
              
              
              
              
              300,000
              
              
              300,000Schereville
              
              
              
              
              
              
              
              
              380,345
              
              
              -Building
                  -
                  Munster
              
              
              
              
              
              
              
              
              457,773
              
              
              457,773Hammond
              
              
              
              
              
              
              
              
              319,985
              
              
              319,985Dyer
              
              
              
              
              
              
              
              
              1,796,151
              
              
              1,796,151Branch
                  construction in process
              
              
              
              
              143,433
              
              
              -Furniture
                  and equipment
              
              
              
              
              2,071,743
              
              
              1,981,1765,543,399
              
              
              4,929,054Less
                  accumulated depreciation:Building
                  -
                  Munster
              
              
              
              
              
              
              
              
              429,202
              
              
              427,476Hammond
              
              
              
              
              
              
              
              
              283,010
              
              
              275,904Dyer
              
              
              
              
              
              
              
              
              408,755
              
              
              347,379Furniture
                  and equipment
              
              
              
              
              1,566,000
              
              
              1,486,8062,686,967
              
              
              2,537,565Net
                  book value
              
              
              
              
              
              
              
              $
              2,856,432
              
              
              2,391,489


Depreciation
      of office properties and equipment for the years ended December 31, 2006, 2005
      and 2004 amounted to $200,411, $204,650 and $229,479, respectively.





The
      Bank
      owns a three story office building in Dyer, Indiana, which is one-third utilized
      by the Bank as its branch office location. An additional one-third of the
      building is leased to a third party at a current annual lease rent of $70,424.
      This lease commenced on June 1, 2002 and terminates May 31, 2007 subject to
      two
      five-year lease renewal options. One half of the remaining third of the building
      is being leased to a third-party at a current annual lease rent of $32,831.
      This
      lease commenced on October 1, 2003 and terminates September 30, 2009 subject
      to
      two six-year lease renewal options. The remainder of the building is being
      leased to a third-party at a current annual lease rent of $36,857. This lease
      commenced on January 1, 2004 and terminates December 31, 2008 subject to two
      five-year lease renewal options.


9)
              Real
                    Estate Held for
                    Development


The
      Company has entered into an agreement with a local builder to acquire vacant
      lots and construct single family residences. Costs incurred as of December
      31,
      2006 for the acquisition of seven land parcels and construction costs on several
      lots in various stages of completion amounted to $1,881,551. Upon sale of each
      completed residence, before any profit distribution, the Company will receive
      a
      stipulated amount as interest on the funds that have been advanced. After
      payment of this amount, the Company is entitled to receive 30% of any remaining
      profit. There were two sales of properties during the year ended December 31,
      2006 resulting in income recognition of $50,598. At December 31, 2006, there
      were two completed properties listed for sale and two other properties close
      to
      completion that are anticipated to be marketed in early 2007.







35







10)
            Prepaid
                Expenses and Other Assets





Prepaid
                expenses and other assets consist of the
                following:




December
                  31,2006
              
              2005Prepaid
                  insurance premiums
              
              $
              89,534
              
              
              80,502Prepaid
                  pension cost
              
              
              277,573
              
              
              300,957Prepaid
                  statutory trust preferred fees
              
              
              160,780
              
              
              167,200Prepaid
                  income taxes
              
              
              337,264
              
              
              90,509Other
                  prepaid expenses
              
              
              70,814
              
              
              120,500Deferred
                  federal and state income tax asset - net (a)
              
              
              384,780
              
              
              368,170Purchased
                  accounts receivable (b)
              
              
              2,959,901
              
              
              2,790,117Purchased
                  accounts receivable, serviced by others
              
              
              -
              
              
              1,000,000Miscellaneous
                  (c)
              
              
              65,201
              
              
              165,438$
              4,345,847
              
              
              5,083,393





(a)
            Significant
                components of the deferred tax assets and liabilities are as
                follows:





December
                  31,2006
              
              2005Deferred
                  tax assets:Deferred
                  compensation
              
              $
              374,192
              
              
              345,524Nondeductible
                  incentive plan expense
              
              
              6,957
              
              
              6,957Book
                  allowance for loan losses
              
              
              274,587
              
              
              299,544Allowance
                  for uncollected interest
              
              
              71,280
              
              
              64,286Unrealized
                  loss on securities available for sale
              
              
              16,434
              
              
              12,580Total
                  deferred tax assets
              
              
              743,450
              
              
              728,891Deferred
                  tax liabilities:Accelerated
                  tax depreciation
              
              
              43,844
              
              
              44,552Federal
                  Home Loan Bank stock dividend
              
              
              67,258
              
              
              71,280Pension
                  expense
              
              
              111,029
              
              
              120,383Unrealized
                  gain on trading account securities
              
              
              52,375
              
              
              48,283Other
              
              
              84,164
              
              
              76,223Total
                  deferred tax liabilities
              
              
              358,670
              
              
              360,721Net
                  deferred tax benefit
              
              $
              384,780
              
              
              368,170





(b)
                The
                    Bank has entered into a program to purchase and manage the accounts
                    receivable of credit-worthy merchants with required repurchase
                    of
                    delinquent accounts and with the merchant's repurchase obligation
                    supported by a cash collateral reserve account. For each merchant,
                    the
                    Bank establishes a maximum amount of purchased receivables allowed
                    to be
                    outstanding at any one time. At December 31, 2006 and 2005, the
                    unused
                    amount was $2,655,000 and $2,460,000,
                    respectively.





(1)
              In
                  March 2005, the shareholders of Intrieve Incorporated, the Bank’s data
                  processing provider, approved the sale and merger of Intrieve into
                  Harland
                  Financial Solutions Inc., a wholly owned subsidiary of John H.
                  Harland
                  Company. This transaction closed in April 2005. As a shareholder
                  of
                  Intrieve, the Bank received $360,166 in cash on its $15,000 investment,
                  resulting in a gain of $345,166. During the current year, the Bank
                  received additional funds of $38,851 from this investment which
                  represents
                  the net proceeds of amounts held back to cover expenses of the
                  transaction.










36









11)
            Deposits




Deposit
        accounts are summarized as follows:


December31,2006
              
              2005Passbook
                  accounts
              
              $
              17,616,276
              
              
              19,515,031Demand
                  deposits and NOW accounts
              
              
              15,465,231
              
              
              12,876,076Money
                  market accounts
              
              
              10,852,290
              
              
              12,958,92243,933,797
              
              
              45,350,029Certificates
                  of deposit by interest rate:1.01
                  - 2.00%
              
              
              297,703
              
              
              1,183,9862.01
                  - 3.00
              
              
              1,989,515
              
              
              21,223,7173.01
                  - 4.00
              
              
              14,421,201
              
              
              41,254,7614.01
                  - 5.00
              
              
              34,932,869
              
              
              18,422,5015.01
                  - 6.00
              
              
              29,282,916
              
              
              -80,924,204
              
              
              82,084,965$
              124,858,001
              
              
              127,434,994





The
      weighted average rate on deposit accounts at December 31, 2006 and 2005 was
      3.49% and 2.79%, respectively.





The
      aggregate amount of certificates of deposit with a minimum denomination of
      $100,000 was $22,296,000 and $20,293,000 at December 31, 2006 and 2005,
      respectively.





A
      summary
      of certificates of deposit by maturity is as follows:


December31,2006
              
              2005Within
                  12 months
              
              $
              73,033,334
              
              
              62,649,33012
                  months to 24 months
              
              
              4,697,758
              
              
              17,361,75724
                  months to 36 months
              
              
              2,327,437
              
              
              1,072,79736
                  months to 48 months
              
              
              865,675
              
              
              1,001,081Total
              
              $
              80,924,204
              
              
              82,084,965


Interest
      expense on deposits consists of the following:


Years
                  Ended December 31,2006
              
              2005
              
              2004Passbook
                  accounts
              
              $
              231,534
              
              
              252,244
              
              
              261,513NOW
                  accounts
              
              
              64,906
              
              
              61,160
              
              
              60,788Money
                  market accounts
              
              
              368,782
              
              
              370,977
              
              
              364,548Certificates
                  of deposit
              
              
              3,309,345
              
              
              2,116,030
              
              
              1,582,178Total
              
              $
              3,974,567
              
              
              2,800,411
              
              
              2,269,027
 
  37







12)
            Borrowed
                Money





Borrowed
      money consists of advances from the Federal Home Loan Bank of Indianapolis
      and
      is summarized as follows:


Interest
              
              December
                  31,Maturity
                  Date
              
              
              Rate
              
              
              2006
              
              
              2005January
                  23, 2006
              
              
              4.73
              %
              $
              -
              
              
              2,000,000May
                  1, 2006
              
              
              2.83
              
              
              -
              
              
              2,000,000August
                  23, 2006
              
              
              5.32
              
              
              -
              
              
              1,000,000December
                  18, 2006
              
              
              2.93
              
              
              -
              
              
              1,000,000March
                  28, 2007
              
              
              4.37
              
              
              2,000,000
              
              
              2,000,000April
                  13, 2007
              
              
              4.18
              
              
              1,000,000
              
              
              1,000,000May
                  25, 2007
              
              
              5.24
              
              
              2,000,000
              
              
              -July
                  18, 2007
              
              
              5.67
              
              
              1,000,000
              
              
              -August
                  23, 2007
              
              
              5.46
              
              
              1,000,000
              
              
              -August
                  29, 2007
              
              
              5.45
              
              
              2,000,000
              
              
              -November
                  28, 2007
              
              
              5.21
              
              
              2,000,000
              
              
              -December
                  26, 2007
              
              
              5.27
              
              
              2,000,000
              
              
              -January
                  23, 2008
              
              
              4.88
              
              
              2,000,000
              
              
              -February
                  19, 2008
              
              
              5.24
              
              
              1,000,000
              
              
              -May
                  1, 2008
              
              
              5.42
              
              
              2,000,000
              
              
              -July
                  1, 2008
              
              
              4.13
              
              
              2,000,000
              
              
              2,000,000August
                  25, 2008
              
              
              3.84
              
              
              2,000,000
              
              
              2,000,000March
                  30, 2009
              
              
              5.23
              
              
              2,000,000
              
              
              -May
                  15, 2009
              
              
              5.93
              
              
              308,419
              
              
              421,016August
                  16, 2010
              
              
              5.99
              
              
              1,500,000
              
              
              1,500,000September
                  20, 2010
              
              
              5.95
              
              
              1,000,000
              
              
              1,000,000December
                  20, 2010
              
              
              4.98
              
              
              2,000,000
              
              
              2,000,000March
                  22, 2011
              
              
              4.09
              
              
              -
              
              
              500,000March
                  28, 2011
              
              
              5.26
              
              
              3,000,000
              
              
              -July
                  15, 2015
              
              
              5.91
              
              
              623,969
              
              
              635,869November
                  16, 2020
              
              
              6.71
              
              
              1,642,440
              
              
              1,712,110$
              34,074,828
              
              
              20,768,995Weighted
                  average interest rate
              
              
              
              
              
              5.16
              %
              
              4.67
              %


The
      Bank
      has adopted a collateral pledge agreement whereby the Bank has agreed to all
      times keep on hand, free of all other pledges, liens, and encumbrances, first
      mortgages with unpaid principal balances aggregating no less than 145% of the
      outstanding secured advances from the Federal Home Loan Bank of Indianapolis.
      At
      December 31, 2006, no securities were pledged for these borrowings.





Interest
      expense on FHLB advances amounted to $1,360,285, $987,546 and $899,497 for
      the
      years ended December 31, 2006, 2005 and 2004, respectively.





The
      Company has entered into a revolving line of credit in the maximum amount of
      $243,000. The loan will bear interest at one half percent under the Wall Street
      Journal prime rate. The Company may borrow up to 75% of the market value of
      the
      collateral security. At December 31, 2006, the Company pledged common stock
      with
      a market value of approximately $339,000 as collateral securing this line of
      credit. At December 31, 2006 the Company had an outstanding balance against
      this
      line of credit of $242,761. Interest expense incurred on this advance amounted
      to $18,563 and $2,397 for the years ended December 31, 2006 and 2005,
      respectively. The Company did not borrow against this line of credit during
      2004.







38







13)
            Guaranteed
                Preferred Beneficial Interest in Junior Subordinated
                Debentures





In
      March
      of 2002, the Company formed AMB Financial Statutory Trust I ("Trust"). The
      Trust
      is a statutory business trust and is wholly owned by the Company. The Trust
      issued $5.0 million of Trust Preferred Capital Securities (the "Capital
      Securities") as a participant in a pooled trust preferred securities offering
      concurrent with the issuance of the Capital Securities, the Trust issued trust
      common securities to the Company in the aggregate liquidation value of $155,000.
      The proceeds of the issuance of the Capital Securities and trust common
      securities were invested in the Company's junior subordinated debentures. The
      junior subordinated debentures are the sole assets of the Trust. The junior
      subordinated debentures and the trust preferred securities pay interest on
      a
      quarterly basis. The junior subordinated debentures and the securities bear
      interest at a rate of 3-month LIBOR plus 3.60%, mature on March 27, 2032 and
      are
      non-callable for five years and, after that period, the securities may be called
      at any quarterly interest payment date at par. Distributions on the Capital
      Securities are payable quarterly. Interest expense for the years ended December
      31, 2006, 2005 and 2004 amounted to $453,656, $359,035 and $264,849,
      respectively. The costs associated with the Capital Securities issuance have
      been capitalized and are being amortized over the estimated life of the
      securities.





14)
            Other
                Liabilities





Other
      liabilities include the following:


December
                  31,2006
              
              2005Accrued
                  interest on deposits
              
              $
              14,136
              
              
              8,942Accrued
                  interest on borrowings
              
              
              74,932
              
              
              43,072Accrued
                  bonus
              
              
              91,234
              
              
              96,475Accrued
                  audit and accounting fees
              
              
              39,010
              
              
              36,555Accrued
                  real estate and personal property taxes
              
              
              75,822
              
              
              84,991Deferred
                  compensation (see note 15)
              
              
              935,481
              
              
              863,810Outstanding
                  bank drafts
              
              
              1,162,197
              
              
              919,828Miscellaneous
                  accounts payable
              
              
              308,373
              
              
              340,345$
              2,701,185
              
              
              2,394,018


15)
            Benefit
                Plans





The
      Bank
      participates in an industry-wide, multi-employer, defined-benefit pension plan,
      which covers all full-time employees who have attained at least 21 years of
      age
      and completed one year of service. The Plan is administered by the Financial
      Institutions Retirement Fund. Calculations to determine full-funding status
      are
      made annually as of June 30. Contributions to the Plan for the Plan years ended
      June 30, 2006, 2005 and 2004 amounted to $383,246, $380,900 and $264,569,
      respectively. Pension expense for the years ended December 31, 2006, 2005 and
      2004 amounted to $407,735, $350,037, and $254,946, respectively. Information
      regarding the Bank's share of assets and liabilities and plan benefit
      information of this plan is not available on an individual basis.





The
      Bank
      participates in the Financial Institutions Thrift Plan, which qualifies under
      Section 401(k) of the Internal Revenue Code and which covers substantially
      all
      employees. This plan calls for a discretionary contribution within specified
      limits and a matching Bank contribution equal to 25% of the first 6% of the
      employee contributions. Plan expense for the years ended December 31, 2006,
      2005
      and 2004 amounted to $15,361, $15,919 and $15,286, respectively.





The
      Bank
      also has established three non-qualified 401(k) Plan for officers of the Bank.
      Both Plans provide participating officers the opportunity to defer up to 6%
      of
      their salary into a tax deferred accumulation for future retirement. In
      addition, the Bank has also established a Director Deferral Plan which provides
      participating directors with the opportunity to defer all or a portion of their
      fees over a predetermined period. All deferred non-qualified 401(k) Plan
      contributions and deferred director fees are credited with interest from the
      Bank at the rate of 10% per year. Interest credited by the Bank to the
      non-qualified plans and deferred director fees on accumulated funds was $89,456,
      $82,583 and $77,227 for the years ended December 31, 2006, 2005 and 2004,
      respectively.







39






16)
            Director,
                Officer and Employee Plans





Stock
      Option Plan .
      In
      conjunction with the Conversion, the stockholders of the Company approved the
      AMB Financial Corp. 1996 Stock Option and Incentive Plan. This is an incentive
      stock option plan for the benefit of the directors, officers and employees
      of
      the Company and its affiliates. This Plan authorized grants of options to
      purchase 210,767 shares of common stock after adjustments of stock dividends
      and
      stock splits (original authorized number of shares was 112,412, equal to 10%
      of
      the total number of shares issued in the Conversion). On October 23, 1996,
      187,573 options (after adjusting for the stock dividends) were granted at $6.80
      per share, exercisable at a rate of 20% per year commencing October 23, 1997,
      and expiring ten years from the date of grant.





At
      the
      shareholders’ meeting on April 27, 2005, the shareholders approved the AMB
      Financial Corp. 2005 Stock Option Plan, which authorized 40,000 stock options
      to
      become available for grant. During 2005, options for 43,120 shares were granted
      (23,194 options from the 1996 Plan and 19,926 from the 2005 Plan) at $13.25
      per
      share exercisable over four years and expiring ten years from the date of grant.
      The per share weighted average fair value of stock options granted during 2005
      was $ 3.51 on the date of grant, using a Black-Scholes option pricing model
      with
      the following historical weighted average assumptions: expected dividend yield
      of 2.0%, risk-free interest rate of 3.85%, expected life of 10 years and
      volatility of 27%.





The
      following is an analysis of the stock option activity for each of the years
      in
      the three year period ended December 31, 2006 and the stock options outstanding
      at the end of the respective periods.


Exercise
                  PriceNumberof
                    Options
              
              
              Per
                  Share
              
              
              TotalOutstanding
                  at December 31, 2003
              
              
              187,573
              
              
              6.80
              
              
              1,275,496Granted
              
              
              0Exercised
              
              
              (70,716
              )
              
              6.80
              
              
              (480,869
              )Forfeited
              
              
              0Outstanding
                  at December 31, 2004
              
              
              116,857
              
              
              6.80
              
              
              794,627Granted
              
              
              43,120
              
              
              13.25
              
              
              571,340Exercised
              
              
              (10,505
              )
              
              6.80
              
              
              (71,434
              )Forfeited
              
              
              0Outstanding
                  at December 31, 2005
              
              
              149,472
              
              
              6.80-13.25
              
              
              1,294,533Granted
              
              
              0Exercised
              
              
              (106,352
              )
              
              6.80
              
              
              (723,193
              )Forfeited
              
              
              (2,810
              )
              
              13.25
              
              
              (37,232
              )Outstanding
                  at December 31, 2006
              
              
              40,310
              
              $
              13.25
              
              $
              534,108Exercisable
                  at December 31, 2006
              
              
              35,478
              
              $
              13.25
              
              $
              470,083Options
                    available for futuregrants
                    at December 31, 2006
              
              
              22,884





As
      of
      December 31, 2006, the weighted average exercise price for options outstanding
      was $13.25 with a weighted average remaining contractual life of 8.25
      years.






40








16)
            Director,
                Officer and Employee Plans
                (continued)





Employee
      Stock Ownership Plan .
      In
      conjunction with the Conversion, the Bank formed an Employee Stock Ownership
      Plan ("ESOP"). The ESOP covers substantially all employees with more than one
      year of employment and who have attained the age of 18. The ESOP borrowed
      $899,300 from the Company and purchased 168,618 common shares issued in the
      Conversion. The Bank will make scheduled discretionary cash contributions to
      the
      ESOP sufficient to service the amount borrowed. In accordance with generally
      accepted accounting principles, the unpaid balance of the ESOP loan, which
      is
      comparable to unearned compensation, is reported as a reduction of stockholders'
      equity. Total contributions by the Bank to the ESOP which were used to fund
      principal and interest payments on the ESOP debt totaled $90,946 and $92,997
      for
      the years ended December 31, 2005 and 2004, respectively. At December 31, 2005,
      the balance of this loan had been fully repaid.





Statement
      of Position No. 93-6, "Employers' Accounting for Employee Stock Ownership Plans"
      ("SOP 93-6") provides guidance for accounting for all ESOPs. SOP 93-6
      requires that the issuance or sale of treasury shares to the ESOP be reported
      when the issuance or sale occurs and that compensation expense be recognized for
      shares committed to be released to directly compensate employees equal to the
      fair value of the shares committed. In addition, SOP 93-6 requires that
      leveraged ESOP debt and related interest expense be reflected in the employer's
      financial statements. Prior practice was to recognize compensation expense
      based
      on the amount of the employer's contributions to the ESOP. The application
      of
      SOP 93-6 results in fluctuations in compensation expense as a result of changes
      in the fair value of the Company's common stock; however, any such compensation
      expense fluctuations will result in an offsetting adjustment to additional
      paid-in capital. For the years ended December 31, 2005 and 2004, additional
      compensation expense of $135,709 and $177,300 was recognized as a result of
      implementation of this accounting principle.






41








17)
            Income
                Taxes





The
      Bank
      had qualified under provisions of the Internal Revenue Code, which permitted
      it
      to deduct from taxable income an allowance for bad debt, which differed from
      the
      provision for such losses charged to income. Accordingly, retained earnings
      at
      December 31, 2006 includes approximately $1,950,000, for which no provision
      for
      income taxes has been made. If in the future this portion of retained earnings
      is distributed, or the Bank no longer qualifies as a bank for tax purposes,
      income taxes may be imposed at the then applicable rates.





The
      provision for income taxes consists of the following:


Years
                  Ended December 31,2006
              
              2005
              
              2004Current
              
              $
              131,828
              
              
              381,864
              
              
              135,887Deferred
              
              
              (12,756
              )
              
              (38,195
              )
              
              213,962$
              119,072
              
              
              343,669
              
              
              349,849


A
      reconciliation of the statutory federal income tax rate to effective income
      tax
      rate is as follows:


Years
                  Ended December 31,2006
              
              2005
              
              2004Statutory
                  federal income tax rate
              
              
              34.0
              %
              
              34.0
              %
              
              34.0
              %State
                  income taxes
              
              
              1.2
              
              
              5.8
              
              
              5.6Low
                  income housing credit
              
              
              (18.2
              )
              
              (11.6
              )
              
              (11.4
              )Cash
                  surrender value of life insurance
              
              
              (4.1
              )
              
              (4.0
              )
              
              (5.2
              )Employee
                  benefit plan expense
              
              
              1.7
              
              
              4.5
              
              
              5.7Other
              
              
              .9
              
              
              (.1
              )
              
              (.3
              )Effective
                  income tax rate
              
              
              15.5
              %
              
              28.6
              %
              
              28.4
              %


Deferred
      income tax expense consists of the following tax effects of timing
      differences:


Years
                  Ended December 31,2006
              
              2005
              
              2004Loan
                  fees
              
              $
              -
              
              
              -
              
              
              10,058Federal
                  Home Loan Bank stock dividend
              
              
              -
              
              
              7,440
              
              
              30,240Federal
                  Home Loan Bank stock redemption
              
              
              (4,022
              )
              
              -
              
              
              -Depreciation
              
              
              (708
              )
              
              3,939
              
              
              9,415Deferred
                  compensation
              
              
              (28,668
              )
              
              (28,266
              )
              
              1,470Pension
              
              
              (9,354
              )
              
              13,443
              
              
              5,000Book
                  loan loss provision (in excess of)less
                  than tax deduction
              
              
              24,957
              
              
              (13,152
              )
              
              126,898Unrealized
                  gain on trading account securities
              
              
              4,092
              
              
              (20,397
              )
              
              10,998Other,
                  net
              
              
              947
              
              
              (1,202
              )
              
              19,883$
              (12,756
              )
              
              (38,195
              )
              
              213,962








42







18)
            Regulatory
                Capital Requirements





The
      Bank
      is subject to various regulatory capital requirements administered by the
      federal banking agencies. Failure to meet minimum total requirements can
      initiate certain mandatory and possible additional discretionary actions by
      regulators that, if undertaken, could have a direct material effect on the
      Bank's financial statements. Under capital adequacy guidelines and the
      regulatory framework for prompt correction action, the Bank must meet specific
      capital guidelines that involve quantitative measures of the Bank's assets,
      liabilities, and certain off-balance-sheet items as calculated under regulatory
      accounting practices. The Bank's capital amounts and classification are also
      subject to quantitative judgments by the regulators about components, risk
      weightings, and other factors.





Quantitative
      measures established by regulation to ensure capital adequacy require the Bank
      to maintain minimum amounts and ratios, set forth in the table below of the
      total risk-based, tangible and core capital, as defined in the regulations.
      Management believes, as of December 31, 2006, that the Bank meets all capital
      adequacy requirements to which it is subject.





The
      Bank,
      according to federal regulatory standards, is well-capitalized under the
      regulatory framework for prompt corrective action. To be categorized as
      adequately capitalized, the Bank must maintain minimum total risk-based,
      tangible, and core ratios as set forth in the table. There are no conditions
      or
      events since that notification that management believes have changed the
      institution's category.





At
      December 31, 2006 and 2005, the Bank's actual capital amounts and ratios,
      minimum amounts and ratios required for capital adequacy purposes and minimum
      amounts and ratios to meet the well-capitalized criteria under prompt corrective
      action provision, are as follows:


Actual
              
              For
                  Capital Adequacy Purposes
              
              To
                  Be Well-Capitalized UnderPrompt
                  CorrectiveAction ProvisionsAmount
              
              Ratio
              
              Amount
              
              Ratio
              
              Amount
              
              RatioDecember
                  31, 2006Tangible
              
              $
              15,574,894
              
              
              8.74
              %
              $
              2,672,000
              
              
              1.50
              %
              $
              N/A
              
              
              N/A
              %Core
              
              
              15,574,894
              
              
              8.74
              
              
              5,344,000
              
              
              3.00
              
              
              8,907,000
              
              
              5.00Risk-based
              
              
              16,261,361
              
              
              14.93
              
              
              8,712,000
              
              
              8.00
              
              
              10,891,000
              
              
              10.00December
                  31, 2005Tangible
              
              $
              15,427,834
              
              
              9.26
              %
              $
              2,498,000
              
              
              1.50
              %
              $
              N/A
              
              
              N/A
              %Core
              
              
              15,427,834
              
              
              9.26
              
              
              4,996,000
              
              
              3.00
              
              
              8,327,000
              
              
              5.00Risk-based
              
              
              16,176,693
              
              
              15.85
              
              
              8,165,000
              
              
              8.00
              
              
              10,206,000
              
              
              10.00
   Tangible
                  Capital
                
                Core
                  Capital
                
                Risk-based
                  CapitalDecember
                    31, 2006Stockholders'
                    equity
                
                
                
                
                $
                15,550,244
                
                
                15,550,244
                
                
                15,550,244Unrealized
                    loss on securities
                  available
                    for sale, net of taxes
                
                
                
                
                
                24,650
                
                
                24,650
                
                
                24,650General
                    loss allowances
                
                
                
                
                
                -
                
                
                -
                
                
                686,467Regulatory
                    capital computed
                
                
                
                
                $
                15,574,894
                
                
                15,574,894
                
                
                16,261,361December
                    31, 2005Stockholders'
                    equity
                
                
                
                
                $
                15,408,964
                
                
                15,408,964
                
                
                15,408,964Unrealized
                    loss on securities
                  available
                    for sale, net of taxes
                
                
                
                
                
                18,870
                
                
                18,870
                
                
                18,870General
                    loss allowances
                
                
                
                
                
                -
                
                
                -
                
                
                748,859Regulatory
                    capital computed
                
                
                
                
                $
                15,427,834
                
                
                15,427,834
                
                
                16,176,693
 
  43


19)
            Stockholders'
                Equity





As
      part
      of the Conversion, the Bank established a liquidation account for the benefit
      of
      all eligible depositors who continue to maintain their deposit accounts in
      the
      Bank after conversion. In the unlikely event of a complete liquidation of the
      Bank, each eligible depositor will be entitled to receive a liquidation
      distribution from the liquidation account, in the proportionate amount of the
      then current adjusted balance for deposit accounts held, before distribution
      may
      be made with respect to the Bank's capital stock. The Bank may not declare
      or
      pay a cash dividend to the Company on, or repurchase any of, its capital stock
      if the effect thereof would cause the retained earnings of the Bank to be
      reduced below the amount required for the liquidation account. Except for such
      restrictions, the existence of the liquidation account does not restrict the
      use
      or application of retained earnings.





In
      addition, the Bank may not declare or pay cash dividends on or repurchase any
      of
      its shares of common stock if the effect thereof would cause stockholders'
      equity to be reduced below applicable regulatory capital maintenance
      requirements or if such declaration and payment would otherwise violate
      regulatory requirements.





Unlike
      the Bank, the Company is not subject to these regulatory restrictions on the
      payment of dividends to its stockholders. However, the Company's source of
      funds
      for future dividends may depend upon dividends received by the Company from
      the
      Bank.





20)
            Financial
                Instruments with Off-Balance Sheet
                Risk





The
      Bank
      is a party to various transactions with off-balance sheet risk in the normal
      course of business. These transactions are primarily commitments to originate
      loans and to extend credit on previously approved unused lines of credit. These
      financial instruments carry varying degrees of credit and interest-rate risk
      in
      excess of amounts recorded in the consolidated financial
      statements.





Commitments
      to originate mortgage loans of $3,209,500 at December 31, 2006 represent amounts
      which the Bank plans to fund within the normal commitment period of 60 to 90
      days. Of this amount $2,731,500 are fixed rate commitments with rates ranging
      from 6.25% to 8.25% and $478,000 are in adjustable rate commitments. Because
      the
      credit worthiness of each customer is reviewed prior to extension of the
      commitment, the Bank adequately controls its credit risk on these commitments,
      as it does for loans recorded on the balance sheet. The Bank conducts all of
      its
      lending activities in the Northwest Indiana area. Management believes the Bank
      has a diversified loan portfolio and the concentration of lending activities
      in
      these local communities does not result in an acute dependency upon economic
      conditions of the lending region.





The
      Bank
      has approved, but unused, home equity lines of credit of approximately
      $4,904,000 at December 31, 2006. Approval of lines of credit is based upon
      underwriting standards that generally do not allow total borrowings, including
      the line of credit, to exceed 75% of the estimated fair value of the customer's
      home. In addition, the Bank has approved but unused equity lines of credit
      on
      various construction and commercial projects of approximately $1,440,000 at
      December 31, 2006. The Bank also has approved but unused credit card lines
      of
      credit of approximately $1,782,000.





The
      Bank
      is currently participating with several local financial institutions in credit
      enhancement agreements with in-state municipalities to guarantee the repayment
      on municipal revenue bonds. The Bank has accepted credit risk on these various
      municipal projects in the amount of approximately $942,000. These credit
      enhancements are in cooperation with the Federal Home Loan Bank of Indianapolis
      ("FHLB") and have pledging requirements as part of the qualifying collateral
      agreement with FHLB. Additionally, at December 31, 2006, the Bank had issued
      standby letters of credit totaling approximately $95,000 to guarantee the
      performance of various customers to third parties.




21)
            Contingencies





The
      Bank
      is, from time to time, a party to certain lawsuits in the ordinary course of
      its
      business, wherein it enforces its security interest. Management, based upon
      discussions with legal counsel, believes that the Company and the Bank are
      not
      engaged in any legal proceedings of a material nature at the present time.





22)
            Subsequent
                Event





On
      January 24, 2007, the Company declared a quarterly cash dividend of $.08 per
      share, totaling $83,708, payable February 16, 2007 to shareholders of record
      as
      of February 2, 2007.






44







23)
            Disclosures
                About the Fair Value of Financial
                Instruments





The
      following methods and assumptions were used to estimate the fair value of each
      class of financial instruments for which it is practicable to estimate that
      value:





Cash
      and cash equivalents :
      For
      cash and interest-bearing deposits, the carrying amount is a reasonable estimate
      of fair value.





Investment
      securities :
      Fair
      values for securities held to maturity, available for sale or held for trade
      are
      based on quoted market prices as published in financial publications or on
      quotes from third-party brokers.





Mortgage-backed
      securities :
      Fair
      values for mortgage-backed securities are based on the lower of quotes received
      from various third-party brokers.





Loans
      receivable :
      The
      fair values of fixed-rate one-to-four family residential mortgage loans are
      based on quoted market prices of similar loans sold in conjunction with
      securitization transactions. The fair values for other fixed and adjustable
      rate
      mortgage loans are estimated using discounted cash flow analyses, using interest
      rates currently being offered for loans with similar terms and collateral to
      borrowers of similar credit quality.





Accrued
      interest receivable and payable :
      The
      carrying value of accrued interest receivable, net of the allowance for
      uncollected interest, and accrued interest payable approximates fair value
      due
      to the relatively short period of time between accrual and expected
      realization.





Deposit
      liabilities :
      The
      fair value of demand deposits, savings accounts and money market deposits is
      the
      amount payable on demand at the reporting date. The fair value of fixed maturity
      certificates of deposit is estimated by discounting the future cash flows using
      the rates currently offered for deposits of similar original maturities.





Borrowed
      money :
      Rates
      currently available to the Company for debt with similar terms and remaining
      maturities are used to estimate fair value of existing debt.





The
      estimated fair value of the Company's financial instruments as of December
      31,
      2006 and 2005 are as follows:


December
                  31, 2005Carrying
                  Amount
              
              Fair
                  ValueFinancial
                  assets:Cash and cash equivalents
              
              $
              9,727,842
              
              $
              9,727,842Investment securities, available for sale
              
              
              3,178,431
              
              
              3,178,431Trading securities
              
              
              339,275
              
              
              339,275Mortgage-backed securities, available for sale
              
              
              1,252,251
              
              
              1,252,251Loans receivable
              
              
              150,701,080
              
              
              150,667,000Accrued interest receivable
              
              
              796,354
              
              
              796,354Financial
                  liabilities:Deposits
              
              $
              124,858,001
              
              
              124,790,000Borrowed money
              
              
              34,317,589
              
              
              34,587,000Accrued interest payable
              
              
              89,068
              
              
              89,068
 
 December
                    31, 2005Carrying
                    Amount
                
                Fair
                    ValueFinancial
                    assets:Cash and cash equivalents
                
                $
                9,039,011
                
                
                9,039,011Investment securities, available for sale
                
                
                3,188,251
                
                
                3,188,251Trading securities
                
                
                329,045
                
                
                329,045Mortgage-backed securities, available for sale
                
                
                1,664,278
                
                
                1,664,278Loans receivable
                
                
                140,034,877
                
                
                139,251,000Accrued interest receivable
                
                
                706,561
                
                
                706,561Financial
                    liabilities:Deposits
                
                $
                127,434,994
                
                
                127,018,000Borrowed money
                
                
                21,011,756
                
                
                21,115,000Accrued interest payable
                
                
                52,014
                
                
                52,014
  45








24)
            Condensed
                Parent Company Only Financial
                Statements





The
      following condensed statement of financial condition, as of December 31, 2006
      and 2005 and condensed statements of income and cash flows for the years ended
      December 31, 2006, 2005 and 2004 for AMB Financial Corp. should be read in
      conjunction with the consolidated financial statements and the notes
      thereto.




Condensed
      Statements of Financial
      Condition






December
                  31,2006
              
              2005AssetsCash
                  and cash equivalents
              
              $
              347,843
              
              
              183,122Trading
                  securities
              
              
              339,275
              
              
              329,045Loans
                  receivable
              
              
              1,257,693
              
              
              1,758,261Real
                  estate held for development
              
              
              1,881,551
              
              
              1,352,611Investment
                  in American Savings, FSB
              
              
              14,841,281
              
              
              14,694,221Investment
                  in AMB Financial Statutory Trust I
              
              
              155,000
              
              
              155,000Prepaid
                  expenses and other assets
              
              
              605,820
              
              
              611,509Total
                  assets
              
              
              19,428,463
              
              
              19,083,769Liabilities
                  and Stockholders' EquityLiabilities:Borrowed
                  money
              
              
              242,761
              
              
              442,761Junior
                  subordinated debentures
              
              
              5,155,000
              
              
              5,155,000Accrued
                  taxes and other liabilities
              
              
              78,497
              
              
              56,119Total
                  liabilities
              
              
              5,476,258
              
              
              5,653,880Stockholders'
                  Equity:Common
                  stock
              
              
              16,862
              
              
              16,862Additional
                  paid-in capital
              
              
              10,785,555
              
              
              10,657,470Retained
                  earnings
              
              
              9,963,363
              
              
              10,021,965Treasury
                  stock
              
              
              (6,813,575
              )
              
              (7,266,408
              )Total
                  stockholders' equity
              
              
              13,952,205
              
              
              13,429,889$
              19,428,463
              
              
              19,083,769


Condensed
      Statements of Income


Years
                  Ended December 31,2006
              
              
              2005
              
              
              2004Net
                  interest expense
              
              $
              (285,019
              )
              
              (227,881
              )
              
              (136,372
              )Gain
                  on sale of trading securities
              
              
              -
              
              
              42,821
              
              
              6,876Unrealized
                  gain (loss) on trading securities
              
              
              10,230
              
              
              (50,993
              )
              
              27,494Income
                  from real estate held for development
              
              
              50,598
              
              
              -
              
              
              -Other
                  non-interest income
              
              
              49,000
              
              
              9,017
              
              
              4,359Non-interest
                  expense
              
              
              (336,954
              )
              
              (294,181
              )
              
              (280,999
              )Net
                  loss before income taxes andequity
                  in earnings of subsidiaries
              
              
              (512,145
              )
              
              (521,217
              )
              
              (378,642
              )Benefit
                  from income taxes
              
              
              213,353
              
              
              209,551
              
              
              153,442Net
                  loss before equity in earnings of subsidiaries
              
              
              (298,792
              )
              
              (311,666
              )
              
              (225,200
              )Equity
                  in earnings of subsidiaries
              
              
              947,060
              
              
              1,171,408
              
              
              1,105,834Net
                  income
              
              $
              648,268
              
              
              859,742
              
              
              880,634
 
  46





24)
            Condensed
                Parent Company Only Financial Statements
                (continued)







Condensed
        Statements of Cash Flows
 
 Years
                  Ended December 31,2006
              
              2005
              
              2004Operating
                  activities:Net
                  income
              
              $
              648,268
              
              
              859,742
              
              
              880,634Equity
                  in earnings of subsidiaries
              
              
              (947,060
              )
              
              (1,171,408
              )
              
              (1,105,834
              )Amortization
                  of premiums and accretion of discounts
              
              
              -
              
              
              -
              
              
              11Stock
                  option compensation
              
              
              50,019
              
              
              -
              
              
              -Gain
                  on sale of trading securities
              
              
              -
              
              
              (42,821
              )
              
              (6,876
              )Unrealized
                  (gain) loss on trading securities held for trade
              
              
              (10,230
              )
              
              50,993
              
              
              (27,494
              )Proceeds
                  from sale of trading securities
              
              
              -
              
              
              177,736
              
              
              17,845(Decrease)
                  increase in deferred income on loans
              
              
              (6,595
              )
              
              9,512
              
              
              -Income
                  from real estate held for development
              
              
              (50,598
              )
              
              -
              
              
              -Decrease
                  (increase) in prepaid taxes and other assets
              
              
              83,755
              
              
              (25,705
              )
              
              80,226Increase
                  in other liabilities
              
              
              22,378
              
              
              3,639
              
              
              6,883Net
                  cash provided for operating activities
              
              
              (210,063
              )
              
              (138,312
              )
              
              (154,605
              )Investing
                  activities:Proceeds
                  from maturities of investment securities
              
              
              -
              
              
              -
              
              
              200,000Proceeds
                  from sale of real estate held for development
              
              
              881,679
              
              
              -
              
              
              -Purchase
                  of real estate held for development
              
              
              (1,360,021
              )
              
              (1,352,611
              )
              
              -Loan
                  disbursements
              
              
              (37,837
              )
              
              (1,767,773
              )
              
              -Loan
                  repayments
              
              
              545,000
              
              
              89,930
              
              
              89,930Net
                  cash provided by (for) investing activities
              
              
              28,821
              
              
              (3,030,454
              )
              
              289,930Financing
                  activities:Proceeds
                  from borrowed money
              
              
              -
              
              
              442,761
              
              
              -Repayment
                  of borrowed money
              
              
              (200,000
              )
              
              -
              
              
              -Proceeds
                  from exercise of stock options
              
              
              481,783
              
              
              71,434
              
              
              105,914Repurchase
                  of stock options
              
              
              -
              
              
              -
              
              
              (108,215
              )Purchase
                  of treasury stock
              
              
              (420,505
              )
              
              (166,187
              )
              
              (74,269
              )Dividends
                  received from Bank
              
              
              800,000
              
              
              -
              
              
              -Dividends
                  paid on common stock
              
              
              (315,315
              )
              
              (259,197
              )
              
              (224,172
              )Net
                  cash provided by (for) investing activities
              
              
              345,963
              
              
              88,811
              
              
              (300,742
              )Net
                  increase (decrease) in cash and cash equivalents
              
              
              164,721
              
              
              (3,079,955
              )
              
              (165,417
              )Cash
                  and cash equivalents at beginning of year
              
              
              183,122
              
              
              3,263,077
              
              
              3,428,494Cash
                  and cash equivalents at end of year
              
              $
              347,843
              
              
              183,122
              
              
              3,263,077
   47
 
 **AMB
          Financial Corp.**
 **Stockholder
          Information**
 
 **Annual
          Meeting**
 
 The
          annual meeting of stockholders will be held at 10:30 a.m., on April 25,
          2007, at
          the Company’s corporate office, located at 8230 Hohman Avenue, Munster,
          Indiana.
 
 **Stock
          Listing**
 
 The
          Company’s stock is traded on the OTC Bulletin Board under the symbol
“AMFC.OB”.
 
 Price
          Range of Common Stock and Dividends
 
 The
          table
          below shows the range of high and low sale prices and dividends paid in
          fiscal
          2006.
 Quarter
                      Ended
                  High
                  Low
                  DividendsMarch
                      31, 2006
                  16.000
                  13.500
                  $0.070June
                      30, 2006
                  16.350
                  14.160
                  $0.080September
                      30, 2006
                  14.750
                  14.200
                  $0.080December
                      31, 2006
                  15.950
                  14.220
                  $0.080
 The
            Board
            of Directors will consider the payment of future cash dividends and the
            amount
            of such dividends based on the results of operations and the financial
            condition
            of the Company, tax considerations, industry standards, economic conditions,
            regulatory restrictions, general business practices and other factors.
            See Note
            19 of the Notes to the Consolidated Financial Statements for information
            regarding limitations of the Bank’s ability to pay dividends to the
            Company.
 
 As
            of
            December 31, 2006, the Company had 1,046,350 outstanding shares of common
            stock.
 **Shareholder
                        General Inquiries**
                    **Transfer
                        Agent**Clement
                        B. Knapp, Jr., President
                    Registrar
                        & Transfer Co.AMB
                        Financial Corp.
                    10
                        Commerce Drive8230
                        Hohman Ave.
                    Cranford,
                        New Jersey 07016Munster,
                        Indiana 46321
                    (800)
                        456-0596(219)
                        836-5870
 
  48
  **AMB
            Financial Corp.**
 **Corporate
            Information**
 **Corporate
                    Office**AMB
                      Financial Corp.
                    8230
                      Hohman Avenue
                    Munster,
                      IN 46321
                  Telephone
                      (219) 836-5870
                    Fax
                      (219) 836-5883
                    Web
                      site ambfinancial.com**Directors
                      of the Board**
                  **AMB
                      Financial Corp.**
                      **Officers**Clement
                      B. Knapp, Jr.
                    President
                      and Chief Executive Officer
                    Since
                      1977
                  Clement
                      B. Knapp, Jr.
                    Chairman
                      of the Board, PresidentRonald
                      W. Borto
                    Director
                      since 1986
                  Louis
                      A. Green
                    Senior
                      Vice-PresidentDonald
                      L. Harle
                    Director
                      since 1995
                  Scott
                      S. Gyure
                    Vice-President,
                      Treasurer
                    Chief
                      Financial OfficerMichael
                      Mellon
                    Director
                      since 2004
                  Denise
                      L. Knapp
                    Corporate
                      SecretaryJohn
                      G. Pastrick
                    Director
                      since 1979
                  Michael
                      Mellon
                    Executive
                      Vice PresidentRobert
                      E. Tolley
                    Director
                      since 1987
                  Todd
                      Williams
                    Vice
                      PresidentRobert
                      B. Rossa
                    Vice
                      President**Independent
                      Auditors**
                    Cobitz,
                      VandenBerg & Fennessy
                    9944
                      S. Roberts Road Suite 202
                    Palos
                      Hills, IL 60465
                  **Corporate
                      Counsel / Local**
                    Abrahamson
                      & Reed
                    Attorneys
                      at Law
                    200
                      Russell Street
                    Hammond,
                      IN 46320**Corporate
                      Counsel / Washington DC**
                    Luse,
                      Gorman, Pomerent & Schick, P.C.
                    5335
                      Wisconsin Avenue, N.W.
                    Suite
                      400
                    Washington,
                      D.C. 20015
  49
   **Annual
            and Other Report**
 
 The
            Company is required to file an annual report on Form 10-KSB with the
            Securities
            and Exchange Commission. Copies of the Form 10-KSB, annual report and
            the
            Company’s quarterly reports may be obtained without charge by
            contacting:
 
 Tricia
            Cassity
 AMB
            Financial Corp.
 8230
            Hohman Avenue
 Munster,
            Indiana 46321
 (219)
            836-5870
   50