**SECURITIES
        AND EXCHANGE COMMISSION**
 **WASHINGTON,
        D.C. 20549**
 
 **FORM
        10-Q**
 
 (Mark
        One)
 
 [X]
              QUARTERLY
                  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                  ACT OF
                  1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2005
                  OR
 
 [   ]
              TRANSITION
                  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                  ACT OF
                  1934 FOR THE TRANSITION PERIOD FROM
                  TO
 
 Commission
        file number:   0-21765
 
 RIVER
        VALLEY BANCORP
 (Exact
        name of registrant specified in its charter)
 
 Indiana
              35-1984567(State
                  or other jurisdiction of incorporation or organization)
              (I.R.S.
                  Employer Identification Number)
 
 430
        Clifty Drive
 Madison,
        Indiana 47250
 (Address
        of principal executive offices, including Zip Code)
 
 (812)
        273-4949
 (Registrant’s
        telephone number, including area code)
 
 
 Indicate
        by check mark whether the Registrant (1) has filed all reports required to
        be
        filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
        the
        preceding 12 months (or for such shorter period that the Registrant was required
        to file such report), and (2) has been subject to such filing requirements
        for
        the past 90
        days. Yes [X]   No [   ]
 
 Indicate
        by check mark whether the Registrant is an accelerated filer (as defined
        in Rule
        12b-2 of the Exchange Act).
        Yes [   ]   No [X]
 
 Indicate
        by check mark whether the Registrant is a shell company (as defined in Rule
        12b-2 of the Exchange
        Act).   Yes [   ]   No [X]
 
 The
        number of shares of the Registrant’s common stock, without par value,
        outstanding as of September 30, 2005 was 1,588,987.
 
 
  1
  RIVER
        VALLEY BANCORP
 FORM
        10-Q
 
 INDEX
 
 
 Page
                  No.FORWARD
                  LOOKING STATEMENT
              3PART
                  I.
              FINANCIAL
                  INFORMATION
              3Item
                  1.
              Financial
                  Statements
              3Consolidated
                  Condensed Balance Sheets
              3Consolidated
                  Condensed Statements of Income
              4Consolidated
                  Condensed Statements of Comprehensive Income
              5Consolidated
                  Condensed Statements of Cash Flows
              6Notes
                  to Unaudited Consolidated Condensed Financial Statements
              7Item
                  2.
              Management's
                  Discussion and Analysis of Financial Condition and Results of
                  Operations
              10Item
                  3.
              Quantitative
                  and Qualitative Disclosures about Market Risk
              14Item
                  4.
              Controls
                  and Procedures
              15PART
                  II.
              OTHER
                  INFORMATION
              16Item
                  1.
              Legal
                  Proceedings
              16Item
                  2.
              Unregistered
                  Sales of Equity Securities and Use of Proceeds
              16Item
                  3.
              Defaults
                  Upon Senior Securities
              16Item
                  4.
              Submission
                  of Matters to a Vote of Security Holders
              16Item
                  5.
              Other
                  Information
              16Item
                  6.
              Exhibits
              16SIGNATURES
              17EXHIBIT
                  INDEX
              18
 
 
  2
 **PART
          I FINANCIAL INFORMATION**
 **Item
        1. Financial Statements**
  **RIVER
        VALLEY BANCORP**
 Consolidated
        Condensed Balance Sheets
 
 September
                  30,
                2005
                (Unaudited)
              
              December
                  31,
                2004(In
                  Thousands, Except Share Amounts)**Assets**Cash
                  and due from banks
              
              $
              3,733
              
              $
              4,911Interest-bearing
                  demand deposits
              
              
              5,052
              
              
              7,526Cash
                  and cash equivalents
              
              
              8,785
              
              
              12,437Investment
                  securities available for sale
              
              
              52,399
              
              
              26,964Loans
                  held for sale
              
              
              270
              
              
              337Loans
              
              
              234,446
              
              
              233,400Allowance
                  for loan losses
              
              
              2,333
              
              
              2,364Net
                  loans
              
              
              232,113
              
              
              231,036Premises
                  and equipment
              
              
              8,289
              
              
              6,798Federal
                  Home Loan Bank stock
              
              
              4,050
              
              
              3,281Interest
                  receivable
              
              
              1,908
              
              
              1,599Cash
                  surrender value life insurance
              
              
              5,456
              
              
              5,302Other
                  assets
              
              
              1,232
              
              
              1,673Total
                  assets
              
              $
              314,502
              
              $
              289,427**Liabilities**DepositsNon-interest-bearing
              
              $
              20,084
              
              $
              5,066Interest-bearing
              
              
              169,193
              
              
              155,472Total
                  deposits
              
              
              189,277
              
              
              170,538Borrowings
              
              
              99,990
              
              
              94,600Interest
                  payable
              
              
              459
              
              
              382Other
                  liabilities
              
              
              1,654
              
              
              1,514Total
                  liabilities
              
              
              291,380
              
              
              267,034**Commitments
                  and Contingencies****Shareholders’
                  Equity**Preferred
                  stock, without par valueAuthorized
                  and unissued - 2,000,000 sharesCommon
                  stock, without par valueAuthorized
                  - 5,000,000 sharesIssued
                  and outstanding - 1,588,987 and 1,584,377 sharesAdditional
                  paid-in capital
              
              
              9,037
              
              
              8,843Retained
                  earnings
              
              
              14,608
              
              
              13,800Shares
                  acquired by stock benefit plans
              
              
              (273
              )
              
              (215
              )Accumulated
                  other comprehensive income
              
              
              (250
              )
              
              (35
              )Total
                  shareholders’ equity
              
              
              23,122
              
              
              22,393Total
                  liabilities and shareholders’ equity
              
              $
              314,502
              
              $
              289,427
  See
        notes
        to consolidated condensed financial statements.
 3
 **RIVER
        VALLEY BANCORP**
 Consolidated
        Condensed Statements of Income
 (Unaudited)
 
 Nine
                  Months Ended
              
              Three
                  Months EndedSeptember
                  30,
              
              September
                  30,2005
              
              2004
              
              2005
              
              2004(In
                  Thousands, Except Share Amounts)Interest
                  IncomeLoans
                  receivable
              
              $
              10,575
              
              $
              9,055
              
              $
              3,617
              
              $
              3,199Investment
                  securities
              
              
              1,082
              
              
              652
              
              
              414
              
              
              182Interest-earning
                  deposits and other
              
              
              246
              
              
              135
              
              
              85
              
              
              47Total
                  interest income
              
              
              11,903
              
              
              9,842
              
              
              4,116
              
              
              3,428Interest
                  ExpenseDeposits
              
              
              2,490
              
              
              2,056
              
              
              876
              
              
              691Borrowings
              
              
              3,316
              
              
              1,956
              
              
              1,210
              
              
              722Total
                  interest expense
              
              
              5,806
              
              
              4,012
              
              
              2,086
              
              
              1,413Net
                  Interest Income
              
              
              6,097
              
              
              5,830
              
              
              2,030
              
              
              2,015Provision
                  for loan losses
              
              
              216
              
              
              266
              
              
              72
              
              
              72Net
                  Interest Income After Provision for Loan Losses
              
              
              5,881
              
              
              5,564
              
              
              1,958
              
              
              1,943Other
                  IncomeNet
                  realized gains (losses) on sales of available-for-sale securities
              
              
              0
              
              
              24
              
              
              0
              
              
              15Service
                  fees and charges
              
              
              1,399
              
              
              1,323
              
              
              507
              
              
              461Net
                  gains on loan sales
              
              
              248
              
              
              342
              
              
              76
              
              
              80Other
                  income
              
              
              240
              
              
              264
              
              
              69
              
              
              79Total
                  other income
              
              
              1,887
              
              
              1,953
              
              
              652
              
              
              635Other
                  ExpensesSalaries
                  and employee benefits
              
              
              2,721
              
              
              2,348
              
              
              883
              
              
              791Net
                  occupancy and equipment expenses
              
              
              858
              
              
              840
              
              
              312
              
              
              361Data
                  processing fees
              
              
              94
              
              
              108
              
              
              37
              
              
              35Advertising
              
              
              189
              
              
              170
              
              
              72
              
              
              53Legal
                  and professional fees
              
              
              198
              
              
              167
              
              
              45
              
              
              67Amortization
                  of mortgage servicing rights
              
              
              100
              
              
              141
              
              
              18
              
              
              4Other
                  expenses
              
              
              977
              
              
              826
              
              
              380
              
              
              185Total
                  other expenses
              
              
              5,137
              
              
              4,600
              
              
              1,747
              
              
              1,496Income
                  Before Income Tax
              
              
              2,631
              
              
              2,917
              
              
              863
              
              
              1,082Income
                  tax expense
              
              
              910
              
              
              1,117
              
              
              287
              
              
              436Net
                  Income
              
              $
              1,721
              
              $
              1,800
              
              $
              576
              
              $
              646Basic
                  earnings per share
              
              $
              1.09
              
              $
              1.12
              
              $
              .36
              
              $
              .41Diluted
                  earnings per share
              
              
              1.05
              
              
              1.08
              
              
              .35
              
              
              .39Dividends
                  per share
              
              
              .58
              
              
              .53
              
              
              .195
              
              
              .18
  See
        notes
        to consolidated condensed financial statements.
 4
 **RIVER
          VALLEY BANCORP**
 Consolidated
        Condensed Statements of Comprehensive Income
 (Unaudited)
 
 Nine
                  Months Ended
                September
                  30,
              
              Three
                  Months Ended
                September
                  30,2005
              
              2004
              
              2005
              
              2004(In
                  Thousands)Net
                  income
              
              $
              1,721
              
              $
              1,800
              
              $
              576
              
              $
              646Other
                  comprehensive income, net of taxUnrealized
                  gains on securities available for saleUnrealized
                  holding gains (losses) arising during the period, net of tax expense
                  (benefit) of $(141), $(107), $(44) and $42.
              
              
              (215
              )
              
              (163
              )
              
              (68
              )
              
              64Less:
                  Reclassification adjustment for gains (losses) included in net
                  income, net
                  of tax expense (benefit) of $0, $10, $0 and $6.
              
              
              
              
              
              14
              
              
              
              
              
              9(215
              )
              
              (177
              )
              
              (68
              )
              
              55Comprehensive
                  income
              
              $
              1,506
              
              $
              1,623
              
              $
              508
              
              $
              701
 
 
 See
        notes
        to consolidated condensed financial statements.
  5
 **RIVER
        VALLEY BANCORP**
 Consolidated
        Condensed Statements of Cash Flows
 (Unaudited)
 
 Nine
                  Months EndedSeptember
                  30,2005
              
              2004(In
                  Thousands)Operating
                  ActivitiesNet
                  income
              
              $
              1,721
              
              $
              1,800Adjustments
                  to reconcile net income to net cash provided by operating
                  activitiesProvision
                  for loan losses
              
              
              216
              
              
              266Depreciation
                  and amortization
              
              
              426
              
              
              433Loss
                  on sale of premises and equipment
              
              
              14
              
              
              0Investment
                  securities gains
              
              
              0
              
              
              (24
              )Loans
                  originated for sale in the secondary market
              
              
              (11,615
              )
              
              (15,798
              )Proceeds
                  from sale of loans in the secondary market
              
              
              11,794
              
              
              15,960Gain
                  on sale of loans
              
              
              (248
              )
              
              (342
              )Amortization
                  of deferred loan origination cost
              
              
              91
              
              
              99Amortization
                  of expense related to stock benefit plans
              
              
              249
              
              
              248Net
                  change in:Interest
                  receivable
              
              
              (309
              )
              
              (73
              )Interest
                  payable
              
              
              77
              
              
              (33
              )Other
                  adjustments
              
              
              419
              
              
              (787
              )Net
                  cash provided by operating activities
              
              
              2,835
              
              
              1,749Investing
                  ActivitiesPurchases
                  of securities available for sale
              
              
              (36,771
              )
              
              (3,132
              )Proceeds
                  from maturities of securities available for sale
              
              
              11,015
              
              
              14,034Proceeds
                  from sale of securities available for sale
              
              
              0
              
              
              4,211Purchase
                  of Federal Home Loan Bank stock
              
              
              (695
              )
              
              (992
              )Net
                  change in loans
              
              
              (1,328
              )
              
              (35,613
              )Purchases
                  of premises and equipment
              
              
              (1,931
              )
              
              (654
              )Proceeds
                  from sale of foreclosed real estate
              
              
              80
              
              
              0Net
                  cash used in investing activities
              
              
              (29,630
              )
              
              (22,146
              )Financing
                  ActivitiesNet
                  change inNoninterest-bearing,
                  interest-bearing demand and savings deposits
              
              
              13,744
              
              
              (1,794
              )Certificates
                  of deposit
              
              
              4,995
              
              
              233Short
                  term borrowings
              
              
              (8,610
              )Proceeds
                  from borrowings
              
              
              32,000
              
              
              34,000Repayment
                  of borrowings
              
              
              (18,000
              )
              
              (12,000
              )Cash
                  dividends
              
              
              (903
              )
              
              (842
              )Purchase
                  of stock
              
              
              -
              
              
              (1,679
              )Stock
                  options exercised
              
              
              17
              
              
              101Acquisition
                  of stock for stock benefit plans
              
              
              (147
              )
              
              (34
              )Advances
                  by borrowers for taxes and insurance
              
              
              47
              
              
              24Net
                  cash provided by financing activities
              
              
              23,143
              
              
              18,009Net
                  Change in Cash and Cash Equivalents
              
              
              (3,652
              )
              
              (2,388
              )Cash
                  and Cash Equivalents, Beginning of Period
              
              
              12,437
              
              
              12,512Cash
                  and Cash Equivalents, End of Period
              
              $
              8,785
              
              $
              10,124Additional
                  Cash Flows and Supplementary InformationInterest
                  paid
              
              $
              5,729
              
              $
              4,045Income
                  tax paid
              
              
              880
              
              
              673
  See
        notes
        to consolidated condensed financial statements.
 6
  **RIVER
        VALLEY BANCORP**
 Notes
        to
        Unaudited Consolidated Condensed Financial Statements
 
 River
        Valley Bancorp (the “Corporation” or the “Company”) is a unitary savings and
        loan holding company whose activities are primarily limited to holding the
        stock
        of River Valley Financial Bank (“River Valley” or the “Bank”). The Bank conducts
        a general banking business in southeastern Indiana which consists of attracting
        deposits from the general public and applying those funds to the origination
        of
        loans for consumer, residential and commercial purposes. River Valley’s
        profitability is significantly dependent on net interest income, which is
        the
        difference between interest income generated from interest-earning assets
        (i.e.
        loans and investments) and the interest expense paid on interest-bearing
        liabilities (i.e. customer deposits and borrowed funds). Net interest income
        is
        affected by the relative amount of interest-earning assets and interest-bearing
        liabilities and the interest received or paid on these balances. The level
        of
        interest rates paid or received by the Bank can be significantly influenced
        by a
        number of competitive factors, such as governmental monetary policy, that
        are
        outside of management’s control.
 
 
 Note
        1: Basis of Presentation
 
 The
        accompanying unaudited consolidated condensed financial statements were prepared
        in accordance with instructions for Form 10-Q and, therefore, do not include
        information or footnotes necessary for a complete presentation of financial
        position, results of operations and cash flows in conformity with generally
        accepted accounting principles. Accordingly, these financial statements should
        be read in conjunction with the consolidated financial statements and notes
        thereto of the Corporation included in the Annual Report on Form 10-KSB for
        the
        year ended December 31, 2004. However, in the opinion of management, all
        adjustments (consisting of only normal recurring accruals) which are necessary
        for a fair presentation of the financial statements have been included. The
        results of operations for the nine and three-month periods ended September
        30,
        2005, are not necessarily indicative of the results which may be expected
        for
        the entire year. The consolidated condensed balance sheet of the Corporation
        as
        of December 31, 2004 has been derived from the audited consolidated balance
        sheet of the Corporation as of that date.
 
 
 Note
        2: Principles of Consolidation
 
 The
        consolidated financial statements include the accounts of the Corporation
        and
        its subsidiary, the Bank, and the Bank’s subsidiary, Madison First Services
        Corporation (“First Service”). All significant intercompany balances and
        transactions have been eliminated in the accompanying consolidated financial
        statements.
  
 Note
        3: Earnings Per Share
 
 Earnings
        per share have been computed based upon the weighted average common shares
        outstanding. Unearned Employee Stock Ownership Plan shares have been excluded
        from the computation of average common shares outstanding.
 
 
  7
  
 Nine
                  Months Ended
                September
                  30, 2005
              
              Nine
                  Months Ended
                September
                  30, 2004Income
              
              Weighted
                Average
                Shares
              
              Per
                  Share
                Amount
              
              Income
              
              Weighted
                Average
                Shares
              
              Per
                  Share
                Amount(In
                  Thousands, Except Share Amounts)Basic
                  earnings per shareIncome
                  available to common shareholders
              
              $
              1,721
              
              
              1,578,958
              
              $
              1.09
              
              $
              1,800
              
              
              1,600,173
              
              $
              1.12Effect
                  of dilutive RRP awards and stock options
              
              
              
              
              
              61,387
              
              
              
              
              
              
              
              
              72,289Diluted
                  earnings per shareIncome
                  available to common shareholders and assumed conversions
              
              $
              1,721
              
              
              1,640,345
              
              $
              1.05
              
              $
              1,800
              
              
              1,672,462
              
              $
              1.08
 
 
 Three
                  Months Ended
                September
                  30, 2005
              
              Three
                  Months Ended
                September
                  30, 2004Income
              
              Weighted
                Average
                Shares
              
              Per
                  Share
                Amount
              
              Income
              
              Weighted
                Average
                Shares
              
              Per
                  Share
                Amount(In
                  Thousands, Except Share Amounts)Basic
                  earnings per shareIncome
                  available to common shareholders
              
              $
              576
              
              
              1,584,073
              
              $
              .
                  36
              
              $
              646
              
              
              1,589,574
              
              $
              .
                  41Effect
                  of dilutive RRP awards and stock options
              
              
              
              
              
              60,084
              
              
              
              
              
              
              
              
              69,629Diluted
                  earnings per shareIncome
                  available to common shareholders and assumed conversions
              
              $
              576
              
              
              1,644,157
              
              $
              .35
              
              $
              646
              
              
              1,659,203
              
              $
              .39
 
 
 Note
        4:  Stock
        Options
 
 The
        Company has a stock-based employee compensation plan, which is described
        more
        fully in Notes to Financial Statements included in the December 31, 2004
        Annual
        Report to Shareholders. The Company accounts for this plan under the recognition
        and measurement principles of APB Opinion No. 25, *Accounting
        for Stock Issued to Employees* ,
        and
        related interpretations. No stock-based employee compensation cost is reflected
        in net income, as all options granted under the plan had an exercise price
        equal
        to the market value of the underlying common stock on the grant date. The
        following table illustrates the effect on net income and earnings per share
        if
        the Company had applied the fair value provisions of Statement of Financial
        Accounting Standards (“SFAS”) No. 123, *Accounting
        for Stock-Based Compensation* ,
        to
        stock-based employee compensation.
   8
  
  Nine
                  Months Ended
                September
                  30,
                2005
              
              Nine
                  Months Ended
                September
                  30,
                2004
              
              Three
                  Months Ended
                September
                  30,
                2005
              
              Three
                  Months Ended
                September
                  30,
                2004Net
                  income, as reported
              
              $
              1,721
              
              $
              1,800
              
              $
              576
              
              $
              646Less:
                  Total stock-based employee compensation cost determined under the
                  fair
                  value based method, net of income taxes
              
              
              10
              
              
              20
              
              
              2
              
              
              7Pro
                  forma net income
              
              $
              1,711
              
              $
              1,780
              
              $
              574
              
              $
              639Earnings
                  per share:Basic
                  - as reported
              
              $
              1.09
              
              $
              1.12
              
              $
              .36
              
              $
              .41Basic
                  - pro forma
              
              
              1.08
              
              
              1.11
              
              
              .36
              
              
              .40Diluted
                  - as reported
              
              
              1.05
              
              
              1.08
              
              
              .35
              
              
              .39Diluted
                  - pro forma
              
              
              1.04
              
              
              1.06
              
              
              .35
              
              
              .39
 
 In
        December, 2004, the Financial Accounting Standards Board (FASB) issued an
        amendment to SFAS 123(SFAS 123R) which eliminates the ability to account
        for
        share-based compensation transactions using Accounting Principles Board Opinion
        No. 25 and generally requires that such transactions be accounted for using
        a
        fair value-based method. SFAS 123R will be effective for the Company beginning
        January 1, 2006. SFAS 123R applies to all awards granted after the required
        effective date and to awards modified, repurchased, or cancelled after that
        date. The cumulative effect of initially applying this Statement, if any,
        is
        recognized as of the required effective date.
 
 As
        of the
        required effective date, the Company will apply SFAS 123R using either the
        modified version of prospective application or the modified version of
        retrospective application. Under prospective transition method, compensation
        cost is recognized on or after the required effective date for the portion
        of
        outstanding awards for which the requisite service has not yet been rendered,
        based on the grant-date fair value of those awards calculated under SFAS
        123 for
        either recognition or pro forma disclosures. For periods before the required
        effective date, a company may elect to apply a modified version of retrospective
        application under which financial statements for prior periods are adjusted
        on a
        basis consistent with the pro forma disclosures required for those periods
        by
        SFAS 123.
 
 The
        Company is currently evaluating the effect of the recognition and measurement
        provisions of SFAS 123R but believes the adoption of SFAS 123R will not result
        in a material impact on the Company’s results of operation or financial
        condition.
 
 
 Note
        5:  Reclassifications
 
 Certain
        reclassifications have been made to the 2004 consolidated condensed financial
        statements to conform to the September 30, 2005 presentation.
 
 
  9
  Note
        6:  Recent Accounting Developments
 
 In
        June,
        2005 the FASB Board decided not to provide additional guidance on the meaning
        of
        other-than-temporary impairment, but directed the FASB staff to issue a staff
        position (FSP) which will be retitled FSP 115-1 “The Meaning of
        Other-Than-Temporary Impairment and Its Application to Certain Investments”. The
        final FSP will supersede EITF Issue No. 03-1, “The Meaning of
        Other-Than-Temporary Impairment and Its Application to Certain Investments,” and
        EITF Topic No. D-44, “Recognition of Other-Than-Temporary Impairment upon the
        Planned Sale of a Security Whose Cost Exceeds Fair Value.” FSP FAS 115-1 will
        replace guidance in EITF Issue 03-1 on loss recognition with references to
        existing other-than-temporary impairment guidance, such as FASB Statement
        No.
        115, “Accounting for Certain Investments in Debt and Equity Securities”. FSP FAS
        115-1 will clarify that an investor should recognize an impairment loss no
        later
        than when the impairment is deemed other than temporary, even if a decision
        to
        sell has not been made.
 
 FSP
        FAS
        115-1 will be effective for other-than-temporary impairment analysis conducted
        in periods beginning after September 15, 2005. The Company has consistently
        followed the loss recognition guidance in SFAS No. 115, so the adoption of
        FSP
        FAS 115-1 will not have any significant impact on the Company's financial
        condition or results of operation.
 
 
 **Item
        2.**  **Management's
        Discussion and Analysis of Financial Condition and Results of
        Operations**
 
 **Forward
        Looking Statements**
 
 This
        Quarterly Report on Form 10-Q ("Form 10-Q") contains statements which constitute
        forward looking statements within the meaning of the Private Securities
        Litigation Reform Act of 1995. These statements appear in a number of places
        in
        this Form 10-Q and include statements regarding the intent, belief, outlook,
        estimate or expectations of the Corporation (as defined in the notes to the
        consolidated condensed financial statements), its directors or its officers
        primarily with respect to future events and the future financial performance
        of
        the Corporation. Readers of this Form 10-Q are cautioned that any such forward
        looking statements are not guarantees of future events or performance and
        involve risks and uncertainties, and that actual results may differ materially
        from those in the forward looking statements as a result of various factors.
        The
        accompanying information contained in this Form 10-Q identifies important
        factors that could cause such differences. These factors include changes
        in
        interest rates; loss of deposits and loan demand to other financial
        institutions; substantial changes in financial markets; changes in real estate
        values and the real estate market; or regulatory changes.
 
 **Critical
        Accounting Policies**
 
 The
        notes
        to the consolidated financial statements contain a summary of the Company’s
        significant accounting policies presented on pages 24 through 26 of the Annual
        Report to Shareholders for the year ended December 31, 2004. Certain of these
        policies are important to the portrayal of the Company’s financial condition,
        since they require management to make difficult, complex or subjective
        judgments, some of which may relate to matters that are inherently uncertain.
        Management believes that its critical accounting policies include determining
        the allowance for loan losses and the valuation of mortgage servicing
        rights.
 
 
 Allowance
        for loan losses
 
 The
        allowance for loan losses is a significant estimate that can and does change
        based on management’s assumptions about specific borrowers and current general
        economic and business conditions, among other factors. Management reviews
        the
        adequacy of the allowance for loan losses on at least a quarterly basis.
        The
        evaluation by management includes consideration of past loss experience,
        changes
        in the composition of the loan portfolio, the current condition and amount
        of
        loans outstanding, identified problem loans and the probability of collecting
        all amounts due.
 
 The
        allowance for loan losses represents management’s estimate of probable losses
        inherent in the Corporation’s loan portfolios. In determining the appropriate
        amount of the allowance for loan losses, management makes numerous assumptions,
        estimates and assessments.
 
  10
  The
        Corporation’s strategy for credit risk management includes conservative,
        centralized credit policies, and uniform underwriting criteria for all loans
        as
        well as an overall credit limit for each customer significantly below legal
        lending limits. The strategy also emphasizes diversification on a geographic,
        industry and customer level, regular credit quality reviews and quarterly
        management reviews of large credit exposures and loans experiencing
        deterioration of credit quality.
 
 The
        Corporation’s allowance consists of three components: probable losses estimated
        from individual reviews of specific loans, probable losses estimated from
        historical loss rates, and probable losses resulting from economic or other
        deterioration above and beyond what is reflected in the first two components
        of
        the allowance.
 
 Larger
        commercial loans that exhibit probable or observed credit weaknesses are
        subject
        to individual review. Where appropriate, reserves are allocated to individual
        loans based on management’s estimate of the borrower’s ability to repay the loan
        given the availability of collateral, other sources of cash flow and legal
        options available to the Corporation. Included in the review of individual
        loans
        are those that are impaired as provided in SFAS No. 114, *Accounting
        by Creditors for Impairment of a Loan.* Any
        allowances for impaired loans are measured based on the present value of
        expected future cash flows discounted at the loan’s effective interest rate or
        fair value of the underlying collateral. The Corporation evaluates the
        collectibility of both principal and interest when assessing the need for
        a loss
        accrual. Historical loss rates are applied to other commercial loans not
        subject
        to specific reserve allocations
 
 Homogenous
        loans, such as consumer installment and residential mortgage loans are not
        individually risk graded. Rather, standard credit scoring systems are used
        to
        assess credit risks. Reserves are established for each pool of loans based
        on
        the expected net charge-offs for one year. Loss rates are based on the average
        net charge-off history by loan category.
 
 Historical
        loss rates for commercial and consumer loans may be adjusted for significant
        factors that, in management’s judgment, reflect the impact of any current
        conditions on loss recognition. Factors which management considers in the
        analysis include the effects of the national and local economies, trends
        in the
        nature and volume of loans (delinquencies, charge-offs and non-accrual loans),
        changes in mix, credit score migration comparisons, asset quality trends,
        risk
        management and loan administration, changes in the internal lending policies
        and
        credit standards, collection practices and examination results from bank
        regulatory agencies and the Corporation’s internal loan review.
 
 An
        unallocated reserve is maintained to recognize the imprecision in estimating
        and
        measuring loss when evaluating reserves for individual loans or pools of
        loans.
        Allowances on individual loans and historical loss rates are reviewed quarterly
        and adjusted as necessary based on changing borrower and/or collateral
        conditions and actual collection and charge-off experience.
 
 The
        Corporation’s primary market area for lending is southeastern Indiana and
        portions of northwestern Kentucky. When evaluating the adequacy of allowance,
        consideration is given to this regional geographic concentration and the
        closely
        associated effect changing economic conditions have on the Corporation’s
        customers.
 
 The
        Corporation has not substantively changed any aspect to its overall approach
        in
        the determination of the allowance for loan losses. There have been no material
        changes in assumptions or estimation techniques as compared to prior periods
        that impacted the determination of the current period allowance.
 
 
 Valuation
        of Mortgage Servicing Rights
 
 The
        Company recognizes the rights to service mortgage loans as separate assets
        in
        the consolidated balance sheet. The total cost of loans when sold is allocated
        between loans and mortgage servicing rights based on the relative fair values
        of
        each. Mortgage servicing rights are subsequently carried at the lower of
        the
        initial carrying value, adjusted for amortization, or fair value. Mortgage
        servicing rights are evaluated for impairment based on the fair value of
        those
        rights. Factors included in the calculation of fair value of the mortgage
        servicing rights include, estimating the present value of future net cash
        flows,
        market loan prepayment speeds for similar loans, discount rates, servicing
        costs, and other economic factors. Servicing rights are amortized over the
        estimated period of net servicing revenue. It is likely that these economic
        factors will change over the life of the mortgage servicing rights, resulting
        in
        different valuations of the mortgage servicing rights. The differing valuations
        will affect the carrying value of the mortgage servicing rights on the
        consolidated balance sheet as well as the income recorded from loan servicing
        in
        the income statement. As of September 30, 2005 and December 31, 2004, mortgage
        servicing rights had carrying values of $896,000 and $860,000,
        respectively.
  11
  **Financial
        Condition**
 
 At
        September 30, 2005, the Corporation’s consolidated assets totaled $314.5
        million, an increase of $25.1 million, or 8.7% from December 31, 2004. The
        increase in assets resulted primarily from an increase in the investment
        portfolio of $25.4 million, partially offset by the decrease of liquid
        assets(i.e., cash and cash equivalents) of $3.6 million. Net loans receivable,
        including loans held for sale, were $232.4 million at September 30, 2005,
        an
        increase of $1.0 million, or .4%, from $231.4 at December 31, 2004.
 
 The
        Corporation’s consolidated allowance for loan losses totaled $2.4 million on
        December 31, 2004 and $2.3 million at September 30, 2005, which represented
        1.0%
        and .99% of total loans respectively. Non-performing loans (defined as loans
        delinquent greater than 90 days and loans on non-accrual status) totaled
        $2,100,000 and $1,758,000 at December 31, 2004 and September 30, 2005
        respectively. Although management believes that its allowance for loan losses
        at
        September 30, 2005, was adequate based upon the available facts and
        circumstances, there can be no assurance that additions to such allowance
        will
        not be necessary in future periods, which could negatively affect the
        Corporation’s results of operations.
 
 Deposits
        totaled $189.3 million at September 30, 2005, an increase of $18.8 million,
        or
        11.0%, compared to total deposits at December 31, 2004. The growth for the
        nine-month period resulted from the fact that our home market has changed.
        The
        sale of our largest competitor allowed us to increase our deposits at a time
        when deposits are very difficult to attract.
 
 Borrowings
        totaled $94.6 million at December 31, 2004, and $100.0 million on September
        30,
        2005. Of these totals, $65.0 million and $79.0 million respectively were
        FHLB
        Advances with average rates of 4.07% and 4.27%. Our interest spread is suffering
        as a result.
 
 Shareholders’
        equity totaled $23.1 million at September 30, 2005, an increase of $729,000,
        or
        3.3% from $22.4 million at December 31, 2004. The increase resulted primarily
        from the Corporation’s net income and the offset by dividends paid.
 
 The
        Bank
        is required to maintain minimum regulatory capital pursuant to federal
        regulations. At September 30, 2005, the Bank’s regulatory capital exceeded all
        applicable regulatory capital requirements.
 
 
 **Comparison
        of Operating Results for the Nine Months Ended September 30, 2005 and
        2004**
 
 General
 
 The
        Corporation’s net income for the nine months ended September 30, 2005, totaled
        $1,721,000, a decrease of $79,000 or 4.4% from the $1,800,000 reported for
        the
        period ended September 30, 2004. The decrease in income in the 2005 period
        was
        primarily attributable to increases in other expenses.
 
 Net
        Interest Income
 
 Total
        interest income for the nine months ended September 30, 2005 amounted to
        $11.9
        million, an increase of $2.1 million, or 20.9%, from the comparable period
        in
        2004, reflecting the effects of an increase in average interest-earning assets
        outstanding and an increase in the average loan rate of approximately
        0.44%.
 
 Interest
        expense on deposits increased by $434,000, or 21.1%, to a total of $2.5 million
        for the nine months ended September 30, 2005, due primarily to an increase
        in
        the average rate paid on deposits outstanding year-to-year. Interest expense
        on
        borrowings totaled $3.3 million for the nine months ended September 30, 2005,
        an
        increase of $1.4 million, from the comparable period in 2004. This increase
        resulted from an increase in the interest rate paid and the average borrowings
        year-to-year.
 
 As
        a
        result of the foregoing changes in interest income and interest expense,
        net
        interest income increased by $267,000, or 4.6%, for the nine months ended
        September 30, 2005, as compared to the same period in 2004.
 
  12
  Provision
        for Losses on Loans
 
 A
        provision for losses on loans is charged to income to bring the total allowance
        for loan losses to a level considered appropriate by management based upon
        historical experience, the volume and type of lending conducted by the Bank,
        the
        status of past due principal and interest payment, general economic conditions,
        particularly as such conditions relate to the Bank’s market area, and other
        factors related to the collectibility of the Bank’s loan portfolio. As a result
        of such analysis, management recorded a $216,000 provision for losses on
        loans
        for the nine months ended September 30, 2005, compared to the $266,000 amount
        recorded in the 2004 period. The 2005 provision amount was predicated on
        the
        increase in the balance of the loan portfolio, coupled with the decrease
        in the
        level of delinquent loans year-to-year. While management believes that the
        allowance for losses on loans is adequate at September 30, 2005, based upon
        the
        available facts and circumstances, there can be no assurance that the loan
        loss
        allowance will be adequate to cover losses on non-performing assets in the
        future.
 
 Other
        Income
 
 Other
        income decreased by $66,000, during the nine months ended September 30, 2005,
        as
        compared to the same period in 2004. The decrease was due primarily to a
        $94,000
        decrease in gains on sale of loans, offset in part by an increase in service
        fees and charges. The current mortgage rates are deterring loan refinancing
        in
        comparison to previous periods.
 
 Other
        Expense
 
 Other
        expense increased by $537,000, or 11.7%, during the nine months ended September
        30, 2005, as compared to the same period in 2004. The increase was due primarily
        to a $378,000 increase in salaries and benefits resulting from an expanded
        branch network and an increase in the asset base that is being served.
  Income
        Taxes
 
 The
        provision for income taxes totaled $.9 million for the nine months ended
        September 30, 2005, a decrease of $207,000, or 18.5%, as compared to the
        same
        period in 2004. This decrease resulted primarily from a decrease in net income
        before income taxes of $286,000.00 or 9.8%.
 
 
 **Comparison
        of Operating Results for the Three Months Ended September 30, 2005 and
        2004**
 
 General
 
 The
        Corporation’s net income for the three months ended September 30, 2005, totaled
        $576,000, a decrease of $70,000, or 10.8% from the $646,000 of net income
        reported in the comparable 2004 period. The decrease in earnings in the 2005
        period was primarily attributable to an increase in other expenses.
 
 Net
        Interest Income
 
 Total
        interest income for the three months ended September 30, 2005 amounted to
        $4.1
        million, an increase of $688,000, or 20.1%, from the comparable quarter in
        2004,
        reflecting the effects of an increase in average interest-earning assets
        outstanding. Interest income on loans totaled $3.6 million for the three
        months
        ended September 30, 2005, an increase of $418,000, or 13.1%, from the comparable
        quarter in 2004, reflecting the effects of an increase in average balance
        of
        loans year-to-year.
 
  13
 Interest
        expense on deposits increased by $185,000, or 26.8%, to a total of $876,000
        for
        the quarter ended September 30, 2005, due to an increase in the average rate
        and
        average outstanding balance of deposits. Interest expense on borrowings totaled
        $1,210,000 for the three months ended September 30, 2005, an increase of
        $488,000 over the comparable quarter in 2004. This increase resulted from
        an
        increase in the rates and an increase in average borrowings outstanding from
        year-to-year.
 
 As
        a
        result of the foregoing changes in interest income and interest expense,
        net
        interest income increased by $15,000, or .7%, for the three months ended
        September 30, 2005, as compared to the same quarter in 2004.
 
 Provision
        for Losses on Loans
 
 A
        provision for losses on loans is charged to earnings to bring the total
        allowance for loan losses to a level considered appropriate by management
        based
        upon historical experience, the volume and type of lending conducted by the
        Bank, the status of past due principal and interest payments, general economic
        conditions, particularly as such conditions relate to the Bank’s market area,
        and other factors related to the collectibility of the Bank’s loan portfolio. As
        a result of such analysis, management recorded a $72,000 provision for losses
        on
        loan for the three months ended September 30, 2005. The same amount was recorded
        in the 2004 period. While management believes that the allowance for losses
        on
        loans is adequate at September 30, 2005, based upon the available facts and
        circumstances, there can be no assurance that the loan loss allowance will
        be
        adequate to cover losses on non-performing assets in the future.
 
 Other
        Income
 
 Other
        income increased by $17,000, for the three months ended September 30, 2005,
        as
        compared to the same period in 2004, due primarily to an increase in Service
        fees and charges.
 
 Other
        Expense
 
 Other
        expenses increased by $251,000, or 16.8%, during the three months ended
        September 30, 2005, compared to the same period in 2004. The increase was
        due
        primarily to the increase in general expense due to growth.
 
 Income
        Taxes
 
 The
        provision for income taxes totaled $287,000 for the three months ended September
        30, 2005, a decrease of $149,000, or 34.2%, as compared to the same period
        in
        2004. This decrease resulted primarily from a decrease in net income before
        income taxes of $219,000, or 20.2%.
  **Other**
 
 The
        Securities and Exchange Commission maintains a Web site that contains reports,
        proxy information statements, and other information regarding registrants
        that
        file electronically with the Commission, including the Corporation. The
        address  is http://www.sec.gov .
 
 **Item
        3.**  **Quantitative
        and Qualitative Disclosures About Market Risk**
 
 An
        important part of River Valley Financial Bank’s asset/liability management
        policy includes examining the interest rate sensitivity of the assets and
        liabilities and monitoring the expected effects of interest rate changes
        on its
        net portfolio value.
 
 Presented
        below, as of June 30, 2005 and 2004, is an analysis performed by the OTS
        of
        River Valley’s interest rate risk as measured by changes in River Valley’s net
        portfolio value (“NPV”) for instantaneous and sustained parallel shifts in the
        yield curve, in 100 basis point increments, up 300 basis points and down
        200
        basis points. Down -200 basis points was added back as of the March 31, 2005
        calculations.
  14
  
 June
                  30, 2005Net
                  Portfolio Value
              
              
              NPV
                  as% of PV of AssetsChanges
                  In Rates
              $
                  Amount
              $
                  Change
              %Change
              NPV
                  Ratio
              Change(Dollars
                  in thousands)+300
              bp
              39,043
              
              1,999
              
              +5
              %
              12.79
              %
              +97
              bp+200
              bp
              39,018
              
              1,975
              
              +5
              %
              12.65
              %
              +83
              bp+100
              bp
              38,406
              
              1,362
              
              +4
              %
              12.34
              %
              +52
              bp0
              bp
              37,044
              
              
              
              
              
              11.82
              %-100
              bp
              34,793
              
              -2,251
              
              -6
              %
              11.04
              %
              -78
              bp-200
              bp
              32,081
              
              -4,963
              
              -13
              %
              10.14
              %
              -168
              bp
  
 June
                  30, 2004Net
                  Portfolio Value
              
              
              NPV
                  as% of PV of AssetsChanges
                  In Rates
              $
                  Amount
              $
                  Change
              %Change
              NPV
                  Ratio
              Change(Dollars
                  in thousands)+300
              bp
              38,053
              
              733
              
              +2
              %
              14.63
              %
              +66
              bp+200
              bp
              38,495
              
              1,174
              
              +3
              %
              14.64
              %
              +67
              bp+100
              bp
              38,321
              
              1,001
              
              +3
              %
              14.44
              %
              +47
              bp0
              bp
              37,320
              
              
              
              
              
              13.97
              %-100
              bp
              35,278
              
              -2,043
              
              -5
              %
              13.16
              %
              -81
              bp
 
 Management
        believes at September 30, 2005 there have been no material changes in River
        Valley’s interest rate sensitive instruments which would cause a material change
        in the market risk exposures which affect the quantitative and qualitative
        risk
        disclosures as presented in Item 6., Management’s Discussion and Analysis or
        Plan of Operation, of the Company’s Annual Report on Form 10-KSB for the period
        ended December 31, 2004
 
 
 **Item
        4.**  **Controls
        and Procedures.**
 
 A.  Evaluation
        of disclosure controls and procedures .
        The
        Company’s chief executive officer and chief financial officer, after evaluating
        the effectiveness of the Company’s disclosure controls and procedures (as
        defined in Sections 13a-15(e) and 15d-15(e) of regulations promulgated under
        the
        Securities Exchange Act of 1934, as amended (the “Exchange Act”)), as of the end
        of the most recent fiscal quarter covered by this quarterly report (the
“Evaluation Date”), have concluded that as of the Evaluation Date, the Company’s
        disclosure controls and procedures were effective in ensuring that information
        required to be disclosed by the Company in reports it files or submits under
        the
        Exchange Act is recorded, processed, summarized and reported within the time
        periods specified in the Securities and Exchange Commission’s rules and forms.
 
 B.  Changes
        in internal control over financial reporting .
        There
        were no changes in the Company’s internal control over financial reporting
        identified in connection with the Company’s evaluation of controls that occurred
        during the Company’s last fiscal quarter that have materially affected, or are
        reasonably likely to materially affect, the Company’s internal control over
        financial reporting.
  15
  
 **PART
                  II.   OTHER INFORMATION**Item
                  1.
              Legal
                  Proceedings.None.Item
                  2.
              Unregistered
                  Sales of Equity Securities and Use of Proceeds.None.Item
                  3.
              Defaults
                  Upon Senior Securities.None.Item
                  4.
              Submission
                  of Matters to Vote of Security Holders.None.Item
                  5.
              Other
                  Information.None.Item
                  6.
              Exhibits.**No.**
              **Description**31(1)
              CEO
                  Certification required by 17 C.F.R. Section
                  240.13a-14(a)31(2)
              CFO
                  Certification required by 17 C.F.R. Section
                  240.13a-14(a)32
              Certification
                  pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
                  906 of
                  the Sarbanes-Oxley Act of 2002.
  16
  
 **Signatures**
 
 Pursuant
        to the requirements of the Securities Exchange Act of 1934, as amended, the
        registrant has duly caused this report to be signed on its behalf by the
        undersigned thereunto duly authorized.
 
 
 **RIVER
                  VALLEY BANCORP**Date:
              November
                  14, 2005
              /s/
                  Matthew P. ForresterMatthew
                  P. ForresterPresident
                  and Chief Executive OfficerDate:
              November
                  14, 2005
              By:
                  /s/ Larry C. FouseLarry
                  C. FouseVice
                  President of Finance
 
  17
  **EXHIBIT
        INDEX**
  
  **No.**
              
              **Description**
              
              **Location**31(1)
              
              CEO
                  Certification required by 17 C.F.R. Section 240.13a-14(a)
              
              Attached31(2)
              
              CFO
                  Certification required by 17 C.F.R. Section 240.13a-14(a)
              
              Attached32
              
              Certification
                  pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
                  906 of
                  the Sarbanes-Oxley Act of 2002.
              
              Attached