**UNITED
        STATES**
 **SECURITIES
        AND EXCHANGE COMMISSION**
 **WASHINGTON,
        D.C. 20549**
  **FORM
        10-Q**
  **(MARK
        ONE)**
  
 ýQUARTERLY
                  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES
                  EXCHANGE ACT OF 1934For
                  the quarterly period ended September 30, 2007ORoTRANSITION
                  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES
                  EXCHANGE ACT OF 1934For
                  the transition period from ________________ to
                  ________________
  Commission
        file number: 0-21765
  **RIVER
        VALLEY BANCORP**
 (Exact
        name of registrant as specified in its charter)
 
 **Indiana**
              **35-1984567**(State
                  or other jurisdiction of incorporation or organization)
              (I.R.S.
                  Employer Identification No.)**430
                  Clifty Drive**
                **Madison,
                  Indiana**
              **47250**(Address
                  of principal executive offices)
              (Zip
                  Code)
  **(812)
        273-4949**
 (Registrant’s
        telephone number, including area code)
  **[None]**
 (Former
        name, former address and former fiscal year, if changed since last
        report)
  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 reports), and (2) has been subject to such filing requirements
        for
        the past 90 days.
  Yes  ý          No  o
  Indicate
        by check mark whether the registrant is a large accelerated filer, an
        accelerated filer, or a non-accelerated filer. See definition of “accelerated
        filer and large accelerated filer” in Rule 12b-2 of the Exchange
        Act.
  Large
        accelerated filer  o          Accelerated
        filer  o          Non-accelerated
        filer  ý
  Indicate
        by check mark whether the registrant is a shell company (as defined in Rule
        12b-2 of the Exchange Act).
  Yes  o          No  ý
  The
        number of shares of the Registrant’s common stock, without par value,
        outstanding as of **September 30, 2007** was
**1,630,432.**
  
  **RIVER
        VALLEY BANCORP**
 **FORM
        10-Q**
 **INDEX**
 
 Page
                  No.PART
                  I. FINANCIAL INFORMATIONItem
                  1.
              Financial
                  StatementsConsolidated
                  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
              9Item
                  3.
              Quantitative
                  and Qualitative Disclosure about Market Risk
              14Item
                  4.
              Controls
                  and Procedures
              15PART
                  II. OTHER INFORMATION
              15Item
                  1.
              Legal
                  Proceedings
              15Item
                  1A.
              Risk
                  Factors
              15Item
                  2.
              Unregistered
                  Sales of Equity Securities and Use of Proceeds
              15Item
                  3.
              Defaults
                  Upon Senior Securities
              15Item
                  4.
              Submission
                  of Matters to a Vote of Security Holders
              16Item
                  5.
              Other
                  Information
              16Item
                  6.
              Exhibits
              16SIGNATURES
              17EXHIBIT
                  INDEX
 
  2
   **PART
        I.  FINANCIAL INFORMATION**
  **ITEM
        1. FINANCIAL STATEMENTS**
  **RIVER
        VALLEY BANCORP**
 Consolidated
        Condensed Balance Sheet
 
 **September
                    30, 2007**
                  **(Unaudited)**
              
              
              **December
                    31, 2006**(In
                  Thousands, Except Share Amounts)**Assets**Cash
                  and due from banks
              
              $
              5,101
              
              
              $
              6,838Interest-bearing
                  demand deposits
              
              
              2,782
              
              
              
              4,736Fed
                  funds sold
              
              
              0
              
              
              
              234Cash
                  and cash equivalents
              
              
              7,883
              
              
              
              11,808Investment
                  securities available for sale
              
              
              63,520
              
              
              
              65,150Loans
                  held for sale
              
              
              228
              
              
              
              0Loans
              
              
              254,791
              
              
              
              244,063Allowance
                  for loan losses
              
              
              (2,019
              )
              
              
              (2,176
              )Net
                  loans
              
              
              252,772
              
              
              
              241,887Premises
                  and equipment
              
              
              7,672
              
              
              
              7,813Federal
                  Home Loan Bank stock
              
              
              4,550
              
              
              
              4,400Interest
                  receivable
              
              
              2,573
              
              
              
              2,334Cash
                  surrender value life insurance
              
              
              7,443
              
              
              
              7,222Other
                  assets
              
              
              1,386
              
              
              
              1,635Total
                  assets
              
              $
              348,027
              
              
              $
              342,249**Liabilities**DepositsNon-interest-bearing
              
              $
              19,867
              
              
              $
              19,340Interest-bearing
              
              
              203,050
              
              
              
              200,898Total
                  deposits
              
              
              222,917
              
              
              
              220,238Borrowings
              
              
              97,217
              
              
              
              95,217Interest
                  payable
              
              
              718
              
              
              
              705Other
                  liabilities
              
              
              2,265
              
              
              
              1,942Total
                  liabilities
              
              
              323,117
              
              
              
              318,102**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 - 1,630,432 and 1,620,431 shares
              
              
              9,099
              
              
              
              9,129Retained
                  earnings
              
              
              15,994
              
              
              
              15,346Accumulated
                  other comprehensive loss
              
              
              (183
              )
              
              
              (328
              )Total
                  shareholders’ equity
              
              
              24,910
              
              
              
              24,147Total
                  liabilities and shareholders’ equity
              
              $
              348,027
              
              
              $
              342,249
  See
        notes
        to consolidated condensed financial statements.
  3
  **RIVER
        VALLEY BANCORP**
 Consolidated
        Condensed Statement of Income
 (Unaudited)
  **Nine
                      Months Ended**
                    **September
                      30,**
                
                
                **Three
                      Months Ended**
                    **September
                      30,****2007**
                
                
                **2006**
                
                
                **2007**
                
                
                **2006**(In
                    Thousands, Except Share Amounts)Interest
                    IncomeLoans
                        receivable
                
                $
                12,862
                
                
                
                11,659
                
                
                
                4,418
                
                
                
                3,962Investment
                    securities
                
                
                1,960
                
                
                
                1,880
                
                
                
                672
                
                
                
                669Interest-earning
                    deposits and other
                
                
                413
                
                
                
                362
                
                
                
                165
                
                
                
                76Total
                    interest income
                
                
                15,235
                
                
                
                13,901
                
                
                
                5,255
                
                
                
                4,707Interest
                    ExpenseDeposits
                
                
                5,684
                
                
                
                5,083
                
                
                
                1,976
                
                
                
                1,811Borrowings
                
                
                3,484
                
                
                
                2,973
                
                
                
                1,176
                
                
                
                1,023Total
                    interest expense
                
                
                9,168
                
                
                
                8,056
                
                
                
                3,152
                
                
                
                2,834Net
                    Interest Income
                
                
                6,067
                
                
                
                5,845
                
                
                
                2,103
                
                
                
                1,873Provision
                    for loan losses
                
                
                292
                
                
                
                216
                
                
                
                196
                
                
                
                48Net
                    Interest Income After Provision for Loan Losses
                
                
                5,775
                
                
                
                5,629
                
                
                
                1,907
                
                
                
                1,825Other
                    IncomeNet
                    realized losses on sales of available-for-sale securities
                
                
                (22
                )
                
                
                (47
                )
                
                
                0
                
                
                
                (47
                )Service
                    fees and charges
                
                
                1,570
                
                
                
                1,500
                
                
                
                538
                
                
                
                538Net
                    gains on loan sales
                
                
                85
                
                
                
                109
                
                
                
                40
                
                
                
                54Increase
                    in cash value of life insurance
                
                
                221
                
                
                
                148
                
                
                
                77
                
                
                
                50Trust
                    Income
                
                
                163
                
                
                
                93
                
                
                
                35
                
                
                
                30ATM/Merchant
                    Income
                
                
                126
                
                
                
                48
                
                
                
                59
                
                
                
                18Other
                    income
                
                
                105
                
                
                
                22
                
                
                
                34
                
                
                
                2Total
                    other income
                
                
                2,248
                
                
                
                1,873
                
                
                
                783
                
                
                
                645Other
                    ExpensesSalaries
                    and employee benefits
                
                
                3,192
                
                
                
                2,982
                
                
                
                1,099
                
                
                
                995Net
                    occupancy and equipment expenses
                
                
                877
                
                
                
                869
                
                
                
                293
                
                
                
                286Data
                    processing fees
                
                
                149
                
                
                
                125
                
                
                
                47
                
                
                
                40Advertising
                
                
                244
                
                
                
                201
                
                
                
                89
                
                
                
                71Legal
                    and professional fees
                
                
                300
                
                
                
                145
                
                
                
                97
                
                
                
                46Amortization
                    of mortgage servicing rights
                
                
                234
                
                
                
                291
                
                
                
                73
                
                
                
                92Other
                    expenses
                
                
                818
                
                
                
                916
                
                
                
                275
                
                
                
                277Total
                    other expenses
                
                
                5,814
                
                
                
                5,529
                
                
                
                1,973
                
                
                
                1,807Income
                    Before Income Tax
                
                
                2,209
                
                
                
                1,973
                
                
                
                717
                
                
                
                663Income
                    tax expense
                
                
                586
                
                
                
                594
                
                
                
                185
                
                
                
                190Net
                    Income
                
                $
                1,623
                
                
                
                1,379
                
                
                
                532
                
                
                
                473Basic
                    earnings per share
                
                $
                1.00
                
                
                
                .86
                
                
                
                .33
                
                
                
                .29Diluted
                    earnings per share
                
                
                .98
                
                
                
                .84
                
                
                
                .32
                
                
                
                .29Dividends
                    per share
                
                
                .60
                
                
                
                .585
                
                
                
                .20
                
                
                
                .195
   See
        notes
        to consolidated condensed financial statements.
  4
  **RIVER
        VALLEY BANCORP**
 Consolidated
        Condensed Statement of Comprehensive Income
 (Unaudited)
 
 **Nine
                    Months Ended**
                  **September
                    30,**
              
              
              **Three
                    Months Ended**
                  **September
                    30,****2007**
              
              
              **2006**
              
              
              **2007**
              
              
              **2006**(In
                  Thousands)Net
                  income
              
              $
              1,623
              
              
              
              1,379
              
              
              
              532
              
              
              
              473Other
                  comprehensive income, net of taxUnrealized
                  gains (losses) on securities available for saleUnrealized
                  holding gains (losses) arising during the period, net of tax expense
                  (benefit) of ($74), $26, ($259), and ($183)
              
              
              132
              
              
              
              (46
              )
              
              
              462
              
              
              
              325Less:
                  Reclassification adjustment for losses included in net income,
                  net of tax
                  benefit of $9, $18, $0, and $18.
              
              
              (13
              )
              
              
              (28
              )
              
              
              0
              
              
              
              (28
              )145
              
              
              
              (18
              )
              
              
              462
              
              
              
              353Comprehensive
                  income
              
              $
              1,768
              
              
              
              1,361
              
              
              
              994
              
              
              
              826
  
   See
        notes
        to consolidated condensed financial statements.
  5
  **RIVER
        VALLEY BANCORP**
 Consolidated
        Condensed Statement of Cash Flows
 (Unaudited)
 
 **Nine
                      Months Ended**
                    **September
                      30,****2007**
                
                
                **2006**(In
                    Thousands)Operating
                    ActivitiesNet
                    income
                
                $
                1,623
                
                
                
                1,379Adjustments
                    to reconcile net income to net cash provided by operating
                    activitiesProvision
                    for loan losses
                
                
                292
                
                
                
                216Depreciation
                    and amortization
                
                
                444
                
                
                
                481Investment
                    securities gains
                
                
                22
                
                
                
                47Loans
                    originated for sale in the secondary market
                
                
                (5,003
                )
                
                
                (3,643
                )Proceeds
                    from sale of loans in the secondary market
                
                
                4,813
                
                
                
                3,628Gain
                    on sale of loans
                
                
                (85
                )
                
                
                (109
                )Amortization
                    of net loan origination cost
                
                
                93
                
                
                
                110Employee
                    Stock Ownership Plan compensation
                
                
                136
                
                
                
                0Net
                    change in:Interest
                    receivable
                
                
                (239
                )
                
                
                (144
                )Interest
                    payable
                
                
                13
                
                
                
                112Other
                    adjustments
                
                
                281
                
                
                
                (377
                )Net
                    cash provided by operating activities
                
                
                2,390
                
                
                
                1,700Investing
                    ActivitiesPurchases
                    of securities available for sale
                
                
                (14,341
                )
                
                
                (17,018
                )Proceeds
                    from sale of securities available for sale
                
                
                8,917
                
                
                
                6,012Proceeds
                    from maturities of securities available for sale
                
                
                7,345
                
                
                
                5,948Purchase
                    of Federal Home Loan Bank stock
                
                
                (150
                )
                
                
                (100
                )Net
                    change in loans
                
                
                (11,435
                )
                
                
                (9,265
                )Purchases
                    of premises and equipment
                
                
                (306
                )
                
                
                (234
                )Proceeds
                    from sale of foreclosed real estate
                
                
                103
                
                
                
                506Other
                    investing activities
                
                
                (1
                )
                
                
                (44
                )Net
                    cash used in investing activities
                
                
                (9,868
                )
                
                
                (14,195
                )Financing
                    ActivitiesNet
                    change inNon-interest
                    bearing, interest-bearing demand and savings deposits
                
                
                3,128
                
                
                
                8,842Certificates
                    of deposit
                
                
                (449
                )
                
                
                1,233Short
                    term borrowings
                
                
                0
                
                
                
                (14,565
                )Proceeds
                    from borrowings
                
                
                25,000
                
                
                
                29,000Repayment
                    of borrowings
                
                
                (23,000
                )
                
                
                (21,000
                )Cash
                    dividends
                
                
                (973
                )
                
                
                (934
                )Excess
                    tax benefit on stock options exercised
                
                
                8
                
                
                
                49Stock
                    options exercised
                
                
                90
                
                
                
                229Purchase
                    of common stock
                
                
                (183
                )
                
                
                0Acquisition
                    of stock for stock benefit plans
                
                
                (107
                )
                
                
                0Advances
                    by borrowers for taxes and insurance
                
                
                39
                
                
                
                45Net
                    cash provided by financing activities
                
                
                3,553
                
                
                
                2,899Net
                    Change in Cash and Cash Equivalents
                
                
                (3,925
                )
                
                
                (9,596
                )Cash
                    and Cash Equivalents, Beginning of Period
                
                
                11,808
                
                
                
                17,730Cash
                    and Cash Equivalents, End of Period
                
                $
                7,883
                
                
                
                8,134Additional
                    Cash Flows and Supplementary InformationInterest
                    paid
                
                $
                9,155
                
                
                
                7,944Income
                    tax paid
                
                
                496
                
                
                
                754
    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-K for
        the
        year ended December 31, 2006. 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 three- and nine-month periods ended September
        30,
        2007, 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, 2006 has been derived from the audited consolidated balance
        sheet of the Corporation as of that date.
   **NOTE
        2:     PRINCIPLES OF
        CONSOLIDATION**
  The
        consolidated condensed financial statements include the accounts of the
        Corporation and its subsidiary, the Bank. The Bank currently owns four
        subsidiaries. Madison First Service Corporation, which was incorporated under
        the laws of the State of Indiana on July 3, 1973, currently holds land and
        cash
        but does not otherwise engage in significant business activities. RVFB
        Investments, Inc., RVFB Holdings, Inc., and RVFB Portfolio, LLC were established
        in Nevada the latter part of 2005. They hold and manage a significant portion
        of
        the Bank’s investment portfolio. All significant inter-company 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.
  **Nine
                    Months Ended**
                  **September
                    30, 2007**
              
              
              **Nine
                    Months Ended**
                  **September
                    30, 2006****Income**
              
              
              **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
              
              $
              1,623
              
              
              
              1,621,862
              
              
              $
              1.00
              
              
              $
              1,379
              
              
              
              1,603,263
              
              
              $
              .86Effect
                  of dilutive RRP awards and stock options
              
              
              
              
              
              
              26,546
              
              
              
              
              
              
              
              
              
              
              
              41,339Diluted
                  earnings per shareIncome
                  available to common shareholders and assumed conversions
              
              $
              1,623
              
              
              
              1,648,408
              
              
              $
              .98
              
              
              $
              1,379
              
              
              
              1,644,602
              
              
              $
              .84
  
 7
 **Three
                    Months Ended**
                  **September
                    30, 2007**
              
              
              **Three
                    Months Ended**
                  **September
                    30, 2006****Income**
              
              
              **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
              
              $
              532
              
              
              
              1,629,132
              
              
              $
              .33
              
              
              $
              473
              
              
              
              1,612,660
              
              
              $
              .29Effect
                  of dilutive RRP awards and stock options
              
              
              
              
              
              
              24,111
              
              
              
              
              
              
              
              
              
              
              
              35,613Diluted
                  earnings per shareIncome
                  available to common shareholders and assumed conversions
              
              $
              532
              
              
              
              1,653,243
              
              
              $
              .32
              
              
              $
              473
              
              
              
              1,648,273
              
              
              $
              .29
   Options
        to purchase 5,000 shares of common stock
        at $22.67 per share were outstanding at September 30, 2007, but were not
        included in the computation of diluted earnings per share because the option
        price was greater than the average market price of the common
        shares.
   **NOTE
        4:     CHANGE IN ACCOUNTING
        PRINCIPLE**
  The
        Company or one of its subsidiaries files income tax returns in the U.S. federal
        and Indiana jurisdictions.  With few exceptions, the Company is no
        longer subject to U.S. federal, state and local examinations by tax authorities
        for years before 2003.
  The
        Company adopted the provisions of the Financial Accounting Standards Board
        (FASB) Interpretation No. 48 (FIN 48), *Accounting for Uncertainty in Income
        Taxes - an interpretation of FASB Statement No. 109*, on January 1,
        2007.  FIN 48 prescribes a recognition threshold and measurement
        attribute for the financial statement recognition and measurement of a tax
        position taken or expected to be taken in a tax return.  FIN 48 also
        provides guidance on derecognition, classification, interest and penalties,
        accounting in interim periods, disclosure and transition.  As a result
        of the implementation of FIN 48, the Company did not identify any uncertain
        tax
        positions that it believes should be recognized in the financial
        statements.
   **NOTE
        5:     FUTURE ACCOUNTING
        PRONOUNCEMENTS**
  In
        September 2006, the FASB issued Statement No. 157, *Fair Value
        Measurements*.  This Statement defines fair value, establishes a
        framework for measuring fair value and expands disclosures about fair value
        measurements. This Statement establishes a fair value hierarchy about the
        assumptions used to measure fair value and clarifies assumptions about risk
        and
        the effect of a restriction on the sale or use of an asset. The standard
        is
        effective for fiscal years beginning after November 15, 2007. The Company
        does
        not expect that the adoption of SFAS No. 157 will have a material impact
        on
        financial condition or results of operations.
  In
        September 2006, the FASB Emerging Issues Task Force (EITF) finalized Issue
        No.
        06−5, *Accounting for Purchases of Life Insurance - Determining the Amount
        That Could Be Realized in Accordance with FASB Technical Bulletin No. 85−4*
        (Accounting for Purchases of Life Insurance).  This issue requires
        that a policyholder consider contractual terms of a life insurance policy
        in
        determining the amount that could be realized under the insurance
        contract.  It also requires that if the contract provides for a
        greater surrender value if all individual policies in a group are surrendered
        at
        the same time, that the surrender value be determined based on the assumption
        that policies will be surrendered on an individual basis.  Lastly, the
        issue discusses whether the cash surrender value should be discounted when
        the
        policyholder is contractually limited in its ability to surrender a
        policy.  This issue is effective for fiscal years beginning after
        December 15, 2006.  Adoption of EITF No. 06-5 has not had a material
        impact on the financial condition of results of operations.
  8
   On
        February 15, 2007, the FASB issued its Statement No. 159, *The Fair Value
        Option for Financial Assets and Financial Liabilities—Including an Amendment of
        FASB Statement No. 115*.  FAS 159 permits entities to elect to
        report most financial assets and liabilities at their fair value with changes
        in
        fair value included in net income.  The fair value option may be
        applied on an instrument-by-instrument or instrument class-by-class
        basis.  The option is not available for deposits withdrawable on
        demand, pension plan assets and obligations, leases, instruments classified
        as
        stockholders’ equity, investments in consolidated subsidiaries and variable
        interest entities and certain insurance policies. The new standard is effective
        at the beginning of the Company’s fiscal year beginning January 1, 2008, and
        early application may be elected in certain circumstances.  The
        Company expects to first apply the new standard at the beginning of its 2008
        fiscal year.  The Company does not expect that the adoption of SFAS
        No. 159 will have a material impact on financial condition or results of
        operations.
   **NOTE
        6:     RECLASSIFICATIONS**
  Certain
        reclassifications have been made to the 2006 consolidated condensed financial
        statements to conform to the September 30, 2007 presentation.
   **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 55 through 58 of the Annual
        Report to Shareholders for the year ended December 31, 2006. 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.
  9
   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 Clark, Floyd and Jefferson
        counties in southeastern Indiana and portions of northeastern 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.
  10
   **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, 2007 and December 31, 2006, mortgage
        servicing rights had carrying values of $338,000 and $525,000,
        respectively.
   **FINANCIAL
        CONDITION**
  At
        September 30, 2007, the Corporation’s consolidated assets totaled $348.0
        million, an increase of $5.8 million, or 1.7% from December 31,
        2006.  The net increase was a result of $11.0 million in new loans
        added to the portfolio, a $3.9 million reduction in cash and cash equivalents,
        and a $1.6 million reduction in investment securities.  This activity
        was funded by increases in deposits and borrowings.
  The
        Corporation’s consolidated allowance for loan losses totaled $2.0 million and
        $2.2 million on September 30, 2007 and December 31, 2006, respectively, which
        represented .79% and .89% of total loans. Non-performing loans (defined as
        loans
        delinquent greater than 90 days and loans on non-accrual status) totaled
        $1,948,000 and $1,114,000 at September 30, 2007 and December 31, 2006
        respectively. The increase in non-performing loans from December 31, 2006
        to
        September 30, 2007 was primarily due to an increase in non-performing
        residential loans which are well collateralized.  Although management
        believes that its allowance for loan losses at September 30, 2007, 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 $222.9 million at September 30, 2007, an increase of $2.7 million,
        or
        1.2%, compared to total deposits at December 31, 2006. This change was due
        primarily to the late collection of tax revenues by local
        municipalities.
  Borrowings
        used primarily to fund lending, increased slightly by
        $2.0 million from $95.2 million at December 31, 2006 to $97.2 million at
        September 30, 2007. Of total borrowings, $90.0 million represents FHLB Advances
        with an average rate of 4.69% at the end of both periods.
  Shareholders’
        equity totaled $24.9 million at September 30, 2007, an increase of $763,000,
        or
        3.16% from the $24.1 million reported at December 31, 2006. The increase
        in
        shareholders’ equity was primarily due to net income of $1.6 million and a
        decrease in unrealized losses on securities available for sale of $145,000,
        offset by dividends of $975,000. The Bank is required to maintain minimum
        regulatory capital pursuant to federal regulations. At September 30, 2007,
        the
        Bank’s regulatory capital exceeded all applicable regulatory capital
        requirements.
   **COMPARISON
        OF OPERATING RESULTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2007 AND
        2006**
  **GENERAL**
  The
        Corporation’s net income for the nine months ended September 30, 2007, totaled
        $1,623,000, an increase of $244,000 or 17.7% from the $1,379,000 reported
        for
        the period ended September 30, 2006. The increase in income in the 2007 period
        was primarily attributable to increases in non-interest income and a modest
        increase in net interest income.
  11
   **NET
        INTEREST INCOME**
  Total
        interest income for the nine months ended September 30, 2007 increased by
        $1.3
        million, or 9.6%, to $15.2 million from the $13.9 million recorded for the
        same
        period in 2006.  The increase was a reflection of growth in the loan
        portfolio and modest increases in the yields on investments.
  Total
        interest expense for the same period showed an increase of $1.1 million,
        or
        13.8%, from $8.1 million at September 30, 2006 to $9.2 million at September
        30,
        2007.  Of this increase, $511,000 was attributable to increased costs
        for advances from the Federal Home Loan Bank and $601,000 in the cost of
        deposits.
  Net
        interest income showed a modest gain of $222,000, or 3.8% for the nine months
        ended September 30, 2007 over the same period of 2006, $6.1 million and $5.8
        million, respectively.  This gain reflects the effective management of
        the interest margin during somewhat difficult times.
   **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 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 $292,000 provision for losses on
        loans
        for the nine months ended September 30, 2007, as compared to $216,000 for
        the
        same period in 2006. The 2007 provision amount was predicated on the increase
        in
        the balance of the loan portfolio, coupled with an increase in the level
        of
        delinquent loans year-to-year fueled by a slowdown in the real estate market
        and
        the economy in general. While management believes that the allowance for
        losses
        on loans is adequate at September 30, 2007, 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 $375,000, during the nine months ended September 30,
        2007,
        as compared to the same period in 2006. This change was due primarily to
        increases in income from trust department estate fees collected of approximately
        $70,000, increases in service fees primarily for overdrafts of $70,000,
        increased income of $78,000 for merchant interchange fees under a newly
        implemented ATM/Debit processing system, and $37,000 in revenue from the
        Bank’s
        new wealth management division.Increased revenue
        relative to increases in the cash surrender values of bank owned life insurance
        also contributed approximately $73,000 to the overall increase in other
        income.  Whereas the other increases may be typical in future periods,
        trust fees collected in relation to estate administration cannot be
        predicted.
   **OTHER
        EXPENSE**
  Other
        expenses increased from $5.5 million at September 30, 2006 to $5.8 million
        at
        September 30, 2007, an increase of approximately 5.5% period to period. Period
        to period increases in personnel costs and professional expenses were offset
        by
        decreases in other managed expenses and a reduction in the amortization expense
        for mortgage servicing rights.  Specifically, professional fees
        increased primarily due to the Bank’s implementation of Sarbanes-Oxley
        legislation, and the expense for office supplies decreased by
        $26,000.
   **INCOME
        TAXES**
  The
        provision for income taxes totaled $586,000 for the nine months ended September
        30, 2007, comparable to the $594,000 for the same period in 2006.  The
        effective tax rate for the nine months ended September 30, 2007 was 26.5%
        as
        compared to 30.1% for the same period in 2006.  The decrease was
        primarily due to an increase in tax-exempt income from cash surrender value
        life
        insurance and municipal investments.
  12
   **COMPARISON
        OF OPERATING RESULTS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2007 AND
        2006**
  **GENERAL**
  The
        Corporation’s net income for the three months ended September 30, 2007, totaled
        $532,000, an increase of $59,000, or 12.6% from the $473,000 of net income
        reported in the comparable 2006 period.
   **NET
        INTEREST INCOME**
  Total
        interest income for the three months ended September 30, 2007 amounted to
        $5.3
        million, an increase of $548,000, or 11.6%, from the comparable quarter in
        2006,
        reflecting the effects of an increase in average interest-earning assets
        outstanding. Interest income on loans totaled $4.4 million for the three
        months
        ended September 30, 2007, an increase of $456,000, or 11.5%, from the comparable
        quarter in 2006.  The average yield on loans at September 30, 2007 was
        7.05% compared to 6.91%, an increase of .14%, for the same date in
        2006.
  Interest
        expense on deposits experienced an increase of $165,000, or 9.1%, to a total
        of
        $2.0 million for the three months ended September 30, 2007 as compared to
        the
        same period in 2006.  Interest expense on borrowings totaled $1.2
        million for the three months ended September 30, 2007, an increase of $153,000,
        or 14.9%, over the comparable quarter in 2006. The increase resulted from
        an
        increase in the average borrowings outstanding from period to period. The
        average cost of deposits and borrowed money at September 30, 2007 was 3.82%
        compared to 3.70% for the same date in 2006, a change of .12%, slightly less
        than the changes in loan yields over the same period.
  As
        a
        result of the foregoing offsetting changes in interest income and interest
        expense, net interest income increased by 12.3% from $1.9 million for the
        three
        months ended September 30,2006 to $2.1 million for the same period in 2007,
        a
        $230,000 increase period to period.
   **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 $196,000 provision for losses
        on loans for the three months ended September 30, 2007 and $48,000 was recorded
        for the same period in 2006. This increase in provision expense reflects
        uncertainties in the real estate market and increases in non-performing loans
        period to period.  While management believes that the allowance for
        losses on loans is adequate at September 30, 2007, 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 $138,000, or 21.4%, for the three months ended September
        30,
        2007, as compared to the same period in 2006, due primarily to increased
        value
        in the cash surrender value of bank owned life insurance, increased income
        for
        merchant interchange fees under a newly implemented ATM/Debit processing
        system,
        and income from the Bank’s wealth management division.
   **OTHER
        EXPENSE**
  Other
        expenses increased by $166,000, or 9.2%, during the three months ended September
        30, 2007, compared to the same period in 2006. The increase was due to an
        increase in salaries/benefits due to the growth of the Bank, and professional
        fees incurred during the period for Sarbanes-Oxley implementation, offset
        by
        savings in data processing costs and office supplies.
  13
   **INCOME
        TAXES**
  The
        provision for income taxes totaled $185,000 for the three months ended September
        30, 2007, as compared to $190,000 for the same period in 2006.  The
        effective tax rate for the quarter ended September 30, 2007 was 25.8% as
        compared to 28.7% for the same period in 2006.  The decrease was
        primarily due to an increase in tax-exempt income from cash surrender value
        life
        insurance and municipal investments.
   **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 .
  As
        disclosed in the June 30, 2007 10-Q, on June 20, 2007 the Company’s Board
        of Directors announced their intent to establish a branch at the corner of
        Paoli
        Pike and Scottsville Road in Floyd Knobs, Indiana, to be opened mid-year
        2008.
    **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, 2007 and 2006, 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.
  **June
        30, 2007**
 **Net
                    Portfolio Value**
              
              
              
              **NPV
                    as % of PV of Assets****Changes
                    In Rates**
              
              **$
                    Amount**
              
              **$
                    Change**
              
              **%
                    Change**
              
              **NPV
                    Ratio**
              
              **Change**(Dollars
                  in thousands)+300
              bp
              
              
              $     
                    44,673
              
              
              $     
                  (1,348
              )
              
              -3
              %
              
              13.22
              %
              
              +4
              bp+200
              bp
              
              
              45,319
              
              
              (703
              )
              
              -2
              %
              
              13.27
              %
              
              +8
              bp+100
              bp
              
              
              45,823
              
              
              (199)
              
              
              0
              %
              
              13.27
              %
              
              +8
              bp0
              bp
              
              
              46,022
              
              
              
              
              
              
              
              
              13.18
              %-100
              bp
              
              
              44,674
              
              
              (1,348
              )
              
              -3
              %
              
              12.72
              %
              
              -47
              bp-200
              bp
              
              
              42,547
              
              
              (3,475
              )
              
              -8
              %
              
              12.05
              %
              
              -113
              bp
    **June
        30, 2006**
 **Net
                    Portfolio Value**
              
              
              
              
              **NPV
                    as % of PV of Assets****Changes
                    In Rates**
              
              **$
                    Amount**
              
              **$
                    Change**
              
              **%
                    Change**
              
              **NPV
                    Ratio**
              
              **Change**(Dollars
                  in thousands)+300
              bp
              
              
              $     
                  39,587
              
              
              $     
                  (1,849
              )
              
              -4
              %
              
              12.14
              %
              
              -18
              bp+200
              bp
              
              
              40,214
              
              
              (1,222
              )
              
              -3
              %
              
              12.21
              %
              
              -11
              bp+100
              bp
              
              
              40,893
              
              
              (544)
              
              
              -1
              %
              
              12.28
              %
              
              -3
              bp0
              bp
              
              
              41,436
              
              
              
              
              
              
              
              
              12.32
              %-100
              bp
              
              
              40,736
              
              
              (700
              )
              
              -2
              %
              
              12.02
              %
              
              -29
              bp-200
              bp
              
              
              39,074
              
              
              (2,362
              )
              
              -6
              %
              
              11.48
              %
              
              -84
              bp
  
  14
   Management
        believes at September 30, 2007 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 7., Management’s Discussion and Analysis of
        Financial Condition and Results of Operations and Item 7A, Quantitative and
        Qualitative Disclosures About Market Risk, of the Company’s Annual Report on
        Form 10-K for the period ended December 31, 2006.
   **ITEM
        4.     CONTROLS AND
        PROCEDURES**
  A.
        Evaluation of disclosure controls and procedures. The Corporation’s chief
        executive officer and chief financial officer, after evaluating the
        effectiveness of the Corporation’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
        Corporation’s disclosure controls and procedures were effective in ensuring that
        information required to be disclosed by the Corporation 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 and are designed to ensure that information required to be
        disclosed in those reports is accumulated and communicated to management
        as
        appropriate to allow timely decisions regarding required
        disclosure.
  B.
        Changes in internal control over financial reporting. There were no
        changes in the Corporation’s internal control over financial reporting
        identified in connection with the Corporation’s evaluation of controls that
        occurred during the Corporation’s last fiscal quarter that have materially
        affected, or are reasonably likely to materially affect, the Corporation’s
        internal control over financial reporting.
    **PART
        II.  OTHER
        INFORMATION**
  **ITEM
        1.     LEGAL
        PROCEEDINGS.**
  As
        previously reported in the Form 10-Q for the quarter ended June 30, 2007,
        on April 27, 2007, Cecilia Means filed a putative class action complaint
        in the
        Marion County Superior Court, Marion County, Indiana, on behalf of herself
        and
        others who paid funds into a pre-need trust (the “Pre-Need Trust”) for burial
        services and merchandise from Grandview Memorial Gardens, against the Bank,
        a
        former trustee of the Pre-Need Trust; three other banks that serve or have
        served as trustees of the Pre-Need Trust; and the current and former owners
        of
        Grandview Memorial Gardens.  The complaint alleges that the Bank and
        other trustees did not properly account for funds placed in the Pre-Need
        Trust
        and did not properly verify the legitimacy of disbursements from the Pre-Need
        Trust in violation of certain state statutes and in breach of the trustees’
alleged fiduciary duties.  The complaint is not specific as to the
        amount of damages sought but states that the plaintiff believes that the
        Pre-Need Trust has an estimated $4 million in unfunded liabilities. The Bank
        believes that it has meritorious defenses to the allegations, and the Bank
        continues to vigorously defend against the litigation.
   **ITEM
        1A.     RISK FACTORS**
  There
        have been no material changes with respect to the risk factors disclosed
        in the
        Corporation’s Annual Report on Form 10-K for the year ended December 31,
        2006.
   **ITEM
        2.    
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
        PROCEEDS.**
  None.
   **ITEM
        3.     DEFAULTS
        UPON SENIOR SECURITIES.**
  None.
  15
  **ITEM
        4.    
SUBMISSION OF MATTERS TO VOTE OF SECURITY
        HOLDERS.**
  None.
   **ITEM
        5.     OTHER
        INFORMATION.**
  None.
   **ITEM
        6.    
EXHIBITS.**
  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
        Issuer has duly caused this report to be signed on its behalf by the undersigned
        thereunto duly authorized.
 
 **RIVER
                  VALLEY BANCORP**Date:
                  November 14, 2007
              By:
              /s/
                  Matthew P. ForresterMatthew
                  P. ForresterPresident
                  and Chief Executive OfficerDate:
                  November 14, 2007
              By:
              /s/
                  Vickie L. GrimesVickie
                  L. GrimesVice
                  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