**UNITED        STATES**

**SECURITIES        AND EXCHANGE COMMISSION**

**WASHINGTON,        D.C. 20549**

**FORM        10-Q**

**(MARK        ONE)**

|   | ý | QUARTERLY                  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE                              |
|--------|--------|-------------------------------------------------------------------------------------------------------|
|   |   | SECURITIES                  EXCHANGE ACT OF 1934                                                      |
|   |   |                                                                                                  |
|   |   | For                  the quarterly period ended September 30, 2006                                    |
|   |   |                                                                                                  |
|   |   | OR                                                                                                    |
|   |   |                                                                                                  |
|   | o      | TRANSITION                  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE                             |
|   |   | SECURITIES                  EXCHANGE ACT OF 1934                                                      |
|   |   |                                                                                                  |
|   |   | For                  the transition period from ________________ to                  ________________ |

**RIVER        VALLEY BANCORP**

|   | **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**

**[None]**

|   | Yes  ý |   | No  o |   |
|--------|-----------------------|--------|-----------------|--------|

| Large                  accelerated filer  o |   | Accelerated                  filer  o |   | Non-accelerated                  filer  ý |
|-------------------------------------------------------|--------|-------------------------------------------------|--------|----------------------------------------------------------|

|   | Yes  o |   | No  ý |   |
|--------|------------------|--------|----------------------|--------|

----

**RIVER        VALLEY BANCORP **

**FORM        10-Q**

**INDEX**

|                                           |                                                                                                                          | Page                  No. |
|------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------|---------------------------|
| PART                  I. FINANCIAL INFORMATION |                                                                                                                          |
| Item                  1.                       | Financial                  Statements                                                                                         |                      |
|                                           | Consolidated                  Condensed Balance Sheets                                                                        | 3                         |
|                                           | Consolidated                  Condensed Statements of Income                                                                  | 4                         |
|                                           | Consolidated                  Condensed Statements of Comprehensive Income                                                    | 5                         |
|                                           | Consolidated                  Condensed Statements of Cash Flows                                                              | 6                         |
|                                           | Notes                  to Unaudited Consolidated Condensed Financial Statements                                               | 7                         |
| Item                  2.                       | Management’s                  Discussion and Analysis of Financial Condition and Results of                  Operations | 10                        |
| Item                  3.                       | Quantitative                  and Qualitative Disclosure about Market Risk                                                    | 14                        |
| Item                  4.                       | Controls                  and Procedures                                                                                      | 15                        |
|                                           |                                                                                                                          |
| PART                  II. OTHER INFORMATION    | 16                                                                                                                            |
| Item                  1.                       | Legal                  Proceedings                                                                                            | 16                        |
| Item                  1A.                      | Risk                  Factors                                                                                                 | 16                        |
| Item                  2.                       | Unregistered                  Sales of Equity Securities and Use of Proceeds                                                  | 16                        |
| Item                  3.                       | Defaults                  Upon Senior Securities                                                                              | 16                        |
| Item                  4.                       | Submission                  of Matters to a Vote of Security Holders                                                          | 16                        |
| Item                  5.                       | Other                  Information                                                                                            | 16                        |
| Item                  6.                       | Exhibits                                                                                                                      | 16                        |
| SIGNATURES                                     | 17                                                                                                                            |
| EXHIBIT                  INDEX                 | 18                                                                                                                            |

----

**PART        I FINANCIAL INFORMATION **

**ITEM        1. FINANCIAL STATEMENTS**

**RIVER        VALLEY BANCORP **

|                                                                      |   | September                    30, 2006(Unaudited)        |    | December                    31, 2005 |   |
|---------------------------------------------------------------------------|--------|---------------------------------------------------------|---------|--------------------------------------|--------|
|                                                                      |   | (In                    Thousands, Except Share Amounts) |    |
| **Assets**                                                                |   |                                                    |    |                                 |   |
| Cash                    and due from banks                                |   | $                                                       | 7,070   |                                 | $      | 4,749 |   |
| Interest-bearing                    demand deposits                       |   |                                                    | 848     |                                 |   | 12,933 |   |
| Fed                    funds sold                                         |   |                                                    | 216     |                                 |   | 48 |   |
| Cash                    and cash equivalents                              |   |                                                    | 8,134   |                                 |   | 17,730 |   |
| Investment                    securities available for sale               |   |                                                    | 64,744  |                                 |   | 59,609 |   |
| Loans                    held for sale                                    |   |                                                    | 45      |                                 |   | -- |   |
| Loans                                                                     |   |                                                    | 240,417 |                                 |   | 232,044 |   |
| Allowance                    for loan losses                              |   |                                                    | 2,296   |                                 |   | 2,320 |   |
| Net                    loans                                              |   |                                                    | 238,121 |                                 |   | 229,724 |   |
| Premises                    and equipment                                 |   |                                                    | 7,942   |                                 |   | 8,189 |   |
| Federal                    Home Loan Bank stock                           |   |                                                    | 4,150   |                                 |   | 4,050 |   |
| Interest                    receivable                                    |   |                                                    | 2,204   |                                 |   | 2,060 |   |
| Cash                    surrender value life insurance                    |   |                                                    | 5,671   |                                 |   | 5,523 |   |
| Other                    assets                                           |   |                                                    | 2,509   |                                 |   | 1,863 |   |
| Total                    assets                                           |   | $                                                       | 333,520 |                                 | $      | 328,748 |   |
|                                                                      |   |                                                    |    |                                 |   |   |   |
| **Liabilities**                                                           |   |                                                    |    |                                 |   |   |   |
| Deposits                                                                  |   |                                                    |    |                                 |   |   |   |
| Non-interest-bearing                                                      |   | $                                                       | 19,371  |                                 | $      | 19,270 |   |
| Interest-bearing                                                          |   |                                                    | 197,437 |                                 |   | 187,463 |   |
| Total                    deposits                                         |   |                                                    | 216,808 |                                 |   | 206,733 |   |
| Borrowings                                                                |   |                                                    | 90,217  |                                 |   | 96,782 |   |
| Interest                    payable                                       |   |                                                    | 666     |                                 |   | 554 |   |
| Other                    liabilities                                      |   |                                                    | 2,072   |                                 |   | 1,661 |   |
| Total                    liabilities                                      |   |                                                    | 309,763 |                                 |   | 305,730 |   |
|                                                                      |   |                                                    |    |                                 |   |   |   |
| **Commitments                    and Contingencies**                      |   |                                                    |    |                                 |   |   |   |
|                                                                      |   |                                                    |    |                                 |   |   |   |
| **Shareholders’                    Equity**                         |   |                                                    |    |                                 |   |   |   |
| Preferred                    stock, without par value                     |   |                                                    |    |                                 |   |   |   |
| Authorized                    and unissued - 2,000,000 shares             |   |                                                    |    |                                 |   |   |   |
| Common                    stock, without par value                        |   |                                                    |    |                                 |   |   |   |
| Authorized                    - 5,000,000 shares                          |   |                                                    |    |                                 |   |   |   |
| Issued                    and outstanding - 1,617,731and 1,586,495 shares |   |                                                    |    |                                 |   |   |   |
| Additional                    paid-in capital                             |   |                                                    | 9,137   |                                 |   | 8,973 |   |
| Retained                    earnings                                      |   |                                                    | 15,104  |                                 |   | 14,663 |   |
| Shares                    acquired by stock benefit plans                 |   |                                                    | --      |                                 |   | (152 | ) |
| Accumulated                    other comprehensive income                 |   |                                                    | (484    | )                                    |   | (466 | ) |
| Total                    shareholders’ equity                       |   |                                                    | 23,757  |                                 |   | 23,018 |   |
|                                                                      |   |                                                    |    |                                 |   |   |   |
| Total                    liabilities and shareholders’ equity       |   | $                                                       | 333,520 |                                 | $      | 328,748 |   |

----

**RIVER        VALLEY BANCORP **

|                                                                               |   | Nine                      Months EndedSeptember                      30, |   | Three                      Months EndedSeptember                      30, |   |
|------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------|--------|---------------------------------------------------------------------------|--------|
|                                                                               |   | 2006                                                                     |   | 2005                                                                      |   | 2006 |   | 2005 |   |
|                                                                               |   | (In                      Thousands, Except Share Amounts)                |   |
| InInterest                      Income                                             |   |                                                                     |   |                                                                      |   |   |   |   |   |
| Loans                      receivable                                              |   | $                                                                        | 11,659 |                                                                      | $      | 10,575 |   | $ | 3,962 |   | $ | 3,617 |   |
| Investment                      securities                                         |   |                                                                     | 1,880  |                                                                      |   | 1,082 |   |   | 669 |   |   | 414 |   |
| Interest-earning                      deposits and other                           |   |                                                                     | 362    |                                                                      |   | 246 |   |   | 76 |   |   | 85 |   |
| Total                      interest income                                         |   |                                                                     | 13,901 |                                                                      |   | 11,903 |   |   | 4,707 |   |   | 4,116 |   |
|                                                                               |   |                                                                     |   |                                                                      |   |   |   |   |   |   |   |   |   |
| Interest                      Expense                                              |   |                                                                     |   |                                                                      |   |   |   |   |   |   |   |   |   |
| Deposits                                                                           |   |                                                                     | 5,083  |                                                                      |   | 2,490 |   |   | 1,811 |   |   | 876 |   |
| Borrowings                                                                         |   |                                                                     | 2,973  |                                                                      |   | 3,316 |   |   | 1,023 |   |   | 1,210 |   |
| Total                      interest expense                                        |   |                                                                     | 8,056  |                                                                      |   | 5,806 |   |   | 2,834 |   |   | 2,086 |   |
|                                                                               |   |                                                                     |   |                                                                      |   |   |   |   |   |   |   |   |   |
| Net                      Interest Income                                           |   |                                                                     | 5,845  |                                                                      |   | 6,097 |   |   | 1,873 |   |   | 2,030 |   |
| Provision                      for loan losses                                     |   |                                                                     | 216    |                                                                      |   | 216 |   |   | 48 |   |   | 72 |   |
| Net                      Interest Income After Provision for Loan Losses           |   |                                                                     | 5,629  |                                                                      |   | 5,881 |   |   | 1,825 |   |   | 1,958 |   |
|                                                                               |   |                                                                     |   |                                                                      |   |   |   |   |   |   |   |   |   |
| Other                      Income                                                  |   |                                                                     |   |                                                                      |   |   |   |   |   |   |   |   |   |
| Net                      realized losses on sales of available-for-sale securities |   |                                                                     | (47    | )                                                                         |   | 0 |   |   | (47 | ) |   | 0 |   |
| Service                      fees and charges                                      |   |                                                                     | 1,500  |                                                                      |   | 1,399 |   |   | 538 |   |   | 507 |   |
| Net                      gains on loan sales                                       |   |                                                                     | 109    |                                                                      |   | 248 |   |   | 54 |   |   | 76 |   |
| Other                      income                                                  |   |                                                                     | 263    |                                                                      |   | 240 |   |   | 82 |   |   | 69 |   |
| Total                      other income                                            |   |                                                                     | 1,825  |                                                                      |   | 1,887 |   |   | 627 |   |   | 652 |   |
|                                                                               |   |                                                                     |   |                                                                      |   |   |   |   |   |   |   |   |   |
| Other                      Expenses                                                |   |                                                                     |   |                                                                      |   |   |   |   |   |   |   |   |   |
| Salaries                      and employee benefits                                |   |                                                                     | 2,982  |                                                                      |   | 2,721 |   |   | 995 |   |   | 883 |   |
| Net                      occupancy and equipment expenses                          |   |                                                                     | 869    |                                                                      |   | 858 |   |   | 286 |   |   | 312 |   |
| Data                      processing fees                                          |   |                                                                     | 77     |                                                                      |   | 94 |   |   | 22 |   |   | 37 |   |
| Advertising                                                                        |   |                                                                     | 201    |                                                                      |   | 189 |   |   | 71 |   |   | 72 |   |
| Legal                      and professional fees                                   |   |                                                                     | 145    |                                                                      |   | 198 |   |   | 46 |   |   | 45 |   |
| Amortization                      of mortgage servicing rights                     |   |                                                                     | 291    |                                                                      |   | 100 |   |   | 92 |   |   | 18 |   |
| Other                      expenses                                                |   |                                                                     | 916    |                                                                      |   | 977 |   |   | 277 |   |   | 380 |   |
| Total                      other expenses                                          |   |                                                                     | 5,481  |                                                                      |   | 5,137 |   |   | 1,789 |   |   | 1,747 |   |
|                                                                               |   |                                                                     |   |                                                                      |   |   |   |   |   |   |   |   |   |
| Income                      Before Income Tax                                      |   |                                                                     | 1,973  |                                                                      |   | 2,631 |   |   | 663 |   |   | 863 |   |
| Income                      tax expense                                            |   |                                                                     | 594    |                                                                      |   | 910 |   |   | 190 |   |   | 287 |   |
|                                                                               |   |                                                                     |   |                                                                      |   |   |   |   |   |   |   |   |   |
| Net                      Income                                                    |   | $                                                                        | 1,379  |                                                                      | $      | 1,721 |   | $ | 473 |   | $ | 576 |   |
|                                                                               |   |                                                                     |   |                                                                      |   |   |   |   |   |   |   |   |   |
| Basic                      earnings per share                                      |   | $                                                                        | .86    |                                                                      | $      | 1.09 |   | $ | .29 |   | $ | .36 |   |
| Diluted                      earnings per share                                    |   |                                                                     | .84    |                                                                      |   | 1.05 |   |   | .29 |   |   | .35 |   |
| Dividends                      per share                                           |   |                                                                     | .585   |                                                                      |   | .58 |   |   | .195 |   |   | .195 |   |

----

**RIVER        VALLEY BANCORP**

|                                                                                                                                                                     |   | Nine                  Months EndedSeptember                  30, |   | Three                  Months EndedSeptember                  30, |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------------------------------|--------|-------------------------------------------------------------------|--------|
|                                                                                                                                                                     |   | 2006                                                             |   | 2005                                                              |   | 2006 |   | 2005 |   |
|                                                                                                                                                                     |   | (In                  Thousands)                                  |   |
|                                                                                                                                                                     |   |                                                             |   |                                                              |   |   |   |   |   |
| Net                  income                                                                                                                                              |   | $                                                                | 1,379  |                                                              | $      | 1,721 |   | $ | 473 |   | $ | 576 |   |
| Other                  comprehensive income, net of tax                                                                                                                  |   |                                                             |   |                                                              |   |   |   |   |   |   |   |   |   |
| Unrealized                  gains on securities available for sale                                                                                                       |   |                                                             |   |                                                              |   |   |   |   |   |   |   |   |   |
| Unrealized                  holding gains (losses) arising during the period, net of tax expense                  (benefit) of $26, $(141), $183 and $(44).              |   |                                                             | (46    | )                                                                 |   | (215 | ) |   | 325 |   |   | (68 | ) |
| Less:                  Reclassification adjustment for gains losses included in net income,                  net                  of tax benefit of $18, $0, $18 and $0. |   |                                                             | (28    | )                                                                 |   |   |   |   | (28 | ) |   |   |   |
|                                                                                                                                                                     |   |                                                             | (18    | )                                                                 |   | (215 | ) |   | 353 |   |   | (68 | ) |
| Comprehensive                  income                                                                                                                                    |   | $                                                                | 1,361  |                                                              | $      | 1,506 |   | $ | 826 |   | $ | 508 |   |

----

**RIVER        VALLEY BANCORP **

|                                                                                                               |   | Nine                  Months Ended |    |
|--------------------------------------------------------------------------------------------------------------------|--------|------------------------------------|---------|
|                                                                                                               |   | September                  30,     |    |
|                                                                                                               |   | 2006                               |    | 2005 |   |
|                                                                                                               |   | (In                  Thousands)    |    |
| Operating                  Activities                                                                              |   |                               |    |   |   |
| Net                  income                                                                                        |   | $                                  | 1,379   |   | $ | 1,721 |   |
| Adjustments                  to reconcile net income to net cash provided by operating                  activities |   |                               |    |   |   |   |   |
| Provision                  for loan losses                                                                         |   |                               | 216     |   |   | 216 |   |
| Depreciation                  and amortization                                                                     |   |                               | 481     |   |   | 426 |   |
| Loss                  on sale of premises and equipment                                                            |   |                               | 0       |   |   | 14 |   |
| Investment                  securities gains                                                                       |   |                               | 47      |   |   | 0 |   |
| Loans                  originated for sale in the secondary market                                                 |   |                               | (3,643  | ) |   | (11,615 | ) |
| Proceeds                  from sale of loans in the secondary market                                               |   |                               | 3,628   |   |   | 11,794 |   |
| Gain                  on sale of loans                                                                             |   |                               | (109    | ) |   | (248 | ) |
| Amortization                  of deferred loan origination cost                                                    |   |                               | 110     |   |   | 91 |   |
| Amortization                  of expense related to stock benefit plans                                            |   |                               | 37      |   |   | 249 |   |
| Net                  change in:                                                                                    |   |                               |    |   |   |   |   |
|                          Interest receivable                                    |   |                               | (144    | ) |   | (309 | ) |
|                          Interest payable                                       |   |                               | 112     |   |   | 77 |   |
| Other                  adjustments                                                                                 |   |                               | (414    | ) |   | 419 |   |
| Net                  cash provided by operating activities                                                         |   |                               | 1,700   |   |   | 2,835 |   |
|                                                                                                               |   |                               |    |   |   |   |   |
| Investing                  Activities                                                                              |   |                               |    |   |   |   |   |
| Purchases                  of securities available for sale                                                        |   |                               | (17,018 | ) |   | (36,771 | ) |
| Proceeds                  from maturities of securities available for sale                                         |   |                               | 5,948   |   |   | 11,015 |   |
| Proceeds                  from sale of securities available for sale                                               |   |                               | 6,012   |   |   | 0 |   |
| Purchase                  of Federal Home Loan Bank stock                                                          |   |                               | (100    | ) |   | (695 | ) |
| Net                  change in loans                                                                               |   |                               | (9,265  | ) |   | (1,328 | ) |
| Purchases                  of premises and equipment                                                               |   |                               | (234    | ) |   | (1,931 | ) |
| Proceeds                  from sale of foreclosed real estate                                                      |   |                               | 506     |   |   | 80 |   |
| Other                  investing activities                                                                        |   |                               | (44     | ) |   | 0 |   |
| Net                  cash used in investing activities                                                             |   |                               | (14,195 | ) |   | (29,630 | ) |
|                                                                                                               |   |                               |    |   |   |   |   |
| Financing                  Activities                                                                              |   |                               |    |   |   |   |   |
| Net                  change in                                                                                     |   |                               |    |   |   |   |   |
| Noninterest-bearing,                  interest-bearing demand and savings deposits                                 |   |                               | 8,842   |   |   | 13,744 |   |
| Certificates                  of deposit                                                                           |   |                               | 1,233   |   |   | 4,995 |   |
| Short                  term borrowings                                                                             |   |                               | (14,565 | ) |   | (8,610 | ) |
| Proceeds                  from borrowings                                                                          |   |                               | 29,000  |   |   | 32,000 |   |
| Repayment                  of borrowings                                                                           |   |                               | (21,000 | ) |   | (18,000 | ) |
| Cash                  dividends                                                                                    |   |                               | (934    | ) |   | (903 | ) |
| Excess                  tax benefit on stock options exercised                                                     |   |                               | 49      |   |   | 0 |   |
| Stock                  options exercised                                                                           |   |                               | 229     |   |   | 17 |   |
| Purchase                  of stock                                                                                 |   |                               | 0       |   |   | (147 | ) |
| Advances                  by borrowers for taxes and insurance                                                     |   |                               | 45      |   |   | 47 |   |
| Net                  cash provided by financing activities                                                         |   |                               | 2,899   |   |   | 23,143 |   |
|                                                                                                               |   |                               |    |   |   |   |   |
| Net                  Change in Cash and Cash Equivalents                                                           |   |                               | (9,596  | ) |   | (3,652 | ) |
| Cash                  and Cash Equivalents, Beginning of Period                                                    |   |                               | 17,730  |   |   | 12,437 |   |
| Cash                  and Cash Equivalents, End of Period                                                          |   | $                                  | 8,134   |   | $ | 8,785 |   |
| Additional                  Cash Flows and Supplementary Information                                               |   |                               |    |   |   |   |   |
| Interest                  paid                                                                                     |   | $                                  | 7,944   |   | $ | 5,729 |   |
| Income                  tax paid                                                                                   |   |                               | 754     |   |   | 880 |   |

----

**RIVER        VALLEY BANCORP **

**NOTE        1: BASIS OF PRESENTATION **

**NOTE        2: PRINCIPLES OF CONSOLIDATION **

**NOTE        3: EARNINGS PER SHARE **

----

|                                                                             |   | Nine                  Months Ended September                  30, 2006 |   | Nine                  Months Ended September                  30, 2005 |   |
|----------------------------------------------------------------------------------|--------|------------------------------------------------------------------------|--------|------------------------------------------------------------------------|--------|
|                                                                             |   | Income                                                                 |   | Weighted                  Average Shares                               |   | Per                  Share Amount |   | Income |   | Weighted                  Average Shares |   | Per                  Share Amount |   |
|                                                                        |   | (In                  Thousands, Except Share Amounts)                  |   |
| Basic                  earnings per share                                        |   |                                                                   |   |                                                                   |   |   |   |   |   |   |   |   |   |
| Income                  available to common shareholders                         |   | $                                                                      | 1,379  |                                                                   |   | 1,603,263 |   | $ | .86 |   | $ | 1,721 |   |   | 1,578,958 |   | $ | 1.09 |   |
|                                                                             |   |                                                                   |   |                                                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Effect                  of dilutive RRP awards and stock options                 |   |                                                                   |   |                                                                   |   | 41,339 |   |   |   |   |   |   |   |   | 61,387 |   |   |   |   |
| Diluted                  earnings per share                                      |   |                                                                   |   |                                                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Income                  available to common shareholders and assumed conversions |   | $                                                                      | 1,379  |                                                                   |   | 1,644,602 |   | $ | .84 |   | $ | 1,721 |   |   | 1,640,345 |   | $ | 1.05 |   |

|                                                                             |   | Three                  Months Ended September                  30, 2006 |   | Three                  Months Ended September                  30, 2005 |   |
|----------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------|--------|-------------------------------------------------------------------------|--------|
|                                                                             |   | Income                                                                  |   | Weighted                  Average Shares                                |   | Per                  Share Amount |   | Income |   | Weighted                  Average Shares |   | Per                  Share Amount |   |
|                                                                        |   | (In                  Thousands, Except Share Amounts)                   |   |
| Basic                  earnings per share                                        |   |                                                                    |   |                                                                    |   |   |   |   |   |   |   |   |   |
| Income                  available to common shareholders                         |   | $                                                                       | 473    |                                                                    |   | 1,612,660 |   | $ | .                  29 |   | $ | 576 |   |   | 1,584,073 |   | $ | .                  36 |   |
|                                                                             |   |                                                                    |   |                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Effect                  of dilutive RRP awards and stock options                 |   |                                                                    |   |                                                                    |   | 35,613 |   |   |   |   |   |   |   |   | 60,084 |   |   |   |   |
| Diluted                  earnings per share                                      |   |                                                                    |   |                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Income                  available to common shareholders and assumed conversions |   | $                                                                       | 473    |                                                                    |   | 1,648,273 |   | $ | .29 |   | $ | 576 |   |   | 1,644,157 |   | $ | .35 |   |

**NOTE        4: CHANGE IN ACCOUNTING PRINCIPLE**

----

*Accounting        for Stock Issued to Employees*
*Accounting        for Stock-Based Compensation*

|                                                                                                                                                                    |   | Nine                  Months Ended September                  30, 2005 |   | Three                  Months Ended September                  30, 2005 |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------------------------------------|--------|-------------------------------------------------------------------------|--------|
|                                                                                                                                                                    |   |                                                                   |   |                                                                    |   |
| Net                  income, as reported                                                                                                                                |   | $                                                                      | 1,721  |                                                                    | $      | 576 |   |
| Less:                  Total stock-based employee compensation cost determined under the                  fair                  value based method, net of income taxes |   |                                                                   | 10     |                                                                    |   | 2 |   |
| Pro                  forma net income                                                                                                                                   |   | $                                                                      | 1,711  |                                                                    | $      | 574 |   |
| Earnings                  per share:                                                                                                                                    |   |                                                                   |   |                                                                    |   |   |   |
| Basic                  - as reported                                                                                                                                    |   | $                                                                      | 1.09   |                                                                    | $      | .36 |   |
| Basic                  - pro forma                                                                                                                                      |   |                                                                   | 1.08   |                                                                    |   | .36 |   |
| Diluted                  - as reported                                                                                                                                  |   |                                                                   | 1.05   |                                                                    |   | .35 |   |
| Diluted                  - pro forma                                                                                                                                    |   |                                                                   | 1.04   |                                                                    |   | .35 |   |

**NOTE        5: ACCOUNTING CHANGES**

*Accounting        for Transfers and Servicing of Financial Assets and Extinguishments of        Liabilities,*

| **·**   | Amortization                method—Amortize servicing assets or servicing liabilities in proportion                to                and over the period of estimated net servicing income or net servicing                loss and assess servicing assets or servicing liabilities for impairment                or increased obligation based on fair value at each reporting date.                  |
|------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| **·  ** | Fair                value measurement method—Measure servicing assets or servicing liabilities                at fair value at each reporting date and report changes in fair value                in                earnings in the period in which the changes occur. |
|------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**NOTE        6:**

**RECLASSIFICATIONS**

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**ITEM        2. MANAGEMENT'S        DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF        OPERATIONS**

**FORWARD        LOOKING STATEMENTS**

**CRITICAL        ACCOUNTING POLICIES**

**ALLOWANCE        FOR LOAN LOSSES**

*Accounting        by Creditors for Impairment of a Loan. *

----

**VALUATION        OF MORTGAGE SERVICING RIGHTS**

**FINANCIAL        CONDITION**

----

**COMPARISON        OF OPERATING RESULTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2006 AND        2005**

**GENERAL**

**NET        INTEREST INCOME**

**PROVISION        FOR LOSSES ON LOANS**

**OTHER        INCOME**

----

**OTHER        EXPENSE**

**INCOME        TAXES**

**COMPARISON        OF OPERATING RESULTS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2006 AND        2005**

**GENERAL**

**NET        INTEREST INCOME**

**PROVISION        FOR LOSSES ON LOANS**

**OTHER        INCOME**

----

**OTHER        EXPENSE**

**INCOME        TAXES**

**OTHER**

**ITEM        3. ****QUANTITATIVE        AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**

|   | 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 | bp |
|   | 0                                    | 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 |

|   | Net                  Portfolio Value |   |                      |                                    | NPV                  as% of PV of Assets |
|--------|--------------------------------------|--------|---------------------------|-----------------------------------------|------------------------------------------|
|   | Changes                  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 | bp |
|   | 0                                    | 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 |

----

**ITEM        4. CONTROLS AND PROCEDURES**

----

**PART        II. OTHER INFORMATION**

|  Item                  1. |  Legal                  Proceedings.                                                                                                                                                                                                      |
|--------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                           |  None.                                                                                                                                                                                                                                    |
|                           |                                                                                                                                                                                                                                      |
| 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, 2005. |
|                           |                                                                                                                                                                                                                                           |
|  Item                  2. |  Changes                  in Securities and Use of Proceeds and Issuers Purchases of Equity                  Securities.                                                                                                                  |
|                           |  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.                                                                                                                                                                                                                                      |

|    | 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 |

----

**Signatures**

|   |                                     | **RIVER                  VALLEY BANCORP** |
|--------|------------------------------------------|-------------------------------------------|
|   |                                     |                                      |   |
|   |                                     |                                      |   |
|   | Date:                  November 14, 2006 | By:                                       | /s/Matthew                P. Forrester |
|   |                                     |                                      | Matthew                  P. Forrester |
|   |                                     |                                      | President                  and Chief Executive Officer |
|   |                                     |                                      |   |
|   |                                     |                                      |   |
|   | Date:                  November 14, 2006 | By:                                       | /s/Larry                C. Fouse |
|   |                                     |                                      | Larry                  C. Fouse |
|   |                                     |                                      | Vice                  President of Finance |

----

**EXHIBIT        INDEX**

|   | **No.** | **Description**                                                                                                                                                            | **Location** |
|--------|---------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------|
|   |    |                                                                                                                                                                       |         |
|   | 31(1)   | CEO                  Certification required by 17 C.F.R. Section 240.13a-14(a)                                                                                             | Attached     |
|   | 31(2)   | CFO                  Certification required by 17 C.F.R. Section 240.13a-14(a)                                                                                             | Attached     |
|   | 32      | Certification                  pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section                  906 of                  the Sarbanes-Oxley Act of 2002. | Attached     |