UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
D.C. 20549




FORM
10-Q




(MARK
ONE)







xQUARTERLY REPORT
      PURSUANT TO SECTION 13 OR 15(d) OF THE
              SECURITIES
      EXCHANGE ACT OF 1934For
      the quarterly period ended March 31, 2008OR ̈TRANSITION REPORT
      PURSUANT TO SECTION 13 OR 15(d) OF THE
              SECURITIES
      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  x          No   ̈




Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act. (Check One):




Large
      Accelerated Filer  ̈
            Accelerated
      Filer  ̈Non-Accelerated
      Filer  ̈
              (Do
      not check if a smaller reporting company)
            Smaller
      Reporting Company x




Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).




Yes   ̈          No  x




The
number of shares of the Registrant’s common stock, without par value,
outstanding as of May 14,
2008 was 1,635,281.





RIVER
VALLEY BANCORP




FORM
10-Q




INDEX





Page No.PART
      I. FINANCIAL INFORMATION
            3Item
      1.
            Financial
      Statements
            3Consolidated
      Condensed Balance Sheets
            3Consolidated
      Condensed Statements of Income
            4Consolidated
      Condensed Statements of Comprehensive Income
            5Consolidated
      Condensed Statements of Cash Flows
            6Notes
      to Unaudited Consolidated Condensed Financial Statements
            7Item
      2.
            Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
            12Item
      3.
            Quantitative
      and Qualitative Disclosure about Market Risk
            16Item
      4T.
            Controls
      and Procedures
            16PART
      II. OTHER INFORMATION
            16Item
      1.
            Legal
      Proceedings
            16Item
      2.
            Unregistered
      Sales of Equity Securities and Use of Proceeds
            16Item
      3.
            Defaults
      Upon Senior Securities
            16Item
      4.
            Submission
      of Matters to a Vote of Security Holders
            16Item
      5.
            Other
      Information
            16Item
      6.
            Exhibits
            17SIGNATURES
            18EXHIBIT
      INDEX
            19







2


PART
I FINANCIAL INFORMATION




ITEM
1. FINANCIAL STATEMENTS




RIVER
VALLEY BANCORP


Consolidated
Condensed Balance Sheets




March
      31, 2008
                (Unaudited)
            
            
            December
      31, 2007(In
      Thousands, Except Share Amounts)AssetsCash
      and due from banks
            
            $
            5,261
            
            
            $
            5,131Interest-bearing
      demand deposits
            
            
            3,600
            
            
            
            3,006Cash
      and cash equivalents
            
            
            8,861
            
            
            
            8,137Investment
      securities available for sale
            
            
            55,408
            
            
            
            58,999Loans
      held for sale
            
            
            376
            
            
            
            312Loans
            
            
            263,479
            
            
            
            260,836Allowance
      for loan losses
            
            
            (2,355
            )
            
            
            (2,208
            )Net
      loans
            
            
            261,124
            
            
            
            258,628Premises
      and equipment
            
            
            7,610
            
            
            
            7,631Real
      estate, held for sale
            
            
            205
            
            
            
            184Federal
      Home Loan Bank stock
            
            
            4,750
            
            
            
            4,750Interest
      receivable
            
            
            1,948
            
            
            
            2,396Cash
      value of life insurance
            
            
            7,630
            
            
            
            7,552Other
      assets
            
            
            1,141
            
            
            
            1,472Total
      assets
            
            $
            349,053
            
            
            $
            350,061LiabilitiesDepositsNon-interest-bearing
            
            $
            20,516
            
            
            $
            18,619Interest-bearing
            
            
            199,522
            
            
            
            201,063Total
      deposits
            
            
            220,038
            
            
            
            219,682Borrowings
            
            
            99,644
            
            
            
            102,217Interest
      payable
            
            
            871
            
            
            
            724Other
      liabilities
            
            
            2,195
            
            
            
            1,761Total
      liabilities
            
            
            322,748
            
            
            
            324,384Commitments
      and ContingenciesShareholders’
      EquityPreferred
      stock, no par valueAuthorized
      and unissued - 2,000,000 sharesCommon
      stock, no par valueAuthorized
      - 5,000,000 sharesIssued
      and outstanding – 1,635,281and 1,634,931 shares
            
            
            9,168
            
            
            
            9,160Retained
      earnings
            
            
            16,508
            
            
            
            16,237Accumulated
      other comprehensive gains
            
            
            629
            
            
            
            280Total
      shareholders’ equity
            
            
            26,305
            
            
            
            25,677Total
      liabilities and shareholders’ equity
            
            $
            349,053
            
            
            $
            350,061








See Notes
to Unaudited Consolidated Condensed Financial Statements.


3


RIVER
VALLEY BANCORP


Consolidated
Condensed Statements of Income


(Unaudited)




Three
      Months Ended
                March
      31,2008
            
            
            2007(In
      Thousands, Except Share Amounts)Interest
      IncomeLoans
      receivable
            
            $
            4,389
            
            
            $
            4,176Investment
      securities
            
            
            638
            
            
            
            659Interest-earning
      deposits and other
            
            
            134
            
            
            
            123Total
      interest income
            
            
            5,161
            
            
            
            4,958Interest
      ExpenseDeposits
            
            
            1,698
            
            
            
            1,859Borrowings
            
            
            1,228
            
            
            
            1,150Total
      interest expense
            
            
            2,926
            
            
            
            3,009Net
      Interest Income
            
            
            2,235
            
            
            
            1,949Provision
      for loan losses
            
            
            200
            
            
            
            48Net
      Interest Income After Provision for Loan Losses
            
            
            2,035
            
            
            
            1,901Other
      IncomeService
      fees and charges
            
            
            478
            
            
            
            503Net
      realized gains (losses) on sale of available-for-sale
      securities
            
            
            30
            
            
            
            (22
            )Net
      gains on loan sales
            
            
            102
            
            
            
            28Interchange
      fee income
            
            
            64
            
            
            
            38Increase
      in cash value of life insurance
            
            
            78
            
            
            
            60Trust
      operations income
            
            
            55
            
            
            
            71Other
      income
            
            
            40
            
            
            
            28Total
      other income
            
            
            847
            
            
            
            706Other
      ExpensesSalaries
      and employee benefits
            
            
            1,106
            
            
            
            1,022Net
      occupancy and equipment expenses
            
            
            330
            
            
            
            286Data
      processing fees
            
            
            96
            
            
            
            57Advertising
            
            
            78
            
            
            
            68Legal
      and professional fees
            
            
            97
            
            
            
            95Amortization
      of mortgage servicing rights
            
            
            53
            
            
            
            81Other
      expenses
            
            
            286
            
            
            
            261Total
      other expenses
            
            
            2,046
            
            
            
            1,870Income
      Before Income Tax
            
            
            836
            
            
            
            737Income
      tax expense
            
            
            221
            
            
            
            204Net
      Income
            
            $
            615
            
            
            $
            533Basic
      earnings per share
            
            $
            .38
            
            
            $
            .33Diluted
      earnings per share
            
            
            .37
            
            
            
            .32Dividends
      per share
            
            
            .21
            
            
            
            .20








See Notes
to Unaudited Consolidated Condensed Financial Statements.


4




RIVER
VALLEY BANCORP


Consolidated
Condensed Statements of Comprehensive Income


(Unaudited)





Three
      Months Ended
                March
      31,2008
            
            
            2007Net
      income
            
            $
            615
            
            
            $
            533Other
      comprehensive income, net of taxUnrealized
      gains on securities available for saleUnrealized
      holding gains arising during the period, net of tax expense of $198 and
      $38
            
            
            368
            
            
            
            72Less:  Reclassification
      adjustment for gains (losses) included in net income, net of tax expense
      (benefit) of $12 and $(9)
            
            
            19
            
            
            
            (13
            )349
            
            
            
            85Comprehensive
      income
            
            $
            964
            
            
            $
            618














See Notes
to Unaudited Consolidated Condensed Financial Statements.


5


RIVER
VALLEY BANCORP


Consolidated
Condensed Statements of Cash Flows


(Unaudited)




Three
      Months Ended March 31,2008
            
            
            2007(In
      Thousands)Operating
      ActivitiesNet
      income
            
            $
            615
            
            
            $
            533Adjustments
      to reconcile net income to net cash provided by operating
      activitiesProvision
      for loan losses
            
            
            200
            
            
            
            48Depreciation
      and amortization
            
            
            159
            
            
            
            143Investment
      securities (gains)losses
            
            
            (30
            )
            
            
            22Loans
      originated for sale in the secondary market
            
            
            (4,946
            )
            
            
            (1,722
            )Proceeds
      from sale of loans in the secondary market
            
            
            4,933
            
            
            
            1,733Gain
      on sale of loans
            
            
            (102
            )
            
            
            (28
            )Amortization
      of net loan origination cost
            
            
            34
            
            
            
            38Employee
      Stock Ownership Plan compensation
            
            
            ---
            
            
            
            44Net
      change in:Interest
      receivable
            
            
            448
            
            
            
            208Interest
      payable
            
            
            146
            
            
            
            (4
            )Other
      adjustments
            
            
            523
            
            
            
            (3
            )Net
      cash provided by operating activities
            
            
            1,980
            
            
            
            1,012Investing
      ActivitiesPurchases
      of securities available for sale
            
            
            (12,070
            )
            
            
            (1,971
            )Proceeds
      from maturities of securities available for sale
            
            
            11,260
            
            
            
            1,000Proceeds
      from sale of securities available for sale
            
            
            4,975
            
            
            
            5,916Purchase
      of Federal Home Loan Bank stock
            
            
            0
            
            
            
            (150
            )Net
      change in loans
            
            
            (2,751
            )
            
            
            (1,554
            )Purchases
      of premises and equipment
            
            
            (144
            )
            
            
            (131
            )Proceeds
      from sale of premises and equipment
            
            
            ---
            
            
            
            ---Other
      investing activities
            
            
            ---
            
            
            
            1Net
      cash provided by investing activities
            
            
            1,270
            
            
            
            3,111Financing
      ActivitiesNet
      change inNon-interest
      bearing, interest-bearing demand and savings deposits
            
            
            (25,095
            )
            
            
            (4,705
            )Certificates
      of deposit
            
            
            25,451
            
            
            
            2,001Short
      term borrowings
            
            
            427
            
            
            
            ---Proceeds
      from borrowings
            
            
            5,000
            
            
            
            12,000Repayment
      of borrowings
            
            
            (8,000
            )
            
            
            (13,000
            )Cash
      dividends
            
            
            (343
            )
            
            
            (324
            )Excess
      tax benefit on stock options exercised
            
            
            ---
            
            
            
            8Stock
      options exercised
            
            
            2
            
            
            
            22Purchase
      of stock
            
            
            ---
            
            
            
            (183
            )Advances
      by borrowers for taxes and insurance
            
            
            32
            
            
            
            54Net
      cash used in financing activities
            
            
            (2,526
            )
            
            
            (4,127
            )Net
      Change in Cash and Cash Equivalents
            
            
            724
            
            
            
            (4
            )Cash
      and Cash Equivalents, Beginning of Period
            
            
            8,137
            
            
            
            11,808Cash
      and Cash Equivalents, End of Period
            
            $
            8,861
            
            
            $
            11,804Additional
      Cash Flows and Supplementary InformationInterest
      paid
            
            $
            2,779
            
            
            $
            3,013Income
      tax paid
            
            
            25
            
            
            
            0






See Notes
to Unaudited 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, 2007. 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-month period ended March 31, 2008, 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,
2007 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. Unearned Employee Stock Ownership Plan shares have been excluded
from the computation of average common shares outstanding.






7






Three
      Months Ended
                March
      31, 2008
            
            Three
      Months Ended
                March
      31, 2007Income
            
            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
            
            $
            615
            
            1,634,989
            
            $
            .38
            
            $
            533
            
            1,614,802
            
            $
            .33Effect
      of dilutive RRP awards and stock options
            
            
            
            
            18,726
            
            
            
            
            
            
            
            29,514Diluted
      earnings per shareIncome
      available to common shareholders and assumed conversions
            
            $
            615
            
            1,653,715
            
            $
            .37
            
            $
            533
            
            1,644,316
            
            $
            .32









Options
to purchase 5,000 shares of common stock at $22.25 per share were outstanding at
March 31, 2008, 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





Effective
January 1, 2008, the Corporation  adopted Statement of Financial
Accounting Standards No. 157, Fair Value Measurements (FAS
157).  FAS 157 defines fair value, establishes a framework for
measuring fair value and expands disclosures about fair value
measurements.  FAS 157 has been applied prospectively as of the
beginning of the period.




FAS 157
defines fair value as the price that would be received to sell an asset or paid
to transfer a liability in an orderly transaction between market participants at
the measurement date.  FAS 157 also establishes a fair value hierarchy
which requires an entity to maximize the use of observable inputs and minimize
the use of unobservable inputs when measuring fair value.  The
standard describes three levels of inputs that may be used to measure fair
value:




Level 1
            Quoted
      prices in active markets for identical assets or
    liabilities




Level 2
            Observable
      inputs other than Level 1 prices, such as quoted prices for similar assets
      or liabilities; quoted prices in markets that are not active; or other
      inputs that are observable or can be corroborated by observable market
      data for substantially the full term of the assets or
      liabilities




Level 3
            Unobservable
      inputs that are supported by little or no market activity and that are
      significant to the fair value of the assets or
  liabilities




Following
is a description of the valuation methodologies used for instruments measured at
fair value on a recurring basis and recognized in the accompanying balance
sheet, as well as the general classification of such instruments pursuant to the
valuation hierarchy.




8




Available-for-sale
Securities




Where
quoted market prices are available in an active market, securities are
classified within Level 1 of the valuation hierarchy.  If quoted
market prices are not available, then fair values are estimated by using pricing
models, quoted prices of securities with similar characteristics or discounted
cash flows.  Level 2 securities include collateralized mortgage
obligations, mortgage backed securities, federal agency securities and certain
municipal securities.  In certain cases where Level 1 or Level 2
inputs are not available, securities are classified within Level 3 of the
hierarchy and include corporate investments including trust preferred stock
pools which are less liquid securities.




The
following table presents the fair value measurements of assets and liabilities
recognized in the accompanying balance sheet measured at fair value on a
recurring basis and the level within the FAS 157 fair value hierarchy in which
the fair value measurements fall at March 31, 2008 (In thousands).




Fair
      Value Measurements UsingFair
      Value
            
            
            Quoted
      Prices in Active Markets for Identical Assets
              (Level
      1)
            
            
            Significant
      Other Observable Inputs
              (Level
      2)
            
            
            Significant
      Unobservable Inputs
              (Level
      3)Available-for-sale
      securities
            
            
            $ 
      55,408
            
            
            
            $ 
      -0-
            
            
            
            $ 
      53,679
            
            
            
            $ 
      1,729







The
following is a reconciliation of the beginning and ending balances of recurring
fair value measurements recognized in the accompanying balance sheet using
significant unobservable (Level 3) inputs:




Available-For-Sale
      Securities(In
      Thousands)Beginning
      balance
            
            $
            888Total
      realized and unrealized gains and lossesAmortization
      included in net income
            
            
            -0-Unrealized
      gain (losses) included in other comprehensive income
            
            
            (61
            )Purchases,
      issuances and settlements including paydowns
            
            
            902Transfers
      in and/or out of Level 3
            
            
            -0-Ending
      balance
            
            $
            1,729Total
      gains or losses for the period included in net income attributable to the
      change in unrealized gains or losses related to assets and liabilities
      still held at the reporting date
            
            $
            -0-







9


Realized
and unrealized gains and losses included in net income for the period from
January 1, 2008, through March 31, 2008, are reported in the consolidated
statements of income as follows (In Thousands):




Operating
      Income
            
            
            Other
      Income (Expense)Total
      gains and losses
            
            
            $ 
      -0-
            
            
            
            $ 
      -0-Change
      in unrealized gains or losses relating to assets still held at the balance
      sheet date
            
            
            $ 
      -0-
            
            
            
            $ 
      -0-







Following
is a description of the valuation methodologies used for instruments measured at
fair values on a non-recurring basis and recognized in the accompanying balance
sheet, as well as the general classification of such instruments pursuant to the
valuation hierarchy.




The
following table presents the fair value measurements of assets and liabilities
recognized in the accompanying balance sheet measured at fair value on a
non-recurring basis and the level within the FAS 157 fair value hierarchy in
which the fair value measurements fall at March 31, 2008 (In
Thousands).




Fair
      Value Measurements UsingFair
      Value
            
            Quoted
      Prices in Active Markets for Identical Assets
              (Level
      1)
            
            Significant
      Other Observable Inputs
              (Level
      2)
            
            Significant
      Unobservable Inputs
              (Level
      3)Impaired
      loans
            
            $
            597
            
            
            $
            -0-
            
            
            $
            -0-
            
            
            $
            597Mortgage
      Servicing Rights
            
            $
            51
            
            
            $
            -0-
            
            
            $
            -0-
            
            
            $
            51







Impaired
Loans




Impaired
loans are carried at the present value of estimated future cash flows using the
loan’s existing rate, or the fair value of collateral if the loan is collateral
dependent.  Loans are evaluated for impairment quarterly. During the first
quarter of 2008, certain of these impaired loans were impaired for the first
time, partially charged-off or re-evaluated, resulting in a remaining balance
for these loans, net of specific allowance, of $597,000. This valuation would be
considered Level 3.  Level 3 inputs for impaired loans included current and
prior appraisals, discounting factors, the borrowers’ financial results and
other considerations including expected cash flows.






Mortgage
Servicing Rights




Mortgage
servicing rights are initially recorded at fair value and are subsequently
reported at amortized cost and periodically evaluated for impairment as
described in (SFAS) No. 156, Accounting for Servicing of
Financial Assets-an amendment of FASB Statement No. 140.New mortgage
servicing rights recorded during the current accounting period are recorded at
fair value and are disclosed as a nonrecurring measurement.




Mortgage
servicing rights recorded as an asset and into income during the three months
ended March 31, 2008 totaled $51,000. Mortgage servicing rights do not trade in
an active, open market with readily observable prices.  Accordingly,
fair values of new mortgage servicing rights are estimated using discounted cash
flow models.  Due to the nature of the valuation inputs, recording
initial mortgage servicing rights are classified within Level 3 of the
hierarchy.




10




NOTE 5: RECENT ACCOUNTING
PRONOUNCEMENTS





In
February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
Financial Assets and Financial Liabilities—including an amendment of FASB
Statement No. 115,” which was effective for the Corporation on January 1,
2008.  The fair value option established by this Statement permits all
entities to choose to measure eligible items at fair value at specified election
dates. A business entity shall report unrealized gains and losses on items for
which the fair value option has been elected in earnings (or another performance
indicator if the business entity does not report earnings) at each subsequent
reporting date.  The fair value option a) may be applied instrument by
instrument, with a few exceptions, such as investments otherwise accounted for
by the equity method; b) is irrevocable (unless a new election date occurs); and
c) is applied only to entire instruments and not to portions of
instruments.  Management did not elect the fair value option for any
financial assets or liabilities.





In
December 2007, the FASB issued SFAS No. 141(R), “Business Combinations” which
replaces SFAS No. 141, “Business Combinations.”  This Statement
retains the fundamental requirements in SFAS No. 141 that the acquisition method
of accounting (formerly referred to as purchase method) is used for all business
combinations and that an acquirer is identified for each business
combination.  This Statement defines the acquirer as the entity that
obtains control of one or more businesses in the business combination and
establishes the acquisition date as of the date that the acquirer achieves
control.  This Statement requires an acquirer to recognize the assets
acquired, the liabilities assumed, and any noncontrolling interest in the
acquiree at the acquisition date, measured at their fair values.  This
Statement requires the acquirer to recognize acquisition-related costs and
restructuring costs separately from the business combination as period expense.
This statement requires that loans acquired in a purchase business combination
be the present value of amounts to be received.  Valuation allowances
should reflect only those losses incurred by the investor after
acquisition.   This Statement is effective for business
combinations for which the acquisition date is on or after the beginning of the
first annual reporting period beginning on or after December 15,
2008.  Management is currently in the process of determining what
effect the provisions of this statement will have on the Corporation’s financial
position or results of operations.





In
December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
Consolidated Financial Statements - an Amendment to ARB No. 51.”  This
Statement establishes new accounting and reporting standards that require the
ownership interests in subsidiaries held by parties other than the parent be
clearly identified, labeled, and presented in the consolidated statement of
financial position within equity, but separate from the parent’s
equity.  The Statement also requires the amount of consolidated net
income attributable to the parent and to the noncontrolling interest be clearly
identified and presented on the face of the consolidated statement of
income.  This Statement is effective for fiscal years, and interim
periods within those fiscal years, beginning on or after December 15,
2008.  Management is currently in the process of determining what
effect the provisions of this statement will have on the Corporation’s financial
position or results of operations.





In March
2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments
and Hedging Activities - an amendment of FASB Statement No.
133.”  This Statement changes the disclosure requirements for
derivative instruments and hedging activities.  Entities are required
to provide enhanced disclosures about a) how and why an entity uses derivative
instruments, b) how derivative instruments and related hedged items are
accounted for under Statement 133 and its related interpretations, and c) how
derivative instruments and related hedged items affect an entity’s financial
position, financial performance, and cash flows.  This Statement is
effective for financial statements issued for fiscal years and interim periods
beginning after November 15, 2008.  Management is currently in the
process of determining what effect the provisions of this statement will have on
the Corporation’s consolidated financial statements.


11




NOTE 6:  
RECLASSIFICATIONS




Certain
reclassifications have been made to the 2007 consolidated condensed financial
statements to conform to the March 31, 2008 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 56 through 58 of the Annual
Report to Shareholders for the year ended December 31, 2007. 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.




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.


12




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.






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 March 31, 2008 and December 31, 2007, mortgage
servicing rights had carrying values of $282,000 and $284,000
respectively.


13




FINANCIAL
CONDITION




At March
31, 2008, the Corporation’s consolidated assets totaled $349.1 million, a slight
decrease of $1.0 million, or .3% from December 31, 2007. The decrease in assets
resulted primarily from decreases in the investment portfolio of $3.6 million,
which funded increases in the loan portfolio of $2.6 million and other liquidity
needs.  During the same period interest receivable on interest earning
assets decreased by $448,000, or 18.7%, reflecting, in part, the drop in
interest rates resulting from the January and March reduction of the Prime rate
by the Federal Reserve.




The
Corporation’s consolidated allowance for loan losses totaled $2.4 million and
$2.2 million on March 31, 2008 and December 31, 2007, respectively, which
represented .89% and .85% of total loans. Non-performing loans (defined as loans
delinquent greater than 90 days and loans on non-accrual status) totaled $2.5
million and $1.8 million at March 31, 2008 and December 31, 2007 respectively.
The increase period to period was due almost entirely to the inclusion of one
real estate secured loan of $565,000 added in March 2008.  Although
management believes that its allowance for loan losses at March 31, 2008, 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.  As a result of analysis of non-performing and classified
loans, management increased the provision for loan losses to $200,000 for the
quarter ended March 31, 2008, as compared to $48,000 for the same period in
2007.




Deposits
totaled $220 million at March 31, 2008, a slight increase of $356,000, or .2%,
compared to total deposits at December 31, 2007. During the three month period,
transactional deposit accounts decreased $25.0 million while certificate of
deposit accounts increased $25.5 million, with the difference accounting for the
slight increase in deposits overall.




Borrowings
totaled $99.6 million at March 31, 2008 versus $102.2 million on December 31,
2007. Of these totals, $92.0 million and $95.0 million respectively were FHLB
Advances with average rates of 4.67% and 4.64%.  The Bank has
experienced a slower drop in the overall cost of funds as a result of these
longer term borrowing rates, which average about 1% over the highest paying
certificate of deposit rate for the Bank.  In addition to the
borrowings from the FHLB, at March 31, 2008 the Bank held repurchase agreements
totaling $427,000.




Shareholders’
equity totaled $26.3 million at March 31, 2008, an increase of $628,000, or 2.4%
from the $25.7 million at December 31, 2007.  Of this increase,
$615,000 was income from operations, $343,000 was paid out in dividends to
shareholders, and $349,000 was a result of additional unrealized gains on
available for sale securities.




The Bank
is required to maintain minimum regulatory capital pursuant to federal
regulations. At March 31, 2008, the Bank’s regulatory capital exceeded all
applicable regulatory capital requirements.






COMPARISON
OF OPERATING RESULTS FOR THE THREE MONTHS ENDED MARCH 31, 2008 AND
2007




GENERAL




The
Corporation’s net income for the three months ended March 31, 2008, totaled
$615,000, an increase of $82,000 or 15.5% from the $533,000 reported for the
period ended March 31, 2007. The Corporation experienced several positive events
that contributed to this increase including, but not limited to, a widening of
the spread between interest earned and interest expensed, an upturn in the sale
of loans in the secondary market, and gains taken in the sale of
investments.  Meanwhile expenses were managed effectively and the
Corporation adequately funded the provision for loan losses at $200,000 for the
three months ended March 31, 2008 as compared to $48,000 for the same period in
2007.






NET INTEREST
INCOME




Total
interest income for the three months ended March 31, 2008 amounted to $5.2
million, an increase of $203,000, or 4.1%, from the comparable period in 2007,
reflecting the effects of an increase in average interest-earning assets
outstanding.  This was in spite of a drop in the average loan rate
from 7.01% at March 31, 2007 to 6.62% at March 31, 2008, a drop of
5.6%.


14




Interest
expense on deposits decreased by $161,000, or 8.7%, to a total of $1.7 million
for the three months ended March 31, 2008, due primarily to a decrease in the
average rate paid on deposits outstanding year-to-year. Interest expense on
borrowings totaled $1.2 million for the three months ended March 31, 2008, an
increase of $78,000, from the comparable period in 2007. This increase was the
result of higher borrowing levels, with only negligible change in the overall
cost of borrowing, period to period.




Net
interest income increased to $2.2 million at March 31, 2008 from $1.9 million
for the same period in 2007, a gain of almost $300,000, or
14.7%.  This increase was primarily due to the widening of the
interest spread and an increase of nearly $10 million in interest earning
assets, period to period.






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 $200,000 provision for losses on loans
for the three months ended March 31, 2008 and $48,000 for the same period in
2007. The 2008 provision amount was predicated on the increase in the balance of
the loan portfolio, coupled with the increase in the level of delinquent loans
year-to-year and most especially, analysis of troubled loans currently in the
process of foreclosure. While management believes that the allowance for losses
on loans is adequate at March 31, 2008, 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 19.9% or $140,000, during the three months ended March 31,
2008, as compared to the same period in 2007. The change was attributable to
several factors, but primarily to gains on the sale of loans, a reflection of
the increase in sales to Freddie Mac year-to-year; to gains on the sale of
securities in 2008 as opposed to losses on sales recorded at the same point in
2007; and to a sizable increase in the level of debit card interchange fee
income being received by the Bank, from $64,000 in 2008 as compared to $38,000
for the same period in 2007, a gain of almost 168%.






OTHER
EXPENSES




Other
expenses increased by 9.4%, from $1.9 million at March 31, 2007 to $2.0 at March
31, 2008. Period to period increases in personnel costs, reflecting the addition
of professional staff, increased building/occupancy costs, reflective of branch
updating, and increased data processing costs, reflecting updating of hardware,
increased activity and increased costs related to data processing charges
associated with the collection of interchange fee income.






INCOME
TAXES




The
provision for income taxes totaled $221,000 for the three months ended March 31,
2008, an increase of $17,000, or 8.3%, as compared to the same period in 2007,
due primarily to increased net income for the period.  The effective
tax rate for the three months ended March 31, 2008, was 26.4% as compared to
27.7% for the same period in 2007, reflecting the continued benefit of holding
investment assets at the Bank’s subsidiary in Nevada and increased income from
the cash surrender value of bank owned life insurance.






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.


15




ITEM
3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK




Not
applicable for Smaller Reporting Companies.






ITEM
4T. 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 Company’s Form 10-K for the year ended December 31,
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
denies the plaintiffs’ allegations but, along with the other trustee defendants,
has agreed to terms for a settlement of the plaintiffs’ claims.  The
Bank anticipates that the settlement will be submitted to the court for approval
within the next 90 days.






ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES
AND USE OF PROCEEDS




None.






ITEM 3. DEFAULTS UPON SENIOR
SECURITIES




None.






ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS




None.






ITEM 5. OTHER INFORMATION




None.


16


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







17




SIGNATURES




Pursuant
to the requirements of the Securities Exchange Act of 1934, as amended, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.







RIVER
      VALLEY BANCORPDate:
      May 15, 2008
            By:
            /s/
      Matthew P. ForresterMatthew
      P. ForresterPresident
      and Chief Executive OfficerDate:
      May 15, 2008
            By:
            /s/
      Vickie L. GrimesVickie
      L. GrimesVice
      President of Finance







18




EXHIBIT
INDEX





No.
            
            Description
            
            Location31(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















19