UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
D.C. 20549




FORM
10-Q




(MARK
ONE)







x
            QUARTERLY
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
              SECURITIES
      EXCHANGE ACT OF 1934For
      the quarterly period ended June 30, 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 August 14, 2008 was 1,639,881.





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 (Loss)
            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
            13Item
      3.
            Quantitative
      and Qualitative Disclosure about Market Risk
            18Item
      4T.
            Controls
      and Procedures
            18PART
      II. OTHER INFORMATION
            19Item
      1.
            Legal
      Proceedings
            19Item
      2.
            Unregistered
      Sales of Equity Securities and Use of Proceeds
            19Item
      3.
            Defaults
      Upon Senior Securities
            19Item
      4.
            Submission
      of Matters to a Vote of Security Holders
            19Item
      5.
            Other
      Information
            19Item
      6.
            Exhibits
            19SIGNATURES
            20EXHIBIT
      INDEX
            21







2


PART
I FINANCIAL INFORMATION




ITEM
1. FINANCIAL STATEMENTS




RIVER
VALLEY BANCORP


Consolidated
Condensed Balance Sheets






June
      30, 2008
                (Unaudited)
            
            
            December
      31, 2007(In
      Thousands, Except Share Amounts)AssetsCash
      and due from banks
            
            $
            5,751
            
            
            $
            5,131Interest-bearing
      demand deposits
            
            
            2,778
            
            
            
            3,006Cash
      and cash equivalents
            
            
            8,529
            
            
            
            8,137Investment
      securities available for sale
            
            
            53,518
            
            
            
            58,999Loans
      held for sale
            
            
            184
            
            
            
            312Loans
            
            
            268,288
            
            
            
            260,836Allowance
      for loan losses
            
            
            (2,129
            )
            
            
            (2,208
            )Net
      loans
            
            
            266,159
            
            
            
            258,628Premises
      and equipment
            
            
            7,913
            
            
            
            7,631Real
      estate, held for sale
            
            
            122
            
            
            
            184Federal
      Home Loan Bank stock
            
            
            4,800
            
            
            
            4,750Interest
      receivable
            
            
            1,913
            
            
            
            2,396Cash
      value of life insurance
            
            
            7,710
            
            
            
            7,552Other
      assets
            
            
            1,848
            
            
            
            1,472Total
      assets
            
            $
            352,696
            
            
            $
            350,061LiabilitiesDepositsNon-interest-bearing
            
            $
            22,106
            
            
            $
            18,619Interest-bearing
            
            
            199,063
            
            
            
            201,063Total
      deposits
            
            
            221,169
            
            
            
            219,682Borrowings
            
            
            102,380
            
            
            
            102,217Interest
      payable
            
            
            841
            
            
            
            724Other
      liabilities
            
            
            2,777
            
            
            
            1,761Total
      liabilities
            
            
            327,167
            
            
            
            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 – 1,639,881 and 1,634,931 shares
            
            
            9,179
            
            
            
            9,160Retained
      earnings
            
            
            16,752
            
            
            
            16,237Accumulated
      other comprehensive income(loss)
            
            
            (402
            )
            
            
            280Total
      shareholders’ equity
            
            
            25,529
            
            
            
            25,677Total
      liabilities and shareholders’ equity
            
            $
            352,696
            
            
            $
            350,061




See Notes
to Unaudited Consolidated Condensed Financial Statements.


3


RIVER
VALLEY BANCORP


Consolidated
Condensed Statements of Income


(Unaudited)






Six
      Months Ended
                June
      30,
            
            
            Three
      Months Ended
                June
      30,2008
            
            
            2007
            
            
            2008
            
            
            2007(In
      Thousands, Except Share Amounts)Interest
      IncomeLoans
      receivable
            
            $
            8,667
            
            
            $
            8,444
            
            
            $
            4,278
            
            
            $
            4,268Investment
      securities
            
            
            1,235
            
            
            
            1,288
            
            
            
            596
            
            
            
            629Interest-earning
      deposits and other
            
            
            227
            
            
            
            248
            
            
            
            94
            
            
            
            125Total
      interest income
            
            
            10,129
            
            
            
            9,980
            
            
            
            4,968
            
            
            
            5,022Interest
      ExpenseDeposits
            
            
            3,155
            
            
            
            3,708
            
            
            
            1,457
            
            
            
            1,849Borrowings
            
            
            2,430
            
            
            
            2,308
            
            
            
            1,202
            
            
            
            1,158Total
      interest expense
            
            
            5,585
            
            
            
            6,016
            
            
            
            2,659
            
            
            
            3,007Net
      Interest Income
            
            
            4,544
            
            
            
            3,964
            
            
            
            2,309
            
            
            
            2,015Provision
      for loan losses
            
            
            400
            
            
            
            96
            
            
            
            200
            
            
            
            48Net
      Interest Income After Provision for Loan Losses
            
            
            4,144
            
            
            
            3,868
            
            
            
            2,109
            
            
            
            1,967Other
      IncomeService
      fees and charges
            
            
            1,006
            
            
            
            1,033
            
            
            
            529
            
            
            
            530Net
      realized gains (losses) on sale of available-for-sale
      securities
            
            
            48
            
            
            
            (22
            )
            
            
            17
            
            
            
            0Net
      gains on loan sales
            
            
            172
            
            
            
            45
            
            
            
            71
            
            
            
            17Interchange
      fee income
            
            
            137
            
            
            
            96
            
            
            
            73
            
            
            
            58Increase
      in cash value of life insurance
            
            
            158
            
            
            
            144
            
            
            
            80
            
            
            
            83Trust
      operations income
            
            
            96
            
            
            
            128
            
            
            
            41
            
            
            
            57(Gain)/loss
      on sale of premises and equipment
            
            
            (37
            )
            
            
            (3
            )
            
            
            (31
            )
            
            
            (3
            )Other
      income
            
            
            73
            
            
            
            73
            
            
            
            27
            
            
            
            46Total
      other income
            
            
            1,653
            
            
            
            1,494
            
            
            
            807
            
            
            
            788Other
      ExpensesSalaries
      and employee benefits
            
            
            2,293
            
            
            
            2,093
            
            
            
            1,187
            
            
            
            1,070Net
      occupancy and equipment expenses
            
            
            648
            
            
            
            584
            
            
            
            318
            
            
            
            298Data
      processing fees
            
            
            191
            
            
            
            131
            
            
            
            95
            
            
            
            74Advertising
            
            
            170
            
            
            
            155
            
            
            
            93
            
            
            
            88Legal
      and professional fees
            
            
            181
            
            
            
            203
            
            
            
            75
            
            
            
            108Amortization
      of mortgage servicing rights
            
            
            98
            
            
            
            161
            
            
            
            45
            
            
            
            80Other
      expenses
            
            
            607
            
            
            
            543
            
            
            
            330
            
            
            
            282Total
      other expenses
            
            
            4,188
            
            
            
            3,870
            
            
            
            2,143
            
            
            
            2,000Income
      Before Income Tax
            
            
            1,609
            
            
            
            1,492
            
            
            
            773
            
            
            
            755Income
      tax expense
            
            
            405
            
            
            
            402
            
            
            
            184
            
            
            
            197Net
      Income
            
            $
            1,204
            
            
            $
            1,090
            
            
            $
            589
            
            
            $
            558Basic
      earnings per share
            
            $
            .74
            
            
            $
            .67
            
            
            $
            .36
            
            
            $
            .34Diluted
      earnings per share
            
            
            .73
            
            
            
            .66
            
            
            
            .36
            
            
            
            .34Dividends
      per share
            
            
            .42
            
            
            
            .40
            
            
            
            .21
            
            
            
            .20




See Notes
to Unaudited Consolidated Condensed Financial Statements.


4




RIVER
VALLEY BANCORP


Consolidated
Condensed Statements of Comprehensive Income (Loss)


(Unaudited)







Six
      Months Ended
                June
      30,
            
            
            Three
      Months Ended
                June
      30,2008
            
            
            2007
            
            
            2008
            
            
            2007(In
      Thousands)Net
      income
            
            $
            1,204
            
            
            $
            1,090
            
            
            $
            589
            
            
            $
            558Other
      comprehensive income, net of taxUnrealized
      gains (losses) on securities available for saleUnrealized
      holding losses arising during the period, net of tax benefit of $357,
      $185, $555, and $223.
            
            
            (653
            )
            
            
            (329
            )
            
            
            (1,021
            )
            
            
            (402
            )Less:
      Reclassification adjustment for gains (losses) included in net income, net
      of tax benefit (expense) of $(18), $9, $(6) and $0
            
            
            30
            
            
            
            (13
            )
            
            
            11
            
            
            
            -(683
            )
            
            
            (316
            )
            
            
            (1,032
            )
            
            
            (402
            )Comprehensive
      income (loss)
            
            $
            521
            
            
            $
            774
            
            
            $
            (443
            )
            
            $
            156














See Notes
to Unaudited Consolidated Condensed Financial Statements.


5


RIVER
VALLEY BANCORP


Consolidated
Condensed Statements of Cash Flows


(Unaudited)




Six
      Months Ended June 30,2008
            
            
            2007(In
      Thousands)Operating
      ActivitiesNet
      income
            
            $
            1,204
            
            
            $
            1,090Adjustments
      to reconcile net income to net cash provided by operating
      activitiesProvision
      for loan losses
            
            
            400
            
            
            
            96Depreciation
      and amortization
            
            
            188
            
            
            
            294Investment
      securities (gains)losses
            
            
            (48
            )
            
            
            22Loans
      originated for sale in the secondary market
            
            
            (8,000
            )
            
            
            (3,226
            )Proceeds
      from sale of loans in the secondary market
            
            
            8,215
            
            
            
            2,878Gain
      on sale of loans
            
            
            (172
            )
            
            
            (45
            )Amortization
      of net loan origination cost
            
            
            66
            
            
            
            108Employee
      Stock Ownership Plan compensation
            
            
            11
            
            
            
            88Net
      change in:
            Interest
      receivable
            
            
            483
            
            
            
            219Interest
      payable
            
            
            117
            
            
            
            (17
            )Other
      adjustments
            
            
            972
            
            
            
            46Net
      cash provided by operating activities
            
            
            3,436
            
            
            
            1,553Investing
      ActivitiesPurchases
      of securities available for sale
            
            
            (17,162
            )
            
            
            (5,951
            )Proceeds
      from maturities of securities available for sale
            
            
            13,667
            
            
            
            7,016Proceeds
      from sale of securities available for sale
            
            
            7,971
            
            
            
            5,917Purchase
      of Federal Home Loan Bank stock
            
            
            (50
            )
            
            
            (150
            )Net
      change in loans
            
            
            (8,018
            )
            
            
            (1,389
            )Purchases
      of premises and equipment
            
            
            (602
            )
            
            
            (274
            )Proceeds
      from sale of premises and equipment
            
            
            95
            
            
            
            0Other
      investing activities
            
            
            48
            
            
            
            1Net
      cash provided by (used in) investing activities
            
            
            (4,051
            )
            
            
            5,170Financing
      ActivitiesNet
      change inNon-interest
      bearing, interest-bearing demand and savings deposits
            
            
            (29,564
            )
            
            
            (4,320
            )Certificates
      of deposit
            
            
            31,051
            
            
            
            (1,541
            )Short
      term borrowings
            
            
            163
            
            
            
            0Proceeds
      from borrowings
            
            
            21,000
            
            
            
            28,000Repayment
      of borrowings
            
            
            (21,000
            )
            
            
            (28,000
            )Cash
      dividends
            
            
            (688
            )
            
            
            (647
            )Excess
      tax benefit on stock options exercised
            
            
            0
            
            
            
            9Stock
      options exercised
            
            
            8
            
            
            
            90Purchase
      of stock
            
            
            0
            
            
            
            (183
            )Advances
      by borrowers for taxes and insurance
            
            
            37
            
            
            
            95Net
      cash provided by (used in) financing activities
            
            
            1,007
            
            
            
            (6,497
            )Net
      Change in Cash and Cash Equivalents
            
            
            392
            
            
            
            226Cash
      and Cash Equivalents, Beginning of Period
            
            
            8,137
            
            
            
            11,808Cash
      and Cash Equivalents, End of Period
            
            $
            8,529
            
            
            $
            12,034Additional
      Cash Flows and Supplementary InformationInterest
      paid
            
            $
            5,468
            
            
            $
            6,016Income
      tax paid
            
            
            409
            
            
            
            220




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 and six-month periods ended June 30,
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
  Six
      Months Ended
                  June
      30, 2008
              
              Six
      Months Ended
                  June
      30, 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
              
              $
              1,204
              
              
              1,635,868
              
              $
              .74
              
              $
              1,090
              
              
              1,618,166
              
              $
              .67Effect
      of dilutive RRP awards and stock options
              
              
              
              
              
              17,069
              
              
              
              
              
              
              
              
              27,763Diluted
      earnings per shareIncome
      available to common shareholders and assumed conversions
              
              $
              1,204
              
              
              1,652,937
              
              $
              .73
              
              $
              1,090
              
              
              1,645,929
              
              $
              .66







Three
      Months Ended
                June
      30, 2008
            
            Three
      Months Ended
                June
      30, 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
            
            $
            589
            
            
            1,636,747
            
            $
            .36
            
            $
            558
            
            
            1,621,493
            
            $
            .34Effect
      of dilutive RRP awards and stock options
            
            
            
            
            
            15,411
            
            
            
            
            
            
            
            
            26,013Diluted
      earnings per shareIncome
      available to common shareholders and assumed conversions
            
            $
            589
            
            
            1,652,158
            
            $
            .36
            
            $
            558
            
            
            1,647,506
            
            $
            .34




Options
to purchase 5,000 shares of common stock at $22.25 per share were outstanding
for the three and six month periods ending  June 30, 2008 and June 30,
2007, but were not included in the computation of diluted earnings per share
because the option price was greater than the average market price of the common
shares.




8




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.  AS 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.




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 June 30, 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
            
            $
            53,518
            
            
            $
            -0-
            
            
            $
            51,028
            
            
            $
            2,490









9






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)Six
      Months Ended
              June
      30, 2008
            
            
            Three
      Months Ended
              June
      30, 2008Beginning
      balance
            
            $
            888
            
            
            $
            1,729Total
      realized and unrealized gains and lossesAmortization
      included in net income
            
            
            -0-
            
            
            
            -0-Unrealized
      gain (losses) included in other comprehensive income
            
            
            (283
            )
            
            
            (222
            )Purchases,
      issuances and settlements including paydowns
            
            
            1,885
            
            
            
            983Transfers
      in and/or out of Level 3
            
            
            -0-
            
            
            
            -0-Ending
      balance
            
            $
            2,490
            
            
            $
            2,490Total
      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-






Realized
and unrealized gains and (losses) included in net income for the period from
January 1, 2008, through June 30, 2008, are reported in the consolidated
statements of income as follows (In Thousands):




Six
      Months Ended
              June
      30, 2008Operating
      Income
            
            
            Other
      Income (Expense)Total
      gains and losses
            
            $
            -0-
            
            
            $
            48Change
      in unrealized gains or losses relating to assets still held at the balance
      sheet date
            
            $
            -0-
            
            
            $
            -0-





Three
      Months Ended
              June
      30, 2008Operating
      Income
            
            
            Other
      Income (Expense)Total
      gains and losses
            
            $
            -0-
            
            
            $
            17Change
      in unrealized gains or losses relating to assets still held at the balance
      sheet date
            
            $
            -0-
            
            
            $
            -0-









10




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 June 30, 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
            
            $
            558
            
            
            $
            -0-
            
            
            $
            -0-
            
            
            $
            558Mortgage
      Servicing Rights
            
            $
            86
            
            
            $
            -0-
            
            
            $
            -0-
            
            
            $
            86






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 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 $558,000. 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 June 30, 2008 totaled $35,000, and during the six months ended June 30,
2008 totaled $86,000. 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.






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.






11




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.






NOTE 6:  
RECLASSIFICATIONS




Certain
reclassifications have been made to the 2007 consolidated condensed financial
statements to conform to the June 30, 2008 presentation.






12




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.






13




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 June 30, 2008 and December 31, 2007, mortgage
servicing rights had carrying values of $272,000  and $284,000
respectively.






14




FINANCIAL
CONDITION




At June
30, 2008, the Corporation’s consolidated assets totaled $352.7 million, an
increase of $2.6 million, or .8% from December 31, 2007.An increase in
the Bank’s loan portfolio of $7.5 million year to date was comprised primarily
of consumer loans for 1-4 family residential property ($2.9 million), commercial
real estate loans ($2.0 million) and commercial purpose loans, most specifically
agricultural loans, ($2.5 million). Loan growth was funded
partially by called and matured investments and by increases in deposits for the
period.  Over the same period interest receivable on interest earning
assets decreased by $483,000, or 20.1%, reflecting the drop in interest rates
resulting from the January, March, and May reductions of the Prime rate by the
Federal Reserve.  Most radically affected were commercial loans and
home equity lines of credit which change directly with the Prime
rate.  Other increases for the period included a 3.7% increase in
premises and equipment, reflecting the opening of the new branch in Floyds
Knobs, Indiana and a 25.5% increase in non-earning “Other Assets”, primarily
prepaid expenses and deferred tax assets.




The
Corporation’s consolidated allowance for loan losses totaled $2.1 million, $2.2
million, and $1.9 million on June 30, 2008, December 31, 2007, and June 30, 2007
respectively, which represented .79%, .85%, and .78% of total
loans.  Non-performing loans (defined as loans delinquent greater than
90 days and loans on non-accrual status) totaled $2.0 million, $1.8 million, and
$2.2 million for the same periods.  From December 31, 2007 to June 30,
2008 the allowance for loan losses dropped as a problem loan with a significant
allowance reserve was charged off.  With the exception of a few loans
delinquent due to administrative delays in refinancing, the Bank’s
non-performing loans represent loans in the lengthy process of foreclosure, for
which responsible specific loss reserves have been
established.  Charge offs for the period have been appropriately
recognized through the provision expense with an increase in the provision for
loan losses to $200,000 for the quarter ended June 30, 2008, as compared to
$48,000 for the same period in 2007 and $400,000 for the six months ended June
30, 2008 as compared to $96,000 for the same period in 2007.




Although
management believes that its allowance for loan losses at June 30, 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.  Management is diligent in the monitoring of delinquent
loans and in the analysis of the factors affecting the allowance.  At
June 30, 2008 the bank held one piece of repossessed real estate valued at
$122,000 as compared to two pieces with a combined value of $184,000 at December
31, 2007.




Deposits
totaled $221.2 million at June 30, 2008, an increase of $1.5 million, or .7%,
compared to total deposits at December 31, 2007. During the six-month period,
transactional deposit accounts increased by $3.5 million while interest bearing
accounts decreased $2.0 million as businesses and governmental units moved funds
into transactional accounts to meet expenses.




Borrowings
totaled $102.4 million at June 30, 2008 versus $102.2 million on December 31,
2007. For both periods $95.0 million represented Federal Home Loan Bank (FHLB)
advances with average rates of 4.63% and 4.64% for the respective periods. 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.




Shareholders’
equity totaled $25.5 million at June 30, 2008, a slight decrease of $148,000, or
..6% from the $25.7 million at December 31, 2007.  Of this change, $1.2
million was income from operations, $688,000 was paid out in dividends to
shareholders, and $682,000 was a decrease in equity resulting from the change
from a net gain position on unrealized gains/losses on available for sale
securities to a net loss position.




The Bank
is required to maintain minimum regulatory capital pursuant to federal
regulations. At June 30, 2008, the Bank’s regulatory capital exceeded all
applicable regulatory capital requirements.






15




COMPARISON
OF OPERATING RESULTS FOR THE SIX MONTHS ENDED JUNE 30, 2008 AND
2007




GENERAL




The
Corporation’s net income for the six months ended June 30, 2008, totaled
$1,204,000, an increase of $114,000 or 10.4% from the $1,090,000 reported for
the period ended June 30, 2007.The increase in income in the 2008 period was attributable to
improvements in both the spread on interest bearing items and in non-interest
income, most specifically loan sales to the secondary market.






NET INTEREST
INCOME




Total
interest income for the six months ended June 30,2008 increased by
$149,000, or 1.5%, to $10.1 million from the $10 million recorded for the same
period in 2007.  The slight increase was due to growth in the
underlying assets in the face of rates that continue to decline as they lag
behind the interest rate changes by the Federal Reserve earlier this
year.




Total
interest expense for the same period exhibited more significant declines with a
decrease of $431,000, or 7.2%, from $6.0 million at June 30, 2007 to $5.6
million at June 30, 2008.  For the six months ended June 30, 2008
interest expense from deposits totaled $3.2 million while interest expense from
borrowings totaled $2.4 million, as compared to $3.7 million and $2.3 million
for the same period in 2007.  Of the overall decrease in interest
expense, $553,000, or 14.9%, was attributable to interest expense on deposits as
the effect of the Fed rates continued to affect the Bank and funds move from
interest bearing accounts into non-interest bearing accounts.  Over
the same period, the Bank saw a slight increase of $122,000, or 5.3%, on
interest expense for borrowings as the average balance of funds borrowed from
the FHLB increased.




Net
Interest Income increased to $4.6 million for the six months ended June 30, 2008
from $4.0 million for the same period in 2007, an increase of $580,000, or
14.6%.  This increase reflects both loan growth and the affects of the
economy on the deposit mix, in addition to the effects of the interest rate
environment.






PROVISION FOR LOSSES ON
LOANS




A
provision for losses on loans is charged to income to bring the total allowance
for loan losses to a level considered appropriate by management based upon
historical experience, the volume and type of lending conducted by the Bank, the
status of past due principal and interest payment, general economic conditions,
particularly as such conditions relate to the Bank’s market area, and other
factors related to the collectibility of the Bank’s loan portfolio. As a result
of such analysis, management recorded a $400,000 provision for losses on loans
for the six months ended June 30, 2008, as compared to $96,000 for the same
period in 2007. While management believes that the allowance for losses on loans
is adequate at June 30, 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 slightly by $159,000, during the six months ended June 30,
2008, as compared to the same period in 2007. This increase was fueled primarily
by sales of 1-4 family residential loans to the secondary market and gains on
the sale of investments during the period.






OTHER
EXPENSE




Other
expense increased by $318,000, or 8.2% during the six months ended June 30,
2008, as compared to the same period in 2007.  Increases in personnel
and occupancy costs relative to the opening of the Floyds Knobs, Indiana branch
contributed to this increase, along with data processing costs relative to ATM
usage, and loan administration costs, which mirror loan growth and loan
sales.  Increases in the FDIC assessment and charge offs due to debit
card fraud also contributed to the increase.






16




INCOME
TAXES




The
provision for income taxes totaled $405,000 for the six months ended June 30,
2008, in line with the $401,000 for the same period in 2007.  The
effective tax rate for the six months ended June 30, 2008 was 25.2% as compared
to 26.9% for the same period in 2007.  The decrease continues to
reflect the affect of tax-exempt income from cash surrender value life insurance
and municipal investments.






COMPARISON
OF OPERATING RESULTS FOR THE THREE MONTHS ENDED JUNE 30, 2008 AND
2007




GENERAL




The
Corporation’s net income for the three months ended June 30, 2008, totaled
$589,000, with an increase of $31,000 or 5.5% from the $558,000 reported for the
period ended June 30, 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 reflected
the addition of a branch in Floyds Knobs, Indiana, increased loan administration
costs, and the continued decline in the expense for the amortization of mortgage
servicing rights from prior year loan originations.  The Corporation
aggressively funded the provision for loan losses at $200,000 for the three
months ended June 30, 2008 as compared to $48,000 for the same period in 2007
reflecting anticipated losses identified through the analysis of delinquent and
problem loans.






NET INTEREST
INCOME




Total
interest income for the three months ended June 30, 2008 amounted to $5.0
million, a decrease of only $54,000, or 1.1%, from the comparable period in
2007.  This slight decrease reflects the effects of an increase in
average interest-earning assets in the face of a declining average rate as the
loan portfolio catches up to the rate reductions implemented by the Federal
Reserve earlier this year.  The average loan rate dropped from 7.05%
at June 30, 2007 to 6.44% at June 30, 2008, a drop of 8.7%.




Interest
expense on deposits decreased by $392,000, or 21.2%, to a total of $1.5 million
for the three months ended June 30, 2008, primarily due to the 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 June 30, 2008, only a
slight increase of $44,000, from the comparable period in 2007 as the average
rate paid on borrowings remained relatively stable at 4.63% and 4.69% for the
respective periods.




Net
interest income increased to $2.3 million at June 30, 2008 from $2.0 million for
the same period in 2007, a gain of almost $300,000, or 14.6%.  This
increase was primarily due to the widening of the interest spread and an
increase of nearly $14.8 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 June 30, 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 June 30, 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.






17




OTHER
INCOME




Other
income increased by a slight 2.3% or $18,500, during the three months ended June
30, 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 the secondary market year-to-year, and gains on the
sale of securities in 2008 offset by a decline in trust and wealth management
income period to period.  Unlike interest income, “Other Income” is
not always readily predictable and subject to variations depending on outside
influences.






OTHER
EXPENSES




Other
expenses increased by 7.1%, from $2.0 million at June 30, 2007 to $2.1 million
at June 30, 2008.  Period to period increases in personnel costs,
reflecting the addition of professional staff, increased building/occupancy
costs, reflective of branch updating and the opening of the Floyds Knobs,
Indiana branch, and increased data processing expenses contributed most
significantly to the increase.  Declines in the amortization expense
for mortgage servicing rights and in professional fees paid period to period
helped to defray some of the increases.  The Corporation also
experienced an increase in the assessment paid to the FDIC during the period,
signifying the end of the assessment credit granted in 2007, and increases in
charge offs due to ATM/debit card fraud.






INCOME
TAXES




The
provision for income taxes totaled $184,000 for the three months ended June 30,
2008,  a decrease of $12,500, or 6.4%, as compared to the same period
in 2007, due primarily to the effect of tax exempt income from municipal
investments held at the Bank’s Nevada subsidiary and income from the cash
surrender value of bank owned life insurance.  The effective tax rate
for the three months ended June 30, 2008, was 23.9% as compared to 26.1% for the
same period in 2007.






OTHER




The
Securities and Exchange Commission maintains a Web site that contains reports,
proxy information statements, and other information regarding registrants that
file electronically with the Commission, including the Corporation. The address
is http://www.sec.gov.






ITEM
3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK




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.






18




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,
as previously reported, the Bank, along with the other trustee defendants, has
agreed to terms for a settlement of the plaintiffs' claims. The settlement has
not yet been submitted to the court for approval, because the plaintiffs have
been negotiating with the other defendants. The Bank has been informed that
those negotiations have resulted in a global settlement that is expected to be
submitted to the court for approval within the next 30 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




On April
16, 2008, the Annual Meeting of Shareholders of the Corporation was
held.  Three (3) Directors were elected to the following terms, by the
following votes:




Director
            
            Expiration
      of Term
            
            Votes
      For
            
            Votes
      AgainstMichael
      J. Hensley
            
            2011
            
            1,233,254
            
            141,442Fred
      W. Koehler
            
            2010
            
            1,233,177
            
            141,518Lillian
      Sue Livers, M.S., R.D.
            
            2011
            
            1,232,063
            
            142,632









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







19




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:
      August 14, 2008
            By:
            /s/
      Matthew
      P. ForresterMatthew
      P. ForresterPresident
      and Chief Executive OfficerDate:
      August 14, 2008
            By:
            /s/
      Vickie
      L. GrimesVickie
      L. GrimesVice
      President of Finance







20




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







21