**UNITED
        STATES**
 **SECURITIES
        AND EXCHANGE COMMISSION**
 **WASHINGTON,
        D.C. 20549**
  **FORM
        10-Q**
  **(MARK
        ONE)**
  
 ý
              QUARTERLY
                  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES
                  EXCHANGE ACT OF 1934For
                  the quarterly period ended June 30, 2007ORo
              TRANSITION
                  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES
                  EXCHANGE ACT OF 1934For
                  the transition period from ________________ to
                  ________________
  Commission
        file number: 0-21765
  **RIVER
        VALLEY BANCORP**
 (Exact
        name of registrant as specified in its charter)
 
 **Indiana**
              **35-1984567**(State
                  or other jurisdiction of incorporation or organization)
              (I.R.S.
                  Employer Identification No.)**430
                  Clifty Drive**
                **Madison,
                  Indiana**
              **47250**(Address
                  of principal executive offices)
              (Zip
                  Code)
  **(812)
        273-4949**
 (Registrant’s
        telephone number, including area code)
  **[None]**
 (Former
        name, former address and former fiscal year, if changed since last
        report)
  Indicate
        by check mark whether the registrant (1) has filed all reports required to
        be
        filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
        the
        preceding 12 months (or for such shorter period that the registrant was required
        to file such reports), and (2) has been subject to such filing requirements
        for
        the past 90 days.
  Yes  ý          No  o
  Indicate
        by check mark whether the registrant is a large accelerated filer, an
        accelerated filer, or a non-accelerated filer. See definition of “accelerated
        filer and large accelerated filer” in Rule 12b-2 of the Exchange
        Act.
  Large
        accelerated filer  o          Accelerated
        filer  o          Non-accelerated
        filer  ý
  Indicate
        by check mark whether the registrant is a shell company (as defined in Rule
        12b-2 of the Exchange Act).
  Yes  o          No  ý
  The
        number of shares of the Registrant’s common stock, without par value,
        outstanding as of June 30, 2007 was 1,627,933.
  
  **RIVER
        VALLEY BANCORP**
 **FORM
        10-Q**
 **INDEX**
 
 Page
                  No.PART
                  I. FINANCIAL INFORMATIONItem
                  1.
              Financial
                  StatementsConsolidated
                  Condensed Balance Sheets
              3Consolidated
                  Condensed Statements of Income
              4Consolidated
                  Condensed Statements of Comprehensive Income
              5Consolidated
                  Condensed Statements of Cash Flows
              6Notes
                  to Unaudited Consolidated Condensed Financial Statements
              7Item
                  2.
              Management’s
                  Discussion and Analysis of Financial Condition and Results of
                  Operations
              9Item
                  3.
              Quantitative
                  and Qualitative Disclosure about Market Risk
              14Item
                  4.
              Controls
                  and Procedures
              15PART
                  II. OTHER INFORMATION
              15Item
                  1.
              Legal
                  Proceedings
              15Item
                  1A.
              Risk
                  Factors
              15Item
                  2.
              Unregistered
                  Sales of Equity Securities and Use of Proceeds
              15Item
                  3.
              Defaults
                  Upon Senior Securities
              15Item
                  4.
              Submission
                  of Matters to a Vote of Security Holders
              16Item
                  5.
              Other
                  Information
              16Item
                  6.
              Exhibits
              16SIGNATURES
              17EXHIBIT
                  INDEX
              18
 
  2
  
 **PART
        I.  FINANCIAL INFORMATION**
  **ITEM
        1. FINANCIAL STATEMENTS**
  **RIVER
        VALLEY BANCORP**
 Consolidated
        Condensed Balance Sheet
 
 **June
                    30, 2007**
                  **(Unaudited)**
              
              
              **December
                    31, 2006**(In
                  Thousands, Except Share Amounts)**Assets**Cash
                  and due from banks
              
              $
              4,790
              
              
              $
              6,838Interest-bearing
                  demand deposits
              
              
              7,244
              
              
              
              4,736Fed
                  funds sold
              
              
              0
              
              
              
              234Cash
                  and cash equivalents
              
              
              12,034
              
              
              
              11,808Investment
                  securities available for sale
              
              
              57,718
              
              
              
              65,150Loans
                  held for sale
              
              
              365
              
              
              
              0Loans
              
              
              244,914
              
              
              
              244,063Allowance
                  for loan losses
              
              
              (1,904
              )
              
              
              (2,176
              )Net
                  loans
              
              
              243,010
              
              
              
              241,887Premises
                  and equipment
              
              
              7,788
              
              
              
              7,813Federal
                  Home Loan Bank stock
              
              
              4,550
              
              
              
              4,400Interest
                  receivable
              
              
              2,115
              
              
              
              2,334Cash
                  surrender value life insurance
              
              
              7,366
              
              
              
              7,222Other
                  assets
              
              
              1,760
              
              
              
              1,635Total
                  assets
              
              $
              336,706
              
              
              $
              342,249**Liabilities**DepositsNon-interest-bearing
              
              $
              20,973
              
              
              $
              19,340Interest-bearing
              
              
              193,404
              
              
              
              200,898Total
                  deposits
              
              
              214,377
              
              
              
              220,238Borrowings
              
              
              95,217
              
              
              
              95,217Interest
                  payable
              
              
              688
              
              
              
              705Other
                  liabilities
              
              
              2,147
              
              
              
              1,942Total
                  liabilities
              
              
              312,429
              
              
              
              318,102**Commitments
                  and Contingencies****Shareholders’
                  Equity**Preferred
                  stock, without par valueAuthorized
                  and unissued - 2,000,000 sharesCommon
                  stock, without par valueAuthorized
                  - 5,000,000 sharesIssued
                  and outstanding - 1,627,933 and 1,620,431 shares
              
              
              9,133
              
              
              
              9,129Retained
                  earnings
              
              
              15,788
              
              
              
              15,346Accumulated
                  other comprehensive loss
              
              
              (644
              )
              
              
              (328
              )Total
                  shareholders’ equity
              
              
              24,277
              
              
              
              24,147Total
                  liabilities and shareholders’ equity
              
              $
              336,706
              
              
              $
              342,249
  See
        notes
        to consolidated condensed financial statements.
  3
  **RIVER
        VALLEY BANCORP**
 Consolidated
        Condensed Statement of Income
 (Unaudited)
 
 **Six
                    Months Ended****June
                    30,**
              
              
              **Three
                    Months Ended****June
                    30,****2007**
              
              
              **2006**
              
              
              **2007**
              
              
              **2006**(In
                  Thousands, Except Share Amounts)Interest
                  IncomeLoans
                  receivable
              
              $
              8,444
              
              
              
              7,697
              
              
              
              4,268
              
              
              
              3,991Investment
                  securities
              
              
              1,288
              
              
              
              1,211
              
              
              
              629
              
              
              
              619Interest-earning
                  deposits and other
              
              
              248
              
              
              
              286
              
              
              
              125
              
              
              
              140Total
                  interest income
              
              
              9,980
              
              
              
              9,194
              
              
              
              5,022
              
              
              
              4,750Interest
                  ExpenseDeposits
              
              
              3,708
              
              
              
              3,272
              
              
              
              1,849
              
              
              
              1,757Borrowings
              
              
              2,308
              
              
              
              1,950
              
              
              
              1,158
              
              
              
              967Total
                  interest expense
              
              
              6,016
              
              
              
              5,222
              
              
              
              3,007
              
              
              
              2,724Net
                  Interest Income
              
              
              3,964
              
              
              
              3,972
              
              
              
              2,015
              
              
              
              2,026Provision
                  for loan losses
              
              
              96
              
              
              
              168
              
              
              
              48
              
              
              
              84Net
                  Interest Income After Provision for Loan Losses
              
              
              3,868
              
              
              
              3,804
              
              
              
              1,967
              
              
              
              1,942Other
                  IncomeNet
                  realized losses on sales of available-for-sale securities
              
              
              (22
              )
              
              
              0
              
              
              
              0
              
              
              
              0Service
                  fees and charges
              
              
              1,033
              
              
              
              962
              
              
              
              530
              
              
              
              487Net
                  gains on loan sales
              
              
              45
              
              
              
              55
              
              
              
              17
              
              
              
              33Increase
                  in cash value of life insurance
              
              
              144
              
              
              
              98
              
              
              
              83
              
              
              
              51Trust
                  Income
              
              
              128
              
              
              
              63
              
              
              
              57
              
              
              
              31Other
                  income
              
              
              70
              
              
              
              20
              
              
              
              43
              
              
              
              24Total
                  other income
              
              
              1,398
              
              
              
              1,198
              
              
              
              730
              
              
              
              626Other
                  ExpensesSalaries
                  and employee benefits
              
              
              2,093
              
              
              
              1,987
              
              
              
              1,070
              
              
              
              1,002Net
                  occupancy and equipment expenses
              
              
              584
              
              
              
              583
              
              
              
              298
              
              
              
              290Data
                  processing fees
              
              
              35
              
              
              
              55
              
              
              
              16
              
              
              
              25Advertising
              
              
              155
              
              
              
              130
              
              
              
              88
              
              
              
              75Legal
                  and professional fees
              
              
              203
              
              
              
              99
              
              
              
              108
              
              
              
              63Amortization
                  of mortgage servicing rights
              
              
              161
              
              
              
              199
              
              
              
              80
              
              
              
              100Other
                  expenses
              
              
              543
              
              
              
              639
              
              
              
              282
              
              
              
              287Total
                  other expenses
              
              
              3,774
              
              
              
              3,692
              
              
              
              1,942
              
              
              
              1,842Income
                  Before Income Tax
              
              
              1,492
              
              
              
              1,310
              
              
              
              755
              
              
              
              726Income
                  tax expense
              
              
              402
              
              
              
              404
              
              
              
              197
              
              
              
              223Net
                  Income
              
              $
              1,090
              
              
              
              906
              
              
              
              558
              
              
              
              503Basic
                  earnings per share
              
              $
              .67
              
              
              
              .57
              
              
              
              .34
              
              
              
              .31Diluted
                  earnings per share
              
              
              .66
              
              
              
              .55
              
              
              
              .34
              
              
              
              .31Dividends
                  per share
              
              
              .40
              
              
              
              .39
              
              
              
              .20
              
              
              
              .195
  See
        notes
        to consolidated condensed financial statements.
  4
   **RIVER
        VALLEY BANCORP**
 Consolidated
        Condensed Statement of Comprehensive Income
 (Unaudited)
 
  **Six
                      Months Ended****June
                      30,**
                
                
                **Three
                      Months Ended****June
                      30,****2007**
                
                
                **2006**
                
                
                **2007**
                
                
                **2006**(In
                    Thousands)Net
                    income
                
                $
                1,090
                
                
                
                906
                
                
                
                558
                
                
                
                503Other
                    comprehensive income, net of taxUnrealized
                    losses on securities available for saleUnrealized
                    holding losses arising during the period, net of tax benefit
                    of $185,
                    $155, $223, and $157
                
                
                (329
                )
                
                
                (371
                )
                
                
                (402
                )
                
                
                (283
                )Less:
                    Reclassification adjustment for losses included in net income,
                    net of tax
                    benefit of $9, $0, $0, and $0.
                
                
                (13
                )Comprehensive
                    income
                
                $
                774
                
                
                
                535
                
                
                
                156
                
                
                
                220
   
  See
        notes
        to consolidated condensed financial statements.
  5
  **RIVER
        VALLEY BANCORP**
 Consolidated
        Condensed Statement of Cash Flows
 (Unaudited)
  **Six
                    Months Ended****June
                    30,****2007**
              
              
              **2006**(In
                  Thousands)Operating
                  ActivitiesNet
                  income
              
              $
              1,090
              
              
              
              906Adjustments
                  to reconcile net income to net cash provided by operating
                  activitiesProvision
                  for loan losses
              
              
              96
              
              
              
              168Depreciation
                  and amortization
              
              
              294
              
              
              
              319Investment
                  securities gains
              
              
              22
              
              
              
              0Loans
                  originated for sale in the secondary market
              
              
              (3,226
              )
              
              
              (2,360
              )Proceeds
                  from sale of loans in the secondary market
              
              
              2,878
              
              
              
              2,197Gain
                  on sale of loans
              
              
              (45
              )
              
              
              (55
              )Amortization
                  of net loan origination cost
              
              
              108
              
              
              
              72Employee
                  Stock Ownership Plan compensation
              
              
              88
              
              
              
              10Net
                  change in:Interest
                  receivable
              
              
              219
              
              
              
              38Interest
                  payable
              
              
              (17
              )
              
              
              84Other
                  adjustments
              
              
              46
              
              
              
              (1,084
              )Net
                  cash provided by operating activities
              
              
              1,553
              
              
              
              295Investing
                  ActivitiesPurchases
                  of securities available for sale
              
              
              (5,951
              )
              
              
              (8,908
              )Proceeds
                  from sale of securities available for sale
              
              
              5,917
              
              
              
              0Proceeds
                  from maturities of securities available for sale
              
              
              7,016
              
              
              
              4,009Purchase
                  of Federal Home Loan Bank stock
              
              
              (150
              )
              
              
              0Net
                  change in loans
              
              
              (1,389
              )
              
              
              (3,748
              )Purchases
                  of premises and equipment
              
              
              (274
              )
              
              
              (158
              )Proceeds
                  from sale of foreclosed real estate
              
              
              0
              
              
              
              506Other
                  investing activities
              
              
              1
              
              
              
              0Net
                  cash provided by (used in) investing activities
              
              
              5,170
              
              
              
              (8,299
              )Financing
                  ActivitiesNet
                  change inNon-interest
                  bearing, interest-bearing demand and savings deposits
              
              
              (4,320
              )
              
              
              11,970Certificates
                  of deposit
              
              
              (1,541
              )
              
              
              774Short
                  term borrowings
              
              
              0
              
              
              
              (14,565
              )Proceeds
                  from borrowings
              
              
              28,000
              
              
              
              9,000Repayment
                  of borrowings
              
              
              (28,000
              )
              
              
              (8,000
              )Cash
                  dividends
              
              
              (647
              )
              
              
              (620
              )Excess
                  tax benefit on stock options exercised
              
              
              9
              
              
              
              43Stock
                  options exercised
              
              
              90
              
              
              
              162Purchase
                  of stock
              
              
              (183
              )
              
              
              0Advances
                  by borrowers for taxes and insurance
              
              
              95
              
              
              
              14Net
                  cash used in financing activities
              
              
              (6,497
              )
              
              
              (1,222
              )Net
                  Change in Cash and Cash Equivalents
              
              
              226
              
              
              
              (9,226
              )Cash
                  and Cash Equivalents, Beginning of Period
              
              
              11,808
              
              
              
              17,730Cash
                  and Cash Equivalents, End of Period
              
              $
              12,034
              
              
              
              8,504Additional
                  Cash Flows and Supplementary InformationInterest
                  paid
              
              $
              6,016
              
              
              
              5,138Income
                  tax paid
              
              
              220
              
              
              
              574
  See
        notes
        to consolidated condensed financial statements.
  6
  **RIVER
        VALLEY BANCORP**
 Notes
        to
        Unaudited Consolidated Condensed Financial Statements
  River
        Valley Bancorp (the “Corporation” or the “Company”) is a unitary savings and
        loan holding company whose activities are primarily limited to holding the
        stock
        of River Valley Financial Bank (“River Valley” or the “Bank”). The Bank conducts
        a general banking business in southeastern Indiana which consists of attracting
        deposits from the general public and applying those funds to the origination
        of
        loans for consumer, residential and commercial purposes. River Valley’s
        profitability is significantly dependent on net interest income, which is
        the
        difference between interest income generated from interest-earning assets
        (i.e.
        loans and investments) and the interest expense paid on interest-bearing
        liabilities (i.e. customer deposits and borrowed funds). Net interest income
        is
        affected by the relative amount of interest-earning assets and interest-bearing
        liabilities and the interest received or paid on these balances. The level
        of
        interest rates paid or received by the Bank can be significantly influenced
        by a
        number of competitive factors, such as governmental monetary policy, that
        are
        outside of management’s control.
   **NOTE
        1:  BASIS OF PRESENTATION**
  The
        accompanying unaudited consolidated condensed financial statements were prepared
        in accordance with instructions for Form 10-Q and, therefore, do not include
        information or footnotes necessary for a complete presentation of financial
        position, results of operations, and cash flows in conformity with generally
        accepted accounting principles. Accordingly, these financial statements should
        be read in conjunction with the consolidated financial statements and notes
        thereto of the Corporation included in the Annual Report on Form 10-K for
        the
        year ended December 31, 2006. However, in the opinion of management, all
        adjustments (consisting of only normal recurring accruals) which are necessary
        for a fair presentation of the financial statements have been included. The
        results of operations for the three and six-month periods ended June 30, 2007,
        are not necessarily indicative of the results which may be expected for the
        entire year. The consolidated condensed balance sheet of the Corporation
        as of
        December 31, 2006 has been derived from the audited consolidated balance
        sheet
        of the Corporation as of that date.
   **NOTE
        2:  PRINCIPLES OF CONSOLIDATION**
  The
        consolidated condensed financial statements include the accounts of the
        Corporation and its subsidiary, the Bank. The Bank currently owns four
        subsidiaries. Madison First Service Corporation, which was incorporated under
        the laws of the State of Indiana on July 3, 1973, currently holds land and
        cash
        but does not otherwise engage in significant business activities. RVFB
        Investments, Inc., RVFB Holdings, Inc., and RVFB Portfolio, LLC were established
        in Nevada the latter part of 2005. They hold and manage a significant portion
        of
        the Bank’s investment portfolio. All significant inter-company balances and
        transactions have been eliminated in the accompanying consolidated financial
        statements.
   **NOTE
        3:   EARNINGS PER SHARE**
  Earnings
        per share have been computed based upon the weighted average common shares
        outstanding. Unearned Employee Stock Ownership Plan shares have been excluded
        from the computation of average common shares outstanding.
  **Six
                    Months Ended****June
                    30, 2007**
              
              
              **Six
                    Months Ended****June
                    30, 2006****Income**
              
              
              **Weighted
                    Average Shares**
              
              
              **Per
                    Share Amount**
              
              
              **Income**
              
              
              **Weighted
                    Average Shares**
              
              
              **Per
                    Share Amount**(In
                  Thousands, Except Share Amounts)Basic
                  earnings per shareIncome
                  available to common shareholders
              
              $
              1,090
              
              
              
              1,618,166
              
              
              $
              .67
              
              
              
              906
              
              
              
              1,598,487
              
              
              $
              .57Effect
                  of dilutive RRP awards and stock options
              
              
              
              
              
              
              27,763
              
              
              
              
              
              
              
              
              
              
              
              44,201Diluted
                  earnings per shareIncome
                  available to common shareholders and assumed conversions
              
              $
              1,090
              
              
              
              1,645,929
              
              
              $
              .66
              
              
              
              906
              
              
              
              1,642,688
              
              
              $
              .55
  
  7
   
 **Three
                    Months Ended****June
                    30, 2007**
              
              
              **Three
                    Months Ended****June
                    30, 2006****Income**
              
              
              **Weighted
                    Average Shares**
              
              
              **Per
                    Share Amount**
              
              
              **Income**
              
              
              **Weighted
                    Average Shares**
              
              
              **Per
                    Share Amount**(In
                  Thousands, Except Share Amounts)Basic
                  earnings per shareIncome
                  available to common shareholders
              
              $
              558
              
              
              
              1,621,493
              
              
              $
              .34
              
              
              
              503
              
              
              
              1,606,336
              
              
              $
              .31Effect
                  of dilutive RRP awards and stock options
              
              
              
              
              
              
              26,012
              
              
              
              
              
              
              
              
              
              
              
              40,867Diluted
                  earnings per shareIncome
                  available to common shareholders and assumed conversions
              
              $
              558
              
              
              
              1,647,506
              
              
              $
              .34
              
              
              
              503
              
              
              
              1,647,203
              
              
              $
              .31
   Options
        to purchase 5,000 shares of common stock
        at $22.67 per share were outstanding at 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.
   **NOTE
        4:  CHANGE IN ACCOUNTING PRINCIPLE**
  The
        Company or one of its subsidiaries files income tax returns in the U.S. federal
        and Indiana jurisdictions.  With few exceptions, the Company is no
        longer subject to U.S. federal, state and local examinations by tax authorities
        for years before 2003.
  The
        Company adopted the provisions of the Financial Accounting Standards Board
        (FASB) Interpretation No. 48 (FIN 48), *Accounting for Uncertainty in Income
        Taxes - an interpretation of FASB Statement No. 109*, on January 1,
        2007.  FIN 48 prescribes a recognition threshold and measurement
        attribute for the financial statement recognition and measurement of a tax
        position taken or expected to be taken in a tax return.  FIN 48 also
        provides guidance on derecognition, classification, interest and penalties,
        accounting in interim periods, disclosure and transition.  As a result
        of the implementation of FIN 48, the Company did not identify any uncertain
        tax
        positions that it believes should be recognized in the financial
        statements.
   **NOTE
        5:  FUTURE
        ACCOUNTING PRONOUNCEMENTS**
  In
        September 2006, the FASB issued Statement No. 157, *Fair Value
        Measurements*.  This Statement defines fair value, establishes a
        framework for measuring fair value and expands disclosures about fair value
        measurements. This Statement establishes a fair value hierarchy about the
        assumptions used to measure fair value and clarifies assumptions about risk
        and
        the effect of a restriction on the sale or use of an asset. The standard
        is
        effective for fiscal years beginning after November 15, 2007. The Company
        does
        not expect that the adoption of SFAS No. 157 will have a material impact
        on
        financial condition or results of operations.
  In
        September 2006, the FASB Emerging Issues Task Force (EITF) finalized Issue
        No.
        06−5, *Accounting for Purchases of Life Insurance - Determining the Amount
        That Could Be Realized in Accordance with FASB Technical Bulletin No. 85−4*
        (Accounting for Purchases of Life Insurance).  This issue requires
        that a policyholder consider contractual terms of a life insurance policy
        in
        determining the amount that could be realized under the insurance
        contract.  It also requires that if the contract provides for a
        greater surrender value if all individual policies in a group are surrendered
        at
        the same time, that the surrender value be determined based on the assumption
        that policies will be surrendered on an individual basis.  Lastly, the
        issue discusses whether the cash surrender value should be discounted when
        the
        policyholder is contractually limited in its ability to surrender a
        policy.  This issue is effective for fiscal years beginning after
        December 15, 2006.  Adoption of EITF No. 06-5 has not had a
        material impact on the financial condition of results of
        operations.
  8
   On
        February 15, 2007, the FASB issued its Statement No. 159, *The Fair Value
        Option for Financial Assets and Financial Liabilities—Including an Amendment of
        FASB Statement No. 115*.  FAS 159 permits entities to elect to
        report most financial assets and liabilities at their fair value with changes
        in
        fair value included in net income.  The fair value option may be
        applied on an instrument-by-instrument or instrument class-by-class
        basis.  The option is not available for deposits withdrawable on
        demand, pension plan assets and obligations, leases, instruments classified
        as
        stockholders’ equity, investments in consolidated subsidiaries and variable
        interest entities and certain insurance policies. The new standard is effective
        at the beginning of the Company’s fiscal year beginning January 1, 2008, and
        early application may be elected in certain circumstances.  The
        Company expects to first apply the new standard at the beginning of its 2008
        fiscal year.  The Company does not expect that the adoption of SFAS
        No. 159 will have a material impact on financial condition or results of
        operations.
   **NOTE
        6:  RECLASSIFICATIONS**
  Certain
        reclassifications have been made to the 2006 consolidated condensed financial
        statements to conform to the June 30, 2007 presentation.
   **ITEM
                  2.  **MANAGEMENT'S
                  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
                  OPERATIONS****
  **FORWARD-LOOKING
        STATEMENTS**
  This
        Quarterly Report on Form 10-Q ("Form 10-Q") contains statements which constitute
        forward-looking statements within the meaning of the Private Securities
        Litigation Reform Act of 1995. These statements appear in a number of places
        in
        this Form 10-Q and include statements regarding the intent, belief, outlook,
        estimate or expectations of the Corporation (as defined in the notes to the
        consolidated condensed financial statements), its directors or its officers
        primarily with respect to future events and the future financial performance
        of
        the Corporation. Readers of this Form 10-Q are cautioned that any such those
        in
        the forward-looking statements as a result of various factors. The accompanying
        information contained in this Form 10-Q identifies important factors that
        could
        cause such differences. These factors include changes in interest rates;
        loss of
        deposits and loan demand to other financial institutions; substantial changes
        in
        financial markets; changes in real estate values and the real estate market;
        or
        regulatory changes.
   **CRITICAL
        ACCOUNTING POLICIES**
  The
        notes
        to the consolidated financial statements contain a summary of the Company’s
        significant accounting policies presented on pages 55 through 58 of the Annual
        Report to Shareholders for the year ended December 31, 2006. Certain of these
        policies are important to the portrayal of the Company’s financial condition,
        since they require management to make difficult, complex or subjective
        judgments, some of which may relate to matters that are inherently uncertain.
        Management believes that its critical accounting policies include determining
        the allowance for loan losses and the valuation of mortgage servicing
        rights.
   **ALLOWANCE
        FOR LOAN LOSSES**
  The
        allowance for loan losses is a significant estimate that can and does change
        based on management’s assumptions about specific borrowers and current general
        economic and business conditions, among other factors. Management reviews
        the
        adequacy of the allowance for loan losses on at least a quarterly basis.
        The
        evaluation by management includes consideration of past loss experience,
        changes
        in the composition of the loan portfolio, the current condition and amount
        of
        loans outstanding, identified problem loans and the probability of collecting
        all amounts due.
  The
        allowance for loan losses represents management’s estimate of probable losses
        inherent in the Corporation’s loan portfolios. In determining the appropriate
        amount of the allowance for loan losses, management makes numerous assumptions,
        estimates and assessments.
  9
   The
        Corporation’s strategy for credit risk management includes conservative,
        centralized credit policies, and uniform underwriting criteria for all loans
        as
        well as an overall credit limit for each customer significantly below legal
        lending limits. The strategy also emphasizes diversification on a geographic,
        industry and customer level, regular credit quality reviews and quarterly
        management reviews of large credit exposures and loans experiencing
        deterioration of credit quality.
  The
        Corporation’s allowance consists of three components: probable losses estimated
        from individual reviews of specific loans, probable losses estimated from
        historical loss rates, and probable losses resulting from economic or other
        deterioration above and beyond what is reflected in the first two components
        of
        the allowance.
  Larger
        commercial loans that exhibit probable or observed credit weaknesses are
        subject
        to individual review. Where appropriate, reserves are allocated to individual
        loans based on management’s estimate of the borrower’s ability to repay the loan
        given the availability of collateral, other sources of cash flow and legal
        options available to the Corporation. Included in the review of individual
        loans
        are those that are impaired as provided in SFAS No. 114, *Accounting by
        Creditors for Impairment of a Loan.* Any allowances for impaired loans are
        measured based on the present value of expected future cash flows discounted
        at
        the loan’s effective interest rate or fair value of the underlying collateral.
        The Corporation evaluates the collectibility of both principal and interest
        when
        assessing the need for a loss accrual. Historical loss rates are applied
        to
        other commercial loans not subject to specific reserve allocations.
  Homogenous
        loans, such as consumer installment and residential
        mortgage loans are not individually risk graded. Rather, standard credit
        scoring
        systems are used to assess credit risks. Reserves are established for each
        pool
        of loans based on the expected net charge-offs for one year. Loss rates are
        based on the average net charge-off history by loan category.
  Historical
        loss rates for commercial and consumer loans may be adjusted for significant
        factors that, in management’s judgment, reflect the impact of any current
        conditions on loss recognition. Factors which management considers in the
        analysis include the effects of the national and local economies, trends
        in the
        nature and volume of loans (delinquencies, charge-offs and non-accrual loans),
        changes in mix, credit score migration comparisons, asset quality trends,
        risk
        management and loan administration, changes in the internal lending policies
        and
        credit standards, collection practices and examination results from bank
        regulatory agencies and the Corporation’s internal loan review.
  An
        unallocated reserve is maintained to recognize the imprecision in estimating
        and
        measuring loss when evaluating reserves for individual loans or pools of
        loans.
        Allowances on individual loans and historical loss rates are reviewed quarterly
        and adjusted as necessary based on changing borrower and/or collateral
        conditions and actual collection and charge-off experience.
  The
        Corporation’s primary market area for lending is Clark, Floyd and Jefferson
        counties in southeastern Indiana and portions of northeastern Kentucky. When
        evaluating the adequacy of allowance, consideration is given to this regional
        geographic concentration and the closely associated effect changing economic
        conditions have on the Corporation’s customers.
  The
        Corporation has not substantively changed any aspect to its overall approach
        in
        the determination of the allowance for loan losses. There have been no material
        changes in assumptions or estimation techniques as compared to prior periods
        that impacted the determination of the current period
        allowance.
  10
   **VALUATION
        OF MORTGAGE SERVICING RIGHTS**
  The
        Company recognizes the rights to service mortgage loans as separate assets
        in
        the consolidated balance sheet. The total cost of loans when sold is allocated
        between loans and mortgage servicing rights based on the relative fair values
        of
        each. Mortgage servicing rights are subsequently carried at the lower of
        the
        initial carrying value, adjusted for amortization, or fair value. Mortgage
        servicing rights are evaluated for impairment based on the fair value of
        those
        rights. Factors included in the calculation of fair value of the mortgage
        servicing rights include, estimating the present value of future net cash
        flows,
        market loan prepayment speeds for similar loans, discount rates, servicing
        costs, and other economic factors. Servicing rights are amortized over the
        estimated period of net servicing revenue. It is likely that these economic
        factors will change over the life of the mortgage servicing rights, resulting
        in
        different valuations of the mortgage servicing rights. The differing valuations
        will affect the carrying value of the mortgage servicing rights on the
        consolidated balance sheet as well as the income recorded from loan servicing
        in
        the income statement. As of June 30, 2007 and December 31, 2006, mortgage
        servicing rights had carrying values of $391,000 and $525,000,
        respectively.
   **FINANCIAL
        CONDITION**
  At
        June
        30, 2007, the Corporation’s consolidated assets totaled $336.7 million, a
        decrease of $5.5 million, or 1.6% from December 31, 2006. The decrease in
        assets
        resulted primarily from a $7.4 million decline in the investment portfolio
        offset in part by a $2.5 million increase in loans, including loans held
        for
        sale.  Deposits also declined by $5.9 million due in part to a decline
        in local municipality deposits.
  The
        Corporation’s consolidated allowance for loan losses totaled $1.9 million and
        $2.2 million on June 30, 2007****and December 31, 2006,
        respectively, which represented .78% and .89% of total loans**.**
        Non-performing loans (defined as loans delinquent greater than 90 days and
        loans
        on non-accrual status) totaled $2,197,000 and $1,114,000
        at****June 30, 2007 and December 31, 2006 respectively. The
        increase in non-performing loans from December 31, 2006 to June 30, 2007
        was
        primarily due to an increase in non-performing residential loans which are
        well
        collateralized.  Although management believes that its allowance for
        loan losses at June 30, 2007, was adequate based upon the available facts
        and
        circumstances, there can be no assurance that additions to such allowance
        will
        not be necessary in future periods, which could negatively affect the
        Corporation’s results of operations.
  Deposits
        totaled $214.4 million at June 30, 2007, a decrease of $5.9 million, or 2.7%,
        compared to total deposits at December 31, 2006. This change was due primarily
        to decreases in the level of demand deposits held by local municipalities
        due to
        the late collection of tax revenues.
  Borrowings
        remained steady at $95.2 million from December 31,
        2006 to June 30, 2007. Of total borrowings,****$88.0 million
        represents FHLB Advances with average rates of 4.63% and 4.69% period to
        period.
  Shareholders’
        equity totaled $24.3 million at June 30, 2007, an increase of $130,000, or
        .54%
        from the $24.1 million reported at December 31, 2006. The increase in
        shareholders’ equity was primarily due to net income of $1.1 million offset by
        dividends of $649,000 and an increase in unrealized losses on securities
        available for sale of $316,000.
  The
        Bank
        is required to maintain minimum regulatory capital pursuant to federal
        regulations. At June 30, 2007, the Bank’s regulatory capital exceeded all
        applicable regulatory capital requirements.
   **COMPARISON
        OF OPERATING RESULTS FOR THE SIX MONTHS ENDED JUNE 30, 2007 AND
        2006**
  **GENERAL**
  The
        Corporation’s net income for the****six months ended June 30,
        2007, totaled $1,090,000, an increase of $184,000****or 20.4%
        from the $906,000 reported for the period ended June 30, 2006. The increase
        in
        income in the 2007 period was primarily attributable to increases in
        non-interest income.
  11
   **NET
        INTEREST INCOME**
  Total
        interest income for the six months ended June 30,****2007
        increased by $786,000, or 8.6%, to $10.0 million from the $9.2 million recorded
        for the same period in 2006.  The increase represents across the board
        increases, with increases in non-interest income exceeding the increases
        in
        non-interest expense.
  Total
        interest expense for the same period nearly matched the increase in interest
        income with an increase of $795,000, or 15.2%, from $5.2 million at June
        30,
        2006 to $6.0 million at June 30, 2007.  Of this increase, $436,000 was
        attributable to interest expense on deposits and $358,000 to interest expense
        on
        borrowings.  These increases translate to a 13.3% increase in interest
        expense on deposits, to $3.7 million for the six months ended June 30, 2007
        and
        18.4% increase on interest expense on borrowings, to $2.3 million at the
        same
        date.
  Net
        Interest Income remained constant at $4.0 million for both June 30, 2007
        and the
        same period of 2006, due primarily to the effective management of the interest
        margin.
   **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 $96,000 provision for losses on loans
        for the six months ended June 30, 2007, as compared to $168,000 for the same
        period in 2006. The 2007 provision amount was predicated on the increase
        in the
        balance of the loan portfolio, coupled with the decrease in the level of
        delinquent loans year-to-year. While management believes that the allowance for
        losses on loans is adequate at June 30, 2007, based upon the available facts
        and
        circumstances, there can be no assurance that the loan loss allowance will
        be
        adequate to cover losses on non-performing assets in the future.
   **OTHER
        INCOME**
  Other
        income increased by $200,000, during the six months ended June 30, 2007,
        as
        compared to the same period in 2006. This change was due to an increase in
        income from trust department operations of approximately $60,000, over the
        same
        period in 2006 due primarily to estate fees collected, increases in service
        charges and fees of $71,000 over the same period, and $37,000 in revenue
        from
        the Bank’s new wealth management division.
   **OTHER
        EXPENSE**
  Other
        expenses remained constant at $3.7 million, period to period, for June 30,
        2007
        and June 30, 2006. Period to period increases in personnel costs and
        professional expenses were offset by decreases in other managed expenses
        such as
        data processing expenses and a reduction in the amortization expense for
        mortgage servicing rights.
   **INCOME
        TAXES**
  The
        provision for income taxes totaled $402,000 for the six months ended June
        30,
        2007, in line with the $404,000 for the same period in 2006.  The
        effective tax rate for the six months ended June 30, 2007 was 26.9% as compared
        to 30.8% for the same period in 2006.  The decrease was primarily due
        to an increase in tax-exempt income from cash surrender value life insurance
        and
        municipal investments.
  12
   **COMPARISON
        OF OPERATING RESULTS FOR THE THREE MONTHS ENDED JUNE 30, 2007 AND
        2006**
  **GENERAL**
  The
        Corporation’s net income for the three months ended June 30, 2007, totaled
        $558,000, an increase of $55,000,****or 10.9% from the
        $503,000 of net income reported in the comparable 2006 period. The increase
        represents across the board increases, with increases in non-interest income
        exceeding increases in non-interest expense.
   **NET
        INTEREST INCOME**
  Total
        interest income for the three months ended June 30, 2007 amounted to $5.0
        million, a increase of $272,000, or 5.7%, from the comparable quarter in
        2006,
        reflecting the effects of an increase in average interest-earning assets
        outstanding. Interest income on loans totaled $4.3 million for the three
        months
        ended June 30, 2007, an increase of $277,000, or 6.9%, from the comparable
        quarter in 2006.  The average yield on loans at June 30, 2007 was
        7.05% compared to 6.79%, an increase of .26%, for the same date in
        2006.
  Interest
        expense on deposits experienced a modest modest increase of $92,000, or 5.2%,
        to
        a total of $1.9 million for the three months ended June 30, 2007 as compared
        to
        the same period in 2006.  Interest expense on borrowings totaled $1.2
        million for the three months ended June 30, 2007, an increase of $191,000,
        or
        19.8%, over the comparable quarter in 2006. The increase resulted from an
        increase in the average borrowings outstanding from year-to-year. The average
        cost of deposits at June 30, 2007 was 3.84% compared to 3.58% for the same
        date
        in 2006, a change of .26%, nearly exactly matching the changes in loan yields
        over the same period.
  As
        a
        result of the foregoing offsetting changes in interest income and interest
        expense, net interest income remained constant at $2.0 million for both three
        month periods.
   **PROVISION
        FOR LOSSES ON LOANS**
  A
        provision for losses on loans is charged to earnings to bring the total
        allowance for loan losses to a level considered appropriate by management
        based
        upon historical experience, the volume and type of lending conducted by the
        Bank, the status of past due principal and interest payments, general economic
        conditions, particularly as such conditions relate to the Bank’s market area,
        and other factors related to the collectibility of the Bank’s loan portfolio. As
        a result of such analysis, management recorded a $48,000 provision for losses
        on
        loan for the three months ended June 30, 2007 and $84,000 was recorded in
        the
        2006 period. While management believes that the allowance for losses on loans
        is
        adequate at June 30, 2007, based upon the available facts and circumstances,
        there can be no assurance that the loan loss allowance will be adequate to
        cover
        losses on non-performing assets in the future.
   **OTHER
        INCOME**
  Other
        income increased by $104,000, or 16.7%, for the three months ended June 30,
        2007, as compared to the same period in 2006, due to strong income in the
        trust
        and wealth management divisions and increased income from service charges
        and
        fees.
   **OTHER
        EXPENSE**
  Other
        expenses increased by $100,000, or 5.4%, during the three months ended June
        30,
        2007, compared to the same period in 2006. The increase was due to an increase
        in salaries/benefits due to the growth of the Bank, and professional fees
        incurred during the period.
  13
   **INCOME
        TAXES**
  The
        provision for income taxes totaled $197,000 for the three months ended June
        30,
        2007, a decrease of $26,000, or 11.8%, as compared to the same period in
        2006.   The effective tax rate for the quarter ended June 30,
        2007 was 26.1% as compared to 30.7% for the same period in 2006.  The
        decrease was primarily due to an increase in tax-exempt income from cash
        surrender value life insurance and municipal investments.
   **RECENT
        DEVELOPMENTS**
  June
        20,
        2007 the Company’s Board of Directors of River Valley Bancorp notified the
        Office of Thrift Supervision of their intent to establish a branch at the
        corner
        of Paoli Pike and Scottsville Road in Floyd Knobs, Indiana, to be opened
        mid-year 2008.
   **OTHER**
  The
        Securities and Exchange Commission maintains a Web site that contains reports,
        proxy information statements, and other information regarding registrants
        that
        file electronically with the Commission, including the Corporation. The address
        is http://www.sec.gov.
   **ITEM
        3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES
        ABOUT MARKET RISK**
  An
        important part of River Valley Financial Bank’s asset/liability management
        policy includes examining the interest rate sensitivity of the assets and
        liabilities and monitoring the expected effects of interest rate changes
        on its
        net portfolio value.
  Presented
        below, as of March 31, 2007 and 2006, is an analysis performed by the OTS
        of
        River Valley’s interest rate risk as measured by changes in River Valley’s net
        portfolio value (“NPV”) for instantaneous and sustained parallel shifts in the
        yield curve, in 100 basis point increments, up 300 basis points and down
        200
        basis points.
  **March
        31, 2007**
  **Net
                    Portfolio Value**
              
              
              
              **NPV
                    as % of PV of Assets****Changes
                    In Rates**
              
              **$
                    Amount**
              
              **$
                    Change**
              
              **%
                    Change**
              
              **NPV
                    Ratio**
              
              **Change**(Dollars
                  in thousands)+300
              bp
              
              $
              38,602
              $
              (1,859
              )
              
              -5
              %
              
              11.49
              %
              
              -16
              bp+200
              bp
              
              
              39,634
              
              (828
              )
              
              -2
              %
              
              11.66
              %
              
              +1
              bp+100
              bp
              
              
              40,597
              
              136
              
              
              0
              %
              
              11.80
              %
              
              -15
              bp0
              bp
              
              
              40,462
              
              
              
              
              
              
              
              11.65
              %-100
              bp
              
              
              39,371
              
              (1,090
              )
              
              -3
              %
              
              11.25
              %
              
              -39
              bp-200
              bp
              
              
              37,491
              
              (2,971
              )
              
              -7
              %
              
              10.66
              %
              
              -98
              bp
    **March
        31, 2006**
  **Net
                    Portfolio Value**
              
              
              
              
              **NPV
                    as % of PV of Assets****Changes
                    In Rates**
              
              **$
                    Amount**
              
              **$
                    Change**
              
              **%
                    Change**
              
              **NPV
                    Ratio**
              
              **Change**(Dollars
                  in thousands)+300
              bp
              
              $
              42,566
              $
              (277
              )
              
              -1
              %
              
              13.12
              %
              
              +28
              bp+200
              bp
              
              
              42,792
              
              (51
              )
              
              0
              %
              
              13.07
              %
              
              +22
              bp+100
              bp
              
              
              42,953
              
              110
              
              
              0
              %
              
              13.00
              %
              
              +15
              bp0
              bp
              
              
              42,843
              
              
              
              
              
              
              
              12.85
              %-100
              bp
              
              
              41,640
              
              (1,203
              )
              
              -3
              %
              
              12.41
              %
              
              -44
              bp-200
              bp
              
              
              39,474
              
              (3,369
              )
              
              -8
              %
              
              11.72
              %
              
              -113
              bp
    14
   Management
        believes at June 30, 2007 there have been no material
        changes in River Valley’s interest rate sensitive instruments which would cause
        a material change in the market risk exposures which affect the quantitative
        and
        qualitative risk disclosures as presented in Item 7., Management’s Discussion
        and Analysis of Financial Condition and Results of Operations and Item 7A,
        Quantitative and Qualitative Disclosures About Market Risk, of the Company’s
        Annual Report on Form 10-K for the period ended December 31**,**2006.
   **ITEM
        4.  CONTROLS AND
        PROCEDURES**
  A.
        Evaluation of disclosure controls and procedures . The Corporation’s
        chief executive officer and chief financial officer, after evaluating the
        effectiveness of the Corporation’s disclosure controls and procedures (as
        defined in Sections 13a-15(e) and 15d-15(e) of regulations promulgated under
        the
        Securities Exchange Act of 1934, as amended (the “Exchange Act”)), as of the end
        of the most recent fiscal quarter covered by this quarterly report (the
“Evaluation Date”), have concluded that as of the Evaluation Date, the
        Corporation’s disclosure controls and procedures were effective in ensuring that
        information required to be disclosed by the Corporation in reports it files
        or
        submits under the Exchange Act is recorded, processed, summarized and reported
        within the time periods specified in the Securities and Exchange Commission’s
        rules and forms and are designed to ensure that information required to be
        disclosed in those reports is accumulated and communicated to management
        as
        appropriate to allow timely decisions regarding required
        disclosure.
  B.
        Changes in internal control over financial reporting . There were no
        changes in the Corporation’s internal control over financial reporting
        identified in connection with the Corporation’s evaluation of controls that
        occurred during the Corporation’s last fiscal quarter that have materially
        affected, or are reasonably likely to materially affect, the Corporation’s
        internal control over financial reporting.
  
  **PART
        II.  OTHER
        INFORMATION**
  **ITEM
        1.  LEGAL
        PROCEEDINGS.**
 
 On
        April
        27, 2007, Cecilia Means filed a putative class action complaint in the Marion
        County Superior Court, Marion County, Indiana, on behalf of herself and others
        who paid funds into a pre-need trust (the “Pre-Need Trust”) for burial services
        and merchandise from Grandview Memorial Gardens, against the Bank, a former
        trustee of the Pre-Need Trust; three other banks that serve or have served
        as
        trustees of the Pre-Need Trust; and the current and former owners of Grandview
        Memorial Gardens.  The complaint alleges that the Bank and other
        trustees did not properly account for funds placed in the Pre-Need Trust
        and did
        not properly verify the legitimacy of disbursements from the Pre-Need Trust
        in
        violation of certain state statutes and in breach of the trustees’ alleged
        fiduciary duties.  The complaint is not specific as to the amount of
        damages sought but states that the plaintiff believes that the Pre-Need Trust
        has an estimated $4 million in unfunded liabilities. The Bank believes that
        it
        has meritorious defenses to the allegations, and the Bank intends to vigorously
        defend against the litigation.
 
  **ITEM
        1A.  RISK FACTORS.**
  There
        have been no material changes with respect to the risk factors disclosed
        in the
        Corporation’s Annual Report on Form 10-K for the year ended December 31,
        2006.
   **ITEM
        2.  UNREGISTERED SALES OF
        EQUITY SECURITIES AND USE OF PROCEEDS.**
  None
   **ITEM
        3.  DEFAULTS UPON SENIOR
        SECURITIES.**
  None.
  15
   **ITEM
        4.  SUBMISSION OF MATTERS TO VOTE
        OF SECURITY HOLDERS.**
  On
        April
        18, 2007, the Annual Meeting of the Corporation was held.  One
        director was elected to the following term, by the following
        votes:
 Charles
                  J. McKay (three year term)
              Votes
                  for:  1,402,468
              Votes
                  against:  15,978
  **ITEM
        5.  OTHER
        INFORMATION.**
  Effective
        June 19, 2007 the Board of Directors of River Valley Bancorp voted to amend
        its
        Code of By-Laws to establish an age limitation of 75 years of age for the
        election, re-election, appointment or reappointment of any director to the
        Board. A copy of the Code of By-Laws as amended is attached as Exhibit 3(1)
        to
        this Form 10-Q.
  **ITEM
        6.  EXHIBITS.**
  3(1)
              Amended
                  Code of By-Laws of River Valley Bancorp, As Amended July 19,
                  200731(1)
              CEO
                  Certification required by 17 C.F.R. Section
                  240.13a-14(a)31(2)
              CFO
                  Certification required by 17 C.F.R. Section
                  240.13a-14(a)32
              Certification
                  pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
                  906 of
                  the Sarbanes-Oxley Act of 2002
  16
  
 **SIGNATURES**
  Pursuant
        to the requirements of the Securities Exchange Act of 1934, as amended, the
        Issuer has duly caused this report to be signed on its behalf by the undersigned
        thereunto duly authorized.
 
 **RIVER
                  VALLEY BANCORP**Date:
                  August 14, 2007
              By:
              /s/
                  Matthew P. ForresterMatthew
                  P. ForresterPresident
                  and Chief Executive OfficerDate:
                  August 14, 2007
              By:
              /s/
                  Vickie L. GrimesVickie
                  L. GrimesVice
                  President of Finance
 
   17
  **EXHIBIT
        INDEX**
 
 **No.**
              
              **Description**
              
              **Location**3(1)
              
              Amended
                  Code of By-Laws of River Valley Bancorp, As Amended July 19,
                  2007
              
              Attached31(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
   
     18