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 1934
	For the quarterly period ended June 30, 2008
	OR
¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For 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		3
Item 1.	Financial Statements	3
	Consolidated Condensed Balance Sheets	3
	Consolidated Condensed Statements of Income	4
	Consolidated Condensed Statements of Comprehensive Income (Loss)	5
	Consolidated Condensed Statements of Cash Flows	6
	Notes to Unaudited Consolidated Condensed Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	13
Item 3.	Quantitative and Qualitative Disclosure about Market Risk	18
Item 4T.	Controls and Procedures	18
PART II. OTHER INFORMATION		19
Item 1.	Legal Proceedings	19
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	19
Item 3.	Defaults Upon Senior Securities	19
Item 4.	Submission of Matters to a Vote of Security Holders	19
Item 5.	Other Information	19
Item 6.	Exhibits	19
SIGNATURES		20
EXHIBIT 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)
Assets
Cash and due from banks	$	5,751		$	5,131
Interest-bearing demand deposits		2,778			3,006
Cash and cash equivalents		8,529			8,137
Investment securities available for sale		53,518			58,999
Loans held for sale		184			312
Loans		268,288			260,836
Allowance for loan losses		(2,129	)		(2,208	)
Net loans		266,159			258,628
Premises and equipment		7,913			7,631
Real estate, held for sale		122			184
Federal Home Loan Bank stock		4,800			4,750
Interest receivable		1,913			2,396
Cash value of life insurance		7,710			7,552
Other assets		1,848			1,472
Total assets	$	352,696		$	350,061
Liabilities
Deposits
Non-interest-bearing	$	22,106		$	18,619
Interest-bearing		199,063			201,063
Total deposits		221,169			219,682
Borrowings		102,380			102,217
Interest payable		841			724
Other liabilities		2,777			1,761
Total liabilities		327,167			324,384
Commitments and Contingencies
Shareholders’ Equity
Preferred stock, no par value
Authorized and unissued - 2,000,000 shares
Common stock, no par value
Authorized - 5,000,000 shares
Issued and outstanding – 1,639,881 and 1,634,931 shares		9,179			9,160
Retained earnings		16,752			16,237
Accumulated other comprehensive income(loss)		(402	)		280
Total shareholders’ equity		25,529			25,677
Total 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 Income
Loans receivable	$	8,667		$	8,444		$	4,278		$	4,268
Investment securities		1,235			1,288			596			629
Interest-earning deposits and other		227			248			94			125
Total interest income		10,129			9,980			4,968			5,022
Interest Expense
Deposits		3,155			3,708			1,457			1,849
Borrowings		2,430			2,308			1,202			1,158
Total interest expense		5,585			6,016			2,659			3,007
Net Interest Income		4,544			3,964			2,309			2,015
Provision for loan losses		400			96			200			48
Net Interest Income After Provision for Loan Losses		4,144			3,868			2,109			1,967
Other Income
Service fees and charges		1,006			1,033			529			530
Net realized gains (losses) on sale of available-for-sale securities		48			(22	)		17			0
Net gains on loan sales		172			45			71			17
Interchange fee income		137			96			73			58
Increase in cash value of life insurance		158			144			80			83
Trust operations income		96			128			41			57
(Gain)/loss on sale of premises and equipment		(37	)		(3	)		(31	)		(3	)
Other income		73			73			27			46
Total other income		1,653			1,494			807			788
Other Expenses
Salaries and employee benefits		2,293			2,093			1,187			1,070
Net occupancy and equipment expenses		648			584			318			298
Data processing fees		191			131			95			74
Advertising		170			155			93			88
Legal and professional fees		181			203			75			108
Amortization of mortgage servicing rights		98			161			45			80
Other expenses		607			543			330			282
Total other expenses		4,188			3,870			2,143			2,000
Income Before Income Tax		1,609			1,492			773			755
Income tax expense		405			402			184			197
Net Income	$	1,204		$	1,090		$	589		$	558
Basic earnings per share	$	.74		$	.67		$	.36		$	.34
Diluted earnings per share		.73			.66			.36			.34
Dividends 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		$	558
Other comprehensive income, net of tax
Unrealized gains (losses) on securities available for sale
Unrealized 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 Activities
Net income		$	1,204		$	1,090
Adjustments to reconcile net income to net cash provided by operating activities
Provision for loan losses			400			96
Depreciation and amortization			188			294
Investment securities (gains)losses			(48	)		22
Loans originated for sale in the secondary market			(8,000	)		(3,226	)
Proceeds from sale of loans in the secondary market			8,215			2,878
Gain on sale of loans			(172	)		(45	)
Amortization of net loan origination cost			66			108
Employee Stock Ownership Plan compensation			11			88
Net change in:	Interest receivable		483			219
	Interest payable		117			(17	)
Other adjustments			972			46
Net cash provided by operating activities			3,436			1,553
Investing Activities
Purchases of securities available for sale			(17,162	)		(5,951	)
Proceeds from maturities of securities available for sale			13,667			7,016
Proceeds from sale of securities available for sale			7,971			5,917
Purchase 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			0
Other investing activities			48			1
Net cash provided by (used in) investing activities			(4,051	)		5,170
Financing Activities
Net change in
Non-interest bearing, interest-bearing demand and savings deposits			(29,564	)		(4,320	)
Certificates of deposit			31,051			(1,541	)
Short term borrowings			163			0
Proceeds from borrowings			21,000			28,000
Repayment of borrowings			(21,000	)		(28,000	)
Cash dividends			(688	)		(647	)
Excess tax benefit on stock options exercised			0			9
Stock options exercised			8			90
Purchase of stock			0			(183	)
Advances by borrowers for taxes and insurance			37			95
Net cash provided by (used in) financing activities			1,007			(6,497	)
Net Change in Cash and Cash Equivalents			392			226
Cash and Cash Equivalents, Beginning of Period			8,137			11,808
Cash and Cash Equivalents, End of Period		$	8,529		$	12,034
Additional Cash Flows and Supplementary Information
Interest paid		$	5,468		$	6,016
Income 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, 2007
	Income		Weighted Average Shares		Per Share Amount		Income		Weighted Average Shares		Per Share Amount
	(In Thousands, Except Share Amounts)
Basic earnings per share
Income available to common shareholders	$	1,204		1,635,868	$	.74	$	1,090		1,618,166	$	.67
Effect of dilutive RRP awards and stock options				17,069						27,763
Diluted earnings per share
Income 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, 2007
	Income		Weighted Average Shares		Per Share Amount		Income		Weighted Average Shares		Per Share Amount
	(In Thousands, Except Share Amounts)
Basic earnings per share
Income available to common shareholders	$	589		1,636,747	$	.36	$	558		1,621,493	$	.34
Effect of dilutive RRP awards and stock options				15,411						26,013
Diluted earnings per share
Income 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 Using
	Fair 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, 2008
Beginning balance	$	888		$	1,729
Total realized and unrealized gains and losses
Amortization included in net income		-0-			-0-
Unrealized gain (losses) included in other comprehensive income		(283	)		(222	)
Purchases, issuances and settlements including paydowns		1,885			983
Transfers in and/or out of Level 3		-0-			-0-
Ending balance	$	2,490		$	2,490
Total 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, 2008
	Operating Income		Other Income (Expense)
Total gains and losses	$	-0-	$	48
Change in unrealized gains or losses relating to assets still held at the balance sheet date	$	-0-	$	-0-

	Three Months Ended June 30, 2008
	Operating Income		Other Income (Expense)
Total gains and losses	$	-0-	$	17
Change 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 Using
	Fair 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-	$	558
Mortgage 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.

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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.

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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.

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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.

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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.

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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.

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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.

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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 Against
Michael J. Hensley	2011	1,233,254	141,442
Fred W. Koehler	2010	1,233,177	141,518
Lillian 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

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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 BANCORP
Date: August 14, 2008	By:	/s/ Matthew P. Forrester
		Matthew P. Forrester
		President and Chief Executive Officer
Date: August 14, 2008	By:	/s/ Vickie L. Grimes
		Vickie L. Grimes
		Vice President of Finance

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EXHIBIT INDEX

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

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