AMB Financial (AMFC) 10QSB 2006 Q3 Quarterly report (small business)

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-QSB

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2006

OR

o TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _________ to _________

Commission File Number 000-23182

AMB Financial Corp.

(Exact name of registrant as specified in its charter)

Delaware	35-1905382
(State or other jurisdiction	I.R.S. Employer
of incorporation or	Identification
organization)	Number

8230 Hohman Avenue, Munster, Indiana	46321-1578
(Address of Principle executive offices)	(Zip Code)

Registrant telephone number, include are code: (219) 836-5870

Check whether the issuer (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 o

As of November 1, 2006 there were 1,686,169 shares of the Registrant’s common stock issued and 1,057,490 shares outstanding.

Transitional Small Business Disclosure Format (check one) : Yes o No x

AMB FINANCIAL CORP.

FORM 10-QSB

TABLE OF CONTENTS

		Page
Part I.	FINANCIAL INFORMATION
Item 1.	Financial Statements
	Consolidated Statements of Financial Condition at September 30, 2006 (Unaudited) and December 31, 2005	3
	Consolidated Statements of Earnings for the three months ended September 30, 2006 and 2005(unaudited)	4
	Consolidated Statement of Changes in Stockholders Equity, nine months ended September 30, 2006 (unaudited)	5
	Consolidated Statements of Cash Flow for the nine months ended September 30, 2006 and 2005(unaudited)	6
	Notes to Unaudited Consolidated Financial Statements	7-8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	9-20
Item 3.	Control and Procedures	20
Part II.	OTHER INFORMATION	20
	Signatures Section 13 and 15d	22
	Index of Exhibits	23
	Earnings Per Share Analysis (Exhibit 11)	24
	Rule 13a-14 Certifications (Exhibits 31.1 and 31.2)	25-26
	Section 906 Certification (Exhibits 32.1 and 32.2)	27-28

2

AMB FINANCIAL CORP.

AND SUBSIDIARIES

Consolidated Statements of Financial Condition

	September 30,			December 31,
	2006			2005
	unaudited
Assets
Cash and amounts due from depository institutions	$	3,926,825		$	4,662,586
Interest-bearing deposits		3,019,268			4,376,425
Total cash and cash equivalents		6,946,093			9,039,011
Investment securities, available for sale, at fair value		3,182,087			3,188,251
Trading securities		332,005			329,045
Mortgage backed securities, available for sale, at fair value		1,354,816			1,664,278
Loans receivable (net of allowance for loan losses:
$661,587 at September 30, 2006 and
$748,859 at December 31, 2005)		147,083,571			140,034,877
Investment in LTD Partnership		761,948			797,948
Real estate owned		1,275,620			584,206
Stock in Federal Home Loan Bank of Indianapolis		1,712,700			1,802,600
Accrued interest receivable		779,500			706,561
Office properties and equipment- net		2,439,144			2,391,489
Real estate held for development		1,665,218			1,352,611
Bank owned life insurance		3,583,911			3,491,606
Prepaid expenses and other assets		4,910,735			5,083,393
Total assets	$	176,027,348		$	170,465,876
Liabilities and Stockholders' Equity
Liabilities
Deposits	$	121,375,234		$	127,434,994
Borrowed money		31,387,259			21,011,756
Guaranteed preferred beneficial interest in the
Company's subordinated debentures		5,000,000			5,000,000
Notes Payable		342,566			480,476
Other liabilities		3,116,675			2,394,018
Total liabilities		161,221,734			156,321,244
Stockholders' Equity
Preferred stock, $.01 par value; authorized
100,000 shares; none outstanding		—			—
Common Stock, $.01 par value; authorized 1,900,000 shares;
1,686,169 shares issued and 1,051,265 shares outstanding
at September 30, 2006 and 984,648 shares outstanding at December 31, 2005		16,862			16,862
Additional paid- in capital		11,510,362			11,391,083
Retained earnings, substantially restricted		10,007,948			10,021,965
Accumulated other comprehensive loss, net of tax		(23,556	)		(18,870	)
Treasury stock, at cost (634,904 shares at September 30, 2006
and 701,521 shares at December 31, 2005)		(6,706,002	)		(7,266,408	)
Total stockholders' equity		14,805,614			14,144,632
Total liabilities and stockholders' equity	$	176,027,348		$	170,465,876

See accompanying notes to unaudited consolidated financial statements.

3

AMB FINANCIAL CORP.

AND SUBIDIARIES

Consolidated Statements of Earnings

Unaudited

	Three Months			Three Months			Nine Months			Nine Months
	Ended			Ended			Ended			Ended
	September 30,			September 30,			September 30,			September 30,
	2006			2005			2006			2005
Interest income
Loans	$	2,489,786		$	2,075,694		$	7,117,765		$	5,989,441
Mortgage-backed securities		16,930			19,509			53,959			70,135
Investment securities		40,106			33,211			119,136			83,349
Interest-bearing deposits		31,223			48,905			108,076			106,356
Dividends on FHLB stock		16,999			22,576			62,495			60,025
Total interest income		2,595,044			2,199,895			7,461,431			6,309,306
Interest expense
Deposits		1,008,625			750,425			2,922,475			1,967,685
Borrowings		499,237			357,870			1,296,000			1,001,272
Total interest expense		1,507,862			1,108,295			4,218,475			2,968,957
Net interest income		1,087,182			1,091,600			3,242,956			3,340,349
Provision for loan losses		59,019			47,418			213,441			235,082
Net interest income after
provision for loan losses		1,028,163			1,044,182			3,029,515			3,105,267
Non-interest income:
Loan fees and service charges		78,100			47,227			179,563			118,860
Deposit related fees		115,615			164,722			374,181			431,293
Other fee income		86,580			93,306			335,707			276,100
Gain (loss) on the sale of real estate owned		(3,152	)		—			32,174			—
Rental Income		34,831			34,610			104,162			103,793
Unrealized gain on trading securities		18,362			1,052			2,960			6,394
Loss on sale of investment
securities available for sale		—			(69	)		—			(69	)
Loss from investment in limited partnership		—			(16,500	)		(36,000	)		(58,500	)
Income from real estate held for development		—			—			50,598			—
Gain on sale of other assets		—			16,286			38,851			345,166
Increase in cash value of life insurance		31,123			30,383			92,305			90,574
Other income		4,873			5,329			16,750			23,606
Total non-interest income		366,332			376,346			1,191,251			1,337,217
Non-interest expense:
Staffing costs		563,665			588,834			1,744,391			1,718,504
Advertising		100,873			61,793			199,078			132,784
Occupancy and equipment expense		114,582			107,798			326,685			307,306
Data processing		114,089			191,535			360,920			485,697
Professional fees		64,439			51,713			251,223			158,872
Federal deposit insurance premiums		4,038			3,971			12,126			12,378
Other operating expenses		211,189			181,872			588,553			538,627
Total non-interest expense		1,172,875			1,187,516			3,482,976			3,354,168
Net income before income taxes		221,620			233,012			737,790			1,088,316
Provision for federal and state income taxes		40,833			58,942			152,956			331,909
Net income	$	180,787		$	174,070		$	584,834		$	756,407
Earnings per share- basic	$	0.18		$	0.18		$	0.59		$	0.79
Earnings per share- diluted	$	0.18		$	0.17		$	0.58		$	0.68

See accompanying notes to unaudited consolidated financial statements.

4

AMB FINANCIAL CORP

AND SUBIDIARIES

Consolidated Statements of Changes in Stockholders’ Equity

(Unaudited)

								Accumulated
			Additional					Other
	Common		Paid-in		Retained			Comprehensive			Treasury
	Stock		Capital		Earnings			Loss			Stock			Total
Balance at December 31, 2005	$	16,862		11,391,083		10,021,965			(18,870	)		(7,266,408	)		14,144,632
Comprehensive income:
Net income						584,834									584,834
Other comprehensive loss,
net of income taxes:
Unrealized holding loss during the period									(4,686	)					(4,686	)
Total comprehensive income						584,834			(4,686	)					580,148
Purchase of treasury stock (16,861 shares)												(247,182	)		(247,182	)
Exercise of 100,127 stock options,
and reissuance of treasury stock						(368,136	)					807,588			439,452
Tax benefit related to stock options exercised				78,066											78,066
Stock option compensation				41,213											41,213
Dividends declared on
common stock ($.23 per share)						(230,715	)								(230,715	)
Balance at September 30, 2006 $	$	16,862		11,510,362		10,007,948			(23,556	)		(6,706,002	)		14,805,614

See accompanying notes to unaudited consolidated financial statements.

5

AMB FINANCIAL CORP.

AND SUBSIDIARIES

Consolidated Statements of Cash Flows

	Nine Months Ended September 30,
	2006			2005
	(unaudited)
Cash flows from operating activities:
Net income	$	584,834			756,407
Adjustments to reconcile net income to net cash:
Depreciation		150,531			154,724
Amortization of premiums and accretion of discounts		13,145			15,888
Federal Home Loan Bank stock dividend		—			(37,400	)
Provision for loan losses		213,441			235,082
Increase in deferred compensation		53,701			53,901
ESOP compensation		—			104,250
Stock option compensation		41,213			—
Gain on sale of other assets		(38,851	)		(345,166	)
Unrealized gain on trading securities		(2,960	)		(6,394	)
Loss from limited partnership		36,000			58,500
Increase in cash surrender value of life insurance		(92,305	)		(90,574	)
Income from real estate held for development		(50,598	)		—
Gain on sale of real estate owned		(32,174	)		—
Increase in deferred income on loans		8,601			58,333
Increase in accrued interest receivable		(72,939	)		(32,462	)
Increase in accrued interest payable		33,268			19,695
Decrease in purchased accounts receivable		160,497			272,694
Change in current and deferred income taxes		(117,044	)		331,909
Other, net		921,490			(254,621	)
Net cash provided by operating activities		1,809,850			1,294,766
Cash flows from investing activities:
Proceeds from sale of Intrieve stock		38,851			360,166
Proceeds from maturity and early redemption of
investment securities		500,000			400,000
Purchase of investment securities		(506,021	)		(1,010,156	)
Proceeds from repayments of mortgage-backed securities		300,693			438,369
Proceeds from sale of mortgage-backed securities		—			2,316
Proceeds from redemption of Federal Home Loan Bank stock		89,900			—
Purchase of loans		(7,503,008	)		(8,125,978	)
Loan disbursements		(36,193,963	)		(31,046,861	)
Loan repayments		35,361,385			31,664,779
Proceeds from sale of real estate held for development		881,679			—
Purchase of real estate held for development		(1,143,688	)		—
Proceeds from sale of real estate owned		405,577			—
Property and equipment expenditures, net		(198,186	)		(127,435	)
Net cash provided for investing activities		(7,966,781	)		(7,444,800	)
Cash flows from financing activities:
Net (decrease) increase in deposits		(6,059,760	)		6,498,819
Proceeds from borrowed money		16,000,000			5,000,000
Repayment of borrowed money		(5,624,497	)		(3,119,712	)
Repayment of note payable		(137,910	)		(140,434	)
Decrease in advance payments by borrowers
for taxes and insurance		(75,375	)		(347,842	)
Proceeds from exercise of stock options		439,452			—
Purchase of treasury stock		(247,182	)		(166,187	)
Dividends paid on common stock		(230,715	)		(192,179	)
Net cash provided by financing activities		4,064,013			7,532,465
Net change in cash and cash equivalents		(2,092,918	)		1,382,431
Cash and cash equivalents at beginning of period		9,039,011			8,352,775
Cash and cash equivalents at end of period	$	6,946,093			9,735,206
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest	$	4,185,207			2,949,262
Income taxes		270,000			—
Non-cash investing activities:
Transfer of loans to real estate owned		1,064,850			639,140

See accompanying notes to unaudited consolidated financial statements.

6

AMB Financial Corp.

And Subsidiaries

Notes to Consolidated Financial Statements

1. Statement of Information Furnished

The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. Generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. In our opinion, all adjustments (all of which are normal and recurring in nature) necessary to present fairly the financial position as of September 30, 2006, the results of operations for the three and nine months ended September 30, 2006 and 2005 and cash flows for the nine months ended September 30, 2006 and 2005 have been included. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The attached consolidated statements are those of AMB Financial Corp. (the “Holding Company”) and its consolidated subsidiaries American Savings, FSB (the “Bank”), the Bank’s wholly owned subsidiary NIFCO, Inc., and the wholly owned subsidiary of NIFCO, Inc., Ridge Management, Inc. The results of operations for the three and nine month period ended September 30, 2006 is not necessarily indicative of the results that may be expected for the full year.

2. Earnings Per Share

Earnings per share for the three and nine month periods ended September 30, 2006 and 2005 were determined by dividing net income for the periods by the weighted average number of both basic and diluted shares of common stock and common stock equivalents outstanding (see Exhibit 11 attached). Stock options are regarded as common stock equivalents and are considered in diluted earnings per share calculations. Common stock equivalents are computed using the treasury stock method. ESOP shares not committed to be released to participants are not considered outstanding for purposes of computing earnings per share amounts.

3. Industry Segments

The Company operates principally in the banking industry through its subsidiary bank. As such, substantially all of the Company’s revenues, net income, identifiable assets and capital expenditures are related to banking operations.

Impact of New Accounting Standards

The following does not constitute a comprehensive summary of all material changes or developments affecting the manner in which the Company keeps its books and records and performs its financial accounting responsibilities. It is intended only as a summary of some of the recent pronouncements made by the Financial Accounting Standards Board (“FASB”), which are of particular interest to financial institutions.

7

Stock Based Compensation. In December 2004, the FASB issued Statement No. 123R, “Shared-Based Payment” (“SFAS No. 123R”). SFAS No. 123R is a revision of SFAS No. 123, “Accounting for Stock Based Compensation”, supersedes APB 25 and amends FASB Statement No. 95, “Statement of Cash Flows.” SFAS No. 123R establishes standards for the accounting for transactions in which an entity (i) exchanges its equity instruments for goods or services, or (ii) incurs liabilities in exchange for goods or services that are based on the fair value of the entity’s equity instruments or that may be settled by the issuance of the equity instruments. SFAS No. 123R eliminates the ability to account for stock-based compensation using APB 25 and requires that such transactions be recognized as compensation cost in the income statement based on their fair values on the date of the grant. SFAS No. 123R permits companies to adopt the recognition requirements using either a “modified prospective” method or a “modified retrospective” method. Under the “modified prospective” method, compensation cost is recognized in the financial statements beginning with the effective date, based on the requirements of SFAS No. 123R for all shared-based payments granted after that date, and based on the requirements of SFAS No. 123 for all unvested awards granted prior to the effective date of SFAS No. 123R. Under the “modified retrospective” method, the requirements are the same as under the “modified prospective” method, but also permits entities to restate financial statement of previous periods based on pro forma disclosures made in accordance with SFAS No. 123.

The Company adopted to SFAS No. 123R under the “modified prospective” method effective January 1, 2006. The Company estimates that the adoption of SFAS 123R will result in an additional expense in 2006 of approximately $55,000, net of tax, relating to the expensing of stock options. Future levels of compensation cost recognized related to share-based compensation awards may be impacted by new awards and/or modification, repurchases and cancellations of existing awards after the adoption of this standard.

Separately Recognized Servicing Assets and Servicing Liabilities. In March 2006, the Financial Accounting Standards Board (“FASB”) issued Statement No. 156, “Accounting for Servicing of Financial Assets” (“SFAS No. 156"), which requires all separately recognized servicing assets and liabilities to be initially measured at fair value, if practical. An entity can elect either to (1) subsequently measure servicing rights at fair value and report changes in fair value in earnings, or (2) continue the current practice of amortizing servicing rights in proportion to and over the expected period of servicing income or loss. The statement also permits entities, at the date of adoption, a one-time option to reclassify certain available-for-sale (“AFS”) securities to trading securities, without calling into question the classification of other AFS securities under Statement No. 115, “Accounting for Certain Investments in Debt and Equity Securities,” provided that the AFS securities are identified as offsetting the entity’s exposure to changes in fair value of servicing assets or liabilities that the entity has elected to subsequently measure at fair value. This statement is effective for fiscal years beginning after September 15, 2006 or at January 1, 2007 for calendar-year companies. The Company is currently evaluating the impact of the statement on its financial position and results of operations.

8

Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations

Cautionary Statement Regarding Forward-Looking Information

This report in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere, contains, and other periodic reports and press releases of the Company may contain, certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1973, as amended, and Section 21E of the Securities Exchanged Act of 1934, as amended. The Company intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and is including this statement for purposes of invoking these safe harbor provisions. Forward-looking statements, which are based on certain assumptions and describe future plans, strategies and expectations of the Company are generally identifiable by the words “believe, intend, anticipate, estimate, project, plan”, or similar expressions. The Company’s ability to predict results or the actual effect of future plans or strategies is inherently uncertain and actual results may differ from those predicted. Factors which could have a material adverse effect on the operations and future prospects of the Company and the subsidiaries include, but are not limited to changes in interest rates, general national and local economic conditions, legislative/regulatory changes, monetary and fiscal policies of the U.S. Government, including policies of the U.S. Treasury and the Federal Reserve Board, the quality or composition of the Company’s loan or investment portfolios, demand for loan products, deposit flows, cost and availability of borrowings, competition, demand for financial services in the Company’s market area, real estate values in the Company’s primary market area, the possible short-term dilutive effect of potential acquisitions, and tax and financial accounting principles, policies and guidelines. These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements.

Comparison of Financial Condition at September 30, 2006 and December 31, 2005

Total assets of the Company increased by $5.5 million to $176.0 million at September 30, 2006 from $170.5 million at December 31, 2005. The increase was primarily due to higher balances in net loans receivable which were funded in part by a decrease in cash and cash equivalents and an increase in borrowed money.

Cash and short-term investments totaled a combined $6.95 million at September 30, 2006, a decrease of $2.1 million, from the combined balances of $9.04 million at December 31, 2005. The decline in cash accounts during the period was used, in part, to fund the higher net loan receivable balances.

Investment securities, available for sale, decreased by $6,000 to $3.18 million at September 30, 2006. This portfolio consists primarily of U.S. government agency obligations. Unrealized losses in the available for sale investment portfolio amounted to $13,500 at September 30, 2006 compared to $12,600 at December 31, 2005

Trading account securities increased by $3,000 to $332,000 at September 30, 2006. The increase is attributable to an increase in unrealized appreciation in the portfolio. The trading accounting portfolio consists of holdings in small thrift and community bank stocks.

Mortgage-backed securities, available for sale, decreased by $309,000 to $1.35 million at September 30, 2006 due to amortization and prepayments. There were no new purchases of mortgage-backed securities over the most recent nine month period. Unrealized losses in the available for sale portfolio were $25,700 at September 30, 2006 compared to $18,800 at December 31, 2005. This portfolio consists of mostly fixed-rate pass-through securities.

9

Loans receivable increased $7.1 million, or 5.0%, to $147.1 million at September 30, 2006 from $140.0 million at December 31, 2005. The Bank originated loans of $36.2 million and purchased loans totaling $7.5 million, including $3.7 million in out of state adjustable rate single-family residential mortgage loans, $860,000 of adjustable rate single-family residential loans located locally, $770,000 in medical equipment loans, an out of state $1.0 million adjustable rate loan for the development of a 152 lot subdivision and a $500,000 local commercial participation loan during the nine months ended September 30, 2006, compared to $31.0 million of originations and $8.2 million of purchases during the prior year period. The originations in the current period included a $1.9 million adjustable rate land development loan to a local developer as well as a $915,000 multi-family loan in the local community. Offsetting originations and purchases were amortization and prepayments totaling $35.4 million and $31.7 million for the nine months ended September 30, 2006 and 2005, respectively.

The allowance for loan losses totaled $662,000, a decrease of $87,000 from the balance of $749,000 at December 31, 2005. The decrease was primarily due to the charge-off of a $286,000 commercial loan account during the third quarter of 2006. During the current nine month period, the Bank recorded $213,000 of loan loss provisions offset by net charge-offs of $300,000. The Bank’s allowance for loan losses to total loans outstanding was .45% at September 30, 2006 and .53% at December 31, 2005. Non-performing loans increased $132,000 to $1.61 million, or 1.09% of total loans receivable at September 30, 2006 compared to $1.47 million, or 1.05% of total loans receivable at December 31, 2005. The ratio of allowance for loan losses to non-performing loans was 41.19% at September 30, 2006 compared to 50.80% at December 31, 2005.

At September 30, 2006, the Bank had $1.3 million of other real estate owned, an increase of $691,000 from the balance at December 31, 2005. Included in other real estate owned at September 30, 2006, was a $408,000 single-family residence located in St. John, Indiana and a $403,000 commercial office building located in Highland, Indiana. Several of these properties are currently being rented while the Bank continues to actively pursue their ultimate disposition.

The Company has acquired, in conjunction with an agreement with a local builder, nine vacant lots on which to construct single-family residences. During the current nine month period, the investment in real estate held for development increased by $313,000 to $1.67 million from $1.35 million at December 31, 2005 as additional expenditures of $1.14 million were offset by proceeds from the sale of two properties totaling $882,000. One additional property is complete and available for sale, while two other properties are in the late stages of completion and should be available for sale during the fourth quarter. The properties being built on are located within the local community of the Bank.

Deposits decreased $6.0 million, to $121.4 million at September 30, 2006 from $127.4 million at December 31, 2005. The net decrease in deposits is primarily attributed to increased competition for deposits from special rate promotions and management’s view that aggressive pricing for these deposits was not justified and could be replaced with short-term borrowings. Certificates of deposit comprise the largest portion of the Bank’s total deposits, totaling $79.2 million or 65.3% of the Bank’s total deposits at September 30, 2006, compared to $82.1 million or 64.4% of total deposits at December 31, 2005. Passbook accounts totaled $18.1 million or 14.9% of the Bank’s total deposits at September 30, 2006 compared to $19.5 million or 15.3% of total deposits at December 31, 2005. Demand deposits and NOW accounts totaled $13.3 million or 11.0% of the Bank’s total deposits at September 30, 2006, compared to $12.9 million or 10.1% of total deposits at December 31, 2005. Money market accounts totaled $10.8 million or 8.8% of the Bank’s total deposits at September 30, 2006 compared to $13.0 million or 10.2% of total deposits at December 31, 2005.

10

Borrowed money, which consisted of Federal Home Loan Bank of Indianapolis (“FHLB”) advances, increased by $10.4 million at September 30, 2006 to $31.4 million. There is currently $10.0 million of FHLB advances maturing over the next twelve month period at a weighted average rate of 4.84%. As of September 30, 2006, the weighted average term to maturity of the FHLB advances was 2.5 years compared to 3.0 years at December 31, 2005.

Total stockholders’ equity of the Company increased by $661,000 to $14.8 million, or 8.41% of total assets, at September 30, 2006, compared to $14.1 million, or 8.30% of total assets at December 31, 2005. The increase was due to net income of $585,000, the exercise of stock options and the related tax benefits totaling $518,000, and activities associated with the stock option plans of $41,000 offset by the Company’s repurchase of common stock in the amount of $247,000, the payment of $231,000 in cash dividends and an increase in unrealized holding losses on securities available for sale, net of tax, in the amount of $5,000. The Company may, from time to time, based on market conditions, continue modest repurchases of stock as previously announced.

Comparison of the Results of Operations for the Three Months Ended September 30, 2006 and 2005

General -

Net income for the three months ended September 30, 2006 was $181,000, or $.18 per diluted share, compared to net income of $174,000, or $.17 per diluted share for the three months ended September 30, 2005. The 2006 third quarter performance resulted in an annualized return on average stockholders’ equity of 4.98%, identical to the third quarter of 2005 and an annualized return on average assets of .42% for the third quarter of 2006 as compared to .41% for the third quarter of 2005.

Net Interest Income -

Net interest income was $1.087 million for the current quarter, compared to $1.091 million for the quarter ended September 30, 2005, a decrease of $4,000. The Company’s average interest-earning assets increased to $156.7 million for the three months ended September 30, 2006 compared to $147.7 million for the three months ended September 30, 2005. On a year-over-year basis, the Company’s net interest margin decreased 18 basis points to 2.78% for the current quarter, compared to 2.96% for the prior year’s quarter due to a combination of rising short-term interest rates, a flattening yield curve environment and continued higher deposit pricing driven by increased pricing competition and a shift of funds out of lower cost core deposits into certificates of deposit.

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The average yield on interest-earnings assets increased 66 basis points to 6.62% for the three months ended September 30, 2006 from 5.96% for the three months ended September 30, 2005. This increase was due primarily to an increase in the yield on loans receivable. Interest income on loans receivable increased $414,000 due in part to a $13.3 million increase in the average balance of loans receivable to $147.7 million at September 30, 2006 compared to the prior year period. The yield on loans receivable increased 56 basis points to 6.74% at September 30, 2006 compared to 6.18% in the 2005 period, primarily as a result of new fixed rate originations at rates higher than the loan portfolio and increased collections on nonaccrual loans, as well as increases in the yield on both equity lines of credit and other adjustable rate loans tied to the prime rate or other short-term indexes. The yield on all other interest-earning assets, with the exception of Federal Home Loan Bank of Indianapolis stock, also benefited from rising rates, but their impact was negligible due to the relatively small average balance in each category.

The average cost of interest-bearing liabilities increased 83 basis points to 3.86% for the three months ended September 30, 2006 from 3.03% for the three months ended September 30, 2005. This increase was primarily due to an increase in the cost of deposits as well as an increase in the cost of the Company’s trust preferred securities. The cost of deposits increased 80 basis points to 3.32% for the third quarter of 2006 from 2.52% for the third quarter of 2005 mostly due to higher rates on certificates of deposit driven by higher short-term interest rates and competitive deposit pricing. The cost of the Company’s underlying subordinated debt of the trust preferred securities increased by 208 basis points due to the upward repricing of this floating rate borrowing.

Provision for Loan Losses -

Based on management’s assessment of the adequacy of the loan loss reserve, the Company recorded a provision for loan losses of $59,000 during the three month period ended September 30, 2006 as compared to a $47,000 provision in the prior year period. During the current year’s quarter, the Company charged-off a $286,000 commercial loan to a professional services firm which was discussed during the second quarter of this year. Net charge-offs in the prior year’s quarter were $19,000, including $10,000 relating to automobile loans and $9,000 in credit card loans. At September 30, 2006, the Bank’s allowance for loan losses was $662,000, which equaled .45% of total net loans receivable, compared to $749,000, or .53% of total net loans receivable at December 31, 2005. At September 30, 2006, the Company was aware of no regulatory directives or suggestions that the Company make additional provisions for losses on loans.

Non-Interest Income -

Non-interest income decreased to $367,000 in the current quarter, compared to $376,000 reported in last year’s third quarter. The decrease in non-interest income was attributable, in part, to a $16,000 gain reported in the prior year’s quarter from the sale of stock in the Bank’s data processing provider as well as a decline of $37,000 in overdraft fee income from the NOW account overdraft protection program and, to a lesser extent, to lower ATM surcharge fees of $12,000. The decline in overdraft activity was due, in part, to a recent amendment in regulatory disclosures regarding overdrawn ATM transactions which resulted in lower volumes and a decrease in the number of such transactions. The Company also reported a decrease of $7,000 in service fee income related to accounts receivable serviced for others as $1.0 million in such receivables paid off during the second quarter of 2006. Offsetting these decreases was an increase in unrealized gains of $17,000 from trading account securities as the market price of the Company’s portfolio of small thrift and community bank stock increased due to the general upward bias in financial institution stock prices during the quarter. Loan related fees and charges also increased during the quarter compared to the 2005 quarter by $31,000 due to an increase in mortgage release fees related to a loan on an out of state condominium conversion which paid off during the third quarter of 2006.

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In addition, the Company reported no loss in the current quarter, compared to a loss of $16,000 in the prior year’s quarter, related to an investment in a low-income housing joint venture. The improved performance of this venture in the current year compared to the prior year is due to higher revenue due to increased occupancy rates, lower operating expenses and decreased interest charges. As a result of this investment, the Company recorded an offsetting $35,000 in federal income tax credits during both periods which resulted in the reduction of the Company’s effective tax rate.

Non-Interest Expense -

Non-interest expense increased by $14,000 to $1.173 million in the current quarter, compared to $1.187 million reported in last year’s third quarter. The increase reflected decreased data processing costs of $77,000 due, in part, to increased efficiencies which were undertaken in 2005 as well as a $29,000 deconversion charge incurred in 2005 to convert all ATM and debit card operations from a third-party vendor to the Bank’s data processing provider. In addition, staffing costs declined by $26,000, primarily due to a decline in ESOP related expenses. Offsetting these declines was an increase in advertising costs of $39,000 as the Company continues to promote heavily through monthly newspaper advertisements, their current loan and deposit products as well as the Bank’s image in the local community. Additionally increases in professional fees of $12,000, net real estate owned expenses of $22,000 and meetings, seminar and convention expenses of $11,000 occurred.

Income Taxes -

For the three months ended September 30, 2006, income tax expense totaled $41,000, or an effective tax rate of 18.4% compared to $59,000, or an effective tax rate of 25.3% for the three months ended September 30, 2005. Both periods were positively impacted by the recognition of approximately $35,000 in low-income housing tax credits which have a greater impact on the effective rate in a lower earnings period compared to a higher earnings period.

Comparison of the Results of Operations for the Nine months Ended September 30, 2006 and 2005

General -

Net income for the nine months ended September 30, 2006 was $585,000, or $.58 per diluted share, compared to net income of $756,000, or $.74 per diluted share for the nine months ended September 30, 2005. The decrease in earnings is primarily due to the aforementioned gain on the sale of the Bank’s stock investment in its data processing provider reported in the prior year, lower net interest income and increased non-interest expense offset by a lower loan loss provision and decreased income tax expense.

Net Interest Income -

Net interest income was $3.24 million for the nine months ended September 30,2006, compared to $3.34 million for the nine months ended September 30, 2005, a decrease of $98,000. The decrease was due to a reduction in the Company’s net interest margin and net interest rate spread which was 2.77% and 2.76% for the nine months ended September 30, 2006 compared to 3.10% and 3.07% for the nine months ended September 30, 2005.

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The average yield on interest-earning assets increased 53 basis points to 6.38% for the nine months ended September 30, 2006 from 5.85% for the nine months ended September 30, 2005. As was the case with the three month comparison, the increase was due primarily to an increase in the yield on loans receivable and, to a lesser extent, interest-bearing deposits. The yield on loans receivable increased to 6.50% for the nine months ended September 30, 2006 from 6.06% for the prior year nine month period primarily as a result of new fixed rate originations at rates higher than the loan portfolio and also to increases in the yield on both equity lines of credit and other adjustable rate loans tied to the prime rate or other short-term index. The yield on interest-bearing deposits increased to 4.47% for the nine months ended September 30, 2006 from 2.92% for the nine months ended September 30, 2005 as a result of continued rising short-term interest rates.

The average cost of interest-bearing liabilities increased 84 basis points to 3.62% for the nine months ended September 30, 2006 from 2.78% for the nine months ended September 30, 2005. This increase was primarily due to an increase in the cost of deposits as well as an increase in the cost of the Company’s trust preferred securities. The cost of deposits increased 87 basis points to 3.12% for the nine months of 2006 from 2.25% for the nine months of 2005 mostly due to higher rates on certificates of deposit and more aggressive deposit pricing as the Company attempts to compete for deposit growth in its market. The cost of the Company’s underlying subordinated debt of the trust preferred securities increased by 203 basis points to 8.99% at September 30, 2006 as the interest rate to which the debt is pegged increased dramatically between the periods.

Provision for Loan Losses -

Based on management’s assessment of the adequacy of the loan loss reserve, the Company recorded a provision for loan losses of $213,000 during the nine month period ended September 30, 2006 as compared to a $253,000 provision in the prior year period. Net loan charge-offs were $300,000 and $232,000 for the nine months ended September 30, 2006 and 2005, respectively. The current year provision includes the establishment of $108,000 of additional loan loss reserves against the commercial loan charged-off during the most recent quarter, discussed above. The provision in the prior year includes the establishment, during the first quarter of 2005 of $105,000 of additional reserves against three non-accrual loans including two related purchased commercial business loans secured by medical equipment and one unsecured loan to an unrelated borrower. All three of these loans were charged-off in April, 2005.

Non-Interest Income -

Non-interest income decreased by $145,000, to $1.19 million for the nine months ended September 30, 2006, compared to $1.34 million for the nine months ended September 30, 2005. The decrease was due to the $306,000 reduction in gain realized on the sale of stock in the Bank’s data processing provider, previously discussed, offset by an increase of $64,000 in fees and service charges, primarily in mortgage loan release fees discussed above and in accounts receivable service fees. In addition, the Company reported $51,000 in income from real estate operations which began in 2006 and a $32,000 gain on the sale of real estate owned properties.

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In addition, the Company also recorded a loss of $36,000 during the nine months ended September 30, 2006 as compared to a loss of $58,000 recorded in the year ago period, related to an investment in a low-income housing joint venture. The improved performance of this venture in the current year compared to the prior year resulted from higher revenue due to increased occupancy rates, lower operating expenses and decreased interest charges. As a result of this investment, the Company recorded an offsetting $105,000 in federal income tax credits during both periods which resulted in the reduction of the Company’s effective income tax rate.

Non-Interest Expense -

Non-interest expense increased by $129,000 to $3.48 million at September 30, 2006 compared to $3.35 million for the nine months ended September 30, 2005. This increase resulted primarily from increased staffing costs of $25,000 due to normal salary increases and higher pension expense, offset by reduced ESOP expense, increased advertising costs of $66,000, increased real estate owned expenses of $23,000 due to the volume of real estate owned properties and increased professional fees of $92,000. The increase in professional fees relates to increases in legal, both internal and external auditing, brokerage, consulting on various topics and an extensive loan file review that occurred during the first quarter of 2006. Offsetting these increases was a decline of $124,000 in data processing costs, primarily in debit card and ATM processing fees, due in part to increased efficiencies which were undertaken during 2005.

Income Taxes -

For the nine months ended September 30, 2006, income tax expense totaled $153,000, or an effective tax rate of 20.7% compared to $332,000, or an effective tax rate of 30.5% for the nine months ended September 30, 2005. Both periods were positively impacted by the recognition of approximately $105,000 in low-income housing tax credits which have a greater impact on the effective tax rate in a lower earnings period compared to a higher earnings period.

Regulation and Supervision

Capital Standards

As a federally chartered savings bank, the Bank’s deposits are insured up to the applicable limits by the Federal Deposits Insurance Corporation (“FDIC”). The Bank is a member of the Federal Home Loan Bank (“FHLB”) of Indianapolis, which is one of the twelve regional banks for federally insured savings institutions comprising the FHLB system. The Bank is regulated by the Office of Thrift Supervision (“OTS”) and the FDIC. The Bank is further regulated by the Board of Governors of the Federal Reserve System as to reserves required to be maintained against deposits and certain other matters. Such regulation and supervision establishes a comprehensive framework of activities in which an institution can engage and is intended primarily for the protection of the insurance fund and depositors. The regulatory structure also gives the regulatory authorities extensive discretion in connection with their supervisory and enforcement activities. Any change in such regulation, whether by the OTS, the FDIC or Congress could have a material impact on the Company and its operations.

Savings associations must meet three capital requirements: core and tangible capital to total assets ratios as well as a regulatory capital to total risk-weighted assets ratio.

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Core Capital Requirement

The core capital requirement, or the required “leverage limit”, currently requires a savings institution to maintain core capital of not less than 3% of adjusted total assets. For the Bank, core capital generally includes common stockholders’ equity (including retained earnings), and minority interests in the equity accounts of fully consolidated subsidiaries, less intangibles other than certain servicing rights. Investments in and advances to subsidiaries engaged in activities not permissible for national banks are also required to be deducted in computing core total capital.

Tangible Capital Requirement

Under OTS regulation, savings institutions are required to meet a tangible capital requirement of 1.5% of adjusted total assets. Tangible capital is defined as core capital less any intangible assets, plus purchased mortgage servicing rights in an amount includable in core capital.

Risk-Based Capital Requirement

The risk-based capital requirement provides that savings institutions maintain total capital equal to not less than 8% of total risk-weighted assets. For purposes of the risk-based capital computation, total capital is defined as core capital, as defined above, plus supplementary capital, primarily general loan loss reserves (limited to a maximum of 1.25% of total risk-weighted assets.) Supplementary capital included in total capital cannot exceed 100% of core capital.

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Capital Requirement

At September 30, 2006, the Bank was in compliance with all of its capital requirements as follows:

	September 30, 2006					December 31, 2005
			Percent of					Percent of
	Amount		Assets			Amount		Assets
Stockholders' equity of the Bank	$	15,614,570		9.08	%	$	15,408,964		9.25	%
Tangible capital		15,638,126		9.10	%	$	15,427,834		9.26	%
Tangible capital requirement		2,578,000		1.50			2,498,000		1.50
Exess	$	13,060,126		7.60	%	$	12,929,834		7.76	%
Core capital		15,638,126		9.10	%	$	15,427,834		9.26	%
Core capital requirement		5,157,000		3.00			4,996,000		3.00
Excess	$	10,481,126		6.10	%	$	10,431,834		6.26	%
Core and supplementary capital		16,299,713		15.41	%	$	16,176,694		15.85	%
Risk-based capital requirement		8,462,000		8.00			8,165,000		8.00
Exess	$	7,837,713		7.41	%	$	8,011,694		7.85	%
Total Bank assets	$	171,873,000				$	166,531,000
Adjusted total Bank assets		171,896,000				$	166,549,000
Total risk-weighted assets		105,773,000				$	102,064,000

A reconciliation of consolidated stockholders' equity of the Bank for financial reporting purposes to capital available to the Bank to meet regulatory capital requirements is as follows:

	September 30, 2006		December 31, 2005
Stockholders' equity of the Bank	$	15,614,570	$	15,408,964
Regulatory capital adjustment
for available for sale securities		23,556		18,870
Tangible and core capital	$	15,638,126	$	15,427,834
General loan loss reserves		661,587		748,860
Core and supplementary capital	$	16,299,713	$	16,176,694

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Non-Performing Assets

The following table sets forth the amounts and categories of non-performing assets in the Company’s portfolio. Loans are reviewed monthly and any loan whose collectivity is doubtful is placed on non-accrual status. Loans are placed on non-accrual status when principal and interest is 90 days or more past due, unless, in the judgment of management, the loan is well collateralized and in the process of collection. Interest accrued and unpaid at the time a loan is placed on non-accrual status is charged against interest income. Subsequent payments are either applied to the outstanding principal balance or recorded as interest income, depending on the assessment of the ultimate collectivity of the loan. Restructured loans include troubled debt restructuring (which involved forgiving a portion of interest principal on any loans or making loans at a rate materially less than the market).

	September 30, 2006			December 31, 2005
	(Dollars in thousands)
Non- accruing loans:
One to four family	$	921		$	527
Multi- family		—			—
Non- residential		338			707
Land		—			144
Construction		264			—
Consumer		83			96
Total		1,606			1,474
Foreclosed assets:
One to four family		872			584
Multi-family		—			—
Non-residential		404			—
Construction		—			—
Consumer		—			—
Total		1,276			584
Other Assets:
Escrow advances on non performing loans		—			48
Total		—			48
Total non- performing assets	$	2,882		$	2,106
Total as a percentage of total assets		1.64	%		1.24	%

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Non-performing assets increased during the past nine months, totaling $2.88 million or 1.64% of total assets at September 30, 2006 compared to $2.11 million or 1.24% of total assets at December 31, 2005. The increase in the nine month period relates to a $264,000 single family residence construction loan located in Merrillville as well as several delinquent single family residential loans.

For the nine month period ended September 30, 2006, gross interest, which would have been recorded, had the non-accruing loans been current in accordance with their original terms amounted to $52,000.

At September 30, 2006, the Bank had $1.3 million of other real estate owned, an increase of $692,000 from the balance at December 31, 2005. Included in other real estate owned at September 30, 2006, was a $408,000 single-family residence located in St. John, Indiana and a $403,000 commercial retail property located in Highland, Indiana. Several of these properties are currently being rented while the Bank continues to actively pursue their ultimate disposition.

In addition to the non-performing assets set forth in the table above as of September 30, 2006, there were no loans with respect to which known information about the possible credit problems of the borrowers or the cash flows of the security properties have caused management to have concerns as to the ability of the borrowers to comply with present loan repayment terms and which may result in the future inclusion of such items in the non-performing asset categories.

Management has considered the Company’s non-performing and “of concern” assets in establishing its allowance for loan losses.

Liquidity and Capital Resources

The Company’s principal sources of funds are cash dividends paid by the Bank and liquidity generated by investments or borrowings. The Company’s principal uses of funds are cash dividends to shareholders as well as real estate held for development acquisitions and stock repurchases.

The Bank’s principal sources of funds are deposits, advances from the FHLB of Indianapolis, principal repayments on loans and mortgage-backed securities, proceeds from the sale or maturity of investment securities and funds provided by operations. While scheduled loan and mortgage-backed securities amortization and maturing investment securities are a relatively predictable source of funds, deposit flows and loan and mortgage-backed securities prepayments are greatly influenced by economic conditions, the general level of interest rates and competition. The Bank utilizes particular sources of funds based on comparative costs and availability. The Bank generally manages the pricing of its deposits to maintain a steady deposit balance, but has from time to time decided to increase rates on deposits, and when necessary, to supplement deposits with longer term and/or less expensive alternative sources of funds in order to achieve a desired funding level.

Recent Developments

On October 25, 2006 the Company declared a cash dividend of $.08 per share, payable on November 25, 2006 to shareholders of record on November 10, 2006.

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Item 3.Control and Procedures

The Company has adopted disclosure controls and procedures designed to facilitate the Company’s financial reporting. The disclosure controls currently consist of communications between the Chief Executive Officer, the Chief Financial Officer and each department head to identify any new transactions, events, trends or contingencies which may be material to the Company’s operations. In addition, the Company’s Chief Executive Officer, Chief Financial Officer, Audit Committee and independent accountants meet on a quarterly basis and discuss the Company’s material accounting policies. The Company’s Chief Executive Officer and Chief Financial Officer has evaluated the effectiveness of these interim disclosure controls as of the end of the period covered by this report and found them to be adequate.

The Company maintains internal control over financial reporting. There have not been any significant changes in such internal control over financial reporting in the last quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS

From time to time, the Bank is a party to legal proceedings in the ordinary course of business, wherein it enforces its security interest. The Company and the Bank are not engaged in any legal proceedings of a material nature at the present time.

Item 2. CHANGES IN SECURITIES

None.

Item 3. DEFAULTS UPON SENIOR SECURITIES

None.

Item 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS

None.

Item 5. OTHER INFORMATION

None.

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Item 6. EXHIBITS

Exhibits:

Exhibit 11	Computation of earnings per share
Exhibit 31.1	Rule 13a-14 Certification of Clement B. Knapp, Jr.
Exhibit 31.2	Rule 13a-14 Certification of Scott S. Gyure.
Exhibit 32.1	Certification of Clement B. Knapp pursuant to section 906 of the Sarbanes Oxley Act of 2002.
Exhibit 32.2	Certification of Scott S. Gyure pursuant to Section 906 of the Sarbanes Oxley Act of 2002.

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SIGNATURES

Pursuant to the requirements of Section 13 and 15 (d) of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	AMB FINANCIAL CORP. Registrant
Date: November 1, 2006
	By:	/s/ Clement B. Knapp, Jr.
		President and Chief Executive Officer (Duly Authorized Representative)

By:	/s/ Scott S. Gyure
	Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)

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INDEX TO EXHIBITS

Exhibits No.
11	Statement re: Computation of Earnings Per Share
31.1	Rule 13a-14 Certification
31.2	Rule 13a-14 Certification
32.1	Section 906 Certification of CEO
32.2	Section 906 Certification of CFO

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EXHIBIT 11

EXHIBIT 11
	Three Months		Three Months
	Ended		Ended
	September 30, 2006		September 30, 2005
Net Income	$	180,787		174,070
Weighted average shares outstanding
for basic EPS computation		1,010,880		974,143
Reduction for common shares not yet
released by Employee Stock Ownership Plan		0		(8,368	)
Total weighted average common shares					��
outstanding for basic computation		1,010,880		965,775
Basic earnings per share	$	0.18	$	0.18
Total weighted average common shares
outstanding for basic computation		1,010,880		965,775
Common stock equivalents due to
dilutive effect of stock options		7,020		57,023
Total weighted average common shares and
equivalents outstanding for diluted computation		1,017,900		1,022,798
Diluted earnings per share	$	0.18	$	0.17
		Nine Months		Nine Months
		Ended		Ended
		September 30, 2006		September 30, 2005
Net Income	$	584,834		756,407
Weighted average shares outstanding
for basic EPS computation		997,862		976,561
Reduction for common shares not yet
released by Employee Stock Ownership Plan		0		(16,734	)
Total weighted average common shares
outstanding for basic computation		997,862		959,827
Basic earnings per share	$	0.59	$	0.79
Total weighted average common shares
outstanding for basic computation		997,862		959,827
Common stock equivalents due to
dilutive effect of stock options		6,375		57,868
Total weighted average common shares and
equivalents outstanding for diluted computation		1,004,237		1,017,695
Diluted earnings per share	$	0.58	$	0.74

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