SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_______________________________

FORM 10-Q

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

For the quarterly period ended March 31, 2008
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
of incorporation or
organization)
 
I.R.S. Employer
Identification
Number

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

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

Indicate by a check mark 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

Indicate by a 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.

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

Indicate by a check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  o  No  x

As of May 8, 2008 there were 984,166 shares of the Registrant’s common stock issued and outstanding.


AMB FINANCIAL CORP.
FORM 10-Q
TABLE OF CONTENTS

     
Page
       
Part I.
 
FINANCIAL INFORMATION
 
       
Item 1.
 
Financial Statements
 
       
   
Consolidated Statements of Financial Condition at March 31, 2008 (unaudited) and December 31, 2007
3
       
   
Consolidated Statements of Earnings for the three months ended March 31, 2008 and 2007 (unaudited)
4
       
   
Consolidated Statement of Changes in Stockholders Equity, three months ended March 31, 2008 (unaudited)
5
       
   
Consolidated Statements of Cash Flows for the three months ended March 31, 2008 and 2007 (unaudited)
6
       
   
Notes to Unaudited Consolidated Financial Statements
7-8
 
 
 
 
Item 2.
 
Management’s Discussion and Analysis of Financial Condition and Results of Operations
8-18
       
Item 3.
 
Quantitative and Qualitative Disclosure About Market Risk
18
       
Item 4T.
 
Control and Procedures
18
       
Part II.
 
OTHER INFORMATION
 
       
Item 1.
 
Legal Proceedings
19
       
Item 1A.
 
Risk Factors
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
20
       
Item 6.
 
Exhibits
20
       
   
Index of Exhibits
22
       
   
Earnings Per Share Analysis (Exhibit 11)
 
       
   
Rule 13a-14 Certifications (Exhibits 31.1 and 31.2)
 
       
   
Section 906 Certification (Exhibits 32.1 and 32.2)
 

2

AMB FINANCIAL CORP.
AND SUBSIDIARIES

Consolidated Statements of Financial Condition

   
March 31,
 
December 31,
 
   
2008
 
2007
 
   
unaudited
 
 
 
Assets
         
           
Cash and amounts due from depository institutions
 
$
3,037,324
 
$
2,555,155
 
Interest-bearing deposits
   
3,801,312
   
379,853
 
Total cash and cash equivalents
   
6,838,636
   
2,935,008
 
               
Investment securities, available for sale, at fair value
   
1,732,427
   
1,718,634
 
Trading securities
   
312,996
   
306,566
 
Mortgage backed securities, available for sale, at fair value
   
715,460
   
857,988
 
Loans receivable (net of allowance for loan losses:
$777,657 at March 31, 2008 and
$737,886 at December 31, 2007)
   
151,397,876
   
148,024,848
 
Real estate owned
   
742,912
   
750,412
 
Investment in LTD Partnership
   
700,879
   
712,129
 
Stock in Federal Home Loan Bank of Indianapolis
   
1,965,100
   
1,750,900
 
Accrued interest receivable
   
723,824
   
741,272
 
Office properties and equipment- net
   
7,174,159
   
6,211,224
 
Real estate held for development
   
1,966,541
   
1,953,953
 
Bank owned life insurance
   
3,771,505
   
3,740,294
 
Prepaid expenses and other assets
   
5,317,824
   
5,050,438
 
               
Total assets
 
$
183,360,139
 
$
174,753,666
 
               
Liabilities and Stockholders' Equity
             
               
Liabilities
             
               
Deposits
 
$
122,197,909
 
$
118,881,547
 
Borrowed money
   
40,970,258
   
35,913,019
 
Guaranteed preferred beneficial interest in the Company's subordinated debentures
   
3,000,000
   
3,000,000
 
Notes Payable
   
206,530
   
206,530
 
Advance payments by borrowers for taxes and insurance
   
731,203
   
189,225
 
Other liabilities
   
2,787,186
   
3,110,841
 
Total liabilities
 
$
169,893,086
 
$
161,301,162
 
               
               
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 984,166 shares outstanding at March 31, 2008 and December 31, 2007
   
16,862
   
16,862
 
Additional paid- in capital
   
11,531,108
   
11,530,669
 
Retained earnings, substantially restricted
   
9,653,958
   
9,653,588
 
Accumulated other comprehensive income, net of tax
   
25,968
   
12,228
 
Treasury stock, at cost (702,003 shares at March 31, 2008 and December 31, 2007)
   
(7,760,843
)
 
(7,760,843
)
Total stockholders' equity
 
$
13,467,053
 
$
13,452,504
 
               
Total liabilities and stockholders' equity
 
$
183,360,139
 
$
174,753,666
 


3

AMB FINANCIAL CORP.
AND SUBIDIARIES

Consolidated Statements of Earnings
(Unaudited)
 
   
Three Months
Ended
March 31,
 
Three Months
Ended
March 31,
 
   
2008
 
2007
 
           
Interest income
         
Loans
 
$
2,398,067
 
$
2,392,834
 
Mortgage-backed securities
   
8,520
   
14,040
 
Investment securities
   
26,133
   
43,638
 
Interest-bearing deposits
   
12,705
   
85,467
 
Dividends on FHLB stock
   
20,963
   
22,079
 
Total interest income
 
$
2,466,388
 
$
2,558,058
 
               
Interest expense
             
Deposits
 
$
1,022,195
 
$
1,089,839
 
Borrowings
   
503,710
   
565,703
 
Total interest expense
 
$
1,525,905
 
$
1,655,542
 
               
Net interest income
 
$
940,483
 
$
902,516
 
Provision for loan losses
   
60,000
   
25,563
 
Net interest income after provision for loan losses
 
$
880,483
 
$
876,953
 
               
Non-interest income:
             
Loan fees and service charges
 
$
46,686
 
$
34,778
 
Deposit related fees
   
119,236
   
107,743
 
Other fee income
   
118,130
   
93,167
 
Rental Income
   
38,953
   
34,959
 
Unrealized gain on trading securities
   
6,430
   
17,311
 
Loss from investment in limited partnership
   
(11,250
)
 
(9,000
)
Loss on the sale of real estate owned
   
0
   
(94,927
)
Gain on sale of other assets
   
22,641
   
0
 
Increase in cash value of insurance
   
31,211
   
30,919
 
Other income
   
9,391
   
6,693
 
Total non-interest income
 
$
381,428
 
$
221,643
 
               
Non-interest expense:
             
Staffing costs
 
$
555,555
 
$
565,084
 
Advertising
   
39,496
   
27,175
 
Occupancy and equipment expense
   
124,093
   
107,639
 
Data processing
   
114,043
   
125,117
 
Professional fees
   
97,844
   
84,311
 
Federal deposit insurance premiums
   
26,077
   
3,696
 
Other operating expenses
   
177,990
   
183,382
 
Total non-interest expense
 
$
1,135,098
 
$
1,096,404
 
               
Income before income taxes
 
$
126,813
 
$
2,192
 
Income tax expense (benefit)
   
37,868
   
(13,874
)
               
Net income
 
$
88,945
 
$
16,066
 
               
Earnings per share- basic
 
$
0.09
 
$
0.02
 
Earnings per share- diluted
 
$
0.09
 
$
0.02
 

See accompanying notes to consolidated financial statements.

4

AMB FINANCIAL CORP.
AND SUBIDIARIES

Consolidated Statements of Changes in Stockholders’ Equity
(Unaudited)
 
   
Common
Stock
 
Additional
Paid-in
Capital
 
Retained
Earnings
 
Accumulated Other Comprehensive Income
 
Treasury
Stock
 
Total
 
   
 
                     
Balance at December 31, 2007
 
$
16,862
 
$
11,530,669
 
$
9,653,588
 
$
12,228
 
$
(7,760,843
)
$
13,452,504
 
                           
Comprehensive income:
                         
Net income
           
88,945
           
88,945
 
Other comprehensive income, net of income taxes:
                         
Unrealized holding gain during the period
               
 
   
13,740
         
13,740
 
Total comprehensive income
           
88,945
   
13,740
       
102,685
 
                                       
Purchase of treasury stock
                           
-
   
0
 
Stock option compensation
         
439
               
439
 
Dividends declared on common stock ($.09 per share)
   
 
   
 
   
(88,575
)
 
 
   
 
   
(88,575
)
                           
Balance at March 31, 2008
 
$
16,862
 
$
11,531,108
 
$
9,653,958
 
$
25,968
 
$
(7,760,843
)
$
13,467,053
 

See accompanying notes to consolidated financial statements

5
 
AMB FINANCIAL CORP.
AND SUBSIDIARIES

Consolidated Statements of Cash Flows

   
Three Months Ended March 31,
 
   
2008
 
2007
 
   
(unaudited)
 
           
Cash flows from operating activities:
         
Net income
 
$
88,945
 
$
16,066
 
Adjustments to reconcile net income to net cash:
             
Depreciation
   
48,406
   
51,202
 
Amortization of premiums and accretion of discounts
   
1,255
   
4,087
 
Provision for loan losses
   
60,000
   
25,563
 
Provision for REO losses
   
7,500
   
-
 
Increase in deferred compensation
   
4,709
   
16,561
 
Stock option compensation
   
439
   
2,875
 
Gain on sale of other assets
   
(22,640
)
 
-
 
Loss on sale of real estate owned
   
-
   
94,927
 
Unrealized gain on trading securities
   
(6,430
)
 
(17,311
)
Loss from limited partnership
   
11,250
   
9,000
 
Increase in cash surrender value of life insurance
   
(31,211
)
 
(30,919
)
Decrease in deferred income on loans
   
(17,928
)
 
(3,290
)
Decrease (increase) in accrued interest receivable
   
17,448
   
(12,507
)
Increase in accrued interest payable
   
10,508
   
9,374
 
(Increase) decrease in purchased accounts receivable
   
(448,030
)
 
514,177
 
Decrease (increase) in current and deferred income taxes
   
187,887
   
(7,105
)
Other, net
   
(330,045
)
 
(232,237
)
           
Net cash provided (for) by operating activities
   
(417,937
)
 
440,463
 
               
Cash flows from investing activities:
             
Purchase of investment securities
   
(2,162
)
 
(2,035
)
 
             
Proceeds from repayments of mortgage-backed Securities
   
152,544
   
109,069
 
Purchase of Federal Home Loan Stock
   
(214,200
)
 
-
 
Purchase of loans
   
(1,142,381
)
 
(1,405,600
)
Loan disbursements
   
(14,591,260
)
 
(7,052,514
)
Loan repayments
   
12,318,541
   
12,369,236
 
Proceeds from sale of real estate held owned
   
-
   
432,635
 
Purchase of real estate held for development
   
(12,588
)
 
(324,518
)
Property and equipment expenditures, net
   
(1,013,933
)
 
(241,722
)
           
Net cash provided (for) by investing activities
   
(4,505,439
)
 
3,884,551
 
               
Cash flows from financing activities:
             
Net increase (decrease) in deposits
   
3,316,362
   
(169,501
)
Proceeds from borrowed money
   
16,300,000
   
5,000,000
 
Repayment of borrowed money
   
(11,242,761
)
 
(7,000,000
)
Increase in advance payments by borrowers for taxes and insurance
   
541,978
   
519,374
 
Purchase of treasury stock
   
-
   
(88,862
)
Dividends paid on common stock
   
(88,575
)
 
(83,708
)
           
Net cash provided by (for) financing activities
   
8,827,004
   
(1,822,697
)
               
Net change in cash and cash equivalents
   
3,903,628
   
2,502,317
 
               
Cash and cash equivalents at beginning of period
   
2,935,008
   
9,727,842
 
               
Cash and cash equivalents at end of period
 
$
6,838,636
 
$
12,230,159
 
               
Supplemental disclosure of cash flow information:
             
Cash paid during the period for:
         
Interest
 
$
1,515,397
 
$
1,646,168
 
Income taxes
   
-
   
-
 
Non-cash investing activities:
             
Transfer of loans to real estate owned
   
-
   
90,000
 
 
See accompanying notes to 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 Form 10-Q instructions and Article 10 of Regulation S-K, and in the opinion of management contains all adjustments (all of which are normal and recurring in nature) necessary to present fairly the financial position as of March 31, 2008, the results of operations for the three months ended March 31, 2008 and 2007 and cash flows for the three months ended March 31, 2008 and 2007. These results have been determined on the basis of accounting principles generally accepted in the United States of America. 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 “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 month period ended March 31, 2008 is not necessarily indicative of the results to be expected for the full year.

2.
Earnings Per Share

Earnings per share for the three month periods ended March 31, 2008 and 2007 were determined by dividing net income for the periods by the weighted average number of both basic and diluted shares of common stock, as well as 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.

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

In September 2006, the FASB issued Statement No. 157, “Fair Value Measurements”. This Statement defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. This Statement establishes a fair value hierarchy about the assumptions used to measure fair value and clarifies assumptions about risk and the effect of a restriction on the sale or use of an asset. The standard is effective for fiscal years beginning after November 15, 2007. In February 2008, the FASB issued Staff Position (FSP) 157-2, Effective Date of FASB Statement No. 157. This FSP delays the effective date of FAS 157 for all nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value on a recurring basis (al least annually) to fiscal years beginning after November 15, 2008, and interim periods within those fiscal years. The impact of the adoption was not material.
 
In February 2007, the FASB issued Statement No. 159, “The Fair Value Option for Financial Assets and Liabilities”. The standard provides companies with an option to report selected financial assets and liabilities at fair value and establishes presentation and disclosure requirements designed to facilitate comparisons between companies that choose different measurement attributes for similar types of assets and liabilities. The new standard is effective for the Company on January 1, 2008. The Company did not elect the fair value option for any financial assets or financial liabilities as of January 1, 2008.
 
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 loans, deposits and other 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 Company’s stock price, 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.
 
Financial Condition. During the quarter ended March 31, 2008, the Company’s total assets increased by $8.6 million, or 4.9%, to $183.4 million from $174.8 million at December 31, 2007. The increase in assets was primarily the result of a $3.9 million increase in cash and cash equivalents, a $3.4 million increase in net loans receivable, and a $1.0 million increase in office properties and equipment. Primarily funding this asset growth was a $3.3 million increase in deposits and a $5.1 million increase in borrowings due primarily from the Federal Home Loan Bank of Indianapolis. Cash and cash equivalents totaled a combined $6.8 million at March 31, 2008, as compared to $2.9 million at December 31, 2007.

8

Investment securities, available for sale, increased by $14,000 totaling $1.7 million at March 31, 2008, as compared to the balance at December 31, 2007, due in part to an increase in the market value of the securities. This portfolio consists primarily of U.S. government agency obligations. At March 31, 2008, the Company had an unrealized gain on available for sale investment securities of $36,000 compared to an unrealized gain of $24,000 at December 31, 2007.
 
Trading account securities, which are held at the Holding Company level, increased by $6,000 to $313,000 at March 31, 2008, as compared to $307,000 at December 31, 2007. The increase is attributable to an increase in unrealized appreciation in the portfolio. There were no purchases or sales of trading securities during the three month period ended March 31, 2008. The trading account portfolio consists primarily of holdings in small thrift and community bank stocks.

Mortgage-backed securities, available for sale, totaled $715,000 at March 31, 2008, as compared to $858,000 at December 31, 2007. There were no new purchases of mortgage-backed securities during the current period and as a result, the balance of mortgage-backed securities decreased by $143,000, or 16.6%, due to amortization and prepayments. At March 31, 2008, the Company had an unrealized gain on available for sale mortgage-backed securities of $8,000 compared to an unrealized loss of $4,000 at December 31, 2007.

Loans receivable increased $3.4 million, or 2.3%, to $151.4 million at March 31, 2008, from $148.0 million at December 31, 2007. As a result of an increase in mortgage demand, loan originations and purchases increased to $15.7 million for the quarter ended March 31, 2008, as compared to $8.5 million in the prior year’s quarter. Offsetting the originations and purchases were amortization and prepayments of loans totaling $12.3 million and $12.4 million for the quarters ended March 31, 2008 and 2007, respectively. The growth was primarily concentrated in one-to four family residential lending, which was favorably impacted by a decline in mortgage rates during the quarter ended March 31, 2008. The Company also purchased a $0.9 million participation interest in a non-residential real estate loan during the current period.

The determination of the allowance for loan losses involves material estimates that are susceptible to significant change in the near term. The allowance for loan losses is maintained at a level adequate to provide for losses through charges to operating expense. The allowance is based upon past loss experience and other factors, which, in management's judgment, deserve current recognition in estimating losses. Such other factors considered by management include growth and composition of the loan portfolio, the relationship of the allowance for losses to outstanding loans and economic conditions.

Management believes that the allowance is adequate. While management uses available information to recognize losses on loans, future additions to the allowance may be necessary based on changes in economic conditions. In addition, various regulatory agencies, as an integral part of their examination process, periodically review the Bank's allowance for losses. Such agencies may require the Bank to recognize additions to the allowance based on their judgments about information available to them at the time of their examination.

9

The allowance for loan losses totaled $778,000 at March 31, 2008, an increase of $40,000, or 5.4% from the $738,000 allowance at December 31, 2007. The Bank’s allowance for loan losses to net loans receivable was .51% at March 31, 2008, compared to .50% at December 31, 2007. Non-performing loans totaled $3.1 million, or 2.03% of total loans receivable at March 31, 2008, compared to $2.6 million, or 1.72% of total loans receivable at December 31, 2007. Included in non-performing loans at March 31, 2008, were one single family construction loan totaling $233,000, fifteen one-to four family mortgage loans totaling $1.8 million, two multi-family mortgage loans totaling $708,000, one non-residential mortgage loan totaling $353,000 and five consumer loans totaling $53,000. The ratio of allowance for loan losses to non-performing loans was 25.0% at March 31, 2008, compared to 28.5% at December 31, 2007.

The Company’s investment in a limited partnership decreased $11,000 to $701,000 at March 31, 2008, as compared to $712,000 as of December 31, 2007. The decline represents the Company’s share of the operating losses generated by the partnership, which consists of an investment in an apartment development, which generates low-income housing tax credits to offset federal income tax liabilities.

Net real estate owned at March 31, 2008 totaled $743,000. Real estate owned consisted of one non-residential parcel totaling $396,000 located in Highland, Indiana and thirty-two vacant land parcels located near Indianapolis, Indiana totaling $347,000. The real estate owned properties are valued at the lower of cost or managements’ estimate of net realizable value.

Stock in the FHLB of Indianapolis increased by $214,000, or 12.2%, totaling $2.0 million at March 31, 2008. The Company is required to hold stock in the FHLB of Indianapolis in order to obtain advances. The amount of FHLB stock, required to be held, by the Company is determined by the amount of borrowed funds from the FHLB of Indianapolis. The increased stock balance during the current quarter was required as a result of the increase in borrowings from the FHLB of Indianapolis.

Office properties and equipment increased $1.0 million, or 15.5%, to $7.2 million at March 31, 2008, as compared to $6.2 million at December 31, 2007. The increase was due to the ongoing construction of a three-story office building located in Schererville, Indiana, which will be partially utilized by the Bank as a full service branch office. The Bank will attempt to lease the remaining portion of the building. Construction of the banking facility is near completion and anticipated to be open to the public in the third quarter of 2008. Costs incurred through March 31, 2008, totaled $4.6 million. Remaining costs to complete the construction project are anticipated to be approximately $1.0 million.

The Company had previously acquired, in conjunction with an agreement with a local builder, vacant lots on which to construct single-family residences in St. John and Munster, Indiana. At March 31, 2008, the Company’s $2.0 million investment in real estate development projects consisted of three completed single-family dwelling units and four vacant lots. Due to the slowdown in the real estate market, the Company has decided not to build on the remaining vacant lots. All of the completed units and vacant lots are currently listed for sale. In view of the currently weak real estate market, there can be no assurance whether when, and at what price the Company will be able to sell these assets.

Bank owned life insurance increased $31,000 to $3.8 million at March 31, 2008, as compared to December 31, 2007. The change represents the increase in the cash surrender value of the life insurance policies purchased in connection with deferred compensation plans utilized by directors and officers of the Company.

Prepaid expenses and other assets increased $267,000 to $5.3 million at March 31, 2008, as compared to December 31, 2007. The increase was due to a $448,000 increase in the Company’s purchased accounts receivable program, which totaled $4.1 million at March 31, 2008. The program involves the purchase and subsequent management of the accounts receivables of credit-worthy business customers.
 
10
 
Deposits increased $3.3 million, or 2.8%, to $122.2 million at March 31, 2008, from $118.9 million at December 31, 2007. The increase in deposits is due to an increase in checking and money market deposits totaling $2.0 million, passbook accounts totaling $800,000 and certificates of deposits totaling $500,000. At March 31, 2008, the Bank’s non-certificate accounts (passbook, checking and money market accounts) comprised $43.0 million, or 35.2% of deposits, compared to $40.3 million, or 33.9% of deposits at December 31, 2007. The increase in deposits during the current year is attributable in part to increased marketing efforts to attract deposits in the local market area of the Company.
 
Borrowed money, which consisted primarily of FHLB of Indianapolis advances, increased by $5.1 million, or 14.1%, to $41.0 million at March 31, 2008, as compared to $35.9 million at December 31, 2007. The increased borrowings were used in part to fund loan originations and raise liquidity. Borrowings from the FHLB of Indianapolis totaled $38.4 million at March 31, 2008, compared with $33.4 million at December 31, 2007. As of March 31, 2008, the weighted average rate for the FHLB of Indianapolis borrowings was 4.29%, compared to a weighted average rate of 4.87%, as of December 31, 2007, while the weighted term to maturity of the Company’s FHLB of Indianapolis borrowings was 1.8 years. FHLB of Indianapolis borrowings scheduled to mature during the next twelve months total $17.2 million at a weighted average rate of 3.83%. During the first quarter of 2008, the Company repaid $2.0 million in other borrowed funds, which had an adjustable interest rate and an annual renewal term and replaced it with a new $2.0 million borrowing at a fixed rate of interest and a five-year term.
 
Total stockholders’ equity of the Company increased by $14,000 to $13.5 million, or 7.34% of total assets, at March 31, 2008, compared to 7.70% of total assets at December 31, 2007. The decline in the ratio was due to the $8.6 million increase in assets. The increase in stockholders’ equity was the result of the Company’s net income of $89,000 and an increase in unrealized gains on securities available for sale, net of tax, in the amount of $14,000, which was offset by the payment of $89,000 in cash dividends. The number of common shares outstanding at March 31, 2008 was 984,166 and the book value per common share outstanding was $13.68. The Bank’s tangible, core and risk-based capital percentages of 8.28%, 8.28% and 13.05%, respectively, at March 31, 2008 exceeded all regulatory requirements and categorize the Bank as well capitalized under OTS guidelines.
 
It is not clear how serious an effect the current slowdown of the economy will have on the Company’s loan volume, credit quality and deposit flows. However, management believes that the Company’s construction loans, non-owner occupied loans, purchased loans, and consumer loans may be particularly sensitive to adverse economic conditions.
 
Results for the Quarter Ended March 31, 2008 Compared to the Quarter Ended March 31, 2007
 
General - Net income for the quarter ended March 31, 2008 increased $73,000, to $89,000, as compared to $16,000 for the quarter ended March 31, 2007. Diluted earnings per share totaled $0.09 per share for the quarter ended March 31, 2008, as compared to $0.02 per share for the quarter ended March 31, 2007. The increase in net income is attributable to an increase in net interest income and an increase in non-interest income, offset by increases in provision for loan losses, non-interest expenses and income taxes. The annualized return on average equity and return on average assets were 2.65% and 0.20%, respectively, in the current quarter, compared to 0.44% and 0.04% in last year’s comparable period.
 
Interest income - Total interest income decreased by $92,000, or 3.6%, to $2.5 million for the quarter ended March 31, 2008, as compared with the prior year. This decrease was the result of a $5.4 million decrease in the average balance of interest-earning assets to $155.7 million for the quarter ended March 31, 2008, as compared to $161.1 million for the quarter ended March 31, 2007, as well as a slight decrease in the average yield on interest-earning assets to 6.34% for the quarter ended March 31, 2008, as compared to 6.35% for the quarter ended March 31, 2007. The decrease in the average balance of interest-earning assets was primarily due to a decrease in the average balance of interest-bearing deposits.

11

Interest income on loans receivable increased $5,000, or 0.2%, to $2.4 million, as compared to the prior year. The increase in interest income on loans was the result of a $1.7 million increase in the average balance of loans outstanding, offset in part by a six basis point decline in the average yield to 6.41% for the quarter ended March 31, 2008, from 6.47% for the quarter ended March 31, 2007. The increase in the average balance was due to higher levels of new originations and purchases exceeding principal repayments. The decrease in the average yield on loans receivable reflects the impact of repayments on higher rate loans, which were replaced with lower yielding new originations and purchases. Interest income on mortgage-backed securities decreased $6,000, or 39.3%, due to a $415,000 decrease in the average balance in the portfolio, as well as a decrease in the average yield to 4.05% for the current quarter, as compared to 4.64% for the prior year’s quarter. Interest income on investment securities decreased $17,000, or 40.1%, to $26,000, as compared to the prior year. The decrease in interest income on investment securities was the result of a $1.5 million decrease in the average balance of investment securities outstanding, which was partially offset by an increase in the average yield to 5.46% for the quarter ended March 31, 2008, from 5.17% for the quarter ended March 31, 2007. The decrease in the average balance was due to the maturities of investment securities. Interest income on interest bearing deposits decreased by $73,000, or 85.1%, as compared to the prior year. The decrease in interest income was the result of a $5.2 million decrease in the average balance outstanding, as well as a decrease in the average yield to 3.28% for the quarter ended March 31, 2008, from 4.99% for the quarter ended March 31, 2007. The decrease in the average balance was due in part to fund loan originations and the construction of a new branch office. The decrease in the average yield was due to lower short-term interest rates paid on overnight deposits during 2008, as compared to 2007. Dividend income on FHLB of Indianapolis stock decreased by $1,000, or 5.1%, as compared to the prior year. The decrease in dividend income was the result of a decrease in the average yield to 4.63% for the quarter ended March 31, 2008, from 5.03% for the quarter ended March 31, 2007, while the average balance outstanding remained relatively unchanged. The decrease in the average yield reflects the impact of a lower dividend rate paid in 2008, as compared to 2007.

Interest Expense - Total interest expense decreased by $129,000, or 7.8%, to $1.5 million for the quarter ended March 31, 2008, as compared to the prior year. The cost of interest-bearing liabilities decreased thirty-one basis points to 3.80% for the quarter ended March 31, 2008, as compared to 4.11% for the quarter ended March 31, 2007, due in part to the refinancing of the Company’s trust preferred debt in the prior year at a lower rate, as well as declining short-term interest rates, which enabled management to lower the rate on repricing certificates of deposits and still remain competitive. Also contributing to the decline was a $600,000 decrease in the outstanding average balance of interest-bearing liabilities to $160.6 million for the quarter ended March 31, 2008, as compared to $161.2 million for the quarter ended March 31, 2007.

Interest expense on deposits decreased by $68,000, or 6.2%, to $1.0 million for the quarter ended March 31, 2008, as compared with the prior year, as a result of a $2.6 million decline in the average balance outstanding and a fifteen basis point decrease in the average cost of deposits to 3.42% for the quarter ended March 31, 2008. The decrease in the average cost of deposits was primarily impacted by an eleven basis point average rate decrease on certificates of deposits to an average rate of 4.51% during 2008, as compared to an average rate of 4.62% for 2007. During 2008, the majority of certificates of deposits that were scheduled to reprice did so at relatively lower short-term rates.

12

Interest expense on borrowings decreased by $62,000 to $504,000, or 11.0%, for the quarter ended March 31, 2008, as compared with the prior year’s quarter as a result of an eighty-seven basis point decline in the average cost of borrowed funds, which was offset in part by a $1.9 million increase in the average balance of borrowings to $41.2 million for the quarter ended March 31, 2008, from $39.3 million for the quarter ended March 31, 2007. Interest expense on FHLB of Indianapolis advances decreased by $25,000 to $413,000 for the quarter ended March 31, 2008, as compared with the prior year as a result of a decrease of forty-eight basis points in the average cost of FHLB of Indianapolis advances to 4.67%, offset in part by a $1.3 million increase in the average balance to $35.3 million for the quarter ended March 31, 2008, from $34.0 million for the quarter ended March 31, 2007. Interest expense on other borrowings decreased $37,000 to $91,000 for the quarter ended March 31, 2008, as compared to $128,000 for the prior year. The decrease was due primarily to the Company’s refinancing of its trust preferred issue at a reduced rate of interest. During the first quarter of 2007, the Company repaid its $5.0 million trust preferred issue and replaced it with a new $3.0 million trust preferred issue at a reduced rate as well as reduced rate on a $2.0 million borrowing.

Net Interest Income - As a result of the above changes in interest income and interest expense, net interest income increased $37,000, or 4.2%, to $940,000 for the quarter ended March 31, 2008, as compared to the prior year’s quarter. The net interest rate spread increased to 2.54% during the current quarter, as compared to 2.24% for the quarter ended March 31, 2007. The net interest margin also increased to 2.42% in the current quarter, as compared to 2.24% a year ago. The net interest rate spread and net interest margin increased between the periods primarily due to a decrease in the average cost of interest-bearing liabilities, which was favorably impacted by recent federal funds rate declines.

Provision for Loan Losses - The Company recorded a provision for loan losses of $60,000 during the quarter, as compared to $26,000 during the prior year’s quarter. The provision during the current year’s quarter was primarily the result of managements’ periodic assessment of the allowance for loan losses on loans. Based upon managements’ assessment, appropriate provisions are made to maintain the adequacy of the allowance to cover probable losses in the loan portfolio. The prior year’s provision was favorably impacted by a $249,000 loan loss recovery. The amount of the allowance is based on estimates and ultimate losses may vary from such estimates. During the current quarter, the Bank charged-off $20,000 in loans, including $9,000 in auto loans and $11,000 in credit card loans.

Non-Interest Income - Non-interest income increased by $160,000, or 72.1%, to $381,000 for the quarter ended March 31, 2008, as compared to $221,000 for the quarter ended March 31, 2007. The increase was due in part to a $49,000 increase in service fee income, primarily in accounts receivable program fees due to an increase in volume, a $95,000 decline in losses on the sale of real estate owned, and a $23,000 gain consisting of a mandatory partial redemption of the Bank’s ownership interest in VISA. Partially offsetting these increases was an $11,000 decline in income from trading securities due to a smaller increase in market value of the Company’s investment in equity securities as compared to the prior year’s quarter.

13

Non-Interest Expense - Non-interest expense increased by $39,000, or 3.5%, to $1.1 million, primarily due to a $12,000 increase in advertising due to the Company undertaking more promotions during the current quarter as compared to the prior year’s quarter, a $16,000 increase in occupancy and equipment expenses due in part to increased snow removal expenses, a $14,000 increase in professional fees due in part to legal fees related to delinquent loans, and a $22,000 increase in federal deposit insurance premiums due to the Bank fully utilizing its FDIC insurance credit in 2007. Partially offsetting the increase was a $9,000 decline in compensation expense and an $11,000 decline in data processing expense due in part to the contract renegotiation of the primary data processing vendor of the Bank. Included in the current period’s other non-interest expense total of $178,000 is $28,000 in holding costs, consisting primarily of real estate taxes, related to the Company’s investment in the aforementioned real estate held for development, which were not present in the prior year. It is anticipated that our occupancy and equipment expenses, compensation and various other expenses will increase significantly in the second half of 2008 as a result of the anticipated June 2008 opening of our new branch office facility. The Company will attempt to lease a portion of the building that it will not utilize to offset some of these costs.
 
Income Taxes - The Company recorded an income tax expense of $37,000 for the quarter ended March 31, 2008, as compared to an income tax benefit of $14,000 for the quarter ended March 31, 2007. The prior year tax benefit was generated in part by favorable permanent tax adjustments relating to increases in cash value on bank-owned life insurance and the result of amending a prior year’s state income tax return.
 
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 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.
 
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.

14

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.
 
15
Capital Requirement

At March 31, 2008, the Bank was in compliance with all of its capital requirements as follows:

   
March 31, 2008
 
December 31, 2007
 
   
Amount
 
Percent of
Assets
 
Amount
 
Percent of
Assets
 
Stockholders' equity of the Bank
 
$
14,923,647
   
8.30
%
$
15,167,017
   
8.87
%
                       
Tangible capital
   
14,897,020
   
8.28
%
$
15,153,994
   
8.86
%
Tangible capital requirement
   
2,697,486
   
1.50
   
2,564,790
   
1.50
 
Excess
 
$
12,199,534
   
6.78
%
$
12,589,204
   
7.36
%
                           
Core capital
   
14,897,020
   
8.28
%
$
15,153,994
   
8.86
%
Core capital requirement
   
5,395,770
   
3.00
   
5,129,970
   
3.00
 
Excess
 
$
9,501,250
   
5.28
%
$
10,024,024
   
5.86
%
                           
Core and supplementary capital
   
15,674,677
   
13.05
%
$
15,891,880
   
14.13
%
Risk-based capital requirement
   
9,608,560
   
8.00
   
8,996,000
   
8.00
 
Excess
 
$
6,066,117
   
5.05
%
$
6,895,880
   
6.13
%
                           
Total Bank assets
 
$
179,859,000
       
$
170,999,000
       
Adjusted total Bank assets
   
179,832,000
       
$
170,985,977
       
Total risk-weighted assets
   
120,107,000
       
$
112,450,000
       
 
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:

   
March 31, 2008
 
December 31, 2007
 
           
Stockholders' equity of the Bank
 
$
14,923,647
 
$
15,167,017
 
Regulatory capital adjustment
             
For mortgage servicing rights
   
(659
)
 
(795
)
For available for sale securities
   
(25,968
)
 
(12,228
)
               
Tangible and core capital
 
$
14,897,020
     
$
15,153,994
 
General loan loss reserves
   
777,657
   
737,886
 
               
Core and supplementary capital
 
$
15,674,677
 
$
15,891,880
 
 
16
 
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.
 
   
March 31,
2008
 
December 31,
2007
 
   
(Dollars in thousands)
 
(Dollars in thousands)
 
           
Non- accruing loans:
 
 
 
 
 
One to four family
   
1,771
   
1,679
 
Multi- family
   
708
   
350
 
Non- residential
   
353
   
260
 
Land
   
—
   
—
 
Commercial business
   
—
   
37
 
Construction
   
233
   
231
 
Consumer
   
53
   
36
 
           
Total
   
3,118
   
2,593
 
               
Foreclosed assets:
         
One to four family
   
—
   
—
 
Multi-family
   
—
   
—
 
Non-residential
   
396
   
403
 
Land
   
347
   
347
 
Construction
   
—
   
—
 
Consumer
   
—
   
—
 
               
Total
   
743
   
750
 
               
Total non- performing assets
   
3,861
   
3,343
 
               
Total as a percentage of total assets
   
2.11
%
 
1.91
%

Non-performing assets increased during the past three months, totaling $3.9 million or 2.11% of total assets at March 31, 2008, compared to $3.3 million, or 1.91% of total assets at December 31, 2007. The increase in the three month period was due in part to the addition of three loans related to the same borrower, consisting of a $358,000 loan secured by both a five-unit and seven-unit apartment building located in Valparaiso, Indiana as well as two non-owner occupied single family dwelling units totaling $173,000 located in Gary, Indiana. Management has considered the Company’s non-performing loans in establishing its allowance for loan losses.
 
17
 
For the three month period ended March 31, 2008, gross interest, which would have been recorded, had the non-accruing loans been current in accordance with their original terms totaled $84,158.
 
At March 31, 2008, the Bank had net real estate owned properties totaling $743,000, which consisted of one non-residential property located in Highland, Indiana totaling $396,000 and thirty-two vacant land parcels located near Indianapolis, Indiana totaling $347,000. Both parcels are valued at the lower of cost or managements’ estimate of net realizable value.

In addition to the non-performing assets set forth in the table above, as of March 31, 2008, there was one receivable totaling $163,000 related to the Company’s purchased accounts receivable program as to which the merchant is no longer in business and the Company is collecting amounts due through work-out arrangements directly from the third parties who owed funds to the merchant. During the three months ended March 31, 2008, the Company collected $75,000 towards the repayment of this receivable. In the event that the purchased receivables become uncollectable, the Company maintains loss mitigation insurance with a deductible amount of $55,000, which would amount to the Company’s loss exposure.

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 investment security purchases 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 April 22, 2008, the Company declared a cash dividend of $.09 per share, payable on May 23, 2008 to shareholders of record on May 9, 2008.

Item 3 . Quantitative and Qualitative Disclosure About Market Risk

A smaller reporting company is not required to provide the information required of this item.

Item 4T. 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 have 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.
 
18
 
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

We, from time to time, are party to certain lawsuits in the ordinary course of its business, wherein American Savings enforces its security interest. American Savings is currently involved in one legal proceeding, Steve H. Tokarski, et al. v. American Savings, FSB , Cause No. 45D04-0706-CC-075, which involves multiple claims, including a claim involving a restricted deposit account in the amount of $155,000 and another involving the cashing of two checks totaling approximately $513,000. The suit claims that we violated a Notice of Restriction placed on the deposit account and that we assisted an individual in misappropriating funds. Management believes that the transactions were handled appropriately and will refute the charges. The Plaintiff filed the complaint in Lake County, Indiana Superior Court in June 2007, more than two years after the May 2005 withdrawal of funds or the June 2003 presentation and cashing of checks. At this time, the outcome of this litigation is still in question and the amount of potential loss, if any, cannot be estimated.

At March 31, 2008, other than as described above, we were not involved in any legal proceedings, that are not routine and incidental to our business.
.
Item 1A.   Risk Factors

A smaller reporting company is not required to provide the information required of this item.

 
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.    

Item 4. Submission Of Matters To A Vote of Security Holders
 
None.
 
19
 
Item 5. Other Information

None.

Item 6. Exhibits

Exhibits:  
Exhibit 11 Computation of earnings per share

Exhibit 31.1 Rule 13a-14 Certification of Michael Mellon.

Exhibit 31.2 Rule 13a-14 Certification of Steven A. Bohn.

Exhibit 32.1 Certification of Michael Mellon pursuant to Section 906 of the Sarbanes Oxley Act of 2002.

Exhibit 32.2 Certification of Steven A. Bohn pursuant to Section 906 of the Sarbanes Oxley Act of 2002.
 
20
 
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: May 8, 2008
   
     
 
By:  
/s/ Michael Mellon
     
   
President and Chief Executive Officer
   
(Duly Authorized Representative)
     
 
By:   
/s/ Steven A. Bohn
   
Vice President and Chief Financial Officer
   
(Principal Financial and Accounting Officer)
 
21

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

22
 
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