LAFAYETTE, Ind., Aug. 13 /PRNewswire-FirstCall/ -- LSB Financial Corp. (Nasdaq: LSBI), the parent company of Lafayette Savings Bank, FSB, today reported quarterly earnings of $457,000 or $0.29 diluted earnings per share compared to $312,000 or $0.20 diluted earnings per share a year earlier. Earnings year-to-date were $989,000 or $0.64 diluted earnings per share compared to $614,000 or $0.40 per share in 2009. Randolph F. Williams, president and CEO stated, "We are pleased to report that despite the continued slow economy, we achieved another profitable quarter and further positioned the Bank for the ongoing economic challenges. As with most community banks, net interest income - the difference between the income generated from loans and investments and the cost of funding - represents a significant portion of our earnings. Our improved performance this quarter was fueled by a substantial $613,000 or 24% increase in our net interest margin. This increase is reflected in our net interest margin which increased from 2.74% in June of last year to the current level of 3.54%. A positive sign for the local economic recovery is that in the first half of the year a surprising 50% of our residential volume came from people purchasing new homes rather than from borrowers refinancing existing mortgages. Noninterest expenses were down $132,000 in the second quarter of 2010 from $2.7 million the second quarter of 2009 to $2.6 million for the second quarter of 2010. For the year-to-date, non-interest expenses were down $265,000."

Our net interest income was offset by a $76,000 increase in the provision for loan losses from $389,000 to $465,000 compared to the second quarter last year. For the year-to-date the provision for loan losses was down slightly from $958,000 to $899,000. The gain on sale of loans in the quarter decreased $360,000, a $797,000 decrease year-to-date, primarily due to a strategic decision to keep a larger share of residential loan originations in the Bank's own portfolio to stay within regulatory thresholds rather than to sell them on the secondary market. We also showed a $127,000 increase in the loss on OREO properties for the quarter, $195,000 year-to-date, as we made adjustments to recognize new valuations or property deterioration. The Bank continues to maintain a strong capital base with a Tier I capital ratio at June 30, 2010 of 9.11% which is in excess of the 5.00% required to remain categorized as well-capitalized as defined by the regulators but down slightly from the 9.13% at December 31, 2009.

Mr. Williams stated, "Despite the positives mentioned above, we remain tentative about the economic recovery, the negative impact of unemployment on our local market and the chance of a double-dip recession. The recent adoption of the new Dodd-Frank Wall Street Reform and Consumer Protection Act introduced additional uncertainty into the banking industry. Among other things, that legislation could impose higher capital requirements on bank and thrift holding companies. Consequently, until the ramifications of the legislation and the prospects for economic recovery become clearer, the Company will not be paying a dividend to shareholders. We intend to focus our attention on reducing the level of non-performing assets which remain a challenge, and this will be a key priority for the remainder of 2010. We will also focus our efforts on growing capital, maintaining liquidity, improving our operational efficiencies, building core customer relationships and ultimately improving shareholder value.

The closing market price of LSB stock on August 12, 2010 was $11.30 per share as reported by the Nasdaq Global Market.

                             LSB FINANCIAL CORP.
                 SELECTED CONSOLIDATED FINANCIAL INFORMATION
          (Dollars in thousands except share and per share amounts)

                                                Three months
                                                    ended        Year ended
                                                                December 31,
    Selected balance sheet data:               June 30, 2010         2009

    Cash and due from banks                            $5,648          $8,084
    Short-term investments                              3,381           4,817
    Securities available-for-sale                      11,362          11,345
    Loans held for sale                                   853           3,303
    Net portfolio loans                               332,699         317,860
    Allowance for loan losses                           4,240           3,737
    Premises and equipment, net                         6,195           6,209
    Federal Home Loan Bank stock, at cost               3,997           3,997
    Bank owned life insurance                           6,171           6,071
    Other assets                                        8,274           9,364
    Total assets                                      378,580         371,050

    Deposits                                          300,721         277,866
    Advances from Federal Home Loan Bank               41,000          57,000
    Other liabilities                                   2,366           2,300

    Shareholders' equity                               34,493          33,884
    Book value per share                               $22.20          $21.81
    Equity / assets                                      9.11%           9.13%
    Total shares outstanding                        1,553,525       1,553,525

    Asset quality data:
    Non-accruing loans                                $14,621         $12,604
    Loans past due 90 days still on accrual               ---             ---
    Other real estate/assets owned                      1,210           1,892
    Total non-performing assets                        15,831          14,496
    Non-performing loans / total loans                   4.38%           3.92%
    Non-performing assets / total assets                 4.18%           3.91%
    Allowance for loan losses /non-
     performing loans                                   29.00%          29.65%
    Allowance for loan losses /non-
     performing assets                                  26.78%          25.78%
    Allowance for loan losses / total loans              1.27%           1.16%
    Loans charged off (quarter-to-date and
     year-to-date, respectively)                         $353          $3,186
    Recoveries on loans previously charged
     off                                                    7              28

                                 Three months ended        Six months ended
                                      June 30,                 June 30,
     Selected operating
      data:                       2010         2009       2010       2009
     ------------------           ----         ----       ----       ----
     Total interest income      $4,721       $5,059     $9,393    $10,031
     ---------------------      ------       ------     ------    -------
     Total interest expense      1,572        2,523      3,295      5,109
     ----------------------      -----        -----      -----      -----
      Net interest income        3,149        2,536      6,098      4,922
      -------------------        -----        -----      -----      -----
     Provision for loan
      losses                       465          389        899        958
     ------------------            ---          ---        ---        ---
       Net interest income
        after provision          2,684        2,147      5,199      3,964
       -------------------       -----        -----      -----      -----
     Non-interest income:
     --------------------
     Deposit account service
      charges                      397          370        764        706
     -----------------------       ---          ---        ---        ---
     Gain on sale of
      mortgage loans                92          451        177        974
     ---------------               ---          ---        ---        ---
     Gain(loss) on sale of
      securities and other
      assets                      (228)        (100)      (261)       (66)
     ---------------------        ----         ----       ----        ---
     Other non-interest
      income                       283          250        558        494
     ------------------            ---          ---        ---        ---
       Total non-interest
        income                     544          971      1,238      2,108
       ------------------          ---          ---      -----      -----
     Non-interest expense:
     ---------------------
     Salaries and benefits       1,349        1,380      2,641      2,732
     ---------------------       -----        -----      -----      -----
     Occupancy and
      equipment, net               326          317        665        670
     ---------------               ---          ---        ---        ---
     Computer service              148          147        275        281
     ----------------              ---          ---        ---        ---
     Advertising                    78           60        134        117
     -----------                   ---          ---        ---        ---
    FDIC Insurance Premium         164          235        323        368
     Other                         494          552        935      1,070
     -----                         ---          ---        ---      -----
       Total non-interest
        expense                  2,559        2,691      4,973      5,238
       ------------------        -----        -----      -----      -----
     Income before income
      taxes                        669          427      1,464        834
     --------------------          ---          ---      -----        ---
     Income tax expense            212          115        475        220
     ------------------            ---          ---        ---        ---
       Net income                  457          312        989        614
       ----------                  ---          ---        ---        ---


     Weighted average number
      of diluted shares      1,553,525    1,555,084  1,553,525  1,553,525
     ----------------------- ---------    ---------  ---------  ---------
     Diluted earnings per
      share                      $0.29        $0.20      $0.64      $0.40
     --------------------        -----        -----      -----      -----


     Return on average
      equity                      5.31%        3.63%      5.77%      3.58%
     -----------------            ----         ----       ----       ----
     Return on average
      assets                      0.48%        0.33%      0.53%      0.32%
     -----------------            ----         ----       ----       ----
     Average earning assets   $347,657     $361,361   $344,569   $359,463
     ----------------------   --------     --------   --------   --------
     Net interest margin          3.62%        2.81%      3.54%      2.74%
     -------------------          ----         ----       ----       ----
     Efficiency ratio            79.28%       86.31%     77.26%     86.25%
     ----------------            -----        -----      -----      -----

www.LSBANK.com

SOURCE LSB Financial Corp.