LSB Financial Corp. Announces Second Quarter and Year-to-Date Results

LAFAYETTE, Ind., Aug. 4, 2011 /PRNewswire/ — LSB Financial Corp. (NASDAQ:
LSBI), the parent company of Lafayette Savings Bank, FSB, today reported
quarterly earnings of $477,000 or $0.31 diluted earnings per share compared to
$457,000 or $0.29 diluted earnings per share a year earlier. Year-to-date
earnings were $681,000 or $0.44 diluted earnings per share compared to $989,000
or $0.64 per share for the comparable period in 2010. We believe the
fundamentals of the bank are strong. The largest positive impact on our income
comes from low market interest rates which translated into a $579, 000 increase
in our net interest margin year-to-date and a $163,000 increase for the quarter,
primarily because of lower interest rates on deposits and borrowings. The
largest negative impact continues to come from the provision for loan losses
which was $952,000 over last year for the first six months and $210,000 higher
for the quarter.

Randolph F. Williams, president and CEO stated, “Despite additional credit
related expenses, including the increased loan loss provision, OREO write downs
and appraisal driven value adjustments on non-performing loans, this quarter
represents our sixth straight profitable quarter. Additionally, we increased
capital, improved our net interest margin, and further built up our loan loss
reserves.”

Williams noted, “The bank continues to benefit from lower interest rates in the
economy which have resulted in an increase in our net interest margin from 3.54%
for the six months ended June 30, 2010 to 3.96% for the same period in 2011.
Additionally, we have kept expenses virtually unchanged for the first six months
of 2011, increasing only $27,000 over the first six months of 2010. Expenses for
the second quarter were $149,000 lower than the first quarter of 2010. We have
done this through targeted expense control rather than the reductions in staff
that we so frequently see in the mega banks. Our people are critical to
attracting and maintaining customer relationships that are at the heart of the
traditional community bank model.”

Williams continued, “An area that continues to plague nearly all banks to some
extent is problem loans. At June 30, 2011, our non-performing assets (loans and
OREO properties) totaled $21.3 million or 5.92% of total assets, up from the
$19.3 million or 5.18% at the end of 2010. We are encouraged by our success in
selling bank properties during the quarter. We have reduced our level of OREO to
$130,000 compared $1.2 million at the start of this year. While we continually
work to reduce problem loan balances, as a community bank we believe that there
is little to be gained from routinely putting borrowers on a track to
foreclosure at the first sign of delinquency. Of the $21.2 million of problem
loans we held on our books at June 30, 2011, nearly 50% of these borrowers
continued to make payments and $3.6 million of those are actually paid current.
In the meantime we will continue to work with our borrowers to bring about the
best possible outcome. To recognize potential losses in our loan portfolio, we
have added $1.9 million to our reserve for loan losses in the first six months
of 2011, compared to $899,000 for the first six months of 2010. The contribution
to this reserve for the quarter was $675,000 compared to $465,000 last year in
the second quarter. This brings our reserve to $7.0 million or 2.20% of total
loans compared to $5.3 million and 1.65% at December 31, 2010. This equates to
33.2% of our non-performing loans, up from 29.0% last year at the same time. We
believe this amount will be adequate to cover losses based on our quarterly
evaluation and loan mix.”

The bank continues to maintain a strong capital base with a Tier I capital ratio
of 10.09% at June 30, 2011 compared to 9.57% at December 31, 2010. Mr. Williams
stated, “There is considerable uncertainty about where the economy is headed,
both nationally and to a lesser extent here in Greater Lafayette. We believe
that the combination of our continued profitability, a $7.0 million loan loss
reserve and over 10.00% capital should be adequate to allow us to work through
the issues presented by this struggling economy.”

“The Company will refrain from paying a quarterly cash dividend again this
quarter,” Williams stated. “Because the new banking regulations are expected to
address and likely revise capital levels for banks, we believe it is prudent to
use our earnings to build our capital levels to make sure the bank continues on
a firm capital foundation.”

The closing market price of LSB stock on August 3, 2011 was $15.40 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)
———————————————————

Six months ended Year ended
December 31,
Selected balance sheet data: June 30, 2011 2010

Cash and due from banks $10,061 $10,593
Interest bearing deposits 3,283 2,980
Securities available-for-sale 12,024 11,805
Loans held for sale 1,342 2,265
Net portfolio loans 311,644 320,810
Allowance for loan losses 7,028 5,343
Premises and equipment, net 6,192 6,116
Federal Home Loan Bank stock, at cost 3,185 3,583
Bank owned life insurance 6,348 6,264
Other assets 5,782 7,431
Total assets 359,861 371,847

Deposits 303,779 311,458
Advances from Federal Home Loan Bank 18,000 22,500
Other liabilities 1,756 2,312

Shareholders’ equity 36,326 35,577
Book value per share $23.37 $22.90
Equity / assets 10.09% 9.57%
Total shares outstanding 1,554,275 1,553,525

Asset quality data:
Non-accruing loans $20,366 $17,370
Loans past due 90 days still on accrual 790 676
Other real estate / assets owned 130 1,214
Total non-performing assets 21,286 19,260
Non-performing assets / total assets 5.92% 5.18%
Allowance for loan losses /non-performing
loans 33.22% 29.61%
Allowance for loan losses /non-performing
assets 33.02% 27.74%
Allowance for loan losses / total loans 2.20% 1.65%
Loans charged off (quarter-to-date and
year-to-date, respectively) $204 $1,382
Recoveries on loans previously charged off 38 229

Three months ended June Six months ended June
30, 30,
Selected operating
data: 2011 2010 2011 2010
—————— —- —- —- —-
Total interest income $4,358 $4,721 $8,834 $9,393
——————— —— —— —— ——
Total interest expense 1,046 1,572 2,157 3,295
———————- —– —– —– —–
Net interest income 3,312 3,149 6,677 6,098
——————- —– —– —– —–
Provision for loan
losses 675 465 1,851 899
—————— — — —– —
Net interest income
after provision 2,637 2,684 4,826 5,199
——————- —– —– —– —–
Non-interest income:
——————–
Deposit account
service charges 319 397 611 764
—————- — — — —
Gain on sale of
mortgage loans 226 92 390 177
————— — — — —
Gain(loss) on sale of
available-for-sale
securities 2 0 2 0
——————— — — — —
Gain(loss) on sale
OREO (311) (228) (336) (261)
—————— —- —- —- —-
Other non-interest
income 278 283 538 558
—————— — — — —
Total non-interest
income 514 544 1,205 1,238
—————— — — —– —–
Non-interest expense:
———————
Salaries and benefits 1,372 1,349 2,782 2,641
——————— —– —– —– —–
Occupancy and
equipment, net 268 326 596 665
————— — — — —
Computer service 147 148 289 275
—————- — — — —
Advertising 57 78 115 134
———– — — — —
FDIC Insurance Premium 134 164 318 323
———————- — — — —
Other 432 494 900 935
—– — — — —
Total non-interest
expense 2,410 2,559 5,000 4,973
—————— —– —– —– —–
Income before income
taxes 741 669 1,031 1,464
——————– — — —– —–
Income tax expense 264 212 350 475
—————— — — — —
Net income 477 457 681 989
———- — — — —

Weighted average
number of diluted
shares 1,556,146 1,553,538 1,556,525 1,553,525
—————— ——— ——— ——— ———
Diluted earnings per
share $0.31 $0.29 $0.44 $0.64
——————– —– —– —– —–

Return on average
equity 5.27% 5.31% 3.78% 5.77%
—————– —- —- —- —-
Return on average
assets 0.53% 0.48% 0.35% 0.53%
—————– —- —- —- —-
Average earning assets $333,808 $347,658 $336,854 $344,570
———————- ——– ——– ——– ——–
Net interest margin 3.97% 3.62% 3.96% 3.54%
——————- —- —- —- —-
Efficiency ratio 76.48% 79.28% 82.90% 77.26%
—————- —– —– —– —–

www.LSBANK.com

SOURCE LSB Financial Corp.