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

LAFAYETTE, Ind., Nov. 3, 2011 /PRNewswire/ — 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
$526,000 or $0.34 diluted earnings per share a year earlier. Year-to-date
earnings were $1.1 million or $0.73 diluted earnings per share compared to $1.5
million or $0.98 per share for the comparable period in 2010. The largest
positive impact on income comes from low market interest rates which translated
into a $551,000 increase in net interest margin year-to-date, 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 $927,000 over
last year for the first nine months but improved $25,000 over the same quarter
last year.

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 strengthened
capital, grew our net interest margin, and further built up our loan loss
reserves. The fundamentals of the bank are sound.”

Williams continued, “The bank continues to benefit from lower interest rates in
the economy which have resulted in an increase in our net interest margin from
3.64% for the nine months ended September 30, 2010 to 4.00% for the same period
in 2011. We have also increased non-interest income by $74,000 for the first
nine months of 2011 over the same period in 2010, and by $106,000 for the
quarter ended September 30, 2011 over the same period in 2010. We have done this
through increases in the gain on the sale of mortgage loans and through
decreases in the losses on the sale of our OREO properties. Our people are
essential 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 September 30, 2011, our non-performing assets (loans
and OREO properties) totaled $16.4 million or 4.50% of total assets, down from
the $19.3 million or 5.18% at the end of 2010. Our non-accruing loans were $14.9
million at September 30, 2011 compared to $18.0 million in December 2011. Our
level of OREOs increased to $1.5 million compared to $1.2 million at the end of
last year as we made progress in obtaining control of some properties which had
been working through the foreclosure system for months. While we continually
work to reduce problem loan balances, as a hometown, 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. One thing that helped us was a
drop in the unemployment rate to 7.3% in September. 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 $2.7 million to
our reserve for loan losses in the first nine months of 2011, compared to $1.8
million for the first nine months of 2010. The contribution to this reserve for
the quarter was $885,000 compared to $910,000 last year in the third quarter.
This brings our reserve to $5.4 million or 1.69% of total loans compared to $5.3
million and 1.65% at December 31, 2010. This equates to 36.05% of our
non-performing loans, up from 29.61% 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 capital ratio of
10.12% at September 30, 2011, comparable to the 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 $5.4 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 closing market price of LSB stock on November 2, 2011 was $13.50 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)
Selected balance sheet data: September 30, 2011 December 31, 2010
—————————- —————— —————–

Cash and due from banks $12,445 $10,593
———————– ——- ——-
Interest bearing deposits 4,711 2,980
————————- —– —–
Securities available-for-
sale 12,747 11,805
————————- —— ——
Loans held for sale 2,018 2,265
——————- —– —–
Net portfolio loans 309,206 320,810
——————- ——- ——-
Allowance for loan losses 5,366 5,343
————————- —– —–
Premises and equipment, net 6,201 6,116
————————— —– —–
Federal Home Loan Bank
stock, at cost 3,185 3,583
———————- —– —–
Bank owned life insurance 6,391 6,264
————————- —– —–
Other assets 6,942 7,431
———— —– —–
Total assets 363,846 371,847
———— ——- ——-

Deposits 306,843 311,458
——– ——- ——-
Advances from Federal Home
Loan Bank 18,000 22,500
————————– —— ——
Other liabilities 2,172 2,312
—————– —– —–

Shareholders’ equity 36,831 35,577
——————– —— ——
Book value per share $23.68 $22.90
——————– —— ——
Equity / assets 10.12% 9.57%
————— —– —-
Total shares outstanding 1,555,222 1,553,525
———————— ——— ———

Asset quality data:
——————-
Non-accruing loans $14,885 $17,370
—————— ——- ——-
Loans past due 90 days still
on accrual — 676
—————————- — —
Other real estate /assets
owned 1,479 1,214
————————- —– —–
Total non-performing assets 16,364 19,260
————————— —— ——
Non-performing assets /
total assets 4.50% 5.18%
———————– —- —-
Allowance for loan losses /
non-performing loans 36.05% 29.61%
————————— —– —–
Allowance for loan losses /
non-performing assets 32.79% 27.74%
————————— —– —–
Allowance for loan losses /
total loans 1.69% 1.65%
————————— —- —-
Loans charged off (quarter-
to-date and year-to-
date, respectively) $2,768 $1,382
————————— —— ——
Recoveries on loans
previously charged off 55 229
———————– — —

Three months ended Nine months ended
September 30, September 30,
Selected operating data: 2011 2010 2011 2010
———————— —- —- —- —-
Total interest income $4,399 $4,876 $13,233 $14,268
——————— —— —— ——- ——-
Total interest expense 1,041 1,489 3,198 4,784
———————- —– —– —– —–
Net interest income 3,358 3,387 10,035 9,484
——————- —– —– —— —–
Provision for loan
losses 885 910 2,736 1,809
—————— — — —– —–
Net interest income
after provision 2,473 2,477 7,299 7,675
——————- —– —– —– —–
Non-interest income:
——————–
Deposit account service
charges 381 393 992 1,157
———————– — — — —–
Gain on sale of mortgage
loans 334 366 724 542
———————— — — — —
Gain(loss) on sale of
available-for-sale
securities 5 0 7 0
——————— — — — —
Gain(loss) on sale OREO (103) (189) (438) (449)
———————– —- —- —- —-
Other non-interest
income 307 248 845 806
—————— — — — —
Total non-interest
income 924 818 2,130 2,056
—————— — — —– —–
Non-interest expense:
———————
Salaries and benefits 1,436 1,372 4,219 4,013
——————— —– —– —– —–
Occupancy and equipment,
net 292 321 888 986
———————— — — — —
Computer service 145 147 434 421
—————- — — — —
Advertising 95 68 210 203
———– — — — —
FDIC Insurance Premium 118 171 436 494
———————- — — — —
Other 606 428 1,505 1,362
—– — — —– —–
Total non-interest
expense 2,692 2,507 7,692 7,479
—————— —– —– —– —–
Income before income
taxes 705 788 1,737 2,252
——————– — — —– —–
Income tax expense 248 262 598 737
—————— — — — —
Net income 457 526 1,139 1,515
———- — — —– —–

Weighted average number
of diluted shares 1,554,060 1,553,525 1,553,972 1,553,525
———————– ——— ——— ——— ———
Diluted earnings per
share $0.29 $0.34 $0.73 $0.98
——————– —– —– —– —–

Return on average equity 5.00% 6.02% 4.19% 5.85%
———————— —- —- —- —-
Return on average assets 0.51% 0.55% 0.42% 0.53%
———————— —- —- —- —-
Average earning assets $329,296 $353,706 $334,322 $347,706
———————- ——– ——– ——– ——–
Net interest margin 4.08% 3.83% 4.00% 3.64%
——————- —- —- —- —-
Efficiency ratio 79.25% 76.08% 81.58% 76.86%
—————- —– —– —– —–

SOURCE LSB Financial Corp.