10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20529

FORM 10-Q

þ Quarterly Report Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934

For the quarterly period ended March 31, 2007

o Transition Report Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934

For the transition period from                      to                     

Commission File Number 000-32955

LSB Corporation

(Exact name of Registrant as specified in its Charter)

Massachusetts
(State or other jurisdiction of
incorporation or organization) 04-3557612
(I.R.S. Employer
Identification Number)

30 Massachusetts Avenue, North Andover, MA
(Address of principal executive offices) 01845
(Zip Code)

(978) 725-7500
(Registrant’s telephone number, including area code)

Indicate by check mark whether the Registrant (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 report), and (2) has been subject to such filing requirements for the past 90 days.

Yes þ     No o

Indicate by a check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act (check one).

Large Accelerated Filer o     Accelerated Filer o     Non-Accelerated Filer þ

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o     No þ

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.

Class	Outstanding as of May 4, 2007
Common Stock, par value $.10 per share	4,601,617 shares

LSB CORPORATION AND SUBSIDIARY

INDEX

		Page:
PART I — FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS
	Consolidated Balance Sheets		3
	Consolidated Statements of Income		4
	Consolidated Statements of Changes in Stockholders’ Equity		5
	Consolidated Statements of Cash Flows		6
	Notes to Consolidated Financial Statements		7—9
ITEM 2 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS			9—17
ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK			18
ITEM 4 CONTROLS 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			19
ITEM 6 EXHIBITS			20
SIGNATURES			21
EXHIBIT INDEX			22
EX-10.1 Special Termination Agreement dated May 10, 2007
EX-31.1 Section 302 CEO Certification
EX-31.2 Section 302 CFO Certification
EX-32.1 Section 906 CEO Certification
EX-32.2 Section 906 CFO Certification

2

PART 1 — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

LSB CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)

	March 31,			December 31,
	2007			2006
	(In thousands, except share data)
ASSETS
Assets:
Cash and due from banks	$	7,150		$	6,896
Federal funds sold		14,938			11,871
Total cash and cash equivalents		22,088			18,767
Investment securities available for sale (amortized cost of $216,119 in 2007 and $221,652 in 2006)		213,942			218,682
Federal Home Loan Bank stock, at cost		9,981			10,046
Loans, net of allowance for loan losses		303,350			283,854
Premises and equipment		3,603			3,807
Accrued interest receivable		2,465			2,259
Deferred income tax asset, net		3,310			3,606
Other assets		958			1,944
Total assets	$	559,697		$	542,965
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Deposits	$	307,620			295,662
Borrowed funds		189,246			184,782
Advance payments by borrowers for taxes and insurance		680			586
Other liabilities		2,912			3,404
Total liabilities		500,458			484,434
Stockholders’ equity:
Preferred stock, $.10 par value per share:
5,000,000 shares authorized, none issued		—			—
Common stock, $.10 par value per share;
20,000,000 shares authorized; 4,601,617 and 4,593,617 shares issued and outstanding at March 31, 2007 and December 31, 2006, respectively		460			459
Additional paid-in capital		61,674			61,578
Accumulated deficit		(1,970	)		(2,090	)
Accumulated other comprehensive loss, net of tax		(925	)		(1,416	)
Total stockholders’ equity		59,239			58,531
Total liabilities and stockholders’ equity	$	559,697		$	542,965

The accompanying notes are an integral part of these unaudited Consolidated Financial Statements.

3

LSB CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)

	Three months ended
	March 31,
	2007		2006
	(In thousands, except share data)
Interest and dividend income:
Loans	$	5,298	$	3,948
Investment securities available for sale		2,514		2,438
Federal Home Loan Bank stock		160		123
Short term interest income		121		26
Total interest and dividend income		8,093		6,535
Interest expense:
Deposits		2,213		1,547
Borrowed funds		2,106		1,694
Total interest expense		4,319		3,241
Net interest income		3,774		3,294
Provision for loan losses		60		—
Net interest income after provision for loan losses		3,714		3,294
Non-interest income:
Deposit account fees		186		209
Loan servicing fees, net		58		7
Gain on sales of mortgage loans, net		—		4
Other income		110		110
Total non-interest income		354		330
Non-interest expense:
Salaries and employee benefits		1,764		2,067
Occupancy and equipment expense		286		330
Data processing expense		281		233
Marketing expense		29		38
Professional expense		108		163
Other expense		390		392
Total non-interest expense		2,858		3,223
Income before income tax expense		1,210		401
Income tax expense		446		141
Net income	$	764	$	260
Average shares outstanding		4,598,128		4,496,013
Common stock equivalents		30,697		59,712
Average diluted shares outstanding		4,628,825		4,555,725
Basic earnings per share	$	0.17	$	0.06
Diluted earnings per share	$	0.17	$	0.06

The accompanying notes are an integral part of these unaudited Consolidated Financial Statements.

4

LSB CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 2006 AND THE
THREE MONTHS ENDED MARCH 31, 2007
(UNAUDITED)

					(Accumulated			Accumulated
			Additional		Deficit)/			Other			Total
	Common		Paid-In		Retained			Comprehensive			Stockholders’
	Stock		Capital		Earnings			Loss			Equity
	(In thousands, except per share data)
Balance at December 31, 2005	$	446	$	59,856	$	326		$	(706	)	$	59,922
Net income		—		—		126			—			126
Other comprehensive loss:
Unrealized loss on securities available for sale, net (tax effect $619)		—		—		—			(1,160	)		(1,160	)
Total comprehensive loss												(1,034	)
Stock-based compensation		—		400		—			—			400
Exercise of stock options and tax benefit		13		1,322		—			—			1,335
Adjustment to initially apply SFAS No. 158, net of tax									450			450
Dividends declared and paid ($0.56 per share)		—		—		(2,542	)		—			(2,542	)
Balance at December 31, 2006	$	459	$	61,578	$	(2,090	)	$	(1,416	)	$	58,531

								Accumulated
			Additional					Other			Total
	Common		Paid-In		Accumulated			Comprehensive			Stockholders’
	Stock		Capital		Deficit			Loss			Equity
	(In thousands, except per share data)
Balance at December 31, 2006	$	459	$	61,578	$	(2,090	)	$	(1,416	)	$	58,531
Net income		—		—		764			—			764
Other comprehensive income:
Unrealized gain on securities available for sale, net (tax effect $302)		—		—		—			491			491
Total comprehensive income												1,255
Stock-based compensation		—		7		—			—			7
Exercise of stock options and tax benefit		1		89		—			—			90
Dividends declared and paid ($0.14 per share)		—		—		(644	)		—			(644	)
Balance at March 31, 2007	$	460	$	61,674	$	(1,970	)	$	(925	)	$	59,239

The accompanying notes are an integral part of these unaudited Consolidated Financial Statements.

5

LSB CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

	Three months ended March 31,
	2007			2006
	(In thousands)
Cash flows from operating activities:
Net income	$	764		$	260
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan loss		60			—
Gains on sales of mortgage loans, net		—			(4	)
Net amortization of investment securities		12			332
Depreciation and amortization of premises and equipment		146			106
Loans originated for sale		—			(682	)
Proceeds from sales of mortgage loans		—			998
Increase in accrued interest receivable		(206	)		(467	)
Deferred income tax benefit		(6	)		(218	)
Stock-based compensation		7			32
Decrease in other assets		986			101
Decrease in other liabilities		(492	)		(360	)
Net cash provided by operating activities		1,271			98
Cash flows from investing activities:
Proceeds from maturities of investment securities held to maturity		—			2,900
Purchases of investment securities available for sale		—			(27,600	)
Redemption of FHLB stock		65			—
Principal payments of investment securities held to maturity		—			4,680
Principal payments of investment securities available for sale		5,521			943
Increase in loans, net		(19,556	)		(8,083	)
Reductions (purchases) of premises and equipment		58			(99	)
Net cash used in investing activities		(13,912	)		(27,259	)
Cash flows from financing activities:
Net increase (decrease) in deposits		11,958			(156	)
Additions to Federal Home Loan Bank advances		32,000			20,000
Payments on Federal Home Loan Bank advances		(10,035	)		(5,240	)
Net increase (decrease) in agreements to repurchase securities		1,499			(406	)
Net (decrease) increase in other borrowed funds		(19,000	)		14,000
Increase in advance payments by borrowers		94			178
Dividends paid		(644	)		(628	)
Proceeds from exercise of stock options		68			618
Excess tax benefit from exercise of stock options		22			57
Net cash provided by financing activities		15,962			28,423
Net increase in cash and cash equivalents		3,321			1,262
Cash and cash equivalents, beginning of period		18,767			10,687
Cash and cash equivalents, end of period	$	22,088		$	11,949
Cash paid during the period for:
Interest on deposits	$	2,213		$	1,547
Interest on borrowed funds		2,137			1,601
Income taxes		28			896

The accompanying notes are an integral part of these unaudited Consolidated Financial Statements.

6

LSB CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2007
(UNAUDITED)

1. BASIS OF PRESENTATION

LSB Corporation (the “Corporation” or the “Company”) is a Massachusetts corporation and the holding company of its wholly-owned subsidiary River Bank (the “Bank”), a state-chartered Massachusetts savings bank organized in 1868. The Corporation was organized by the Bank on July 1, 2001 to be a bank holding company and to acquire all of the capital stock of the Bank.

The Corporation is supervised by the Board of Governors of the Federal Reserve System (“FRB”), and it is also subject to the jurisdiction of the Massachusetts Division of Banks, while the Bank is subject to the regulations of, and periodic examination by, the Federal Deposit Insurance Corporation (“FDIC”) and the Massachusetts Division of Banks. The Bank’s deposits are insured by the Deposit Insurance Fund of the FDIC up to $100,000 per account, as defined by the FDIC (except for certain retirement accounts which are insured up to $250,000), and the Depositors Insurance Fund (“DIF”) of Massachusetts, a private industry-sponsored insurer, for customer deposit amounts in excess of FDIC insurance limits. The Consolidated Financial Statements include the accounts of LSB Corporation and its wholly-owned consolidated subsidiary, River Bank, and the Bank’s wholly-owned subsidiaries, Shawsheen Security Corporation, Shawsheen Security Corporation II, and Spruce Wood Realty Trust. All inter-company balances and transactions have been eliminated in consolidation. The Company has one reportable operating segment. In the opinion of management, the accompanying Consolidated Financial Statements reflect all necessary adjustments consisting of normal recurring accruals for fair presentation. Certain amounts in prior periods have been re-classified to conform to the current presentation.

The Corporation’s Consolidated Financial Statements have been prepared in conformity with accounting principles generally accepted in the United States of America. Accordingly, management is required to make estimates and assumptions that affect amounts reported in the balance sheets and statements of income. Actual results could differ significantly from those estimates and judgments. A material estimate that is particularly susceptible to change relates to the allowance for loan losses.

The interim results of consolidated income are not necessarily indicative of the results for any future interim period or for the entire year. These interim Consolidated Financial Statements do not include all disclosures associated with annual financial statements and, accordingly, should be read in conjunction with the annual Consolidated Financial Statements and accompanying notes included in the Company’s Annual Report on Form 10-K as of and for the year ended December 31, 2006 filed with the Securities and Exchange Commission.

2. EQUITY AWARDS

At March 31, 2007, there were no shares available for grant under either the 1986 Plan due to its expiration or the 1997 Plan due to all authorized awards previously being granted although subsequent forfeitures by former participants would allow an additional 10,425 options to be granted under the 1997 Plan. Under all plans, the option exercise price equals the fair market value on the date of grant. All options granted under the 1986 and 1997 Plans vested over three years from the date of grant and have ten-year contractual terms. All currently outstanding options granted under these plans expire between 2007 and 2015. All options granted under the 2006 Plan vest over two years from the date of grant and have seven-year contractual terms. Options granted in 2006 under the 2006 Plan expire in 2013. Restricted stock awards of 14,000 were granted during 2006 representing shares of stock granted with a transfer restriction of one year. These stock awards were fully vested upon grant and allow the receipt of dividends and voting rights on all shares. The Company issues shares for option exercises and restricted stock issuances from its pool of authorized but unissued shares.

Cash received from stock option exercises for the three months ended March 31, 2007 and 2006 was approximately $68,000 and $618,000, respectively. The actual tax benefit realized for the tax deductions from option exercises under all plans totaled $22,000 and $57,000, respectively, for the three months ended March 31, 2007 and 2006. No cash was used by the Company to settle equity instruments granted under share-based compensation arrangements during the three months ended March 31, 2007 and 2006.

7

A summary of the status of the Company’s 2006 Plan, 1997 Plan and 1986 Plan for the three months ended March 31, 2007 is presented in the table below:

	2007
				Weighted		Wtd. Avg.
				Average		Remaining
	Option			Exercise		Contractual
	Shares			Price ($)		Term (years)
Balance, January 1		244,900		$	14.07		5.4
Granted		—			—		—
Exercised		(8,000	)	$	8.52		5.2
Forfeited		—			—		—
Expired		—			—		—
Balance, March 31		236,900		$	14.26		5.4
Options exercisable at March 31		214,800		$	14.03		5.2
Weighted average grant date fair value of options granted		n/a			n/a

The aggregate intrinsic value in the preceding table represents the total pretax intrinsic value, based on the average of the high price and low price at which the Company’s common stock traded on March 31, 2007 of $529,000, which would have been received by the option holders had all option holders exercised their options as of that date.

A summary of the status of the Company’s nonvested stock awards and stock options as of March 31, 2007 and changes during the three months then ended is presented in the table below:

	Nonvested Shares Issued Under the Plans
	Stock Awards				Stock Options
			Weighted					Weighted
			Average					Average
			Grant Date					Grant Date
	Shares		Fair Value		Shares			Fair Value
Nonvested at January 1, 2007		—	$	—		35,575		$	16.59
Granted		—		—		—			—
Vested		—		—		(13,475	)	$	16.77
Forfeited		—		—		—			—
Nonvested at March 31, 2007		—	$	—		22,100		$	16.47

3. DEFINED BENEFIT PLAN

The Company terminated the Savings Bank Employees’ Retirement Association defined benefit plan (the “Plan”) effective on December 31, 2006. All assets of the Plan will be applied to the payment of the accrued benefit obligations and plan expenses in connection with the plan’s termination. No pension benefits accrued under the Plan as of the termination date will be reduced or forfeited in connection with the plan termination. In connection with the termination of the Plan, the Company froze future pension benefits effective December 31, 2006. As a result of that cessation of future pension benefits, the Company recognized a curtailment gain of $602,000 pre-tax, due to the reversal of the accrued pension liability recorded on the financial statements.

Effective December 31, 2006, the Company adopted Statement of Financial Accounting Standards No. 158 which resulted in the recognition of the net gains or losses and prior service costs that had not yet been included in the net periodic benefits costs as components of the ending balance of accumulated other comprehensive income, net of tax. The Plan’s assets are distributed to Plan participants in the form of benefits. The Plan paid benefits of $2.0 million and $142,000 for the Plan years ended October 31, 2006 and 2005, respectively. The Company anticipates that the Plan will distribute all of its assets, or approximately $5.9 million in total, during the third quarter of 2007. As a result of the final distribution, the Company anticipates recording a settlement gain of approximately $750,000 during the third quarter of 2007.

8

4. CONTINGENCIES

The Bank is involved in various legal proceedings incidental to its business. During the quarter ended March 31, 2007, no new legal proceeding was filed and no material development in any pending legal proceeding occurred that the Company expects will have a material adverse effect on its financial condition or operating results.

5. RECENT ACCOUNTING PRONOUNCEMENTS

In March 2006, the Financial Accounting Standards Board (“FASB”) issued Statement No. 156, “Accounting for Servicing of Financial Assets — An Amendment of FASB Statement No. 140” (“SFAS 156”). SFAS 156 requires that all separately recognized servicing assets and servicing liabilities be initially measured at fair value, if practicable. The statement permits, but does not require, the subsequent measurement of servicing assets and servicing liabilities at fair value. SFAS 156 is effective for fiscal years that begin after September 15, 2006. The adoption of SFAS 156 did not have a material impact on the Company’s financial statements.

In June 2006, the FASB issued Financial Interpretation No. 48, “Accounting for Uncertainty in Income Taxes- An Interpretation of FASB Statement No. 109” (“FIN 48”) which clarifies the accounting for uncertainty in income taxes recognized in a company’s financial statements and provides guidance on evaluating and measuring a company’s tax position and recognition of income tax assets and liabilities. Application for the provisions of this Interpretation will be effective for reporting periods beginning after December 15, 2006. The adoption of FIN 48 did not have a material impact on the Company’s financial statements.

In September 2006, the FASB issued Statement No. 157, “Fair Value Measurements” (“SFAS 157”) to provide consistency and comparability in determining fair value measurements and to provide for expanded disclosures about fair value measurements. The definition of fair value maintains the exchange price notion in earlier definitions of fair value but focuses on the exit price of the asset or liability. The exit price is the price that would be received to sell the asset or paid to transfer the liability adjusted for certain inherent risks and restrictions. Expanded disclosures are also required about the use of fair value to measure assets and liabilities. The effective date is for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. The Company does not believe that adoption of SFAS 157 will have a material impact on the Company’s financial statements.

In February 2007, the FASB issued Statement No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (“SFAS 159”). SFAS 159 permits entities to measure certain financial assets and financial liabilities at fair value and amended FASB Statement No. 115, “Accounting for Investments in Debt and Equity Securities”. Unrealized gains and losses on items for which the fair value option is elected will be reported in earnings. SFAS 159 is effective for fiscal years beginning after November 15, 2007. Management is currently evaluating the impact of adopting this statement on the Company’s financial statements.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FORWARD-LOOKING STATEMENTS

In this report, the Company has made forward-looking statements (within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities and Exchange Act of 1934 as amended) that are subject to risks and uncertainties. Such forward-looking statements are expressions of management’s expectations as of the date of this report regarding future events or trends and which do not relate to historical matters. Such expectations may or may not be realized, depending on a number of variable factors, including but not limited to, changes in interest rates, general economic conditions, regulatory considerations and competition. For more information about these factors, please see our 2006 Annual Report on Form 10-K on file with the SEC, including the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations”. As a result of such risk factors and uncertainties, the Company’s actual results may differ materially from such forward-looking statements. The Company does not undertake and specifically disclaims any obligation to publicly release updates or revisions to any such forward-looking statements as a result of new information, future events or otherwise.

9

Critical Accounting Policies & Estimates

The Company has not changed its significant accounting and reporting policies from those disclosed in its 2006 Annual Report on Form 10-K. In applying these accounting policies, management is required to exercise judgment in determining many of the methodologies, assumptions and estimates to be utilized. As discussed in the Company’s 2006 Annual Report on Form 10-K, the three most significant areas in which management applies critical assumptions and estimates that are particularly susceptible to change relate to the determination of the allowance for loan losses, deferred tax asset valuation and impairment of the investment portfolio. Management’s estimates and assumptions affect the reported amounts of assets and liabilities as of the balance sheet date and revenues and expenses for the period. Actual results could differ from those estimates.

EXECUTIVE LEVEL OVERVIEW

The Company’s financial results are dependent on the following areas of the income statement: net interest income, provision for loan losses, non-interest income, non-interest expense and provision for income taxes. Net interest income is the primary earnings of the Company and the main focus of management. Management’s efforts are to increase the commercial loan portfolios, which include construction, commercial real estate and commercial loans. Management’s efforts for funding are to increase core deposit accounts, which are lower interest-bearing accounts. Net interest income is the difference between interest earned on loans and investment securities and interest paid on deposits and borrowings. Deposits and borrowings have short durations and the costs of these funds do not necessarily rise and fall concurrent with earnings from loans and investment securities. There are many risks involved in managing net interest income including, but not limited to, credit risk, interest rate risk and duration risk. These risks have a direct impact on the level of net interest income. The Company manages these risks through its internal credit and underwriting function and review at meetings of the Asset and Liability Management Committee (“ALCO”) on a regular basis. The credit review process reviews loans for underwriting and grading of loan quality while ALCO reviews the liquidity, interest rate risk, duration risk and allocation of capital resources. Loan quality has a direct impact on the amount of provisions for loan losses the Company reports.

The provision for loan losses was $60,000 for the three months ended March 31, 2007 based on management’s assessment of the adequacy of the allowance based on an evaluation of the Bank’s loan portfolio and the level of non-performing loans.

Non-interest income includes gains and losses on sales of investment securities and various fees. Customers’ loan and deposit accounts generate various amounts of fee income depending on the product selected. The Company receives fee income from servicing loans that were sold in previous periods. Non-interest income is primarily impacted by the volume of customer transactions, which could change in response to changes in interest rates, pricing and competition.

Non-interest expenses include salaries and employee benefits, occupancy and equipment, professional, data processing and other expenses of the Company, which generally are directly related to business volume and are controlled by a budget process.

Provisions for income taxes are directly related to earnings of the Company. Changes in the statutory tax rates and the earnings of the Company, the Bank and its subsidiaries, as well as the mix of earnings among the different entities would affect the amount of income tax expense reported and the overall effective income tax rate recorded.

The Company believes that the most significant challenge in the current interest rate environment is to increase net interest income while also maintaining competitive deposit rates. The Company was able to achieve a 15% increase in the net interest income for the three months ended March 31, 2007 over the comparable period in 2006 due to the balance sheet restructuring undertaken in the second quarter of 2006 as well as the continued emphasis on increasing loan originations instead of lower-yielding investment securities.

10

FINANCIAL CONDITION

SUMMARY

The Company maintains its commitment to servicing the banking needs of the local community in the Merrimack Valley area of northeastern Massachusetts and southern New Hampshire. The Company had total assets of $559.7 million at March 31, 2007 compared to $543.0 million at December 31, 2006. The increase in asset size at March 31, 2007 from December 31, 2006 reflected strong loan growth of $19.6 million since year end 2006 accompanied by a slight increase in Federal Funds sold of $3.1 million partially offset by a decline of $4.7 million in the investment portfolio from December, 2006.

Investments:

The investment securities portfolio totaled $213.9 million or 38.2% of total assets at March 31, 2007, compared to $218.7 million or 40.3% of total assets at December 31, 2006, a decrease of $4.7 million from year-end.

During the first quarter of 2007, approximately $5.5 million of investments available for sale paid down and the funds were reinvested in new loan originations. The Company intends to use the principal paydowns and maturities from the investment portfolio to fund future loan growth as a strategy to improve the Company’s net interest margin.

The net unrealized loss as of March 31, 2007 totaled $2.2 million, or $1.4 million net of taxes. The unrealized losses are attributable to changes in interest rates and a corresponding decline in fair value and are not related to credit quality, nor are they deemed to be other than temporarily impaired.

The following table reflects the components and carrying values of the investment securities portfolio at March 31, 2007 and December 31, 2006:

	3/31/07									12/31/06
	Amortized		Unrealized					Fair		Amortized		Unrealized					Fair
	Cost		Gains		Losses			Value		Cost		Gains		Losses			Value
	(In thousands)									(In thousands)
Investment securities available for sale:
U.S. treasury obligations	$	5,601	$	—	$	(337	)	$	5,264	$	5,605	$	—	$	(391	)	$	5,214
Federal agency bonds		780		10		(2	)		788		839		10		(2	)		847
Government-sponsored entities		34,739		2		(396	)		34,345		34,871		4		(532	)		34,343
U.S. treasury and Government sponsored entities		41,120		12		(735	)		40,397		41,315		14		(925	)		40,404
Mortgage-backed securities		95,322		676		(1,092	)		94,906		98,608		606		(1,316	)		97,898
Collateralized mortgage obligations		70,833		100		(1,149	)		69,784		72,899		73		(1,417	)		71,555
Collateralized mortgage obligations and mortgage-backed securities		166,155		776		(2,241	)		164,690		171,507		679		(2,733	)		169,453
Corporate obligations		7,330		74		(13	)		7,391		7,316		50		(2	)		7,364
Mutual funds		1,000		—		(50	)		950		1,000		—		(53	)		947
Equity securities		514		—		—			514		514		—		—			514
Corporate and other investment securities		8,844		74		(63	)		8,855		8,830		50		(55	)		8,825
Total investment securities available for sale	$	216,119	$	862	$	(3,039	)	$	213,942	$	221,652	$	743	$	(3,713	)	$	218,682

Loans:

Total loans increased $19.6 million to $307.7 million or 55.0% of total assets at March 31, 2007 versus $288.2 million or 53.1% of total assets at December 31, 2006. Retail loans, comprised primarily of residential mortgage loans, increased $101,000 during the first three months of 2007 while corporate loans, comprised mainly of construction and commercial real estate loans, increased $19.6 million during the same period. The loan growth has been experienced in all corporate loan categories and residential mortgage loans offset by slight declines in equity and consumer loans and reflects the continued interest in loan originations over investment purchases.

11

The following table reflects the loan portfolio at March 31, 2007 and December 31, 2006:

	3/31/07			12/31/06
	(In thousands)
Residential mortgage loans	$	71,087		$	69,876
Home equity lines and loans		19,639			20,339
Consumer loans		565			975
Total retail loans		91,291			91,190
Construction loans		51,345			43,283
Commercial real estate loans		149,779			142,820
Commercial loans		15,301			10,870
Total corporate loans		216,425			196,973
Total loans		307,716			288,163
Allowance for loan losses		(4,366	)		(4,309	)
Total loans, net	$	303,350		$	283,854

Allowance For Loan Losses:

The following table summarizes changes in the allowance for loan losses for the three months ended March 31, 2007 and 2006:

	Three months ended
	3/31/07			3/31/06
	(In thousands)
Beginning balance	$	4,309		$	4,126
Provision charged to operations		60			—
Recoveries on loans previously charged-off		5			38
Loans charged-off		(8	)		(4	)
Ending balance	$	4,366		$	4,160

The allowance for loan losses increased modestly to $4.4 million at March 31, 2007 as compared to $4.3 million at December 31, 2006. However, the allowance for loan losses as a percent of total loans has decreased to 1.42% at March 31, 2007 down from 1.50% at December 31, 2006, due to an increase in total loans outstanding at March 31, 2007 compared to December 31, 2006. The Company considers the current level of the allowance for loan losses to be appropriate and adequate. The corporate loan portfolio did not have any loan charge-offs and delinquencies were low for the first quarter of 2007.

The balance of the allowance for loan losses reflects management’s assessment of estimated credit quality and is based on a review of the risk characteristics of the loan portfolio. The Company considers many factors in determining the adequacy of the allowance for loan losses. Collateral value on a loan by loan basis, trends of loan delinquencies on a portfolio segment level, risk classification identified in the Company’s regular review of individual loans, and economic conditions are primary factors in establishing allowance levels. Management believes the allowance level is adequate to absorb the estimated credit losses inherent in the loan portfolio. The allowance for loan losses reflects information available to management at the end of each period.

Risk Assets:

Risk assets consist of non-performing loans and other real estate owned (OREO). Non-performing loans consist of both loans 90 days or more past due and loans placed on non-accrual because full collection of the principal balance is in doubt. Other real estate owned is comprised of foreclosed properties where the Company has formally received title or has possession of the collateral.

Total risk assets were $94,000 and $1.1 million, respectively, at March 31, 2007 and December 31, 2006. All of the $1.1 million in impaired loans at December 31, 2006, had been measured using the fair value of the collateral

12

method and did not require a related allowance. The Company had no impaired loans at March 31, 2007 or March 31, 2006. The increase in non-performing loans as of December 31, 2006 was primarily due to the deterioration of one borrower with multiple loans that were collateral dependent. This relationship was resolved in the first quarter of 2007 and paid in full.

The following table summarizes the Company’s risk assets at March 31, 2007, December 31, 2006 and March 31, 2006:

	3/31/07			12/31/06			3/31/06
	(Dollars in thousands)
Non-performing loans	$	94		$	1,057		$	32
Other real estate owned		—			—			—
Total risk assets	$	94		$	1,057		$	32
Risk assets as a percent of total loans		0.03	%		0.37	%		0.01	%
Risk assets as a percent of total assets		0.02	%		0.19	%		0.01	%

Deposits:

Total interest-bearing deposits amounted to $275.8 million at March 31, 2007 compared to $264.2 million at December 31, 2006, an increase of $11.6 million due primarily to an increase of $11.4 million in certificates of deposit. Non-interest bearing or demand deposit accounts increased slightly to $31.8 million at March 31, 2007, an increase of $361,000 from December 31, 2006. The increase in term certificates of deposit reflects the customers’ preference in achieving the highest yields possible as the rates paid on these accounts have increased in conjunction with the increases in interest rates coupled with an aggressive promotional campaign targeting new customers. Partially offsetting these increases was a decrease of $924,000 in savings accounts. Money market investment accounts and NOW accounts increased $1.1 million and $49,000, respectively, from December 31, 2006.

The following table reflects the components of the deposit portfolio at March 31, 2007 and December 31, 2006:

	3/31/07		12/31/06
	(In thousands)
NOW and super NOW accounts	$	17,756	$	17,707
Demand deposit accounts		31,785		31,424
Savings accounts		32,752		33,676
Money market investment accounts		74,223		73,163
Certificates of deposit		151,104		139,692
Total deposits	$	307,620	$	295,662

Borrowings:

Borrowings consist of long-term and short-term Federal Home Loan Bank (FHLB) advances and securities sold under agreements to repurchase. Total borrowings amounted to $189.2 million at March 31, 2007 compared to $184.8 million at December 31, 2006, an increase of $4.5 million. While the total borrowings increased since year-end, the mix of borrowings has shifted from a heavier reliance on short-term borrowings to longer-term advances. Short-term borrowings decreased $19.0 million from December 31, 2006 while long-term FHLB advances increased $22.0 million due to the availability of more favorable, longer term rates. The Company believes its borrowing position leaves the Company less vulnerable to rate fluctuations in the coming year.

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The following table reflects the components of borrowings at March 31, 2007 and December 31, 2006:

	3/31/07		12/31/06
	(In thousands)
FHLB long-term advances	$	165,484	$	143,519
FHLB short-term borrowings		17,000		36,000
Customer repurchase agreements		6,762		5,263
Total borrowings	$	189,246	$	184,782

RESULTS OF OPERATIONS

THREE MONTHS ENDED MARCH 31, 2007 AND 2006

SUMMARY

The Company reported net income of $764,000, or $0.17 per diluted share, as compared to net income of $260,000, or $0.06 per diluted share, for the three months ended March 31, 2007 and 2006, respectively. The first quarter of 2007 experienced an increase in net income primarily due to a reduction in salary and benefit expenses resulting from costs of $373,000 associated with the resignation of two former executive officers in 2006 along with increases in net interest income of $480,000 and increases in non-interest income of $24,000.

Net Interest Income From Operations:

Net interest income for the three months ended March 31, 2007 increased by $480,000, or 14.6%, to $3.8 million from $3.3 million for the same period of 2006. The net interest rate spread increased to 2.30% for the three months ended March 31, 2007 versus 2.21% for the same period of 2006. Interest income for the three months ended March 31, 2007 increased $1.6 million primarily due to higher average loan balances and higher investment security and loan rates from the same period of 2006. Partially offsetting the increase in total interest income was a corresponding increase of $1.1 million in total interest expense primarily due to higher rates paid on deposits and borrowings and an increase in average deposit and borrowing balances. Another factor in the increase in the net interest margin to 2.88% versus 2.60% for the quarters ended March 31, 2007 and 2006, respectively, was due to the balance sheet restructuring undertaken in the second quarter of 2006.

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The following table presents the Company’s average balance sheet, net interest income and average interest rates for the three months ended March 31, 2007 and 2006. Average loans include non-performing loans.

	Three months ended								Three months ended
	3/31/07								3/31/06
						Average								Average
	Average					Interest			Average					Interest
	Balance			Interest		Rate			Balance			Interest		Rate
	(Dollars in thousands)
Assets
Investment securities:
Short-term investments	$	9,206		$	121		5.33	%	$	2,346		$	26		4.49	%
U. S. treasury and Government- sponsored entities		40,367			392		3.94			102,361			807		3.20
Corporate and other investment securities		18,861			271		5.83			25,780			237		3.73
Collateralized mortgage obligations and mortgage- backed securities		167,070			2,011		4.88			145,084			1,517		4.24
Total investment securities		235,504			2,795		4.81			275,571			2,587		3.81
Loans:
Residential real estate		70,465			985		5.67			63,119			821		5.28
Equity		20,033			307		6.22			10,641			160		6.10
Consumer		911			16		7.12			532			8		6.10
Total retail loans		91,409			1,308		5.80			74,292			989		5.40
Construction		46,224			1,077		9.45			26,824			571		8.63
Commercial real estate		144,975			2,635		7.37			127,232			2,216		7.06
Commercial		13,591			278		8.30			9,057			172		7.70
Total corporate loans		204,790			3,990		7.90			163,113			2,959		7.36
Total loans		296,199			5,298		7.25			237,405			3,948		6.74
Total interest-earning assets		531,703			8,093		6.17	%		512,976			6,535		5.17	%
Allowance for loan losses		(4,327	)							(4,147	)
Other assets		16,286								17,471
Total assets	$	543,662							$	526,300
Liabilities and Stockholders’ Equity
Deposits:
NOW and super NOW accounts	$	17,784		$	8		0.18	%	$	36,387		$	11		0.12	%
Regular savings accounts		32,894			40		0.49			41,013			50		0.49
Money market investment accounts		73,405			524		2.90			79,849			430		2.18
Certificates of deposit and escrow		146,621			1,641		4.54			127,772			1,056		3.35
Total interest-bearing deposits		270,704			2,213		3.32			285,021			1,547		2.20
Borrowed funds:
Other borrowed funds		33,442			420		5.09			33,445			365		4.43
FHLB advances		148,752			1,686		4.60			125,776			1,329		4.29
Total borrowed funds		182,194			2,106		4.69			159,221			1,694		4.31
Total interest-bearing liabilities		452,898			4,319		3.87	%		444,242			3,241		2.96	%
Non-interest-bearing deposits		29,085								17,439
Other liabilities		3,714								4,794
Total liabilities		485,697								466,475
Stockholders’ equity		57,965								59,825
Total liabilities and stockholders’ equity	$	543,662							$	526,300
Net interest rate spread							2.30	%							2.21	%
Net interest income				$	3,774							$	3,294
Net interest margin on average earning assets							2.88	%							2.60	%

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Interest Income:

Interest income increased $1.6 million, or 23.8%, during the first quarter of 2007 versus the same quarter in 2006, primarily attributable to a rise in average loan balances coupled with higher investment security rates.

Average loan interest rates increased 51 basis points from 6.74% to 7.25% during the first quarters of 2006 and 2007, respectively, contributing $242,000 to interest income. Average loan balances rose $58.8 million from $237.4 million in 2006 to $296.2 million in 2007 contributing $1.1 million to interest income.

Average investment security interest rates increased 100 basis points during the first quarter of 2007 from 3.81% in 2006 to 4.81% in 2007 adding $518,000 to interest income. Average investment security balances declined $40.1 million from $275.6 million in 2006 to $235.5 million in 2007 reducing interest income by $310,000.

Interest Expense:

Interest expense increased $1.1 million, or 33.3%, during the first quarter of 2007 from $3.2 million in the first quarter of 2006 to $4.3 million in the first quarter of 2007, primarily due to the rise in overall market interest rates experienced by both the deposit portfolio and borrowed funds position.

Average deposit interest rates increased 112 basis points from 2.20% to 3.32% in the first quarter of 2006 and 2007, respectively, contributing $548,000 to interest expense. Average interest-bearing deposit balances decreased by $14.3 million from $285.0 million in 2006 to $270.7 million in 2007, but a change in the mix resulting in a preference for higher costing certificates of deposit increased interest expense by $118,000.

Average borrowed funds interest rates increased 38 basis points from 4.31% in the first quarter of 2006 to 4.69% in the same quarter of 2007 resulting in a rise of $157,000 to interest expense, the majority of which, $102,000, related to longer term borrowed funding. Average borrowed fund balances rose $23.0 million, or 14.4%, from $159.2 million in 2006 to $182.2 million in 2007. This increase resulted in additional interest expense of $255,000 entirely due to an increase in longer term borrowed funds.

Provision for Loan Losses:

The provision for loan losses was $60,000 and zero for the three months ended March 31, 2007 and 2006, respectively. The provision of $60,000 in 2007 reflects management’s analysis of loan growth during the first quarter of 2007. The absence of a provision for loan losses in 2006 was based on management’s assessment of the adequacy of the allowance based on an evaluation of the Bank’s loan portfolio and the level of non-performing loans. The balance of the allowance for loan losses has grown to $4.4 million at March 31, 2007, from $4.2 million at March 31, 2006, respectively. The coverage of the allowance for loan losses has decreased to 1.42% at March 31, 2007 from 1.72% at March 31, 2006 due to the loan growth experienced during 2007 and 2006 which, combined with the low levels of non-performing and delinquent loans, led to management’s assessment of the allowance for loan losses being adequate as of March 31, 2007.

Non-Interest Income:

Non-interest income increased $24,000 for the three months ended March 31, 2007 compared to the same period in 2006, and totaled $354,000 and $330,000, respectively. The increase was primarily attributable to an increase in loan servicing fees. Loan servicing fees increased to $58,000 from $7,000 for the three months ended March 31, 2007 and 2006, respectively, due mainly to $29,000 in additional fee income on corporate loans recognized in 2007. Deposit account fees declined to $186,000 from $209,000 for the three months ended March 31, 2007 and 2006, respectively, due to a reduction in NOW account fees. Other income remained flat at $110,000 for both the three months ended March 31, 2007 and 2006, respectively.

Non-Interest Expense:

Non-interest expenses declined $365,000, or 11.3%, during the first quarter of 2007 to $2.9 versus $3.2 million for the same period of 2006. The majority of the decrease was attributable to a decrease in salary and employee benefits

16

expenses of $303,000, or 14.7%, to $1.8 million in the first quarter of 2007 from $2.1 million in the first quarter of 2006. The decrease resulted from severance payments in the amount of $373,000 incurred with the resignation of two former executive officers in the first quarter of 2006, partially offset by merit raises. Occupancy and equipment expense decreased $44,000, or 13.3%, to $286,000 in the first quarter of 2007 from $330,000 in the same period of 2006. Data processing expenses increased $48,000, or 20.6%, to $281,000 in the first quarter of 2007 from $233,000 in 2006 due to an increase in computer software and license fees and service bureau charges. Marketing expenses decreased $9,000, or 23.7%, during the first quarter of 2007 to $29,000 from $38,000 in the first quarter of 2006 due to a decrease in advertising partially offset by an increase in direct mailings. Professional fees decreased $55,000, or 33.7%, to $108,000 in the first quarter of 2007 from $163,000 in the first quarter of 2006 due primarily to a decrease in audit and tax preparation fees. Other expenses decreased modestly to $390,000 in the first quarter of 2007 from $392,000 in the same period of 2006.

Income Taxes:

The Company reported an income tax expense of $446,000 for the three months ended March 31, 2007, for an effective income tax rate of 36.9%. This compares to an income tax expense of $141,000 for the three months ended March 31, 2006 or effective income tax rate of 35.2%. The increase in the effective tax rate in 2007 was due to the fact that a higher percentage of the taxable earnings was derived from the Bank. Subsidiaries within the consolidated group pay various state income tax rates and the mix of taxable earnings within the group can change.

Liquidity and Capital Resources:

The Company’s primary source of funds is cash dividends from its wholly-owned subsidiary, River Bank. The Bank did not pay a dividend to the Company in the first three months of 2007 or 2006. The Company made cash payments of dividends to shareholders in the amount of $644,000 and $628,000 in the first three months of 2007 and 2006, respectively.

The Bank’s primary sources of funds include collections of principal payments and repayments on outstanding loans, increases in deposits, advances from the Federal Home Loan Bank of Boston (“FHLB”) and securities sold under agreements to repurchase. The Bank has a line of credit of $6.8 million with the FHLB. The Bank currently has a $5.0 million unsecured Federal funds line of credit with another institution. At March 31, 2007, the entire $11.8 million in available lines of credit was available.

The FHLB requires member banks to maintain qualified collateral for its advances. Collateral is comprised of the Bank’s residential mortgage portfolio and the portion of the investment portfolio which meets FHLB qualifying collateral requirements and has been designated as such. The Bank’s borrowing capacity at the FHLB at March 31, 2007 was $237.0 million, of which $189.2 million had been borrowed.

At March 31, 2007, the Company’s stockholders’ equity was $59.2 million as compared to $58.5 million at December 31, 2006. The change during the first three months of 2007 occurred due to net income of $764,000, tax benefits associated with the exercise of stock options of $22,000, proceeds of $68,000 from the exercise of stock options and compensation expense relating to stock options of $7,000. Stockholders’ equity was reduced by the declaration of cash dividends to shareholders of $644,000 and a $491,000 increase in the fair value of investment securities available for sale, net of taxes.

The Company’s leverage ratio at March 31, 2007 and December 31, 2006 was 11.02% and 11.18%, respectively. The Company’s and the Bank’s total risk based capital ratios were 16.12% and 15.73% at March 31, 2007, respectively, compared with 16.86% and 16.35% at December 31, 2006, respectively. The total risk based capital ratios declined from December 31, 2006 due to an increase in the total loan balance portfolio and in the total loan commitments. The Company exceeds all regulatory minimum capital ratio requirements set forth by the FRB, and the Bank exceeds all minimum capital ratio requirements as defined by the FDIC.

17

ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

Management believes there have been no material changes to the discussion under the sub-caption “Interest Rate Sensitivity” of the caption “MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS” of the Company’s 2006 Annual Report on Form 10-K which is incorporated by reference.

ITEM 4: CONTROLS AND PROCEDURES

The Company’s chief executive officer and chief financial officer, after evaluating the effectiveness of the Company’s “disclosure controls and procedures” (as defined in the Securities Exchange Act of 1934 Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this quarterly report (the “Evaluation Date”), have concluded that as of the Evaluation Date the Company’s disclosure controls and procedures were effective and designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.

During the period covered by this quarterly report, there were no changes in the Company’s internal controls that have materially affected, or are reasonable likely to materially affect, the Company’s internal controls over financial reporting.

18

PART II — OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The Bank is involved in various legal proceedings incidental to its business. During the quarter ended March 31, 2007, no new legal proceeding was filed and no material development in any pending legal proceeding occurred that the Company expects will have a material adverse effect on its financial condition or operating results.

ITEM 1A. RISK FACTORS

Management believes that there have been no material changes in the Company’s risk factors as reported in the Annual Report on Form 10-K for the year ended December 31, 2006.

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

The Company’s Annual Meeting of Stockholders was held on May 1, 2007. At the Annual meeting, Malcolm W. Brawn and Richard Hart Harrington were elected Class B Directors to serve until the 2010 Annual Meeting and until their successors are elected and qualified. The terms of Class A Directors Marsha A. McDonough and Kathleen Boshar Reynolds continue until the 2009 Annual Meeting and the terms of Class C Directors Eugene A. Beliveau, Byron R. Cleveland, Jr., Robert F. Hatem, and Gerald T. Mulligan continue until the 2008 Annual Meeting. Also at the Annual Meeting, the stockholders ratified the appointment of Wolf & Company, P.C. as the Company’s registered independent auditors for fiscal year 2007. A tabulation of the votes cast for, against or withheld and of the abstentions and broker non-votes as to each matter presented, including a separate tabulation with respect to each Director nominee, is set forth below:

     Proposal 1. Election of two Class B Directors for a three-year term.

Director Nominee	For		Withheld
Malcolm W. Brawn		4,058,539		187,671
Richard Hart Harrington		4,058,564		187,646

     Proposal 2. Ratification of Appointment of Wolf & Company, P.C.

For	4,215,266
Against	24,619
Abstain	6,325

ITEM 5. OTHER INFORMATION

Special Termination Agreements

The Company and the Bank have entered into a special termination agreement, effective May 10, 2007, with Teresa K. Flynn. The special termination agreement provides generally that if there is a “change in control” of the Company or the Bank, and if, at any time during the two-year period following the transaction, the officer’s employment is terminated for any reason (other than death or for cause, under certain circumstances), then the officer would be entitled to receive a lump-sum payment in an amount equal to approximately three times the officer’s average annual compensation over the five previous years of employment with the Company or the Bank

19

(or such shorter period in which the officer was employed). The special termination agreement also provides for a continuation of life, medical and disability coverage for a three-year period after the termination of employment.

A change in control for purposes of the special termination agreement will generally be deemed to include (i) the acquisition by a person or group of persons of beneficial ownership of 25% or more of the common stock of the Company, (ii) a majority of the Board of Directors of the Company no longer being comprised of incumbent directors for any reason, including a tender offer, proxy contest, merger or similar transaction, or (iii) certain business combinations (including a merger of equals), liquidations, or sale or other transactions as described in the agreement.

The foregoing description of the special termination agreement is qualified in its entirety by the terms of the special termination agreement, the form of which is filed as Exhibit 10.1 to this report.

ITEM 6. EXHIBITS

Number	Description
10.1	Special Termination Agreement between LSB Corporation and Teresa K. Flynn dated May 10, 2007.
31.1	Certification of Chief Executive Officer under Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Chief Financial Officer under Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as added by Section 906 of the Sarbanes-Oxley Act of 2002.
32.3	Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as added by Section 906 of the Sarbanes-Oxley Act of 2002.

20

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	LSB CORPORATION
May 11, 2007	/s/ Gerald T. Mulligan
	Gerald T. Mulligan
	President and Chief Executive Officer
May 11, 2007	/s/ Diane L. Walker
	Diane L. Walker
	Executive Vice President, Treasurer and Chief Financial Officer

21

LSB CORPORATION AND SUBSIDIARY
Quarterly Report on Form 10-Q for the three months ended March 31, 2007

EXHIBIT INDEX

10.1	Special Termination Agreement between LSB Corporation and Teresa K. Flynn dated May 10, 2007.
31.1	Certification of Chief Executive Officer under Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Chief Financial Officer under Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as added by Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as added by Section 906 of the Sarbanes-Oxley Act of 2002

22

EX-10.1

                          SPECIAL TERMINATION AGREEMENT

     THIS AGREEMENT, dated as of May 10, 2007 (the "Agreement"), is by and among
LSB CORPORATION, a Massachusetts corporation (the "Company") and its wholly
owned subsidiary, RIVER BANK, a Massachusetts savings bank with its executive
offices in North Andover, Massachusetts (the "Bank") (the Bank and the Company
shall be hereinafter collectively referred to as the "Employers"), and Teresa K.
Flynn, (the "Executive"), an individual presently employed by the Company and
the Bank in the capacity of Senior Vice President.

     1. Purpose. In order to allow the Executive to consider the prospect of a
Change in Control (as defined in Section 2) in an objective manner and in
consideration of the services rendered and to be rendered by the Executive to
the Employers and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged by the Executive and the Employers,
the Employers are willing to provide, subject to the terms of this Agreement,
certain severance benefits to protect the Executive from the consequences of a
Terminating Event (as defined in Section 3) occurring subsequent to a Change in
Control.

     2. Change in Control. A "Change in Control" shall be deemed to have
occurred upon the occurrence of any of the following events:

     (i)  any circumstance that the Company or the Bank would be required to
          report as a change in control under Item 5.01 of the Current Report on
          Form 8-K as prescribed by applicable regulations promulgated under the
          Securities Exchange Act of 1934, as amended (the "1934 Act"), or any
          successor provision; or

     (ii) any "person" (as such term is used in Sections 13(d) and 14(d)(2) of
          the 1934 Act) becomes a "beneficial owner" (as such term is defined in
          Rule 13d-3 promulgated under the 1934 Act), directly or indirectly, of
          securities of the Company or the Bank representing twenty-five percent
          (25%) or more of the total number of votes that may be cast for the
          election of directors of the Company or the Bank (other than in the
          case of the Bank, for the Company's ownership of the capital stock of
          the Bank), and the Board of Directors of the Company or the Bank, as
          the case may be, has not consented to such event by a two-thirds (2/3)
          vote of all of the members of the Board of Directors adopted either
          prior to such event or within sixty (60) days thereafter, provided
          that if at the time such a consent vote is adopted after such event,
          the persons who were directors of the Company or the Bank, as the case
          may be, immediately prior to such event do not constitute a majority
          of the Board of Directors of the Company or the Bank, respectively, or
          of any successor institution, such vote shall not be deemed to
          constitute consent for the purposes of this provision; or

     (iii) any tender or exchange offer for the ordinary voting stock of the
          Company or the Bank, or any merger, consolidation, or other business
          combination involving the Company or the Bank, or any sale or other
          disposition of assets of the Company or the Bank constituting all or
          substantially all of the Company's assets



          (considered a consolidated basis), or any combination of the foregoing
          transactions has occurred, and as the result of, or in connection
          with, such transaction(s) (A) the individuals who were directors of
          the Company or the Bank immediately before the commencement of such
          transaction(s) cease to constitute a majority of the Board of
          Directors of the Company or the Bank, respectively, or of any
          successor institution or (B) persons, who, immediately prior to the
          commencement of such transaction(s), were the beneficial owners of
          ordinary voting stock of the Company or the Bank, beneficially own
          (within the meaning of Rule 13d-3), directly or indirectly, less than
          forty percent (40%) of the then outstanding shares of ordinary voting
          stock of the entity resulting from such transaction(s), including,
          without limitation, an entity which as a result of such transaction(s)
          owns the Company or the Bank or all or substantially all of the assets
          of the Company or the Bank either directly or through one or more
          subsidiaries; or

     (iv) during any period of two consecutive years, individuals who constitute
          the Board of Directors of the Company at the beginning of the two-year
          period cease for any reason to constitute at least a majority of the
          Company's directors; provided, however, that for purposes of this
          clause, an individual shall be deemed to have also been a director at
          the beginning of such period if such individual was elected by the
          Company's Board of Directors (or nominated by the Company's Board of
          Directors of the Company for election by the stockholders) by a vote
          of at least two-thirds (2/3) of the directors who either were
          directors at the beginning of the two-year period or who were so
          elected or nominated by such directors.

     3. Terminating Event; Cause; Good Reason; Disability.

          a. As used in this Agreement, the phrase "Terminating Event" shall
mean the occurrence, after a Change in Control, of (a) termination by either of
the Employers of the employment of the Executive with either of the Employers
for any reason other than (i) death, (ii) Disability (as defined in this
Section), or (iii) Cause (as defined in this Section), or (b) resignation of the
Executive from the employ of either of the Employers for Good Reason (as defined
in this Section), while the Executive is not receiving disability payments or
benefits from the Employers.

          b. As used in this Agreement, the term "Cause" shall mean the
Executive, after the date of this Agreement,

     (i)  has been convicted by a court of competent jurisdiction of any
          criminal offense involving dishonesty, breach of trust or
          misappropriation, or has entered a plea of nolo contendere to such an
          offense; or

     (ii) has committed an act of fraud, embezzlement, theft, or has committed
          any other act which has resulted in the termination of coverage under
          either Employer's Blanket Bond as to the Executive (as distinguished
          from termination of coverage as to the Employer as a whole); or


                                        2



     (iii) has committed a willful violation of the Bank's Code of Conduct or
          any law, rule or regulation governing the operation of the Company or
          the Bank or any of its affiliates or the insurance of deposits held by
          the Bank (A) which is a felony or misdemeanor, or (B) which the Board
          of Directors of either of the Employers determines in good faith, by
          the affirmative vote of at least two-thirds (2/3) of the then current
          directors, has had or will likely have a material adverse effect on
          the business, interests or reputation of the Employers or any of their
          affiliates; or

     (iv) has committed any act which the Board of Directors of either of the
          Employers determines in good faith, by the affirmative vote of at
          least two-thirds (2/3) of the then current directors, constitutes (A)
          a willful or reckless breach of fiduciary duty to the Company or the
          Bank or any of their affiliates involving personal profit to the
          Executive or any of the Executive's family members, associates or
          affiliates and (B) that such breach, together with all consequences
          related thereto, has had or will likely have a material adverse effect
          on the business, interests or reputation of the Employers or any of
          their affiliates or on the Executive's ability to perform the duties
          reasonably assigned to the Executive; or

     (v)  has been convicted of any crime, or has entered a plea of nolo
          contendere to such an offense, or has committed any other act, in each
          case which the Board of Directors of either of the Employers
          determines in good faith, by the affirmative vote of at least
          two-thirds (2/3) of the then current directors, is (A) abhorrent to
          the community and (B) will likely have a material adverse effect on
          the business, interests or reputation of the Employers or the
          Executive's ability to perform the duties reasonably assigned to the
          Executive; or

     (vi) has committed a willful and unauthorized disclosure of material
          confidential information regarding the Employers or any of their
          affiliates, which disclosure the Board of Directors of either of the
          Employers determines in good faith, by the affirmative vote of at
          least two-thirds (2/3) of the then current directors, has had or will
          likely have a material adverse effect on the business, interests or
          reputation of the Employers or any of their affiliates; or

     (vii) has been found by the Board of Directors of either of the Employers,
          acting in good faith by the affirmative vote of at least two-thirds
          (2/3) of the then current directors, after reasonable written notice
          to the Executive and an opportunity to cure, to have a dependency on
          alcohol or other drugs that substantially interferes with the
          Executive's performance of duties reasonably assigned to the
          Executive.

          c. As used in this Agreement, the term "Good Reason" shall mean

     (i)  A significant and, from the Executive's perspective, adverse change in
          the nature or scope of the Executive's responsibilities, authorities,
          powers, functions or duties from the responsibilities, authorities,
          powers, functions or duties exercised by the Executive immediately
          prior to the Change in Control (or at the Executive's election, prior
          to the earlier commencement of the Proposed Business Combination that
          results in such Change in Control); or


                                        3



     (ii) A reasonable determination by the Executive that, as a result of a
          Change in Control, the Executive is unable to exercise the
          responsibilities, authorities, powers, functions or duties exercised
          by the Executive immediately prior to such Change in Control (or at
          the Executive's election, prior to the earlier commencement of the
          Proposed Business Combination that results in such Change in Control);
          or

     (iii) Any decrease in the Executive's base salary or any decrease of five
          percent (5%) or more in the total annual compensation payable by the
          Employers to the Executive as compared to the Executive's base salary
          or total annual compensation target immediately prior to the Change in
          Control (or at the Executive's election, prior to the earlier
          commencement of the Proposed Business Combination that results in such
          Change in Control); provided, however, that a decrease in base salary
          or total compensation payable to the Executive and to all other
          executive officers of the Employers on a comparable basis as a result
          of the Employers' financial performance shall not constitute Good
          Reason; or

     (iv) The failure by the Employers to continue the Executive's participation
          in any material compensation, incentive, bonus or benefit plan,
          including life, medical and disability coverage, in which the
          Executive participates immediately prior to the Change in Control (or
          at the Executive's election, prior to the earlier commencement of the
          Proposed Business Combination that results in such Change in Control),
          or in any successor plan, or the taking of any action by the Employers
          that would reduce, directly or indirectly, in any material respect any
          of such benefits or deprive the Executive of any material fringe
          benefit enjoyed by the Executive under such plan at the time of the
          Change in Control (or at the Executive's election, prior to the
          earlier commencement of the Proposed Business Combination that results
          in such Change in Control), or any successor plan (except to the
          extent any benefits or coverage under such plans may be changed in its
          application to all of the employees of the Employers (or
          successors-in-interest) on a nondiscriminatory basis), or the failure
          of a successor-in-interest to make available its benefits plans to the
          Executive on a basis that is not substantially less favorable than the
          successor generally affords to its other employees holding similar
          positions; or

     (v)  The relocation of the Employers' offices at which the Executive is
          principally employed immediately prior to the Change in Control, or at
          the Executive's election, the earlier commencement of the Proposed
          Business Combination that results in such Change in Control, to a
          location more than 25 miles from such office or from North Andover,
          Massachusetts, or either of the Employers requiring the Executive to
          be based anywhere other than the Employers' executive offices, except
          for required travel on the Employers' business to an extent
          substantially consistent with customary business travel obligations;
          or

     (vi) The failure of either of the Employers to obtain a satisfactory
          agreement from any successor to assume and agree to perform this
          Agreement as required by Section


                                        4



          16 hereof, after written notice from the Executive that makes
          reference to this provision and provides a reasonable opportunity to
          cure.

     For purposes of this Agreement, the term "Business Combination" shall mean
any tender or exchange offer for the ordinary voting stock of the Company or the
Bank, or any merger, consolidation, or other business combination involving the
Company or the Bank, or any sale or other disposition of assets of the Company
or the Bank constituting all or substantially all of the Company's assets
(considered a consolidated basis). A "Proposed Business Combination" shall mean
the occurrence of the Company or the Bank entering into a definitive agreement
providing for a Business Combination that, as the result of or in connection
with such transaction or any combination of related transactions, will result in
a Change in Control.

          d. For purposes of this Agreement, the Executive shall be deemed to be
subject to a Disability if the Executive is permanently disabled within the
meaning of the Employers' long-term disability policy, or if there is no such
policy, if the Executive is unable, through physical or mental illness or other
cause, to perform normal and customary duties which the Executive reasonably is
required to perform for the Employers, for a total of six (6) months during any
one (1) year period. In determining whether the Executive is disabled, the
Employers may rely upon the written statement provided by a licensed physician
reasonably acceptable to the Employers and the Executive. The Executive shall
allow examination from time to time by any licensed physician selected by the
Employers and reasonably acceptable to the Executive. All such examinations will
be conducted at or in a reasonable place, time and manner.

     4. Severance Payment. Subject to the provisions of Section 6 below and the
Executive signing the Employers' standard separation agreement, which includes,
among other provisions, a General Release, in the event a Terminating Event
occurs within two (2) years after a Change in Control, the Employers shall pay
to the Executive an aggregate amount (the "Severance Payment") equal to (x)
three (3) times the "base amount" (as defined in Section 280G(b)(3) of the
Internal Revenue Code of 1986, as amended (the "Code")) applicable to the
Executive, less (y) any other payment or benefit received by the Executive from
the Employers or either of them that is deemed to constitute a "parachute
payment" as defined in Section 280G of the Code, and less (z) One Dollar
($1.00). The Severance Payment shall be payable by the Employers in one lump sum
on the effective date of such Terminating Event.

     5. Benefit Continuation. If a Terminating Event occurs within two years
after a Change in Control, the Employers shall continue to provide to the
Executive, for three (3) years after the Terminating Event, the life, medical
and disability coverage in which the Executive participated, and at the level in
effect, and at the same out-of-pocket cost to the Executive, immediately prior
to the Change in Control, or at the Executive's election, the earlier
commencement of the Proposed Business Combination that results in such Change in
Control (except to the extent any benefit or coverage under such plans may be
changed in its application to all of the employees of the Employers (or
successors-in-interest) on a nondiscriminatory basis). If the Employers are
unable to provide the benefits set forth in this Section 5 due to the change in
Executive's status to that of a non-employee, the Employers shall instead pay to
the Executive a lump sum amount equal to the value of the benefits required to
be provided by this Section 5.


                                        5



     6. Limitation on Benefits.

          (a) It is the intention of the Executive and of the Employers that no
payment by the Employers to or for the benefit of the Executive under this
Agreement and/or any other agreement or plan pursuant to which the Executive is
entitled to receive payments or benefits shall be non-deductible to the
Employers by reason of the operation of Section 280G of the Code relating to
parachute payments. Accordingly, and notwithstanding any other provision of this
Agreement or any such agreement or plan, if by reason of the operation of said
Section 280G, any such payments exceed the amount which can be deducted by the
Employers in the aggregate, such payments shall be reduced to the maximum amount
which can be deducted by the Employers. To the extent that payments exceeding
such maximum deductible amount have been made to or for the benefit of the
Executive, such excess payments shall be refunded to the Employers with interest
thereon at the applicable Federal Rate determined under Section 1274(d) of the
Code, compounded annually, or at such other rate as may be required in order
that no such payments shall be non-deductible to the Employers by reason of the
operation of said Section 280G. To the extent that there is more than one method
of reducing the payments to bring them within the limitations of said Section
280G, the Executive shall determine which method shall be followed, provided
that if the Executive fails to make such determination within forty-five days
(45) after the Employers have sent him written notice of the need for such
reduction, the Employers may determine the method of such reduction in their
sole discretion.

          (b) If any dispute between the Employers and the Executive as to any
of the amounts to be determined under Section 6(a), or the method of calculating
such amounts, cannot be resolved by the Employers and the Executive, either the
Employers or the Executive after giving three (3) days written notice to the
other, may refer the dispute to a partner in the Boston office of a firm of
nationally recognized independent certified public accountants selected jointly
by the Employers and the Executive, which firm shall not be the Employers'
independent registered public accounting firm. The determination of such partner
as to the amount to be determined under Section 6(a) and the method of
calculating such amounts shall be final and binding on both the Employers and
the Executive. The Employers shall bear the costs of any such determination.

          (c) This Agreement is intended to be construed in a manner to avoid
imposition on payments hereunder of interest and additional tax under Section
409A(a)(1)(B) of the Code. Without limiting the scope of the previous sentence,
with respect to any payment hereunder subject to Section 409A, distributions on
account of a separation from service may not be made to the Executive if he is a
"Specified Employee" within the meaning of Section 409A(a)(2)(B)(i) before the
date which is six (6) months after the date after separation from service (or,
if earlier, the date of death of the Executive).

     7. Employment Status. This Agreement is not an agreement for the employment
of the Executive and shall confer no rights on the Executive except as herein
expressly provided.

     8. Term. This Agreement shall take effect May 10, 2007, and shall terminate
upon the earlier of (a) the termination by the Employers of the employment of
the Executive because of death, Disability (as defined in Section 3(d) hereof)
or Cause (as defined in Section 3(b) hereof), (b) the resignation or termination
by the Executive for any reason prior to a Change in


                                        6



Control, or (c) the resignation of the Executive after a Change in Control other
than for Good Reason (as defined in Section 3(c) hereof).

     9. Withholding. All payments made by the Employers under this Agreement
shall be net of any tax or other amounts required to be withheld by the
Employers under applicable law.

     10. Mitigation. The Executive shall have no obligation to mitigate the
consequences of a termination by the Employers of the Executive's employment
without Cause or the Executive's resignation for Good Reason, and neither the
Severance Payment nor benefits provided under Section 5 (or the lump sum payment
is lieu of some or all of such benefits) shall be reduced or otherwise modified
as a result of the Executive obtaining other employment after such a termination
or resignation.

     11. Confidentiality. The Executive understands and agrees (a) that the
Executive will maintain all proprietary and confidential information of the
Employers as proprietary and confidential at all times during and after his/her
employment, (b) that the Executive will not disclose or communicate such
information to any third party or make use of it on his/her own behalf or on
behalf of any third party, and (c) upon his/her termination, that the Executive
will deliver all tangible forms or media which the Executive may have containing
such information to the Employers. For purposes of this Section 11,
"information" includes trade secrets and all non-public records, practices,
letters, plans, drawings, computer programs and data, technical data, financial
and other business data pertaining to the Employers or either of them or any of
their affiliates, customers, vendors or other persons associated with the Bank.
The Executive acknowledges and further agrees that the disclosure of such
information would be a material breach of this Agreement for which the Bank
shall be entitled to any remedies available to it in law or in equity.

     12. Covenant Not to Disrupt Business. The Executive hereby covenants and
agrees that he or she will not now, or for a period of one (1) year after the
effective date of the Executive's termination of employment, whether or not
following a Change in Control, disrupt, damage, impair or interfere with the
business of the Employers or either of them or any of their affiliates, whether
by way of interfering with or soliciting its employees (other than a general
solicitation not targeted at the Employers' employees), or disrupting either of
the Employers' or any of their affiliates' relationships with any customer, loan
packager, representative, vendor, broker or similar party doing business with
the Employer. After termination of employment, whether or not following a Change
in Control, the Executive is not, however, restricted from being employed by or
engaged in a competing business, except as may be provided expressly in any
other written agreement to which the Executive and the Employers or either of
them is a party.

     13. Arbitration of Disputes. Any controversy or claim arising out of or
relating to this Agreement or the breach thereof shall be settled by arbitration
in accordance with the laws of the Commonwealth of Massachusetts by three
arbitrators, one of whom shall be appointed by the Employers, one by the
Executive and the third by the first two arbitrators. If the first two
arbitrators cannot agree on the appointment of a third arbitrator, then the
third arbitrator shall be appointed by the American Arbitration Association in
the City of Boston. Such arbitration shall


                                        7



be conducted in the City of Boston in accordance with the rules of the American
Arbitration Association, except with respect to the selection of arbitrators
which shall be as provided in this Section 13. Judgment upon the award rendered
by the arbitrators may be entered in any court having jurisdiction thereof. This
provision shall not apply to Section 6(b), except in the event that the
Employers and the Executive cannot agree on the selection of the accounting
partner described in said section.

     14. Payment of Costs and Legal Fees. All reasonable costs and legal fees
paid or incurred by the Executive pursuant to any dispute or question of
interpretation relating to this Agreement shall be paid or reimbursed by the
Employers, plus interest on any delayed payment at the rate provided for in
Section 7872(f)(2)(A) of the Code or any successor provision, unless (A) the
Executive is wholly unsuccessful on the merits of such dispute or question of
interpretation, as determined pursuant to a legal judgment, arbitration award or
settlement (whether formal or informal) or (B) unless and to the extent the
arbitrators shall determine that under the circumstances recovery by the
Executive of all or a part of any such fees and costs and expenses would be
unjust.

     15. Cooperation Covenant. Both during and after the Executive's employment,
the Executive shall cooperate fully with the Employers and with any legal
counsel, expert or consultant the Employers or either of them may retain to
assist in connection with any judicial proceedings, arbitration, administrative
proceeding, governmental investigation, examination, inquiry or internal audit
in which the Employers or either of them or any of their affiliates, may be or
become involved, including full disclosure of all relevant information and
truthfully testifying on the Employers' behalf (or, at the request of the
Employers, on behalf of any such affiliate of the Employers) in connection with
any such proceeding or investigation.

     16. Assignment; Successors and Assigns.

     a. The Executive may not make any assignment of this Agreement or any
interest herein, by operation of law or otherwise, without the prior written
consent of the Employers.

     b. This Agreement shall inure to the benefit of and be binding upon the
Employers and the Executive, their respective successors, executors,
administrators, heirs and permitted assigns. In the event of the Executive's
death prior to the completion by the Employers of all payments due to the
Executive under this Agreement, the Employers shall continue such payments to
the Executive's beneficiary designated in writing to the Employers prior to the
Executive's death (or to the Executive's estate, if the Executive fails to make
such designation).

     c. Each of the Employers shall require their respective successors (whether
direct or indirect, by purchase, merger, consolidation, or otherwise) to all or
substantially all of their business and/or assets to expressly assume and agree
to perform this Agreement in the same manner and to the same extent that the
Employers would be required to perform it if no such succession had taken place.
Failure by either of the Employers to obtain such assumption and agreement prior
to the effectiveness of any such succession shall constitute a breach of this
Agreement and the provisions of Section 3 hereof shall apply. As used in this
Agreement, the term "Employers" shall mean any successor to the respective
business and/or assets of the


                                        8



Employers or either of them that assumes, by operation of law or otherwise, the
Employers' obligations under this Agreement.

     17. Enforceability. If any portion or provision of this Agreement shall to
any extent be declared illegal or unenforceable by a court of competent
jurisdiction, then the remainder of this Agreement, or the application of such
portion or provision in circumstances other than those as to which it is so
declared illegal or unenforceable, shall not be affected thereby, and each
portion and provision of this Agreement shall be valid and enforceable to the
fullest extent permitted by law. The agreements of the Executive contained in
Section 11 and Section 12 hereof are of a special, unique and extraordinary
character, and the obligations of the Executive set forth therein shall
therefore be enforceable both at law and in equity, by injunction or otherwise.
The rights and remedies of the parties hereunder shall be cumulative and not
alternative and shall not be exhausted by any one or more uses thereof

     18. Waiver. No waiver of any provision hereof shall be effective unless
made in writing and signed by the waiving party. Only the Chief Executive
Officer of the Company or the Bank, as applicable, is authorized by such entity
to sign a writing waiving a provision hereof. The failure of any party to
require the performance of any term or obligation of this Agreement, or the
waiver by any party of any breach of this Agreement, shall not prevent any
subsequent enforcement of such term or obligation or be deemed a waiver of any
subsequent breach.

     19. Notices. Any notices, requests, demands and other communications
provided for by this Agreement shall be sufficient if in writing and delivered
in person or sent by registered or certified mail, postage prepaid, to the
Executive at the last address the Executive has filed in writing with the
Employers or, in the case of the Bank, at its main offices, attention of the
Clerk or, in the case of the Company, at its main office, attention of the
Secretary.

     20. Election of Remedies. An election by the Executive to resign for Good
Reason after a Change in Control under the provisions of this Agreement shall
not constitute a breach by the Executive of any employment agreement between the
Employers and the Executive and shall be deemed a voluntary termination of
employment by the Executive for the purpose of interpreting the provisions of
any of the Employers' benefit plans, programs or policies.

     21. Time. Time is of the essence with respect to the performance of every
provision of this Agreement.

     22. Entire Agreement. This Agreement represents the entire and integrated
agreement among the Employers and the Executive regarding the subject matter
hereof and supersedes all prior negotiations, representations or agreements,
either written or oral. Notwithstanding the immediately preceding sentence,
except as expressly provided in this Agreement, nothing in this Agreement shall
affect in any way any benefit to which the Executive may be entitled under any
prior written agreement or previously adopted plan.

     23. Construction. Headings at the beginning of each paragraph are solely
for the convenience of the parties and are not a part of this Agreement.
Whenever required by the context of this Agreement, the singular shall include
the plural and the masculine shall include the feminine and vice versa. This
Agreement shall not be construed as if it had been prepared by


                                        9



one of the parties, but rather as if both parties had prepared the same. Unless
otherwise indicated, all references to sections are to this Agreement.

     24. Amendment. This Agreement may be amended or modified only by a written
instrument signed by the Executive and by duly authorized representatives of
each of the Employers.

     25. Allocation of Obligations Between Employers. The obligations of the
Employers under this Agreement are intended to be the joint and several
obligations of the Bank and the Company and the Employers shall, as between
themselves, allocate these obligations in a manner agreed upon by them.
Notwithstanding any other provision of this Agreement, neither the Company nor
the Bank shall have any obligation to pay the Severance Payment or to provide
any other benefit hereunder if and to the extent such Severance Payment or other
benefit is prohibited by applicable federal or state law, including without
limitation Part 359 of the regulations of the Federal Deposit Insurance
Corporation (12 CFR Section 359 et seq.) or any successor provision.

     26. Governing Law. This is a Massachusetts contract and shall be construed
under and be governed in all respects by the laws of the Commonwealth of
Massachusetts.

                  [Remainder of Page Intentionally Left Blank]


                                       10



     IN WITNESS WHEREOF, this Agreement has been executed as a sealed instrument
by the Bank, the Executive and the Company as of the date first above written.

                                       RIVER BANK


                                       By: /s/ Gerald T. Mulligan
                                           -------------------------------------
                                           Gerald T. Mulligan
                                           President and Chief Executive Officer


                                       LSB CORPORATION


                                       By: /s/ Gerald T. Mulligan
                                           -------------------------------------
                                           Gerald T. Mulligan
                                           President and Chief Executive Officer


                                       EXECUTIVE


                                       /s/ Teresa K. Flynn
                                       -----------------------------------------


                                       11

EX-31.1

Exhibit 31.1

CERTIFICATIONS

I, Gerald T. Mulligan, certify that:

1.	I have reviewed this Form 10-Q of LSB Corporation;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiary, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusion about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and,
c)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and,

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting to the registrant’s auditors and the Audit Committee of the registrant’s Board of Directors (or persons performing the equivalent functions):

a)	All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting,

Date: May 11, 2007

/s/ Gerald T. Mulligan  

Gerald T. Mulligan 

President and
Chief Executive Officer 

EX-31.2

Exhibit 31.2

I, Diane L. Walker, certify that:

1.	I have reviewed this report on Form 10-Q of LSB Corporation;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a)	Designed such disclosure controls and procedures or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiary, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusion about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation and;
c)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting and;

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting to the registrant’s auditors and the Audit Committee of registrant’s Board of Directors (or persons performing the equivalent functions):

a)	All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 11, 2007

/s/ Diane L. Walker  

Diane L. Walker 

Executive Vice President, Treasurer and
Chief Financial Officer 

EX-32.1

Exhibit 32.1

LSB CORPORATION AND SUBSIDIARY

CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350
AS ADDED BY SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of LSB Corporation (the “Company”) on Form 10-Q for the period ending March 31, 2007 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Gerald T. Mulligan, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. section 1350, as added by section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)	The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)	The information contained in the Report fairly presents, in all material respects, the financial condition of the Company as of March 31, 2007 and results of operations of the Company for the three months ended March 31, 2007.

/s/ Gerald T. Mulligan  

Gerald T. Mulligan 

President and
Chief Executive Officer 

May 11, 2007 

EX-32.2

Exhibit 32.2

LSB CORPORATION AND SUBSIDIARY

CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350
AS ADDED BY SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of LSB Corporation (the “Company”) on Form 10-Q for the period ending March 31, 2007, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Diane L. Walker, Executive Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. section 1350, as added by section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)	The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)	The information contained in the Report fairly presents, in all material respects, the financial condition of the Company as of March 31, 2007 and results of operations of the Company for the three months ended March 31, 2007.

/s/ Diane L. Walker  

Diane L. Walker 

Executive Vice President, Treasurer and
Chief Financial Officer 

May 11, 2007