8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of report (Date of earliest event reported)   November 1, 2010
LSB Financial Corp.
(Exact Name of Registrant as Specified in Its Charter)
Indiana	0-25070	35-1934975
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(IRS Employer Identification No.)
101 Main Street, Lafayette, Indiana		47901
(Address of Principal Executive Offices)		(Zip Code)
(765) 742-1064
(Registrant’s Telephone Number, Including Area Code)
(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02  Results of Operations and Financial Condition.

On November 1, 2010, LSB Financial Corp. issued a press release reporting its results of operations and financial condition for the quarter and nine months ended September 30, 2010.

A copy of the press release is attached as Exhibit 99.1 to this Current Report and is incorporated herein by this reference. The information disclosed under this Item 2.02, including Exhibit 99.1 hereto, is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and shall not be deemed incorporated by reference into any filing made under the Securities Act of 1933, except as expressly set forth by specific reference in such filing.

Item 9.01  Financial Statements and Exhibits.

(d)  Exhibits
Exhibit No.	Description
99.1	Press Release issued November 1, 2010

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 hereto duly authorized.

Date: November 2, 2010	LSB Financial Corp.
	By:	/s/ Mary Jo David
		Mary Jo David, Treasurer (Principal Financial and Accounting Officer)

EXHIBIT INDEX

Exhibit Number	Exhibit Description	Location
99.1	Press Release, dated November 1, 2010	Attached

EX-99.1

Exhibit 99.1

101 Main St.

P.O. Box 1628

Lafayette, IN 47902

(765) 742-1064

www.LSBANK.com

lsbmail@LSBANK.com

FOR IMMEDIATE RELEASE	For further information contact:
	Randolph F. Williams
	President/CEO
	(765) 742-1064
	Fax: (765) 429-5932

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

 November 1, 2010, Lafayette, IN - LSB Financial Corp. (NASDAQ:LSBI), the parent company of Lafayette Savings Bank, FSB, today reported quarterly earnings of $526,000 or $0.34 diluted earnings per share compared to $24,000 or $0.02 diluted earnings per share a year earlier.  Year-to-date earnings were $1.5 million or $0.98 diluted earnings per share compared to $639,000 or $0.41 per share for the comparable period in 2009, up 137%.  Randolph F. Williams, president and CEO stated, “Our profitable third quarter provides a good indication of our strength and stability in this challenging economy.  Through the first nine months of this year we have strengthened capital, increased operating revenue, improved our net interest margin, reduced expenses and f urther solidified our loan loss reserve.”

Williams continued, “The bank continues to benefit from lower interest rates in the economy which have resulted in an increase in our net interest margin from 2.83% for the nine months ended September 30, 2009 to 3.64% for the same period in 2010.  As a community bank most of our income is tied to this number – typically about 80% of our total income is from net interest income.   We saw a $1.9 million, or 26% increase, in net interest income for the first nine months of 2010 compared to the same period in 2009.   Lower interest rates on mortgages also typically cause people to consider refinancing their mortgages, often to fixed rate mortgages which we sell on the secondary market.   The lower mortgage rates early last year set off a first round of refinancing.  0;The further drop in rates this quarter is giving borrowers a chance to refinance again, perhaps to an even lower rate or to a shorter term.   Our gain on the sale of loans for the first nine months of 2009 was $1.2 million while gains for the first nine months of 2010 were $542,000.  Additionally, we have kept expenses at a level that is lower than the first nine months of 2009, spending $7.5 million in 2010 compared to $7.8 million in 2009.  We have done this through targeted expense control rather than the reductions in staff that we so frequently see in the mega banks.  Our people are critical to attracting and maintaining customer relationships that are at the heart of the traditional community bank model.  Evidence of the success of this approach is seen in the $43 million increase in deposits since year-end 2009 and our move into third highest in the FDIC’s recent deposit market share report for Tippecanoe County.”

Williams continued, “An area that continues to plague all banks to some extent is problem loans.  At September 30, 2010, our non-performing assets (non-performing loans and OREO properties) totaled $15.8 million or 4.10% of total assets, up slightly from the $14.5 million or 3.91% at the end of 2009.  While we continually work to reduce the number of problem loans, as a community bank we believe that there is little to be gained from routinely putting borrowers on a track to foreclosure at the first sign of delinquency.  We tend to work longer and harder with our struggling borrowers to help see them through a crisis.  One of the downsides to that is that it results in a higher level of troubled loans.  Since we have been working on these issues for several years now, we know there is no quick fix.  95% of our problem loans are secured by local real estate, and the typical loan performed as agreed for nearly four years before encountering a payment problem.  Of the $14.5 million of problem loans we held on our books at December 31, 2009, $6.7 million were still considered problem loans at September 30, 2010, but over 75% of these borrowers continued to make payments.  In addition we had eliminated $5.9 million from the December list because the properties had been sold, the loans were paid off, the borrowers resumed paying for a sufficient time to be upgraded to performing, or the properties were taken into OREO.  $9.1 million in new loans were added to the list and over half of these were residential properties.  An improved economy will go a long way toward correcting these problems.  In the meantime we will continue to work with our borrowers in an effort to minimize the impact of a slow economy on them and on our performan ce.  To recognize potential losses in our loan portfolio we have added $1.8 million to our reserve for loan losses in the first nine months of 2010, the same amount as in the first nine months of 2009.  This brings our reserve to $4.8 million or 1.45% of total loans compared to $3.7 million and 1.16% at December 31, 2009.  We believe this amount will be adequate to cover losses based on our evaluation and loan mix.”

“We do see signs of an improving economy, with the county unemployment rate dropping from 9.1% to 8.5% in September; Subaru, our largest industrial employer, converting 100 temporary jobs to permanent status and running overtime; and the recently released data from the Federal Housing Finance Agency showing the Lafayette Metropolitan Statistical Area (MSA) in the top fifty markets in the U.S. out of 303 MSAs in year-over-year housing appreciation.  That said, we remain focused on the challenges that lie ahead in this troublesome economy.”

The bank continues to maintain a strong capital base with a Tier I capital ratio of 9.12% at September 30, 2010, which is well in excess of the 5.00% required to remain categorized as well-capitalized as defined by the regulators and comparable to the 9.13% at December 31, 2009.  Mr. Williams stated, “While the future direction of the economy is unclear, we believe that the combination of our continued profitability, a $4.8 million loan loss reserve and $15.8 million in excess capital should be adequate to allow us to work through the issues presented by this struggling economy.”

The closing market price of LSB stock on October 29, 2010 was $10.25 per share as reported by the Nasdaq Global Market.

LSB FINANCIAL CORP. SELECTED CONSOLIDATED FINANCIAL INFORMATION (Dollars in thousands except share and per share amounts)
Selected balance sheet data:	Nine months ended September 30, 2010			Year ended December 31, 2009
Cash and due from banks	$	11,069		$	8,084
Short-term investments		4,943			4,817
Securities available-for-sale		11,560			11,345
Loans held for sale		4,114			3,303
Net portfolio loans		328,336			317,860
Allowance for loan losses		4,832			3,737
Premises and equipment, net		6,152			6,209
Federal Home Loan Bank stock, at cost		3,997			3,997
Bank owned life insurance		6,219			6,071
Other assets		8,346			9,364
Total assets		384,736			371,050
Deposits		321,289			277,866
Advances from Federal Home Loan Bank		25,500			57,000
Other liabilities		2,869			2,300
Shareholders’ equity		35,078			33,884
Book value per share	$	22.58		$	21.81
Equity / assets		9.12	%		9.13	%
Total shares outstanding		1,553,525			1,553,525
Asset quality data:
Non-accruing loans	$	14,707		$	12,604
Loans past due 90 days still on accrual		---			---
Other real estate / assets owned		1,068			1,892
Total non-performing assets		15,775			14,496
Non-performing loans / total loans		4.42	%		3.92	%
Non-performing assets / total assets		4.10	%		3.91	%
Allowance for loan losses / non-performing loans		32.86	%		29.65	%
Allowance for loan losses / non-performing assets		30.63	%		25.78	%
Allowance for loan losses / total loans		1.45	%		1.16	%
Loans charged off (quarter-to-date and year-to-date, respectively)	$	823		$	3,186
Recoveries on loans previously charged off		109			28

	Three months ended September 30,						Nine months ended September 30,
Selected operating data:	2010			2009			2010			2009
Total interest income	$	4,876		$	4,874		$	14,268		$	14,905
Total interest expense		1,489			2,262			4,784			7,371
Net interest income		3,387			2,612			9,484			7,534
Provision for loan losses		910			865			1,809			1,823
Net interest income after provision		2,477			1,747			7,675			5,711
Non-interest income:
Deposit account service charges		393			387			1,157			1,093
Gain on sale of mortgage loans		366			167			542			1,141
Gain(loss) on sale of securities and other assets		(189	)		(40	)		(449	)		(106	)
Other non-interest income		248			285			806			778
Total non-interest income		818			799			2,056			2,906
Non-interest expense:
Salaries and benefits		1,372			1,245			4,013			3,977
Occupancy and equipment, net		321			325			986			994
Computer service		147			143			421			424
Advertising		68			81			203			198
FDIC Insurance Premium		171			256			494			624
Other		428			539			1,362			1,609
Total non-interest expense		2,507			2,589			7,479			7,826
Income before income taxes		788			(43	)		2,252			791
Income tax expense		262			(67	)		737			152
Net income		526			24			1,515			639
Weighted average number of diluted shares		1,553,525			1,553,586			1,553,525			1,553,598
Diluted earnings per share	$	0.34		$	0.02		$	0.98		$	0.41
Return on average equity		6.02	%		0.28	%		5.85	%		2.48	%
Return on average assets		0.55	%		0.03	%		0.53	%		0.23	%
Average earning assets	$	353,815		$	346,774		$	347,719		$	355,233
Net interest margin		3.83	%		3.01	%		3.64	%		2.83	%
Efficiency ratio		76.08	%		101.69	%		76.86	%		90.82	%