lsbi-20120331.htm

10-Q 1 lsbi-20120331.htm FQE MARCH 31, 2012 lsbi-20120331.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

	ý	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
		SECURITIES EXCHANGE ACT OF 1934

		For the quarterly period ended March 31, 2012

		OR

	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: 0-25070

LSB FINANCIAL CORP.

(Exact name of registrant as specified in its charter)

Indiana		35-1934975
(State or other jurisdiction of incorporation or organization)		(I.R.S. 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)

None

(Former name, former address and former fiscal year, if changed since last report)

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 reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check One):

Large Accelerated Filer o	Accelerated Filer o
Non-Accelerated Filer o (Do not check if a smaller reporting company)	Smaller Reporting Company ý

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

The number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date is indicated below.

Class		Outstanding at May 10, 2012
Common Stock, $.01 par value per share		1,555,972 shares

LSB FINANCIAL CORP.

INDEX

PART I FINANCIAL INFORMATION		1

Item 1.	Financial Statements	1

	Consolidated Condensed Balance Sheets	1

	Consolidated Condensed Statements of Income and Comprehensive Income	2

	Consolidated Condensed Statements of Changes in Shareholders’ Equity	3

	Consolidated Condensed Statements of Cash Flows	4

	Notes to Consolidated Condensed Financial Statements	5

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	38

Item 4.	Controls and Procedures.	38

PART II. OTHER INFORMATION		39

Item 1.	Legal Proceedings	39

Item 1A.	Risk Factors	41

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	42

Item 3.	Defaults Upon Senior Securities	42

Item 4.	Mine Safety Disclosures	42

Item 5.	Other Information	42

Item 6.	Exhibits	42

SIGNATURES		43

PART I FINANCIAL INFORMATION

Item 1. Financial Statements

LSB FINANCIAL CORP.

Consolidated Condensed Balance Sheets

(Dollars in thousands, except per share data)

	March 31, 2012			December 31, 2011
	(unaudited)
Assets
Cash and due from banks	$	34,735		$	18,552
Interest bearing deposits		2,669			3,156
Cash and cash equivalents		37,404			21,708
Interest bearing time deposits		745			---
Available-for-sale securities		16,335			13,845
Loans held for sale		2,368			3,120
Total loans		298,432			307,841
Less: Allowance for loan losses		(5,305	)		(5,331	)
Net loans		293,127			302,510
Premises and equipment, net		6,132			6,146
Federal Home Loan Bank stock, at cost		3,185			3,185
Bank owned life insurance		6,474			6,434
Interest receivable and other assets		5,785			7,342
Total assets	$	371,555		$	364,290

Liabilities and Shareholders’ Equity
Liabilities
Deposits	$	314,627		$	308,433
Federal Home Loan Bank advances		18,000			18,000
Interest payable and other liabilities		2,148			1,683
Total liabilities		334,775			328,116

Commitments and Contingencies

Shareholders’ Equity
Common stock, $.01 par value
Authorized - 7,000,000 shares Issued and outstanding 2012 - 1,555,972 shares, 2011 - 1,555,222 shares		15			15
Additional paid-in-capital		11,040			11,010
Retained earnings		25,508			24,913
Accumulated other comprehensive income		217			236
Total shareholders’ equity		36,780			36,174

Total liabilities and shareholders’ equity	$	371,555		$	364,290

See notes to consolidated condensed financial statements.

LSB FINANCIAL CORP.

Consolidated Condensed Statements of Income and Comprehensive Income

(Dollars in thousands, except per share data)

(Unaudited)

	Three months ended March 31,
	2012			2011
Interest and Dividend Income
Loans	$	4,075		$	4,358
Securities
Taxable		66			68
Tax-exempt		39			45
Other		14			4
Total interest and dividend income		4,194			4,475
Interest Expense
Deposits		811			990
Borrowings		99			121
Total interest expense		910			1,111

Net Interest Income		3,284			3,364
Provision for Loan Losses		600			1,176
Net Interest Income After Provision for Loan Losses		2,684			2,188

Non-interest Income
Deposit account service charges and fees		325			292
Net gains on loan sales		406			164
Loss on other real estate owned		(83	)		(24	)
Other		260			260
Total non-interest income		908			692

Non-Interest Expense
Salaries and employee benefits		1,519			1,410
Net occupancy and equipment expense		318			329
Computer service		148			142
Advertising		88			58
FDIC insurance premiums		119			184
Other		468			466
Total non-interest expense		2,660			2,589

Income Before Income Taxes		932			291
Provision for Income Taxes		337			86
Net Income		595			205
Unrealized appreciation (depreciation) on available-for-sale securities net of taxes (credits) of $(13) and $15, for 2012 and 2011, respectively		(19	)		22
Comprehensive income	$	576		$	227

Basic Earnings Per Share	$	0.38		$	0.13
Diluted Earnings Per Share	$	0.38		$	0.13

Dividends Declared Per Share	$	0.00		$	0.00

See notes to consolidated condensed financial statements.

LSB FINANCIAL CORP.

Consolidated Condensed Statements of Changes in Shareholders’ Equity

For the Three Months Ended March 31, 2012 and 2011

(Dollars in thousands, except per share data)

(Unaudited)

	Common Stock		Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Income			Total

Balance, January 1, 2011	$	15	$	10,987	$	24,374	$	201		$	35,577
Net income						205					205
Change in unrealized appreciation on available-for-sale securities, net of taxes								22			22
Share-based compensation expense				1							1
Balance, March 31, 2011	$	15	$	10,988	$	24,579	$	223		$	35,805



Balance, January 1, 2012	$	15	$	11,010	$	24,913	$	236		$	36,174
Net income						595					595
Change in unrealized appreciation on available-for-sale securities, net of taxes								(19	)		(19	)
Stock options exercised (750 shares)				7							7
Tax benefit related to stock options exercised				2							2
Share-based compensation expense				21							21
Balance, March 31, 2012	$	15	$	11,040	$	25,508	$	217		$	36,780

See notes to consolidated condensed financial statements.

LSB FINANCIAL CORP.

Consolidated Condensed Statements of Cash Flows

(Dollars in thousands)

(Unaudited)

	Three months ended March 31,
	2012			2011
Operating Activities
Net income	$	595		$	205
Items not requiring (providing) cash
Depreciation		113			98
Provision for loan losses		600			1,176
Amortization of premiums and discounts on securities		24			16
Loss on sale of other real estate owned		83			24
Gain on sale of loans		(406	)		(164	)
Loans originated for sale		(13,201	)		(10,211	)
Proceeds on loans sold		14,359			12,151
Amortization of stock options		21			1
Changes in
Interest receivable and other assets		371			184
Interest payable and other liabilities		478			217
Net cash provided by operating activities		3,037			3,697

Investing Activities
Purchases of available-for-sale securities		(4,967	)		(1,038	)
Proceeds from maturities of available-for-sale securities		1,675			870
Net change in loans		8,755			4,004
Proceeds from sale of other real estate owned		1,092			165
Purchase of premises and equipment		(99	)		(81	)
Net cash provided by investing activities		6,456			3,920

Financing Activities
Net change in demand deposits, money market, NOW and savings accounts		6,029			(960	)
Net change in certificates of deposit		165			(5,569	)
Proceeds from Federal Home Loan Bank advances		---			4,000
Repayment of Federal Home Loan Bank advances		---			(6,000	)
Proceeds from stock options exercised		7			---
Tax benefits related to stock options exercised		2			---
Net cash provided by (used in) financing activities		6,203			(8,529	)

Increase (decrease) in Cash and Cash Equivalents		15,696			(912	)
Cash and Cash Equivalents, Beginning of Period		21,708			13,573
Cash and Cash Equivalents, End of Period	$	37,404		$	12,661

Supplemental Cash Flows Information
Interest paid	$	901		$	1,109
Income taxes paid		---			400

Supplemental Non-Cash Disclosures
Capitalization of mortgage servicing rights		49			15
Loans transferred to other real estate owned		28			---

See notes to consolidated condensed financial statements.

LSB FINANCIAL CORP.

Notes to Consolidated Condensed Financial Statements

March 31, 2012

Note 1 – General

The financial statements were prepared in accordance with the instructions for Form 10-Q and, therefore, do not include all of the disclosures necessary for a complete presentation of financial position, results of operations and cash flows in conformity with accounting principles generally accepted in the United States of America. These interim financial statements have been prepared on a basis consistent with the annual financial statements and include, in the opinion of management, all adjustments, consisting of only normal recurring adjustments, necessary for a fair presentation of the results of operations and financial position for and at the end of such interim periods. The consolidated condensed balance sheet of LSB Financial Corp. as of December 31, 2011 has been derived from the audited consolidated balance sheet of LSB Financial Corp. as of that date.

Certain information and note disclosures normally included in the Company’s annual financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Form 10-K annual report for the fiscal year ended December 31, 2011 filed with the Securities and Exchange Commission. The results of operations for the periods are not necessarily indicative of the results to be expected for the full year.

Note 2 – Principles of Consolidation

The accompanying financial statements include the accounts of LSB Financial Corp., its wholly owned subsidiary Lafayette Savings Bank, FSB (“Lafayette Savings”), and Lafayette Savings’ wholly owned subsidiaries, LSB Service Corporation and Lafayette Insurance and Investments, Inc. All significant intercompany transactions have been eliminated upon consolidation.

Note 3 – Earnings per share

Earnings per share are based upon the weighted average number of shares outstanding during the period. Diluted earnings per share further assume the issuance of any potentially dilutive shares. For the three month period ended March 31, 2011, 15,327 shares related to stock options outstanding were dilutive and 21,458 were antidilutive. For the three month period ended March 31, 2012, 6,000 shares related to stock options outstanding were dilutive and 51,433 were antidilutive. The following table presents information about the number of shares used to compute earnings per share and the results of the computations:

	Three months ended March 31,
	2012		2011

Weighted average shares outstanding		1,555,337		1,553,525
Stock options		664		2,715
Shares used to compute diluted earnings per share		1,556,001		1,556,240
Basic earnings per share	$	0.38	$	0.13
Diluted earnings per share	$	0.38	$	0.13

Note 4 – Securities

The amortized cost and approximate fair values, together with gross unrealized gains and losses, of securities are as follows:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Approximate Fair Value
			(in Thousands)
Available-for-sale Securities:
March 31, 2012:
U.S. Government sponsored agencies	$	4,653	$	2	$	(34	)	$	4,621
Mortgage-backed securities – government sponsored entities		5,208		170		(1	)		5,377
State and political subdivisions		6,114		224		(1	)		6,337
	$	15,975	$	396	$	(36	)	$	16,335

December 31, 2011:
U.S. Government sponsored agencies	$	3,172	$	7	$	(2	)	$	3,177
Mortgage-backed securities – government sponsored entities		3,570		149		---			3,719
State and political subdivisions		6,710		242		(3	)		6,949
	$	13,452	$	398	$	(5	)	$	13,845

The amortized cost and fair value of available-for-sale securities at March 31, 2012, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

	Available for Sale
	Amortized Cost		Fair Value
	March 31, 2012
	(in thousands)

Within one year	$	1,095	$	1,097
One to five years		5,661		5,722
Five to ten years		4,011		4,139
After ten years		---		----
		10,767		10,958

Mortgage-backed securities		5,208		5,377

Totals	$	15,975	$	16,335

The carrying value of securities pledged as collateral, to secure public deposits and for other purposes, was $2.2 million at March 31, 2012 and $2.3 million at December 31, 2011.

The following table shows our investments’ gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities had been in a continuous unrealized loss position at March 31, 2012 and December 31, 2011

	Less Than 12 Months				12 Months or More				Total
Description of Securities	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
	(In thousands)
March 31, 2012
U.S. Government sponsored agencies	$	4,115	$	34	$	---	$	---	$	4,115	$	34
Mortgage-backed securities		1,306	$	1	$	---	$	---	$	1,306	$	1
State and political subdivisions		223		1		---		---		223		1
Total temporarily impaired securities	$	5,644	$	36	$	---	$	---	$	5,644	$	36

December 31, 2011
U.S. Government sponsored agencies	$	368	$	2	$	---	$	---	$	368	$	2
State and political subdivisions		570		3		---		---		570		3
Total temporarily impaired securities	$	938	$	5	$	---	$	---	$	938	$	5

Note 5 - Loans and Allowance for Loan Losses

The allowance for loan losses represents management’s estimate of probable losses inherent in Lafayette Savings’ loan portfolios. In determining the appropriate amount of the allowance for loan losses, management makes numerous assumptions, estimates and assessments.

The strategy also emphasizes diversification on an industry and customer level, regular credit quality reviews and quarterly management reviews of large credit exposures and loans experiencing deterioration of credit quality.

Lafayette Savings’ allowance consists of three components: probable losses estimated from individual reviews of specific loans, probable losses estimated from historical loss rates, and probable losses resulting from economic or other deterioration above and beyond what is reflected in the first two components of the allowance.

All loans that are rated substandard and impaired, or are troubled debt restructures are subject to individual review. Where appropriate, reserves are allocated to individual loans based on management’s estimate of the borrower’s ability to repay the loan given the availability of collateral, other sources of cash flow and legal options available to the Bank. Included in the review of individual loans are those that are impaired as provided in Financial Accounting Standards Board (“FASB”) ASC 310-10 (formerly FAS 114, Accounting by Creditors for Impairment of a Loan). Any allowances for impaired loans are determined by the fair value of the underlying collateral based on the discounted appraised value. Allowances for loans that are not collateral dependent are determined by the present value of expected future cash flows discounted at the loan’s effective interest rate. Historical loss rates are applied to all loans not included in the ASC 310-10 calculation.

Historical loss rates for commercial and consumer loans may be adjusted for significant qualitative factors that, in management’s judgment, reflect the impact of any current conditions on loss recognition. Factors which management considers in the analysis include the effects of the national and local economies, trends in the nature and volume of loans (delinquencies, charge-offs and nonaccrual loans), changes in mix, asset quality trends, risk management and loan administration, changes in the internal lending policies and credit standards, collection practices, examination results from bank regulatory agencies and Lafayette Savings’ internal loan review.

Allowances on individual loans and historical loss rates are reviewed quarterly and adjusted as necessary based on changing borrower and/or collateral conditions and actual collection and charge-off experience.

Lafayette Savings’ primary market area for lending is Tippecanoe County, Indiana and to a lesser extent the eight surrounding counties. When evaluating the adequacy of the allowance, consideration is given to this regional geographic concentration and the closely associated effect of changing economic conditions on Lafayette Savings’ customers.

Categories of loans include:

	March 31, 2012			December 31, 2011
	(In thousands)
Real Estate
One-to-four family residential	$	108,192		$	108,867
Multi-family residential		60,527			60,612
Commercial real estate		87,415			90,879
Construction and land development		13,680			18,364
Commercial		12,504			14,366
Consumer and other		1,185			1,161
Home equity lines of credit		17,653			17,330
Total loans		301,156			311,579
Less
Net deferred loan fees, premiums and discounts		(490	)		(496	)
Undisbursed portion of loans		(2,234	)		(3,242	)
Allowance for loan losses		(5,305	)		(5,331	)
Net loans	$	293,127		$	302,510

The risk characteristics of each loan portfolio segment are as follows:

Commercial

Commercial loans are primarily based on the identified cash flows of the borrower and secondarily on the underlying collateral provided by the borrower. The cash flows of borrowers, however, may not be as expected and the collateral securing these loans may fluctuate in value. Most commercial loans are secured by the assets being financed or other business assets such as accounts receivable or inventory and may incorporate a personal guarantee; however, some short-term loans may be made on an unsecured basis. In the case of loans secured by accounts receivable, the availability of funds for the repayment of these loans may be substantially dependent on the ability of the borrower to collect amounts due from its customers.

Commercial real estate

These loans are viewed primarily as cash flow loans and secondarily as loans secured by real estate. Commercial real estate lending typically involves higher loan principal amounts and the repayment of these loans is generally dependent on the successful operation of the property securing the loan or the business conducted on the property securing the loan. Commercial real estate loans may be more adversely affected by conditions in the real estate markets or in the general economy. The properties securing the Company’s commercial real estate portfolio are diverse in terms of type and geographic location. Management monitors and evaluates commercial real estate loans based on collateral, geography and risk grade criteria. As a general rule, the Company avoids financing single purpose projects unless other underwriting factors are present to help mitigate risk. In addition, management tracks the level of owner-occupied commercial real estate loans versus non-owner occupied loans.

Construction

Construction loans are underwritten utilizing feasibility studies, independent appraisal reviews, sensitivity analysis of absorption and lease rates and financial analysis of the developers and property owners. Construction loans are generally based on estimates of costs and value associated with the complete project. These estimates may be inaccurate. Construction loans often involve the disbursement of substantial funds with repayment substantially dependent on the success of the ultimate project. Sources of repayment for these types of loans may be pre-committed permanent loans from approved long-term lenders, sales of developed property or an interim loan commitment from the Company until permanent financing is obtained. These loans are closely monitored by on-site inspections and are considered to have higher risks than other real estate loans due to their ultimate repayment being sensitive to interest rate changes, governmental regulation of real property, general economic conditions and the availability of long-term financing.

Residential and Consumer

With respect to residential loans that are secured by one- to four-family residences and are generally owner occupied, the Company generally establishes a maximum loan-to-value ratio and requires private mortgage insurance if that ratio is exceeded. Home equity loans are typically secured by a subordinate interest in one- to four-family residences, and consumer loans are secured by consumer assets such as automobiles or recreational vehicles. Some consumer loans are unsecured such as small installment loans and certain lines of credit. Repayment of these loans is primarily dependent on the personal income of the borrowers, which can be impacted by economic conditions in their market areas such as unemployment levels. Repayment can also be impacted by changes in property values on residential properties. Risk is mitigated by the fact that the loans are of smaller individual amounts and spread over a large number of borrowers.

Additional information on the allocation of loan loss reserves by loan category, which does not include loans held for sale, for the three month periods ending March 31, 2012 and March 31, 2011 and for the year ended December 31, 2011 is provided below.

Allowance for Loan Losses and Recorded Investment in Loans for the Three Months Ended March 31, 2012

Three Months Ended March 31, 2012	Commercial			Owner Occupied 1-4			Non-owner Occupied 1-4			Multi- family			Commercial Real Estate		Construction			Land			Consumer and Home Equity			Total
	In thousands
Allowance for losses
Beginning balance	$	667		$	436		$	1,330		$	646		$	1,788	$	64		$	264		$	136		$	5,331
Provision charged to expense		362			(19	)		(87	)		276			212		(51	)		(121	)		28			600
Losses charged off		(313	)		(6	)		(25	)		(259	)		---		---			(17	)		(11	)		(631	)
Recoveries		---			---			3			1			---		---			1			---			5
Ending balance		716			411			1,221			664			2,000		13			127			153			5,305
ALL individually evaluated		---			7			62			46			939		---			---			---			1,054
ALL collectively evaluated		716			404			1,159			618			1,061		13			127			153			4,251
Total ALL		716			411			1,221			664			2,000		13			127			153			5,305
Loans individually evaluated		460			1,520			6,748			3,520			11,913		---			1,899			158			26,218
Loans collectively evaluated		12,044			50,228			49,696			57,007			75,443		6,995			4,786			18,680			274,938
Total loans evaluated		12,504			51,748			56,444			60,527			87,415		6,995			6,685			18,838			301,156

Allowance for Loan Losses for the Three Months Ended March 31, 2011
Three Months Ended March 31, 2011	Commercial			Owner Occupied 1-4			Non-owner Occupied 1-4			Multi- family			Commercial Real Estate		Construction			Land			Consumer and Home Equity			Total
	In thousands
Allowance for losses
Beginning balance	$	565		$	242		$	773		$	1,138		$	2,061	$	---		$	480		$	84		$	5,343
Provision charged to expense		162			231			690			17			33		78			(37	)		2			1,176
Losses charged off		---			---			---			---			---		---			---			(9	)		(9	)
Recoveries		---			22			8			---			---		---			7			---			37
Ending balance		727			495			1,471			1,155			2,094		78			450			77			6,547

Allowance for Loan Losses and Recorded Investment in Loans at December 31, 2011
ALL individually evaluated		129			13			84			---			413		---			---			---			639
ALL collectively evaluated		538			423			1,246			646			1,375		64			264			136			4,692
Total ALL		667			436			1,330			646			1,788		64			264			136			5,331
Loans individually evaluated		2,451			2,094			8,315			4,558			11,764		---			2,140			143			31,465
Loans collectively evaluated		11,915			48,248			50,209			56,054			79,115		8,060			8,164			18,349			280,114
Total loans evaluated		14,366			50,342			58,524			60,612			90,879		8,060			10,304			18,491			311,579

Management’s general practice is to charge down collateral dependent loans individually evaluated for impairment to the fair value of the underlying collateral.

Consistent with regulatory guidance, charge-offs on all loan segments are taken when specific loans, or portions thereof, are considered uncollectible. The Company’s policy is to promptly charge these loans off in the period the uncollectible loss is reasonably determined.

For all loan portfolio segments except one- to four-family residential properties and consumer, the Company promptly charges-off loans, or portions thereof, when available information confirms that specific loans are uncollectible based on information that includes, but is not limited to, (1) the deteriorating financial condition of the borrower, (2) declining collateral values, and/or (3) legal action, including bankruptcy, that impairs the borrower’s ability to adequately meet its obligations. For impaired loans that are considered to be solely collateral dependent, a partial charge-off is recorded when a loss has been confirmed by an updated appraisal or other appropriate valuation of the collateral.

The Company charges-off one- to four-family residential and consumer loans, or portions thereof, when the Company reasonably determines the amount of the loss. The Company adheres to timeframes established by applicable regulatory guidance which provides for the charge-down of one- to four-family first and junior lien mortgages to the net realizable value less costs to sell when the loan is 120 days past due, charge-off of unsecured open-end loans when the loan is 120 days past due, and charge-down to the net realizable value when other secured loans are 120 days past due. Loans at these respective delinquency thresholds for which the Company can clearly document that the loan is both well-secured and in the process of collection, such that collection will occur regardless of delinquency status, need not be charged off. Charge-offs may be taken sooner than the above-referenced timeframes if circumstances warrant.

The entire balance of a loan is considered delinquent if the minimum payment contractually required to be made is not received by the specified due date.

The historical loss experience is determined by portfolio segment and is based on the actual loss history experienced by the Company over the prior four years. Management believes the four year historical loss experience methodology is appropriate in the current economic environment, as it captures loss rates that are comparable to the current period being analyzed.

We rate all loans by credit quality using the following designations:

GRADE 1 - Pass, superior credit quality

Loans of the highest quality. Financial strength of the borrower (exhibited by extremely low debt-to-income ratios/high debt-service coverage, low loan-to-value ratio, and clean credit history) is such that no loss is anticipated. Probability of serious or rapid deterioration is extremely small.

GRADE 2 - Pass, good credit quality

Loans of good quality. Overall above average credit, with strong capacity to repay (exhibited by higher debt-to-income ratios/lower debt-service coverage than Grade 1, but still better than average levels), sound credit history and employment. Loan-to-value is not as strong as Grade 1, but is greater than Grade 3. Minor loss exposure with the probability of serious financial deterioration unlikely.

GRADE 3 - Pass, low risk

Loans of satisfactory quality. Average quality due to average capacity to repay (exhibited by higher debt-to-income ratios/lower debt-service coverage than Grade 2 but better than levels requiring Loan Committee approval), employment, credit history, loan-to-value ratio, or paying habits. Deterioration possible if adverse factors occur.

GRADE 4 - Pass, acceptable risk

Loans of marginal, but acceptable quality due to below average capacity to repay (exhibited by high debt-to-income ratios/low debt-service coverage), high loan-to-value, or poor paying habits. Deterioration likely if adverse factors occur.

GRADE W-4 - Pass, watch list credit

These loans have the same characteristics as standard Grade 4 loans, with an added significant weakness such as the global debt-service coverage of the borrower being below 1.00. Such loans should have no delinquencies within the previous 12 months.

GRADE 5- Special Mention

Loans in this classification are in a state of change that could adversely affect paying ability, collateral value or which require monthly monitoring to protect the asset value.

GRADE 6- Substandard

A substandard asset with a defined weakness. Heavy debt condition, deterioration of collateral, poor paying habits, or conditions present that unless deficiencies are corrected will result in some loss. Loans 90 or more days past due should be automatically included in this grade.

GRADE 7- Doubtful

Poor quality. Loans in this group are characterized by less than adequate collateral and all of the characteristics of a loan classified as substandard. The possibility of a loss is extremely high, but factors may be underway to minimize the loss or maximize the recovery.

GRADE 8 - Loss

Loans classified loss are considered uncollectible and of such little value that their continuance as an asset is not warranted.

Interest income on loans individually classified as impaired is recognized on a cash basis after all past due and current principal payments have been made.

Subsequent payments on non-accrual loans are recorded as a reduction of principal, and interest income is recorded only after principal recovery is reasonably assured. Nonaccrual loans are returned to accrual status when, in the opinion of management, the financial position of the borrower indicates there is no longer any reasonable doubt as to the timely collection of interest or principal. The Company requires a period of satisfactory performance of not less than six months before returning a nonaccrual loan to accrual status.

The following table provides an analysis of loan quality using the above designations, based on property type at March 31, 2012.

Credit Rating	Commercial		Owner Occupied 1-4		Non-owner Occupied 1-4		Multi- Family		Commercial Real Estate		Construction		Land		Consumer and Home Equity		Total
							(In thousands)

1- Superior	$	254	$	4,217	$	258	$	---	$	106	$	---	$	198	$	1,576	$	6,609
2 - Good		3,593		19,668		5,078		8,156		9,580		1,207		384		11,675		59,341
3 - Pass Low risk		6,519		18,979		13,658		25,261		32,512		4,366		283		4,285		105,863
4 - Pass		1,479		6,629		28,702		20,170		23,958		1,422		1,804		1,137		83,301
4W - Watch		125		699		6,831		4,479		7,353		---		2,117		90		21,694
5 - Special mention		---		84		159		697		849		---		---		---		1,789
6 - Substandard		534		1,472		3,758		1,764		13,057		---		1,899		75		22,559
7 - Doubtful		---		---		---		---		---		---		---		---		---
8 - Loss		---		---		---		---		---		---		---		---		---
Total	$	12,504	$	51,748	$	56,444	$	60,527	$	87,415	$	6,995	$	6,685	$	18,838	$	301,156

The following table provides an analysis of loan quality using the above designations, based on property type at December 31, 2011.

Credit Rating	Commercial		Owner Occupied 1-4		Non-owner Occupied 1-4		Multi- Family		Commercial Real Estate		Construction		Land		Consumer and Home Equity		Total
							(In thousands)

1- Superior	$	257	$	2,911	$	115	$	---	$	107	$	---	$	200	$	1,743	$	5,333
2 - Good		2,719		18,638		5,167		8,176		10,761		1,094		763		11,336		58,654
3 - Pass Low risk		6,408		19,801		13,665		24,884		33,730		4,170		354		4,376		107,388
4 - Pass		2,229		6,403		28,118		20,475		25,302		2,796		1,312		803		87,438
4W - Watch		303		748		6,398		4,342		9,772		---		2,077		90		23,730
5 - Special mention		1,550		475		188		704		232		---		3,501		99		6,749
6 - Substandard		900		1,366		4,874		2,031		10,975		---		2,097		44		22,287
7 - Doubtful		---		---		---		---		---		---		---		---		---
8 - Loss		---		---		---		---		---		---		---		---		---
Total	$	14,366	$	50,342	$	58,524	$	60,612	$	90,879	$	8,060	$	10,304	$	18,491	$	311,579

Analyses of past due loans segregated by loan type as of March 31, 2012 and December 31, 2011 are provided below.

	Loan Portfolio Aging Analysis as of March 31, 2012

	30-59 Days		60-89 Days		Over 90 Days		Total Past Due		Current		Total Loans		Under 90 Days and Not Accruing		Total 90 Days and Accruing
							(In thousands)

Commercial	$	128	$	62	$	208	$	398	$	12,106	$	12,504	$	128	$	---
Owner occupied 1-4		173		287		596		1,056		50,692		51,748		725		---
Non owner occupied 1-4		462		180		1,030		1,672		54,772		56,444		1,025		---
Multi-family		88		642		542		1,272		59,255		60,527		496		---
Commercial Real Estate		18		---		2,859		2,877		84,538		87,415		2,611		---
Construction		---		---		---		---		6,996		6,995		---		---
Land		---		---		1,079		1,079		5,606		6,685		819		---
Consumer and home equity		1		7		68		76		18,761		18,838		7		---
Total	$	870	$	1,178	$	6,382	$	8,430	$	292,726	$	301,156	$	5,811	$	---

	Loan Portfolio Aging Analysis as of December 31, 2011

	30-59 Days		60-89 Days		Over 90 Days		Total Past Due		Current		Total Loans		Under 90 Days and Not Accruing		Total 90 Days and Accruing
							(In thousands)

Commercial	$	1,387	$	572	$	148	$	2,107	$	12,259	$	14,366	$	568	$	---
Owner occupied 1-4		336		211		714		1,261		49,081		50,342		433		---
Non owner occupied 1-4		435		25		1,918		2,378		56,147		58,524		1,184		---
Multi-family		---		116		801		917		59,695		60,612		501		---
Commercial Real Estate		19		74		1,974		2,067		88,812		90,879		1,677		---
Construction		---		---		---		---		8,060		8,060		---		---
Land		---		---		1,173		1,173		9,131		10,304		924		---
Consumer and home equity		86		8		36		130		18,361		18,491		8		---
Total	$	2,263	$	1,006	$	6,764	$	10,033	$	301,546	$	311,579	$	5,295	$	---

Impaired loans are those for which we believe it is probable that we will not collect all principal and interest due in accordance with the original terms of the loan agreement. The following table presents impaired loans and interest recognized on them for the quarter ended March 31, 2012 and impaired loans for the year ended December 31, 2011 and interest recognized for the quarter ended March 31, 2011.

	Impaired Loans as of and for the Quarter Ended March 31, 2012
	Recorded Balance		Unpaid Principal Balance		Specific Allowance		Average Impaired Loans		Interest Income Recognized
					In thousands
Loans without a specific valuation allowance
Commercial	$	460	$	773	$	---	$	1,455	$	5
Owner occupied 1-4		1,423		1,439		---		2,022		27
Non-owner occupied 1-4		6,052		6,309		---		6,410		83
Multi-family		3,347		5,095		---		3,866		44
Commercial real estate		7,236		8,087		---		8,045		76
Construction		---		---		---		---		---
Land		1,899		1,937		---		2,019		1
Consumer and home equity		158		174		---		196		3
Total loans without a specific valuation allowance		20,575		23,815		---		24,013		239

Loans with a specific valuation allowance
Commercial		---		---		---		---		---
Owner occupied 1-4		97		97		7		94		2
Non-owner occupied 1-4		696		696		62		701		5
Multi-family		172		172		46		173		3
Commercial real estate		4,677		4,677		939		3,794		31
Construction		---		---		---		---		---
Land		---		---		---		---		---
Consumer and home equity		---		---		---		---		---
Total loans with a specific valuation allowance		5,642		5,642		1,054		4,762		41

Total
Commercial		460		773		---		1,455		5
Owner occupied 1-4		1,520		1,535		7		2,116		29
Non-owner occupied 1-4		6,748		7,005		62		7,111		88
Multi-family		3,520		5,267		46		4,039		47
Commercial real estate		11,913		12,764		939		11,839		107
Construction		---		---		---		---		---
Land		1,899		1,937		---		2,019		1
Consumer and home equity		158		174		---		196		3
Total impaired loans	$	26,218	$	29,457	$	1,054	$	28,775	$	280

	Impaired Loans as of December 31, 2011						Impaired Loans for the Quarter Ended March 31, 2011
	Recorded Balance		Unpaid Principal Balance		Specific Allowance		Average Impaired Loans		Interest Income Recognized
					In thousands
Loans without a specific valuation allowance
Commercial	$	2,233	$	2,257	$	---	$	865	$	9
Owner occupied 1-4		1,951		1,960		---		1,315		16
Non-owner occupied 1-4		7,475		8,605		---		7,566		59
Multi-family		4,558		6,083		---		1,067		23
Commercial real estate		8,854		10,406		---		3,591		21
Construction		---		---		---		---		---
Land		2,140		2,234		---		3,225		25
Consumer and home equity		143		148		---		50		---
Total loans without a specific valuation allowance		27,354		31,693		---		17,679		153
Loans with a specific valuation allowance
Commercial		218		231		129		250		1
Owner occupied 1-4		143		153		13		58		---
Non-owner occupied 1-4		840		840		84		1,339		2
Multi-family		---		---		---		559		5
Commercial real estate		2,910		2,910		413		6,901		21
Construction		---		---		---		---		---
Land		---		---		---		1,184		---
Consumer and home equity		---		---		---		25		---
Total loans with a specific valuation allowance		4,111		4,134		639		10,316		29
Total
Commercial		2,451		2,488		129		1,115		10
Owner occupied 1-4		2,094		2,113		13		1,373		16
Non-owner occupied 1-4		8,315		9,445		84		8,905		61
Multi-family		4,558		6,083		---		1,626		28
Commercial real estate		11,764		13,316		413		10,492		42
Construction		---		---		---		---		---
Land		2,140		2,234		---		4,409		25
Consumer and home equity		143		148		---		75		---
Total impaired loans	$	31,465	$	35,827	$	639	$	27,995	$	182

All loans rated substandard that have had an impairment allocated to them and all troubled debt restructures are considered impaired. A loan is considered impaired when, based on current information and events, it is probable that the Bank will be unable to collect all amounts due (both principal and interest) according to contractual terms of the loan agreement. Loans that are considered impaired are reviewed to determine if a specific allowance is required based on the borrower’s financial condition, resources and payment record, support from guarantors and the realizable value of any collateral. As a practical expedient the Bank will typically use the collateral fair market value method to determine impairments unless circumstances preclude its use. In this method, any portion of the investment above the current fair market value of the collateral should be identified as an impairment. Fair market value is determined using a current appraisal or evaluation in compliance with federal appraisal regulations.

The following table gives a breakdown of non-accruing loans by loan class at March 31, 2012 and at December 31, 2011

Loan Class	March 31, 2012		December 31, 2011
	(In thousands)

Commercial	$	336	$	716
Owner occupied 1-4		1,322		1,147
Non owner occupied 1-4		2,055		3,102
Multi-family		1,037		1,302
Commercial Real Estate		5,471		3,651
Construction		---		---
Land		1,899		2,097
Consumer and home equity		75		44
Total	$	12,195	$	12,059

Loans are placed on non-accrual status when, in the judgment of management, the probability of collection of interest is deemed to be insufficient to warrant further accrual. All interest accrued, but not received for loans placed on non-accrual, is reversed against interest income. Interest subsequently received on such loans is accounted for by using the cost-recovery basis for commercial loans and the cash-basis for retail loans until qualifying for return to accrual status.

The following tables present information regarding troubled debt restructurings by class for the three months ended March 31, 2012.

	Newly classified troubled debt restructurings for the three months ended March 31, 2012
	(Dollars in thousands)
	Number of loans		Pre-modification Recorded Balance		Post-modification Recorded Balance		Type of Modification

Commercial	$	---	$	---	$	---		---
Owner occupied 1-4		1		108		108	Below market rate
Non owner occupied 1-4		---		---		---		---
Multi-family		---		---		---		---
Commercial Real Estate		1		245		245	Below market rate
Construction		---		---		---		---
Land		---		---		---		---
Consumer and home equity		---		---		---		---
Total	$	2	$	353	$	353

There were no troubled debt restructurings that subsequently defaulted for the three months ended March 31, 2012.

Note 7 - Disclosures About Fair Value of Assets and Liabilities

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurements must maximize the use of observable inputs and minimize the use of unobservable inputs. There is a hierarchy of three levels of inputs that may be used to measure fair value:

Level 1

Quoted prices in active markets for identical assets or liabilities

Level 2

Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities

Level 3

Unobservable inputs supported by little or no market activity and are significant to the fair value of the assets or liabilities

Recurring Measurements

The following table presents the fair value measurements of assets recognized in the accompanying balance sheets measured at fair value on a recurring basis and the level within the fair value hierarchy in which the fair value measurements fall at March 31, 2012 and December 31, 2011:

			Fair Value Measurements Using
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)	Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
				(In thousands)

Available-for-sale securities

March 31, 2012:
U.S. Government-sponsored agencies	$	4,621		$	4,621
Mortgage-backed securities		5,377			5,377
State and political subdivision securities		6,337			6,337

Totals		16,335			16,335

December 31, 2011:
U.S. Government-sponsored agencies	$	3,177		$	3,177
Mortgage-backed securities		3,719			3,719
State and political subdivision securities		6,949			6,949

Totals		13,845			13,845

Following is a description of the valuation methodologies and inputs used for assets measured at fair value on a recurring basis and recognized in the accompanying balance sheets, as well as the general classification of such assets pursuant to the valuation hierarchy. There have been no significant changes in the valuation techniques during the quarter ended March 31, 2012. For assets classified within Level 3 of the fair value hierarchy, the process used to develop the reported fair value is described below.

Available-for-sale Securities

Where quoted market prices are available in an active market, securities are classified within Level 1 of the valuation hierarchy. If quoted market prices are not available, then fair values are estimated by using quoted prices of securities with similar characteristics or independent asset pricing services and pricing models, the inputs of which are market-based or independently sourced market parameters, including, but not limited to, yield curves, interest rates, volatilities, prepayments, defaults, cumulative loss projections and cash flows. Such securities are classified in Level 2 of the valuation hierarchy. In certain cases where Level 1 or Level 2 inputs are not available, securities are classified within Level 3 of the hierarchy. See the table below for inputs and valuation techniques used for Level 3 securities.

Nonrecurring Measurements

The following table presents the fair value measurement of assets measured at fair value on a nonrecurring basis and the level within the fair value hierarchy in which the fair value measurements fall at March 31, 2012 and December 31, 2011.

			Fair Value Measurements Using
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
			(in thousands)

March 31, 2012:

Collateral-dependent impaired loans	$	1,055		—		—	$	1,055

December 31, 2011:

Collateral-dependent impaired loans	$	3,701		—		—	$	3,701

Following is a description of the valuation methodologies and inputs used for assets measured at fair value on a nonrecurring basis and recognized in the accompanying balance sheet, as well as the general classification of such assets pursuant to the valuation hierarchy. For assets classified within Level 3 of the fair value hierarchy, the process used to develop the reported fair value is described below.

Collateral-Dependent Impaired Loans, Net of Allowance for Loan and Lease Losses

The estimated fair value of collateral-dependent impaired loans is based on the appraised fair value of the collateral, less estimated cost to sell. Collateral-dependent impaired loans are classified within Level 3 of the fair value hierarchy.

The Company considers the appraisal or evaluation as the starting point for determining fair value and then considers other factors and events in the environment that may affect the fair value. Appraisals of the collateral underlying collateral-dependent loans are obtained when the loan is determined to be collateral-dependent and subsequently as deemed necessary by the Controller’s office. Appraisals are reviewed for accuracy and consistency by the Controller’s office. Appraisers are selected from the list of approved appraisers maintained by management. The appraised values are reduced by discounts to consider lack of marketability and estimated cost to sell if repayment or satisfaction of the loan is dependent on the sale of the collateral. These discounts and estimates are developed by the Controller’s office by comparison to historical results.

Unobservable (Level 3) Inputs

The following table presents quantitative information about unobservable inputs used in recurring and nonrecurring Level 3 fair value measurements other than goodwill.

	Fair Value at 12/31/11	Valuation Technique	Unobservable Inputs	Range (Weighted Average)
		In thousands

Collateral-dependent impaired loans	$1,055	Market comparable properties	Marketability discount	10%

Fair Value of Financial Instruments

The following table presents estimated fair values of the Company’s financial instruments and the level within the fair value hierarchy in which the fair value measurements fall at March 31, 2012 and December 31, 2011.

			Fair Value Measurements Using
	Carrying Amount		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
			In thousands
March 31, 2012:
Financial assets
Cash and cash equivalents	$	37,404	$	37,404	$	—	$	—
Interest bearing time deposits		745		—		745		—
Available for sale securities		16,335		—		16,335		—
Loans held for sale		2,368		—		2,368		—
Loans, net of allowance for losses		293,127		—		—		314,299
Federal Home Loan Bank stock		3,185		—		3,185		—
Accrued interest receivable		1,218		—		1,218		—

Financial liabilities
Deposits		314,627		—		---		318,898
Federal Home Loan Bank advances		18,000		—		18,000		—
Accrued interest payable		59		—		59		—

December 31, 2011
	Carrying Amount		Fair Value
Financial assets
Cash and cash equivalents	$	21,708	$	21,708
Available-for-sale securities		13,845		13,845
Loans held for sale		3,120		3,120
Loans, net of allowance for loan losses		302,510		316,250
Federal Home Loan Bank stock		3,185		3,185
Interest receivable		1,250		1,250

Financial liabilities
Deposits		308,433		313,717
Federal Home Loan Bank advances		18,000		18,609
Interest payable		50		50

The following methods were used to estimate the fair value of all other financial instruments recognized in the accompanying balance sheets at amounts other than fair value.

Cash and Cash Equivalents and Interest Bearing Time Deposits

The carrying amount approximates fair value.

Loans Held For Sale

The carrying amount approximates fair value due to the insignificant time between origination and date of sale. The carrying amount is the amount funded and accrued interest.

Loans

Fair value is estimated by discounting the future cash flows using the market rates at which similar notes would be made to borrowers with similar credit ratings and for the same remaining maturities. The market rates used are based on current rates the Bank would impose for similar loans and reflect a market participant assumption about risks associated with non-performance, illiquidity, and the structure and term of the loans along with local economic and market conditions.

Federal Home Loan Bank Stock

Fair value is estimated at book value due to restrictions that limit the sale or transfer of such securities.

Accrued Interest Receivable and Payable

The carrying amount approximates fair value. The carrying amount is determined using the interest rate, balance and last payment date.

Deposits

Fair value of term deposits is estimated by discounting the future cash flows using rates of similar deposits with similar maturities. The market rates used were obtained from a knowledgeable independent third party and reviewed by the Company. The rates were the average of current rates offered by local competitors of the Bank.

The estimated fair value of demand, NOW, savings and money market deposits is the book value since rates are regularly adjusted to market rates and amounts are payable on demand at the reporting date.

Federal Home Loan Bank Advances

Fair value is estimated by discounting the future cash flows using rates of similar advances with similar maturities. These rates were obtained from current rates offered by FHLB.

Commitments to Originate Loans, Forward Sale Commitments, Letters of Credit and Lines of Credit

The fair value of commitments to originate loans is estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the present creditworthiness of the counterparties. For fixed-rate loan commitments, fair value also considers the difference between current levels of interest rates and the committed rates.

The fair value of commitments to sell securities is estimated based on current market prices for securities of similar terms and credit quality.

The fair values of letters of credit and lines of credit are based on fees currently charged for similar agreements or on the estimated cost to terminate or otherwise settle the obligations with the counterparties at the reporting date.

Note 8 –Accounting Developments

In April 2011, the FASB issued ASU No. 2011-03: Reconsideration of Effective Control for Repurchase Agreements. The amendments in this ASU remove from the assessment of effective control the criterion relating to the transferor’s ability to repurchase or redeem financial assets on substantially the agreed terms, even in the event of default by the transferee. The amendments in this ASU also eliminate the requirement to demonstrate that the transferor possesses adequate collateral to fund substantially all the cost of purchasing replacement financial assets. The Company adopted the methodologies prescribed by the ASU effective January 1, 2012. There was no significant effect on the Company’s financial statement disclosure upon adoption of this ASU.

In May 2011, the FASB issued ASU No. 2011-04: Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs. The amendments in this ASU generally represent clarifications of Topic 820, but also include some instances where a particular principle or requirement for measuring fair value or disclosing information about fair value measurements has changed. This ASU results in common principles and requirements for measuring fair value and for disclosing information about fair value measurements in accordance with U.S. GAAP and IFRSs. The amendments in this ASU are to be applied prospectively. The Company adopted the methodologies prescribed by the ASU effective January 1, 2012. There was no significant effect on the Company’s financial statement disclosure upon adoption of this ASU.

In June 2011, the FASB issued ASU No. 2011-05: Amendments to Topic 220, Comprehensive Income. Under the amendments in this ASU, an entity has the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In both choices, an entity is required to present each component of net income along with total net income, each component of other comprehensive income along with a total for other comprehensive income, and a total amount for comprehensive income. This ASU eliminates the option to present the components of other comprehensive income as part of the statement of changes in stockholders’ equity. The amendments in this ASU do not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income. The Company adopted the methodologies prescribed by the ASU effective January 1, 2012. There was no significant effect on the Company’s financial statement disclosure upon adoption of this ASU.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Executive Summary

LSB Financial Corp., an Indiana corporation (“LSB Financial” or the “Company”), is the holding company of Lafayette Savings Bank, FSB (“Lafayette Savings” or the “Bank”). LSB Financial has no separate operations and its business consists only of the business of Lafayette Savings. References in this Quarterly Report to “we,” “us” and “our” refer to LSB Financial and/or Lafayette Savings as the context requires.

Lafayette Savings is, and intends to continue to be, an independent, community-oriented financial institution. The Bank has been in business for 142 years and differs from many of our competitors in having a local board and local decision-making in all areas of business. In general, our business consists of attracting or acquiring deposits and lending that money out primarily as real estate loans to construct and purchase single-family residential properties, multi-family and commercial properties and to fund land development projects. We also make a limited number of commercial business and consumer loans.

We have an experienced and committed staff and enjoy a good reputation for serving the people of the community, for understanding their financial needs and for finding a way to meet those needs. We contribute time and money to improve the quality of life in our market area and many of our employees volunteer for local non-profit agencies. We believe this sets us apart from the other 22 banks and credit unions that compete with us. We also believe that operating independently under the same name for over 142 years is a benefit to us—especially as local offices of large banks often have less local authority as their companies strive to consolidate. Focusing time and resources on acquiring customers who may be feeling disenfranchised by their no-longer-local or very large bank has proved to be a successful strategy.

In these extraordinary economic times, we find ourselves in a community that to some extent has been sheltered from the worst effects of the slowdown. The Greater Lafayette area enjoys diverse employment including major manufacturers such as Subaru/Toyota, Caterpillar, and Wabash National; a strong education sector with Purdue University and a large local campus of Ivy Tech Community College; government offices of Lafayette, West Lafayette and Tippecanoe County; a growing high-tech presence with the Purdue Research Park; and the growth of a new medical corridor spurred by the building of two new hospitals. The area’s diversity did not make us immune to the effects of the recession, but we were spared its worst effects. Current signs of recovery, based on a report from Greater Lafayette Commerce, include increasing manufacturing employment, a continuing commitment to new facilities and renovations at Purdue University, and signs of renewed activity in residential development projects. Capital investments announced and/or made in 2011 totaled $444 million compared to $640 million in 2010 and $341 million in 2009. Wabash National, the area’s second largest industrial employer, continues to hire and intends to employ up to 200 more for a new line for production of bulk liquid storage containers. Subaru, the area’s largest industrial employer and producer of the Subaru Legacy, Outback and Tribeca, has increased employment and is investing between $14 million and $19 million for the 2013 Legacy and Outback engine model. Nanshan America will be opening an aluminum extrusion plant in Lafayette in 2012 employing 200 people. Alcoa will be adding a 115,000 square foot aluminum lithium plant to begin production in 2014. Growth in the medical corridor has continued with numerous clinics and specialized care facilities underway, which along with the two new hospitals makes Greater Lafayette a regional healthcare hub. In the education sector, Purdue’s West Lafayette 2012 enrollment was down slightly from last year to just under 40,000 students and Ivy Tech’s was over 7,600 students. The Purdue Research Park includes 110 high-tech and life science businesses and has more than 3,700 employees earning an average annual wage of $54,000. The Park has about 364,000 square feet of incubation space, making it the largest business incubator complex in the state. The Tippecanoe County unemployment rate peaked at 10.6% in July 2009 and ended the first quarter of 2012 at 7.2% compared to 8.2% for Indiana and nationally.

The housing market has remained fairly stable for the last several years with no price bubble and no resulting price swings. As of the fourth quarter 2011 results provided by the Federal Housing Finance Agency, the five year percent change in house prices for the Lafayette Metropolitan Statistical Area was a negative -0.42% decrease with the one-year change a -1.90% decrease. For the fourth quarter, the most recent report available, housing prices decreased -1.00%. The number of houses sold in the county in 2011 was stable, down about 1.4% from last year. Building permits for single family residences were up substantially, from 381 in 2010 to 462 in 2011, a 21% increase.

We continue to work with borrowers who have fallen behind on their loans. We have seen progress in our problem loans as more borrowers who had fallen behind on their loans are qualifying for troubled debt restructures, have resumed payments or we have acquired control of their properties. The majority of our delinquent loans are secured by real estate and we believe we have sufficient reserves to cover incurred losses. The challenge is to get delinquent borrowers back on a workable payment schedule or if that is not feasible, to get control of their properties through an overburdened court system. In the first quarter of 2012, we acquired 1 property through a deed-in-lieu of foreclosure and sold 21 OREO properties.

The funds we use to make loans come primarily from deposits from customers in our market area, from brokered deposits and from Federal Home Loan Bank (“FHLB”) advances. In addition we maintain an investment portfolio of available-for-sale securities to provide liquidity as needed. Our preference is to rely on local deposits unless the cost is not competitive, but if the need is immediate we will acquire pre-payable FHLB advances which are immediately available for member banks within their borrowing tolerance and can then be replaced with local or brokered deposits as they become available. We will also consider purchasing fixed term FHLB advances or brokered deposits as needed. We generally prefer brokered deposits over FHLB advances when the cost of raising money locally is not competitive. The deposits are available with a range of terms, there is no collateral requirement and the money is predictable as it cannot be withdrawn early except in the case of the death of a depositor and there is no option to have the money rollover at maturity. In the first quarter of 2012 total deposits increased by over $6.0 million, from $308.4 million to $314.6 million. This increase consisted primarily of an increase in our core deposits, primarily because of depositors’ preference for immediate access to their accounts if needed. Our reliance on brokered funds remained unchanged at $16.2 million as we had no maturities during the period. While we always welcome local deposits, the cost and convenience of brokered funds make them a useful alternative. We will also continue to rely on FHLB advances to provide immediate liquidity and help manage interest rate risk.

Our primary source of income is net interest income, which is the difference between the interest income earned on our loan and investment portfolio and the interest expense incurred on deposits and borrowings. Our net interest income depends on the balance of our loan and investment portfolios and the size of our net interest margin – the difference between the income generated from loans and the cost of funding. Our net interest income also depends on the shape of the yield curve. The Federal Reserve has held short-term rates at almost zero for the last two years while long-term rates have fallen to the 3.0% range. Because deposits are generally tied to shorter-term market rates and loans are generally tied to longer-term rates this would typically be viewed as a positive step and in fact our net interest margin has been increasing. Our expectation for 2012 is that deposits rates will remain at these low levels as the Federal Reserve continues to focus on strengthening the economy. Overall loan rates are expected to stay low or rise slightly.

Rate changes can typically be expected to have an impact on interest income. Because the Federal Reserve has stated it intends to keep rates low, we expect to see little change in the money supply or market rates in 2012. Low rates generally increase borrower preference for fixed rate products which we typically sell on the secondary market. Some existing adjustable rate loans can be expected to reprice to lower rates which could be expected to have a negative impact on our interest income, although many of our loans have already reached their interest rate floors. While we would expect to sell the majority of our fixed rate loans on the secondary market, we expect to book some higher quality loans to replace runoff in the portfolio. Although new loans put on the books in 2012 will be at comparatively low rates we expect they will provide a return above any other opportunities for investment.

Our primary expense is interest on deposits and FHLB advances which are used to fund loan growth. We offer customers in our market area time deposits for terms ranging from three months to 66 months, checking accounts and savings accounts. We also purchase brokered deposits and FHLB advances as needed to provide funding or improve our interest rate risk position. Generally when interest rates are low, depositors will choose shorter-term products and conversely when rates are high, depositors will choose longer-term products.

We consider expected changes in interest rates when structuring our interest-earning assets and our interest-bearing liabilities. When rates are expected to increase we try to book shorter-term assets that will reprice relatively quickly to higher rates over time, and book longer-term liabilities that will remain for a longer time at lower rates. Conversely, when rates are expected to fall, we would like our balance sheet to be structured such that loans will reprice more slowly to lower rates and deposits will reprice more quickly. We currently offer a three-year and a five-year certificate of deposit that allows depositors one opportunity to have their rate adjusted to the market rate at a future date to encourage them to choose longer-term deposit products. However, since we are not able to predict market interest rate fluctuations, our asset/liability management strategy may not prevent interest rate changes from having an adverse effect on our results of operations and financial condition.

Our results of operations may also be affected by general and local competitive conditions, particularly those with respect to changes in market rates, government policies and actions of regulatory authorities.

The level of turmoil in the financial services industry does present unusual risks and challenges for the Company, as described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Possible Implications of Current Events” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011.

Also, the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) has made sweeping changes to the United States financial system. The Dodd-Frank Act eliminated the Office of Thrift Supervision (the “OTS”) as of July 21, 2011. The Dodd-Frank Act transferred to the Office of the Comptroller of the Currency (the “OCC”) all functions and all rulemaking authority of the OTS relating to federal savings associations. The Dodd-Frank Act also transferred to the Board of Governors of the Federal Reserve System (the “Federal Reserve”) all functions of the OTS relating to savings and loan holding companies and their non-depository institution subsidiaries. Thus, the Bank is being supervised by the OCC and the Company is being supervised by the Federal Reserve from and after July 21, 2011. The OCC and the Federal Reserve have published regulations that will apply to the entities that they are regulating for the first time. OTS guidance, orders, interpretations, and policies to which federal savings associations like the Bank and savings and loan holding companies like the Company are subject are to remain in effect until they are suspended.

Critical Accounting Policies

Generally accepted accounting principles are complex and require management to apply significant judgments to various accounting, reporting and disclosure matters. Management of LSB Financial must use assumptions and estimates to apply these principles where actual measurement is not possible or practical. For a complete discussion of LSB Financial’s significant accounting policies, see Note 1 to the Consolidated Financial Statements as of December 31, 2011 included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011. Certain policies are considered critical because they are highly dependent upon subjective or complex judgments, assumptions and estimates. Changes in such estimates may have a significant impact on the financial statements. Management has reviewed the application of these policies with the Audit Committee of LSB Financial’s Board of Directors. These policies include the following:

Allowance for Loan Losses

Larger commercial loans that exhibit probable or observed credit weaknesses and all loans that are rated substandard or lower are subject to individual review. Where appropriate, reserves are allocated to individual loans based on management’s estimate of the borrower’s ability to repay the loan given the availability of collateral, other sources of cash flow and legal options available to the Bank. Included in the review of individual loans are those that are impaired as provided in FASB ASC 310-10 (formerly FAS 114, Accounting by Creditors for Impairment of a Loan). Any allowances for impaired loans are determined by the present value of expected future cash flows discounted at the loan’s effective interest rate or fair value of the underlying collateral based on the discounted appraised value. Historical loss rates are applied to other commercial loans not subject to specific reserve allocations.

Homogenous smaller balance loans, such as consumer installment and mortgage loans secured by various property types are not individually risk graded. Reserves are established for each pool of loans based on the expected net charge-offs. Loss rates are based on the average net charge-off history by loan category.

Historical loss rates for commercial and consumer loans may be adjusted for significant factors that, in management’s judgment, reflect the impact of any current conditions on loss recognition. Factors which management considers in the analysis include the effects of the national and local economies, trends in the nature and volume of loans (delinquencies, charge-offs and nonaccrual loans), changes in mix, asset quality trends, risk management and loan administration, changes in the internal lending policies and credit standards, collection practices, examination results from bank regulatory agencies and Lafayette Savings’ internal loan review.

Allowances on individual loans are reviewed quarterly and historical loss rates are reviewed annually and adjusted as necessary based on changing borrower and/or collateral conditions and actual collection and charge-off experience.

Mortgage Servicing Rights

Mortgage servicing rights (MSRs) associated with loans originated and sold, where servicing is retained, are capitalized and included in other intangible assets in the consolidated balance sheet. The value of the capitalized servicing rights represents the present value of the future servicing fees arising from the right to service loans in the portfolio. Critical accounting policies for MSRs relate to the initial valuation and subsequent impairment tests. The methodology used to determine the valuation of MSRs requires the development and use of a number of estimates, including anticipated principal amortization and prepayments of that principal balance. Events that may significantly affect the estimates used are changes in interest rates, mortgage loan prepayment speeds and the payment performance of the underlying loans. The carrying value of the MSRs is periodically reviewed for impairment based on a determination of fair value. For purposes of measuring impairment, the servicing rights are compared to a valuation prepared based on a discounted cash flow methodology, utilizing current prepayment speeds and discount rates. Impairment, if any, is recognized through a valuation allowance and is recorded as amortization of intangible assets.

Accounting for Foreclosed Assets

Assets acquired through, or in lieu of, loan foreclosure are held for sale and are initially recorded at fair value less cost to sell at the date of foreclosure, establishing a new cost basis. Subsequent to foreclosure, valuations are periodically performed by management and the assets are carried at the lower of carrying amount or fair value less cost to sell. Revenue and expenses from operations and changes in the valuation allowance are included in net income or expense from foreclosed assets.

Financial Condition

SELECTED FINANCIAL CONDITION DATA
(Dollars in Thousands)

	March 31,		December 31,		$			%
	2012		2011		Difference			Difference

Total assets	$	371,555	$	364,290	$	7,265		1.99	%

Loans receivable, including loans held for sale, net		295,495		305,630		(10,135	)	(3.32	)
1-4 family residential mortgage loans		110,560		111,987		(1,427	)	(1.27	)
Home equity lines of credit		17,653		17,330		323		1.86
Other real estate loans net of undisbursed portion of loans		161,622		169,855		(8,233	)	(4.85	)
Commercial business loans		12,504		14,366		(1,862	)	(12.96	)
Consumer loans		1,185		1,162		23		1.98
Loans sold (for quarter and year, respectively)		14,359		52,700

Non-performing loans over 90 days past due		6,383		6,764		(381	)	(5.63	)
Loans past due 90 days, still accruing		---		---		---		---
Loans less than 90 days past due, not accruing		5,812		5,295		517		9.76
Other real estate owned		599		1,746		(1,147	)	(65.69	)
Non-performing assets		12,794		13,805		(1,011	)	(7.32	)

Cash and due from banks		34,735		18,552		16,183		87.23
Available-for-sale securities		16,335		13,845		2,490		17.98
Interest bearing depostis		2,669		3,156		(487	)	(15.43	)

Deposits		314,627		308,433		6,194		2.01
Core deposits		160,619		155,223		5,398		3.48
Time accounts		154,008		153,154		854		0.56
Brokered deposits		16,244		16,244		---		---

FHLB advances		18,000		18,000		---		---
Shareholders’ equity (net)		36,780		36,174		606		1.68

Comparison of Financial Condition at March 31, 2012 and December 31, 2011

Our total assets increased $7.3 million, or 1.99%, during the three months from December 31, 2011 to March 31, 2012. Primary components of this increase were a $16.2 million increase in cash and due from banks and a $2.5 million increase in available for sale securities. These increases were offset by a $10.1 million decrease in net loans receivable including loans held for sale, a $1.6 million decrease in other assets and a $487,000 decrease in interest bearing deposits. Deposits increased $6.2 million and Federal Home Loan Bank advances remain unchanged. The increase in cash was generally due to the paydown of loans as borrowers continued to take advantage of unprecedented low rates to refinance their mortgages to lower rate fixed rate mortgages which we sell on the secondary market, and to our continuing efforts to encourage overextended borrowers to pay down their loans or move their relationship to another bank, and to continuing low loan demand. In addition, despite the very low rates on deposits we continued to see increases in core transaction and savings accounts as depositors’ uncertainty about the economy led them to place the money in accounts where it was readily available if needed. The decrease in other assets was primarily due to the sale of $1.1 million of OREO properties which also added to the increase in cash.

Non-performing assets, which include non-accruing loans and foreclosed assets, decreased from $13.8 million at December 31, 2011 to $12.8 million at March 31, 2012. Non-accruing loans at March 31, 2012 were comprised of $5.4 million, or 44.39%, of commercial property loans, $3.5 million, or 28.16%, of one- to four-family residential real estate loans, $1.9 million, or 15.57%, of loans on land, $1.0 million, or 8.51%, multi-family property loans, and $411,000, or 3.37%, of non real estate and consumer loans including $68,000 of Home Equity loans. Non-performing assets at March 31, 2012 also include $599,000 of foreclosed assets compared to $1.7 million at December 30, 2011. At March 31, 2012, our allowance for loan losses equaled 1.80% of total loans compared to 1.74% at December 31, 2011. The allowance for loan losses at March 31, 2012 totaled 41.46% of non-performing assets compared to 38.62% at December 31, 2011, and 43.50% of non-performing loans at March 31, 2012 compared to 44.21% at December 31, 2011. Our non-performing assets equaled 3.44% of total assets at March 31, 2012 compared to 3.79% at December 31, 2011. Non-performing loans totaling $631,000 were charged off in the first three months of 2012, offset by $5,000 of recoveries. These charge offs were primarily due to the Bank charging off impairments on non-performing loans due to lower appraisal values.

When a loan is added to our classified loan list, an impairment analysis is completed to determine expected losses upon final disposition of the property. An adjustment to loan loss reserves is made at that time for any anticipated losses. This analysis is updated quarterly thereafter. It may take up to two years to move a foreclosed property through the system to the point where we can obtain title to the property and dispose of it. We attempt to acquire properties through deeds in lieu of foreclosure if there are no other liens on the properties. We acquired one property in the first quarter of 2012 through a deed in lieu of foreclosure. Although we believe we use the best information available to determine the adequacy of our allowance for loan losses, future adjustments to the allowance may be necessary, and net income could be significantly affected if circumstances and/or economic conditions cause substantial changes in the estimates we use in making the determinations about the levels of the allowance for losses. Additionally, various regulatory agencies, as an integral part of their examination process, periodically review our allowance for loan losses. These agencies may require the recognition of additions to the allowance based upon their judgments of information available at the time of their examination. Effective August 31, 2010, the Bank entered into a Supervisory Agreement (the “Supervisory Agreement”) with the OTS requiring the Bank, among other things, to submit for review by the OTS revised policies and procedures related to the allowance for loan losses. The Bank has implemented the revised policy which it presumes will address the concerns expressed by the OTS and has not been notified of any concerns. The Supervisory Agreement did not require an additional provision for loan loss reserves. As noted above, as of July 21, 2011, all functions and all rulemaking authority of the OTS relating to federal savings associations were transferred to the OCC. As a result, the OCC will now enforce the Supervisory Agreement with the Bank.

Shareholders’ equity increased from $36.2 million at December 31, 2011 to $36.8 million at March 31, 2012, an increase of $606,000, or 1.68%, primarily as a result of net income of $595,000. Shareholders’ equity to total assets was 9.90% at March 31, 2012 compared to 9.93% at December 31, 2011.

Average Balances, Interest Rates and Yields

The following two tables present, for the periods indicated, the total dollar amount of interest income earned on average interest-earning assets and the resulting yields on such assets, as well as the interest expense paid on average interest-bearing liabilities, and the rates paid on such liabilities. No tax equivalent adjustments were made. All average balances are monthly average balances. Non-accruing loans have been included in the table as loans carrying a zero yield.

	Three months ended March 31, 2012							Three months ended March 31, 2011
	Average Outstanding Balance			Interest Earned/ Paid		Yield/ Rate		Average Outstanding Balance			Interest Earned/ Paid		Yield/ Rate
	(Dollars in Thousands)
Interest-Earning Assets:
Loans receivable(1)	$	297,733		$	4,075	5.47	%	$	319,425		$	4,358	5.46	%
Other investments		21,251			119	2.26			20,453			117	2.29
Total interest-earning assets		318,984			4,194	5.26			339,878			4,475	5.27
Interest-Bearing Liabilities
Savings deposits	$	26,322			6	0.09		$	25,673			10	0.16
Demand and NOW deposits		130,345			140	0.43			119,369			161	0.54
Time deposits		154,816			665	1.72			162,779			819	2.01
Borrowings		18,000			99	2.20			20,167			121	2.40
Total interest-bearing liabilities		329,483			910	1.10			327,988			1,111	1.35

Net interest income				$	3,284						$	3,364
Net interest rate spread						4.16	%						3.92	%
Net earning assets	$	(10,499	)					$	11,890
Net yield on average interest-earning assets						4.12	%						3.96	%
Average interest-earning assets to average interest-bearing liabilities		0.97	x						1.04	x

_________________

(1) Calculated net of deferred loan fees, loan discounts, loans in process and loss reserves.

Results of Operations

Comparison of Operating Results for the Three Months Ended March 31, 2012 and March 31, 2011

General. Net income for the three months ended March 31, 2012 was $595,000, an increase of $390,000, or 190.24%, from the three months ended March 31, 2011. The increase was primarily due to a $576,000, or 48.98%, decrease in the provision for loan losses and a $216,000 increase in noninterest income, partially offset by a $251,000 increase in taxes, an $80,000, or 2.38%, decrease in net interest income and a $71,000, or 2.74%, increase in non-interest expenses.

Net Interest Income. Net interest income for the three months ended March 31, 2012 decreased $80,000, or 2.38%, over the same period in 2011. This decrease was due to a 16 basis point increase in our net interest margin (net interest income divided by average interest-earning assets) from 3.96% for the three months ended March 31, 2011 to 4.12% for the three months ended March 31, 2012, offset by a $22.4 million decrease in average net interest-earning assets. The increase in net interest margin is primarily due to the 25 basis point decrease in the average rate on interest-bearing liabilities from 1.35% for the three months ended March 31, 2011 to 1.10% for the three months ended March 31, 2012. The average rate on interest-earning assets decreased 1 basis point from 5.27% to 5.26% for the same respective periods.

Interest income on loans decreased $283,000 for the three months ended March 31, 2012 compared to the three months ended March 31, 2011 primarily because of lower average loan volume. The average balance of loans held in our portfolio decreased by $21.7 million from $319.4 million from the three month period in 2011 to $297.7 million in 2012. The average yield on loans increased by one basis point from 5.46% to 5.47% over the same period.

Interest earned on other investments and Federal Home Loan Bank stock increased by $2,000 for the three months ended March 31, 2012 compared to the same period in 2011. This was primarily the result of a $798,000 increase in the average balance of investments and Federal Home Loan Bank stock from $20.5 million to $21.3 million over the same periods. The average yield decreased from 2.29% to 2.26% over the comparable periods.

Interest expense for the three months ended March 31, 2012 decreased $201,000, or 18.09%, compared to the same period in 2011 consisting of a $179,000 decrease in interest paid on deposits and a $22,000 decrease in interest expenses on Federal Home Loan Bank advances. The lower deposit costs were primarily due to a decrease in the average rate paid on time deposits from 2.01% for the first three months of 2011 to 1.72% for the first three months of 2012 and an $11.0 million increase in the average balance of lower rate demand deposit accounts combined with an $8.0 million decrease in the average balance of comparatively higher rate time deposits. The increase in demand accounts was largely due to depositors opting for fund availability over higher rates until they feel more confident about the economic situation. The decrease in Federal Home Loan Bank advance expense was due to a decrease in the average rate paid on advances from 2.40% for the three months of 2011 to 2.20% for the first three months of 2012 because of lower rates in the economy, and a $2.2 million decrease in average balances as we paid off maturing advances as slow loan demand reduced our need for additional funds.

Provision for Loan Losses. The evaluation of the level of loan loss reserves is an ongoing process that includes closely monitoring loan delinquencies. The following chart shows delinquent loans as well as a breakdown of non-performing assets.

	03/31/12		12/31/11		03/31/11
	(Dollars in Thousands)

Loans delinquent 30-59 days	$	870	$	2,263	$	2,632
Loans delinquent 60-89 days		1,178		1,006		246
Total delinquencies		2,048		3,269		2,878
Accruing loans past due 90 days		---		---		---
Non-accruing loans		12,195		12,059		18,757
Total non-performing loans		12,195		12,059		18,757
OREO		599		1,746		1,024

Total non-performing assets	$	12,794	$	13,805	$	19,781

Loans that are less than 90 days delinquent but are non-accruing are included in the non-accruing loan category but not in the delinquencies under 90 days.

The accrual of interest income is generally discontinued when a loan becomes 90 days past due. Loans 90 days past due but not yet three payments past due will continue to accrue interest as long as it has been determined that the loan is well secured and in the process of collection. Troubled debt restructurings that were non-performing at the time of their restructure are considered non-accruing loans until sufficient time has passed for them to establish a pattern of compliance with the terms of the restructure.

Changes in non-performing loans at March 31, 2012 compared to December 31, 2011 were primarily due to the Bank charging off $273,000 of non-performing loans, taking $33,000 into OREO, accepting short sales or payoffs on $1.4 million and restoring $276,000 to accrual status. In addition we received principal payments of $477,000. Over this period we also had $2.2 million in new loans become non-performing of which $372,000 were residential properties and $1.8 million were nonresidential or commercial loans.

We establish our provision for loan losses based on a systematic analysis of risk factors in the loan portfolio. The analysis includes consideration of concentrations of credit, past loss experience, current economic conditions, the amount and composition of the loan portfolio, estimated fair value of the underlying collateral, delinquencies and other relevant factors. From time to time, we also use the services of a consultant to assist in the evaluation of our growing commercial real estate loan portfolio. On at least a quarterly basis, a formal analysis of the adequacy of the allowance is prepared and reviewed by management and the Board of Directors. This analysis serves as a point-in-time assessment of the level of the allowance and serves as a basis for provisions for loan losses.

More specifically, our analysis of the loan portfolio will begin at the time the loan is originated, at which time each loan is assigned a risk rating. If the loan is a commercial credit, the borrower will also be assigned a similar rating. Loans that continue to perform as agreed will be included in one of the non-classified loan categories. Portions of the allowance are allocated to loan portfolios in the various risk grades, based upon a variety of factors, including historical loss experience, trends in the type and volume of the loan portfolios, trends in delinquent and non-performing loans, and economic trends affecting our market. Loans no longer performing as agreed are assigned a higher risk rating, eventually resulting in their being regarded as classified loans. A collateral re-evaluation is completed on all classified loans. This process results in the allocation of specific amounts of the allowance to individual problem loans, generally based on an analysis of the collateral securing those loans. These components are added together and compared to the balance of our allowance at the evaluation date.

At March 31, 2012 our largest areas of concern were loans on non-residential properties, one- to four-family non-owner occupied rental properties, and, to a lesser extent land development loans and multi-family loans. Loans totaling $2.9 million on non-residential properties, $1.7 million on one- to four-family rental properties, $1.1 million on land development and $1.3 million on multi-family properties were past due more than 30 days at March 31, 2012. Because of the presence of Purdue University, student housing has been a niche for us, but because of the economy we are seeing problems with vacancies, especially in non-campus housing. The non-residential properties are typically loans where the borrowers are seeing increased vacancies and late rent payments because of the economy. Land loans are of some concern as absorption rates are slower than anticipated on land development loans, although sales continue to improve.

We recorded a $600,000 provision for loan losses for the three months ended March 31, 2012 as a result of our analyses of our current loan portfolios, compared to $1.2 million during the same period in 2011. The provisions in the quarter were necessary to maintain the allowance for loan losses at a level considered appropriate to absorb probable incurred losses in the loan portfolio. The main reason for the decrease for the first three months of 2012 compared to the same period in 2011 was that two large relationships were moved to a substandard classification in the first quarter of 2011 requiring reserves sufficient to cover the estimated impairment. During the first three months of 2012, we charged $631,000 against loan loss reserves and had recoveries of $5,000. We expect to obtain possession of more properties in 2012 that are currently in the process of foreclosure. The final disposition of these properties may result in a loss. The $5.3 million allowance for loan losses was considered appropriate to cover probable incurred losses based on our evaluation and our loan mix. Our ratio of allowance for loan losses to non-performing assets increased from 22.99% at March 31, 2011 to 41.46% at March 31, 2012. That ratio at December 31, 2011 was 38.62%.

Our loan portfolio contains no option ARM products, interest-only loans, or loans with initial teaser rates. While we occasionally make loans with credit scores in the subprime range, these loans are only made if there are sufficient mitigating factors, not as part of a subprime mortgage plan. We occasionally make mortgages that exceed high loan-to-value regulatory guidelines for property type. We currently have $8.5 million of mortgage loans that are other than one- to four-family loans that qualify as high loan-to-value. We typically make these loans only to well-qualified borrowers. Of these loans, $1.4 million are delinquent more than 30 days. We also have $7.0 million of one- to four-family loans which either alone or combined with a second mortgage exceed high loan-to-value guidelines. Of these loans, $330,000 were delinquent more than 30 days. Our total high loan-to-value loans at March 31, 2012 were at 40% of capital, well under regulatory guidelines of 100% of capital. We have $17.75 million of Home Equity Lines of Credit of which four loans totaling $76,000 were delinquent more than 30 days at March 31, 2012.

An analysis of the allowance for loan losses for the three months ended March 31, 2012 and 2011 follows:


	Three months ended March 31,
	2012			2011
	(Dollars in Thousands)

Balance at January 1	$	5,331		$	5,343
Loans charged off		(631	)		(2,768	)
Recoveries		5			55
Provision		600			2,736
Balance at March 31	$	5,305		$	5,366

At March 31, 2012, non-performing assets, consisting of non-accruing loans, accruing loans 90 days or more delinquent and other real estate owned, totaled $12.8 million compared to $13.8 million at December 31, 2011. In addition to our non-performing assets, we identified $21.9 million in other loans of concern where information about possible credit problems of borrowers causes management to have doubts as to the ability of the borrowers to comply with present repayment terms and may result in disclosure of such loans as non-performing assets in the future. The vast majority of these loans, as well as our non-performing assets, are well collateralized.

At March 31, 2012, we believe that our allowance for loan losses was appropriate to absorb probable incurred losses inherent in our loan portfolio. Our allowance for losses equaled 1.80% of net loans receivable and 43.50% of non-performing loans at March 31, 2012 compared to 1.74% and 44.21% at December 31, 2011, respectively. Our non-performing assets equaled 3.44% of total assets at March 31, 2012 compared to 3.79% at December 31, 2011.

Non-Interest Income. Non-interest income for the three months ended March 31, 2012 increased by $216,000, or 31.21%, compared to the same period in 2011. This was primarily due to $242,000 increase in the gain on the sale of mortgage loans and a $33,000 increase in service charges and fee income offset by an increase of $59,000 in losses on the sale or writedown of OREO properties. The increase in the gain on sale of mortgage loans was due to an increase in loans sold from $12.2 million in the first three months of 2011 to $14.4 million for the same period in 2012 primarily because of continuing low loan rates resulting in borrowers refinancing their mortgages to lower rate fixed rate loans that we typically sell on the secondary market, and to an increase in the number of federally insured loans which generate higher fee income. The increase in service fees was primarily due to a higher volume of customer overdrafts. The increase in losses on the sale or writedown of OREO properties was primarily due to the Bank accepting a lower offer on the sale of a large number of properties to a single buyer.

Non-Interest Expense. Non-interest expense for the three months ended March 31, 2012 increased $71,000, or 2.74%, compared to the same period in 2011 due primarily to a $109,000 increase in salaries and employee benefits, including an $84,000 increase in salaries due primarily to continuing loan origination activity by commission-based loan originators and recording $21,000 cost of future stock option expense, and a $30,000 increase in advertising expenses offset by a $65,000 decrease in FDIC insurance premiums and an $11,000 decrease in occupancy expenses due to lower repair and maintenance costs.

Income Tax Expense. Our income tax provision increased by $251,000 for the three months ended March 31, 2012 due primarily to increased pre-tax income.

Liquidity

Our primary sources of funds are deposits, repayment and prepayment of loans, interest earned on or maturation of investment securities and short-term investments, borrowings and funds provided from operations. While maturities and the scheduled amortization of loans, investments and mortgage-backed securities are a predictable source of funds, deposit flows and mortgage prepayments are greatly influenced by general market interest rates, economic conditions and competition.

We monitor our cash flow carefully and strive to minimize the level of cash held in low-rate overnight accounts or in cash on hand. We also carefully track the scheduled delivery of loans committed for sale to be added to our cash flow calculations. Our current internal policy for liquidity requires minimum liquidity of 4.0% of total assets.

Liquidity management is both a daily and long-term function for our senior management. We adjust our investment strategy, within the limits established by the investment policy, based upon assessments of expected loan demand, expected cash flows, Federal Home Loan Bank advance opportunities, market yields and objectives of our asset/liability management program. Base levels of liquidity have generally been invested in interest-earning overnight and time deposits with the Federal Home Loan Bank of Indianapolis and more recently at the Federal Reserve since they have started to pay interest on deposits in excess of reserve requirements and because of increasing wire transfer requests due to a change in funding methods now required by title companies. Funds for which a demand is not foreseen in the near future are invested in investment and other securities for the purpose of yield enhancement and asset/liability management.

Our current internal policy for liquidity is 5% of total assets. Our liquidity ratio at March 31, 2012 was 13.52% as a percentage of total assets compared to 8.61% at December 31, 2011.

We anticipate that we will have sufficient funds available to meet current funding commitments. At March 31, 2012, we had outstanding commitments to originate loans and available lines of credit totaling $33.2 million and commitments to provide funds to complete current construction projects in the amount of $2.2 million. We had $920,000 of outstanding commitments to sell residential loans. Certificates of deposit which will mature in one year or less totaled $82.4 million at March 31, 2012. Included in that number are $2.6 million of brokered deposits. Based on our experience, certificates of deposit held by local depositors have been a relatively stable source of long-term funds as such certificates are generally renewed upon maturity since we have established long-term banking relationships with our customers. Therefore, we believe a significant portion of such deposits will remain with us, although this cannot be assured. Brokered deposits can be expected not to renew at maturity and will have to be replaced with other funding upon maturity. We also have $8.0 million of Federal Home Loan Bank advances maturing in the next twelve months.

Capital Resources

Shareholders’ equity totaled $36.8 million at March 31, 2012 compared to $36.2 million at December 31, 2011, an increase of $606,000, or 1.68%, due primarily to net income of $595,000. Shareholders’ equity to total assets was 9.90% at March 31, 2012 compared to 9.93% at December 31, 2011.

Federal insured savings institutions are required to maintain a minimum level of regulatory capital. If the requirement is not met, regulatory authorities may take legal or administrative actions, including restrictions on growth or operations or, in extreme cases, seizure. As of March 31, 2012 and December 31, 2011, Lafayette Savings was categorized as well capitalized. Our actual and required capital amounts and ratios at March 31, 2012 and December 31, 2011 are presented below:

	Actual				For Capital Adequacy Purposes				To Be Well Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio		Amount		Ratio		Amount		Ratio
As of March 31, 2012	(Dollars in Thousands)
Total risk-based capital (to risk-weighted assets)	$	39,365	15.0	%	$	20,982	8.0	%	$	26,227	10.0	%
Tier I capital (to risk-weighted assets)		36,062	13.8			10,491	4.0			15,736	6.0
Tier I capital (to adjusted total assets)		36,062	9.7			11,151	3.0			18,585	5.0
Tier I capital (to adjusted tangible assets)		36,062	9.7			7,264	2.0			N/A	N/A
Tangible capital (to adjusted tangible assets)		36,062	9.7			5,576	1.5			N/A	N/A

As of December 31, 2011
Total risk-based capital (to risk-weighted assets)	$	38,860	14.5	%	$	21,494	8.0	%	$	26,867	10.0	%
Tier I capital (to risk-weighted assets)		35,502	13.2			10,747	4.0			16,120	6.0
Tier I capital (to adjusted total assets)		35,502	9.8			10,919	3.0			18,198	5.0
Tier I capital (to adjusted tangible assets)		35,502	9.8			7,279	2.0			N/A	N/A
Tangible capital (to adjusted tangible assets)		35,502	9.8			5,459	1.5			N/A	N/A

Effective August 31, 2010, the Company entered into a Memorandum of Understanding (“MOU”) with the OTS, requiring the Company to submit to the OTS by October 31, 2010 a capital plan for enhancing the consolidated capital of the Company for the period January 1, 2011 through December 31, 2012. In its submitted capital plan, the Company proposes to maintain risk-based capital ratios above twelve percent (200 basis points above the ten percent well-capitalized level), and core capital above eight percent (300 basis points above the five percent well-capitalized level). The current capital levels shown in the table above are at least 1% above these levels. The OTS notified the Company that certain revisions to the capital plan primarily relating to consolidated capital ratios and consolidated financial statements of the Company must be submitted by August 30, 2011. The Company has requested clarification from the Federal Reserve regarding the requested information and has submitted a response on August 30, 2011 explaining a labeling correction that the Company believes will address the concerns noted by the OTS.

The Bank’s Supervisory Agreement and the MOU require prior OCC (the Bank’s current primary regulator following elimination of the OTS) approval of dividends by the Bank or the Company, respectively. In addition, the MOU requires prior approval by the Federal Reserve (formerly the OTS) of any debt at the holding company level not in the ordinary course (including loans, cumulative preferred stock and subordinated debt), unless such debt is contemplated by the capital plan. The holding company does not now hold any such debt. As noted above, as a result of the Dodd-Frank Act, the Bank is being supervised by the OCC and the Company is being supervised by the Federal Reserve from and after July 21, 2011. As a result, the OCC will now enforce the Bank’s Supervisory Agreement and the Federal Reserve will enforce the MOU. Despite the fact that LSB Financial believes it could obtain regulatory approval of dividends from the Bank to LSB Financial, the Bank has elected not to declare dividends at this time (and LSB Financial is therefore unable to declare dividends) because of the uncertainty regarding increased capital requirements anticipated under the Dodd-Frank Act and because the Bank has obtained a new bank regulator - the OCC - under the Dodd-Frank Act and the Bank is not familiar with the OCC’s positions on capital and other related financial matters.

Disclosure Regarding Forward-Looking Statements

This document, including information included or incorporated by reference, contains, and future filings by LSB Financial on Form 10-K, Form 10-Q and Form 8-K and future oral and written statements by LSB Financial and our management may contain, forward-looking statements about LSB Financial and its subsidiaries which we believe are within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, without limitation, statements with respect to anticipated future operating and financial performance, growth opportunities, interest rates, cost savings and funding advantages expected or anticipated to be realized by management. Words such as may, could, should, would, believe, anticipate, estimate, expect, intend, plan and similar expressions are intended to identify forward-looking statements. Forward-looking statements by LSB Financial and its management are based on beliefs, plans, objectives, goals, expectations, anticipations, estimates and intentions of management and are not guarantees of future performance. We disclaim any obligation to update or revise any forward-looking statements based on the occurrence of future events, the receipt of new information or otherwise. The important factors we discuss below and elsewhere in this document, as well as other factors discussed under the caption Management’s Discussion and Analysis of Financial Condition and Results of Operations in this document and identified in our filings with the SEC and those presented elsewhere by our management from time to time, could cause actual results to differ materially from those indicated by the forward-looking statements made in this document.

The following factors, many of which are subject to change based on various other factors beyond our control, could cause our financial performance to differ materially from the plans, objectives, expectations, estimates and intentions expressed in such forward-looking statements:

the strength of the United States economy in general and the strength of the local economies in which we conduct our operations;

the effects of, and changes in, trade, monetary and fiscal policies and laws, including interest rate policies of the Federal Reserve Board;

financial market, monetary and interest rate fluctuations, particularly the relative relationship of short-term interest rates to long-term interest rates;

the timely development of and acceptance of new products and services of Lafayette Savings and the perceived overall value of these products and services by users, including the features, pricing and quality compared to competitors’ products and services;

the willingness of users to substitute competitors’ products and services for our products and services;

the impact of changes in financial services laws and regulations (including laws concerning taxes, accounting standards, banking, securities and insurance);

the impact of technological changes;

acquisitions;

changes in consumer spending and saving habits; and

our success at managing the risks involved in the foregoing.

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

Not Applicable for Smaller Reporting Companies.

Item 4.

Controls and Procedures.

Evaluation of Disclosure Controls and Procedures. An evaluation of the Company’s disclosure controls and procedures (as defined in Sections 13a-15(e) and 15d-15(e) of the regulations promulgated under the Securities Exchange Act of 1934, as amended (the “Act”)), as of March 31, 2012, was carried out under the supervision and with the participation of the Company’s Chief Executive Officer, Chief Financial Officer and several other members of the Company’s senior management. The Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures currently in effect are effective in ensuring that the information required to be disclosed by the Company in the reports it files or submits under the Act is (i) accumulated and communicated to the Company’s management (including the Chief Executive Officer and Chief Financial Officer) in a timely manner and (ii) recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.

Changes in Internal Controls over Financial Reporting. There have been no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) of the Act) identified in connection with the Company’s evaluation of controls that occurred during the quarter ended March 31, 2012, that have materially affected, or are reasonably likely to materially affect, our internal control over the financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

Effective August 31, 2010, the Bank executed an updated Supervisory Agreement (the “Supervisory Agreement”) with the Office of Thrift Supervision (“OTS”) and LSB Financial Corp. (the “Company”) entered into a Memorandum of Understanding (the “MOU”) with the OTS under which the Bank and the Company have agreed to take a number of actions within specified timeframes to address concerns identified by the OTS in connection with its 2010 examination of the Bank. These agreements replace the prior Memorandum of Understanding and Supervisory Agreement between the Bank and the OTS. As a result of the Dodd-Frank Act, from and after July 21, 2011, the Bank is being supervised by the OCC and the Company is being supervised by the Federal Reserve. As a result, the OCC will now enforce the Bank’s Supervisory Agreement and the Federal Reserve will enforce the MOU. The Supervisory Agreement and the MOU will remain in effect until terminated, modified or superseded by the OCC or Federal Reserve, respectively.

The updated Supervisory Agreement eliminates certain requirements satisfied in the Bank’s prior agreement with the OTS.

Under the Supervisory Agreement, by September 30, 2010, the Bank’s board of directors was required to provide to the OTS written workout plans for each adversely classified asset or group of classified assets to any one borrower or loan relationship of $500,000 or greater certain classified assets. The Bank must also present quarterly status reports to the OCC (formerly, the OTS). The Bank timely submitted the required workout plans and has provided, and will continue to provide, the quarterly written asset status reports as required. The Bank believes it is in compliance with this provision of the Supervisory Agreement and that these plans are a useful tool in monitoring the progress of its workouts of classified assets.

The Bank’s board of directors was also required to revise its policy on concentrations of credit and, in the event the revised limits are lower, adopt a plan to bring the Bank into compliance with the revised policy. The Bank’s board must also, on a quarterly basis, review the Bank’s compliance with the revised policy and the appropriateness of its concentration limits given current economic conditions and the Bank’s capital position. On September 20, 2010, the Bank’s board of directors approved a revised Concentrations of Credit Policy and Reduction Plan and continues to review the policy and compliance therewith on a quarterly basis. The Bank believes it is in compliance with these provisions of the Supervisory Agreement, and that its concentrations in the area of one- to four-family non-owner occupied rental properties have been reduced as a result of these actions.

The Bank was also required to revise its policies and procedures related to the establishment and maintenance of its allowance for loan losses and submit the revised policy to the Regional Director of the OTS for review and comment. However, the Supervisory Agreement did not require an additional provision for loan loss reserves. The Bank revised its allowance for loan losses policy on September 21, 2010. On June 20, 2011, the Bank’s board of directors further revised the policy to add clarification with respect to the requirement for outside appraisals. As a result of these actions, the Bank now obtains appraisals performed by a state-certified appraiser on all higher risk transactions. The Bank believes that it is in compliance with this provision of the Supervisory Agreement.

The Supervisory Agreement also required the Bank to revise its written internal asset review and classification program. The Bank revised its internal asset review and classification program policy on September 21, 2010. The Bank’s board of directors has also approved establishment of an asset review committee that will review any loan rating changes. As a result of these actions, the Bank believes it has improved its loan classification process and its identification of troubled debt restructurings and nonaccrual loans. The Bank believes that it is in compliance with this provision of the Supervisory Agreement.

The Bank was required to submit to the OTS an updated business plan for the period beginning January 1, 2011 through December 31, 2012. The Bank submitted a three-year Business Plan to the OTS by October 31, 2010 which sets forth minimum capital goals of 8 percent and 12 percent for Tier 1 (Core) and risk-based capital, respectively. The Plan outlines strategies that will be employed to boost earnings and preserve capital, and includes pro-forma financial projections and budget assumptions. Any material modifications to the Business Plan must receive prior, written non-objection of the OCC (formerly the OTS). By December 31, 2011, and each December 31st thereafter while the Supervisory Agreement remains in effect, the Business Plan must be updated and submitted to the OCC (formerly the OTS). The OTS Regional Director notified the Bank on July 14, 2011 that the Plan was acceptable and should be implemented immediately. The Bank has implemented the Business Plan and there have been no material modifications to the Business Plan since submission. The Bank believes it is in compliance with this provision of the Supervisory Agreement, except to the extent not yet applicable. The Bank believes that these actions relating to its Business Plan have improved its budgeting process.

The Bank’s board of directors is also required to review written quarterly variance reports on the Bank’s compliance with the Business Plan. A copy of each variance report is to be provided to the OCC (formerly the OTS) within five (5) days after review by the board. A budget variance report explaining the reasons for material variances from original projections is submitted to the Bank’s board of directors within 45 days of the quarter end. The board discusses the impact of noted variances and determines whether or not corrective action is required. The Bank believes it is in compliance with this provision of the Supervisory Agreement.

The Supervisory Agreement requires prior written non-objection of the OCC (formerly the OTS) of the declaration or payment of dividends or other capital distributions by the Bank. The Bank has not declared or paid dividends, nor has it made any other capital distribution to the Company without the required prior approval. The Bank’s last approved dividend to the Company was paid in July, 2010. It does not anticipate needing further approvals of Bank dividends before the end of the year. The Bank is in compliance with this provision of the Supervisory Agreement.

The Supervisory Agreement places restrictions on the Bank with respect to certain operating activities, requiring prior notice to the OCC (formerly the OTS) of changes in directors and senior executive officers and prior written non-objection from the OCC (formerly the OTS) with respect to senior executive officer or director compensation, material third party service provider contracts, and asset growth over certain levels until the approval of the Bank’s Business Plan. Asset growth resulting from lending activities has not exceeded interest credited since third quarter 2010 (the quarter in which the Supervisory Agreement was executed). No payments covered by the Supervisory Agreement’s restriction on “golden parachute payments” as defined in 12 CFR § 359.1(f) have been made or requested since the effective date of the Supervisory Agreement. Director Thomas Parent and Vice President Todd Van Sickel are the only new additions to the board or executive management since the effective date of the Supervisory Agreement and their appointments complied with the requirements of the Supervisory Agreement. The Bank believes it is in compliance with these provisions of the Supervisory Agreement.

Under the MOU, the Company was required to submit to the OTS by October 31, 2010, a capital plan for enhancing the consolidated capital of the Company for the period January 1, 2011 through December 31, 2012. The capital plan is to be updated each year during which the MOU is effective. On July 14, 2011, the OTS notified the Company that certain revisions to the capital plan primarily relating to consolidated capital ratios and consolidated financial statements of the Company were needed. The Company requested clarification from the Federal Reserve regarding the requested information and submitted a response on August 30, 2011 explaining a labeling correction that the Company believes will address the concerns noted by the OTS.

The MOU also requires prior written non-objection of the Federal Reserve (formerly the OTS) of the declaration or payment of dividends or other capital distributions by the Company and of any Company debt not in the ordinary course (including loans, cumulative preferred stock and subordinated debt) unless such debt is contemplated by the capital plan. The Company does not now hold any such debt. The Company believes it is in compliance with the provisions of the MOU. The Company suspended dividends to its shareholders starting with the third quarter of 2010 and its Board of Directors periodically evaluates whether to resume payment of any such dividends. Any resumption of dividends would require the prior approval of the Federal Reserve.

The Company believes that the Supervisory Agreement and the MOU have not had, and will not have, a material impact on the financial condition or results of operations of the Bank or the Company, taken as a whole.

We are, from time to time, involved as plaintiff or defendant in various legal actions arising in the normal course of business. While the ultimate outcome of these proceedings cannot be predicted with certainty, it is the opinion of management, after consultation with counsel representing us in the proceedings, that the resolution of any prior and pending proceedings should not have a material effect on our financial condition or results of operations.

Item 1A.

Risk Factors

Not Applicable to Smaller Reporting Companies.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The following table sets forth the number and prices paid for repurchased shares.

Issuer Purchases of Equity Securities
Month of Purchase	Total Number of Shares Purchased1		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs2		Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs2

January 1 – January 31, 2012		---		---		---		52,817

February 1 – February 29, 2012		---		---		---		52,817

March 1 – March 31, 2012		---		---		---		52,817

Total		---		---		---		52,817

1 There were no shares repurchased other than through a publicly announced plan or program.

2 We have in place a program, announced February 6, 2007, to repurchase up to 100,000 shares of our common stock.

Item 3.

Defaults Upon Senior Securities

None.

Item 4.

Mine Safety Disclosures

Not Applicable.

Item 5.

Other Information

None.

Item 6.

Exhibits

The exhibits listed in the Index to Exhibits are incorporated herein by reference.

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 FINANCIAL CORP.
	(Registrant)


Date: May 14, 2012	By:	/s/ Randolph F. Williams
		Randolph F. Williams, President
		(Principal Executive Officer)


Date: May 14, 2012	By:	/s/ Mary Jo David
		Mary Jo David, Treasurer
		(Principal Financial and Accounting Officer)

INDEX TO EXHIBITS

Regulation S-K Exhibit Number		Document

31.1		Rule 13(a)-14(a) Certification (Chief Executive Officer)
31.2		Rule 13(a)-14(a) Certification (Chief Financial Officer)
32		Section 906 Certification
101		The following materials from the Company’s Form 10-Q for the quarterly period ending March 31, 2012, formatted in an XBRL Interactive Data File: (i) Consolidated Balance Sheets; (ii) Consolidated Statements of Income and Comprehensive Income; (iii) Consolidated Statements of Changes in Shareholders’ Equity; (iv) Consolidated Statements of Cash Flows; and (v) Notes to Consolidated Financial Statements, tagged as blocks of text.*

* Users of the XBRL-related information in Exhibit 101 of this Quarterly Report on Form 10-Q are advised, in accordance with Regulation S-T Rule 406T, that this Interactive Data File is deemed not filed as a part of a registration statement for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections. The financial information contained in the XBRL-related documents is unaudited and unreviewed.