10-Q

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 June 30, 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	(I.R.S. Employer
incorporation or organization)	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 [   ]

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 ýNo  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 [   ]       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 August 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	26
Item 3.		Quantitative and Qualitative Disclosures About Market Risk	46
Item 4.		Controls and Procedures.	46
PART II.		OTHER INFORMATION	46
Item 1.		Legal Proceedings	47
Item 1A.		Risk Factors	49
Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds	50
Item 3.		Defaults Upon Senior Securities	50
Item 4.		Mine Safety Disclosures	50
Item 5.		Other Information	50
Item 6.		Exhibits	50
SIGNATURES			51

PART I                FINANCIAL INFORMATION

Item 1. Financial Statements

LSB FINANCIAL CORP.

Consolidated Condensed Balance Sheets

(Dollars in thousands, except per share data)

	June 30, 2012			December 31, 2011
	(unaudited)
Assets
Cash and due from banks	$	25,847		$	18,552
Interest bearing deposits		3,866			3,156
Cash and cash equivalents		29,713			21,708
Interest bearing time deposits		747			---
Available-for-sale securities		23,785			13,845
Loans held for sale		2,302			3,120
Total loans		294,061			307,841
Less: Allowance for loan losses		(5,268	)		(5,331	)
Net loans		288,793			302,510
Premises and equipment, net		6,082			6,146
Federal Home Loan Bank stock, at cost		3,185			3,185
Bank owned life insurance		6,514			6,434
Interest receivable and other assets		6,128			7,342
Total assets	$	367,249		$	364,290
Liabilities and Shareholders’ Equity
Liabilities
Deposits	$	309,997		$	308,433
Federal Home Loan Bank advances		18,000			18,000
Interest payable and other liabilities		1,869			1,683
Total liabilities		329,866			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		11,061			11,010
Retained earnings		26,017			24,913
Accumulated other comprehensive income		290			236
Total shareholders’ equity		37,383			36,174
Total liabilities and shareholders’ equity	$	367,249		$	364,290

See notes to consolidated condensed financial statements.

1

LSB FINANCIAL CORP.

Consolidated Condensed Statements of Income and  Comprehensive Income

(Dollars in thousands, except per share data)

(Unaudited)

	Three months ended June 30,						Six months ended June 30,
	2012			2011			2012			2011
Interest and Dividend Income
Loans	$	3,806		$	4,245		$	7,881		$	8,604
Securities
Taxable		90			66			157			134
Tax-exempt		39			43			78			89
Other		15			4			29			7
Total interest and dividend income		3,950			4,358			8,145			8,834
Interest Expense
Deposits		747			943			1,558			1,933
Borrowings		104			103			204			224
Total interest expense		851			1,046			1,762			2,157
Net Interest Income		3,099			3,312			6,383			6,677
Provision for Loan Losses		500			675			1,100			1,851
Net Interest Income After Provision for Loan Losses		2,599			2,637			5,283			4,826
Non-interest Income
Deposit account service charges and fees		321			319			646			611
Net gains on loan sales		425			226			832			390
Net realized gain on sale of available-for-sale securities		0			2			0			2
Loss on other real estate owned		(56	)		(311	)		(139	)		(336	)
Other		185			278			445			538
Total non-interest income		875			514			1,784			1,205
Non-Interest Expense
Salaries and employee benefits		1,496			1,372			3,015			2,782
Net occupancy and equipment expense		283			268			601			596
Computer service		152			147			300			289
Advertising		89			57			177			115
FDIC insurance premiums		120			134			240			318
Other		543			432			1,011			900
Total non-interest expense		2,683			2,410			5,344			5,000
Income  Before Income Taxes		791			741			1,723			1,031
Provision for Income Taxes		282			264			619			350
Net Income		509			477			1,104			681
Unrealized appreciation on available-for-sale securities net of taxes of $49 and $23 for the three months ended June 30, 2012 and 2011, and of $36 and $37, for the six months ended June 30, 2012 and 2011, respectively		73			34			54			56
Total comprehensive income	$	582		$	511		$	1,158		$	737
Basic Earnings Per Share	$	0.33		$	0.31		$	0.71		$	0.44
Diluted Earnings Per Share	$	0.33		$	0.31		$	0.71		$	0.44
Dividends Declared Per Share	$	0.00		$	0.00		$	0.00		$	0.00

See notes to consolidated condensed financial statements.

2

LSB FINANCIAL CORP.

Consolidated Condensed Statements of Changes in Shareholders’ Equity

For the Six Months Ended June 30, 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						681				681
Change in unrealized appreciation on available-for-sale securities, net of taxes								56		56
Stock options exercised (750 shares)				8						8
Tax benefit related to stock options exercised				2						2
Share-based compensation expense				2						2
Balance, June 30, 2011	$	15	$	10,999	$	25,055	$	257	$	36,326
Balance, January 1, 2012	$	15	$	11,010	$	24,913	$	236	$	36,174
Net income						1,104				1,104
Change in unrealized appreciation on available-for-sale securities, net of taxes								54		54
Stock options exercised (750 shares)				7						7
Tax benefit related to stock options exercised				2						2
Share-based compensation expense				42						42
Balance, June 30, 2012	$	15	$	11,061	$	26,017	$	290	$	37,383

See notes to consolidated condensed financial statements.

3

LSB FINANCIAL CORP.

Consolidated Condensed Statements of Cash Flows

(Dollars in thousands)

(Unaudited)

	Six months ended June 30,
	2012			2011
Operating Activities
Net income	$	1,104		$	681
Items not requiring (providing) cash
Depreciation		228			197
Provision for loan losses		1,100			1,851
Amortization of premiums and discounts on securities		(140	)		39
Loss on sale of other real estate owned		139			336
Gain on sale of loans		(832	)		(390	)
Loans originated for sale		(28,281	)		(21,323	)
Proceeds on loans sold		29,931			22,636
Share-based compensation expense		42			2
Tax benefit related to stock options exercised		2			2
Changes in
Interest receivable and other assets		176			481
Interest payable and other liabilities		151			(594	)
Net cash provided by operating activities		3,620			3,918
Investing Activities
Purchases of available-for-sale securities		(12,827	)		(1,336	)
Proceeds from maturities of available-for-sale securities		2,368			951
Proceeds from sale of available-for-sale securities		---			220
Net change in loans		11,877			7,207
Proceeds from sale of other real estate owned		1,560			856
Purchase of premises and equipment		(164	)		(272	)
Redemption of Federal Home Loan Bank stock		---			398
Net cash provided by investing activities		2,814			8,024
Financing Activities
Net change in demand deposits, money market, NOW and savings accounts		(1,299	)		(1,056	)
Net change in certificates of deposit		2,863			(6,623	)
Proceeds from Federal Home Loan Bank advances		---			8,000
Repayment of Federal Home Loan Bank advances		---			(12,500	)
Proceeds from stock options exercised		7			8
Net cash provided by (used in) financing activities		1,571			(12,171	)
Increase (decrease) in Cash and Cash Equivalents		8,005			(229	)
Cash and Cash Equivalents, Beginning of Period		21,708			13,573
Cash and Cash Equivalents, End of Period	$	29,713		$	13,344
Supplemental Cash Flows Information
Interest paid	$	1,762		$	2,154
Income taxes paid		125			675
Supplemental Non-Cash Disclosures
Capitalization of mortgage servicing rights		103			36
Loans transferred to other real estate owned		654			207

See notes to consolidated condensed financial statements.

4

LSB FINANCIAL CORP.

Notes to Consolidated Condensed Financial Statements

June 30, 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.

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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 June 30, 2012, 40,317 shares related to stock options outstanding were dilutive and 17,116 were antidilutive and for the six month period ended June 30, 2012, 6,000 shares related to stock options outstanding were dilutive and 51,433 were antidilutive.  For the three and six month periods ended June 30, 2011, 14,577 shares related to stock options outstanding were dilutive and 25,208 were antidilutive.  The following table presents information about the number of shares used to compute earnings per share and the results of the computations:

	(Unaudited)
	Three months ended June 30,				Six months ended June 30,
	2012		2011		2012		2011
Weighted average shares outstanding		1,555,972		1,553,764		1,555,646		1,553,645
Stock options		724		2,382		---		2,463
Shares used to compute diluted  earnings per share		1,556,696		1,556,146		1,555,646		1,556,108
Basic earnings per share	$	0.33	$	0.31	$	0.71	$	0.44
Diluted earnings per share	$	0.33	$	0.31	$	0.71	$	0.44

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:
June 30, 2012: (Unaudited)
U.S. Government sponsored agencies	$	7,413	$	42	$	---		$	7,455
Mortgage-backed securities – government sponsored entities		7,610		171		(1	)		7,780
State and political subdivisions		8,282		270		(2	)		8,550
	$	23,305	$	483	$	(3	)	$	23,785
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

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The amortized cost and fair value of available-for-sale securities at June 30, 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
	June 30, 2012
	Unaudited (in thousands)
Within one year	$	1,093	$	1,096
One to five years		7,374		7,489
Five to ten years		7,228		7,420
After ten years		---		---
		15,695		16,005
Mortgage-backed securities		7,610		7,780
Totals	$	23,305	$	23,785

The carrying value of securities pledged as collateral, to secure public deposits and for other purposes, was $2.2 million at June 30, 2012 (unaudited) 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 June 30, 2012 and December 31, 2011, respectively.

	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)
June 30, 2012 (Unaudited)
Mortgage-backed securities		1,734	$	1	$	---	$	---	$	1,734	$	1
State and political subdivisions		1,110		2		---		---		1,110		2
Total temporarily impaired securities	$	2,844	$	3	$	---	$	---	$	2,844	$	3

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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,

8

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:

	(Unaudited) June 30, 2012			December 31, 2011
Real Estate	(In thousands)
One-to-four family residential	$	105,352		$	108,867
Multi-family residential		62,311			60,612
Commercial real estate		86,748			90,879
Construction and land development		14,998			18,364
Commercial		11,159			14,366
Consumer and other		998			1,161
Home equity lines of credit		17,428			17,330
Total loans		298,994			311,579
Less
Net deferred loan fees, premiums and discounts		(488	)		(496	)
Undisbursed portion of loans		(4,445	)		(3,242	)
Allowance for loan losses		(5,268	)		(5,331	)
Net loans	$	288,793		$	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

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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 and Development

Construction and land development 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. Multi-family property 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.  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 and six month periods ending June 30, 2012 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 June 30, 2012 (Unaudited)
Three Months Ended       June 30, 2012	Commercial			Owner Occupied 1-4			Non-owner Occupied 1-4			Multi- family			Commercial Real Estate			Construction			Land			Consumer and Home Equity		Total
Allowance for losses												(In thousands)
Beginning balance	$	716		$	411		$	1,221		$	664		$	2,000		$	13		$	127		$	153	$	5,305
Provision charged to expense		99			31			(108	)		224			276			(5	)		(23	)		6		500
Losses charged off		(148	)		(10	)		(12	)		---			(417	)		---			---			---		(587	)
Recoveries		17			---			17			---			---			---			16			---		50
Ending balance	$	684		$	432		$	1,118		$	888		$	1,859		$	8		$	120		$	159	$	5,268

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	Allowance for Loan Losses and Recorded Investment in Loans for the Six Months Ended June 30, 2012 (Unaudited)
Six Months Ended      June  30, 2012	Commercial			Owner Occupied 1-4			Non-owner Occupied 1-4			Multi- family			Commercial Real Estate			Construction			Land			Consumer and Home Equity			Total
Allowance for losses												(In thousands)
Beginning balance	$	667		$	436		$	1,330		$	646		$	1,788		$	64		$	264		$	136		$	5,331
Provision charged to expense		462			12			(195	)		500			488			(56	)		(145	)		34			1,100
Losses charged off		(462	)		(16	)		(37	)		(259	)		(417	)		---			(15	)		(11	)		(1,217	)
Recoveries		17			---			20			1			---			---			16			---			54
Ending balance		684			432			1,118			888			1,859			8			120			159			5,268
ALL individually evaluated		2			11			60			208			617			---			---			---			898
ALL collectively evaluated		682			421			1,058			680			1,242			8			120			159			4,368
Total ALLL		684			432			1,118			888			1,859			8			120			159			5,268
Loans individually evaluated		298			1,475			6,552			2,143			10,169			---			1,661			158			22,456
Loans collectively evaluated		10,861			51,099			46,226			60,168			76,579			9,144			4,193			18,268			276,538
Total loans evaluated	$	11,159		$	52,574		$	52,778		$	62,311		$	86,748		$	9,144		$	5,854		$	18,426		$	298,994

	Allowance for Loan Losses and Recorded Investment in Loans for the Quarter Ended June 30, 2011 (Unaudited)
Three Months Ended       June 30, 2011	Commercial			Owner Occupied 1-4			Non-owner Occupied 1-4			Multi- family		Commercial Real Estate			Construction			Land		Consumer and Home Equity		Total
Allowance for losses
Beginning balance	$	727		$	495		$	1,471		$	1,155	$	2,094		$	78		$	450	$	877	$	6,547
Provision charged to expense		(148	)		61			157			139		404			(44	)		59		46		675
Losses charged off		(15	)		(80	)		(61	)		---		(39	)		---			---		---		(195	)
Recoveries		---			---			1			---		---			---			7		---		1
Ending balance	$	564		$	476		$	1,568		$	1,294	$	2,460		$	34		$	509	$	123	$	7,028

	Allowance for Loan Losses and Recorded Investment in Loans for the Six Months Ended June 30, 2011 (Unaudited)
Six Months Ended       June  30, 2011	Commercial			Owner Occupied 1-4			Non-owner Occupied 1-4			Multi- family			Commercial Real Estate			Construction		Land		Consumer and Home Equity			Total
Allowance for losses												(In thousands)
Beginning balance	$	565		$	242		$	773		$	1,138		$	2,061		$	---	$	480	$	84		$	5,343
Provision charged to expense		14			292			847			156			438			34		22		48			1,851
Losses charged off		(15	)		(80	)		(61	)		---			(39	)		---		---		(9	)		(204	)
Recoveries		---			22			9			---			---			---		7		---			38
Ending balance	$	564		$	476		$	1,568		$	1,294		$	2,460		$	34	$	509	$	123		$	7,028

11

	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 ALLL		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.

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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

13

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.

14

The following table provides an analysis of loan quality using the above designations, based on property type at June 30, 2012. (Unaudited)

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	$	33	$	4,218	$	254	$	---	$	105	$	282	$	196	$	1,575	$	6,663
2 - Good		2,880		21,161		5,224		8,135		10,874		882		198		11,758		61,112
3 - Pass Low risk		6,262		18,732		12,897		30,363		33,196		5,662		219		3,795		111,126
4 - Pass		1,641		6,264		24,269		18,316		23,337		2,318		1,646		1,226		79,017
4W - Watch		29		683		5,908		4,447		7,466		---		1,934		---		20,467
5 - Special mention		---		84		762		---		831		---		---		---		1,677
6 - Substandard		314		1,432		3,464		1,050		10,939		---		1,661		72		18,932
7 - Doubtful		---		---		---		---		---		---		---		---		---
8 - Loss		---		---		---		---		---		---		---		---		---
Total	$	11,159	$	52,574	$	52,778	$	62,311	$	86,748	$	9,144	$	5,854	$	18,426	$	298,994

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	$	58,525	$	60,612	$	90,879	$	8,060	$	10,304	$	18,491	$	311,579

15

Analyses of past due loans segregated by loan type as of June 30, 2012 and December 31, 2011 are provided below.

	Loan Portfolio Aging Analysis as of June 30, 2012 (Unaudited)
	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	$	---	$	---	$	63	$	63	$	11,096	$	11,159	$	---	$	---
Owner occupied 1-4		---		---		425		425		52,149		52,574		853		---
Non owner occupied 1-4		---		1,459		987		2,444		50,333		52,778		939		---
Multi-family		---		84		---		84		62,227		62,311		483		---
Commercial Real Estate		---		93		2,372		2,465		84,283		86,748		2,462		---
Construction		---		---		---		---		9,144		9,144		---		---
Land		---		---		827		827		5,027		5,854		834		---
Consumer and home equity		---		4		68		72		18,354		18,426		4		---
Total	$	---	$	1,640	$	4,741	$	6,381	$	292,613	$	298,994	$	5,575	$	---

	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	$	---

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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.

	Impaired Loans as of and for the Quarter and Six months ended June 30,2012 (Unaudited)
	Recorded Balance		Unpaid Principal Balance		Specific Allowance		Quarterly Average Impaired Loans		Year to date Average Impaired Loans		Quarterly Interest Income Recognized		Year to date Interest Income Recognized
							(In thousands)
Loans without specific valuation allowance
Commercial	$	63	$	433	$	---	$	139	$	910	$	---	$	4
Owner occupied 1-4		1,334		1,386		---		1,374		1,584		11		33
Non owner occupied 1-4		6,162		6,454		---		6,286		6,829		63		157
Multi-family		1,744		2,004		---		2,428		3,001		46		93
Commercial Real Estate		6,947		8,399		---		7,763		7,994		90		180
Construction		---		---		---		---		---		---		---
Land		1,661		1,885		---		1,780		1,900		2		3
Consumer and Home Equity		158		174		---		158		183		2		4
Total loans without a specific valuation allowance		18,069		20,735		---		19,928		22,401		214		474
Loans with a specific valuation allowance
Commercial		235		235		2		240		160		---		2
Owner occupied 1-4		141		142		11		123		82		---		---
Non owner occupied 1-4		389		389		60		392		395		1		2
Multi-family		399		406		208		404		406		---		---
Commercial Real Estate		3,221		3,249		617		3,249		3,268		12		29
Construction		---		---		---		---		---		---		---
Land		---		---		---		---		---		---		---
Consumer and Home Equity		---		---		---		---		---		---		---
Total loans with a specific valuation allowance		4,385		4,421		898		4,407		4,311		13		33
Total
Commercial		298		668		2		379		1,070		---		6
Owner occupied 1-4		1,475		1,528		11		1,497		1,666		11		33
Non owner occupied 1-4		6,552		6,843		60		6,678		7,224		64		159
Multi-family		2,143		2,410		208		2,831		3,407		46		93
Commercial Real Estate		10,169		11,648		617		11,012		11,263		102		209
Construction		---		---		---		---		---		---		---
Land		1,661		1,885		---		1,780		1,900		2		3
Consumer and Home Equity		158		174		---		158		183		2		4
Total impaired loans	$	22,456	$	25,156	$	898	$	24,336	$	26,712	$	227	$	507

17

	Impaired loans as of and for the Year Ended December 31, 2011						Impaired loans for the Quarter and Six Months Ended June 30, 2011 (Unaudited)
	Recorded Balance		Unpaid Principal Balance		Specific Allowance		Quarterly Average Impaired Loans		Year to date Average Impaired Loans		Quarterly Interest Income Recognized		Year to date Interest Income Recognized
							(In thousands)
Loans without specific valuation allowance
Commercial	$	2,233	$	2,257	$	---	$	1,651	$	1,100	$	21	$	40
Owner occupied 1-4		1,951		1,960		---		1,610		1,518		20		37
Non owner occupied 1-4		7,475		8,605		---		7,543		6,688		76		126
Multi-family		4,558		6,083		---		3,530		2,957		86		139
Commercial Real Estate		8,854		10,406		---		4,214		3,848		31		56
Construction		---		---		---		---		---		---		---
Land		2,140		2,234		---		3,987		4,034		31		63
Consumer and Home Equity		143		148		---		166		134		1		2
Total loans without a specific valuation allowance		27,354		31,693		---		22,701		20,279		266		463
Loans with a specific valuation allowance
Commercial		218		231		129		252		256		2		3
Owner occupied 1-4		143		153		13		100		66		2		2
Non owner occupied 1-4		840		840		84		1,842		2,029		2		3
Multi-family		---		---		---		2,848		2,848		---		2
Commercial Real Estate		2,910		2,910		413		6,112		4,812		25		46
Construction		---		---		---		---		---		---		---
Land		---		---		---		396		348		1		3
Consumer and Home Equity		---		---		---		70		47		---		---
Total loans with a specific valuation allowance		4,111		4,134		639		11,620		10,406		32		59
Total
Commercial		2,451		2,488		129		1,902		1,356		23		43
Owner occupied 1-4		2,094		2,113		13		1,709		1,585		22		39
Non owner occupied 1-4		8,315		9,445		84		9,385		8,716		78		129
Multi-family		4,558		6,083		---		6,378		5,805		86		141
Commercial Real Estate		11,764		13,316		413		10,326		8,660		57		102
Construction		---		---		---		---		---		---		---
Land		2,410		2,234		---		4,383		4,383		32		66
Consumer and Home Equity		143		148		---		236		180		1		2
Total impaired loans	$	31,465	$	35,827	$	639	$	34,321	$	30,685	$	299	$	522

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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 June 30, 2012 and at December 31, 2011.

Loan Class	(Unaudited) June 30, 2012		December 31, 2011
	(In thousands)
Commercial	$	63	$	716
Owner occupied 1-4		1,278		1,147
Non owner occupied 1-4		1,925		3,102
Multi-family		483		1,302
Commercial Real Estate		4,834		3,651
Construction		---		---
Land		1,661		2,097
Consumer and home equity		72		44
Total	$	10,316	$	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 June 30, 2012.

	Newly restructured loans for the three months ended June 30, 2012 (Unaudited)
	(Dollars in thousands)
	Number of loans		Pre-modification Recorded Balance		Post-modification Recorded Balance		Type of Modification
Commercial		---	$	---	$	---		---
Owner occupied 1-4		---		---		---		---
Non owner occupied 1-4		---		---		---		---
Multi-family		---		---		---		---

19

Commercial Real Estate	1		100		100	Below market rate
Construction	---		---		---		---
Land	---		---		---		---
Consumer and home equity	---		---		---		---
Total	1	$	100	$	100

	Newly restructured loans for the six months ended June 30, 2012 (Unaudited)
	(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		2		345		345	Below market rate
Construction		---		---		---		---
Land		---		---		---		---
Consumer and home equity		---		---		---		---
Total		3	$	453	$	453

	Troubled debt restructurings that subsequently defaulted for the six months ended  June 30, 2012 (Unaudited)
	(Dollars in thousands)
	Number of loans		Recorded Balance
Commercial		1	$	125
Owner occupied 1-4		---		---
Non owner occupied 1-4		---		---
Multi-family		---		---
Commercial Real Estate		---		---
Construction		---		---
Land		---		---
Consumer and home equity		---		---
Total		1	$	125

Note 6 - 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

20

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 June 30, 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
June 30, 2012: (Unaudited)
U.S. Government-sponsored agencies	$	7,455		$	7,455
Mortgage-backed securities		7,780			7,780
State and political subdivision securities		8,550			8,550
Totals		23,785			23,785
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 June 30, 2012.  For assets classified within Level 3 of the fair value hierarchy, the process used to develop the reported fair value is described below.

21

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 June 30, 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)
June 30, 2012: (Unaudited)
Collateral-dependent impaired loans	$	2,680		—		—	$	2,680
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 sheets, 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

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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.

	Value at 06/30/12		Valuation Technique	Unobservable Inputs	Range (Weighted Average)
			In thousands
Collateral-dependent impaired loans	$	2,680	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 June 30, 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
June 30, 2012: (Unaudited)
Financial assets
Cash and cash equivalents	$	29,713	$	29,713	$	—	$	—
Interest bearing time deposits		747		—		745		—
Loans held for sale		2,302		—		2,302		—
Loans, net of allowance for losses		288,793		—		---		305,238
Federal Home Loan Bank stock		3,185		—		3,185		---
Accrued interest receivable		1,206		—		1,206		—
Financial liabilities
Deposits		309,997		---		---		312,817
Federal Home Loan Bank advances		18,000		—		18,376		—
Accrued interest payable		59		—		59		—

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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

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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.  The fair value of  commitments was not material at June 30, 2012 and December 31, 2011.

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

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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.

 In December 2011, FASB issued ASU 2011-11: Accounting Standards Update No. 2011-11—Balance Sheet (Topic 210).  The objective of this Update is to provide enhanced disclosures that will enable users of its financial statements to evaluate the effect or potential effect of netting arrangements on an entity’s financial position. This includes the effect or potential effect of rights of setoff associated with an entity’s recognized assets and recognized liabilities within the scope of this Update. The amendments require enhanced disclosures by requiring improved information about financial instruments and derivative instruments that are either (1) offset in accordance with either Section 210-20-45 or Section 815-10-45 or (2) subject to an enforceable master netting arrangement or similar agreement, irrespective of whether they are offset in accordance with either Section 210-20-45 or Section 815-10-45.  An entity is required to apply the amendments for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. An entity should provide the disclosures required by those amendments retrospectively for all comparative periods presented. The Company will adopt the methodologies prescribed by this ASU by the date required, and does not anticipate that the ASU will have a material effect on its financial position or results of operations.

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.  Decision making at local offices of large banks located elsewhere is typically done at a regional or home office.   Consolidation of services can alienate existing customers. 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

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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 so far in 2012 totaled over $270 million compared to $444 million in all of 2011.  Wabash National, the area’s second largest industrial employer, continues to hire, adding another 60 positions as part of a plan to begin production of a new carbon steel vacuum tanker. 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 has begun construction of a new $100 million, 700,000 sq.–ft. aluminum extrusion plant in Lafayette.  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 146 high-tech and life science businesses and has more than 2,700 employees earning an average annual wage of $53,000 for startups.  The Park has about 259,000 square feet of incubation space, making it the largest business incubator complex in the state. The Park had ten new life science/high-tech startups in 2012 through June 30.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.  As of the first quarter 2012 results provided by the Federal Housing Finance Agency, the five year percent change in house prices for the Lafayette Metropolitan Statistical Area was a 3.07% decrease with the one-year change a 0.32% decrease. For the first quarter, the most recent report available, housing prices decreased 1.23%. There were 603 houses sold in the county in the second quarter of 2012 compared to 1,627 in the full year of 2011.

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 two quarters of 2012, we acquired 5 properties through deeds-in-lieu of foreclosure and sold 25 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 six months of 2012 total deposits increased by $1.6 million, from $308.4 million to $310.0 million. This increase consisted primarily of an increase in our core deposits, primarily because of depositors’

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preference for immediate access to their accounts if needed. Our reliance on brokered funds decreased from $16.2 million at December 31, 2011 to $13.7 million at June 30, 2012 because of a maturity. 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 continues to hold short-term rates at almost zero and long-term rates have fallen to the 2.5% range. Because deposits are generally tied to shorter-term market rates and loans are generally tied to longer-term rates this decrease in long term rates would typically be viewed as a negative step and in fact our net interest margin has been decreasing slightly. 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 later in the year.

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 loan 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.

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Effect of Current Events

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.

The Dodd-Frank Act also established the Consumer Financial Protection Bureau (the “CFPB”) within the Federal Reserve, which has broad authority to regulate consumer financial products and services and entities offering such products and services, including banks. Many of the consumer financial protection functions formerly assigned to the federal banking and other designated agencies are now performed by the CFPB. The CFPB has a large budget and staff, and has broad rulemaking authority over providers of credit, savings, and payment services and products. In this regard, the CFPB has the authority to implement regulations under federal consumer protection laws and enforce those laws against, and examine, financial institutions. State officials also will be authorized to enforce consumer protection rules issued by the CFPB. This bureau also is authorized to collect fines and provide consumer restitution in the event of violations, engage in consumer financial education, track consumer complaints, request data, and promote the availability of financial services to underserved consumers and communities. The CFPB also is directed to prevent “unfair, deceptive or abusive practices” and ensure that all consumers have access to markets for consumer financial products and services, and that such markets are fair, transparent, and competitive.

The CFPB has indicated that mortgage lending is an area of supervisory focus and that it will concentrate its examination and rulemaking efforts on the variety of mortgage-related topics required under the Dodd-Frank Act, including steering consumers to less-favorable products, discrimination, abusive or unfair lending practices, predatory lending, origination disclosures, minimum mortgage underwriting standards, mortgage loan originator compensation, and servicing practices.  The CFPB has published proposed regulations on several of these topics, including minimum mortgage underwriting standards.  In addition, the Federal Reserve and other federal bank regulatory agencies have issued a proposed rule under the Dodd-Frank Act that would exempt “qualified residential mortgages” from the securitization risk retention requirements of the Dodd-Frank Act.  The final definition of what constitutes a “qualified residential mortgage” may impact the pricing and depth of the secondary market into which we may sell mortgages we originate.  At this time, we cannot predict the content of final CFPB and other federal agency regulations or the impact they might have on the

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Company’s financial results.  The CFPB’s authority over mortgage lending, and its authority to change regulations adopted in the past by other regulators (i.e., regulations issued under the Truth in Lending Act, for example), or to rescind or ignore past regulatory guidance, could increase the Company’s compliance costs and litigation exposure.

In addition to the CFPB’s authority over mortgage lending, the Dodd-Frank Act includes a series of provisions covering mortgage loan origination standards affecting, among other things, originator compensation, minimum repayment standards, and pre-payments. Moreover, the Dodd-Frank Act requires public companies like the Company to hold shareholder advisory “say-on-pay” votes on executive compensation at least once every three years and submit related proposals to a vote of shareholders. However, the SEC has provided a temporary exemption for smaller reporting companies, such as the Company, from the requirement to hold “say-on-pay” votes until the first annual or other shareholder meeting occurring on or after January 21, 2013. The Dodd-Frank Act contains numerous other provisions affecting financial institutions of all types, many of which may have an impact on the operating environment of the Company in substantial and unpredictable ways. Consequently, the Dodd-Frank Act is expected to increase our cost of doing business, it may limit or expand our permissible activities, and it may affect the competitive balance within our industry and market areas. The Company’s management continues to actively monitor the implementation of the Dodd-Frank Act and the regulations promulgated thereunder and assess its probable impact on the business, financial condition, and results of operations of the Company. However, the ultimate effect of the Dodd-Frank Act on the financial services industry in general, and the Company in particular, continues to be uncertain.

On June 7, 2012, the Federal Reserve approved proposed rules that would substantially amend the regulatory risk-based capital rules applicable to the Company and the Bank.  The FDIC and the OCC subsequently approved these proposed rules on June 12, 2012.  The proposed rules implement the “Basel III” regulatory capital reforms and changes required by the Dodd-Frank Act.  “Basel III” refers to two consultative documents released by the Basel Committee on Banking Supervision in December 2009, the rules text released in December 2010, and loss absorbency rules issued in January 2011, which include significant changes to bank capital, leverage and liquidity requirements.  The proposed rules are subject to a comment period running through September 7, 2012.

The proposed rules include new risk-based capital and leverage ratios, which would be phased in from 2013 to 2019, and would refine the definition of what constitutes “capital” for purposes of calculating those ratios.  The proposed new minimum capital level requirements applicable to the Company and the Bank under the proposals would be: (i) a new common equity Tier 1 capital ratio of 4.5%; (ii) a Tier 1 capital ratio of 6% (increased from 4%); (iii) a total capital ratio of 8% (unchanged from current rules); and (iv) a Tier 1 leverage ratio of 4% for all institutions.  The proposed rules would also establish a “capital conservation buffer” of 2.5% above the new regulatory minimum capital requirements, which must consist entirely of common equity Tier 1 capital and would result in the following minimum ratios: (i) a common equity Tier 1 capital ratio of 7.0%, (ii) a Tier 1 capital ratio of 8.5%, and (iii) a total capital ratio of 10.5%.  The new capital conservation buffer requirement would be phased in beginning in January 2016 at 0.625% of risk-weighted assets and would increase by that amount each year until fully implemented in January 2019.  An institution would be subject to limitations on paying dividends, engaging in share repurchases, and paying discretionary bonuses if its capital level falls below the buffer amount.  These limitations would establish a maximum percentage of eligible retained income that could be utilized for such actions.

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Basel III provided discretion for regulators to impose an additional buffer, the “countercyclical buffer,” of up to 2.5% of common equity Tier 1 capital to take into account the macro-financial environment and periods of excessive credit growth.  However, the proposed rules permit the countercyclical buffer to be applied only to “advanced approach banks” ( i.e. , banks with $250 billion or more in total assets or $10 billion or more in total foreign exposures), which currently excludes the Company and the Bank.  The proposed rules also implement revisions and clarifications consistent with Basel III regarding the various components of Tier 1 capital, including common equity, unrealized gains and losses, as well as certain instruments that will no longer qualify as Tier 1 capital, some of which would be phased out over time.

The federal bank regulatory agencies also proposed revisions to the prompt corrective action framework, which is designed to place restrictions on insured depository institutions, including the Bank, if their capital levels begin to show signs of weakness.  These revisions would take effect January 1, 2015.  Under the prompt corrective action requirements, which are designed to complement the capital conservation buffer, insured depository institutions would be required to meet the following increased capital level requirements in order to qualify as “well capitalized:” (i) a new common equity Tier 1 capital ratio of 6.5%; (ii) a Tier 1 capital ratio of 8% (increased from 6%); (iii) a total capital ratio of 10% (unchanged from current rules); and (iv) a Tier 1 leverage ratio of 5% (increased from 4%).

The proposed rules set forth certain changes for the calculation of risk-weighted assets, which we would be required to utilize beginning January 1, 2015.  The standardized approach proposed rule utilizes an increased number of credit risk exposure categories and risk weights, and also addresses: (i) a proposed alternative standard of creditworthiness consistent with Section 939A of the Dodd-Frank Act; (ii) revisions to recognition of credit risk mitigation; (iii) rules for risk weighting of equity exposures and past due loans; (iv) revised capital treatment for derivatives and repo-style transactions; and (v) disclosure requirements for top-tier banking organizations with $50 billion or more in total assets that are not subject to the “advance approach rules” that apply to banks with greater than $250 billion in consolidated assets.

Based on our current capital composition and levels, we believe that we would be in compliance with the requirements as set forth in the proposed rules if they were presently in effect.

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:

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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.

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.

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.

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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

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SELECTED FINANCIAL CONDITION DATA
(Dollars in Thousands)
	(Unaudited)
	June 30,		December 31,		$				%
	2012		2011		Difference			Difference
Total assets	$	367,249	$	364,290	$	2,959			0.81	%
Loans receivable, including loans held for sale, net		291,095		305,630		(14,535	)		(4.76	)
1-4 family residential mortgage loans		107,654		111,987		(4,333	)		(3.87	)
Home equity lines of credit		17,428		17,330		98			0.57
Other real estate loans net of undisbursed portion of loans		164,057		169,855		(5,798	)		(3.41	)
Commercial business loans		11,159		14,366		(3,207	)		(22.32	)
Consumer loans		998		1,162		(164	)		(14.11	)
Loans sold (for six months and year, respectively)		29,931		52,700
Non-performing loans over 90 days past due		4,741		6,764		(2,023	)		(29.91	)
Loans less than 90 days past due, not accruing		5,575		5,295		280			5.29
Other real estate owned		787		1,746		(959	)		(54.93	)
Non-performing assets		11,103		13,805		(2,702	)		(19.57	)
Cash and due from banks		25,847		18,552		7,295			39.32
Available-for-sale securities		23,785		13,845		9,940			71.79
Interest bearing deposits and Time deposits		4,613		3,156		1,457			46.17
Deposits		309,997		308,433		1,564			0.51
Core deposits		159,706		155,223		4,483			2.89
Time accounts		150,291		153,154		(2,863	)		(1.87	)
Brokered deposits		13,690		16,244		(2,554	)		(15.72	)
FHLB advances		18,000		18,000		---			---
Shareholders’ equity (net)		37,383		36,174		1,209			3.34

Comparison of Financial Condition at June 30, 2012 and December 31, 2011

Our total assets increased $3.0 million, or 0.81%, during the six months from December 31, 2011 to June 30, 2012.  Primary components of this increase were a $9.9 million increase in available-for-sale securities, a $7.3 million increase in cash, and a $1.5 million increase in interest bearing deposits and interest bearing time deposits offset by a $14.5 million decrease in net loans receivable including loans held for sale, and a $1.2 million decrease in other assets.  Management attributes the decrease in loans and the increase in cash 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 commercial loan demand.  In addition we invested much of the proceeds from loan paydowns in available for sale securities to generate some return until the demand for loans increases.  Deposits increased $1.6 million primarily 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 $1.0 million of OREO properties.

Non-performing assets, which include non-accruing loans and foreclosed assets, decreased from $13.8 million at December 31, 2011 to $11.1 million at June 30, 2012.  Non-accruing loans at June 30, 2012 were comprised of $4.8 million, or 46.30%, of commercial property loans, $3.3 million,

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or 32.26%, of one- to four-family residential real estate loans including home equity loans, $1.7 million, or 16.10%, of loans on land, $483,000, or 4.68%, multi-family property loans, and $68,000, or 0.66%,of non-real estate and consumer loans.  Non-performing assets at June 30, 2012 also included $787,000 of foreclosed assets compared to $1.7 million at December 30, 2011.  At June 30, 2012, our allowance for loan losses equaled 1.81% of net loans including loans held for sale, compared to 1.74% at December 31, 2011. The allowance for loan losses at June 30, 2012 totaled 47.44% of non-performing assets compared to 38.62% at December 31, 2011, and 51.06% of non-performing loans at June 30, 2012 compared to 44.21% at December 31, 2011.  Our non-performing assets equaled 3.02% of total assets at June 30, 2012 compared to 3.79% at December 31, 2011.  Non-performing loans totaling $1.2 million were charged off in the first six months of 2012, offset by $54,000 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 $37.4 million at June 30, 2012, an increase of $1.2 million, or 3.34%, primarily as a result of net income of $1.1 million.  Shareholders’ equity to total assets was 10.18% at June 30, 2012 compared to 9.93% at December 31, 2011.

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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 June 30, 2012									Three months ended June 30, 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)	$	294,157		$	3,806		5.18	%		$	314,912		$	4,245		5.39	%
Other investments		31,594			144		1.82				18,896			113		2.39
Total interest-earning  assets		325,751			3,950		4.85				333,808			4,358		5.22
Interest-Bearing Liabilities
Savings deposits	$	27,503			6		0.09			$	25,748			10		0.16
Demand and NOW deposits		135,404			125		0.37				119,963			155		0.52
Time deposits		149,975			616		1.64				159,213			778		1.95
Borrowings		18,000			104		2.31				18,833			103		2.19
Total interest-bearing  liabilities		330,882			851		1.03				323,757			1,046		1.29
Net interest income				$	3,099								$	3,312
Net interest rate spread							3.82	%								3.93	%
Net earning assets	$	(5,131	)							$	10,051
Net yield on average  interest-earning assets							3.81	%								3.97	%
Average interest-earning  assets to average  interest-bearing liabilities		0.98	x								1.03	x

_________________

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

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	Six months ended June 30, 2012									Six months ended June 30, 2011
	Average Outstanding  Balance			Interest Earned/  Paid		Yield/  Rate				Average Outstanding  Balance			Interest Earned/  Paid		Yield/  Rate
Interest-Earning Assets:									(Dollars in Thousands)
Loans receivable(1)	$	295,945		$	7,881		5.33	%		$	317,181		$	8,604		5.43	%
Other investments		26,423			264		2.00				19,673			230		2.34
Total interest-earning  assets		322,368			8,145		5.05				336,854			8,834		5.24
Interest-Bearing Liabilities
Savings deposits	$	26,913			11		0.08			$	25,710			20		0.16
Demand and NOW deposits		132,875			265		0.40				119,666			317		0.53
Time deposits		152,395			1,282		1.68				160,996			1,596		1.98
Borrowings		18,000			204		2.27				19,500			224		2.30
Total interest-bearing  liabilities		330,183			1,762		1.07				325,872			2,157		1.32
Net interest income				$	6,383								$	6,677
Net interest rate spread							3.98	%								3.92	%
Net earning assets	$	(7,815	)							$	10,982
Net yield on average  interest-earning assets							3.96	%								3.96	%
Average interest-earning  assets to average   interest-bearing liabilities		0.98	x								1.03	x

_________________

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

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Results of Operations

Comparison of Operating Results for the Six Months and the Quarter ended June 30, 2012 and June 30, 2011

General.  Net income for the six months ended June 30, 2012 was $1.1 million, an increase of $423,000, or 62.11%, from the six months ended June 30, 2011.  The increase was primarily due to a $751,000, or 40.57%, decrease in the provision for loan losses and a $579,000 or 48.05%, increase in non-interest income partially offset by a $344,000, or 6.88% increase in noninterest expenses, a $294,000 decrease in net interest income and a $269,000 increase in taxes.

Net income for the three months ended June 30, 2012 was $509,000, an increase of $32,000, or 6.71%, from the three months ended June 30, 2011.  The increase was primarily due to a $361,000, or 70.23%, increase in non-interest income and a $175,000, or 25.93%, decrease in the provision for loan losses partially offset by a $273,000, or 11.33% increase in noninterest expenses, a $213,000 decrease in net interest income and an $18,000 increase in taxes.

Net Interest Income.  Net interest income for the six months ended June 30, 2012 decreased $294,000, or 4.40%, over the same period in 2011.  This decrease was due to an $18.8 million decrease in average net interest-earning assets. Our net interest margin (net interest income divided by average interest-earning assets) of 3.96% was unchanged.  The decrease in net interest earning assets is primarily due to the $21.2 million decrease in average loans receivable partially offset by a $6.7 million increase in average investment securities.

Interest income on loans decreased $723,000, or 8.40%, for the six months ended June 30, 2012 compared to the same six months in 2011 primarily because of lower average loan volume. The average balance of loans held in our portfolio decreased by $21.2 million from $317.2 million from the six month period in 2011 to $295.9 million in 2012.  The average yield on loans decreased by ten basis points from 5.43% to 5.33% over the same period.

Interest earned on other investments and Federal Home Loan Bank stock increased by $34,000, or 14.78%, for the six months ended June 30, 2012 compared to the same period in 2011.  This was primarily the result of a $6.7 million increase in average investment securities partially offset by a 34 basis point decrease in the average yield on the investments and Federal Home Loan Bank stock from 2.34% to 2.00% over the comparable periods.

Interest expense for the six months ended June 30, 2012 decreased $395,000, or 18.31%, compared to the same period in 2011 consisting of a $375,000 decrease in interest paid on deposits and a $20,000 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 1.26% for the first six months of 2011 to 1.00% for the first six months of 2012 offset by a $5.8 million increase in the average balance of deposit accounts.  The average balance in lower rate transaction and savings accounts increased by $14.4 million while the average rate decreased from 46 basis points to 35 basis points.  The increase in these  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

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due to a decrease in the average rate paid on advances from 2.30% for the six months of 2011 to 2.27% for the first six months of 2012 because of lower rates in the economy.

Net interest income for the three months ended June 30, 2012 decreased $213,000, or 6.43% over the same period in 2011 due primarily to a $15.2 million decrease in net earning assets and a 16 basis point decrease in our net interest margin from 3.97% for the second quarter of 2011 to 3.81% for the second quarter of 2012.  Interest income on loans decreased $439,000 for the second quarter of 2012 compared to the second quarter of 2011 primarily due to a 21 basis point decrease in the average yield on loans from 5.39% for the second quarter of 2011 to 5.18% for the second quarter of 2012 and a $20.8 million decrease in average outstanding balances.  Interest income on other investments and Federal Home Loan Bank stock increased $31,000 for the second quarter of 2012 compared to the second quarter of 2011 due primarily to a $12.7 million increase in the average balance offset by a 57 basis point decrease in the average yield on other investments and Federal Home Loan Bank stock due to the relatively lower rate on recently purchased securities.  Interest expense decreased $195,000, or 18.64%, for the second quarter of 2012 from the same period in 2011 primarily due to a 26 basis point decrease in the average rate paid on interest-bearing liabilities from 1.29% for the second quarter of 2011 to 1.03% for the same period in 2012 offset by a $7.1 million increase in average interest-bearing liabilities for the same periods.

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.

	06/30/12		12/31/11		06/30/11
	(Dollars in Thousands)
Loans delinquent 30-59 days	$	---	$	2,263	$	437
Loans delinquent 60-89 days		1,640		1,006		2,051
Total delinquencies		1,640		3,269		2,479
Accruing loans past due 90 days		---		---		790
Non-accruing loans		10,317		12,059		20,366
Total non-performing loans		10,317		12,059		21,156
OREO		787		1,746		130
Total non-performing assets	$	11,104	$	13,805	$	21,286

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.

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Changes in non-performing loans at June 30, 2012 compared to December 31, 2011 were primarily due to the Bank charging off $644,000 of non-performing loans, taking $654,000 into OREO, accepting short sales or payoffs on $1.1 million and restoring $376,000 to accrual status.  In addition we received principal payments of $848,000.  Over this period we also had $1.9 million in new loans become non-performing of which $435,000 were residential properties and $1.4 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 June 30, 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.  Loans totaling $2.5 million on non-residential properties, $2.4 million on one- to four-family rental properties and $827,000 on land development were past due more than 30 days at June 30, 2012.  The non-residential and one- to four-family non-owner occupied rental 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 $1.1 million provision for loan losses for the six months ended June 30, 2012 as a result of our analyses of our current loan portfolios, compared to $1.9 million during the same period in 2011.  The provisions in the months ended June 30, 2012 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 six months of 2012 compared to the same period in 2011 was the addition to a substandard classification of two large relationships in the first quarter of 2011 requiring reserves sufficient to cover the estimated impairment.  During the first six months of 2012, we charged $1.2 million against loan loss reserves and had recoveries of $54,000.   We expect to obtain possession of more properties in

40

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 27.74% at June 30, 2011 to 47.44% at June 30, 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 $7.1 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.  None of these loans were delinquent more than 30 days.  Our total high loan-to-value loans at June 30, 2012 were at 33% of capital, well under regulatory guidelines of 100% of capital.  We have $17.43 million of Home Equity Lines of Credit of which four loans totaling $72,000 were delinquent more than 30 days at June 30, 2012.

An analysis of the allowance for loan losses for the three months ended June 30, 2012 and 2011 follows:

	Three months ended June 30,
	2012			2011
	(Dollars in Thousands)
Balance at January 1	$	5,331		$	5,343
Loans charged off		(1,217	)		(204	)
Recoveries		54			38
Provision		1,100			1,851
Balance at March 31	$	5,268		$	7,028

At June 30, 2012, non-performing assets, consisting of non-accruing loans, accruing loans 90 days or more delinquent and other real estate owned, totaled $11.1 million compared to $13.8 million at December 31, 2011.  In addition to our non-performing assets, we identified $20.5 million in other loans of concern at June 30, 2012 compared to $23.7 million at December 31, 2011 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 June 30, 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 1.81%

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of net loans receivable and 51.06% of non-performing loans at June 30, 2012 compared to 1.74% and 44.21% at December 31, 2011, respectively.  Our non-performing assets equaled 3.02% of total assets at June 30, 2012 compared to 3.79% at December 31, 2011.

Non-Interest Income.  Non-interest income for the six months ended June 30, 2012 increased by $579,000, or 48.05%, compared to the same period in 2011.  This was primarily due to a $442,000 increase in the gain on the sale of mortgage loans and a $197,000 improvement in losses on the sale or writedown of OREO properties from $336,000 of losses in the first six months of 2011 to $139,000 of losses in the same period of 2012, and a $35,000 increase in service charges and fee income.  The increase in the gain on sale of mortgage loans was due to an increase in loans sold from $22.6 million in the first six months of 2011 to $29.9 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 decrease in losses on the sale or writedown of OREO properties was primarily due to an improvement in the condition of properties and more interest in the properties.  The increase in service fees was primarily due to a higher volume of customer overdrafts.

Non-interest income for the second quarter of 2012 increased by $361,000, or 70.23%, compared to the same period in 2011 due primarily to a $255,000 improvement in losses on the sale or writedown of OREO properties from $311,000 of losses in the second quarter of 2011 to $56,000 of losses in the same period of 2012 and a $199,000 increase in the gain on the sale of mortgage loans offset by a $93,000 decrease in other income.  The improvement in losses on the sale or writedown of OREO properties for the three month period was for reasons noted above, the increase in the gain on sale of mortgage loans was due to an increase in loans sold from $10.4 million in the second quarter of 2011 to $15.6 million for the same period in 2012.  The $93,000 decrease in other income was primarily due to a decrease in mortgage servicing fees due to accelerating the accretion of fees on loans paid off early as the borrower refinanced to a lower rate.

Non-Interest Expense.  Non-interest expense for the six months ended June 30, 2012 increased $344,000, or 6.88%, compared to the same period in 2011 due primarily to a $233,000 increase in salaries and employee benefits due mainly to a higher level of loan origination activity by commission-based loan originators and recording $42,000 cost of future stock option expense, a $111,000 increase in other expenses due primarily to increased consulting, legal and appraisal fees incurred as part of regulatory compliance, and a $62,000 increase in advertising expenses to promote new products and services offset by a $78,000 decrease in FDIC insurance premiums.

Non-interest expense for the second quarter of 2012 increased by $273,000 over the same period in 2011, due largely to the factors mentioned above including a $124,000 increase in salaries due mainly to a higher level of loan origination activity, a $111,000 increase in other expenses due primarily to regulatory compliance, a $32,000 increase in advertising expenses to promote new products and services and an $5,000 increase in computer service costs offset by a $14,000 decrease in FDIC insurance premiums.

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Income Tax Expense.   Our income tax provision increased by $269,000 for the six months ended June 30, 2012 compared to the six months ended June 30, 2011 and by $18,000 for the three months ended June 30, 2012 compared to the three months ended June 30, 2011, 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.

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 June 30, 2012 was 13.51% 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 June 30, 2012, we had outstanding commitments to originate loans and available lines of credit totaling $37.2 million and commitments to provide funds to complete current construction projects in the amount of $4.4 million. We had $3.6 million of outstanding commitments to sell residential loans.  Certificates of deposit which will mature in one year or less totaled $80.5 million at June 30, 2012.  There are no brokered deposits included in that number.  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.

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Capital Resources

Shareholders’ equity totaled $37.4 million at June 30, 2012 compared to $36.2 million at December 31, 2011, an increase of $1.2 million, or 3.34%, due primarily to net income of $1.1 million.  Shareholders’ equity to total assets was 10.18% at June 30, 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 June 30, 2012 and December 31, 2011, Lafayette Savings was categorized as well capitalized.  Our actual and required capital amounts and ratios at June 30, 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 June 30, 2012	(Dollars in Thousands)
Total risk-based capital (to risk-weighted assets)	$	40,002		14.9	%	$	21,412		8.0	%	$	26,765		10.0	%
Tier I capital (to risk-weighted assets)		36,633		13.7			10,706		4.0			16,059		6.0
Tier I capital (to adjusted total assets)		36,633		10.0			11,015		3.0			18,358		5.0
Tier I capital (to adjusted tangible assets)		36,633		10.0			7,343		2.0			N/A		N/A
Tangible capital (to adjusted tangible assets)		36,633		10.0			5,508		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

44

Company must be submitted by August 30, 2011.  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 address the concerns noted by the OTS.

See the discussion of the new proposed capital rules implementing the Basel III regulatory capital reforms and changes required by the Dodd-Frank Act in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Effect of Current Events” in this Form 10-Q for a description of the new capital ratios that are proposed to be phased in beginning in 2013.

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

45

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 June 30, 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

46

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 June 30, 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.

47

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 June, 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.

48

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.

49

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
April 1 – April 30, 2012		---		---		---		52,817
May 1 – May 31, 2012		---		---		---		52,817
June 1 – June 30, 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.

50

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:  August 14, 2012	By:	/s/ Randolph F. Williams
		Randolph F. Williams, President
		(Principal Executive Officer)
Date:  August 14, 2012	By:	/s/ Mary Jo David
		Mary Jo David, Treasurer
		(Principal Financial and Accounting Officer)

51

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 June 30, 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, with detailed tagging of notes and financial statement schedules.*
*  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.

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Randolph F. Williams, certify that:

1.   I have reviewed this quarterly report on Form 10-Q of LSB Financial Corp. (the “Registrant”);

2.   Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.   Based on my knowledge, the consolidated  financial statements, and other financial information included in this report, fairly present in all material respects the consolidated financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;

4.   The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d–15(e)) for the Registrant and have:

a.   Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.   Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.   Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and

d.   Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting;

5.   The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):

a.  All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and

b.  Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

Date: August 14, 2012

 /s/ Randolph F. Williams 

Randolph F. Williams

President and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Mary Jo David, certify that:

1.   I have reviewed this quarterly report on Form 10-Q of LSB Financial Corp. (the “Registrant”);

2.   Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.   Based on my knowledge, the consolidated  financial statements, and other financial information included in this report, fairly present in all material respects the consolidated financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;

4.   The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d–15(e)) for the Registrant and have:

a.   Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.   Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.   Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and

d.   Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting;

5.   The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):

a.   All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and

b.   Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

Date: August 14, 2012

 /s/ Mary Jo David 

Mary Jo David

Vice President and Chief Financial Officer

EX-32

Exhibit 32

CERTIFICATION

By signing below, each of the undersigned hereby certifies pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, in his or her capacity as an officer of LSB Financial Corp. (the “Registrant”) that (i) this report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and (ii) the information contained in this report fairly presents, in all material respects, the consolidated financial condition of the Registrant at the end of such period and the results of operations of the Registrant for such period.

Date:	August 14, 2012	/s/ Randolph F. Williams
		Randolph F. Williams
		President and Chief Executive Officer
Date:	August 14, 2012	/s/ Mary Jo David
		Mary Jo David
		Vice President and Chief Financial Officer

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to LSB Financial Corp. and will be retained by LSB Financial Corp. and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Loans and Allowance for Loan Losses - Troubled debt restructurings that subsequently defaulted (Details 7) (USD $) In Thousands, unless otherwise specified	3 Months Ended	6 Months Ended
	Jun. 30, 2012 Loans	Jun. 30, 2012 Loans
Financing Receivable, Modifications [Line Items]
Number of loans		1
Recorded Balance
Loans and Allowance For Loan Losses
Financing Receivable, Modifications [Line Items]
Number of loans	1	3
Loans and Allowance For Loan Losses | Commercial
Financing Receivable, Modifications [Line Items]
Number of loans		1
Recorded Balance
Loans and Allowance For Loan Losses | Owner Occupied 1-4
Financing Receivable, Modifications [Line Items]
Number of loans
Recorded Balance
Loans and Allowance For Loan Losses | Non owner Occupied 1-4
Financing Receivable, Modifications [Line Items]
Number of loans
Recorded Balance		125
Loans and Allowance For Loan Losses | Multi-family
Financing Receivable, Modifications [Line Items]
Number of loans
Recorded Balance
Loans and Allowance For Loan Losses | Commercial Real Estate
Financing Receivable, Modifications [Line Items]
Number of loans	1
Recorded Balance
Loans and Allowance For Loan Losses | Construction
Financing Receivable, Modifications [Line Items]
Number of loans
Recorded Balance
Loans and Allowance For Loan Losses | Land
Financing Receivable, Modifications [Line Items]
Number of loans
Recorded Balance
Loans and Allowance For Loan Losses | Consumer and Home Equity
Financing Receivable, Modifications [Line Items]
Number of loans
Recorded Balance

XML

Securities (Details Textuals) (USD $) In Millions, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Investments, Debt and Equity Securities [Abstract]
Carrying value of securities pledged as collateral, to secure public deposits and for other purposes	$ 2.2	$ 2.3

XML

Disclosures About Fair Value of Assets and Liabilities - Estimated fair values (Details 3) (Recurring and Non Recurring, Significant Unobservable Inputs (Level 3), Fair Value, Market comparable properties, Weighted Average, USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2012
Recurring and Non Recurring | Significant Unobservable Inputs (Level 3) | Fair Value | Market comparable properties | Weighted Average
Fair Value Inputs, Liabilities, Quantitative Information [Line Items]
Range (Weighted Average)	10.00%
Collateral-dependent impaired loans	$ 2,680

XML

General

6 Months Ended

Jun. 30, 2012

General [Abstract]

General

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.

XML

Loans and Allowance for Loan Losses - Analyses of past due loans segregated by loan type (Details 3) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past due loans 30-59 Days
Past due loans 60-89 Days
Past due loans Over 90 Days
Total Past Due
Past due loans, Current
Total loans	294,061	307,841
Past due loans Under 90 Days and Not Accruing
Past due loans Total 90 Days and Accruing
Loans and Allowance for Loan Losses
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past due loans 30-59 Days		2,263
Past due loans 60-89 Days	1,640	1,006
Past due loans Over 90 Days	4,741	6,764
Total Past Due	6,381	10,033
Past due loans, Current	292,613	301,546
Total loans	298,994	311,579
Past due loans Under 90 Days and Not Accruing	5,575	5,295
Past due loans Total 90 Days and Accruing
Loans and Allowance for Loan Losses | Commercial
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past due loans 30-59 Days		1,387
Past due loans 60-89 Days		572
Past due loans Over 90 Days	63	148
Total Past Due	63	2,107
Past due loans, Current	11,096	12,259
Total loans	11,159	14,366
Past due loans Under 90 Days and Not Accruing		568
Past due loans Total 90 Days and Accruing
Loans and Allowance for Loan Losses | Owner Occupied 1-4
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past due loans 30-59 Days		336
Past due loans 60-89 Days		211
Past due loans Over 90 Days	425	714
Total Past Due	425	1,261
Past due loans, Current	52,149	49,081
Total loans	52,574	50,342
Past due loans Under 90 Days and Not Accruing	853	433
Past due loans Total 90 Days and Accruing
Loans and Allowance for Loan Losses | Non owner Occupied 1-4
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past due loans 30-59 Days		435
Past due loans 60-89 Days	1,459	25
Past due loans Over 90 Days	987	1,918
Total Past Due	2,444	2,378
Past due loans, Current	50,333	56,147
Total loans	52,778	58,524
Past due loans Under 90 Days and Not Accruing	939	1,184
Past due loans Total 90 Days and Accruing
Loans and Allowance for Loan Losses | Multi-family
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past due loans 30-59 Days
Past due loans 60-89 Days	84	116
Past due loans Over 90 Days		801
Total Past Due	84	917
Past due loans, Current	62,227	59,695
Total loans	62,311	60,612
Past due loans Under 90 Days and Not Accruing	483	501
Past due loans Total 90 Days and Accruing
Loans and Allowance for Loan Losses | Commercial Real Estate
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past due loans 30-59 Days		19
Past due loans 60-89 Days	93	74
Past due loans Over 90 Days	2,372	1,974
Total Past Due	2,465	2,067
Past due loans, Current	84,283	88,812
Total loans	86,748	90,879
Past due loans Under 90 Days and Not Accruing	2,462	1,677
Past due loans Total 90 Days and Accruing
Loans and Allowance for Loan Losses | Construction
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past due loans 30-59 Days
Past due loans 60-89 Days
Past due loans Over 90 Days
Total Past Due
Past due loans, Current	9,144	8,060
Total loans	9,144	8,060
Past due loans Under 90 Days and Not Accruing
Past due loans Total 90 Days and Accruing
Loans and Allowance for Loan Losses | Land
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past due loans 30-59 Days
Past due loans 60-89 Days
Past due loans Over 90 Days	827	1,173
Total Past Due	827	1,173
Past due loans, Current	5,027	9,131
Total loans	5,854	10,304
Past due loans Under 90 Days and Not Accruing	834	924
Past due loans Total 90 Days and Accruing
Loans and Allowance for Loan Losses | Consumer and Home Equity
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past due loans 30-59 Days		86
Past due loans 60-89 Days	4	8
Past due loans Over 90 Days	68	36
Total Past Due	72	130
Past due loans, Current	18,354	18,361
Total loans	18,426	18,491
Past due loans Under 90 Days and Not Accruing	4	8
Past due loans Total 90 Days and Accruing

XML

Loans and Allowance for Loan Losses - Analysis of loan quality (Details 2) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Financing Receivable, Recorded Investment [Line Items]
Loans and Leases Receivable, Gross	$ 294,061	$ 307,841
Loans and Allowance for Loan Losses
Financing Receivable, Recorded Investment [Line Items]
Loans and Leases Receivable, Gross	298,994	311,579
Loans and Allowance for Loan Losses | Commercial
Financing Receivable, Recorded Investment [Line Items]
Loans and Leases Receivable, Gross	11,159	14,366
Loans and Allowance for Loan Losses | Owner Occupied 1-4
Financing Receivable, Recorded Investment [Line Items]
Loans and Leases Receivable, Gross	52,574	50,342
Loans and Allowance for Loan Losses | Non owner Occupied 1-4
Financing Receivable, Recorded Investment [Line Items]
Loans and Leases Receivable, Gross	52,778	58,524
Loans and Allowance for Loan Losses | Multi-family
Financing Receivable, Recorded Investment [Line Items]
Loans and Leases Receivable, Gross	62,311	60,612
Loans and Allowance for Loan Losses | Commercial Real Estate
Financing Receivable, Recorded Investment [Line Items]
Loans and Leases Receivable, Gross	86,748	90,879
Loans and Allowance for Loan Losses | Construction
Financing Receivable, Recorded Investment [Line Items]
Loans and Leases Receivable, Gross	9,144	8,060
Loans and Allowance for Loan Losses | Land
Financing Receivable, Recorded Investment [Line Items]
Loans and Leases Receivable, Gross	5,854	10,304
Loans and Allowance for Loan Losses | Consumer and Home Equity
Financing Receivable, Recorded Investment [Line Items]
Loans and Leases Receivable, Gross	18,426	18,491
Loans and Allowance for Loan Losses | Superior
Financing Receivable, Recorded Investment [Line Items]
Loans and Leases Receivable, Gross	6,663	5,333
Loans and Allowance for Loan Losses | Superior | Commercial
Financing Receivable, Recorded Investment [Line Items]
Loans and Leases Receivable, Gross	33	257
Loans and Allowance for Loan Losses | Superior | Owner Occupied 1-4
Financing Receivable, Recorded Investment [Line Items]
Loans and Leases Receivable, Gross	4,218	2,911
Loans and Allowance for Loan Losses | Superior | Non owner Occupied 1-4
Financing Receivable, Recorded Investment [Line Items]
Loans and Leases Receivable, Gross	254	115
Loans and Allowance for Loan Losses | Superior | Multi-family
Financing Receivable, Recorded Investment [Line Items]
Loans and Leases Receivable, Gross
Loans and Allowance for Loan Losses | Superior | Commercial Real Estate
Financing Receivable, Recorded Investment [Line Items]
Loans and Leases Receivable, Gross	105	107
Loans and Allowance for Loan Losses | Superior | Construction
Financing Receivable, Recorded Investment [Line Items]
Loans and Leases Receivable, Gross	282
Loans and Allowance for Loan Losses | Superior | Land
Financing Receivable, Recorded Investment [Line Items]
Loans and Leases Receivable, Gross	196	200
Loans and Allowance for Loan Losses | Superior | Consumer and Home Equity
Financing Receivable, Recorded Investment [Line Items]
Loans and Leases Receivable, Gross	1,575	1,743
Loans and Allowance for Loan Losses | Good
Financing Receivable, Recorded Investment [Line Items]
Loans and Leases Receivable, Gross	61,112	58,654
Loans and Allowance for Loan Losses | Good | Commercial
Financing Receivable, Recorded Investment [Line Items]
Loans and Leases Receivable, Gross	2,880	2,719
Loans and Allowance for Loan Losses | Good | Owner Occupied 1-4
Financing Receivable, Recorded Investment [Line Items]
Loans and Leases Receivable, Gross	21,161	18,638
Loans and Allowance for Loan Losses | Good | Non owner Occupied 1-4
Financing Receivable, Recorded Investment [Line Items]
Loans and Leases Receivable, Gross	5,224	5,167
Loans and Allowance for Loan Losses | Good | Multi-family
Financing Receivable, Recorded Investment [Line Items]
Loans and Leases Receivable, Gross	8,135	8,176
Loans and Allowance for Loan Losses | Good | Commercial Real Estate
Financing Receivable, Recorded Investment [Line Items]
Loans and Leases Receivable, Gross	10,874	10,761
Loans and Allowance for Loan Losses | Good | Construction
Financing Receivable, Recorded Investment [Line Items]
Loans and Leases Receivable, Gross	882	1,094
Loans and Allowance for Loan Losses | Good | Land
Financing Receivable, Recorded Investment [Line Items]
Loans and Leases Receivable, Gross	198	763
Loans and Allowance for Loan Losses | Good | Consumer and Home Equity
Financing Receivable, Recorded Investment [Line Items]
Loans and Leases Receivable, Gross	11,758	11,336
Loans and Allowance for Loan Losses | Pass Low risk
Financing Receivable, Recorded Investment [Line Items]
Loans and Leases Receivable, Gross	111,126	107,388
Loans and Allowance for Loan Losses | Pass Low risk | Commercial
Financing Receivable, Recorded Investment [Line Items]
Loans and Leases Receivable, Gross	6,262	6,408
Loans and Allowance for Loan Losses | Pass Low risk | Owner Occupied 1-4
Financing Receivable, Recorded Investment [Line Items]
Loans and Leases Receivable, Gross	18,732	19,801
Loans and Allowance for Loan Losses | Pass Low risk | Non owner Occupied 1-4
Financing Receivable, Recorded Investment [Line Items]
Loans and Leases Receivable, Gross	12,897	13,665
Loans and Allowance for Loan Losses | Pass Low risk | Multi-family
Financing Receivable, Recorded Investment [Line Items]
Loans and Leases Receivable, Gross	30,363	24,884
Loans and Allowance for Loan Losses | Pass Low risk | Commercial Real Estate
Financing Receivable, Recorded Investment [Line Items]
Loans and Leases Receivable, Gross	33,196	33,730
Loans and Allowance for Loan Losses | Pass Low risk | Construction
Financing Receivable, Recorded Investment [Line Items]
Loans and Leases Receivable, Gross	5,662	4,170
Loans and Allowance for Loan Losses | Pass Low risk | Land
Financing Receivable, Recorded Investment [Line Items]
Loans and Leases Receivable, Gross	219	354
Loans and Allowance for Loan Losses | Pass Low risk | Consumer and Home Equity
Financing Receivable, Recorded Investment [Line Items]
Loans and Leases Receivable, Gross	3,795	4,376
Loans and Allowance for Loan Losses | Pass
Financing Receivable, Recorded Investment [Line Items]
Loans and Leases Receivable, Gross	79,017	87,438
Loans and Allowance for Loan Losses | Pass | Commercial
Financing Receivable, Recorded Investment [Line Items]
Loans and Leases Receivable, Gross	1,641	2,229
Loans and Allowance for Loan Losses | Pass | Owner Occupied 1-4
Financing Receivable, Recorded Investment [Line Items]
Loans and Leases Receivable, Gross	6,264	6,403
Loans and Allowance for Loan Losses | Pass | Non owner Occupied 1-4
Financing Receivable, Recorded Investment [Line Items]
Loans and Leases Receivable, Gross	24,269	28,118
Loans and Allowance for Loan Losses | Pass | Multi-family
Financing Receivable, Recorded Investment [Line Items]
Loans and Leases Receivable, Gross	18,316	20,475
Loans and Allowance for Loan Losses | Pass | Commercial Real Estate
Financing Receivable, Recorded Investment [Line Items]
Loans and Leases Receivable, Gross	23,337	25,302
Loans and Allowance for Loan Losses | Pass | Construction
Financing Receivable, Recorded Investment [Line Items]
Loans and Leases Receivable, Gross	2,318	2,796
Loans and Allowance for Loan Losses | Pass | Land
Financing Receivable, Recorded Investment [Line Items]
Loans and Leases Receivable, Gross	1,646	1,312
Loans and Allowance for Loan Losses | Pass | Consumer and Home Equity
Financing Receivable, Recorded Investment [Line Items]
Loans and Leases Receivable, Gross	1,226	803
Loans and Allowance for Loan Losses | Watch
Financing Receivable, Recorded Investment [Line Items]
Loans and Leases Receivable, Gross	20,467	23,730
Loans and Allowance for Loan Losses | Watch | Commercial
Financing Receivable, Recorded Investment [Line Items]
Loans and Leases Receivable, Gross	29	303
Loans and Allowance for Loan Losses | Watch | Owner Occupied 1-4
Financing Receivable, Recorded Investment [Line Items]
Loans and Leases Receivable, Gross	683	748
Loans and Allowance for Loan Losses | Watch | Non owner Occupied 1-4
Financing Receivable, Recorded Investment [Line Items]
Loans and Leases Receivable, Gross	5,908	6,398
Loans and Allowance for Loan Losses | Watch | Multi-family
Financing Receivable, Recorded Investment [Line Items]
Loans and Leases Receivable, Gross	4,447	4,342
Loans and Allowance for Loan Losses | Watch | Commercial Real Estate
Financing Receivable, Recorded Investment [Line Items]
Loans and Leases Receivable, Gross	7,466	9,772
Loans and Allowance for Loan Losses | Watch | Construction
Financing Receivable, Recorded Investment [Line Items]
Loans and Leases Receivable, Gross	0
Loans and Allowance for Loan Losses | Watch | Land
Financing Receivable, Recorded Investment [Line Items]
Loans and Leases Receivable, Gross	1,934	2,077
Loans and Allowance for Loan Losses | Watch | Consumer and Home Equity
Financing Receivable, Recorded Investment [Line Items]
Loans and Leases Receivable, Gross	0	90
Loans and Allowance for Loan Losses | Special mention
Financing Receivable, Recorded Investment [Line Items]
Loans and Leases Receivable, Gross	1,677	6,749
Loans and Allowance for Loan Losses | Special mention | Commercial
Financing Receivable, Recorded Investment [Line Items]
Loans and Leases Receivable, Gross		1,550
Loans and Allowance for Loan Losses | Special mention | Owner Occupied 1-4
Financing Receivable, Recorded Investment [Line Items]
Loans and Leases Receivable, Gross	84	475
Loans and Allowance for Loan Losses | Special mention | Non owner Occupied 1-4
Financing Receivable, Recorded Investment [Line Items]
Loans and Leases Receivable, Gross	762	188
Loans and Allowance for Loan Losses | Special mention | Multi-family
Financing Receivable, Recorded Investment [Line Items]
Loans and Leases Receivable, Gross		704
Loans and Allowance for Loan Losses | Special mention | Commercial Real Estate
Financing Receivable, Recorded Investment [Line Items]
Loans and Leases Receivable, Gross	831	232
Loans and Allowance for Loan Losses | Special mention | Construction
Financing Receivable, Recorded Investment [Line Items]
Loans and Leases Receivable, Gross
Loans and Allowance for Loan Losses | Special mention | Land
Financing Receivable, Recorded Investment [Line Items]
Loans and Leases Receivable, Gross		3,501
Loans and Allowance for Loan Losses | Special mention | Consumer and Home Equity
Financing Receivable, Recorded Investment [Line Items]
Loans and Leases Receivable, Gross		99
Loans and Allowance for Loan Losses | Substandard
Financing Receivable, Recorded Investment [Line Items]
Loans and Leases Receivable, Gross	18,932	22,287
Loans and Allowance for Loan Losses | Substandard | Commercial
Financing Receivable, Recorded Investment [Line Items]
Loans and Leases Receivable, Gross	314	900
Loans and Allowance for Loan Losses | Substandard | Owner Occupied 1-4
Financing Receivable, Recorded Investment [Line Items]
Loans and Leases Receivable, Gross	1,432	1,366
Loans and Allowance for Loan Losses | Substandard | Non owner Occupied 1-4
Financing Receivable, Recorded Investment [Line Items]
Loans and Leases Receivable, Gross	3,464	4,874
Loans and Allowance for Loan Losses | Substandard | Multi-family
Financing Receivable, Recorded Investment [Line Items]
Loans and Leases Receivable, Gross	1,050	2,031
Loans and Allowance for Loan Losses | Substandard | Commercial Real Estate
Financing Receivable, Recorded Investment [Line Items]
Loans and Leases Receivable, Gross	10,939	10,975
Loans and Allowance for Loan Losses | Substandard | Construction
Financing Receivable, Recorded Investment [Line Items]
Loans and Leases Receivable, Gross
Loans and Allowance for Loan Losses | Substandard | Land
Financing Receivable, Recorded Investment [Line Items]
Loans and Leases Receivable, Gross	1,661	2,097
Loans and Allowance for Loan Losses | Substandard | Consumer and Home Equity
Financing Receivable, Recorded Investment [Line Items]
Loans and Leases Receivable, Gross	72	44
Loans and Allowance for Loan Losses | Doubtful
Financing Receivable, Recorded Investment [Line Items]
Loans and Leases Receivable, Gross
Loans and Allowance for Loan Losses | Doubtful | Commercial
Financing Receivable, Recorded Investment [Line Items]
Loans and Leases Receivable, Gross
Loans and Allowance for Loan Losses | Doubtful | Owner Occupied 1-4
Financing Receivable, Recorded Investment [Line Items]
Loans and Leases Receivable, Gross
Loans and Allowance for Loan Losses | Doubtful | Non owner Occupied 1-4
Financing Receivable, Recorded Investment [Line Items]
Loans and Leases Receivable, Gross
Loans and Allowance for Loan Losses | Doubtful | Multi-family
Financing Receivable, Recorded Investment [Line Items]
Loans and Leases Receivable, Gross
Loans and Allowance for Loan Losses | Doubtful | Commercial Real Estate
Financing Receivable, Recorded Investment [Line Items]
Loans and Leases Receivable, Gross
Loans and Allowance for Loan Losses | Doubtful | Construction
Financing Receivable, Recorded Investment [Line Items]
Loans and Leases Receivable, Gross
Loans and Allowance for Loan Losses | Doubtful | Land
Financing Receivable, Recorded Investment [Line Items]
Loans and Leases Receivable, Gross
Loans and Allowance for Loan Losses | Doubtful | Consumer and Home Equity
Financing Receivable, Recorded Investment [Line Items]
Loans and Leases Receivable, Gross
Loans and Allowance for Loan Losses | Loss
Financing Receivable, Recorded Investment [Line Items]
Loans and Leases Receivable, Gross
Loans and Allowance for Loan Losses | Loss | Commercial
Financing Receivable, Recorded Investment [Line Items]
Loans and Leases Receivable, Gross
Loans and Allowance for Loan Losses | Loss | Owner Occupied 1-4
Financing Receivable, Recorded Investment [Line Items]
Loans and Leases Receivable, Gross
Loans and Allowance for Loan Losses | Loss | Non owner Occupied 1-4
Financing Receivable, Recorded Investment [Line Items]
Loans and Leases Receivable, Gross
Loans and Allowance for Loan Losses | Loss | Multi-family
Financing Receivable, Recorded Investment [Line Items]
Loans and Leases Receivable, Gross
Loans and Allowance for Loan Losses | Loss | Commercial Real Estate
Financing Receivable, Recorded Investment [Line Items]
Loans and Leases Receivable, Gross
Loans and Allowance for Loan Losses | Loss | Construction
Financing Receivable, Recorded Investment [Line Items]
Loans and Leases Receivable, Gross
Loans and Allowance for Loan Losses | Loss | Land
Financing Receivable, Recorded Investment [Line Items]
Loans and Leases Receivable, Gross
Loans and Allowance for Loan Losses | Loss | Consumer and Home Equity
Financing Receivable, Recorded Investment [Line Items]
Loans and Leases Receivable, Gross

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Loans and Allowance for Loan Losses - Impaired loans and interest recognized (Details 4) (Loans and Allowance for Loan Losses, USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011	Dec. 31, 2011
Loans Without Specific Valuation Allowance [Abstract]
Loans without a specific valuation allowance, Recorded Balance	$ 18,069		$ 18,069		$ 27,354
Loans without a specific valuation allowance, Unpaid Principal Balance	20,735		20,735		31,693
Loans without a specific valuation allowance Average Impaired Loans	19,928	22,701	22,401	20,279
Loans without a specific valuation allowance, Interest Income Recognized	214	266	474	463
Loans With Specific Valuation Allowance [Abstract]
Loans with a specific valuation allowance, Recorded Balance	4,385		4,385		4,111
Loans with a specific valuation allowance, Unpaid Principal Balance	4,421		4,421		4,134
Impaired Financing Receivable, Loans With Specific Valuation Allowance					639
Loans with a specific valuation allowance, Average Impaired Loans	4,407	11,620	4,311	10,406
Loans with a specific valuation allowance, Interest Income Recognized	13	32	33	59
Loans With and With Out Specific Valuation Allowance [Abstract]
Total Recorded Balance	22,456		22,456		31,465
Total Unpaid Principal Balance	25,156		25,156		35,827
Total impaired loans					639
Total Average Impaired Loans	24,336	34,321	26,712	30,685
Total Interest Income Recognized	227	299	507	522
Commercial
Loans Without Specific Valuation Allowance [Abstract]
Loans without a specific valuation allowance, Recorded Balance	63		63		2,233
Loans without a specific valuation allowance, Unpaid Principal Balance	433		433		2,257
Loans without a specific valuation allowance Average Impaired Loans	139	1,651	910	1,100
Loans without a specific valuation allowance, Interest Income Recognized		21	4	40
Loans With Specific Valuation Allowance [Abstract]
Loans with a specific valuation allowance, Recorded Balance	235		235		218
Loans with a specific valuation allowance, Unpaid Principal Balance	235		235		231
Impaired Financing Receivable, Loans With Specific Valuation Allowance					129
Loans with a specific valuation allowance, Average Impaired Loans	240	252	160	256
Loans with a specific valuation allowance, Interest Income Recognized		2	2	3
Loans With and With Out Specific Valuation Allowance [Abstract]
Total Recorded Balance	298		298		2,451
Total Unpaid Principal Balance	668		668		2,488
Total impaired loans					129
Total Average Impaired Loans	379	1,902	1,070	1,356
Total Interest Income Recognized		23	6	43
Owner Occupied 1-4
Loans Without Specific Valuation Allowance [Abstract]
Loans without a specific valuation allowance, Recorded Balance	1,334		1,334		1,951
Loans without a specific valuation allowance, Unpaid Principal Balance	1,386		1,386		1,960
Loans without a specific valuation allowance Average Impaired Loans	1,374	1,610	1,584	1,518
Loans without a specific valuation allowance, Interest Income Recognized	11	20	33	37
Loans With Specific Valuation Allowance [Abstract]
Loans with a specific valuation allowance, Recorded Balance	141		141		143
Loans with a specific valuation allowance, Unpaid Principal Balance	142		142		153
Impaired Financing Receivable, Loans With Specific Valuation Allowance					13
Loans with a specific valuation allowance, Average Impaired Loans	123	100	82	66
Loans with a specific valuation allowance, Interest Income Recognized		2		2
Loans With and With Out Specific Valuation Allowance [Abstract]
Total Recorded Balance	1,475		1,475		2,094
Total Unpaid Principal Balance	1,528		1,528		2,113
Total impaired loans					13
Total Average Impaired Loans	1,497	1,709	1,666	1,585
Total Interest Income Recognized	11	22	33	39
Non owner Occupied 1-4
Loans Without Specific Valuation Allowance [Abstract]
Loans without a specific valuation allowance, Recorded Balance	6,162		6,162		7,475
Loans without a specific valuation allowance, Unpaid Principal Balance	6,454		6,454		8,605
Loans without a specific valuation allowance Average Impaired Loans	6,286	7,543	6,829	6,688
Loans without a specific valuation allowance, Interest Income Recognized	63	76	157	126
Loans With Specific Valuation Allowance [Abstract]
Loans with a specific valuation allowance, Recorded Balance	389		389		840
Loans with a specific valuation allowance, Unpaid Principal Balance	389		389		840
Impaired Financing Receivable, Loans With Specific Valuation Allowance					84
Loans with a specific valuation allowance, Average Impaired Loans	392	1,842	395	2,029
Loans with a specific valuation allowance, Interest Income Recognized	1	2	2	3
Loans With and With Out Specific Valuation Allowance [Abstract]
Total Recorded Balance	6,552		6,552		8,315
Total Unpaid Principal Balance	6,843		6,843		9,445
Total impaired loans					84
Total Average Impaired Loans	6,678	9,385	7,224	8,716
Total Interest Income Recognized	64	78	159	129
Multi-family
Loans Without Specific Valuation Allowance [Abstract]
Loans without a specific valuation allowance, Recorded Balance	1,744		1,744		4,558
Loans without a specific valuation allowance, Unpaid Principal Balance	2,004		2,004		6,083
Loans without a specific valuation allowance Average Impaired Loans	2,428	3,530	3,001	2,957
Loans without a specific valuation allowance, Interest Income Recognized	46	86	93	139
Loans With Specific Valuation Allowance [Abstract]
Loans with a specific valuation allowance, Recorded Balance	399		399
Loans with a specific valuation allowance, Unpaid Principal Balance	406		406
Impaired Financing Receivable, Loans With Specific Valuation Allowance
Loans with a specific valuation allowance, Average Impaired Loans	404	2,848	406	2,848
Loans with a specific valuation allowance, Interest Income Recognized				2
Loans With and With Out Specific Valuation Allowance [Abstract]
Total Recorded Balance	2,143		2,143		4,558
Total Unpaid Principal Balance	2,410		2,410		6,083
Total impaired loans
Total Average Impaired Loans	2,831	6,378	3,407	5,805
Total Interest Income Recognized	46	86	93	141
Commercial Real Estate
Loans Without Specific Valuation Allowance [Abstract]
Loans without a specific valuation allowance, Recorded Balance	6,947		6,947		8,854
Loans without a specific valuation allowance, Unpaid Principal Balance	8,399		8,399		10,406
Loans without a specific valuation allowance Average Impaired Loans	7,763	4,214	7,994	3,848
Loans without a specific valuation allowance, Interest Income Recognized	90	31	180	56
Loans With Specific Valuation Allowance [Abstract]
Loans with a specific valuation allowance, Recorded Balance	3,221		3,221		2,910
Loans with a specific valuation allowance, Unpaid Principal Balance	3,249		3,249		2,910
Impaired Financing Receivable, Loans With Specific Valuation Allowance					413
Loans with a specific valuation allowance, Average Impaired Loans	3,249	6,112	3,268	4,812
Loans with a specific valuation allowance, Interest Income Recognized	12	25	29	46
Loans With and With Out Specific Valuation Allowance [Abstract]
Total Recorded Balance	10,169		10,169		11,764
Total Unpaid Principal Balance	11,648		11,648		13,316
Total impaired loans					413
Total Average Impaired Loans	11,012	10,326	11,263	8,660
Total Interest Income Recognized	102	57	209	102
Construction
Loans Without Specific Valuation Allowance [Abstract]
Loans without a specific valuation allowance, Recorded Balance
Loans without a specific valuation allowance, Unpaid Principal Balance
Loans without a specific valuation allowance Average Impaired Loans
Loans without a specific valuation allowance, Interest Income Recognized
Loans With Specific Valuation Allowance [Abstract]
Loans with a specific valuation allowance, Recorded Balance
Loans with a specific valuation allowance, Unpaid Principal Balance
Impaired Financing Receivable, Loans With Specific Valuation Allowance
Loans with a specific valuation allowance, Average Impaired Loans
Loans with a specific valuation allowance, Interest Income Recognized
Loans With and With Out Specific Valuation Allowance [Abstract]
Total Recorded Balance
Total Unpaid Principal Balance
Total impaired loans
Total Average Impaired Loans
Total Interest Income Recognized
Land
Loans Without Specific Valuation Allowance [Abstract]
Loans without a specific valuation allowance, Recorded Balance	1,661		1,661		2,140
Loans without a specific valuation allowance, Unpaid Principal Balance	1,885		1,885		2,234
Loans without a specific valuation allowance Average Impaired Loans	1,780	3,987	1,900	4,034
Loans without a specific valuation allowance, Interest Income Recognized	2	31	3	63
Loans With Specific Valuation Allowance [Abstract]
Loans with a specific valuation allowance, Recorded Balance
Loans with a specific valuation allowance, Unpaid Principal Balance
Impaired Financing Receivable, Loans With Specific Valuation Allowance
Loans with a specific valuation allowance, Average Impaired Loans		396		348
Loans with a specific valuation allowance, Interest Income Recognized		1		3
Loans With and With Out Specific Valuation Allowance [Abstract]
Total Recorded Balance	1,661		1,661		2,410
Total Unpaid Principal Balance	1,885		1,885		2,234
Total impaired loans
Total Average Impaired Loans	1,780	4,383	1,900	4,383
Total Interest Income Recognized	2	32	3	66
Consumer and Home Equity
Loans Without Specific Valuation Allowance [Abstract]
Loans without a specific valuation allowance, Recorded Balance	158		158		143
Loans without a specific valuation allowance, Unpaid Principal Balance	174		174		148
Loans without a specific valuation allowance Average Impaired Loans	158	166	183	134
Loans without a specific valuation allowance, Interest Income Recognized	2	1	4	2
Loans With Specific Valuation Allowance [Abstract]
Loans with a specific valuation allowance, Recorded Balance
Loans with a specific valuation allowance, Unpaid Principal Balance
Impaired Financing Receivable, Loans With Specific Valuation Allowance
Loans with a specific valuation allowance, Average Impaired Loans		70		47
Loans with a specific valuation allowance, Interest Income Recognized
Loans With and With Out Specific Valuation Allowance [Abstract]
Total Recorded Balance	158		158		143
Total Unpaid Principal Balance	174		174		148
Total impaired loans
Total Average Impaired Loans	158	236	183	180
Total Interest Income Recognized	$ 2	$ 1	$ 4	$ 2

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Loans and Allowance for Loan Losses - Breakdown of non-accruing loans by loan class (Details 5) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Breakdown Of Non Accruing Loans By Loan Class [Line Items]
Non Accruing Loans	$ 10,316	$ 12,059
Loans and Allowance for Loan Losses | Commercial
Breakdown Of Non Accruing Loans By Loan Class [Line Items]
Non Accruing Loans	63	716
Loans and Allowance for Loan Losses | Owner Occupied 1-4
Breakdown Of Non Accruing Loans By Loan Class [Line Items]
Non Accruing Loans	1,278	1,147
Loans and Allowance for Loan Losses | Non owner Occupied 1-4
Breakdown Of Non Accruing Loans By Loan Class [Line Items]
Non Accruing Loans	1,925	3,102
Loans and Allowance for Loan Losses | Multi-family
Breakdown Of Non Accruing Loans By Loan Class [Line Items]
Non Accruing Loans	483	1,302
Loans and Allowance for Loan Losses | Commercial Real Estate
Breakdown Of Non Accruing Loans By Loan Class [Line Items]
Non Accruing Loans	4,834	3,651
Loans and Allowance for Loan Losses | Construction
Breakdown Of Non Accruing Loans By Loan Class [Line Items]
Non Accruing Loans
Loans and Allowance for Loan Losses | Land
Breakdown Of Non Accruing Loans By Loan Class [Line Items]
Non Accruing Loans	1,661	2,097
Loans and Allowance for Loan Losses | Consumer and Home Equity
Breakdown Of Non Accruing Loans By Loan Class [Line Items]
Non Accruing Loans	$ 72	$ 44

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Consolidated Condensed Statements of Cash Flows (Unaudited) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011
Operating Activities
Net income	$ 1,104	$ 681
Items not requiring (providing) cash
Depreciation	228	197
Provision for loan losses	1,100	1,851
Amortization of premiums and discounts on securities	(140)	39
Loss on sale of other real estate owned	139	336
Gain on sale of loans	(832)	(390)
Loans originated for sale	(28,281)	(21,323)
Proceeds on loans sold	29,931	22,636
Share-based compensation expense	42	2
Tax benefit related to stock options exercised	2	2
Changes in
Interest receivable and other assets	176	481
Interest payable and other liabilities	151	(594)
Net cash provided by operating activities	3,620	3,918
Investing Activities
Purchases of available-for-sale securities	(12,827)	(1,336)
Proceeds from maturities of available-for-sale securities	2,368	951
Proceeds from sale of available-for-sale securities		220
Net change in loans	11,877	7,207
Proceeds from sale of other real estate owned	1,560	856
Purchase of premises and equipment	(164)	(272)
Redemption of Federal Home Loan Bank stock		398
Net cash provided by investing activities	2,814	8,024
Financing Activities
Net change in demand deposits, money market, NOW and savings accounts	(1,299)	(1,056)
Net change in certificates of deposit	2,863	(6,623)
Proceeds from Federal Home Loan Bank advances		8,000
Repayment of Federal Home Loan Bank advances		(12,500)
Proceeds from stock options exercised	7	8
Net cash provided by (used in) financing activities	1,571	(12,171)
Increase (decrease) in Cash and Cash Equivalents	8,005	(229)
Cash and Cash Equivalents, Beginning of Period	21,708	13,573
Cash and Cash Equivalents, End of Period	29,713	13,344
Supplemental Cash Flows Information
Interest paid	1,762	2,154
Income taxes paid	125	675
Supplemental Non-Cash Disclosures
Capitalization of mortgage servicing rights	103	36
Loans transferred to other real estate owned	$ 654	$ 207

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Loans and Allowance for Loan Losses - Troubled debt restructurings by class (Details 6) (USD $) In Thousands, unless otherwise specified	3 Months Ended	6 Months Ended
	Jun. 30, 2012 Loans	Jun. 30, 2012 Loans
Financing Receivable, Modifications [Line Items]
Number of loans		1
Loans and Allowance for Loan Losses
Financing Receivable, Modifications [Line Items]
Number of loans	1	3
Pre-modification Recorded Balance	$ 100	$ 453
Post-modification Recorded Balance	100	453
Loans and Allowance for Loan Losses | Commercial
Financing Receivable, Modifications [Line Items]
Number of loans		1
Pre-modification Recorded Balance
Post-modification Recorded Balance
Loans and Allowance for Loan Losses | Owner Occupied 1-4
Financing Receivable, Modifications [Line Items]
Number of loans
Pre-modification Recorded Balance		108
Post-modification Recorded Balance		108
Type of Modification		Below market rate
Loans and Allowance for Loan Losses | Non owner Occupied 1-4
Financing Receivable, Modifications [Line Items]
Number of loans
Pre-modification Recorded Balance
Post-modification Recorded Balance
Loans and Allowance for Loan Losses | Multi-family
Financing Receivable, Modifications [Line Items]
Number of loans
Pre-modification Recorded Balance
Post-modification Recorded Balance
Loans and Allowance for Loan Losses | Commercial Real Estate
Financing Receivable, Modifications [Line Items]
Number of loans	1
Pre-modification Recorded Balance	100	345
Post-modification Recorded Balance	100	345
Type of Modification	Below market rate	Below market rate
Loans and Allowance for Loan Losses | Construction
Financing Receivable, Modifications [Line Items]
Number of loans
Pre-modification Recorded Balance
Post-modification Recorded Balance
Loans and Allowance for Loan Losses | Land
Financing Receivable, Modifications [Line Items]
Number of loans
Pre-modification Recorded Balance
Post-modification Recorded Balance
Loans and Allowance for Loan Losses | Consumer and Home Equity
Financing Receivable, Modifications [Line Items]
Number of loans
Pre-modification Recorded Balance
Post-modification Recorded Balance

XML

Consolidated Condensed Balance Sheets (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Assets
Cash and due from banks	$ 25,847	$ 18,552
Interest bearing deposits	3,866	3,156
Cash and cash equivalents	29,713	21,708
Interest bearing time deposits	747
Available-for-sale securities	23,785	13,845
Loans held for sale	2,302	3,120
Total loans	294,061	307,841
Less: Allowance for loan losses	(5,268)	(5,331)
Net loans	288,793	302,510
Premises and equipment, net	6,082	6,146
Federal Home Loan Bank stock, at cost	3,185	3,185
Bank owned life insurance	6,514	6,434
Interest receivable and other assets	6,128	7,342
Total assets	367,249	364,290
Liabilities
Deposits	309,997	308,433
Federal Home Loan Bank advances	18,000	18,000
Interest payable and other liabilities	1,869	1,683
Total liabilities	329,866	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	11,061	11,010
Retained earnings	26,017	24,913
Accumulated other comprehensive income	290	236
Total shareholders' equity	37,383	36,174
Total liabilities and shareholders' equity	$ 367,249	$ 364,290

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Consolidated Condensed Statements of Changes in Shareholders' Equity (Unaudited) (USD $) In Thousands, unless otherwise specified	Common Stock	Additional Paid-In Capital	Retained Earnings	Accumulated Other Comprehensive Income	Total
Balance at Dec. 31, 2010	$ 15	$ 10,987	$ 24,374	$ 201	$ 35,577
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income			681		681
Change in unrealized appreciation on available-for-sale securities, net of taxes				56	56
Stock options exercised (750 shares)		8			8
Tax benefit related to stock options exercised		2			2
Share-based compensation expense		2			2
Balance at Jun. 30, 2011	15	10,999	25,055	257	36,326
Balance at Dec. 31, 2011	15	11,010	24,913	236	36,174
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income			1,104		1,104
Change in unrealized appreciation on available-for-sale securities, net of taxes				54	54
Stock options exercised (750 shares)		7			7
Tax benefit related to stock options exercised		2			2
Share-based compensation expense		42			42
Balance at Jun. 30, 2012	$ 15	$ 11,061	$ 26,017	$ 290	$ 37,383

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Disclosures About Fair Value of Assets and Liabilities - Measurement of fair value of assets on nonrecurring basis (Details 1) (Nonrecurring, USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Fair Value
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Carrying Value Of Collateral Dependent Impaired Loans	$ 2,680	$ 3,701
Quoted Prices in Active Markets for Identical Assets (Level 1)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Carrying Value Of Collateral Dependent Impaired Loans
Significant Other Observable Inputs (Level 2)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Carrying Value Of Collateral Dependent Impaired Loans
Significant Unobservable Inputs (Level 3)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Carrying Value Of Collateral Dependent Impaired Loans	$ 2,680	$ 3,701

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Securities (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Available-for-sale Securities [Abstract]
Amortized Cost	$ 23,305	$ 13,452
Gross Unrealized Gains	483	398
Gross Unrealized Losses	(3)	(5)
Available-for-sale securities	23,785	13,845
U.S. Government sponsored agencies
Available-for-sale Securities [Abstract]
Amortized Cost	7,413	3,172
Gross Unrealized Gains	42	7
Gross Unrealized Losses		(2)
Available-for-sale securities	7,455	3,177
Mortgage-backed securities
Available-for-sale Securities [Abstract]
Amortized Cost	7,610	3,570
Gross Unrealized Gains	171	149
Gross Unrealized Losses	(1)
Available-for-sale securities	7,780	3,719
State and political subdivision securities
Available-for-sale Securities [Abstract]
Amortized Cost	8,282	6,710
Gross Unrealized Gains	270	242
Gross Unrealized Losses	(2)	(3)
Available-for-sale securities	$ 8,550	$ 6,949

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Disclosures About Fair Value of Assets and Liabilities - Quantitative information about unobservable inputs used in recurring and nonrecurring (Details 2) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Financial assets
Interest bearing time deposits	$ 747
Totals Available-for-sale securities	23,785	13,845
Loans held for sale	2,302	3,120
Loans, net of allowance for loan losses	288,793	302,510
Federal Home Loan Bank stock, at cost	3,185	3,185
Financial liabilities
Deposits	309,997	308,433
Federal Home Loan Bank advances	18,000	18,000
Carrying Amount
Financial assets
Cash and cash equivalents	29,713	21,708
Interest bearing time deposits	747
Totals Available-for-sale securities		13,845
Loans held for sale	2,302	3,120
Loans, net of allowance for loan losses	288,793	302,510
Federal Home Loan Bank stock, at cost	3,185	3,185
Interest receivable	1,206	1,250
Financial liabilities
Deposits	309,997	308,433
Federal Home Loan Bank advances	18,000	18,000
Interest payable	59	50
Fair Value
Financial assets
Cash and cash equivalents		21,708
Interest bearing time deposits
Totals Available-for-sale securities		13,845
Loans held for sale		3,120
Loans, net of allowance for loan losses		316,250
Federal Home Loan Bank stock, at cost		3,185
Interest receivable		1,250
Financial liabilities
Deposits		313,717
Federal Home Loan Bank advances		18,609
Interest payable		50
Quoted Prices in Active Markets for Identical Assets (Level 1)
Financial assets
Cash and cash equivalents	29,713
Interest bearing time deposits
Loans held for sale
Loans, net of allowance for loan losses
Federal Home Loan Bank stock, at cost
Interest receivable
Financial liabilities
Deposits
Federal Home Loan Bank advances
Interest payable
Significant Other Observable Inputs (Level 2)
Financial assets
Cash and cash equivalents
Interest bearing time deposits	745
Loans held for sale	2,302
Loans, net of allowance for loan losses
Federal Home Loan Bank stock, at cost	3,185
Interest receivable	1,206
Financial liabilities
Deposits
Federal Home Loan Bank advances	18,376
Interest payable	59
Significant Unobservable Inputs (Level 3)
Financial assets
Cash and cash equivalents
Interest bearing time deposits
Loans held for sale
Loans, net of allowance for loan losses	305,238
Federal Home Loan Bank stock, at cost
Interest receivable
Financial liabilities
Deposits	312,817
Federal Home Loan Bank advances
Interest payable

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Securities (Details 2) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value [Abstract]
Less Than 12 Months Fair Value	$ 2,844	$ 938
Less Than 12 Months Unrealized Losses	3	5
12 Months or More Fair Value
12 Months or More Unrealized Losses
Total Unrealized Losses	3	5
Total Fair Value	2,844	938
U.S. Government sponsored agencies
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value [Abstract]
Less Than 12 Months Fair Value		368
Less Than 12 Months Unrealized Losses		2
12 Months or More Fair Value
12 Months or More Unrealized Losses
Total Unrealized Losses		2
Total Fair Value		368
Mortgage-backed securities
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value [Abstract]
Less Than 12 Months Fair Value	1,734
Less Than 12 Months Unrealized Losses	1
12 Months or More Fair Value
12 Months or More Unrealized Losses
Total Unrealized Losses	1
Total Fair Value	1,734
State and political subdivision securities
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value [Abstract]
Less Than 12 Months Fair Value	1,110	570
Less Than 12 Months Unrealized Losses	2	3
12 Months or More Fair Value
12 Months or More Unrealized Losses
Total Unrealized Losses	2	3
Total Fair Value	$ 1,110	$ 570

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Consolidated Condensed Statements of Changes in Shareholders' Equity (Unaudited) (Parentheticals)	6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011
Statement Of Stockholders Equity [Abstract]
Number Stock options exercised (in shares)	750	750

XML

Consolidated Condensed Balance Sheets (Parentheticals) (USD $)	Jun. 30, 2012	Dec. 31, 2011
Statement Of Financial Position [Abstract]
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized	7,000,000	7,000,000
Common stock, shares issued	1,555,972	1,555,222
Common stock, shares outstanding	1,555,972	1,555,222

XML

Securities (Tables)

6 Months Ended

Jun. 30, 2012

Investments, Debt and Equity Securities [Abstract]

Schedule of amortized cost and approximate fair values, together with gross unrealized gains and losses, of securities

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Approximate Fair Value
			(in Thousands)
Available-for-sale Securities:
June 30, 2012: (Unaudited)
U.S. Government sponsored agencies	$	7,413	$	42	$	---		$	7,455
Mortgage-backed securities – government sponsored entities		7,610		171		(1	)		7,780
State and political subdivisions		8,282		270		(2	)		8,550
	$	23,305	$	483	$	(3	)	$	23,785
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

Schedule of amortized cost and fair value of available-for-sale securities by contractual maturity

	Available for Sale
		Amortized Cost		Fair Value
		June 30, 2012
		Unaudited (in thousands)
Within one year		$	1,093	$	1,096
One to five years			7,374		7,489
Five to ten years			7,228		7,420
After ten years			---		---
			15,695		16,005
Mortgage-backed securities			7,610		7,780
Totals		$	23,305	$	23,785

Schedule of investments' gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities in a continuous unrealized loss position

	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)
June 30, 2012 (Unaudited)
Mortgage-backed securities		1,734	$	1	$	---	$	---	$	1,734	$	1
State and political subdivisions		1,110		2		---		---		1,110		2
Total temporarily impaired securities	$	2,844	$	3	$	---	$	---	$	2,844	$	3

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

XML

Document and Entity Information	6 Months Ended
	Jun. 30, 2012	Aug. 10, 2012
Document and Entity Information [Abstract]
Entity Registrant Name	LSB FINANCIAL CORP
Entity Central Index Key	0000930405
Trading Symbol	lsbi
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		1,555,972
Document Type	10-Q
Document Period End Date	Jun. 30, 2012
Amendment Flag	false
Document Fiscal Year Focus	2012
Document Fiscal Period Focus	Q2

XML

Loans and Allowance for Loan Losses (Tables)

6 Months Ended

Jun. 30, 2012

Receivables [Abstract]

Schedule of categories of loans

	(Unaudited) June 30, 2012				December 31, 2011
Real Estate		(In thousands)
One-to-four family residential		$	105,352			$	108,867
Multi-family residential			62,311				60,612
Commercial real estate			86,748				90,879
Construction and land development			14,998				18,364
Commercial			11,159				14,366
Consumer and other			998				1,161
Home equity lines of credit			17,428				17,330
Total loans			298,994				311,579
Less
Net deferred loan fees, premiums and discounts			(488	)			(496	)
Undisbursed portion of loans			(4,445	)			(3,242	)
Allowance for loan losses			(5,268	)			(5,331	)
Net loans		$	288,793			$	302,510

Schedule of Allowance for Loan Losses and Recorded Investment in Loans

	Allowance for Loan Losses and Recorded Investment in Loans for the Three Months Ended June 30, 2012 (Unaudited)
Three Months Ended       June 30, 2012	Commercial			Owner Occupied 1-4			Non-owner Occupied 1-4			Multi- family		Commercial Real Estate			Construction			Land			Consumer and Home Equity		Total
Allowance for losses												(In thousands)
Beginning balance	$	716		$	411		$	1,221		$	664	$	2,000		$	13		$	127		$	153	$	5,305
Provision charged to expense		99			31			(108	)		224		276			(5	)		(23	)		6		500
Losses charged off		(148	)		(10	)		(12	)		---		(417	)		---			---			---		(587	)
Recoveries		17			---			17			---		---			---			16			---		50
Ending balance	$	684		$	432		$	1,118		$	888	$	1,859		$	8		$	120		$	159	$	5,268

	Allowance for Loan Losses and Recorded Investment in Loans for the Six Months Ended June 30, 2012 (Unaudited)
Six Months Ended      June  30, 2012	Commercial			Owner Occupied 1-4			Non-owner Occupied 1-4			Multi- family			Commercial Real Estate			Construction			Land			Consumer and Home Equity			Total
Allowance for losses													(In thousands)
Beginning balance	$	667		$	436		$	1,330		$	646		$	1,788		$	64		$	264		$	136		$	5,331
Provision charged to expense		462			12			(195	)		500			488			(56	)		(145	)		34			1,100
Losses charged off		(462	)		(16	)		(37	)		(259	)		(417	)		---			(15	)		(11	)		(1,217	)
Recoveries		17			---			20			1			---			---			16			---			54
Ending balance		684			432			1,118			888			1,859			8			120			159			5,268
ALL individually evaluated		2			11			60			208			617			---			---			---			898
ALL collectively evaluated		682			421			1,058			680			1,242			8			120			159			4,368
Total ALLL		684			432			1,118			888			1,859			8			120			159			5,268
Loans individually evaluated		298			1,475			6,552			2,143			10,169			---			1,661			158			22,456
Loans collectively evaluated		10,861			51,099			46,226			60,168			76,579			9,144			4,193			18,268			276,538
Total loans evaluated	$	11,159		$	52,574		$	52,778		$	62,311		$	86,748		$	9,144		$	5,854		$	18,426		$	298,994

	Allowance for Loan Losses and Recorded Investment in Loans for the Quarter Ended June 30, 2011 (Unaudited)
Three Months Ended       June 30, 2011	Commercial			Owner Occupied 1-4			Non-owner Occupied 1-4			Multi- family		Commercial Real Estate			Construction			Land		Consumer and Home Equity		Total
Allowance for losses
Beginning balance	$	727		$	495		$	1,471		$	1,155	$	2,094		$	78		$	450	$	877	$	6,547
Provision charged to expense		(148	)		61			157			139		404			(44	)		59		46		675
Losses charged off		(15	)		(80	)		(61	)		---		(39	)		---			---		---		(195	)
Recoveries		---			---			1			---		---			---			7		---		1
Ending balance	$	564		$	476		$	1,568		$	1,294	$	2,460		$	34		$	509	$	123	$	7,028

	Allowance for Loan Losses and Recorded Investment in Loans for the Six Months Ended June 30, 2011 (Unaudited)
Six Months Ended       June  30, 2011	Commercial			Owner Occupied 1-4			Non-owner Occupied 1-4			Multi- family		Commercial Real Estate			Construction		Land		Consumer and Home Equity			Total
Allowance for losses												(In thousands)
Beginning balance	$	565		$	242		$	773		$	1,138	$	2,061		$	---	$	480	$	84		$	5,343
Provision charged to expense		14			292			847			156		438			34		22		48			1,851
Losses charged off		(15	)		(80	)		(61	)		---		(39	)		---		---		(9	)		(204	)
Recoveries		---			22			9			---		---			---		7		---			38
Ending balance	$	564		$	476		$	1,568		$	1,294	$	2,460		$	34	$	509	$	123		$	7,028

	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 ALLL		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

Schedule of an analysis of loan quality based on property

The following table provides an analysis of loan quality using the above designations, based on property type at June 30, 2012. (Unaudited)

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	$	33	$	4,218	$	254	$	---	$	105	$	282	$	196	$	1,575	$	6,663
2 - Good		2,880		21,161		5,224		8,135		10,874		882		198		11,758		61,112
3 - Pass Low risk		6,262		18,732		12,897		30,363		33,196		5,662		219		3,795		111,126
4 - Pass		1,641		6,264		24,269		18,316		23,337		2,318		1,646		1,226		79,017
4W - Watch		29		683		5,908		4,447		7,466		---		1,934		---		20,467
5 - Special mention		---		84		762		---		831		---		---		---		1,677
6 - Substandard		314		1,432		3,464		1,050		10,939		---		1,661		72		18,932
7 - Doubtful		---		---		---		---		---		---		---		---		---
8 - Loss		---		---		---		---		---		---		---		---		---
Total	$	11,159	$	52,574	$	52,778	$	62,311	$	86,748	$	9,144	$	5,854	$	18,426	$	298,994

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	$	58,525	$	60,612	$	90,879	$	8,060	$	10,304	$	18,491	$	311,579

Schedule of Loan Portfolio Aging Analysis

Analyses of past due loans segregated by loan type as of June 30, 2012 and December 31, 2011 are provided below.

	Loan Portfolio Aging Analysis as of June 30, 2012 (Unaudited)
	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	$	---	$	---	$	63	$	63	$	11,096	$	11,159	$	---	$	---
Owner occupied 1-4		---		---		425		425		52,149		52,574		853		---
Non owner occupied 1-4		---		1,459		987		2,444		50,333		52,778		939		---
Multi-family		---		84		---		84		62,227		62,311		483		---
Commercial Real Estate		---		93		2,372		2,465		84,283		86,748		2,462		---
Construction		---		---		---		---		9,144		9,144		---		---
Land		---		---		827		827		5,027		5,854		834		---
Consumer and home equity		---		4		68		72		18,354		18,426		4		---
Total	$	---	$	1,640	$	4,741	$	6,381	$	292,613	$	298,994	$	5,575	$	---

	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	$	---

Schedule of Impaired Loans

	Impaired Loans as of and for the Quarter and Six months ended June 30,2012 (Unaudited)
	Recorded Balance		Unpaid Principal Balance		Specific Allowance		Quarterly Average Impaired Loans		Year to date Average Impaired Loans		Quarterly Interest Income Recognized		Year to date Interest Income Recognized
							(In thousands)
Loans without specific valuation allowance
Commercial	$	63	$	433	$	---	$	139	$	910	$	---	$	4
Owner occupied 1-4		1,334		1,386		---		1,374		1,584		11		33
Non owner occupied 1-4		6,162		6,454		---		6,286		6,829		63		157
Multi-family		1,744		2,004		---		2,428		3,001		46		93
Commercial Real Estate		6,947		8,399		---		7,763		7,994		90		180
Construction		---		---		---		---		---		---		---
Land		1,661		1,885		---		1,780		1,900		2		3
Consumer and Home Equity		158		174		---		158		183		2		4
Total loans without a specific valuation allowance		18,069		20,735		---		19,928		22,401		214		474
Loans with a specific valuation allowance
Commercial		235		235		2		240		160		---		2
Owner occupied 1-4		141		142		11		123		82		---		---
Non owner occupied 1-4		389		389		60		392		395		1		2
Multi-family		399		406		208		404		406		---		---
Commercial Real Estate		3,221		3,249		617		3,249		3,268		12		29
Construction		---		---		---		---		---		---		---
Land		---		---		---		---		---		---		---
Consumer and Home Equity		---		---		---		---		---		---		---
Total loans with a specific valuation allowance		4,385		4,421		898		4,407		4,311		13		33
Total
Commercial		298		668		2		379		1,070		---		6
Owner occupied 1-4		1,475		1,528		11		1,497		1,666		11		33
Non owner occupied 1-4		6,552		6,843		60		6,678		7,224		64		159
Multi-family		2,143		2,410		208		2,831		3,407		46		93
Commercial Real Estate		10,169		11,648		617		11,012		11,263		102		209
Construction		---		---		---		---		---		---		---
Land		1,661		1,885		---		1,780		1,900		2		3
Consumer and Home Equity		158		174		---		158		183		2		4
Total impaired loans	$	22,456	$	25,156	$	898	$	24,336	$	26,712	$	227	$	507

	Impaired loans as of and for the Year Ended December 31, 2011						Impaired loans for the Quarter and Six Months Ended June 30, 2011 (Unaudited)
	Recorded Balance		Unpaid Principal Balance		Specific Allowance		Quarterly Average Impaired Loans		Year to date Average Impaired Loans		Quarterly Interest Income Recognized		Year to date Interest Income Recognized
							(In thousands)
Loans without specific valuation allowance
Commercial	$	2,233	$	2,257	$	---	$	1,651	$	1,100	$	21	$	40
Owner occupied 1-4		1,951		1,960		---		1,610		1,518		20		37
Non owner occupied 1-4		7,475		8,605		---		7,543		6,688		76		126
Multi-family		4,558		6,083		---		3,530		2,957		86		139
Commercial Real Estate		8,854		10,406		---		4,214		3,848		31		56
Construction		---		---		---		---		---		---		---
Land		2,140		2,234		---		3,987		4,034		31		63
Consumer and Home Equity		143		148		---		166		134		1		2
Total loans without a specific valuation allowance		27,354		31,693		---		22,701		20,279		266		463
Loans with a specific valuation allowance
Commercial		218		231		129		252		256		2		3
Owner occupied 1-4		143		153		13		100		66		2		2
Non owner occupied 1-4		840		840		84		1,842		2,029		2		3
Multi-family		---		---		---		2,848		2,848		---		2
Commercial Real Estate		2,910		2,910		413		6,112		4,812		25		46
Construction		---		---		---		---		---		---		---
Land		---		---		---		396		348		1		3
Consumer and Home Equity		---		---		---		70		47		---		---
Total loans with a specific valuation allowance		4,111		4,134		639		11,620		10,406		32		59
Total
Commercial		2,451		2,488		129		1,902		1,356		23		43
Owner occupied 1-4		2,094		2,113		13		1,709		1,585		22		39
Non owner occupied 1-4		8,315		9,445		84		9,385		8,716		78		129
Multi-family		4,558		6,083		---		6,378		5,805		86		141
Commercial Real Estate		11,764		13,316		413		10,326		8,660		57		102
Construction		---		---		---		---		---		---		---
Land		2,410		2,234		---		4,383		4,383		32		66
Consumer and Home Equity		143		148		---		236		180		1		2
Total impaired loans	$	31,465	$	35,827	$	639	$	34,321	$	30,685	$	299	$	522

Schedule of breakdown of non-accruing loans

	(Unaudited)
Loan Class	June 30, 2012		December 31, 2011
	(In thousands)
Commercial	$	63	$	716
Owner occupied 1-4		1,278		1,147
Non owner occupied 1-4		1,925		3,102
Multi-family		483		1,302
Commercial Real Estate		4,834		3,651
Construction		---		---
Land		1,661		2,097
Consumer and home equity		72		44
Total	$	10,316	$	12,059

Schedule of Newly classified troubled debt restructurings

	Newly restructured loans for the three months ended June 30, 2012 (Unaudited)
	(Dollars in thousands)
	Number of loans		Pre-modification Recorded Balance		Post-modification Recorded Balance		Type of Modification
Commercial		---	$	---	$	---		---
Owner occupied 1-4		---		---		---		---
Non owner occupied 1-4		---		---		---		---
Multi-family		---		---		---		---

Commercial Real Estate	1		100		100	Below market rate
Construction	---		---		---		---
Land	---		---		---		---
Consumer and home equity	---		---		---		---
Total	1	$	100	$	100

	Newly restructured loans for the six months ended June 30, 2012 (Unaudited)
	(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		2		345		345	Below market rate
Construction		---		---		---		---
Land		---		---		---		---
Consumer and home equity		---		---		---		---
Total	$	3	$	453	$	453

	Troubled debt restructurings that subsequently defaulted for the six months ended  June 30, 2012 (Unaudited)
	(Dollars in thousands)
	Number of loans		Recorded Balance
Commercial		1	$	125
Owner occupied 1-4		---		---
Non owner occupied 1-4		---		---
Multi-family		---		---
Commercial Real Estate		---		---
Construction		---		---
Land		---		---
Consumer and home equity		---		---
Total		1	$	125

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Consolidated Condensed Statements of Income and Comprehensive Income (Unaudited) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Interest and Dividend Income
Loans	$ 3,806	$ 4,245	$ 7,881	$ 8,604
Securities
Taxable	90	66	157	134
Tax-exempt	39	43	78	89
Other	15	4	29	7
Total interest and dividend income	3,950	4,358	8,145	8,834
Interest Expense
Deposits	747	943	1,558	1,933
Borrowings	104	103	204	224
Total interest expense	851	1,046	1,762	2,157
Net Interest Income	3,099	3,312	6,383	6,677
Provision for Loan Losses	500	675	1,100	1,851
Net Interest Income After Provision for Loan Losses	2,599	2,637	5,283	4,826
Non-interest Income
Deposit account service charges and fees	321	319	646	611
Net gains on loan sales	425	226	832	390
Net realized gain on sale of available-for-sale securities	0	2	0	2
Loss on other real estate owned	(56)	(311)	(139)	(336)
Other	185	278	445	538
Total non-interest income	875	514	1,784	1,205
Non-Interest Expense
Salaries and employee benefits	1,496	1,372	3,015	2,782
Net occupancy and equipment expense	283	268	601	596
Computer service	152	147	300	289
Advertising	89	57	177	115
FDIC insurance premiums	120	134	240	318
Other	543	432	1,011	900
Total non-interest expense	2,683	2,410	5,344	5,000
Income Before Income Taxes	791	741	1,723	1,031
Provision for Income Taxes	282	264	619	350
Net Income	509	477	1,104	681
Unrealized appreciation on available-for-sale securities net of taxes of $49 and $23 for the three months ended June 30, 2012 and 2011, and of $36 and $37, for the six months ended June 30, 2012 and 2011, respectively	73	34	54	56
Total comprehensive income	$ 582	$ 511	$ 1,158	$ 737
Basic Earnings Per Share	$ 0.33	$ 0.31	$ 0.71	$ 0.44
Diluted Earnings Per Share	$ 0.33	$ 0.31	$ 0.71	$ 0.44
Dividends Declared Per Share	$ 0.00	$ 0.00	$ 0.00	$ 0.00

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Securities

6 Months Ended

Jun. 30, 2012

Investments, Debt and Equity Securities [Abstract]

Securities

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:
June 30, 2012: (Unaudited)
U.S. Government sponsored agencies	$	7,413	$	42	$	---		$	7,455
Mortgage-backed securities – government sponsored entities		7,610		171		(1	)		7,780
State and political subdivisions		8,282		270		(2	)		8,550
	$	23,305	$	483	$	(3	)	$	23,785
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 June 30, 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
	June 30, 2012
	Unaudited (in thousands)
Within one year	$	1,093	$	1,096
One to five years		7,374		7,489
Five to ten years		7,228		7,420
After ten years		---		---
		15,695		16,005
Mortgage-backed securities		7,610		7,780
Totals	$	23,305	$	23,785

The carrying value of securities pledged as collateral, to secure public deposits and for other purposes, was $2.2 million at June 30, 2012 (unaudited) 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 June 30, 2012 and December 31, 2011, respectively.

	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)
June 30, 2012 (Unaudited)
Mortgage-backed securities		1,734	$	1	$	---	$	---	$	1,734	$	1
State and political subdivisions		1,110		2		---		---		1,110		2
Total temporarily impaired securities	$	2,844	$	3	$	---	$	---	$	2,844	$	3

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

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Earnings per share

6 Months Ended

Jun. 30, 2012

Earnings Per Share [Abstract]

Earnings per share

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 June 30, 2012, 40,317 shares related to stock options outstanding were dilutive and 17,116 were antidilutive and for the six month period ended June 30, 2012, 6,000 shares related to stock options outstanding were dilutive and 51,433 were antidilutive.  For the three and six month periods ended June 30, 2011, 14,577 shares related to stock options outstanding were dilutive and 25,208 were antidilutive.  The following table presents information about the number of shares used to compute earnings per share and the results of the computations:

	(Unaudited)
	Three months ended June 30,				Six months ended June 30,
	2012		2011		2012		2011
Weighted average shares outstanding		1,555,972		1,553,764		1,555,646		1,553,645
Stock options		724		2,382		---		2,463
Shares used to compute diluted  earnings per share		1,556,696		1,556,146		1,555,646		1,556,108
Basic earnings per share	$	0.33	$	0.31	$	0.71	$	0.44
Diluted earnings per share	$	0.33	$	0.31	$	0.71	$	0.44

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Securities (Details 1) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Available-for-sale Securities, Debt Maturities [Abstract]
Available for Sale Securities Amortized Cost Within one year	$ 1,093
Available for Sale Securities Amortized Cost One to five years	7,374
Available for Sale Securities Amortized Cost Five to ten years	7,228
Available for Sale Securities Amortized Cost After ten years
Available For Sale Securities Having Debt Maturities Amortized Cost	15,695
Available for Sale Securities Amortized Cost Mortgage Backed Securities	7,610
Available for Sale Securities Amortized Cost	23,305
Available for Sale Securities Fair Value Within one year	1,096
Available for Sale Securities Fair Value One to five years	7,489
Available for Sale Securities Fair Value Five to ten years	7,420
Available for Sale Securities Fair Value After ten years
Available For Sale Securities Having Debt Securities Fair Value	16,005
Available for Sale Securities Fair Value Mortgage backed securities	7,780
Totals Available-for-sale securities	$ 23,785	$ 13,845

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Disclosures About Fair Value of Assets and Liabilities (Tables)

6 Months Ended

Jun. 30, 2012

Fair Value Disclosures [Abstract]

Schedule of 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

			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
June 30, 2012: (Unaudited)
U.S. Government-sponsored agencies	$	7,455		$	7,455
Mortgage-backed securities		7,780			7,780
State and political subdivision securities		8,550			8,550
Totals		23,785			23,785
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

Schedule of fair value measurement of assets measured at fair value on a nonrecurring basis and the level within the fair value hierarchy

			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)
June 30, 2012: (Unaudited)
Collateral-dependent impaired loans	$	2,680			—		—	$	2,680
December 31, 2011:
Collateral-dependent impaired loans	$	3,701			—		—	$	3,701

Schedule of quantitative information about unobservable inputs used in recurring and nonrecurring Level 3 fair value measurements other than goodwill

	Value at 06/30/12		Valuation Technique	Unobservable Inputs	Range (Weighted Average)
			In thousands
Collateral-dependent impaired loans	$	2,680	Market comparable properties	Marketability discount		10	%

Schedule of estimated fair values of the Company's financial instruments and the level within the fair value hierarchy

			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
June 30, 2012: (Unaudited)
Financial assets
Cash and cash equivalents	$	29,713	$	29,713	$	—	$	—
Interest bearing time deposits		747		—		745		—
Loans held for sale		2,302		—		2,302		—
Loans, net of allowance for losses		288,793		—		---		305,238
Federal Home Loan Bank stock		3,185		—		3,185		---
Accrued interest receivable		1,206		—		1,206		—
Financial liabilities
Deposits		309,997		---		---		312,817
Federal Home Loan Bank advances		18,000		—		18,376		—
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

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Accounting Developments

6 Months Ended

Jun. 30, 2012

Accounting Changes and Error Corrections [Abstract]

Accounting Developments

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.

 In December 2011, FASB issued ASU 2011-11: Accounting Standards Update No. 2011-11—Balance Sheet (Topic 210).  The objective of this Update is to provide enhanced disclosures that will enable users of its financial statements to evaluate the effect or potential effect of netting arrangements on an entity’s financial position. This includes the effect or potential effect of rights of setoff associated with an entity’s recognized assets and recognized liabilities within the scope of this Update. The amendments require enhanced disclosures by requiring improved information about financial instruments and derivative instruments that are either (1) offset in accordance with either Section 210-20-45 or Section 815-10-45 or (2) subject to an enforceable master netting arrangement or similar agreement, irrespective of whether they are offset in accordance with either Section 210-20-45 or Section 815-10-45.  An entity is required to apply the amendments for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. An entity should provide the disclosures required by those amendments retrospectively for all comparative periods presented. The Company will adopt the methodologies prescribed by this ASU by the date required, and does not anticipate that the ASU will have a material effect on its financial position or results of operations.

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Loans and Allowance for Loan Losses

6 Months Ended

Jun. 30, 2012

Receivables [Abstract]

Loans and Allowance for Loan Losses

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:

	(Unaudited) June 30, 2012			December 31, 2011
Real Estate	(In thousands)
One-to-four family residential	$	105,352		$	108,867
Multi-family residential		62,311			60,612
Commercial real estate		86,748			90,879
Construction and land development		14,998			18,364
Commercial		11,159			14,366
Consumer and other		998			1,161
Home equity lines of credit		17,428			17,330
Total loans		298,994			311,579
Less
Net deferred loan fees, premiums and discounts		(488	)		(496	)
Undisbursed portion of loans		(4,445	)		(3,242	)
Allowance for loan losses		(5,268	)		(5,331	)
Net loans	$	288,793		$	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 and Development

Construction and land development 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. Multi-family property 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.  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 and six month periods ending June 30, 2012 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 June 30, 2012 (Unaudited)
Three Months Ended       June 30, 2012	Commercial			Owner Occupied 1-4			Non-owner Occupied 1-4			Multi- family		Commercial Real Estate			Construction			Land			Consumer and Home Equity		Total
Allowance for losses												(In thousands)
Beginning balance	$	716		$	411		$	1,221		$	664	$	2,000		$	13		$	127		$	153	$	5,305
Provision charged to expense		99			31			(108	)		224		276			(5	)		(23	)		6		500
Losses charged off		(148	)		(10	)		(12	)		---		(417	)		---			---			---		(587	)
Recoveries		17			---			17			---		---			---			16			---		50
Ending balance	$	684		$	432		$	1,118		$	888	$	1,859		$	8		$	120		$	159	$	5,268

	Allowance for Loan Losses and Recorded Investment in Loans for the Six Months Ended June 30, 2012 (Unaudited)
Six Months Ended      June  30, 2012	Commercial			Owner Occupied 1-4			Non-owner Occupied 1-4			Multi- family			Commercial Real Estate			Construction			Land			Consumer and Home Equity			Total
Allowance for losses													(In thousands)
Beginning balance	$	667		$	436		$	1,330		$	646		$	1,788		$	64		$	264		$	136		$	5,331
Provision charged to expense		462			12			(195	)		500			488			(56	)		(145	)		34			1,100
Losses charged off		(462	)		(16	)		(37	)		(259	)		(417	)		---			(15	)		(11	)		(1,217	)
Recoveries		17			---			20			1			---			---			16			---			54
Ending balance		684			432			1,118			888			1,859			8			120			159			5,268
ALL individually evaluated		2			11			60			208			617			---			---			---			898
ALL collectively evaluated		682			421			1,058			680			1,242			8			120			159			4,368
Total ALLL		684			432			1,118			888			1,859			8			120			159			5,268
Loans individually evaluated		298			1,475			6,552			2,143			10,169			---			1,661			158			22,456
Loans collectively evaluated		10,861			51,099			46,226			60,168			76,579			9,144			4,193			18,268			276,538
Total loans evaluated	$	11,159		$	52,574		$	52,778		$	62,311		$	86,748		$	9,144		$	5,854		$	18,426		$	298,994

	Allowance for Loan Losses and Recorded Investment in Loans for the Quarter Ended June 30, 2011 (Unaudited)
Three Months Ended       June 30, 2011	Commercial			Owner Occupied 1-4			Non-owner Occupied 1-4			Multi- family		Commercial Real Estate			Construction			Land		Consumer and Home Equity		Total
Allowance for losses
Beginning balance	$	727		$	495		$	1,471		$	1,155	$	2,094		$	78		$	450	$	877	$	6,547
Provision charged to expense		(148	)		61			157			139		404			(44	)		59		46		675
Losses charged off		(15	)		(80	)		(61	)		---		(39	)		---			---		---		(195	)
Recoveries		---			---			1			---		---			---			7		---		1
Ending balance	$	564		$	476		$	1,568		$	1,294	$	2,460		$	34		$	509	$	123	$	7,028

	Allowance for Loan Losses and Recorded Investment in Loans for the Six Months Ended June 30, 2011 (Unaudited)
Six Months Ended       June  30, 2011	Commercial			Owner Occupied 1-4			Non-owner Occupied 1-4			Multi- family		Commercial Real Estate			Construction		Land		Consumer and Home Equity			Total
Allowance for losses												(In thousands)
Beginning balance	$	565		$	242		$	773		$	1,138	$	2,061		$	---	$	480	$	84		$	5,343
Provision charged to expense		14			292			847			156		438			34		22		48			1,851
Losses charged off		(15	)		(80	)		(61	)		---		(39	)		---		---		(9	)		(204	)
Recoveries		---			22			9			---		---			---		7		---			38
Ending balance	$	564		$	476		$	1,568		$	1,294	$	2,460		$	34	$	509	$	123		$	7,028

	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 ALLL		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 June 30, 2012. (Unaudited)

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	$	33	$	4,218	$	254	$	---	$	105	$	282	$	196	$	1,575	$	6,663
2 - Good		2,880		21,161		5,224		8,135		10,874		882		198		11,758		61,112
3 - Pass Low risk		6,262		18,732		12,897		30,363		33,196		5,662		219		3,795		111,126
4 - Pass		1,641		6,264		24,269		18,316		23,337		2,318		1,646		1,226		79,017
4W - Watch		29		683		5,908		4,447		7,466		---		1,934		---		20,467
5 - Special mention		---		84		762		---		831		---		---		---		1,677
6 - Substandard		314		1,432		3,464		1,050		10,939		---		1,661		72		18,932
7 - Doubtful		---		---		---		---		---		---		---		---		---
8 - Loss		---		---		---		---		---		---		---		---		---
Total	$	11,159	$	52,574	$	52,778	$	62,311	$	86,748	$	9,144	$	5,854	$	18,426	$	298,994

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	$	58,525	$	60,612	$	90,879	$	8,060	$	10,304	$	18,491	$	311,579

Analyses of past due loans segregated by loan type as of June 30, 2012 and December 31, 2011 are provided below.

	Loan Portfolio Aging Analysis as of June 30, 2012 (Unaudited)
	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	$	---	$	---	$	63	$	63	$	11,096	$	11,159	$	---	$	---
Owner occupied 1-4		---		---		425		425		52,149		52,574		853		---
Non owner occupied 1-4		---		1,459		987		2,444		50,333		52,778		939		---
Multi-family		---		84		---		84		62,227		62,311		483		---
Commercial Real Estate		---		93		2,372		2,465		84,283		86,748		2,462		---
Construction		---		---		---		---		9,144		9,144		---		---
Land		---		---		827		827		5,027		5,854		834		---
Consumer and home equity		---		4		68		72		18,354		18,426		4		---
Total	$	---	$	1,640	$	4,741	$	6,381	$	292,613	$	298,994	$	5,575	$	---

	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.

	Impaired Loans as of and for the Quarter and Six months ended June 30,2012 (Unaudited)
	Recorded Balance		Unpaid Principal Balance		Specific Allowance		Quarterly Average Impaired Loans		Year to date Average Impaired Loans		Quarterly Interest Income Recognized		Year to date Interest Income Recognized
							(In thousands)
Loans without specific valuation allowance
Commercial	$	63	$	433	$	---	$	139	$	910	$	---	$	4
Owner occupied 1-4		1,334		1,386		---		1,374		1,584		11		33
Non owner occupied 1-4		6,162		6,454		---		6,286		6,829		63		157
Multi-family		1,744		2,004		---		2,428		3,001		46		93
Commercial Real Estate		6,947		8,399		---		7,763		7,994		90		180
Construction		---		---		---		---		---		---		---
Land		1,661		1,885		---		1,780		1,900		2		3
Consumer and Home Equity		158		174		---		158		183		2		4
Total loans without a specific valuation allowance		18,069		20,735		---		19,928		22,401		214		474
Loans with a specific valuation allowance
Commercial		235		235		2		240		160		---		2
Owner occupied 1-4		141		142		11		123		82		---		---
Non owner occupied 1-4		389		389		60		392		395		1		2
Multi-family		399		406		208		404		406		---		---
Commercial Real Estate		3,221		3,249		617		3,249		3,268		12		29
Construction		---		---		---		---		---		---		---
Land		---		---		---		---		---		---		---
Consumer and Home Equity		---		---		---		---		---		---		---
Total loans with a specific valuation allowance		4,385		4,421		898		4,407		4,311		13		33
Total
Commercial		298		668		2		379		1,070		---		6
Owner occupied 1-4		1,475		1,528		11		1,497		1,666		11		33
Non owner occupied 1-4		6,552		6,843		60		6,678		7,224		64		159
Multi-family		2,143		2,410		208		2,831		3,407		46		93
Commercial Real Estate		10,169		11,648		617		11,012		11,263		102		209
Construction		---		---		---		---		---		---		---
Land		1,661		1,885		---		1,780		1,900		2		3
Consumer and Home Equity		158		174		---		158		183		2		4
Total impaired loans	$	22,456	$	25,156	$	898	$	24,336	$	26,712	$	227	$	507

	Impaired loans as of and for the Year Ended December 31, 2011						Impaired loans for the Quarter and Six Months Ended June 30, 2011 (Unaudited)
	Recorded Balance		Unpaid Principal Balance		Specific Allowance		Quarterly Average Impaired Loans		Year to date Average Impaired Loans		Quarterly Interest Income Recognized		Year to date Interest Income Recognized
							(In thousands)
Loans without specific valuation allowance
Commercial	$	2,233	$	2,257	$	---	$	1,651	$	1,100	$	21	$	40
Owner occupied 1-4		1,951		1,960		---		1,610		1,518		20		37
Non owner occupied 1-4		7,475		8,605		---		7,543		6,688		76		126
Multi-family		4,558		6,083		---		3,530		2,957		86		139
Commercial Real Estate		8,854		10,406		---		4,214		3,848		31		56
Construction		---		---		---		---		---		---		---
Land		2,140		2,234		---		3,987		4,034		31		63
Consumer and Home Equity		143		148		---		166		134		1		2
Total loans without a specific valuation allowance		27,354		31,693		---		22,701		20,279		266		463
Loans with a specific valuation allowance
Commercial		218		231		129		252		256		2		3
Owner occupied 1-4		143		153		13		100		66		2		2
Non owner occupied 1-4		840		840		84		1,842		2,029		2		3
Multi-family		---		---		---		2,848		2,848		---		2
Commercial Real Estate		2,910		2,910		413		6,112		4,812		25		46
Construction		---		---		---		---		---		---		---
Land		---		---		---		396		348		1		3
Consumer and Home Equity		---		---		---		70		47		---		---
Total loans with a specific valuation allowance		4,111		4,134		639		11,620		10,406		32		59
Total
Commercial		2,451		2,488		129		1,902		1,356		23		43
Owner occupied 1-4		2,094		2,113		13		1,709		1,585		22		39
Non owner occupied 1-4		8,315		9,445		84		9,385		8,716		78		129
Multi-family		4,558		6,083		---		6,378		5,805		86		141
Commercial Real Estate		11,764		13,316		413		10,326		8,660		57		102
Construction		---		---		---		---		---		---		---
Land		2,410		2,234		---		4,383		4,383		32		66
Consumer and Home Equity		143		148		---		236		180		1		2
Total impaired loans	$	31,465	$	35,827	$	639	$	34,321	$	30,685	$	299	$	522

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 June 30, 2012 and at December 31, 2011.

	(Unaudited)
Loan Class	June 30, 2012		December 31, 2011
	(In thousands)
Commercial	$	63	$	716
Owner occupied 1-4		1,278		1,147
Non owner occupied 1-4		1,925		3,102
Multi-family		483		1,302
Commercial Real Estate		4,834		3,651
Construction		---		---
Land		1,661		2,097
Consumer and home equity		72		44
Total	$	10,316	$	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 June 30, 2012.

	Newly restructured loans for the three months ended June 30, 2012 (Unaudited)
	(Dollars in thousands)
	Number of loans		Pre-modification Recorded Balance		Post-modification Recorded Balance		Type of Modification
Commercial		---	$	---	$	---		---
Owner occupied 1-4		---		---		---		---
Non owner occupied 1-4		---		---		---		---
Multi-family		---		---		---		---

Commercial Real Estate	1		100		100	Below market rate
Construction	---		---		---		---
Land	---		---		---		---
Consumer and home equity	---		---		---		---
Total	1	$	100	$	100

	Newly restructured loans for the six months ended June 30, 2012 (Unaudited)
	(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		2		345		345	Below market rate
Construction		---		---		---		---
Land		---		---		---		---
Consumer and home equity		---		---		---		---
Total		3	$	453	$	453

	Troubled debt restructurings that subsequently defaulted for the six months ended  June 30, 2012 (Unaudited)
	(Dollars in thousands)
	Number of loans		Recorded Balance
Commercial		1	$	125
Owner occupied 1-4		---		---
Non owner occupied 1-4		---		---
Multi-family		---		---
Commercial Real Estate		---		---
Construction		---		---
Land		---		---
Consumer and home equity		---		---
Total		1	$	125

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Disclosures About Fair Value of Assets and Liabilities

6 Months Ended

Jun. 30, 2012

Fair Value Disclosures [Abstract]

Disclosures About Fair Value of Assets and Liabilities

Note 6 - 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 June 30, 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
June 30, 2012: (Unaudited)
U.S. Government-sponsored agencies	$	7,455		$	7,455
Mortgage-backed securities		7,780			7,780
State and political subdivision securities		8,550			8,550
Totals		23,785			23,785
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 June 30, 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 June 30, 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)
June 30, 2012: (Unaudited)
Collateral-dependent impaired loans	$	2,680		—		—	$	2,680
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 sheets, 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.

	Value at 06/30/12		Valuation Technique	Unobservable Inputs	Range (Weighted Average)
			In thousands
Collateral-dependent impaired loans	$	2,680	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 June 30, 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
June 30, 2012: (Unaudited)
Financial assets
Cash and cash equivalents	$	29,713	$	29,713	$	—	$	—
Interest bearing time deposits		747		—		745		—
Loans held for sale		2,302		—		2,302		—
Loans, net of allowance for losses		288,793		—		---		305,238
Federal Home Loan Bank stock		3,185		—		3,185		---
Accrued interest receivable		1,206		—		1,206		—
Financial liabilities
Deposits		309,997		---		---		312,817
Federal Home Loan Bank advances		18,000		—		18,376		—
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.  The fair value of  commitments was not material at June 30, 2012 and December 31, 2011.

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Earnings per share (Tables)

6 Months Ended

Jun. 30, 2012

Earnings Per Share [Abstract]

Schedule of information about the number of shares used to compute earnings per share and the results of the computations

	(Unaudited)
	Three months ended June 30,				Six months ended June 30,
	2012		2011		2012		2011
Weighted average shares outstanding		1,555,972		1,553,764		1,555,646		1,553,645
Stock options		724		2,382		---		2,463
Shares used to compute diluted  earnings per share		1,556,696		1,556,146		1,555,646		1,556,108
Basic earnings per share	$	0.33	$	0.31	$	0.71	$	0.44
Diluted earnings per share	$	0.33	$	0.31	$	0.71	$	0.44

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Disclosures About Fair Value of Assets and Liabilities - Measurement of fair value of assets on recurring basis (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Available-for-sale Securities [Abstract]
Totals Available-for-sale securities	$ 23,785	$ 13,845
Fair Value
Available-for-sale Securities [Abstract]
Totals Available-for-sale securities		13,845
Recurring | Fair Value
Available-for-sale Securities [Abstract]
Totals Available-for-sale securities	23,785	13,845
Recurring | Fair Value | U.S. Government sponsored agencies
Available-for-sale Securities [Abstract]
Totals Available-for-sale securities	7,455	3,177
Recurring | Fair Value | Mortgage-backed securities
Available-for-sale Securities [Abstract]
Totals Available-for-sale securities	7,780	3,719
Recurring | Fair Value | State and political subdivision securities
Available-for-sale Securities [Abstract]
Totals Available-for-sale securities	8,550	6,949
Recurring | Quoted Prices in Active Markets for Identical Assets (Level 1) | U.S. Government sponsored agencies
Available-for-sale Securities [Abstract]
Totals Available-for-sale securities
Recurring | Quoted Prices in Active Markets for Identical Assets (Level 1) | Mortgage-backed securities
Available-for-sale Securities [Abstract]
Totals Available-for-sale securities
Recurring | Quoted Prices in Active Markets for Identical Assets (Level 1) | State and political subdivision securities
Available-for-sale Securities [Abstract]
Totals Available-for-sale securities
Recurring | Significant Other Observable Inputs (Level 2)
Available-for-sale Securities [Abstract]
Totals Available-for-sale securities	23,785	13,845
Recurring | Significant Other Observable Inputs (Level 2) | U.S. Government sponsored agencies
Available-for-sale Securities [Abstract]
Totals Available-for-sale securities	7,455	3,177
Recurring | Significant Other Observable Inputs (Level 2) | Mortgage-backed securities
Available-for-sale Securities [Abstract]
Totals Available-for-sale securities	7,780	3,719
Recurring | Significant Other Observable Inputs (Level 2) | State and political subdivision securities
Available-for-sale Securities [Abstract]
Totals Available-for-sale securities	8,550	6,949
Recurring | Significant Unobservable Inputs (Level 3) | U.S. Government sponsored agencies
Available-for-sale Securities [Abstract]
Totals Available-for-sale securities
Recurring | Significant Unobservable Inputs (Level 3) | Mortgage-backed securities
Available-for-sale Securities [Abstract]
Totals Available-for-sale securities
Recurring | Significant Unobservable Inputs (Level 3) | State and political subdivision securities
Available-for-sale Securities [Abstract]
Totals Available-for-sale securities

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Earnings per share (Details Textuals)	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Number Of Potentially Dilutive Shares On Stock Options Outstanding	40,317	14,577	6,000	14,577
Antidilutive Shares	17,116	25,208	51,433	25,208

XML

Loans and Allowance for Loan Losses - Categories of loans (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2011	Jun. 30, 2011	Mar. 31, 2011	Dec. 31, 2010
Real Estate
Total loans	$ 294,061		$ 307,841
Less: Allowance for loan losses	(5,268)		(5,331)
Net loans	288,793		302,510
Loans and Allowance for Loan Losses
Real Estate
One-to-four family residential	105,352		108,867
Multi-family residential	62,311		60,612
Commercial real estate	86,748		90,879
Construction and land development	14,998		18,364
Commercial	11,159		14,366
Consumer and other	998		1,161
Home equity lines of credit	17,428		17,330
Total loans	298,994		311,579
Net deferred loan fees, premiums and discounts	(488)		(496)
Undisbursed portion of loans	(4,445)		(3,242)
Less: Allowance for loan losses	(5,268)	(5,305)	(5,331)	(7,028)	(6,547)	(5,343)
Net loans	$ 288,793		$ 302,510

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Consolidated Condensed Statements of Income and Comprehensive Income (Unaudited) (Parentheticals) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Income Statement [Abstract]
Unrealized appreciation (depreciation) on available-for-sale securities net of taxes	$ 49	$ 23	$ 36	$ 37

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Principles of Consolidation

6 Months Ended

Jun. 30, 2012

Principles Of Consolidation [Abstract]

Principles of Consolidation

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.

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Loans and Allowance for Loan Losses - Allocation of loan loss reserves by loan category (Details 1) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011	Dec. 31, 2011
Allowance for losses
Beginning balance					$ 5,331
Ending balance	5,268		5,268		5,331
Less: Allowance for loan losses	5,268		5,268		5,331
Total	294,061		294,061		307,841
Loans and Allowance for Loan Losses
Allowance for losses
Beginning balance	5,305	6,547	5,331	5,343
Provision charged to expense	500	675	1,100	1,851
Losses charged off	(587)	(195)	(1,217)	(204)
Recoveries	50	1	54	38
Ending balance	5,268	7,028	5,268	7,028
ALL individually evaluated	898		898		639
ALL collectively evaluated	4,368		4,368		4,692
Less: Allowance for loan losses	5,268	7,028	5,268	7,028
Loans individually evaluated	22,456		22,456		31,465
Loans collectively evaluated	276,538		276,538		280,114
Total	298,994		298,994		311,579
Loans and Allowance for Loan Losses | Commercial
Allowance for losses
Beginning balance	716	727	667	565
Provision charged to expense	99	(148)	462	14
Losses charged off	(148)	(15)	(462)	(15)
Recoveries	17		17
Ending balance	684	564	684	564
ALL individually evaluated	2		2		129
ALL collectively evaluated	682		682		538
Less: Allowance for loan losses	684	564	684	564
Loans individually evaluated	298		298		2,451
Loans collectively evaluated	10,861		10,861		11,915
Total	11,159		11,159		14,366
Loans and Allowance for Loan Losses | Owner Occupied 1-4
Allowance for losses
Beginning balance	411	495	436	242
Provision charged to expense	31	61	12	292
Losses charged off	(10)	(80)	(16)	(80)
Recoveries				22
Ending balance	432	476	432	476
ALL individually evaluated	11		11		13
ALL collectively evaluated	421		421		423
Less: Allowance for loan losses	432	476	432	476
Loans individually evaluated	1,475		1,475		2,094
Loans collectively evaluated	51,099		51,099		48,248
Total	52,574		52,574		50,342
Loans and Allowance for Loan Losses | Non owner Occupied 1-4
Allowance for losses
Beginning balance	1,221	1,471	1,330	773
Provision charged to expense	(108)	157	(195)	847
Losses charged off	(12)	(61)	(37)	(61)
Recoveries	17	1	20	9
Ending balance	1,118	1,568	1,118	1,568
ALL individually evaluated	60		60		84
ALL collectively evaluated	1,058		1,058		1,246
Less: Allowance for loan losses	1,118	1,568	1,118	1,568
Loans individually evaluated	6,552		6,552		8,315
Loans collectively evaluated	46,226		46,226		50,209
Total	52,778		52,778		58,524
Loans and Allowance for Loan Losses | Multi-family
Allowance for losses
Beginning balance	664	1,155	646	1,138
Provision charged to expense	224	139	500	156
Losses charged off			(259)
Recoveries			1
Ending balance	888	1,294	888	1,294
ALL individually evaluated	208		208
ALL collectively evaluated	680		680		646
Less: Allowance for loan losses	888	1,294	888	1,294
Loans individually evaluated	2,143		2,143		4,558
Loans collectively evaluated	60,168		60,168		56,054
Total	62,311		62,311		60,612
Loans and Allowance for Loan Losses | Commercial Real Estate
Allowance for losses
Beginning balance	2,000	2,094	1,788	2,061
Provision charged to expense	276	404	488	438
Losses charged off	(417)	(39)	(417)	(39)
Recoveries
Ending balance	1,859	2,460	1,859	2,460
ALL individually evaluated	617		617		413
ALL collectively evaluated	1,242		1,242		1,375
Less: Allowance for loan losses	1,859	2,460	1,859	2,460
Loans individually evaluated	10,169		10,169		11,764
Loans collectively evaluated	76,579		76,579		79,115
Total	86,748		86,748		90,879
Loans and Allowance for Loan Losses | Construction
Allowance for losses
Beginning balance	13	78	64
Provision charged to expense	(5)	(44)	(56)	34
Losses charged off
Recoveries
Ending balance	8	34	8	34
ALL individually evaluated
ALL collectively evaluated	8		8		64
Less: Allowance for loan losses	8	34	8	34
Loans individually evaluated
Loans collectively evaluated	9,144		9,144		8,060
Total	9,144		9,144		8,060
Loans and Allowance for Loan Losses | Land
Allowance for losses
Beginning balance	127	450	264	480
Provision charged to expense	(23)	59	(145)	22
Losses charged off			(15)
Recoveries	16	7	16	7
Ending balance	120	509	120	509
ALL individually evaluated
ALL collectively evaluated	120		120		264
Less: Allowance for loan losses	120	509	120	509
Loans individually evaluated	1,661		1,661		2,140
Loans collectively evaluated	4,193		4,193		8,164
Total	5,854		5,854		10,304
Loans and Allowance for Loan Losses | Consumer and Home Equity
Allowance for losses
Beginning balance	153	877	136	84
Provision charged to expense	6	46	34	48
Losses charged off			(11)	(9)
Recoveries
Ending balance	159	123	159	123
ALL individually evaluated
ALL collectively evaluated	159		159		136
Less: Allowance for loan losses	159	123	159	123
Loans individually evaluated	158		158		143
Loans collectively evaluated	18,268		18,268		18,349
Total	$ 18,426		$ 18,426		$ 18,491

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Earnings per share (Details) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Weighted average shares outstanding	1,555,972	1,553,764	1,555,646	1,553,645
Stock options	724	2,382		2,463
Shares used to compute diluted earnings per share	1,556,696	1,556,146	1,555,646	1,556,108
Basic Earnings Per Share	$ 0.33	$ 0.31	$ 0.71	$ 0.44
Diluted Earnings Per Share	$ 0.33	$ 0.31	$ 0.71	$ 0.44