LSB Financial (LSBI) 8-K Results of Operations and Financial Condition

101 Main St.

P.O. Box 1628

Lafayette, IN 47902

(765) 742-1064

www.LSBANK.com

lsbmail@LSBANK.com

FOR IMMEDIATE RELEASE:                                           FOR FURTHER INFORMATION CONTACT:

November 13, 2007                                                              Randolph F. Williams

 President/CEO

 (765) 742-1064

 Fax: (765) 429-5932

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

and Payment of a Cash Dividend

Lafayette, IN  - LSB Financial Corp., the holding company for Lafayette Savings Bank, announced today third quarter 2007 net income of $717,000 which represents diluted earnings per share of $0.46.  This compares to net income of $867,000 and $.53 per share for the same period of 2006.  The decrease in income was due primarily to a $252,000 decrease in net interest income as a result of lower average loan balances.

For the first nine months of 2007 earnings were $1,946,000 compared to $2,603,000 for the same period in 2006.  The diluted per share earnings for those periods were $1.22 and $1.61 respectively.   Again, the decrease in income was due primarily to a decrease in net interest income of $554,000 or 6%, along with an increase in our loan loss provision of $202,000 or 28% over the first nine months of last year.

LSB president and CEO, Randolph F. Williams stated, “We continue to face the challenges brought about by local economic conditions.  The business climate has started to improve and the September unemployment rate for Tippecanoe County was 3.5%.  However, we are still working through borrower’s loan problems as the mortgage loan market struggles to come to terms with the foreclosures and declining housing values.  To better respond we have strengthened our collection and workout areas which pro-actively work with borrowers struggling to keep their properties.  We have gotten more rigorous in evaluating new borrowers and when we acquire non-performing assets we are working aggressively to dispose of them.”

Williams continued, “Much of the news today is about large banks paying the price for exploiting the sub-prime market.  We have never had a program geared at moving unqualified borrowers into new homes.  Our average non-performing loan is over four years old - these are not new loans and new customers.  Many of these borrowers were caught by surprise by the property tax increases or job losses.  While we think there are some borrowers still at risk, we believe not much has changed for the strong borrower.  Rates and terms continue to be attractive and as one of the leading residential lenders in the County, we stand ready to meet their borrowing needs.”

 The Company announced earlier that it will pay a quarterly cash dividend of $0.25 per share to shareholders of record as of the close of business on November 2, 2007 with a payment date of December 7, 2007.

The closing price of LSB stock on November 12, 2007 was $24.00 per share as reported by the Nasdaq National Market.

# # #

LSB FINANCIAL CORP. SELECTED CONSOLIDATED FINANCIAL INFORMATION (Dollars in thousands except share and per share amounts)
Selected balance sheet data:	Nine months ended September 30, 2007			Year ended December 31, 2006
Cash and due from banks	$	1,448		$	1,391
Short-term investments		5,852			8,336
Securities available-for-sale		14,445			16,316
Loans held for sale		110			992
Net portfolio loans		297,859			316,699
Allowance for loan losses		(3,113	)		(2,770	)
Premises and equipment, net		6,876			6,600
Federal Home Loan Bank stock, at cost		3,997			3,997
Bank owned life insurance		5,554			5,381
Other assets		8,740			8,688
Total assets		344,881			368,400
Deposits		236,903			255,304
Advances from Federal Home Loan Bank		71,118			76,618
Other liabilities		2,028			1,638
Shareholders’ equity		34,832			34,840
Book value per share	$	22.24		$	21.73
Equity / assets		10.10	%		9.46	%
Total shares outstanding		1,565,999			1,603,209
Asset quality data:
Non-accruing loans	$	11,246		$	7,364
Loans past due 90 days still on accrual		0			147
Other real estate / assets owned		3,926			4,169
Total non-performing assets		15,172			11,680
Non-performing loans / total loans		3.81	%		2.39	%
Non-performing assets / total assets		4.40	%		3.17	%
Allowance for loan losses / non-performing loans		27.68	%		36.88	%
Allowance for loan losses / non-performing assets		20.52	%		23.72	%
Allowance for loan losses / total loans		1.06	%		0.88	%
Loans charged off (nine months-to-date and year-to-date, respectively)	$	606		$	1,149
Recoveries on loans previously charged off		32			49

	Three months ended September 30,						Nine months ended September 30,
Selected operating data:	2007			2006			2007			2006
Total interest income	$	5,769		$	5,924		$	17,366		$	17,434
Total interest expense		2,929			2,832			8,686			8,200
Net interest income		2,840			3,092			8,680			9,234
Provision for loan losses		180			318			920			718
Net interest income after provision		2,660			2,774			7,760			8,516
Non-interest income:
Deposit account service charges		486			439			1,371			1,312
Gain on sale of mortgage loans		37			65			174			172
Gain(loss) on sale of securities and other real estate owned		(115	)		5			(148	)		7
Other non-interest income		293			200			790			582
Total non-interest income		701			709			2,187			2,073
Non-interest expense:
Salaries and benefits		996			976			3,430			3,406
Occupancy and equipment, net		320			325			990			905
Computer service		127			112			364			314
Advertising		77			55			229			184
Other		702			614			1,868			1,613
Total non-interest expense		2,222			2,082			6,881			6,422
Income before income taxes		1,139			1,401			3,066			4,167
Income tax expense		422			534			1,120			1,564
Net income		717			867			1,946			2,603
Weighted average number of diluted shares		1,573,546			1,647,136			1,594,100			1,618,646
Diluted earnings per share	$	0.46		$	0.53		$	1.22		$	1.61
Return on average equity		8.27	%		10.18	%		7.43	%		10.32	%
Return on average assets		0.83	%		0.95	%		0.73	%		0.94	%
Average earning assets	$	323,013		$	345,101		$	331,335		$	348,974
Net interest margin		3.52	%		3.58	%		3.49	%		3.53	%
Efficiency ratio		66.11	%		59.79	%		69.17	%		60.65	%