**Exhibit 13****LETTER TO THE STOCKHOLDERS**Dear Stockholder:     As predicted in last year’s President’s Letter, 2006 has been a challenging year of rebuildingand repositioning. Much of that effort and expense has already produced improved earnings and astronger balance sheet. We have made great progress in increasing the yield on assets by growingthe loan portfolio and restructuring the investment portfolio. The liability side of the balancesheet has proven a more difficult challenge but there we have made structural and personnel changeswhich portend greater success for 2007.Loan Growth     The loan portfolio grew by $53 million or 23%. Every category of loans increased.Commercial/corporate loans grew by $36 million or 22%, residential mortgages increased by $7million or 12%, and home equity/consumer loans increased $10 million or 96%. The across-the-boardincrease was achieved without sacrificing yield or credit quality. In fact, the total corporateloan yield rose from 6.87% in 2005 to 7.64% in 2006 and the retail loan yield increased from 5.24%to 5.55%. Thus, our goals for growing the loan portfolio and increasing its yield were greatlyexceeded.Investment Portfolio     Another goal for the year was to reduce the investment portfolio and, at the same time,increase its yield by replacing low-yielding investments with higher-yielding investments andloans. This was accomplished in part by a balance sheet restructuring in the second quarter of2006 when the Company sold approximately $80 million of low-yielding investments and paid down $30million of short-term wholesale borrowings. In addition, the Company purchased another $50 millionin new investments. The net impact of this restructuring of the portfolio resulted in a one-timeafter-tax charge of $1.6 million. Offsetting the loss was a 65 basis points improvement in theinvestment portfolio yield.     The growth in the loan portfolio also allowed us to reduce our dependence on the investmentportfolio. Investments as a percentage of total assets decreased from 52% at year end 2005 to 42%at year end 2006. Thus, as with the loan portfolio, we surpassed our goals for the investmentportfolio. This reordering of the assets has
 

 
produced a stronger, higher yielding balance sheet which will provide increased earnings protectionshould interest rates rise and increased earnings should short-term funding costs decline.External Environment     The year-long persistence of the flat to inverted interest yield curve made 2006 a challengingyear for all banks, especially local community banks. The narrowing between asset yields andliability costs was exacerbated by a growth in assets far surpassing deposit growth. Deposit datacollected and maintained by the FDIC indicates that total deposits in all federally insured banksin Massachusetts actually decreased from 2004 to 2005 and grew by just 2% from 2005 to 2006. Thisanemic deposit growth resulted in an increasing percentage of banks’ assets funded with the morecostly and rate sensitive wholesale sources. LSB Corporation was not immune to the difficultchallenge of raising deposits in 2006.Name Change     For many years, Lawrence Savings Bank suffered a steady decline in retail deposit marketshare. Given the goal of reducing our reliance on wholesale borrowings, we recognized the need fordramatic action to reverse the decline in deposit market share. After much deliberation, in aneffort to project a new, more competitive image, the Company decided to change the Bank’s name.“RiverBank” was introduced in early June and the immediate response of our customers andcommunities was more favorable than we had hoped. The name was chosen to build on our history ofserving communities along the Merrimack River and, at the same time, broaden our geographic appeal.     By itself, the name change alone would not bring new customers into the branches or gainmarket share. The name change was matched with new personnel, new sales and service training,marketing support, updated technology and generally, greater focus and support for our branches andbranch personnel. We also changed our deposit pricing strategy to be competitive across thematurity spectrum and to have at least one market-leading deposit product. While we have not seenresulting deposit growth, we believe that these efforts prevented greater deposit declines andleave us more competitive and better positioned for the future.
 

 
Future Goals     Our challenge for 2007 is to grow the retail franchise, especially in local deposits. To thatend, we are looking at numerous strategies including product features and pricing as well as branchrelocation and geographic expansion. We are committed to continue the progress made with theBank’s assets over the last twelve months and to match that success with deposit growth in 2007.     I wish to thank the Directors and employees for the dedication of their talents andexpenditure of their efforts to improve the Company. I also wish to thank the shareholders fortheir support.     Very truly yours,     /s/ Gerald T. Mulligan  Gerald T. Mulligan  President and  Chief Executive Officer
 

 
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