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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, DC 20549
 FORM 10-K
 þ
    
    Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the fiscal year ended December 31, 2006
 o
    
    Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 Commission File Number 000-32955
 LSB CORPORATION
  Massachusetts
    
    04-3557612(State or other jurisdiction of incorporation or organization)
    
    (I.R.S. Employer Identification Number)30 Massachusetts Avenue, North Andover, MA
    
    01845(Address of principal executive offices)
    
    (Zip Code)
 =
  Titles of each Class
    
    Name of each Exchange on which registeredNone
    
    None
 Common Stock, par value $.10 per share   Preferred Stock Purchased Rights
  o þ
  o þ
 þ o
 = þ
  o o þ
 o þ
    Class
    
    
    
    
    
    Outstanding as of March 2, 2007Common Stock, par value $.10 per share
    
    
    
    
    
    4,601,617 shares
   (1)
    
    Portions of the Companys definitive Proxy Statement for its 2007 Annual Meeting (the Proxy
Statement) attached hereto as Exhibit (20) are incorporated by reference in Part III, Items
10-13 and Part IV, Item 14 of this Form 10-K. Such information incorporated by reference
shall not be deemed to specifically incorporate by reference the information referred to in
Item 402(a)(8) of Regulation S-K
 *
    
    For purposes of this calculation only, the common stock of LSB Corporation held by directors
and executive officers of LSB Corporation has been treated as owned by affiliates.




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CAUTION REGARDING FORWARD-LOOKING STATEMENTS
  ITEM
1. BUSINESS
 SUMMARY   The Wall Street Journal
      MARKET AREA
 LENDING
ACTIVITIES
 2




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COMMERCIAL REAL ESTATE   The Wall Street Journal
 COMMERCIAL BUSINESS   The Wall Street Journal
 CONSTRUCTION   The Wall Street Journal
 RESIDENTIAL MORTGAGES
 SECONDARY MORTGAGE MARKET
 HOME EQUITY   The Wall Street Journal
 CONSUMER
 DEPOSIT ACTIVITY AND OTHER SOURCES OF FUNDS
 3




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EMPLOYEES
  COMPETITION
 SUPERVISION AND REGULATION
   BANK HOLDING COMPANY ACT, CHANGE IN CONTROL ACT AND REGULATION Y
 4




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GRAMM-LEACH-BLILEY ACT
   FEDERAL RESERVE ACT SECTIONS 23A AND 23B AND REGULATION W
 FEDERAL RESERVE ACT SECTION 22 AND REGULATION O
 FEDERAL DEPOSIT INSURANCE REFORM ACT OF 2005
 USA PATRIOT ACT
 5




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SARBANES-OXLEY ACT OF 2002
 
    
    The creation of a public company accounting oversight board, with which all accounting
firms performing audits for public companies are required to register, and which is
empowered to set auditing, quality control and independence standards, to inspect
registered firms, and to conduct investigations and to take disciplinary actions, subject
to SEC oversight.
    
    The strengthening of auditor independence from corporate management by limiting the type
and scope of services that auditors can offer their public company audit clients, requiring
periodic rotation of public company audit partners, requiring direct auditor reports to
company audit committees, and prohibiting public companies from exerting improper influence
over their outside auditors.
    
    The imposition of new corporate governance requirements including among other things,
independence and financial expertise requirements for audit committee membership and
empowerment of public company audit committees to appoint, compensate and oversee their
companys outside auditors.
    
    Requirements that the Chief Executive Officer and the Chief Financial Officer certify
financial statements included in public company filings with the SEC and disgorge bonuses
and stock-based compensation for periods for which the company is forced to restate its
financial results, a prohibition of insider stock trades during periods when a companys
employee benefits plans are precluded from trading, and a prohibition of public company
loans or extensions of credit to directors and officers except by regulated financial
institutions in conformity with applicable banking regulations governing insider lending.
    
    Requirements that public companies disclose whether they have a code of ethics for their
senior financial officers and if not, why not, and that management periodically assess and
report on the adequacy of the companys internal controls.
    
    The imposition of new and accelerated public company disclosure requirements,
requirements to report off balance sheet transactions and of accelerated reporting of
insider transactions in company stock.
  SECURITIES AND EXCHANGE COMMISSION FILINGS ON COMPANYS WEB SITE
 MASSACHUSETTS BANK REGULATION
 Regulatory Enforcement Authority
 6




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Parity Regulation
  Depositors Insurance Fund
 ITEM 1A. RISK FACTORS
 Changes in interest rates could adversely impact the Companys financial condition and results
of operations.
  7




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If the Company has higher loan losses than it has allowed for, its earnings could materially
decrease .
 A significant amount of the Companys loans are concentrated in northeastern Massachusetts and
southern New Hampshire, and adverse conditions in this area could negatively impact its operations.
 The Company operates in a highly regulated environment and may be adversely impacted by changes in
law and regulations
 The Company has strong competition within its market area which may limit the Companys growth and
profitability
 The success of the Company is dependent on retaining certain key personnel or attracting and
retaining additional,
qualified personnel
 The Company continues to encounter technological change, and may have fewer resources than many of
its larger competitors to continue to invest in technological improvements.
 The Company relies on dividends from the Bank for substantially all of its revenue
 8




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When the Company becomes subject to SEC requirements under Section 404 of the Sarbanes-Oxley Act of
2002, it will likely incur significant costs in connection with first providing internal control
reports.
 When the Company becomes subject to SEC requirements under Section 404 of the Sarbanes-Oxley Act of
2002, if its internal control reports disclose significant deficiencies or material weaknesses, its
stockholders and lenders could lose confidence in its financial reporting, which would likely harm
the trading price of its stock, its access to additional capital, and its liquidity.
 9




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ITEM 1B. UNRESOLVED STAFF COMMENTS
  ITEM
2. PROPERTIES
   LeaseYear
    
    
    
    
    
    
    
    
    
    CurrentAcquired
    
    Square
    
    Owned/
    
    Term
    
    RenewalOr Leased
    
    Feet
    
    Leased
    
    Expires
    
    OptionsCORPORATE OFFICES AND
MAIN BANKING SUITENorth Andover
    
    
    1992
    
    
    
    45,315
    
    
    Owned
    
    
    
    
    
    
    30 Massachusetts Ave.

No. Andover, MA 01845BRANCH BANKING OFFICESEssex Street
    
    
    1998
    
    
    
    3,432
    
    
    Leased
    
    
    2008
    
    
    Three (1 yr.)300 Essex Street 

Lawrence, MA 01840Jackson Street
    
    
    1968
    
    
    
    2,369
    
    
    Leased
    
    
    2008
    
    
    
    20 Jackson Street 

Methuen, MA 01844West Methuen
    
    
    1979
    
    
    
    5,234
    
    
    Owned
    
    
    
    
    
    
    148 Lowell Street 

Methuen, MA 01844Andover
    
    
    1995
    (1)
    
    
    2,449
    
    
    Leased
    
    
    2010
    
    
    Two (5 yrs.)342 North Main Street 

Andover, MA 01810Salem
    
    
    2004
    
    
    
    2,500
    
    
    Leased
    
    
    2014
    
    
    Two (5 yrs.)401-403 Main Street, Suite 105

Salem, NH 03079
 
 (1)
    
    The Bank occupied the branch since 1979 and performed a sale-leaseback transaction in 1995. ITEM 3. LEGAL PROCEEDINGS
  ITEM
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  10




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PART II
 ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
   Common StockPrices
    
    CashFiscal Year
    
    High
    
    Low
    
    Dividends2006Fourth Quarter
    
    $
    18.06
    
    
    $
    16.00
    
    
    $
    0.14Third Quarter
    
    
    17.50
    
    
    
    16.00
    
    
    
    0.14Second Quarter
    
    
    18.50
    
    
    
    16.54
    
    
    
    0.14First Quarter
    
    
    18.45
    
    
    
    16.95
    
    
    
    0.142005Fourth Quarter
    
    $
    19.24
    
    
    $
    15.96
    
    
    $
    0.14Third Quarter
    
    
    18.50
    
    
    
    16.12
    
    
    
    0.14Second Quarter
    
    
    18.36
    
    
    
    15.90
    
    
    
    0.14First Quarter
    
    
    21.89
    
    
    
    17.26
    
    
    
    0.142004Fourth Quarter
    
    $
    20.50
    
    
    $
    18.27
    
    
    $
    0.13Third Quarter
    
    
    20.81
    
    
    
    16.00
    
    
    
    0.13Second Quarter
    
    
    17.75
    
    
    
    15.00
    
    
    
    0.13First Quarter
    
    
    18.25
    
    
    
    16.68
    
    
    
    0.13
   Supervision and Regulation
  11




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PERFORMANCE GRAPH
 Set forth below is a line graph comparing the yearly percentage change in the cumulative total
stockholder return on the Companys Common Stock (or the Banks Common Stock in the periods prior
to the Reorganization), based on the market price of the Companys Common Stock and assuming
reinvestment of dividends, with the total return of companies within the Standard & Poors 500
Stock Index, the NASDAQ Bank Index and the SNL Thrift Index. The calculation of total cumulative
return assumes a $100 investment in the Companys Common Stock, the S&P 500, the NASDAQ Bank Index
and the SNL Thrift Index on December 31, 2001.
 
 12




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ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
 FINANCIAL HIGHLIGHTS
 December 31,
    
    2006
    
    2005
    
    2004
    
    2003
    
    2002(Dollars in Thousands, Except Per Share Data)Balance Sheet Data:Total assets
    
    $
    542,965
    
    
    $
    521,800
    
    
    $
    518,477
    
    
    $
    466,108
    
    
    $
    439,134Loans, gross
    
    
    288,163
    
    
    
    234,611
    
    
    
    232,810
    
    
    
    211,503
    
    
    
    243,127Allowance for loan losses
    
    
    4,309
    
    
    
    4,126
    
    
    
    4,140
    
    
    
    4,220
    
    
    
    4,167Federal funds sold
    
    
    11,871
    
    
    
    198
    
    
    
    209
    
    
    
    889
    
    
    
    9,633Investment securities
    
    
    218,682
    
    
    
    260,046
    
    
    
    263,303
    
    
    
    232,878
    
    
    
    166,409Deposits
    
    
    295,662
    
    
    
    303,087
    
    
    
    299,106
    
    
    
    272,540
    
    
    
    279,465Borrowed funds
    
    
    184,782
    
    
    
    153,380
    
    
    
    157,263
    
    
    
    133,352
    
    
    
    101,591Stockholders equity
    
    
    58,531
    
    
    
    59,922
    
    
    
    57,838
    
    
    
    55,002
    
    
    
    54,059Year Ended December 31,
    
    2006
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002Operating Data:Interest income
    
    $
    28,956
    
    
    $
    25,558
    
    
    $
    22,331
    
    
    $
    21,334
    
    
    $
    25,138Interest expense
    
    
    15,160
    
    
    
    11,638
    
    
    
    8,520
    
    
    
    8,977
    
    
    
    11,565Net interest income
    
    
    13,796
    
    
    
    13,920
    
    
    
    13,811
    
    
    
    12,357
    
    
    
    13,573Provision for loan losses (recoveries)
    
    
    160
    
    
    
    
    
    
    
    (300
    )
    
    
    
    
    
    
    Loss on sales of investment securities
    
    
    (2,417
    )
    
    
    
    
    
    
    
    
    
    
    (14
    )
    
    
    Curtailment gain on pension termination
    
    
    602
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other non-interest income
    
    
    1,410
    
    
    
    1,555
    
    
    
    1,553
    
    
    
    1,622
    
    
    
    1,493Lawsuit judgment collected
    
    
    
    
    
    
    2,233
    
    
    
    2,280
    
    
    
    1,996
    
    
    
    Salaries and employee benefits expense
    
    
    7,399
    
    
    
    6,899
    
    
    
    6,507
    
    
    
    5,923
    
    
    
    6,006Other non-interest expense
    
    
    5,621
    
    
    
    4,245
    
    
    
    4,157
    
    
    
    3,815
    
    
    
    4,149Income before income taxes
    
    
    211
    
    
    
    6,564
    
    
    
    7,280
    
    
    
    6,223
    
    
    
    4,911Income tax expense
    
    
    85
    
    
    
    2,407
    
    
    
    2,600
    
    
    
    2,087
    
    
    
    1,811Net income
    
    $
    126
    
    
    $
    4,157
    
    
    $
    4,680
    
    
    $
    4,136
    
    
    $
    3,100Basic earnings per share
    
    $
    0.03
    
    
    $
    0.94
    
    
    $
    1.09
    
    
    $
    0.98
    
    
    $
    0.71Diluted earnings per share
    
    $
    0.03
    
    
    $
    0.92
    
    
    $
    1.05
    
    
    $
    0.94
    
    
    $
    0.69At or for the year ended December 31,
    
    2006
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002Other Data:Interest rate spread
    
    
    2.22
    %
    
    
    2.34
    %
    
    
    2.64
    %
    
    
    2.57
    %
    
    
    2.78
    %Net interest margin on average earning
assets
    
    
    2.68
    
    
    
    2.66
    
    
    
    2.91
    
    
    
    2.90
    
    
    
    3.20Return on average assets (net income /
average assets)
    
    
    0.02
    
    
    
    0.77
    
    
    
    0.96
    
    
    
    0.94
    
    
    
    0.71Return on average equity (net income /
average stockholders equity)
    
    
    0.22
    
    
    
    7.14
    
    
    
    8.33
    
    
    
    7.76
    
    
    
    5.72Dividend payout ratio (dividends declared per
share divided by diluted earnings per share)
    
    
    n/m
    
    
    
    60.87
    
    
    
    49.52
    
    
    
    51.06
    
    
    
    63.77Average stockholders equity to average
assets ratio
    
    
    10.80
    
    
    
    10.81
    
    
    
    11.53
    
    
    
    12.16
    
    
    
    12.34Cash dividends declared and paid per
common share
    
    $
    0.56
    
    
    $
    0.56
    
    
    $
    0.52
    
    
    $
    0.48
    
    
    $
    0.44Book value per share at year end
    
    
    12.74
    
    
    
    13.42
    
    
    
    13.33
    
    
    
    12.99
    
    
    
    12.71Tangible book value per share at year end
(excludes accumulated other comprehensive
gain/loss)
    
    
    13.05
    
    
    
    13.58
    
    
    
    13.43
    
    
    
    12.98
    
    
    
    12.55Market value per share
    
    
    16.57
    
    
    
    17.35
    
    
    
    18.52
    
    
    
    17.31
    
    
    
    12.24
 13




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ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
 FORWARD-LOOKING STATEMENTS AND FACTORS WHICH MAY AFFECT FUTURE RESULTS
  OVERVIEW
       CRITICAL ACCOUNTING POLICIES
  ALLOWANCE FOR LOAN LOSSES
  14




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INCOME TAXES
   INVESTMENT SECURITIES
  FINANCIAL CONDITION
OVERVIEW
  INTEREST EARNING ASSETS
    INVESTMENT
SECURITIES
 15




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2006
    
    
    2005
    
    
    2004Amount
    
    
    Percent
    
    
    Amount
    
    
    Percent
    
    
    Amount
    
    
    Percent(Dollars in Thousands)U. S. Treasury bonds
    
    $
    5,214
    
    
    
    2.4
    %
    
    $
    4,769
    
    
    
    10.3
    %
    
    $
    4,845
    
    
    
    7.7
    %Federal agency bonds
    
    
    35,190
    
    
    
    16.1
    %
    
    
    9,667
    
    
    
    20.9
    %
    
    
    34,907
    
    
    
    55.4
    %Mortgage-backed securities
    
    
    97,898
    
    
    
    44.8
    %
    
    
    3,364
    
    
    
    7.3
    %
    
    
    4,582
    
    
    
    7.3
    %Asset-backed securities
    
    
    71,555
    
    
    
    32.7
    %
    
    
    24,329
    
    
    
    52.3
    %
    
    
    14,452
    
    
    
    22.9
    %Corporate obligations
    
    
    7,364
    
    
    
    3.4
    %
    
    
    3,046
    
    
    
    6.6
    %
    
    
    3,120
    
    
    
    4.9
    %Mutual funds
    
    
    947
    
    
    
    0.4
    %
    
    
    955
    
    
    
    2.1
    %
    
    
    972
    
    
    
    1.5
    %Equity securities
    
    
    514
    
    
    
    0.2
    %
    
    
    233
    
    
    
    0.5
    %
    
    
    161
    
    
    
    0.3
    %Total
    
    $
    218,682
    
    
    
    100.0
    %
    
    $
    46,363
    
    
    
    100.0
    %
    
    $
    63,039
    
    
    
    100.0
    %
  2006
    
    
    2005
    
    
    2004Amount
    
    
    Percent
    
    
    Amount
    
    
    Percent
    
    
    Amount
    
    
    Percent(Dollars in Thousands)Federal agency bonds
    
    $
    
    
    
    
    
    %
    
    $
    87,017
    
    
    
    40.7
    %
    
    $
    104,042
    
    
    
    51.9
    %Mortgage-backed securities
    
    
    
    
    
    
    
    %
    
    
    43,701
    
    
    
    20.5
    %
    
    
    31,193
    
    
    
    15.6
    %Asset-backed securities
    
    
    
    
    
    
    
    %
    
    
    70,415
    
    
    
    32.9
    %
    
    
    50,829
    
    
    
    25.4
    %Corporate obligations
    
    
    
    
    
    
    
    %
    
    
    11,024
    
    
    
    5.2
    %
    
    
    12,624
    
    
    
    6.3
    %Municipal obligations
    
    
    
    
    
    
    
    %
    
    
    1,526
    
    
    
    0.7
    %
    
    
    1,576
    
    
    
    0.8
    %Total
    
    $
    
    
    
    
    
    %
    
    $
    213,683
    
    
    
    100.0
    %
    
    $
    200,264
    
    
    
    100.0
    %
  Within
    
    
    Weighted
    
    
    One to
    
    
    Weighted
    
    
    Five
    
    
    Weighted
    
    
    OverOne
    
    
    Average
    
    
    Five
    
    
    Average
    
    
    to Ten
    
    
    Average
    
    
    Ten
    
    
    Average
    
    
    
    
    
    
    AverageYear
    
    
    Yield
    
    
    Years
    
    
    Yield
    
    
    Years
    
    
    Yield
    
    
    Years
    
    
    Yield
    
    
    Total
    
    
    Yield(Dollars in Thousands)U. S. Treasury &
Agency bonds
    
    $
    22,418
    
    
    
    3.59
    %
    
    $
    10,153
    
    
    
    4.30
    %
    
    $
    7,833
    
    
    
    3.71
    %
    
    $
    
    
    
    
    
    %
    
    $
    40,404
    
    
    
    3.80
    %Mortgage-backed
securities
    
    
    35
    
    
    
    7.16
    %
    
    
    5,270
    
    
    
    3.82
    %
    
    
    17,529
    
    
    
    3.78
    %
    
    
    75,064
    
    
    
    5.95
    %
    
    
    97,898
    
    
    
    5.44
    %Collateralized mortgage
obligations
    
    
    38
    
    
    
    6.28
    %
    
    
    
    
    
    
    
    
    
    
    10,488
    
    
    
    4.18
    %
    
    
    61,029
    
    
    
    4.36
    %
    
    
    71,555
    
    
    
    4.33
    %Corporate obligations
    
    
    1,000
    
    
    
    3.24
    %
    
    
    6,364
    
    
    
    5.48
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,364
    
    
    
    5.18
    %Total
    
    $
    23,491
    
    
    
    3.58
    %
    
    $
    21,787
    
    
    
    4.53
    %
    
    $
    35,850
    
    
    
    3.88
    %
    
    $
    136,093
    
    
    
    5.24
    %
    
    $
    217,221
    
    
    
    4.76
    %
 LOANS
  16




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2006
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002Balance
    
    
    Percent
    
    
    Balance
    
    
    Percent
    
    
    Balance
    
    
    Percent
    
    
    Balance
    
    
    Percent
    
    
    Balance
    
    
    Percent(Dollars in Thousands)Residential real estate loans:Fixed rate
    
    $
    39,076
    
    
    
    13.5
    %
    
    $
    34,028
    
    
    
    14.5
    %
    
    $
    33,061
    
    
    
    14.2
    %
    
    $
    33,059
    
    
    
    15.7
    %
    
    $
    31,583
    
    
    
    13.0
    %Adjustable rate
    
    
    30,800
    
    
    
    10.7
    
    
    
    28,159
    
    
    
    12.0
    
    
    
    26,996
    
    
    
    11.6
    
    
    
    23,958
    
    
    
    11.3
    
    
    
    28,557
    
    
    
    11.769,876
    
    
    
    24.2
    
    
    
    62,187
    
    
    
    26.5
    
    
    
    60,057
    
    
    
    25.8
    
    
    
    57,017
    
    
    
    27.0
    
    
    
    60,140
    
    
    
    24.7Home equity loans:Fixed rate
    
    
    11,170
    
    
    
    3.9
    
    
    
    3,592
    
    
    
    1.5
    
    
    
    3,535
    
    
    
    1.5
    
    
    
    5,882
    
    
    
    2.7
    
    
    
    7,915
    
    
    
    3.3Adjustable rate
    
    
    9,169
    
    
    
    3.2
    
    
    
    6,820
    
    
    
    2.9
    
    
    
    5,334
    
    
    
    2.3
    
    
    
    4,354
    
    
    
    2.1
    
    
    
    3,575
    
    
    
    1.520,339
    
    
    
    7.1
    
    
    
    10,412
    
    
    
    4.4
    
    
    
    8,869
    
    
    
    3.8
    
    
    
    10,236
    
    
    
    4.8
    
    
    
    11,490
    
    
    
    4.8Commercial real estate loans:Fixed rate
    
    
    17,434
    
    
    
    6.1
    
    
    
    14,793
    
    
    
    6.3
    
    
    
    18,629
    
    
    
    8.0
    
    
    
    16,508
    
    
    
    7.8
    
    
    
    16,651
    
    
    
    6.8Adjustable rate
    
    
    125,386
    
    
    
    43.5
    
    
    
    112,824
    
    
    
    48.1
    
    
    
    112,976
    
    
    
    48.5
    
    
    
    95,995
    
    
    
    45.3
    
    
    
    96,094
    
    
    
    39.4142,820
    
    
    
    49.6
    
    
    
    127,617
    
    
    
    54.4
    
    
    
    131,605
    
    
    
    56.5
    
    
    
    112,503
    
    
    
    53.1
    
    
    
    112,745
    
    
    
    46.2Construction loans
    
    
    43,283
    
    
    
    15.0
    
    
    
    24,137
    
    
    
    10.3
    
    
    
    15,211
    
    
    
    6.5
    
    
    
    16,040
    
    
    
    7.6
    
    
    
    23,502
    
    
    
    9.7Loans held for sale
    
    
    
    
    
    
    
    
    
    
    472
    
    
    
    0.2
    
    
    
    
    
    
    
    
    
    
    
    338
    
    
    
    0.2
    
    
    
    2,579
    
    
    
    1.1Commercial loans
    
    
    10,870
    
    
    
    3.8
    
    
    
    9,318
    
    
    
    4.0
    
    
    
    16,369
    
    
    
    7.1
    
    
    
    14,805
    
    
    
    7.0
    
    
    
    32,017
    
    
    
    13.2Consumer loans
    
    
    975
    
    
    
    0.3
    
    
    
    468
    
    
    
    0.2
    
    
    
    699
    
    
    
    0.3
    
    
    
    564
    
    
    
    0.3
    
    
    
    654
    
    
    
    0.3Total loans
    
    
    288,163
    
    
    
    100.0
    %
    
    
    234,611
    
    
    
    100.0
    %
    
    
    232,810
    
    
    
    100.0
    %
    
    
    211,503
    
    
    
    100.0
    %
    
    
    243,127
    
    
    
    100.0
    %Allowance for loan losses
    
    
    4,309
    
    
    
    
    
    
    
    4,126
    
    
    
    
    
    
    
    4,140
    
    
    
    
    
    
    
    4,220
    
    
    
    
    
    
    
    4,167Loans, net
    
    $
    283,854
    
    
    
    
    
    
    $
    230,485
    
    
    
    
    
    
    $
    228,670
    
    
    
    
    
    
    $
    207,283
    
    
    
    
    
    
    $
    238,960
  Due AfterDue Within
    
    
    One Through
    
    
    Due AfterOne Year
    
    
    Five Years
    
    
    Five Years
    
    
    Total(In Thousands)Construction
    
    $
    20,160
    
    
    $
    18,471
    
    
    $
    4,652
    
    
    $
    43,283Commercial
    
    
    6,195
    
    
    
    3,671
    
    
    
    1,004
    
    
    
    10,870Total
    
    $
    26,355
    
    
    $
    22,142
    
    
    $
    5,656
    
    
    $
    54,153
   ALLOWANCE FOR LOAN LOSSES
 17




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##### Table of Contents



2006
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002(Dollars in Thousands)Balance at beginning of year
    
    $
    4,126
    
    
    $
    4,140
    
    
    $
    4,220
    
    
    $
    4,167
    
    
    $
    4,070Charge-offs by loan type:Residential mortgage
    
    
    
    
    
    
    
    
    
    
    (25
    )
    
    
    
    
    
    
    Commercial
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Commercial real estate
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Consumer
    
    
    (30
    )
    
    
    (25
    )
    
    
    (20
    )
    
    
    
    
    
    
    (1
    )Total charge-offs
    
    
    (30
    )
    
    
    (25
    )
    
    
    (45
    )
    
    
    
    
    
    
    (1
    )Recoveries by loan type:Residential mortgage
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    31
    
    
    
    Commercial
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Commercial real estate
    
    
    32
    
    
    
    2
    
    
    
    254
    
    
    
    16
    
    
    
    89Consumer
    
    
    21
    
    
    
    9
    
    
    
    11
    
    
    
    6
    
    
    
    9Total recoveries
    
    
    53
    
    
    
    11
    
    
    
    265
    
    
    
    53
    
    
    
    98Net (charge-offs) recoveries
    
    
    23
    
    
    
    (14
    )
    
    
    220
    
    
    
    53
    
    
    
    97Provision (credit) for loan losses
    
    
    160
    
    
    
    
    
    
    
    (300
    )
    
    
    
    
    
    
    Ending balance
    
    $
    4,309
    
    
    $
    4,126
    
    
    $
    4,140
    
    
    $
    4,220
    
    
    $
    4,167Ratio of net (charge-offs) recoveries to average loans
outstanding during the period
    
    
    0.01
    %
    
    
    (0.01
    )%
    
    
    0.10
    %
    
    
    0.02
    %
    
    
    0.04
    %
  2006
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002(Dollars in Thousands)
    
    
    
    
    
    Percent
    
    
    
    
    
    
    Percent
    
    
    
    
    
    
    Percent
    
    
    
    
    
    
    Percent
    
    
    
    
    
    
    Percentof loans
    
    
    
    
    
    
    of loans
    
    
    
    
    
    
    of loans
    
    
    
    
    
    
    of loans
    
    
    
    
    
    
    of loansin each
    
    
    
    
    
    
    in each
    
    
    
    
    
    
    in each
    
    
    
    
    
    
    in each
    
    
    
    
    
    
    in eachcategory
    
    
    
    
    
    
    category
    
    
    
    
    
    
    category
    
    
    
    
    
    
    category
    
    
    
    
    
    
    categoryto total
    
    
    
    
    
    
    to total
    
    
    
    
    
    
    to total
    
    
    
    
    
    
    to total
    
    
    
    
    
    
    to totalAmount
    
    
    loans
    
    
    Amount
    
    
    loans
    
    
    Amount
    
    
    loans
    
    
    Amount
    
    
    loans
    
    
    Amount
    
    
    loansConstruction, commercial and
commercial real estate
    
    $
    3,606
    
    
    
    68.4
    %
    
    $
    3,530
    
    
    
    68.7
    %
    
    $
    3,408
    
    
    
    70.1
    %
    
    $
    3,175
    
    
    
    67.7
    %
    
    $
    3,525
    
    
    
    69.1
    %Residential mortgage and home equity
    
    
    297
    
    
    
    31.3
    
    
    
    290
    
    
    
    31.1
    
    
    
    273
    
    
    
    29.6
    
    
    
    270
    
    
    
    32.0
    
    
    
    314
    
    
    
    30.6Consumer
    
    
    39
    
    
    
    0.3
    
    
    
    21
    
    
    
    0.2
    
    
    
    30
    
    
    
    0.3
    
    
    
    26
    
    
    
    0.3
    
    
    
    29
    
    
    
    0.3Unallocated
    
    
    367
    
    
    
    N/A
    
    
    
    285
    
    
    
    N/A
    
    
    
    429
    
    
    
    N/A
    
    
    
    749
    
    
    
    N/A
    
    
    
    299
    
    
    
    N/A$
    4,309
    
    
    
    100.0
    %
    
    $
    4,126
    
    
    
    100.0
    %
    
    $
    4,140
    
    
    
    100.0
    %
    
    $
    4,220
    
    
    
    100.0
    %
    
    $
    4,167
    
    
    
    100.0
    %
 18




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##### Table of Contents



POTENTIAL PROBLEM LOANS
 RISK ASSETS
 2006
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002(Dollars in Thousands)Risk assets:Non-performing loans:Residential real estate
    
    $
    37
    
    
    $
    32
    
    
    $
    
    
    
    $
    
    
    
    $
    1Commercial real estate
    
    
    1,020
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Commercial business
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total non-performing loans
    
    
    1,057
    
    
    
    32
    
    
    
    
    
    
    
    
    
    
    
    1Other real estate owned:Land
    
    
    
    
    
    
    
    
    
    
    34
    
    
    
    47
    
    
    
    57OREO valuation allowance
    
    
    
    
    
    
    
    
    
    
    (34
    )
    
    
    (45
    )
    
    
    (45
    )Total other real estate owned
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    12Total risk assets
    
    $
    1,057
    
    
    $
    32
    
    
    $
    
    
    
    $
    2
    
    
    $
    13Risk assets as a percent of total loans and OREO
    
    
    0.4
    %
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.0
    %Risk assets as a percent of total assets
    
    
    0.2
    %
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.0
    %
   19




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##### Table of Contents



INTEREST BEARING LIABILITIES
    DEPOSITS
 BORROWED FUNDS
  RESULTS OF OPERATIONS
OVERVIEW
   20




---



##### Table of Contents



AVERAGE BALANCES, NET INTEREST INCOME AND AVERAGE INTEREST RATES
 2006
    
    
    2005
    
    
    2004Average
    
    
    
    
    
    
    
    
    
    
    Average
    
    
    
    
    
    
    
    
    
    
    AverageAverage
    
    
    
    
    
    
    Interest
    
    
    Average
    
    
    
    
    
    
    Interest
    
    
    Average
    
    
    
    
    
    
    InterestBalance
    
    
    Interest
    
    
    Rate
    
    
    Balance
    
    
    Interest
    
    
    Rate
    
    
    Balance
    
    
    Interest
    
    
    Rate(Dollars in Thousands)AssetsLoans:Residential real estate
    
    $
    80,109
    
    
    $
    4,445
    
    
    
    5.55
    %
    
    $
    70,233
    
    
    $
    3,672
    
    
    
    5.23
    %
    
    $
    69,254
    
    
    $
    3,629
    
    
    
    5.24
    %Commercial real estate
    
    
    163,769
    
    
    
    12,472
    
    
    
    7.62
    
    
    
    150,919
    
    
    
    10,402
    
    
    
    6.89
    
    
    
    133,832
    
    
    
    8,855
    
    
    
    6.62Commercial business
    
    
    8,999
    
    
    
    729
    
    
    
    8.10
    
    
    
    12,506
    
    
    
    828
    
    
    
    6.62
    
    
    
    13,989
    
    
    
    832
    
    
    
    5.95Consumer
    
    
    670
    
    
    
    42
    
    
    
    6.27
    
    
    
    631
    
    
    
    38
    
    
    
    6.02
    
    
    
    721
    
    
    
    43
    
    
    
    5.96Total loans
    
    
    253,547
    
    
    
    17,688
    
    
    
    6.98
    
    
    
    234,289
    
    
    
    14,940
    
    
    
    6.38
    
    
    
    217,796
    
    
    
    13,359
    
    
    
    6.13Investment securities:U.S. Treasury and government
agency bonds
    
    
    67,842
    
    
    
    2,326
    
    
    
    3.43
    
    
    
    111,167
    
    
    
    3,473
    
    
    
    3.12
    
    
    
    139,685
    
    
    
    4,807
    
    
    
    3.44Other bonds
and equity securities
    
    
    21,778
    
    
    
    1,029
    
    
    
    4.72
    
    
    
    27,885
    
    
    
    1,057
    
    
    
    3.79
    
    
    
    19,852
    
    
    
    659
    
    
    
    3.32CMOs and mortgage-backed
securities
    
    
    163,847
    
    
    
    7,514
    
    
    
    4.59
    
    
    
    147,449
    
    
    
    5,986
    
    
    
    4.06
    
    
    
    94,342
    
    
    
    3,476
    
    
    
    3.68Short-term investments
    
    
    7,655
    
    
    
    399
    
    
    
    5.21
    
    
    
    3,067
    
    
    
    102
    
    
    
    3.33
    
    
    
    2,324
    
    
    
    30
    
    
    
    1.29Total investment securities
    
    
    261,122
    
    
    
    11,268
    
    
    
    4.32
    
    
    
    289,568
    
    
    
    10,618
    
    
    
    3.67
    
    
    
    256,203
    
    
    
    8,972
    
    
    
    3.50Total interest earning assets
    
    
    514,669
    
    
    
    28,956
    
    
    
    5.63
    %
    
    
    523,857
    
    
    
    25,558
    
    
    
    4.88
    %
    
    
    473,999
    
    
    
    22,331
    
    
    
    4      .71
    %Allowance for loan losses
    
    
    (4,188
    )
    
    
    
    
    
    
    
    
    
    
    (4,150
    )
    
    
    
    
    
    
    
    
    
    
    (4,204
    )Cash and due from banks
    
    
    7,260
    
    
    
    
    
    
    
    
    
    
    
    8,774
    
    
    
    
    
    
    
    
    
    
    
    7,773Other assets
    
    
    11,610
    
    
    
    
    
    
    
    
    
    
    
    9,771
    
    
    
    
    
    
    
    
    
    
    
    9,581Total assets
    
    $
    529,351
    
    
    
    
    
    
    
    
    
    
    $
    538,252
    
    
    
    
    
    
    
    
    
    
    $
    487,149
 21




---



##### Table of Contents



2006
    
    
    2005
    
    
    2004Average
    
    
    
    
    
    
    
    
    
    
    Average
    
    
    
    
    
    
    
    
    
    
    AverageAverage
    
    
    
    
    
    
    Interest
    
    
    Average
    
    
    
    
    
    
    Interest
    
    
    Average
    
    
    
    
    
    
    InterestBalance
    
    
    Interest
    
    
    Rate
    
    
    Balance
    
    
    Interest
    
    
    Rate
    
    
    Balance
    
    
    Interest
    
    
    Rate(Dollars in Thousands)Liabilities and
Stockholders EquityDeposits:Regular savings accounts
    
    $
    38,058
    
    
    $
    189
    
    
    
    0.50
    %
    
    $
    44,676
    
    
    $
    221
    
    
    
    0.49
    %
    
    $
    45,696
    
    
    $
    159
    
    
    
    0.35
    %NOW and super NOW accounts
    
    
    27,915
    
    
    
    38
    
    
    
    0.14
    
    
    
    38,601
    
    
    
    47
    
    
    
    0.12
    
    
    
    37,128
    
    
    
    40
    
    
    
    0.11Money market accounts
    
    
    77,148
    
    
    
    1,944
    
    
    
    2.52
    
    
    
    80,338
    
    
    
    1,355
    
    
    
    1.69
    
    
    
    80,681
    
    
    
    980
    
    
    
    1.21Certificates of deposit
    
    
    135,475
    
    
    
    5,154
    
    
    
    3.80
    
    
    
    122,434
    
    
    
    3,421
    
    
    
    2.79
    
    
    
    109,476
    
    
    
    2,521
    
    
    
    2.30Total interest bearing deposits
    
    
    278,596
    
    
    
    7,325
    
    
    
    2.63
    
    
    
    286,049
    
    
    
    5,044
    
    
    
    1.76
    
    
    
    272,981
    
    
    
    3,700
    
    
    
    1.36Borrowed funds
    
    
    165,388
    
    
    
    7,835
    
    
    
    4.74
    
    
    
    171,615
    
    
    
    6,594
    
    
    
    3.84
    
    
    
    138,554
    
    
    
    4,820
    
    
    
    3.48Total interest bearing liabilities
    
    
    443,984
    
    
    
    15,160
    
    
    
    3.41
    %
    
    
    457,664
    
    
    
    11,638
    
    
    
    2.54
    %
    
    
    411,535
    
    
    
    8,520
    
    
    
    2.07
    %Non-interest bearing deposits
    
    
    23,506
    
    
    
    
    
    
    
    
    
    
    
    19,005
    
    
    
    
    
    
    
    
    
    
    
    15,884Other liabilities
    
    
    4,667
    
    
    
    
    
    
    
    
    
    
    
    3,375
    
    
    
    
    
    
    
    
    
    
    
    3,673Total liabilities
    
    
    472,157
    
    
    
    
    
    
    
    
    
    
    
    480,044
    
    
    
    
    
    
    
    
    
    
    
    431,092Stockholders equity
    
    
    57,194
    
    
    
    
    
    
    
    
    
    
    
    58,208
    
    
    
    
    
    
    
    
    
    
    
    56,178Total liabilities and
stockholders equity
    
    $
    529,351
    
    
    
    
    
    
    
    
    
    
    $
    538,252
    
    
    
    
    
    
    
    
    
    
    $
    487,270Net interest rate spread
    
    
    
    
    
    
    
    
    
    
    2.22
    %
    
    
    
    
    
    
    
    
    
    
    2.34
    %
    
    
    
    
    
    
    
    
    
    
    2.64
    %Net interest income
    
    
    
    
    
    $
    13,796
    
    
    
    
    
    
    
    
    
    
    $
    13,920
    
    
    
    
    
    
    
    
    
    
    $
    13,811Net interest
margin on average earning assets
    
    
    
    
    
    
    
    
    2.68
    %
    
    
    
    
    
    
    
    
    
    
    2.66
    %
    
    
    
    
    
    
    
    
    
    
    2.91
    %
 RATE-VOLUME ANALYSIS
 2006 vs. 2005
    
    
    2005 vs. 2004Total
    
    
    
    
    
    
    
    
    
    
    TotalVolume
    
    
    Rate
    
    
    Change
    
    
    Volume
    
    
    Rate
    
    
    Change(In Thousands)Interest income:Loans:Residential real estate
    
    $
    555
    
    
    $
    218
    
    
    $
    773
    
    
    $
    53
    
    
    $
    (10
    )
    
    $
    43Commercial real estate
    
    
    1,139
    
    
    
    931
    
    
    
    2,070
    
    
    
    1,175
    
    
    
    372
    
    
    
    1,547Commercial business
    
    
    (261
    )
    
    
    162
    
    
    
    (99
    )
    
    
    (93
    )
    
    
    89
    
    
    
    (4
    )Consumer
    
    
    2
    
    
    
    2
    
    
    
    4
    
    
    
    (5
    )
    
    
    
    
    
    
    (5
    )Total loans
    
    
    1,435
    
    
    
    1,313
    
    
    
    2,748
    
    
    
    1,130
    
    
    
    451
    
    
    
    1,581Investment securities:U.S. Treasury and Government
Agency obligations
    
    
    (1,459
    )
    
    
    312
    
    
    
    (1,147
    )
    
    
    (919
    )
    
    
    (415
    )
    
    
    (1,334
    )Other bonds and equity securities
    
    
    (258
    )
    
    
    230
    
    
    
    (28
    )
    
    
    295
    
    
    
    103
    
    
    
    398Mortgage-backed securities
    
    
    706
    
    
    
    822
    
    
    
    1,528
    
    
    
    2,125
    
    
    
    385
    
    
    
    2,510Short-term investments
    
    
    215
    
    
    
    82
    
    
    
    297
    
    
    
    12
    
    
    
    60
    
    
    
    72Total investments
    
    
    (796
    )
    
    
    1,446
    
    
    
    650
    
    
    
    1,513
    
    
    
    133
    
    
    
    1,646Total interest income
    
    
    639
    
    
    
    2,759
    
    
    
    3,398
    
    
    
    2,643
    
    
    
    584
    
    
    
    3,227Interest expense:Deposits:Regular savings accounts
    
    
    (33
    )
    
    
    1
    
    
    
    (32
    )
    
    
    (4
    )
    
    
    66
    
    
    
    62NOW and Super NOW accounts
    
    
    (14
    )
    
    
    5
    
    
    
    (9
    )
    
    
    2
    
    
    
    5
    
    
    
    7Money market accounts
    
    
    (56
    )
    
    
    645
    
    
    
    589
    
    
    
    (4
    )
    
    
    379
    
    
    
    375Certificates of deposit
    
    
    394
    
    
    
    1,339
    
    
    
    1,733
    
    
    
    321
    
    
    
    579
    
    
    
    900Total interest bearing deposits
    
    
    291
    
    
    
    1,990
    
    
    
    2,281
    
    
    
    315
    
    
    
    1,029
    
    
    
    1,344Borrowed funds
    
    
    (254
    )
    
    
    1,495
    
    
    
    1,241
    
    
    
    1,137
    
    
    
    637
    
    
    
    1,774Total interest expense
    
    
    37
    
    
    
    3,485
    
    
    
    3,522
    
    
    
    1,452
    
    
    
    1,666
    
    
    
    3,118Net interest income
    
    $
    602
    
    
    $
    (726
    )
    
    $
    (124
    )
    
    $
    1,191
    
    
    $
    (1,082
    )
    
    $
    109
 NET INTEREST INCOME
 22




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##### Table of Contents



PROVISION FOR LOAN LOSSES
 23




---



##### Table of Contents



NON-INTEREST INCOME (LOSS)
   NON-INTEREST EXPENSE
    INCOME TAXES
 24




---



##### Table of Contents



LIQUIDITY
    CONTRACTUAL OBLIGATIONS AND COMMITMENTS
  Payments
 Due  By PeriodLess than
    
    
    One to
    
    
    Four to
    
    
    AfterContractual obligations
    
    Total
    
    
    One Year
    
    
    Three Years
    
    
    Five Years
    
    
    Five Years(In Thousands)FHLB advances
    
    $
    143,519
    
    
    $
    39,000
    
    
    $
    21,000
    
    
    $
    35,000
    
    
    $
    48,519FHLB short-term borrowings
    
    
    36,000
    
    
    
    36,000
    
    
    
    
    
    
    
    
    
    
    
    Lease obligations
    
    
    707
    
    
    
    203
    
    
    
    296
    
    
    
    94
    
    
    
    114Data processing vendor
    
    
    1,736
    
    
    
    922
    
    
    
    814
    
    
    
    
    
    
    
    Employee benefit
payments (1) (2)
    
    
    1,176
    
    
    
    118
    
    
    
    235
    
    
    
    235
    
    
    
    588Customer repurchase
agreements
    
    
    5,263
    
    
    
    5,263
    
    
    
    
    
    
    
    
    
    
    
    Total
contractual cash obligations
    
    $
    188,401
    
    
    $
    81,506
    
    
    $
    22,345
    
    
    $
    35,329
    
    
    $
    49,221
 (1)
    
    In 2006, the Defined Benefit Plan was terminated. The assets of the Plan will be distributed
to the participants of the Plan in 2007, accordingly, $0 amounts are included for future
contribution by the Company.(2)
    
    The amounts shown reflect expected employee benefits paid by the Company under its
supplemental executive retirement plans through December 31, 2016.
 25




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##### Table of Contents



Amount
of Commitment Expiring  By PeriodLess than
    
    
    One to
    
    
    Four to
    
    
    AfterCommitments
    
    Total
    
    
    One Year
    
    
    Three Years
    
    
    Five Years
    
    
    Five Years(In Thousands)Loan originations
    
    $
    54,844
    
    
    $
    54,844
    
    
    $
    
    
    
    $
    
    
    
    $
    Lines of credit
    
    
    70,654
    
    
    
    27,694
    
    
    
    23,049
    
    
    
    1,573
    
    
    
    18,338Letters of credit
    
    
    1,137
    
    
    
    1,137
    
    
    
    
    
    
    
    
    
    
    
    Sell mortgage loans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total commitments
    
    $
    126,635
    
    
    $
    83,675
    
    
    $
    23,049
    
    
    $
    1,573
    
    
    $
    18,338
  CAPITAL ADEQUACY
    RECENT ACCOUNTING DEVELOPMENTS
     26




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##### Table of Contents



IMPACT OF INFLATION AND CHANGING PRICES
  ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 ASSET/LIABILITY MANAGEMENT
 INTEREST RATE SENSITIVITY
    27




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##### Table of Contents



Interest Rate ShockDown
    
    
    Up2006
    
    Flat Rates
    
    
    200 bp
    
    
    200 bp(In Thousands)Year One
    
    $
    14,477
    
    
    $
    14,382
    
    
    $
    13,992Year Two
    
    
    14,380
    
    
    
    13,064
    
    
    
    12,826Total net interest income for 2 year period
    
    $
    28,857
    
    
    $
    27,446
    
    
    $
    26,818
 Interest Rate ShockDown
    
    
    Up2005
    
    Flat Rates
    
    
    200 bp
    
    
    200 bp(In Thousands)Year One
    
    $
    13,067
    
    
    $
    13,128
    
    
    $
    12,809Year Two
    
    
    13,330
    
    
    
    12,469
    
    
    
    12,306Total net interest income for 2 year period
    
    $
    26,397
    
    
    $
    25,597
    
    
    $
    25,115
  28




---



##### 



ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
  
 PageReport of Management Responsibility
    
    
    30Report of independent registered public accounting firm
    
    
    31Consolidated Balance Sheets
    
    
    32Consolidated Statements of Operations
    
    
    33Consolidated Statements of Changes in Stockholders Equity
    
    
    34Consolidated Statements of Cash Flows
    
    
    35Notes to Consolidated Financial Statements
    
    
    36
  29




---



##### Table of Contents



Report of Management Responsibility
      /s/ Gerald T. Mulligan
    
    
    
    /s/ Diane L. WalkerGerald T. Mulligan
    
    
    
    Diane L. WalkerPresident and
    
    
    
    Executive Vice President, TreasurerChief Executive Officer
    
    
    
    and Chief Financial OfficerMarch 22, 2007
 30




---



##### Table of Contents



Report of Independent Registered Public Accounting Firm
 The Board of Directors and Stockholders  LSB Corporation:
    /s/ KPMG LLPBoston, Massachusetts
March 22, 2007
 31




---



##### Table of Contents



Consolidated Balance Sheets
 December 31,
    
    2006
    
    
    2005(In Thousands, Except Share Data)Assets:Cash and due from banks
    
    $
    6,896
    
    
    $
    10,489Fed funds sold
    
    
    11,871
    
    
    
    198Total cash and cash equivalents
    
    
    18,767
    
    
    
    10,687Investment securities held to maturity
market value of $208,615 in 2005 (notes 2 and 7)
    
    
    
    
    
    
    213,683Investment securities available for sale
amortized cost of $221,652 in 2006 and $47,554 in 2005 (notes 2 and 7)
    
    
    218,682
    
    
    
    46,363Federal Home Loan Bank stock, at cost (note 3)
    
    
    10,046
    
    
    
    10,097Loans, net of allowance for loan losses of $4,309 in 2006
and $4,126 in 2005 (notes 4 and 7)
    
    
    283,854
    
    
    
    230,485Bank premises and equipment (note 5)
    
    
    3,807
    
    
    
    3,251Accrued interest receivable
    
    
    2,259
    
    
    
    2,458Current income tax receivable
    
    
    357
    
    
    
    Deferred income tax asset, net (note 8)
    
    
    3,606
    
    
    
    3,446Other assets
    
    
    1,587
    
    
    
    1,330Total assets
    
    $
    542,965
    
    
    $
    521,800Liabilities and Stockholders Equity:Liabilities:Interest bearing deposits (note 6)
    
    $
    264,238
    
    
    $
    284,175Non-interest bearing deposits (note 6)
    
    
    31,424
    
    
    
    18,912Federal Home Loan Bank advances (note 7)
    
    
    143,519
    
    
    
    121,861Other borrowed funds (note 7)
    
    
    41,263
    
    
    
    31,519Advance payments by borrowers for taxes and insurance
    
    
    586
    
    
    
    506Other liabilities
    
    
    3,404
    
    
    
    4,905Total liabilities
    
    
    484,434
    
    
    
    461,878Commitments and contingencies (notes 5, 12 and 13):Stockholders equity (notes 9 and 10):Preferred stock, $.10 par value; 5,000,000
shares authorized, none issued
    
    
    
    
    
    
    Common stock, $.10 par value; 20,000,000
shares authorized; 4,593,617 and 4,464,033 shares issued
and outstanding in 2006 and 2005, respectively
    
    
    459
    
    
    
    446Additional paid-in capital
    
    
    61,578
    
    
    
    59,856Retained (deficit) earnings
    
    
    (2,090
    )
    
    
    326Accumulated other comprehensive loss (note 10)
    
    
    (1,416
    )
    
    
    (706
    )Total stockholders equity
    
    
    58,531
    
    
    
    59,922Total liabilities and stockholders equity
    
    $
    542,965
    
    
    $
    521,800
 The accompanying notes are an integral part of these consolidated financial statements.
 32




---



##### Table of Contents



Consolidated Statements of Operations
 Year Ended December 31,
    
    2006
    
    
    2005
    
    
    2004(In Thousands, Except Share Data)Interest and dividend
income:Loans
    
    $
    17,688
    
    
    $
    14,940
    
    
    $
    13,359Investment securities held
to maturity
    
    
    1,925
    
    
    
    8,135
    
    
    
    6,834Investment securities
available for sale
    
    
    8,405
    
    
    
    1,959
    
    
    
    1,899Federal Home Loan Bank
stock
    
    
    539
    
    
    
    422
    
    
    
    209Other interest income
    
    
    399
    
    
    
    102
    
    
    
    30Total interest and
dividend income
    
    
    28,956
    
    
    
    25,558
    
    
    
    22,331Interest expense:Deposits (note 6)
    
    
    7,325
    
    
    
    5,044
    
    
    
    3,700Borrowed funds
    
    
    5,231
    
    
    
    4,946
    
    
    
    4,229Securities sold under
agreements to repurchase
    
    
    172
    
    
    
    56
    
    
    
    15Short-term and other
borrowed funds
    
    
    2,432
    
    
    
    1,592
    
    
    
    576Total interest expense
    
    
    15,160
    
    
    
    11,638
    
    
    
    8,520Net interest income
    
    
    13,796
    
    
    
    13,920
    
    
    
    13,811Provision (credit) for
loan losses (note 4)
    
    
    160
    
    
    
    
    
    
    
    (300
    )Net interest income after
provision (credit) for
loan losses
    
    
    13,636
    
    
    
    13,920
    
    
    
    14,111Non-interest income(loss):Deposit account fees
    
    
    792
    
    
    
    870
    
    
    
    889Loan servicing fees, net
    
    
    105
    
    
    
    162
    
    
    
    184Gains on sales of mortgage
loans, net
    
    
    6
    
    
    
    37
    
    
    
    68Loss on sales of
investment securities
(note 2)
    
    
    (2,417
    )
    
    
    
    
    
    
    Curtailment gain on
pension termination (note
10)
    
    
    602
    
    
    
    
    
    
    
    Lawsuit judgment collected
(note 12)
    
    
    
    
    
    
    2,233
    
    
    
    2,280Other income
    
    
    507
    
    
    
    486
    
    
    
    412Total non-interest income
(loss)
    
    
    (405
    )
    
    
    3,788
    
    
    
    3,833Non-interest expense:Salaries and employee
benefits (notes 10 and 11)
    
    
    7,399
    
    
    
    6,899
    
    
    
    6,507Occupancy and equipment
expense
    
    
    1,369
    
    
    
    944
    
    
    
    872Data processing expense
    
    
    1,036
    
    
    
    882
    
    
    
    878Professional expense
    
    
    597
    
    
    
    543
    
    
    
    623Insurance expense
    
    
    168
    
    
    
    166
    
    
    
    157Other expense
    
    
    2,451
    
    
    
    1,710
    
    
    
    1,627Total non-interest expense
    
    
    13,020
    
    
    
    11,144
    
    
    
    10,664Income before income tax
expense
    
    
    211
    
    
    
    6,564
    
    
    
    7,280Income tax expense (note 8)
    
    
    85
    
    
    
    2,407
    
    
    
    2,600Net income
    
    $
    126
    
    
    $
    4,157
    
    
    $
    4,680Average shares outstanding
    
    
    4,543,251
    
    
    
    4,427,525
    
    
    
    4,302,729Common stock equivalents
    
    
    57,514
    
    
    
    100,668
    
    
    
    163,848Average diluted shares
outstanding
    
    
    4,600,765
    
    
    
    4,528,193
    
    
    
    4,466,577Basic earnings per share
    
    $
    0.03
    
    
    $
    0.94
    
    
    $
    1.09Diluted earnings per share
    
    $
    0.03
    
    
    $
    0.92
    
    
    $
    1.05
 The accompanying notes are an integral part of these consolidated financial statements .
 33




---



##### Table of Contents



Consolidated Statements of Changes in  Stockholders Equity
 Retained
    
    
    
    
    
    
    Accumulated
    
    
    TotalAdditional
    
    
    Earnings
    
    
    
    
    
    
    Other
    
    
    StockCommon
    
    
    Paid-in
    
    
    Accumulated
    
    
    Treasury
    
    
    Comprehensive
    
    
    holdersStock
    
    
    Capital
    
    

(Deficit)
    
    
    Stock
    
    
    Income (Loss)
    
    
    Equity(In Thousands)Balance at December 31, 2003
    
    $
    445
    
    
    $
    58,350
    
    
    $
    (1,055
    )
    
    $
    (2,758
    )
    
    $
    20
    
    
    $
    55,002Net income
    
    
    
    
    
    
    
    
    
    
    4,680
    
    
    
    
    
    
    
    
    
    
    
    4,680Other comprehensive income
unrealized gain (loss) on securities
available for sale (tax effect $274)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (414
    )
    
    
    (414
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,266Exercise of stock options and tax
benefits
    
    
    11
    
    
    
    795
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    806Change in classification of treasury
stock
    
    
    (22
    )
    
    
    
    
    
    
    (2,736
    )
    
    
    2,758
    
    
    
    
    
    
    
    Dividends declared and paid
($0.52 per share)
    
    
    
    
    
    
    
    
    
    
    (2,236
    )
    
    
    
    
    
    
    
    
    
    
    (2,236
    )Balance at December 31, 2004
    
    
    434
    
    
    
    59,145
    
    
    
    (1,347
    )
    
    
    
    
    
    
    (394
    )
    
    
    57,838Net income
    
    
    
    
    
    
    
    
    
    
    4,157
    
    
    
    
    
    
    
    
    
    
    
    4,157Other comprehensive income
unrealized gain (loss) on securities
available for sale (tax effect $211)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (312
    )
    
    
    (312
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,845Exercise of stock options and tax
benefits
    
    
    12
    
    
    
    711
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    723Dividends declared and paid ($0.56
per share)
    
    
    
    
    
    
    
    
    
    
    (2,484
    )
    
    
    
    
    
    
    
    
    
    
    (2,484
    )Balance at December 31, 2005
    
    
    446
    
    
    
    59,856
    
    
    
    326
    
    
    
    
    
    
    
    (706
    )
    
    
    59,922Net income
    
    
    
    
    
    
    
    
    
    
    126
    
    
    
    
    
    
    
    
    
    
    
    126Other comprehensive income
unrealized gain (loss) on securities
available for sale (tax effect $619)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,160
    )
    
    
    (1,160
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,034
    )Stock-based compensation
    
    
    
    
    
    
    400
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    400Exercise of stock options and tax
benefits
    
    
    13
    
    
    
    1,322
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,335Adjustment to initially apply
SFAS No. 158, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    450
    
    
    
    450Dividends declared and paid ($0.56
per share)
    
    
    
    
    
    
    
    
    
    
    (2,542
    )
    
    
    
    
    
    
    
    
    
    
    (2,542
    )Balance at December 31, 2006
    
    $
    459
    
    
    $
    61,578
    
    
    $
    (2,090
    )
    
    $
    
    
    
    $
    (1,416
    )
    
    $
    58,531
 Disclosure of reclassification amount:
    
    2006
    
    
    2005
    
    
    2004(In Thousands)Gross unrealized (depreciation) appreciation
arising during the period
    
    $
    (4,174
    )
    
    $
    (523
    )
    
    $
    (688
    )Tax effect
    
    
    1,419
    
    
    
    211
    
    
    
    274Unrealized holding
(depreciation) appreciation
net of tax
    
    
    (2,755
    )
    
    
    (312
    )
    
    
    (414
    )Less: reclassification
adjustment for gains
(losses) included in net income
    
    
    (2,417
    )
    
    
    
    
    
    
    Tax effect
    
    
    822
    
    
    
    
    
    
    
    Unrealized (depreciation)
appreciation on securities,
net of reclassification
    
    $
    (1,160
    )
    
    $
    (312
    )
    
    $
    (414
    )
 The accompanying notes are an integral part of these consolidated financial statements.
 34




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##### Table of Contents



Consolidated Statements  of Cash Flows
 Year Ended December 31,
    
    2006
    
    
    2005
    
    
    2004(In Thousands)Cash flows from operating activities:Net income
    
    $
    126
    
    
    $
    4,157
    
    
    $
    4,680Adjustments to reconcile net income to net cash provided by
operating activities:Provision (credit) for loan losses
    
    
    160
    
    
    
    
    
    
    
    (300
    )Gains on sales of mortgage loans
    
    
    (6
    )
    
    
    (37
    )
    
    
    (68
    )Loss on sale of investment securities available for sale
    
    
    2,417
    
    
    
    
    
    
    
    Curtailment gain on pension termination
    
    
    (602
    )
    
    
    
    
    
    
    Net amortization of investment securities
    
    
    593
    
    
    
    1,428
    
    
    
    1,725Depreciation of premises and equipment
    
    
    606
    
    
    
    450
    
    
    
    430Loans originated for sale
    
    
    (1,043
    )
    
    
    (3,872
    )
    
    
    (3,883
    )Proceeds from sales of mortgage loans
    
    
    1,521
    
    
    
    3,437
    
    
    
    4,289Decrease (increase) in accrued interest receivable
    
    
    199
    
    
    
    436
    
    
    
    (342
    )Deferred income tax (benefit) expense
    
    
    148
    
    
    
    (167
    )
    
    
    726Stock-based compensation
    
    
    400
    
    
    
    
    
    
    
    Tax benefits from exercise of stock options
    
    
    
    
    
    
    211
    
    
    
    Decrease (increase) in other assets
    
    
    147
    
    
    
    227
    
    
    
    (121
    )Increase in advance payments by borrowers
    
    
    80
    
    
    
    
    
    
    
    56Increase (decrease) in other liabilities
    
    
    (899
    )
    
    
    1,352
    
    
    
    (1,000
    )Net cash provided by operating activities
    
    
    3,847
    
    
    
    7,622
    
    
    
    6,192Cash flows from investing activities:Proceeds from maturities of investment securities held to maturity
    
    
    2,900
    
    
    
    54,770
    
    
    
    23,500Proceeds from maturities of investment securities available for sale
    
    
    16,680
    
    
    
    25,000
    
    
    
    25,585Sales of investment securities available for sale
    
    
    78,457
    
    
    
    
    
    
    
    Purchases of investment securities held to maturity
    
    
    
    
    
    
    (71,914
    )
    
    
    (60,422
    )Purchases of investment securities available for sale
    
    
    (20,766
    )
    
    
    (14,198
    )
    
    
    (45,195
    )Purchases of mortgage-backed securities held to maturity
    
    
    
    
    
    
    (23,971
    )
    
    
    Purchases of mortgage-backed securities available for sale
    
    
    (63,544
    )
    
    
    
    
    
    
    Purchase of other equity securities available for sale
    
    
    (358
    )
    
    
    (72
    )
    
    
    Purchases of Federal Home Loan bank stock
    
    
    (889
    )
    
    
    (2,210
    )
    
    
    (1,294
    )Principal payments of securities held to maturity
    
    
    4,680
    
    
    
    26,468
    
    
    
    19,526Principal payments of securities available for sale
    
    
    18,526
    
    
    
    5,222
    
    
    
    4,168Redemption of Federal Home Loan Bank Stock
    
    
    940
    
    
    
    
    
    
    
    Increase in loans, net
    
    
    (54,001
    )
    
    
    (1,343
    )
    
    
    (21,425
    )Proceeds from sales of bank premises and equipment
    
    
    
    
    
    
    
    
    
    
    4Purchases of Bank premises and equipment
    
    
    (1,162
    )
    
    
    (215
    )
    
    
    (1,045
    )Net cash used in investing activities
    
    
    (18,537
    )
    
    
    (2,463
    )
    
    
    (56,598
    )Cash flows from financing activities:Net increase (decrease) in deposits
    
    
    (7,425
    )
    
    
    3,981
    
    
    
    26,566Additions to Federal Home Loan Bank advances
    
    
    82,000
    
    
    
    48,900
    
    
    
    58,346Payments on Federal Home Loan Bank advances
    
    
    (60,342
    )
    
    
    (32,141
    )
    
    
    (32,110
    )Net increase (decrease) in agreements to repurchase securities
    
    
    (3,256
    )
    
    
    1,358
    
    
    
    675(Decrease) increase in other borrowed funds
    
    
    13,000
    
    
    
    (22,000
    )
    
    
    (3,000
    )Dividends paid
    
    
    (2,542
    )
    
    
    (2,484
    )
    
    
    (2,236
    )Excess tax benefit from exercise of stock options
    
    
    122
    
    
    
    
    
    
    
    Proceeds from exercise of stock options
    
    
    1,213
    
    
    
    512
    
    
    
    806Net cash provided by (used in) financing activities
    
    
    22,770
    
    
    
    (1,874
    )
    
    
    49,047Net increase (decrease) in cash and cash equivalents
    
    
    8,080
    
    
    
    3,285
    
    
    
    (1,359
    )Cash and cash equivalents, beginning of year
    
    
    10,687
    
    
    
    7,402
    
    
    
    8,761Cash and cash equivalents, end of year
    
    $
    18,767
    
    
    $
    10,687
    
    
    $
    7,402Cash paid during the year for:Interest on deposits and borrowed funds
    
    $
    14,916
    
    
    $
    11,569
    
    
    $
    8,445Income taxes
    
    
    959
    
    
    
    2,012
    
    
    
    2,871Cash received during the year for:Income taxes
    
    
    192
    
    
    
    215
    
    
    
    120Supplemental Schedule of non-cash activities:Change in valuation of investment securities available for sale, net
    
    
    (1,160
    )
    
    
    (312
    )
    
    
    (414
    )Adjustment to initially apply SFAS No. 158
    
    
    450
    
    
    
    
    
    
    
    
 The accompanying notes are an integral part of these consolidated financial statements.
 35




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##### Table of Contents



Notes to Consolidated  Financial Statements  As of December 31, 2006
 (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 BASIS OF PRESENTATION.
   CASH AND CASH EQUIVALENTS.
 INVESTMENT AND MORTGAGE-BACKED SECURITIES.
  EQUITY SECURITIES.
 INTEREST ON LOANS .
 LOAN FEES.
 MORTGAGE BANKING ACTIVITIES.
 36




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##### Table of Contents



TRANSFER AND SERVICING OF ASSETS AND EXTINGUISHMENTS OF LIABILITIES.
 ALLOWANCE FOR LOAN LOSSES.
       PREMISES AND EQUIPMENT.
 OTHER REAL ESTATE OWNED.
 STOCK OPTIONS.
 37




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##### Table of Contents



2005
    
    2004(In Thousands, Except Per Share Data)Net Income:As reported
    
    $
    4,157
    
    
    $
    4,680Pro forma
    
    
    4,033
    
    
    
    4,344Basic earnings per share:As reported
    
    $
    0.94
    
    
    $
    1.09Pro forma
    
    
    0.91
    
    
    
    1.01Diluted earnings per share:As reported
    
    $
    0.92
    
    
    $
    1.05Pro forma
    
    
    0.89
    
    
    
    0.97
 PENSION EXPENSE.
  INCOME TAXES.
 38




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##### Table of Contents



EARNINGS
PER SHARE
 (2) INVESTMENT SECURITIES
 2006
    
    
    2005Amortized
    
    
    Unrealized
    
    
    Fair
    
    
    Amortized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gain
    
    
    Loss
    
    
    Value
    
    
    Cost
    
    
    Gain
    
    
    Loss
    
    
    Value(In Thousands)Investment securities
available for sale:US Treasury obligations
    
    $
    5,605
    
    
    $
    
    
    
    $
    (391
    )
    
    $
    5,214
    
    
    $
    5,119
    
    
    $
    
    
    
    $
    (350
    )
    
    $
    4,769Federal agency
bonds (1)
    
    
    35,710
    
    
    
    14
    
    
    
    (534
    )
    
    
    35,190
    
    
    
    9,932
    
    
    
    
    
    
    
    (265
    )
    
    
    9,667Mortgage-backed securities
    
    
    98,608
    
    
    
    606
    
    
    
    (1,316
    )
    
    
    97,898
    
    
    
    3,420
    
    
    
    10
    
    
    
    (66
    )
    
    
    3,364Collateralized mortgage
obligations
    
    
    72,899
    
    
    
    73
    
    
    
    (1,417
    )
    
    
    71,555
    
    
    
    24,662
    
    
    
    9
    
    
    
    (342
    )
    
    
    24,329Corporate obligations
    
    
    7,316
    
    
    
    50
    
    
    
    (2
    )
    
    
    7,364
    
    
    
    3,181
    
    
    
    
    
    
    
    (135
    )
    
    
    3,046Mutual funds
    
    
    1,000
    
    
    
    
    
    
    
    (53
    )
    
    
    947
    
    
    
    1,000
    
    
    
    
    
    
    
    (45
    )
    
    
    955Equity securities
    
    
    514
    
    
    
    
    
    
    
    
    
    
    
    514
    
    
    
    240
    
    
    
    
    
    
    
    (7
    )
    
    
    233$
    221,652
    
    
    $
    743
    
    
    $
    (3,713
    )
    
    $
    218,682
    
    
    $
    47,554
    
    
    $
    19
    
    
    $
    (1,210
    )
    
    $
    46,363Investment securities held
to maturity:Federal agency
obligations (1)
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    87,017
    
    
    $
    56
    
    
    $
    (1,944
    )
    
    $
    85,129Mortgage-backed securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    43,701
    
    
    
    40
    
    
    
    (1,262
    )
    
    
    42,479Asset-backed securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    70,415
    
    
    
    4
    
    
    
    (1,679
    )
    
    
    68,740Corporate obligations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,024
    
    
    
    11
    
    
    
    (280
    )
    
    
    10,755Municipal obligations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,526
    
    
    
    
    
    
    
    (14
    )
    
    
    1,512$
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    213,683
    
    
    $
    111
    
    
    $
    (5,179
    )
    
    $
    208,615
 (1)
    
    Federal agency bonds include investment securities issued by Government Sponsored
Enterprises (GSEs) such as Federal National Mortgage Association (FNMA), Federal Home
Loan Mortgage Corporation (FHLMC) and the Federal Home Loan Bank (FHLB). These
investment securities do not represent obligations of the U.S. government and are not
backed by the full faith and credit of the United States Treasury.  2006
    
    2005
    
    2004(In Thousands)Proceeds from sales
    
    $
    78,547
    
    
    $
    
    
    
    $
    Realized gains on sales
    
    
    
    
    
    
    
    
    
    
    Realized losses on sales
    
    
    2,417
    
    
    
    
    
    
    
    
   39




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##### Table of Contents



CustomerRepurchase Agreements
    
    All Other BorrowingsAmortized
    
    Fair
    
    Amortized
    
    FairCost
    
    Value
    
    Cost
    
    Value(In Thousands)At December 31, 2006:U.S. Treasury obligations
    
    $
    
    
    
    $
    
    
    
    $
    5,605
    
    
    $
    5,214Federal agency obligations
    
    
    9,840
    
    
    
    9,854
    
    
    
    25,870
    
    
    
    25,336Mortgage-backed securities
    
    
    
    
    
    
    
    
    
    
    97,521
    
    
    
    96,800Asset-backed securities
    
    
    
    
    
    
    
    
    
    
    72,668
    
    
    
    71,324At December 31, 2005:U.S. Treasury obligations
    
    $
    
    
    
    $
    
    
    
    $
    5,119
    
    
    $
    4,769Federal agency obligations
    
    
    9,671
    
    
    
    9,543
    
    
    
    87,278
    
    
    
    85,254Mortgage-backed securities
    
    
    
    
    
    
    
    
    
    
    45,423
    
    
    
    44,122Asset-backed securities
    
    
    
    
    
    
    
    
    
    
    94,669
    
    
    
    92,661Corporation obligations
    
    
    
    
    
    
    
    
    
    
    360
    
    
    
    371
 OTHER THAN TEMPORARILY IMPAIRED SECURITIES
 Less Than 12 Months
    
    
    12 Months or Longer
    
    
    Total 2006Unrealized
    
    
    Unrealized
    
    
    Unrealized2006
    
    Fair Value
    
    
    Losses
    
    
    Fair Value
    
    
    Losses
    
    
    Fair Value
    
    
    Losses(In Thousands)US Treasury obligations
    
    $
    
    
    
    $
    
    
    
    $
    5,214
    
    
    $
    (391
    )
    
    $
    5,214
    
    
    $
    (391
    )Federal
agency obligations
    
    
    3,119
    
    
    
    (100
    )
    
    
    22,217
    
    
    
    (434
    )
    
    
    25,336
    
    
    
    (534
    )Mortgage-backed securities
    

    
    4,408
    
    
    
    (28
    )
    
    
    34,907
    
    
    
    (1,288
    )
    
    
    39,315
    
    
    
    (1,316
    )Asset-backed securities
    
    
    12,846
    
    
    
    (64
    )
    
    
    54,405
    
    
    
    (1,353
    )
    
    
    67,251
    
    
    
    (1,417
    )Corporate obligations
    
    
    1,924
    
    
    
    (2
    )
    
    
    
    
    
    
    
    
    
    
    1,924
    
    
    
    (2
    )Mutual funds
    
    
    947
    
    
    
    (53
    )
    
    
    
    
    
    
    
    
    
    
    947
    
    
    
    (53
    )Total temporarily impaired
securities
    
    $
    23,244
    
    
    $
    (247
    )
    
    $
    116,743
    
    
    $
    (3,466
    )
    
    $
    139,987
    
    
    $
    (3,713
    )
 Less Than 12 Months
    
    
    12 Months or Longer
    
    
    Total 2005Unrealized
    
    
    Unrealized
    
    
    Unrealized2005
    
    Fair Value
    
    
    Losses
    
    
    Fair Value
    
    
    Losses
    
    
    Fair Value
    
    
    Losses(In Thousands)US Treasury obligations
    
    $
    
    
    
    $
    
    
    
    $
    4,769
    
    
    $
    (350
    )
    
    $
    4,769
    
    
    $
    (350
    )Federal agency
obligations
    
    
    
    
    
    
    
    
    
    
    90,921
    
    
    
    (2,209
    )
    
    
    90,921
    
    
    
    (2,209
    )Mortgage-backed securities
    

    
    23,432
    
    
    
    (355
    )
    
    
    20,410
    
    
    
    (973
    )
    
    
    43,842
    
    
    
    (1,328
    )Asset-backed securities
    
    
    37,887
    
    
    
    (921
    )
    
    
    40,761
    
    
    
    (1,100
    )
    
    
    78,648
    
    
    
    (2,021
    )Corporate obligations
    
    
    
    
    
    
    
    
    
    
    10,549
    
    
    
    (415
    )
    
    
    10,549
    
    
    
    (415
    )Municipal obligations
    
    
    
    
    
    
    
    
    
    
    1,512
    
    
    
    (14
    )
    
    
    1,512
    
    
    
    (14
    )Mutual funds
    
    
    
    
    
    
    
    
    
    
    955
    
    
    
    (45
    )
    
    
    955
    
    
    
    (45
    )Equity securities
    
    
    
    
    
    
    
    
    
    
    233
    
    
    
    (7
    )
    
    
    233
    
    
    
    (7
    )Total temporarily impaired
securities
    
    $
    61,319
    
    
    $
    (1,276
    )
    
    $
    170,110
    
    
    $
    (5,113
    )
    
    $
    213,429
    
    
    $
    (6,389
    )
 40




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##### Table of Contents



U.S.
Treasury and federal agency obligations
  Mortgage-backed and asset-backed securities
 Corporate and municipal obligations
 Equity securities and mutual funds
  Available for SaleWeightedAmortized
    
    
    Market
    
    
    AverageDecember 31, 2006
    
    Cost
    
    
    Value
    
    
    Yield(Dollars in Thousands)US Treasury & Federal Agencies bonds:Within 1 year
    
    $
    22,658
    
    
    $
    22,418
    
    
    
    3.59
    %1 to 2 years
    
    
    5,348
    
    
    
    5,360
    
    
    
    5.182 to 3 years
    
    
    4,986
    
    
    
    4,793
    
    
    
    3.325 to 10 years
    
    
    8,323
    
    
    
    7,833
    
    
    
    3.7141,315
    
    
    
    40,404
    
    
    
    3.80Mortgage-backed securities:Within 1 year
    
    
    35
    
    
    
    35
    
    
    
    7.162 to 3 years
    
    
    1,737
    
    
    
    1,689
    
    
    
    3.943 to 5 years
    
    
    3,762
    
    
    
    3,581
    
    
    
    3.775 to 10 years
    
    
    18,274
    
    
    
    17,529
    
    
    
    3.78After 10 years
    
    
    74,800
    
    
    
    75,064
    
    
    
    5.9598,608
    
    
    
    97,898
    
    
    
    5.44Collateralized Mortgage Obligations:Within 1 year
    
    
    38
    
    
    
    38
    
    
    
    6.285 to 10 years
    
    
    10,725
    
    
    
    10,488
    
    
    
    4.18After 10 years
    
    
    62,136
    
    
    
    61,029
    
    
    
    4.3672,899
    
    
    
    71,555
    
    
    
    4.33Corporate obligations:Within 1 year
    
    
    1,000
    
    
    
    1,000
    
    
    
    3.242 to 3 years
    
    
    1,935
    
    
    
    1,946
    
    
    
    5.423 to 5 years
    
    
    4,381
    
    
    
    4,418
    
    
    
    5.517,316
    
    
    
    7,364
    
    
    
    5.18$
    220,138
    
    
    $
    217,221
    
    
    
    4.76
    %
 41




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##### Table of Contents



(3) FEDERAL HOME LOAN BANK STOCK
 (4) LOANS
 2006
    
    
    2005(In Thousands)Residential real estate
    
    $
    69,876
    
    
    $
    62,187Loans held for sale
    
    
    
    
    
    
    472Home equity
    
    
    20,339
    
    
    
    10,412Consumer
    
    
    975
    
    
    
    468Retail loans
    
    
    91,190
    
    
    
    73,539Construction
    
    
    43,283
    
    
    
    24,137Commercial real estate
    
    
    142,820
    
    
    
    127,617Commercial business
    
    
    10,870
    
    
    
    9,318Corporate loans
    
    
    196,973
    
    
    
    161,072Total loans
    
    
    288,163
    
    
    
    234,611Allowance for loan losses
    
    
    (4,309
    )
    
    
    (4,126
    )Net loans
    
    $
    283,854
    
    
    $
    230,485
      2006
    
    
    2005(In Thousands)Balance at beginning of year
    
    $
    2,251
    
    
    $
    2,080New loans granted
    
    
    385
    
    
    
    615Retirement/reduction of directors and officers
    
    
    (23
    )
    
    
    (262
    )Repayment of principal
    
    
    (445
    )
    
    
    (182
    )Balance at end of year
    
    $
    2,168
    
    
    $
    2,251
  2006
    
    
    2005
    
    
    2004(In Thousands)Balance at beginning of year
    
    $
    4,126
    
    
    $
    4,140
    
    
    $
    4,220Total charge-offs
    
    
    (30
    )
    
    
    (25
    )
    
    
    (45
    )Total recoveries
    
    
    53
    
    
    
    11
    
    
    
    265Net (charge-offs) recoveries
    
    
    23
    
    
    
    (14
    )
    
    
    220Provision (credit) for loan losses
    
    
    160
    
    
    
    
    
    
    
    (300
    )Balance at end of year
    
    $
    4,309
    
    
    $
    4,126
    
    
    $
    4,140
 42




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##### Table of Contents



2006
    
    2005
    
    2004(In Thousands)Interest income in accordance with original loan terms
    
    $
    56
    
    
    $
    1
    
    
    $
    Interest income recognized
    
    
    
    
    
    
    
    
    
    
    Foregone interest income
    
    
    56
    
    
    
    1
    
    
    
    
  2006
    
    2005
    
    2004(In Thousands)Total impaired loans
    
    $
    1,020
    
    
    $
    
    
    
    $
    Impaired loans with reserve
    
    
    
    
    
    
    
    
    
    
    Impaired loans without reserve
    
    
    1,020
    
    
    
    
    
    
    
    Impaired loans average balance
    
    
    1,078
    
    
    
    
    
    
    
    Interest income in accordance with original loan terms
    
    
    54
    
    
    
    
    
    
    
    Interest income recognized
    
    
    
    
    
    
    
    
    
    
    
   2006
    
    
    2005
    
    
    2004(In Thousands)Balance at
beginning of year
    
    $
    308
    
    
    $
    404
    
    
    $
    488Additions
    
    
    
    
    
    
    20
    
    
    
    53Amortization
    
    
    (124
    )
    
    
    (116
    )
    
    
    (137
    )Mortgage
servicing rights
    
    
    184
    
    
    
    308
    
    
    
    404Valuation allowance
    
    
    
    
    
    
    (30
    )
    
    
    (98
    )Balance at
end of year
    
    $
    184
    
    
    $
    278
    
    
    $
    306
  2006
    
    
    2005
    
    
    2004(In Thousands)Balance at beginning of year
    
    $
    30
    
    
    $
    98
    
    
    $
    96Provision (recoveries) charged to operations
    
    
    (30
    )
    
    
    (68
    )
    
    
    2Balance at end of year
    
    $
    
    
    
    $
    30
    
    
    $
    98
  2006
    
    
    2005
    
    
    2004(In Thousands)Service fee income
    
    $
    102
    
    
    $
    123
    
    
    $
    158Amortization of mortgage servicing rights
    
    
    (124
    )
    
    
    (116
    )
    
    
    (137
    )(Provision) recoveries for valuation allowance
    
    
    30
    
    
    
    68
    
    
    
    (2
    )Mortgage servicing income (expense)
    
    
    8
    
    
    
    75
    
    
    
    19Late charges and other loan fees
    
    
    97
    
    
    
    87
    
    
    
    165Loan servicing fees, net
    
    $
    105
    
    
    $
    162
    
    
    $
    184
 43




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##### Table of Contents



(5) BANK PREMISES AND EQUIPMENT
 EstimatedUseful Lives
    
    
    2006
    
    
    2005(In Thousands)Premises
    
    10  39 years
    
    $
    4,150
    
    
    $
    3,830Equipment
    
    3  5   years
    
    
    3,702
    
    
    
    2,886Leasehold improvements
    
    3  10 years(1)
    
    
    1,047
    
    
    
    1,0478,899
    
    
    
    7,763Less accumulated depreciation and amortization
    
    
    
    
    
    
    (5,092
    )
    
    
    (4,512
    )$
    3,807
    
    
    $
    3,251
 (1)
    
    Leasehold improvements  Depreciated over term of lease or asset life, whichever is shorter.   Minimum
    
    
    MinimumRental
    
    
    RentalExpense
    
    
    Income(In Thousands)2007
    
    $
    203
    
    
    $
    2232008
    
    
    159
    
    
    
    2062009
    
    
    137
    
    
    
    1342010
    
    
    51
    
    
    
    532011
    
    
    43
    
    
    
    43Thereafter
    
    
    114
    
    
    
    $
    707
    
    
    $
    659
 (6) DEPOSITS
 Rates as ofDecember 31,2006
    
    
    2006
    
    
    2005(Dollars in Thousands)Interest bearing accounts:NOW acccounts
    
    
    0.10-0.25
    %
    
    $
    17,707
    
    
    $
    38,349Savings accounts
    
    
    0.50
    %
    
    
    33,676
    
    
    
    41,941Money market investment accounts
    
    
    1.00-4.41
    %
    
    
    73,163
    
    
    
    76,594Certificates of deposit
    
    
    2.23-5.50
    %
    
    
    109,635
    
    
    
    98,773Retirement certificates of deposit
    
    
    2.23-5.32
    %
    
    
    30,057
    
    
    
    28,518Total interest bearing deposits
    
    
    
    
    
    
    264,238
    
    
    
    284,175Non-interest bearing demand deposit accounts
    
    
    
    
    
    
    31,424
    
    
    
    18,912Total deposits
    
    
    
    
    
    $
    295,662
    
    
    $
    303,087
  44




---



##### Table of Contents



2006
    
    
    2005
    
    
    2004(In
 Thousands)NOW accounts
    
    $
    38
    
    
    $
    47
    
    
    $
    40Savings accounts
    
    
    190
    
    
    
    221
    
    
    
    161Money market investment accounts
    
    
    1,944
    
    
    
    1,355
    
    
    
    980Certificates of deposit
    
    
    4,008
    
    
    
    2,480
    
    
    
    1,656Retirement certificates of deposit
    
    
    1,145
    
    
    
    941
    
    
    
    863Total interest expense
    
    $
    7,325
    
    
    $
    5,044
    
    
    $
    3,700
  Equal to
    
    
    
    
    
    
    WeightedLess
    
    
    and greater
    
    
    
    
    
    
    Averagethan
    
    
    than
    
    
    
    
    
    
    Interest$100,000
    
    
    $100,000
    
    
    Total
    
    
    Rate(Dollars in Thousands)3 months or less
    
    $
    23,251
    
    
    $
    12,308
    
    
    $
    35,559
    
    
    
    3.94
    %From three to six months
    
    
    23,702
    
    
    
    14,792
    
    
    
    38,494
    
    
    
    4.43From six to twelve months
    
    
    27,786
    
    
    
    13,793
    
    
    
    41,579
    
    
    
    4.81From one to two years
    
    
    10,986
    
    
    
    2,993
    
    
    
    13,979
    
    
    
    4.30From two to three years
    
    
    3,131
    
    
    
    2,141
    
    
    
    5,272
    
    
    
    3.99Three years and thereafter
    
    
    3,809
    
    
    
    1,000
    
    
    
    4,809
    
    
    
    4.10$
    92,665
    
    
    $
    47,027
    
    
    $
    139,692
    
    
    
    4.38
    %
  (7) FEDERAL HOME LOAN BANK ADVANCES AND OTHER BORROWED FUNDS
   2006
    
    
    2005Weighted Average
    
    
    Weighted AverageMaturity
    
    Amount
    
    
    Interest Rate
    
    
    Amount
    
    
    Interest Rate(Dollars in Thousands)2006
    
    $
    
    
    
    
    
    %
    
    $
    30,000
    
    
    
    3.41
    %2007
    
    
    39,000
    
    
    
    4.37
    
    
    
    38,000
    
    
    
    3.512008
    
    
    21,000
    
    
    
    4.89
    
    
    
    15,000
    
    
    
    4.602009
    
    
    
    
    
    
    
    
    
    
    206
    
    
    
    6.422010
    
    
    25,000
    
    
    
    5.60
    
    
    
    25,000
    
    
    
    5.602011
    
    
    10,000
    
    
    
    4.93
    
    
    
    10,000
    
    
    
    4.932016
    
    
    45,000
    
    
    
    3.99
    
    
    
    
    
    
    
    2021
    
    
    2,356
    
    
    
    6.23
    
    
    
    2,453
    
    
    
    6.232024
    
    
    304
    
    
    
    1.07
    
    
    
    320
    
    
    
    1.072025
    
    
    859
    
    
    
    1.60
    
    
    
    882
    
    
    
    1.60$
    143,519
    
    
    
    4.59
    %
    
    $
    121,861
    
    
    
    4.20
    %
   45




---



##### Table of Contents



2006
    
    
    2005(In Thousands)FHLBB Short-term borrowings
    
    $
    36,000
    
    
    $
    27,000Customer repurchase agreements
    
    
    5,263
    
    
    
    4,519$
    41,263
    
    
    $
    31,519
  2006
    
    
    2005
    
    
    2004Short-Term
    
    
    
    
    
    
    Short-Term
    
    
    
    
    
    
    Short-TermRepurchase
    
    
    FHLBB
    
    
    Repurchase
    
    
    FHLBB
    
    
    Repurchase
    
    
    FHLBBAgreements
    
    
    Advances
    
    
    Agreements
    
    
    Advances
    
    
    Agreements
    
    
    Advances(Dollars in Thousands)Outstanding at December 31
    
    $
    5,263
    
    
    $
    36,000
    
    
    $
    4,519
    
    
    $
    27,000
    
    
    $
    3,161
    
    
    $
    49,000Average balance
outstanding during the
year
    
    
    4,915
    
    
    
    47,143
    
    
    
    3,113
    
    
    
    49,964
    
    
    
    2,949
    
    
    
    40,160Maximum outstanding at
any month end
    
    
    6,646
    
    
    
    61,000
    
    
    
    4,519
    
    
    
    85,000
    
    
    
    3,946
    
    
    
    55,500Weighted average rate at
December 31
    
    
    3.75
    %
    
    
    5.31
    %
    
    
    2.75
    %
    
    
    4.31
    %
    
    
    0.75
    %
    
    
    2.27
    %Weighted average rate
during the year
    
    
    3.50
    
    
    
    5.16
    
    
    
    1.79
    
    
    
    3.18
    
    
    
    0.50
    
    
    
    1.43
  (8) INCOME TAXES
 An analysis of income tax expense for the years ended December 31, follows:2006
    
    
    2005
    
    
    2004(In Thousands)Current expense (benefit):Federal
    
    $
    (123
    )
    
    $
    2,154
    
    
    $
    1,590State
    
    
    60
    
    
    
    420
    
    
    
    284Total current expense (benefit)
    
    
    (63
    )
    
    
    2,574
    
    
    
    1,874Deferred expense (benefit):Federal
    
    
    142
    
    
    
    (119
    )
    
    
    574State
    
    
    38
    
    
    
    (45
    )
    
    
    167Change in valuation reserve
    
    
    (32
    )
    
    
    (3
    )
    
    
    (15
    )Total deferred expense
    
    
    148
    
    
    
    (167
    )
    
    
    726Total income tax expense
    
    $
    85
    
    
    $
    2,407
    
    
    $
    2,600
  2006
    
    
    2005
    
    
    2004(In Thousands)Expected federal income tax expense
    
    $
    72
    
    
    $
    2,231
    
    
    $
    2,475Items affecting expected tax:State income tax, net of federal benefit
    
    
    64
    
    
    
    247
    
    
    
    298Tax exempt income
    
    
    (111
    )
    
    
    (113
    )
    
    
    (98
    )Other
    
    
    60
    
    
    
    45
    
    
    
    (60
    )Change in valuation reserve
    
    
    
    
    
    
    (3
    )
    
    
    (15
    )Total income tax expense
    
    $
    85
    
    
    $
    2,407
    
    
    $
    2,600
 46




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##### Table of Contents



2006
    
    
    2005(In Thousands)Deferred tax assets:Allowance for loan losses
    
    $
    1,659
    
    
    $
    1,507Capital loss carryforward
    
    
    5
    
    
    
    37Unrealized loss on investment securities available for sale
    
    
    1,104
    
    
    
    485Pension costs and other post-retirement benefits
    
    
    108
    
    
    
    473Deferred compensation
    
    
    555
    
    
    
    722Depreciation
    
    
    363
    
    
    
    286Other
    
    
    45
    
    
    
    219Gross deferred tax asset
    
    
    3,839
    
    
    
    3,729Valuation reserve
    
    
    (5
    )
    
    
    (37
    )Deferred tax asset
    
    
    3,834
    
    
    
    3,692Deferred tax liabilities:Other
    
    
    (228
    )
    
    
    (246
    )Gross deferred tax liability
    
    
    (228
    )
    
    
    (246
    )Net deferred income tax asset
    
    $
    3,606
    
    
    $
    3,446
     (9) STOCKHOLDERS EQUITY
    47




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##### Table of Contents



Risk-Based RatiosTier 1 Capital
    
    
    Total Capital
    
    
    Leverage Capital2006
    
    
    2005
    
    
    2006
    
    
    2005
    
    
    2006
    
    
    2005(Dollars in Thousands)Capital Ratios:Adequately capitalized
    
    
    4.00
    %
    
    
    4.00
    %
    
    
    8.00
    %
    
    
    8.00
    %
    
    
    4.00
    %
    
    
    4.00
    %Well capitalized
    
    
    6.00
    %
    
    
    6.00
    %
    
    
    10.00
    %
    
    
    10.00
    %
    
    
    5.00
    %
    
    
    5.00
    %LSB Corporation
    
    
    15.73
    %
    
    
    19.09
    %
    
    
    16.86
    %
    
    
    20.34
    %
    
    
    11.18
    %
    
    
    11.34
    %RiverBank
    
    
    15.17
    %
    
    
    18.29
    %
    
    
    16.31
    %
    
    
    19.54
    %
    
    
    10.77
    %
    
    
    10.82
    %Capital Amounts:Adequately capitalizedLSB Corporation
    
    $
    15,237
    
    
    $
    12,508
    
    
    $
    30,474
    
    
    $
    25,015
    
    
    $
    21,446
    
    
    $
    21,066RiverBank
    
    
    15,223
    
    
    
    12,394
    
    
    
    30,446
    
    
    
    24,788
    
    
    
    21,450
    
    
    
    20,956Well capitalizedLSB Corporation
    
    
    22,855
    
    
    
    18,762
    
    
    
    38,092
    
    
    
    31,269
    
    
    
    26,808
    
    
    
    26,333RiverBank
    
    
    22,835
    
    
    
    18,591
    
    
    
    38,058
    
    
    
    30,985
    
    
    
    26,813
    
    
    
    26,195Actual Amounts:LSB Corporation
    
    
    59,916
    
    
    
    59,698
    
    
    
    64,225
    
    
    
    63,609
    
    
    
    59,916
    
    
    
    59,698RiverBank
    
    
    57,749
    
    
    
    56,670
    
    
    
    62,057
    
    
    
    60,546
    
    
    
    57,749
    
    
    
    56,670
 Stockholders Rights Plan
  Treasury Stock
  (10) EMPLOYEE BENEFITS
 Pension Plan
  48




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##### Table of Contents



Before
    
    
    
    
    
    AfterAdoption of
    
    
    
    
    
    AdoptionofSFAS 158
    
    Adjustments
    
    SFAS 158(In Thousands)Deferred tax assets, net
    
    $
    3,918
    
    
    $
    (312
    )
    
    $
    3,606Total assets
    
    
    543,277
    
    
    
    (312
    )
    
    
    542,965Liability for pension benefits
    
    
    762
    
    
    
    (762
    )
    
    
    Total liabilities
    
    
    485,196
    
    
    
    (762
    )
    
    
    484,434Accumulated other comprehensive income
    
    
    (1,866
    )
    
    
    450
    
    
    
    (1,416
    )Total stockholders equity
    
    
    58,081
    
    
    
    450
    
    
    
    58,531
  PensionPlan(In Thousands)Prior service costs
    
    $
    7Net (gain) loss
    
    
    443Total
    
    $
    450
   2006
    
    
    2005Debt securities
    
    
    35
    %
    
    
    35
    %Equity securities
    
    
    65
    %
    
    
    65
    %Total Plan assets
    
    
    100
    %
    
    
    100
    %
  49




---



##### Table of Contents



2006
    
    
    2005(In Thousands)Change in projected benefit obligation:Benefit obligation at beginning of year
    
    $
    8,350
    
    
    $
    7,456Service cost
    
    
    353
    
    
    
    347Interest cost
    
    
    480
    
    
    
    428Curtailment gain on pension termination
    
    
    (602
    )
    
    
    Actuarial (gain) loss
    
    
    (485
    )
    
    
    261Benefits paid
    
    
    (1,996
    )
    
    
    (142
    )Projected benefit obligation at end of year
    
    $
    6,100
    
    
    $
    8,350Change in plan assets:Fair value of plan assets at beginning of year
    
    $
    7,231
    
    
    $
    6,778Actual return on plan assets
    
    
    865
    
    
    
    595Employer contribution
    
    
    
    
    
    
    Benefits paid
    
    
    (1,996
    )
    
    
    (142
    )Fair value of plan assets at end of year
    
    $
    6,100
    
    
    $
    7,231Funded status
    
    $
    
    
    
    $
    (1,119
    )Unrecognized net actuarial loss (gain)
    
    
    
    
    
    
    (21
    )Unrecognized transition asset
    
    
    
    
    
    
    (20
    )Accrued benefit cost included in other liabilities
    
    $
    
    
    
    $
    (1,118
    )Accumulated benefit obligation
    
    
    N/A
    
    
    $
    5,760
   2006
    
    
    2005
    
    
    2004(In Thousands)Service cost
    
    $
    353
    
    
    $
    347
    
    
    $
    415Interest cost
    
    
    480
    
    
    
    428
    
    
    
    423Expected return on plan assets
    
    
    (579
    )
    
    
    (542
    )
    
    
    (485
    )Net amortization and deferrals
    
    
    (4
    )
    
    
    (4
    )
    
    
    (4
    )Net periodic pension cost
    
    $
    250
    
    
    $
    229
    
    
    $
    349
  2006
    
    
    2005
    
    
    2004Discount rate
    
    
    5.75
    %
    
    
    5.75
    %
    
    
    6.25
    %Rate of increase in compensation levels
    
    
    4.50
    
    
    
    4.50
    
    
    
    4.50Expected long-term rate of return on assets
    
    
    8.00
    
    
    
    8.00
    
    
    
    8.00
  401(k) Savings Plan
  50




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##### Table of Contents



Post-Retirement Plan Other Than Pensions
   Employee Stock Ownership Plan
  Incentive Compensation Plan
  Employment Termination or Change-in-Control Agreements
  Supplemental Executive Retirement Plan
  (11) EQUITY AWARDS
  51




---



##### Table of Contents



CumulativeAuthorized
    
    
    
    
    
    
    Awards, Net ofOption Awards
    
    
    Stock Awards
    
    
    Expiration1986 Plan
    
    
    720,500
    
    
    
    N/A
    
    
    
    430,2501997 Plan
    
    
    449,500
    
    
    
    N/A
    
    
    
    427,8502006 Plan
    
    
    400,000
    
    
    
    14,000
    
    
    
    40,0001,570,000
    
    
    
    14,000
    
    
    
    898,100
         2006
    
    
    2005
    
    
    2004Weighted
    
    
    
    
    
    
    Weighted
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    Average
    
    
    
    
    
    
    AverageNumber of
    
    
    Exercise
    
    
    Number of
    
    
    Exercise
    
    
    Number of
    
    
    ExerciseOptions
    
    
    Price
    
    
    Options
    
    
    Price
    
    
    Options
    
    
    PriceOutstanding at beginning of year
    
    
    349,100
    
    
    $
    12.88
    
    
    
    511,350
    
    
    $
    10.97
    
    
    
    505,730
    
    
    $
    8.86Granted
    
    
    40,000
    
    
    
    16.41
    
    
    
    8,400
    
    
    
    17.66
    
    
    
    114,100
    
    
    
    16.77Exercised
    
    
    (133,775
    )
    
    
    11.44
    
    
    
    (168,250
    )
    
    
    7.24
    
    
    
    (102,480
    )
    
    
    6.70Forfeited
    
    
    (10,425
    )
    
    
    16.77
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Expired
    
    
    
    
    
    
    
    
    
    
    (2,400
    )
    
    
    18.25
    
    
    
    (6,000
    )
    
    
    16.77Outstanding at end of year
    
    
    244,900
    
    
    
    14.07
    
    
    
    349,100
    
    
    
    12.88
    
    
    
    511,350
    
    
    
    10.97Options exercisable end of year
    
    
    209,325
    
    
    
    13.65
    
    
    
    249,050
    
    
    
    12.07
    
    
    
    405,250
    
    
    
    9.45Weighted average fair value of
options granted during the year
    
    
    
    
    
    $
    3.76
    
    
    
    
    
    
    $
    3.17
    
    
    
    
    
    
    $
    4.64
 52




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##### Table of Contents



2006
    
    2005
    
    2004Expected volatility
    
    
    25.00
    %
    
    
    29.30
    %
    
    
    28.93
    %Risk-free interest rate
    
    
    4.60
    %
    
    
    3.82
    %
    
    
    3.44
    %Expected dividend yield
    
    
    3.41
    %
    
    
    3.25
    %
    
    
    3.08
    %Expected life in years
    
    7 years
    
    7 years
    
    8 years
  Nonvested Shares Issued Under the PlansStock Awards
    
    
    Stock OptionsWeighted
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    AverageGrant Date
    
    
    
    
    
    
    Grant DateShares
    
    
    Fair Value
    
    
    Shares
    
    
    Fair ValueNonvested at January 1, 2006
    
    
    
    
    
    $
    
    
    
    
    55,050
    
    
    $
    16.84Granted
    
    
    14,000
    
    
    
    16.41
    
    
    
    40,000
    
    
    
    16.41Vested
    
    
    (14,000
    )
    
    
    16.41
    
    
    
    (51,300
    )
    
    
    16.69Forfeited
    
    
    
    
    
    
    
    
    
    
    (8,175
    )
    
    
    16.77Nonvested at December 31, 2006
    
    
    
    
    
    $
    
    
    
    
    35,575
    
    
    $
    16.59
  Options Outstanding
    
    
    Options ExercisableWeighted
    
    
    Weighted
    
    
    
    
    
    
    WeightedAverage
    
    
    Average
    
    
    
    
    
    
    AverageNumber of
    
    
    Exercise
    
    
    Remaining
    
    
    Number of
    
    
    ExerciseRange of Exercise Price
    
    Options
    
    
    Price
    
    
    Life
    
    
    Options
    
    
    Price$6.00 to $10.00
    
    
    57,000
    
    
    $
    9.04
    
    
    2.5 years
    
    
    57,000
    
    
    $
    9.04$10.01 to $14.00
    
    
    71,500
    
    
    
    13.84
    
    
    
    4.5
    
    
    
    71,500
    
    
    
    13.84$14.01 to $19.00
    
    
    116,400
    
    
    
    16.68
    
    
    
    7.1
    
    
    
    80,825
    
    
    
    16.73Outstanding at end of year
    
    
    244,900
    
    
    $
    14.07
    
    
    
    5.4
    
    
    
    209,325
    
    
    $
    13.65
 (12) CONTINGENCIES
  Lawrence Savings Bank vs. Garabedian et al.,
  53




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##### Table of Contents



(13) FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
    Fixed
    
    
    Variable2006
    
    Rate
    
    
    Rate
    
    
    Total(In Thousands)Financial instruments with contract amounts represent credit risk:Unused commitments to extend credit:Residential mortgages
    
    $
    757
    
    
    $
    
    
    
    $
    757Home equity lines of credit
    
    
    1,625
    
    
    
    10,226
    
    
    
    11,851Personal lines of credit
    
    
    145
    
    
    
    
    
    
    
    145Commercial real estate mortgage
    
    
    27
    
    
    
    33,839
    
    
    
    33,866Construction
    
    
    
    
    
    
    42,559
    
    
    
    42,559Commercial loans
    
    
    26
    
    
    
    36,294
    
    
    
    36,320Total unused commitments
    
    $
    2,580
    
    
    $
    122,918
    
    
    $
    125,498Letters of credit and standby letters of credit
    
    $
    
    
    
    $
    1,137
    
    
    $
    1,137
 Fixed
    
    
    Variable2005
    
    Rate
    
    
    Rate
    
    
    Total(In Thousands)Financial instruments with contract amounts represent credit risk:Unused commitments to extend credit:Residential mortgages
    
    $
    1,126
    
    
    $
    275
    
    
    $
    1,401Home equity lines of credit
    
    
    813
    
    
    
    8,371
    
    
    
    9,184Personal lines of credit
    
    
    153
    
    
    
    
    
    
    
    153Commercial real estate mortgage
    
    
    
    
    
    
    13,053
    
    
    
    13,053Construction
    
    
    
    
    
    
    30,018
    
    
    
    30,018Commercial loans
    
    
    272
    
    
    
    18,702
    
    
    
    18,974Total unused commitments
    
    $
    2,364
    
    
    $
    70,419
    
    
    $
    72,783Letters of credit and standby letters of credit
    
    $
    
    
    
    $
    798
    
    
    $
    798Forward commitments to sell mortgage loans
    
    $
    472
    
    
    $
    
    
    
    $
    472Forward commitments to purchase investment security
    
    $
    132
    
    
    $
    
    
    
    $
    132
  (14) FAIR VALUE OF FINANCIAL INSTRUMENTS
   54




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##### Table of Contents



2006
    
    2005Carrying
    
    Fair
    
    Carrying
    
    FairValue
    
    Value
    
    Value
    
    Value(In Thousands)Financial assets:Cash and due from banks
    
    $
    6,896
    
    
    $
    6,896
    
    
    $
    10,489
    
    
    $
    10,489Short-term investments
    
    
    11,871
    
    
    
    11,871
    
    
    
    198
    
    
    
    198Investment securities
    
    
    218,682
    
    
    
    218,682
    
    
    
    260,046
    
    
    
    254,978Federal Home Loan Bank stock
    
    
    10,046
    
    
    
    10,046
    
    
    
    10,097
    
    
    
    10,097Accrued interest receivable
    
    
    2,259
    
    
    
    2,259
    
    
    
    2,458
    
    
    
    2,458Loans, net
    
    
    283,854
    
    
    
    281,665
    
    
    
    230,485
    
    
    
    228,842Financial liabilities:Deposits
    
    
    295,662
    
    
    
    295,012
    
    
    
    303,087
    
    
    
    301,682Borrowed funds
    
    
    184,782
    
    
    
    184,713
    
    
    
    153,380
    
    
    
    154,052Mortgagors escrow accounts
    
    
    586
    
    
    
    586
    
    
    
    506
    
    
    
    506Accrued interest payable
    
    
    756
    
    
    
    756
    
    
    
    513
    
    
    
    513
  55




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##### Table of Contents



(15) CONDENSED PARENT COMPANY FINANCIAL STATEMENTS.
  Balance Sheets
    
    2006
    
    
    2005(In Thousands)Assets:Cash deposits in subsidiaries
    
    $
    1,897
    
    
    $
    247Investment securities held to maturity at amortized cost
    
    
    
    
    
    
    2,881Investment in subsidiary, at equity
    
    
    56,194
    
    
    
    56,615Other assets
    
    
    513
    
    
    
    229Total assets
    
    $
    58,604
    
    
    $
    59,972Liabilities and Stockholders Equity:Liabilities:Accrued income taxes
    
    $
    
    
    
    $
    25Accrued expenses
    
    
    73
    
    
    
    25Total liabilities
    
    
    73
    
    
    
    50Total stockholders equity
    
    
    58,531
    
    
    
    59,922Total liabilities and stockholders equity
    
    $
    58,604
    
    
    $
    59,972
 Statements of Operations
    
    2006
    
    
    2005
    
    
    2004(In Thousands)Dividends from bank subsidiary
    
    $
    
    
    
    $
    1,800
    
    
    $
    4,200Interest income
    
    
    106
    
    
    
    103
    
    
    
    21Total operating income
    
    
    106
    
    
    
    1,903
    
    
    
    4,221Non-interest expenses
    
    
    357
    
    
    
    243
    
    
    
    243Income before income taxes and undistributed earnings
    
    
    (251
    )
    
    
    1,660
    
    
    
    3,978Income tax benefit
    
    
    (88
    )
    
    
    (48
    )
    
    
    (63
    )Income before undistributed earnings of subsidiary
    
    
    (163
    )
    
    
    1,708
    
    
    
    4,041Equity in undistributed earnings of subsidiary
    
    
    289
    
    
    
    2,449
    
    
    
    639Net income
    
    $
    126
    
    
    $
    4,157
    
    
    $
    4,680
  Cash flows
    
    2006
    
    
    2005(In Thousands)Cash flows from operating activities:Net income
    
    $
    126
    
    
    $
    4,157Adjustments to reconcile net income to net cash provided by operating activities:Net distributed earnings of subsidiaries
    
    
    (289
    )
    
    
    (2,449
    )Increase in other assets
    
    
    (284
    )
    
    
    (217
    )Increase in liabilities
    
    
    23
    
    
    
    (22
    )Accretion of discounts on investment securities
    
    
    (19
    )
    
    
    (103
    )Net cash (used) provided by operating activities
    
    
    (443
    )
    
    
    1,366Cash flows from investing activities:Purchases of investment securities held to maturity
    
    
    
    
    
    
    (32,882
    )Proceeds from maturities of investment securities
    
    
    2,900
    
    
    
    33,100Net cash provided by investing activities
    
    
    2,900
    
    
    
    218Cash flows from financing activities:Proceeds from exercise of stock options and tax benefits
    
    
    1,735
    
    
    
    723Dividends paid
    
    
    (2,542
    )
    
    
    (2,484
    )Net cash used in financing activities
    
    
    (807
    )
    
    
    (1,761
    )Net (decrease) increase in cash and cash equivalents
    
    
    1,650
    
    
    
    (177
    )Cash and cash equivalents, beginning of year
    
    
    247
    
    
    
    424Cash and cash equivalents, end of year
    
    $
    1,897
    
    
    $
    247Supplemental scheduled non-cash activities:Adjustments to initially apply SFAS No. 158 on subsidiary
    
    $
    450
    
    
    $
    
 56




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##### Table of Contents



(16) Quarterly Results of Operations (Unaudited)
 2006March
    
    
    June
    
    
    September
    
    
    December31
    
    
    30
    
    
    30
    
    
    31(In Thousands, Except Per Share Data)Interest and dividend income
    
    $
    6,535
    
    
    $
    7,047
    
    
    $
    7,553
    
    
    $
    7,821Interest expense
    
    
    3,241
    
    
    
    3,744
    
    
    
    3,924
    
    
    
    4,253Net interest income
    
    
    3,294
    
    
    
    3,303
    
    
    
    3,629
    
    
    
    3,568Provision for loan losses
    
    
    
    
    
    
    30
    
    
    
    30
    
    
    
    100Net interest income after provision for loan losses
    
    
    3,294
    
    
    
    3,273
    
    
    
    3,599
    
    
    
    3,468Loss on sale of investments
    
    
    
    
    
    
    (2,417)
    (1)
    
    
    
    
    
    
    Curtailment gain on pension termination
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    602
    (3)Non-interest income
    
    
    330
    
    
    
    343
    
    
    
    327
    
    
    
    410Non-interest expense
    
    
    3,223
    
    
    
    4,149
    (2)
    
    
    2,645
    
    
    
    3,000Income (loss) before income tax
    
    
    401
    
    
    
    (2,950
    )
    
    
    1,281
    
    
    
    1,480Income tax expense(benefit)
    
    
    141
    
    
    
    (1,008
    )
    
    
    473
    
    
    
    480Net income (loss)
    
    $
    260
    
    
    $
    (1,942
    )
    
    $
    808
    
    
    $
    1,000Basic earnings per share
    
    $
    0.06
    
    
    $
    (0.43
    )
    
    $
    0.18
    
    
    $
    0.22Diluted earnings per share
    
    $
    0.06
    
    
    $
    (0.42
    )
    
    $
    0.18
    
    
    $
    0.22
 (1)
    
    Includes losses of $2.4 million realized from a balance sheet restructuring of the investment
portfolio.(2)
    
    Includes $800,000 in costs related to the name change of the Companys subsidiary bank to
RiverBank and former employee severance payments.(3)
    
    Includes a pre-tax gain of $602,000 due to the curtailment gain on the pension plan
termination.
 2005March
    
    
    June
    
    
    September
    
    
    December31
    
    
    30
    
    
    30
    
    
    31(In Thousands, Except Per Share Data)Interest and dividend income
    
    $
    6,109
    
    
    $
    6,495
    
    
    $
    6,467
    
    
    $
    6,487Interest expense
    
    
    2,555
    
    
    
    2,964
    
    
    
    3,012
    
    
    
    3,107Net interest income
    
    
    3,554
    
    
    
    3,531
    
    
    
    3,455
    
    
    
    3,380Provision for loan losses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net interest income after provision for loan losses
    
    
    3,554
    
    
    
    3,531
    
    
    
    3,455
    
    
    
    3,380Non-interest income
    
    
    365
    
    
    
    387
    
    
    
    381
    
    
    
    432Lawsuit judgment collected
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,223
    (1)Non-interest expense
    
    
    2,581
    
    
    
    2,760
    
    
    
    2,507
    
    
    
    3,296
    (2)Income before income tax
    
    
    1,338
    
    
    
    1,158
    
    
    
    1,329
    
    
    
    2,739Income tax expense
    
    
    479
    
    
    
    400
    
    
    
    472
    
    
    
    1,056Net income
    
    $
    859
    
    
    $
    758
    
    
    $
    857
    
    
    $
    1,683Basic earnings per share
    
    $
    0.20
    
    
    $
    0.17
    
    
    $
    0.19
    
    
    $
    0.38Diluted earnings per share
    
    $
    0.19
    
    
    $
    0.17
    
    
    $
    0.19
    
    
    $
    0.37
 (1)
    
    Includes the Banks receipt of a final distribution of $2.2 million from the bankruptcy
processing of a debtor in December, 2005.(2)
    
    Includes expenses of $533,000 recognized for the contractual obligations to the former
President and Chief Executive Officer due to changes in his employment agreement.
 57




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##### Table of Contents



ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURES
   ITEM 9A. CONTROLS AND PROCEDURES
 A
  ITEM 9B. OTHER INFORMATION
  PART III
 ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
  ITEM 11. EXECUTIVE COMPENSATION
  ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
  ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
  ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
  58




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##### Table of Contents



PART IV
 ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
  (1)
    
    Financial Statements: The following Consolidated Financial Statements of LSB Corporation and Subsidiary for the year ended
December 31, 2006
are included in
Item 8 of Part II
to this report:Report of Management ResponsibilityReport of Independent Registered Public Accounting FirmConsolidated Balance Sheets as of December 31, 2006 and 2005Consolidated Statements of Operations for the years ended December 31, 2006, 2005 and 2004Consolidated Statements of Changes in Stockholders Equity for the years ended December 31, 2006,
2005 and 2004Consolidated Statements of Cash Flows for the years ended December 31, 2006, 2005 and 2004Notes to Consolidated Financial Statements(2)
    
    Financial Statement Schedules: None.(3)
    
    List of Exhibits: The following is a list of exhibits which are either filed or
incorporated by reference as part of this annual report on Form 10-K. Upon request to
Investors Relations, LSB Corporation, 30 Massachusetts Avenue, North Andover, MA 01845,
copies of the individual exhibits will be furnished upon payment of a reasonable
reproduction fee.Exhibits:Number
    
    Description of Exhibit(2)
    
    Plan of Reorganization and Acquisition, dated as of March 12, 2001 between LSB Corporation
and Lawrence Savings Bank (Filed as Exhibit 2.1 to the Companys Current Report on Form 8-K
filed July 2, 2001 and incorporated herein by reference)(3)(i).1
    
    Articles of Organization of LSB Corporation (Filed as Exhibit 3.1 to the Companys
Current Report on Form 8-K filed July 2, 2001 and incorporated herein by reference)(3)(i).2
    
    Articles of Amendment of the Articles of Organization of LSB Corporation, as submitted
for filing in the Office of the Secretary of the Commonwealth of Massachusetts on December 30,
2005 (Filed as Exhibit 3(i).1 to the Companys Current Report on Form 8-K filed January 6,
2006 and incorporated herein by reference)(3)(ii)
    
    By-Laws of LSB Corporation, as amended and restated (Filed as Exhibit 3(ii) to the
Companys 2004 Annual Report on Form 10-K and incorporated herein by reference)(3)(iii)
    
    Lawrence Savings Bank Certificate of Vote of Directors Establishing a Series of a Class
of Stock (Filed as Exhibit 3(iii) to the Companys 2005 Annual Report on Form 10-K and
incorporated herein by reference)(4.1)
    
    Specimen certificate of shares of common stock of the Company (Filed as Exhibit 4.1 to the
Companys Current Report on Form 8-K filed July 2, 2001 and incorporated herein by reference)(4.2)
    
    Renewed Rights Agreement dated as of November 17, 2005, between LSB Corporation and
Computershare Trust Company, N.A., as Rights Agent (Filed as Exhibit 4.1 to the Companys
Current Report on Form 8-K filed January 31, 2006 and incorporated herein by reference)(10.1)
    
    Supplemental Retirement Agreement by and between the Bank and Paul A. Miller dated April 21,
1989 (Filed as Exhibit 10.8 to the Companys Current Report on Form 8-K filed July 2, 2001 and
incorporated herein by reference)*
 59




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##### Table of Contents



Number
    
    Description of Exhibit(10.2)
    
    Supplemental Retirement Agreement by and between the Bank and Paul A. Miller dated
April 21, 1996 (Filed as Exhibit 10.9 to
the Companys Current Report on Form 8-K filed July 2, 2001 and incorporated herein by
reference)*(10.3)
    
    Lawrence Savings Bank 1986 Stock Option Plan (Filed as Exhibit 10.14 to the Companys
Current Report on Form 8-K filed July 2, 2001 and incorporated herein by reference)*(10.4)
    
    Lawrence Savings Bank 1997 Stock Option Plan (Filed as Exhibit 10.15 to the Companys
Current Report on Form 8-K filed July 2, 2001 and incorporated herein by reference)*(10.5)
    
    LSB Corporation 2006 Stock Option and Incentive Plan (Filed as Exhibit 10.1 to the Companys
Form S-8 filed on June 5, 2006)*(10.6)
    
    LSB Corporations Form of Restricted Stock Agreement (Filed as Exhibit 10.1 to the Companys
Current Report on Form 8-K filed December 26, 2006 and incorporated herein by reference)*(10.7)
    
    LSB Corporations Form of Incentive Stock Option Agreement (Filed as Exhibit 10.2 to the
Companys Current Report on Form 8-K filed December 26, 2006 and incorporated herein by
reference)*(10.8)
    
    LSB Corporations Form of Non-Qualified Stock Option Agreement (Filed as Exhibit 10.3 to the
Companys Current Report on Form 8-K filed December 26, 2006 and incorporated herein by
reference)*(10.9)
    
    LSB Corporation and River Bank Employee Stock Ownership Plan (Filed as Exhibit 10.1 to the
Companys Current Report on Form 8-K filed March 19, 2007 and incorporated herein by
reference)*(10.10)
    
    LSB Corporation and River Bank Special Termination Plan (Filed as Exhibit 10.1 to the
Companys Current Form 10-Q filed August 14, 2006 and incorporated herein by reference).*(10.11)
    
    LSB Corporation and River Bank Special Termination Agreement with Gerald T. Mulligan (Filed
as Exhibit 10.2 to the Companys Current Form 10-Q filed August 14, 2006 and incorporated
herein by reference)*(10.12)
    
    LSB Corporation and River Bank Special Termination Agreement with Michael J. Ecker (Filed
as Exhibit 10.3 to the Companys Current Form 10-Q filed August 14, 2006 and incorporated
herein by reference)*(10.13)
    
    LSB Corporation and River Bank Special Termination Agreement with Stephen B. Jones (Filed
as Exhibit 10.4 to the Companys Current Form 10-Q filed August 14, 2006 and incorporated
herein by reference)*(10.14)
    
    LSB Corporation and River Bank Special Termination Agreement with Diane L. Walker (Filed as
Exhibit 10.5 to the Companys Current Form 10-Q filed August 14, 2006 and incorporated herein
by reference)*(13)
    
    2006 Annual Report to Stockholders of LSB Corporation enclosed herein (furnished solely for
the Commissions information)(14)
    
    LSB Corporation and River Bank Code of Professional Conduct (Filed as Exhibit 99.1 to the
Companys Current Report on Form 8-K filed November 20, 2006 and incorporated herein by
reference)(21)
    
    Subsidiary of LSB Corporation and subsidiaries of River Bank(23.1)
    
    Consent of KPMG LLP(31.1)
    
    Certification of Chief Executive Officer under Section 302 of the Sarbanes-Oxley Act of 2002(31.2)
    
    Certification of Chief Financial Officer under Section 302 of the Sarbanes-Oxley Act of 2002(32.1)
    
    Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350 as added by
Section 906 of the Sarbanes-Oxley Act of 2002(32.2)
    
    Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350 as added by
Section 906 of the Sarbanes-Oxley Act of 2002
  
 *
    
    Management contract or compensatory plan or arrangement
 60




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##### Table of Contents



SIGNATURES
   By: /s/ Gerald T. Mulligan
  Signature
    
    Title
    
    Date/s/ Gerald T. Mulligan

Gerald T. Mulligan
    
    President, Chief Executive Officer and Director
(Principal Executive Officer)
    
    March 22, 2007/s/ Diane L. Walker

Diane L. Walker
    
    Executive Vice President, Treasurer and
Chief Financial Officer
(Principal Financial and Principal Accounting
Officer)
    
    March 22, 2007/s/ Thomas J. Burke

Thomas J. Burke
    
    Chairman of the Board
Director
    
    March 22, 2007/s/ Eugene A. Beliveau

Eugene A. Beliveau
    
    Director
    
    March 22, 2007/s/ Kathleen Boshar Reynolds
Kathleen Boshar Reynolds
    
    Director
    
    March 22, 2007/s/ Malcolm W. Brawn

Malcolm W. Brawn
    
    Director
    
    March 22, 2007/s/ Byron R. Cleveland, Jr.

Byron R. Cleveland, Jr.
    
    Director
    
    March 22, 2007/s/ Richard Hart Harrington
Richard Hart Harrington
    
    Director
    
    March 22, 2007/s/ Robert F. Hatem

Robert F. Hatem
    
    Director
    
    March 22, 2007/s/ Marsha A. McDonough

Marsha A. McDonough
    
    Director
    
    March 22, 2007
 61