##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20529 FORM 10-Q x      Quarterly Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934 For the quarterly period ended March 31, 2004 o      Transition Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
For the transition period from _____ to _____ Commission File Number 000-32955    LSB Corporation     Massachusetts
(State or other jurisdiction of
incorporation or organization)
    
    04-3557612
(I.R.S. Employer
Identification Number)30 Massachusetts Avenue, North Andover, MA
(Address of principal executive offices)
    
    01845
(Zip Code)
    (978) 725-7500
(Registrants telephone number, including area code)    Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such report), and (2) has been subject to such
filing requirements for the past 90 days. Yes x
    
    No o
   Indicate by a check mark whether the registrant is an accelerated filer
(as defined in Rule 12b-2 of the Exchange Act). Yes o
    
    No x
   Indicate the number of shares outstanding of each of the registrants
classes of common stock, as of the latest practicable date. Class
Common Stock, par value $.10 per share
    
    Outstanding as of April 30, 2004
4,306,442 shares




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##### Table of Contents



LSB CORPORATION AND SUBSIDIARY INDEX PagePART I  FINANCIAL INFORMATIONITEM 1
    
    FINANCIAL STATEMENTS:Consolidated Balance Sheets
    
    
    3Consolidated Statements of Income
    
    
    4Consolidated Statements of Changes in Stockholders Equity
    
    
    5Consolidated Statements of Cash Flows
    
    
    6Notes to Consolidated Financial Statements
    
    
    7-8ITEM 2
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS:Financial Condition:Investment Portfolio
    
    
    10Loan Portfolio
    
    
    10Allowance for Loan Losses
    
    
    11Risk Assets
    
    
    11-12Deposit Portfolio
    
    
    12Results of Operations:Three Months ended March 31, 2004 and 2003
    
    
    12Loan Interest Income
    
    
    13Deposit Interest Expense
    
    
    14Liquidity and Capital Resources
    
    
    15ITEM 3
    
    QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
    
    
    15ITEM 4
    
    CONTROLS AND PROCEDURES
    
    
    16PART II  OTHER INFORMATIONITEM 1
    
    LEGAL PROCEEDINGS
    
    
    17ITEM 2
    
    CHANGES IN SECURITIES
    
    
    17ITEM 3
    
    DEFAULTS UPON SENIOR SECURITIES
    
    
    17ITEM 4
    
    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
    
    
    17ITEM 5
    
    OTHER INFORMATION
    
    
    17ITEM 6
    
    EXHIBITS AND REPORTS ON FORM 8-K
    
    
    18SIGNATURES
    
    
    19EXHIBIT INDEX
    
    
    20EX-31.1 SECT. 302 CERTIFICATION OF C.E.O.EX-31.2 SECT. 302 CERTIFICATION OF C.F.O.EX-32.1 SECT. 906 CERTIFICATION OF C.E.O.EX-32.2 SECT. 906 CERTIFICATION OF C.F.O.
 2




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PART 1  FINANCIAL INFORMATION 
 ITEM 1. FINANCIAL STATEMENTS 
 LSB CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(UNAUDITED) March 31,
    
    December 31,2004
    
    2003(In Thousands, Except Share Data)ASSETSAssets:Cash and due from banks
    
    $
    8,591
    
    
    $
    7,872Federal funds sold
    
    
    5,018
    
    
    
    889Total cash and cash equivalents
    
    
    13,609
    
    
    
    8,761Investment securities held to maturity (market value of
$192,641 in 2004 and $184,592 in 2003)
    
    
    190,290
    
    
    
    184,286Investment securities available for sale (amortized cost of
$45,840 in 2004 and $48,571 in 2003)
    
    
    46,015
    
    
    
    48,592Federal Home Loan Bank stock, at cost
    
    
    6,892
    
    
    
    6,593Loans, net of allowance for loan losses
    
    
    214,372
    
    
    
    207,283Bank premises and equipment
    
    
    3,048
    
    
    
    2,875Accrued interest receivable
    
    
    2,964
    
    
    
    2,552Deferred income tax asset
    
    
    3,458
    
    
    
    3,519Other assets
    
    
    1,381
    
    
    
    1,647Total assets
    
    $
    482,029
    
    
    $
    466,108LIABILITIES AND STOCKHOLDERS EQUITYLiabilities:Interest bearing deposits
    
    $
    264,736
    
    
    $
    258,430Non-interest bearing deposits
    
    
    16,150
    
    
    
    14,110Federal Home Loan Bank advances
    
    
    98,841
    
    
    
    78,866Securities sold under agreements to repurchase
    
    
    2,970
    
    
    
    2,486Other borrowed funds
    
    
    39,000
    
    
    
    52,000Advance payments by borrowers for taxes and insurance
    
    
    557
    
    
    
    450Other liabilities
    
    
    4,146
    
    
    
    4,764Total liabilities
    
    
    426,400
    
    
    
    411,106Stockholders equity:Preferred stock, $.10 par value per share:5,000,000 shares authorized, none issued
    
    
    
    
    
    
    Common stock, $.10 par value per share;20,000,000 shares authorized;4,512,442 and 4,454,262 shares issued at March 31, 2004 and
December 31, 2003, respectively, and 4,293,142 and 4,234,962 shares
outstanding at March 31, 2004 and December 31, 2003, respectively
    
    
    451
    
    
    
    445Additional paid-in capital
    
    
    58,644
    
    
    
    58,350Accumulated deficit
    
    
    (822
    )
    
    
    (1,055
    )Treasury stock, at cost (219,300 shares)
    
    
    (2,758
    )
    
    
    (2,758
    )Accumulated other comprehensive income
    
    
    114
    
    
    
    20Total stockholders equity
    
    
    55,629
    
    
    
    55,002Total liabilities and stockholders equity
    
    $
    482,029
    
    
    $
    466,108
 The accompanying notes are an integral part of these unaudited Consolidated
Financial Statements. 3




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LSB CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED) Three months ended March 31,2004
    
    2003(In Thousands, Except Share Data)Interest and dividend income:Loans
    
    $
    3,303
    
    
    $
    3,948Investment securities held to maturity
    
    
    1,669
    
    
    
    1,129Investment securities available for sale
    
    
    428
    
    
    
    493Federal Home Loan Bank stock
    
    
    36
    
    
    
    51Other interest and dividend income
    
    
    6
    
    
    
    41Total interest and dividend income
    
    
    5,442
    
    
    
    5,662Interest expense:Deposits
    
    
    828
    
    
    
    1,150Federal Home Loan Bank advances
    
    
    1,052
    
    
    
    1,203Securities sold under agreements to repurchase
    
    
    3
    
    
    
    5Other borrowed funds
    
    
    136
    
    
    
    41Total interest expense
    
    
    2,019
    
    
    
    2,399Net interest income
    
    
    3,423
    
    
    
    3,263Provision for loan losses
    
    
    
    
    
    
    Net interest income after provision for loan losses
    
    
    3,423
    
    
    
    3,263Non-interest income:Loan servicing fees
    
    
    20
    
    
    
    (130
    )Deposit account fees
    
    
    202
    
    
    
    163Gains on sales of mortgage loans
    
    
    11
    
    
    
    149Other income
    
    
    89
    
    
    
    98Total non-interest income
    
    
    322
    
    
    
    280Non-interest expense:Salaries and employee benefits
    
    
    1,622
    
    
    
    1,651Occupancy and equipment expenses
    
    
    197
    
    
    
    220Professional expenses
    
    
    115
    
    
    
    201Data processing expenses
    
    
    200
    
    
    
    181Other expenses
    
    
    354
    
    
    
    419Total non-interest expenses
    
    
    2,488
    
    
    
    2,672Income before income tax expense
    
    
    1,257
    
    
    
    871Income tax expense
    
    
    471
    
    
    
    321Net income
    
    $
    786
    
    
    $
    550Average shares outstanding
    
    
    4,263,637
    
    
    
    4,214,363Average diluted shares outstanding
    
    
    4,455,979
    
    
    
    4,357,883Basic earnings per share
    
    $
    0.18
    
    
    $
    0.13Diluted earnings per share
    
    $
    0.18
    
    
    $
    0.13
 The accompanying notes are an integral part of these unaudited Consolidated
Financial Statements. 4




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LSB CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 2004 AND 2003
(UNAUDITED) AccumulatedAdditional
    
    
    
    
    
    Other
    
    TotalCommon
    
    Paid-In
    
    (Accumulated
    
    Treasury
    
    Comprehensive
    
    Stockholders'Stock
    
    Capital
    
    Deficit)
    
    Stock
    
    Income
    
    Equity(In Thousands, Except Share Data)Balance at December 31, 2002
    
    $
    439
    
    
    $
    57,845
    
    
    $
    (3,168
    )
    
    $
    (1,736
    )
    
    $
    679
    
    
    $
    54,059Net income
    
    
    
    
    
    
    
    
    
    
    550
    
    
    
    
    
    
    
    
    
    
    
    550Other comprehensive income:Unrealized gain on securities
available for sale (tax effect $4)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12
    
    
    
    12Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    562Exercise of stock options
    
    
    3
    
    
    
    164
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    167Dividends declared and paid
($0.12 per share)
    
    
    
    
    
    
    
    
    
    
    (505
    )
    
    
    
    
    
    
    
    
    
    
    (505
    )Purchase of 82,800 shares of Treasury
Stock, at cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,022
    )
    
    
    
    
    
    
    (1,022
    )Balance at March 31, 2003
    
    $
    442
    
    
    $
    58,009
    
    
    $
    (3,123
    )
    
    $
    (2,758
    )
    
    $
    691
    
    
    $
    53,261
 AccumulatedAdditional
    
    
    
    
    
    Other
    
    TotalCommon
    
    Paid-In
    
    (Accumulated
    
    Treasury
    
    Comprehensive
    
    Stockholders'Stock
    
    Capital
    
    Deficit)
    
    Stock
    
    Income
    
    EquityBalance at December 31, 2003
    
    $
    445
    
    
    $
    58,350
    
    
    $
    (1,055
    )
    
    $
    (2,758
    )
    
    $
    20
    
    
    $
    55,002Net income
    
    
    
    
    
    
    
    
    
    
    786
    
    
    
    
    
    
    
    
    
    
    
    786Other comprehensive income:Unrealized loss on securities
available for sale (tax effect $61)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    94
    
    
    $
    94Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    880Exercise of stock options
    
    
    6
    
    
    
    294
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    300Dividends declared and paid
($0.13 per share)
    
    
    
    
    
    
    
    
    
    
    (553
    )
    

    
    
    
    

    
    
    
    
    
    (553
    )Balance at March 31, 2004
    
    $
    451
    
    
    $
    58,644
    
    
    $
    (822
    )
    
    $
    (2,758
    )
    
    $
    114
    
    
    $
    55,629
 The accompanying notes are an integral part of these unaudited Consolidated
Financial Statements. 5




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LSB CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED) Three months endedMarch 31,2004
    
    2003(In Thousands)Cash flows from operating activities:Net income
    
    $
    786
    
    
    $
    550Adjustments to reconcile net income to net cash provided by operating activities:Gains on sales of mortgage loans
    
    
    (11
    )
    
    
    (149
    )Net amortization of investment securities
    
    
    453
    
    
    
    348Depreciation of premises and equipment
    
    
    84
    
    
    
    114Loans originated for sale
    
    
    (1,497
    )
    
    
    (5,881
    )Proceeds from sales of mortgage loans
    
    
    884
    
    
    
    6,511(Increase) decrease in accrued interest receivable
    
    
    (412
    )
    
    
    111Decrease in deferred income tax asset
    
    
    
    
    
    
    271Decrease in other assets
    
    
    264
    
    
    
    371Increase in advance payments by borrowers
    
    
    107
    
    
    
    70(Decrease) increase in other liabilities
    
    
    (618
    )
    
    
    56Net cash provided by operating activities
    
    
    40
    
    
    
    2,372Cash flows from investing activities:Proceeds from maturities of investment securities held to maturity
    
    
    1,000
    
    
    
    134,400Proceeds from maturities of investment securities available for sale
    
    
    1,585
    
    
    
    2,000Purchases of investment securities held to maturity
    
    
    (11,527
    )
    
    
    (123,868
    )Purchases of mortgage-backed securities held to maturity
    
    
    
    
    
    
    (15,304
    )Purchases of investment securities available for sale
    
    
    
    
    
    
    (4,165
    )Purchase of mutual fund available for sale
    
    
    
    
    
    
    (1,000
    )Purchases of mortgage-backed securities available for sale
    
    
    
    
    
    
    (8,461
    )Purchases of Federal Home Loan Bank stock
    
    
    (299
    )
    
    
    Principal payments of securities held to maturity
    
    
    4,124
    
    
    
    11,259Principal payments of securities available for sale
    
    
    1,092
    
    
    
    1,352(Increase) decrease in loans, net
    
    
    (6,465
    )
    
    
    13,939Proceeds from payments on OREO
    
    
    3
    
    
    
    3Purchases of Bank premises and equipment
    
    
    (257
    )
    
    
    (13
    )Net cash (used in) provided by investing activities
    
    
    (10,744
    )
    
    
    10,142Cash flows from financing activities:Net increase in deposits
    
    
    8,346
    
    
    
    337Additions to Federal Home Loan Bank advances
    
    
    20,000
    
    
    
    Payments on Federal Home Loan Bank advances
    
    
    (25
    )
    
    
    (456
    )Net increase (decrease) in agreements to repurchase securities
    
    
    484
    
    
    
    (1,286
    )Net decrease in other borrowed funds
    
    
    (13,000
    )
    
    
    (1,270
    )Treasury stock purchased
    
    
    
    
    
    
    (1,022
    )Dividends paid
    
    
    (553
    )
    
    
    (505
    )Proceeds from exercise of stock options
    
    
    300
    
    
    
    167Net cash provided by (used in) financing activities
    
    
    15,552
    
    
    
    (4,035
    )Net increase in cash and cash equivalents
    
    
    4,848
    
    
    
    8,479Cash and cash equivalents, beginning of period
    
    
    8,761
    
    
    
    16,769Cash and cash equivalents, end of period
    
    $
    13,609
    
    
    $
    25,248Cash paid during the period for:Interest on deposits
    
    $
    827
    
    
    $
    1,134Interest on borrowed funds
    
    
    1,171
    
    
    
    1,253Income taxes
    
    
    1,145
    
    
    
    115Supplemental Schedule of non-cash activities:Net change in valuation of investment securities available for sale
    
    
    154
    
    
    
    16
 The accompanying notes are an integral part of these unaudited Consolidated
Financial Statements. 6




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LSB CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2004
(UNAUDITED) 1.  BASIS OF PRESENTATION LSB Corporation (the Corporation or the Company) is a Massachusetts
corporation and the holding company of its wholly-owned subsidiary Lawrence
Savings Bank (the Bank) a state-chartered Massachusetts savings bank. The
Corporation was organized by the Bank on July 1, 2001 to be a bank holding
company and to acquire all of the capital stock of the Bank. The Corporation is supervised by the Board of Governors of the Federal Reserve
System (FRB), and it is also subject to the jurisdiction of the Massachusetts
Division of Banks, while the Bank is subject to the regulations of, and
periodic examination by, the Federal Deposit Insurance Corporation (FDIC) and
the Massachusetts Division of Banks. The Banks deposits are insured by the
Bank Insurance Fund of the FDIC up to $100,000 per account, as defined by the
FDIC, and the Depositors Insurance Fund (DIF) for customer deposit amounts in
excess of $100,000. The Consolidated Financial Statements include the accounts
of LSB Corporation and its wholly-owned consolidated subsidiary, Lawrence
Savings Bank, and its wholly-owned subsidiaries, Shawsheen Security
Corporation, Shawsheen Security Corporation II, Pemberton Corporation, and
Spruce Wood Realty Trust. All inter-company balances and transactions have
been eliminated in consolidation. The Company has one reportable operating
segment. Certain amounts in prior periods have been re-classified to conform
to the current presentation. The Corporations Consolidated Financial Statements have been prepared in
conformity with accounting principles generally accepted in the United States
of America. Accordingly, management is required to make estimates and
assumptions that affect amounts reported in the balance sheets and statements
of income. Actual results could differ significantly from those estimates and
judgments. Material estimates that are particularly susceptible to change
relate to the allowance for loan losses, income taxes and mortgage servicing
rights. The interim results of consolidated income are not necessarily indicative of
the results for any future interim period or for the entire year. These
interim Consolidated Financial Statements do not include all disclosures
associated with annual financial statements and, accordingly, should be read in
conjunction with the annual Consolidated Financial Statements and accompanying
notes included in the Companys Annual Report on Form 10-K as of and for the
year ended December 31, 2003 filed with the Securities and Exchange Commission. 2.  STOCK OPTIONS The Corporation measures compensation cost for stock-based plans using the
intrinsic value method. The intrinsic value method measures compensation cost,
if any, as the fair market value of the Companys stock at the grant date over
the exercise price. All options granted have an exercise price equivalent to
the fair market value at the date of grant and, accordingly, no compensation
cost has been recorded. If the fair value based method of accounting for stock
options had been used, the Companys net income and earnings per share would
have been reduced to the proforma amounts for the three months ended March 31,
and are presented in the table which follows: Three months ended3/31/04
    
    3/31/03(In Thousands, Except Share Data)Net income:As Reported
    
    $
    786
    
    
    $
    550Less: Pro forma stock based compensation cost (net of taxes)
    
    
    104
    
    
    
    44Pro forma
    
    $
    682
    
    
    $
    506Basic earnings per share:As Reported
    
    $
    0.18
    
    
    $
    0.13Pro forma
    
    
    0.16
    
    
    
    0.12Diluted earnings per share:As Reported
    
    $
    0.18
    
    
    $
    0.13Pro forma
    
    
    0.15
    
    
    
    0.12
 The fair value of each option grant is estimated on the date of grant using the
Black-Scholes option-pricing model with the following weighted average
assumptions used for grants in 2004; expected volatility of 28.9%, expected
average life of 8 years, and risk-free interest rates of 3.4% and expected
dividend yield of 3.08%. 7




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3.  DEFINED BENEFIT PLAN The Company provides pension benefits for its employees through membership in
the Savings Bank Employees Retirement Association (the Plan). The Plan is a
multiple-employer, non-contributory, defined benefit plan. Bank employees
become eligible after attaining 21 years of age and completing one year of
service. Additionally, benefits become fully vested after three years of
eligible service. The Companys annual contribution to the Plan is based upon
standards established by the Employee Retirement Income Security Act. The
contribution is based on an actuarial method intended to provide not only for
benefits attributable to service date, but also for those expected to be earned
in the future. The Company expects to contribute approximately $372 thousand
during the Plan Year ending at October 31, 2004. Net pension cost components for the quarter ended March 31, follow: 2004
    
    2003(In Thousands)Service cost
    
    $
    104
    
    
    $
    89Interest cost
    
    
    106
    
    
    
    102Expected return on plan assets
    
    
    (121
    )
    
    
    (106
    )Amortization of net gains
    
    
    
    
    
    
    Net amortization and deferrals
    
    
    (1
    )
    
    
    (1
    )Net periodic pension cost
    
    $
    88
    
    
    $
    84
 4.  CONTINGENCIES The Bank was awarded a $4.2 million judgment in 1997. The Bank prevailed on
this matter in Appeals Court. The Bank expects to collect this judgment, at
least in substantial part, which will have a favorable impact to the Companys
Consolidated Financial Statements. On February 13, 2002, the defendant filed
bankruptcy under Chapter 7 (liquidation). Post-judgment interest accrues from
the date of the judgment to February 13, 2002 and approximates $1.9 million.
However, collectibility of post-judgment interest in addition to the $4.2
million award has not yet been determined. Bids of approximately $3.3 million for the major assets were approved by the
Bankruptcy Court on October 14, 2002. The net amount to be received by the
Bank after taxes and bankruptcy expenses is not known at this time. However,
it is not likely that the full $4.2 million judgment and post-judgment interest
of $1.9 million will be collected. On February 26, 2004, the Company reported in a press release that the
Bankruptcy Trustee filed a motion seeking Bankruptcy Court approval to make an
interim distribution to the Bank of approximately $2.6 million. The Bank has
agreed to return any of the interim distribution as would be necessary to pay
additional taxes imposed on the bankruptcy estate in the event reserves set
aside for taxes are insufficient. Subsequent to the press release on February
26, 2004, management became aware of approximately $120 thousand in additional
expenses associated with the interim distribution in which the Company would
receive approximately $2.4 million after these expenses. The diluted earnings
per share impact on the proposed interim distribution are approximately $0.35
per share based on estimated average shares outstanding for the quarter ended
March 31, 2004. This impact will be recognized in the Companys reported
financial results when the proposed interim distribution is approved by the
Bankruptcy Court. It is managements opinion the timing and final amount to be collected can not
be determined at this time. Accordingly, no recognition of this matter has
been recorded in the Companys unaudited Consolidated Financial Statements at
March 31, 2004. 5.  RECENT ACCOUNTING DEVELOPMENTS In December 2003, the American Institute of Certified Public Accountants
(AICPA) issued Statement of Position 03-3 (SOP 03-3): Accounting for
Certain Loans or Debt Securities Acquired in a Transfer". SOP 03-3 requires
loans acquired through a transfer, such as a business combination, where there
are differences in expected cash flows and contractual cash flows due in part
to credit quality be recognized at their fair value. The excess of contractual
cash flows over expected cash flows is not to be recognized as an adjustment of
yield, loss accrual, or valuation allowance. Valuation allowances can not be
created nor carried over in the initial accounting for loans acquired in a
transfer. This SOP is effective for loans acquired after December 31, 2004,
with early adoption encouraged. The Company does not believe the adoption of
SOP 03-3 will have a material impact on the Companys financial position or
results of operations. 8




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##### Table of Contents



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FORWARD-LOOKING STATEMENTS The Company has made forward-looking statements (within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities and
Exchange Act of 1934 as amended) in this report that are subject to risks and
uncertainties. Forward-looking statements include information concerning
possible or assumed future results of operations of the Company and projected
or anticipated benefits or events related to other future developments
involving the Company or the industry in which it operates. When verbs in the
present tense such as believes, expects, seeks, anticipates,
continues, attempts, or similar expressions are used, forward-looking
statements are being made. Stockholders should note that many factors, some of
which are discussed elsewhere in this report and in the documents which we
incorporate by reference in this report, could affect the future financial
results of the Company and could cause the results to differ materially from
those expressed in or incorporated by reference in this report. Without
limitation, those factors include fluctuations in interest rates, inflation,
government regulations and economic conditions and competition, as well as,
possible infrastructure disruptions due to weather, terrorist activity,
computer capacity overload or other factors in the geographic and business
areas in which the Company conducts its operations. As a result of such risks
and uncertainties, the Companys actual results may differ materially from such
forward-looking statements. The Company does not undertake, and specifically
disclaims any obligation to publicly release revisions to any such
forward-looking statements to reflect the occurrence of anticipated or
unanticipated events or circumstances after the date of such statements. EXECUTIVE LEVEL OVERVIEW The Companys financial results are dependent on the following areas of the
income statement: net interest income, provision for loan losses, non-interest
income, non-interest expense and provision for income taxes. Net interest
income is the primary earnings of the Company and the main focus of management.
Net interest income is the difference between interest earned on loans and
investment securities and interest paid on deposits and borrowings. Deposits
and borrowings have short durations and the cost of these funds do not rise and
fall in tandem with loans and investment securities. There are many risks
involved in managing net interest income including, but not limited to
underwriting standards, interest rate and duration risk. These risks have a
direct impact on the level of net interest income. The Company manages these
risks through credit review by an outside firm and the Asset and Liability
Management Committee (ALCO) meetings on a regular basis. The credit review
process reviews loans for underwriting and grading of loan quality while ALCO
reviews the liquidity, interest rate risk and capital resources. Loan quality
has a direct impact on the amount of provisions for loan losses the Company
reports. Non-interest income has a direct impact on earnings of the Company.
Maintenance of customers accounts for loans and deposits generate fee income
depending on the product selected. The Company generates gains on sales of
mortgage loans and receives fee income from servicing loans sold. Non-interest
income is primarily impacted by the volume of transactions from customers,
which could change based on interest rates, pricing and competition. Non-interest expenses include various expenses of the Company which are
controlled by a budget process. Provisions for income taxes are directly related to earnings or implemented tax
strategies of the Company. Changes in the statutory tax rates and the earnings
of the Company, the Bank and its subsidiaries, would effect the amount of
income taxes reported. There are areas in the Consolidated Financial Statements in which significant
estimates or assumptions are used in preparation of the Consolidated Financial
Statements. Management monitors the application of the Companys Critical
Accounting Policies due to the nature and impact of these estimates and
assumptions on earnings. 
 FINANCIAL CONDITION OVERVIEW The Company has maintained risk assets below 1% of total assets for the past
several years. The Company maintains its commitment to servicing the needs of
the local community in the Merrimack Valley area. The Company had total assets
of $482.0 million at March 31, 2004 compared to $466.1 million at December 31,
2003. The increase in asset size at March 31, 2004 from December 31, 2003 is
mainly attributable to an increase of $7.1 million in loans and $7.6 million in
investment securities and Federal funds sold. The funding for these assets
came from an increase in deposits of $8.3 million and an increase in borrowed
funds of $7.5 million since December 2003. 9




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##### Table of Contents



INVESTMENTS The investment securities portfolio totaled $236.3 million or 49.0% of total
assets at March 31, 2004, compared to $232.9 million, or 50.0% of total assets
at December 31, 2003, an increase of $3.4 million from year-end. The change in
mix in the investment securities portfolio was the result of payments and
maturities on asset-backed securities and payments on mortgage-backed
securities. Funds were reinvested in U.S. Government Agency Obligations. The
increase in investment securities was the result of the utilization of excess
funds from deposit growth and an increase in borrowed funds. The following table reflects the components and carrying values of the
investment securities portfolio at March 31, 2004 and December 31, 2003: 3/31/04
    
    12/31/03(In Thousands)Investment securities held to maturity (at amortized cost):US Government Agency obligations
    
    $
    104,587
    
    
    $
    94,798Mortgage-backed securities
    
    
    37,036
    
    
    
    39,467Asset-backed securities
    
    
    30,943
    
    
    
    32,735Corporate obligations
    
    
    16,112
    
    
    
    15,662Municipal obligations
    
    
    1,612
    
    
    
    1,624Total investment securities held to maturity
    
    $
    190,290
    
    
    $
    184,286Investment securities available for sale (at market value):US Treasury obligations
    
    $
    4,920
    
    
    $
    4,795US Government Agency obligations
    
    
    21,394
    
    
    
    21,479Mortgage-backed securities
    
    
    6,428
    
    
    
    6,862Asset-backed securities
    
    
    5,903
    
    
    
    8,091Corporate obligations
    
    
    6,217
    
    
    
    6,228Mutual Funds
    
    
    985
    
    
    
    969Equity securities
    
    
    168
    
    
    
    168Total investment securities available for sale
    
    $
    46,015
    
    
    $
    48,592Total investment securities portfolio
    
    $
    236,305
    
    
    $
    232,878
 
 LOANS The following table reflects the loan portfolio at March 31, 2004 and December
31, 2003: 3/31/04
    
    12/31/03(In Thousands)Residential mortgage loans
    
    $
    57,617
    
    
    $
    57,017Loans held for sale
    
    
    962
    
    
    
    338Equity loans
    
    
    11,280
    
    
    
    10,236Construction loans
    
    
    12,504
    
    
    
    16,040Commercial real estate loans
    
    
    120,933
    
    
    
    112,503Commercial loans
    
    
    14,648
    
    
    
    14,805Consumer loans
    
    
    646
    
    
    
    564Total loans
    
    
    218,590
    
    
    
    211,503Allowance for loan losses
    
    
    (4,218
    )
    
    
    (4,220
    )Total loans, net
    
    $
    214,372
    
    
    $
    207,283
 Total loans increased to $218.6 million or 45.3% of total assets at March 31,
2004 from $211.5 million or 45.4% of total assets at December 31, 2003. The
residential mortgage loan balances have remained fairly level compared to
year-end 2003. The low interest rate environment has been consistent; however,
the refinancing activity of existing mortgages and sales into the secondary
market has slowed during the first quarter of 2004. Construction loans have
declined $3.0 million due to the completion of some projects which have been
transferred into the commercial real estate portfolio. Commercial real estate
and commercial loans have increased due to competitive pricing and an increased
borrower demand for these loans. 10




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##### Table of Contents



ALLOWANCE FOR LOAN LOSSES The following table summarizes changes in the allowance for loan losses for the
three months ended March 31, 2004 and 2003: Three months ended3/31/04
    
    3/31/03(In Thousands)Beginning balance
    
    $
    4,220
    
    
    $
    4,167Provision charged to operations
    
    
    
    
    
    
    Recoveries on loans previously charged-off
    
    
    2
    
    
    
    3Loans charged-off
    
    
    (4
    )
    
    
    Ending balance
    
    $
    4,218
    
    
    $
    4,170
 The balance of the allowance for loan losses reflects managements assessment
of losses and is based on a review of the risk characteristics of the loan
portfolio. The Company considers many factors in determining the adequacy of
the allowance for loan losses. Collateral value on a loan by loan basis,
trends of loan delinquencies on a portfolio segment level, risk classification
identified in the Companys regular review of individual loans, and economic
conditions are primary factors in establishing allowance levels. Management
believes the allowance level is adequate to absorb estimated credit losses
associated with the loan portfolio. The allowance for loan losses reflects
information available to management at the end of each period. 
 RISK ASSETS Risk assets consist of non-performing loans and other real estate owned.
Non-performing loans consist of both a) loans 90 days or more past due, and b)
loans placed on non-accrual because full collection of the principal balance is
in doubt. Other real estate owned (OREO) is comprised of foreclosed properties
where the Company has formally received title or has possession of the
collateral. Properties are carried at the lower of the investment in the
related loan or the estimated fair value of the property or collateral less
selling costs. Fair value of such property or collateral is determined based
upon independent appraisals and other relevant factors. Management
periodically reviews property values and makes adjustments as required. Gains
from sales of properties, net operating expenses and any subsequent provisions
to increase the allowance for losses on real estate acquired by foreclosure are
charged to other real estate owned expenses. Losses are charged to the
allowance. Total risk assets were $106 thousand at March 31, 2004. This represents an
increase of $104 thousand from December 31, 2003 and an increase of $74
thousand from March 31, 2003. These changes were primarily attributable to an
increase in non-performing loans to $106 thousand at March 31, 2004 from zero
at December 31, 2003 and $23 thousand at March 31, 2003. The Company had no
impaired loans at March 31, 2004, December 31, 2003 and March 31, 2003. The following table summarizes the Companys risk assets at March 31, 2004,
December 31, 2003 and March 31, 2003: 3/31/04
    
    12/31/03
    
    3/31/03(Dollars in Thousands)Non-performing loans
    
    $
    106
    
    
    $
    
    
    
    $
    23Other real estate owned
    
    
    
    
    
    
    2
    
    
    
    9Total risk assets
    
    $
    106
    
    
    $
    2
    
    
    $
    32Risk assets as a percent of total assets
    
    
    0.02
    %
    
    
    0.00
    %
    
    
    0.01
    %
 11




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##### Table of Contents



The following table shows the allowance for loan losses as a percent of total
loans at March 31, 2004, December 31, 2003 and March 31, 2003: 3/31/04
    
    12/31/03
    
    3/31/03(Dollars in Thousands)Allowance for loan losses
    
    $
    4,218
    
    
    $
    4,220
    
    
    $
    4,170Allowance for loan losses as a percent of total loans
    
    
    1.93
    %
    
    
    2.00
    %
    
    
    1.82
    %
 The allowance for loan losses has remained fairly consistent at $4.2 million at
the end of March 31, 2004 and December 31, 2003. However, allowance for loan
losses as a percent of total loans has decreased to 1.93% down from 2.00% at
March 31, 2004 and December 31, 2003, respectively. This decrease is due to
the higher balances in the loan portfolio at March 31, 2004 compared to
December 31, 2003. 
 DEPOSITS Total interest bearing deposits amounted to $264.7 million at March 31, 2004
compared to $258.4 million at December 31, 2003, an increase of $6.3 million.
The change from December 31, 2003 is due to an increase in money market
investment accounts, savings accounts and certificates of deposit, partially
offset by a decrease in NOW and Super NOW accounts. Although the total balance
of interest bearing deposits increased, the mix of deposits has changed from
higher interest bearing accounts to lower interest bearing accounts. The following table reflects the components of interest bearing deposits at
March 31, 2004 and December 31, 2003: 3/31/04
    
    12/31/03(In Thousands)NOW and Super NOW accounts
    
    $
    35,613
    
    
    $
    36,108Savings accounts
    
    
    46,142
    
    
    
    44,324Money market investment accounts
    
    
    80,492
    
    
    
    76,148Certificates of deposit
    
    
    74,729
    
    
    
    74,184Retirement accounts
    
    
    27,760
    
    
    
    27,666Total interest bearing deposits
    
    $
    264,736
    
    
    $
    258,430
 
 RESULTS OF OPERATIONS 
 THREE MONTHS ENDED MARCH 31, 2004 AND 2003 OVERVIEW The Company reported net income of $786 thousand or $0.18 diluted earnings per
share and $550 thousand or $0.13 diluted earnings per share for the three
months ended March 31, 2004 and 2003, respectively. The net income increase
was primarily a result of a rise in net interest income of $160 thousand due to
higher average investment securities balances; non-interest income increasing
by $42 thousand primarily attributable to an increase in loan fee income and a
reduction in non-interest expenses of $184 thousand due to a reduction in
professional fees and a reimbursement from an insurance claim recovery. NET INTEREST INCOME FROM OPERATIONS Net interest income for the three months ended March 31, 2004 and 2003 was $3.4
million and $3.3 million, respectively. The net interest rate spread decreased
to 2.75% for the quarter ended March 31, 2004 from 2.79% for the same quarter
of 2003. Interest income in the first quarter of 2004 experienced an overall
decrease due to a declining interest rate environment and lower average loan
balances outstanding from the first quarter of 2003. Interest expense incurred
a similar decline in interest rates resulting in lower rates paid on deposits
and borrowed funds; however, the rates paid on borrowed funds have declined at
a slower pace than rates paid on deposits. 12




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##### Table of Contents



The following table presents the components of net interest income and net
interest rate spread for the three months ended March 31, 2004 and 2003: Income/Expense
    
    Yield/RateThree Months Ended3/31/04
    
    3/31/03
    
    3/31/04
    
    3/31/03(Dollars in Thousands)Interest income and average yield:Loans
    
    $
    3,303
    
    
    $
    3,948
    
    
    
    6.15
    %
    
    
    6.83
    %Investments, mortgage-backed securities
and other earning assets
    
    
    2,139
    
    
    
    1,714
    
    
    
    3.58
    
    
    
    3.74Total
    
    
    5,442
    
    
    
    5,662
    
    
    
    4.80
    
    
    
    5.46Interest expense and average rate paid:Deposits
    
    
    828
    
    
    
    1,150
    
    
    
    1.27
    
    
    
    1.76Federal Home Loan Bank advances
    
    
    1,052
    
    
    
    1,203
    
    
    
    5.15
    
    
    
    5.19Securities sold under agreements to
repurchase and other borrowed funds
    
    
    139
    
    
    
    46
    
    
    
    1.05
    
    
    
    3.36Total
    
    
    2,019
    
    
    
    2,399
    
    
    
    2.05
    
    
    
    2.67Net interest income
    
    $
    3,423
    
    
    $
    3,263Net interest rate spread
    
    
    
    
    
    
    
    
    
    
    2.75
    %
    
    
    2.79
    %Net interest margin
    
    
    
    
    
    
    
    
    
    
    3.02
    %
    
    
    3.15
    %
 
 INTEREST INCOME Interest income for the first quarter of 2004 was $5.4 million as compared to
$5.7 million for the same quarter of 2003. The decrease of $220 thousand in
interest income is due to $420 thousand from lower yields earned on loans and
investment securities, coupled with lower average loan balances, which
decreased interest income by $283 thousand. Partially offsetting these
declines were higher average investment securities balances which increased
interest income by $483 thousand. Yields on loans were 6.15% and 6.83% for the quarters ended March 31, 2004 and
2003, respectively. The impact to interest income due to lower loan yields was
$362 thousand. Lower average loan balances of $216.1 million versus $234.6
million for the quarters ended March 31, 2004 and 2003, respectively, decreased
interest income by $283 thousand. The following table lists the components of loan interest income for the three
months ended March 31, 2004 and 2003: Three months ended3/31/04
    
    3/31/03(In Thousands)Residential mortgage loans
    
    $
    778
    
    
    $
    941Loans held for sale
    
    
    6
    
    
    
    27Equity loans
    
    
    133
    
    
    
    160Construction loans
    
    
    206
    
    
    
    339Commercial real estate loans
    
    
    1,944
    
    
    
    2,068Commercial loans
    
    
    225
    
    
    
    401Consumer loans
    
    
    11
    
    
    
    12Total loan interest income
    
    $
    3,303
    
    
    $
    3,948
 Yields on investment securities were 3.58% and 3.74% for the quarters ended
March 31, 2004 and 2003, respectively, decreasing interest income by $58
thousand. Higher average investment securities balances of $240.3 million
during the first quarter of 2004 versus $186.0 million for the same period in
2003 increased interest income by $483 thousand. 13




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##### Table of Contents



INTEREST EXPENSE Interest expense for the first quarter of 2004 totaled $2.0 million, a decrease
of $380 thousand from the same quarter of 2003. This decrease is primarily due
to lower rates paid on interest bearing liabilities, which impacted interest
expense by $343 thousand. Higher average balances in other borrowed funds
resulted in a $125 thousand increase to interest expense while lower average
balances for FHLB advances decreased interest expense by $151 thousand. Lower
average balances in deposits reduced interest expense by $11 thousand. Rates on deposits were 1.27% and 1.76% for the quarters ended March 31, 2004
and 2003, respectively. This decrease resulted in interest expense decreasing
by $311 thousand. Average deposit balances were $261.3 million for the first
quarter of 2004 versus $264.7 million for the same period in 2003, which
resulted in an $11 thousand decrease to interest expense. The following table lists the components of deposit interest expense for the
three months ended March 31, 2004 and 2003: Three months ended3/31/04
    
    3/31/03(In Thousands)NOW and Super NOW accounts
    
    $
    10
    
    
    $
    10Savings deposit accounts
    
    
    40
    
    
    
    57Money market investment accounts
    
    
    236
    
    
    
    238Certificates of deposit
    
    
    332
    
    
    
    594Retirement accounts
    
    
    210
    
    
    
    251Total deposit interest expense
    
    $
    828
    
    
    $
    1,150
 Rates on FHLB advances were 5.15% and 5.19% for the first quarters of 2004 and
2003, respectively. The decrease in rates paid on FHLB advances had a nominal
impact on interest expense. The average balances of FHLB advances decreased
to $82.1 million in the first quarter 2004 from $93.9 million for the first
quarter of 2003, which resulted in a decrease in interest expense of $151
thousand. Rates on repurchase agreements and other borrowed funds were 1.05% and 3.36%
for the first quarters of 2004 and 2003, respectively. The decrease in rates
paid on these interest bearing liabilities resulted in interest expense
decreasing by $32 thousand. The average balance increased to $53.3 million in
2004 from $5.5 million in 2003, which increased interest expense by $125
thousand. PROVISION FOR LOAN LOSSES The provision for loan losses was zero for the quarters ended March 31, 2004
and 2003. The absence of a provision for loan losses was based on
managements assessment of the adequacy of the allowance based on an evaluation
of the Banks loan portfolio and the level of non-performing loans. The
balance of the allowance for loan losses has remained fairly consistent at $4.2
million at March 31, 2004 and December 31, 2003. NON-INTEREST INCOME Non-interest income amounted to $322 thousand and $280 thousand for the
quarters ended March 31, 2004 and 2003, respectively. The increase in
non-interest income was primarily due to an increase in loan fee income to $20
thousand in 2004 compared to a loss of $130 thousand in 2003. The increase in
loan fees for the first quarter of 2004 can be attributed to a reduction in
provisions for losses on mortgage servicing rights (MSR) to $19 thousand in
2004 compared to $229 thousand in the first quarter of 2003. The reason for
higher provisions for losses on MSR in 2003 is due to higher than normal
prepayment speeds used in the fair value calculation of MSR experienced by the
Company in 2003 compared to 2004. Deposit account fees increased $39 thousand
to $202 thousand in the first quarter of 2004 due to an increase in NOW account
fees of $32 thousand attributable to a new product the Company began offering
to its customers in December 2003. Partially offsetting these increases was a
decrease in gains on sales of mortgage loans declining to $11 thousand from
$149 thousand in the first quarter of 2004 and 2003, respectively, due to a
reduction in loan sales by $5.4 million. 14




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##### Table of Contents



NON-INTEREST EXPENSE Non-interest expense totaled $2.5 million and $2.7 million for the quarters
ended March 31, 2004 and 2003, respectively. Salaries and employee benefits
decreased by $29 thousand in the first quarter 2004 compared to the first
quarter in 2003 mainly due to a lower headcount. Occupancy and equipment
expenses totaled $197 thousand in 2004, a decrease of $23 thousand over 2003
mainly due to a decrease in depreciation expenses and a reduction in building
maintenance and repairs expenses. Professional expenses decreased to $115
thousand in the first quarter 2004 compared to $201 thousand in the same period
in 2003 due to lower legal and consulting fees. Data processing expenses
increased to $200 thousand in the first quarter of 2004 compared to $181
thousand in the same quarter in 2003 due to an increase in service bureau
charges. Other expenses decreased to $354 thousand in 2004s first quarter
compared to $419 thousand in the same period in 2003. Other expenses decreased
due in part to $100 thousand of legal expenses which were reimbursed as part of
an insurance claim recovery in the amount of $197 thousand. Offsetting this
decrease were increases in other operating expenses, marketing and customer
servicing expenses totaling $36 thousand in the aggregate. INCOME TAXES The Company reported an income tax expense of $471 thousand for the quarter
ended March 31, 2004 or an effective income tax rate of 37.5%. This compares
to an income tax expense of $321 thousand for the quarter ended March 31, 2003
or effective income tax rate of 36.9%. The increase in the effective income tax rate in 2004 from 2003 is due to the
Banks State income tax expense increasing as a result of the increase in the
Banks taxable income. 
 LIQUIDITY AND CAPITAL RESOURCES The Companys primary source of funds is cash dividends from its wholly-owned
subsidiary, Lawrence Savings Bank (the Bank). The Bank paid dividends to the
Company in the amount of $550 thousand and $500 thousand during the first
quarter of 2004 and 2003, respectively. The Company made payments of dividends
to shareholders in the amount of $553 thousand and $505 thousand in the first
three months of 2004 and 2003, respectively. The Banks primary sources of funds include collections of principal payments
and repayments on outstanding loans, increases in deposits, advances from the
Federal Home Loan Bank of Boston (FHLB) and securities sold under agreements
to repurchase. The Bank has a line of credit of $6.8 million with the FHLB.
The Bank also has a $5 million unsecured Federal funds line of credit. The FHLB requires member banks to maintain qualified collateral for its
advances. Collateral is comprised of the Banks investments in FHLB stock, its
residential mortgage portfolio and the portion of the investment portfolio
which meets FHLB qualifying collateral requirements and have been designated as
such. The Banks borrowing capacity at the FHLB at March 31, 2004 was $169.5
million. At March 31, 2004, the Companys stockholders equity was $55.6 million as
compared to $55.0 million at December 31, 2003. The change during the first
three months of 2004 occurred due to net income of $786 thousand, $300 thousand
due to the exercise of stock options and an increase of $94 thousand in market
values on securities available for sale, net of taxes. Stockholders equity
was reduced by the declaration of dividends of $553 million. The Companys
leverage ratio at March 31, 2004 and December 31, 2003 was 11.52% and 12.11%,
respectively. The Companys and the Banks total risk based capital ratios
were 19.81% and 19.52% at March 31, 2004, respectively, compared with 20.50%
and 20.25% at December 31, 2003, respectively. The Company exceeds all
regulatory minimum capital ratio requirements set forth by the FRB, and the
Bank exceeds all minimum capital ratio requirements as defined by the FDIC. 
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK The response is incorporated herein by reference to the discussion under the
sub-caption Interest Rate Sensitivity of the caption MANAGEMENTS DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS on pages 19 and
20 of the LSB Corporations Annual Report for the fiscal year ended December
31, 2003. 15




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##### Table of Contents



ITEM 4: CONTROLS AND PROCEDURES The Companys chief executive officer and chief financial officer, after
evaluating the effectiveness of the Companys disclosure controls and
procedures (as defined in the Securities Exchange Act of 1934 Rules 13a-15(e)
and 15d-15(e)) as of the end of the period covered by this quarterly report
(the Evaluation Date), have concluded that as of the Evaluation Date the
Companys disclosure controls and procedures were effective and designed to
ensure that material information relating to the Company and its subsidiaries
would be made known to them by others within those entities. During the period covered by this quarterly report, there were no significant
changes in the Companys internal controls that have materially affected, or
are reasonable likely to materially affect the internal controls over financial
reporting. 16




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##### Table of Contents



PART II  OTHER INFORMATION 
 ITEM 1.   LEGAL PROCEEDINGS The Company is involved in various legal proceedings incidental to its
business. Other than the following matter, management does not believe
resolution of such litigation will have a material effect on the financial
condition and operating results of the Company. The Bank was awarded a $4.2 million judgment in 1997. The Bank prevailed on
this matter in the Commonwealth of Massachusetts Appeals Court. On February
13, 2002, the defendant filed bankruptcy under Chapter 7 (liquidation).
Post-judgment interest accrues from the date of the judgment to February 13,
2002 and approximates $1.9 million. However, collectibility of post-judgment
interest in addition to the $4.2 million award has not yet been determined. Bids of approximately $3.3 million for the major assets of the debtor were
approved by the Bankruptcy Court on October 14, 2002. The net amount to be
received by the Bank after taxes and bankruptcy expenses is not known at this
time. However, it is not likely that the full $4.2 million judgment and
post-judgment interest of $1.9 million will be collected. On February 26, 2004, the Company reported in a press release that the U.S.
Bankruptcy Trustee filed a motion seeking Bankruptcy Court approval to make an
interim distribution to the Bank of approximately $2.6 million. The Bank has
agreed to return any of the interim distribution as would be necessary to pay
additional taxes imposed on the bankruptcy estate in the event reserves set
aside for taxes are insufficient. Subsequent to the press release on February
26, 2004, management became aware of approximately $120 thousand in additional
expenses associated with the interim distribution in which the Company would
receive approximately $2.5 million after these expenses. If approved, the
diluted earnings per share impact on the proposed interim distribution will be
approximately $0.35 per share based on estimated average shares outstanding for
the quarter ended March 31, 2004. The financial impact of any interim
distribution will be recognized in the Companys reported financial results if
and when such interim distribution is approved by the U.S. Bankruptcy Court. It is managements opinion the timing and final amount to be collected can not
be determined at this time. Accordingly, no recognition of this matter has
been recorded in the Companys Consolidated Financial Statements. For further information, please refer to the discussion under the caption
CONTINGENCIES on page 41 of the Corporations Annual Report for the fiscal
year ended December 31, 2003, which is hereby incorporated herein by reference. 
 ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS None. 
 ITEM 3. DEFAULTS UPON SENIOR SECURITIES None. 
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. 
 ITEM 5. OTHER INFORMATION None. 17




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##### Table of Contents



ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K  a.
    
    Exhibits.Please see the Exhibit Index attached hereto.b.
    
    Reports on Form 8-K.The following is a list of Form 8-K filed by LSB Corporation with
the Securities and
Exchange Commission during the quarter ended
March 31, 2004: Date Filed
    
    Items reportedJanuary 21, 2004
    
    LSB Corporations press release announcing the Companys
earnings for the three months and twelve months ended December 31, 2003.January 26, 2004
    
    LSB Corporations press release announcing the Companys
dividend to shareholders for the first quarter 2004.February 27, 2004
    
    LSB Corporations press release reporting Bankruptcy
Trustee Proposes Interim Distribution to Bank Subsidiary, dated February 26, 2004.
 18




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##### Table of Contents



SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized. LSB CORPORATION AND SUBSIDIARYMay 14, 2004
    /s/ Paul A. MillerPaul A. MillerPresident and Chief Executive Officer May 14, 2004
    /s/ John E. SharlandJohn E. SharlandSenior Vice President Chief Financial Officer 19




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##### Table of Contents



LSB CORPORATION AND SUBSIDIARY Quarterly Report on Form 10-Q For Quarter Ended March 31, 2004 
 EXHIBIT INDEX Page31.1
    
    Certification of Chief Executive Officer under Section 302 of the
Sarbanes-Oxley Act of 2002
    
    
    2131.2
    
    Certification of Chief Financial Officer under Section 302 of the
Sarbanes-Oxley Act of 2002
    
    
    2232.1
    
    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
    
    
    2332.2
    
    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
    
    
    24
 20