##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, DC 20549
 FORM 10-Q
 þ
    
    Quarterly Report Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934
 For the quarterly period ended March 31, 2010
 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
 
  þ o
  o o
  Large Accelerated Filer o
    
    Accelerated Filer o
    
    Non-Accelerated Filer o
    
    Smaller Reporting Company þ(Do
not check if a smaller reporting company)
  o þ
  Class
    
    Outstanding as of May 7, 2010Common Stock, par value $.10 per share
    
    4,506,686 shares




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##### 



Page:PART I  FINANCIAL INFORMATIONITEM 1 FINANCIAL STATEMENTSConsolidated Balance Sheets
    
    
    3Consolidated Statements of Income
    
    
    4Consolidated Statements of Changes in Stockholders Equity
    
    
    5Consolidated Statements of Cash Flows
    
    
    6Notes to Consolidated Financial Statements
    
    
    7-12ITEM 2 MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
    
    
    12-21ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
    
    
    21ITEM 4T CONTROLS AND PROCEDURES
    
    
    22PART II  OTHER INFORMATIONITEM 1 LEGAL PROCEEDINGS
    
    
    22ITEM 1A RISK FACTORS
    
    
    22ITEM 6 EXHIBITS
    
    
    22-23SIGNATURES
    
    
    24EXHIBIT INDEX
    
    
    25EX-31.1EX-31.2EX-32.1EX-32.2
  2




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##### Table of Contents



PART 1   FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
  
   March 31,
    
    
    December 31,2010
    
    
    2009(In thousands, except share data)ASSETSAssets:Cash and due from banks
    
    $
    7,940
    
    
    $
    8,615Federal funds sold
    
    
    13,423
    
    
    
    6,597Total cash and cash equivalents
    
    
    21,363
    
    
    
    15,212Investment securities available for sale, at fair value, amortized
cost of $199,546 in 2010 and $224,130 in 2009
    
    
    206,450
    
    
    
    230,533Federal Home Loan Bank stock, at cost
    
    
    11,825
    
    
    
    11,825Loans, net of allowance for loan losses
of $7,277 in 2010 and $7,168 in 2009
    
    
    537,176
    
    
    
    529,451Premises and equipment, net
    
    
    7,700
    
    
    
    7,209Accrued interest receivable
    
    
    2,593
    
    
    
    2,727Deferred income tax asset, net
    
    
    3,998
    
    
    
    4,315Bank-owned life insurance
    
    
    11,235
    
    
    
    11,120Prepaid FDIC insurance
    
    
    2,867
    
    
    
    3,069Other assets
    
    
    1,360
    
    
    
    1,137Total assets
    
    $
    806,567
    
    
    $
    816,598LIABILITIES AND STOCKHOLDERS EQUITYLiabilities:Core deposits
    
    $
    277,762
    
    
    $
    252,389Term deposits
    
    
    226,556
    
    
    
    240,405Total deposits
    
    
    504,318
    
    
    
    492,794Long-term borrowed funds
    
    
    226,930
    
    
    
    245,971Short-term borrowed funds
    
    
    3,095
    
    
    
    7,111Subordinated debt
    
    
    6,000
    
    
    
    6,000Mortgagors escrow accounts
    
    
    1,028
    
    
    
    776Other liabilities
    
    
    3,157
    
    
    
    3,426Total liabilities
    
    
    744,528
    
    
    
    756,078Stockholders equity:Preferred stock, Series A, $.10 par value per share;
5,000,000 shares authorized, none issued
    
    
    
    
    
    
    Common stock, $.10 par value per share;
20,000,000 shares authorized;
4,506,686 shares issued and outstanding at
March 31, 2010 and December 31, 2009, respectively
    
    
    451
    
    
    
    451Additional paid-in capital
    
    
    60,004
    
    
    
    60,004Accumulated deficit
    
    
    (2,571
    )
    
    
    (3,802
    )Accumulated other comprehensive income, net of tax
    
    
    4,155
    
    
    
    3,867Total stockholders equity
    
    
    62,039
    
    
    
    60,520Total liabilities and stockholders equity
    
    $
    806,567
    
    
    $
    816,598
  3




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##### Table of Contents



Three months endedMarch 31,2010
    
    
    2009(In thousands, except share data)Interest and dividend income:Loans
    
    $
    7,706
    
    
    $
    6,677Investment securities available for sale
    
    
    2,379
    
    
    
    3,364Short-term investments
    
    
    8
    
    
    
    4Total interest and dividend income
    
    
    10,093
    
    
    
    10,045Interest expense:Deposits
    
    
    2,231
    
    
    
    2,659Long-term borrowed funds
    
    
    2,495
    
    
    
    2,774Short-term borrowed funds
    
    
    3
    
    
    
    40Subordinated debt
    
    
    129
    
    
    
    Total interest expense
    
    
    4,858
    
    
    
    5,473Net interest income
    
    
    5,235
    
    
    
    4,572Provision for loan losses
    
    
    700
    
    
    
    240Net interest income after provision for loan losses
    
    
    4,535
    
    
    
    4,332Non-interest income:Deposit account fees
    
    
    223
    
    
    
    223Loan servicing fees, net
    
    
    82
    
    
    
    52Gains on sales of securities
    
    
    697
    
    
    
    227Income on bank-owned life insurance
    
    
    115
    
    
    
    124Prepayment penalty on FHLB advances
    
    
    (149
    )
    
    
    Other income
    
    
    123
    
    
    
    105Total non-interest income
    
    
    1,091
    
    
    
    731Non-interest expense:Salaries and employee benefits
    
    
    1,816
    
    
    
    1,743Occupancy and equipment
    
    
    475
    
    
    
    374Data processing
    
    
    240
    
    
    
    241Professional
    
    
    112
    
    
    
    185Marketing
    
    
    145
    
    
    
    142Other real estate owned
    
    
    5
    
    
    
    1FDIC deposit insurance
    
    
    211
    
    
    
    391Other
    
    
    476
    
    
    
    546Total non-interest expense
    
    
    3,480
    
    
    
    3,623Income before income tax expense
    
    
    2,146
    
    
    
    1,440Income tax expense
    
    
    600
    
    
    
    476Net income before preferred stock dividends and accretion
    
    
    1,546
    
    
    
    964Preferred stock dividends and accretion
    
    
    
    
    
    
    (159
    )Net income available to common shareholders
    
    $
    1,546
    
    
    $
    805Average basic common shares outstanding
    
    
    4,506,686
    
    
    
    4,470,941Common stock equivalents
    
    
    2,325
    
    
    
    73Average diluted common shares outstanding
    
    
    4,509,011
    
    
    
    4,471,014Basic earnings per common share
    
    $
    0.34
    
    
    $
    0.18Diluted earnings per common share
    
    $
    0.34
    
    
    $
    0.18
  4




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##### Table of Contents



AccumulatedAdditional
    
    
    
    
    
    
    Other
    
    
    TotalPreferred
    
    
    Common
    
    
    Paid-In
    
    
    Accumulated
    
    
    Comprehensive
    
    
    StockholdersStock
    
    
    Stock
    
    
    Capital
    
    
    Deficit
    
    
    Income
    
    
    Equity(In thousands, except share data)Balance at December 31, 2008
    
    $
    14,455
    
    
    $
    447
    
    
    $
    60,179
    
    
    $
    (6,250
    )
    
    $
    3,311
    
    
    $
    72,142Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,037
    
    
    
    
    
    
    
    5,037Other comprehensive income -
Unrealized gain on securities
available for sale
(tax effect $343)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    556
    
    
    
    556Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,593Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    121
    
    
    
    
    
    
    
    
    
    
    
    121Exercise of stock options
and tax benefits (28,995 shares)
    
    
    
    
    
    
    4
    
    
    
    264
    
    
    
    
    
    
    
    
    
    
    
    268Common dividends declared and
paid ($0.30 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,344
    )
    
    
    
    
    
    
    (1,344
    )Preferred dividends declared
and paid
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (700
    )
    
    
    
    
    
    
    (700
    )Accretion of discount on
preferred stock
    
    
    545
    
    
    
    
    
    
    
    
    
    
    
    (545
    )
    
    
    
    
    
    
    Redemption of preferred stock
    
    
    (15,000
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (15,000
    )Repurchase of warrants issued
with preferred stock
    
    
    
    
    
    
    
    
    
    
    (560
    )
    
    
    
    
    
    
    
    
    
    
    (560
    )Balance at December 31, 2009
    
    
    
    
    
    
    451
    
    
    
    60,004
    
    
    
    (3,802
    )
    
    
    3,867
    
    
    
    60,520Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,546
    
    
    
    
    
    
    
    1,546Other comprehensive income -
Unrealized gain on securities
available for sale
(tax effect $213)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    288
    
    
    
    288Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,834Dividends declared and paid
($0.07 per common share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (315
    )
    
    
    
    
    
    
    (315
    )Balance at March 31, 2010
    
    $
    
    
    
    $
    451
    
    
    $
    60,004
    
    
    $
    (2,571
    )
    
    $
    4,155
    
    
    $
    62,039
  5




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##### Table of Contents



Three months ended March 31,2010
    
    
    2009(In thousands)Cash flows from operating activities:Net income
    
    $
    1,546
    
    
    $
    964Adjustments to reconcile net income to net cash
provided by operating activities:Provision for loan losses
    
    
    700
    
    
    
    240Gains on sales of securities
    
    
    (697
    )
    
    
    (227
    )Net accretion of investment securities
    
    
    (57
    )
    
    
    (202
    )Depreciation and amortization of premises and equipment
    
    
    174
    
    
    
    137Decrease (increase) in accrued interest receivable
    
    
    134
    
    
    
    (61
    )Deferred income tax provision
    
    
    105
    
    
    
    132Stock-based compensation
    
    
    
    
    
    
    8Income on bank-owned life insurance
    
    
    (115
    )
    
    
    (124
    )(Increase) decrease in other assets and prepaid FDIC Insurance
    
    
    (22
    )
    
    
    96(Decrease) increase in other liabilities
    
    
    (269
    )
    
    
    333Net cash provided by operating activities
    
    
    1,499
    
    
    
    1,296Cash flows from investing activities:Proceeds from maturities of investment securities available for sale
    
    
    11,779
    
    
    
    Proceeds from sales of investment securities available for sale
    
    
    15,631
    
    
    
    3,457Purchases of investment securities available for sale
    
    
    (15,844
    )
    
    
    (7,173
    )Principal payments of investment securities available for sale
    
    
    13,772
    
    
    
    20,132Loan originations, net of principal payments
    
    
    (8,425
    )
    
    
    (20,524
    )Loans purchased
    
    
    
    
    
    
    (6,837
    )Purchases of premises and equipment
    
    
    (665
    )
    
    
    (246
    )Net cash provided by (used in) investing activities
    
    
    16,248
    
    
    
    (11,191
    )Cash flows from financing activities:Net increase in deposits
    
    
    11,524
    
    
    
    25,024Additions to long-term borrowed funds
    
    
    9,000
    
    
    
    Payments on long-term borrowed funds
    
    
    (28,041
    )
    
    
    (2,039
    )Net decrease in short-term borrowed funds
    
    
    (4,016
    )
    
    
    (7,366
    )Increase in mortgagors escrow accounts
    
    
    252
    
    
    
    132Dividends paid to preferred shareholders
    
    
    
    
    
    
    (131
    )Dividends paid to common shareholders
    
    
    (315
    )
    
    
    (671
    )Net cash (used in) provided by financing activities
    
    
    (11,596
    )
    
    
    14,949Net increase in cash and cash equivalents
    
    
    6,151
    
    
    
    5,054Cash and cash equivalents, beginning of period
    
    
    15,212
    
    
    
    13,328Cash and cash equivalents, end of period
    
    $
    21,363
    
    
    $
    18,382Cash paid during the period for:Interest on deposits
    
    $
    2,235
    
    
    $
    2,666Interest on borrowed funds
    
    
    2,727
    
    
    
    2,849Income taxes
    
    
    692
    
    
    
    367
  6




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7




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##### Table of Contents



3/31/10
    
    
    12/31/09Amortized
    
    
    Unrealized
    
    
    Fair
    
    
    Amortized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    Losses
    
    
    Value
    
    
    Cost
    
    
    Gains
    
    
    Losses
    
    
    Value(In thousands)Debt securities:U.S. Treasury obligations
    
    $
    5,552
    
    
    $
    254
    
    
    $
    
    
    
    $
    5,806
    
    
    $
    5,557
    
    
    $
    237
    
    
    $
    
    
    
    $
    5,794Government-sponsored
enterprise obligations (1)
    
    
    32,717
    
    
    
    218
    
    
    
    (16
    )
    
    
    32,919
    
    
    
    33,379
    
    
    
    188
    
    
    
    (49
    )
    
    
    33,518Residential mortgage-backed:U.S. government guaranteed
    
    
    14,229
    
    
    
    470
    
    
    
    
    
    
    
    14,699
    
    
    
    16,037
    
    
    
    483
    
    
    
    
    
    
    
    16,520Government-sponsored
enterprises
    
    
    102,532
    
    
    
    5,474
    
    
    
    (6
    )
    
    
    108,000
    
    
    
    118,537
    
    
    
    5,543
    
    
    
    (71
    )
    
    
    124,009Residential collateralized
mortgage obligations:U.S. government guaranteed
    
    
    26,246
    
    
    
    193
    
    
    
    (13
    )
    
    
    26,426
    
    
    
    21,965
    
    
    
    94
    
    
    
    (80
    )
    
    
    21,979Government-sponsored
enterprises
    
    
    13,532
    
    
    
    217
    
    
    
    (1
    )
    
    
    13,748
    
    
    
    21,283
    
    
    
    389
    
    
    
    
    
    
    
    21,672Private-label
    
    
    1,271
    
    
    
    149
    
    
    
    
    
    
    
    1,420
    
    
    
    1,415
    
    
    
    93
    
    
    
    
    
    
    
    1,508Corporate obligations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,489
    
    
    
    
    
    
    
    (111
    )
    
    
    2,378Total debt securities
    
    
    196,079
    
    
    
    6,975
    
    
    
    (36
    )
    
    
    203,018
    
    
    
    220,662
    
    
    
    7,027
    
    
    
    (311
    )
    
    
    227,378Equity securities:Mutual funds
    
    
    1,000
    
    
    
    
    
    
    
    (25
    )
    
    
    975
    
    
    
    1,000
    
    
    
    
    
    
    
    (34
    )
    
    
    966Equity securities
    
    
    2,467
    
    
    
    
    
    
    
    (10
    )
    
    
    2,457
    
    
    
    2,468
    
    
    
    
    
    
    
    (279
    )
    
    
    2,189Total equity securities
    
    
    3,467
    
    
    
    
    
    
    
    (35
    )
    
    
    3,432
    
    
    
    3,468
    
    
    
    
    
    
    
    (313
    )
    
    
    3,155Total investment securities
    
    $
    199,546
    
    
    $
    6,975
    
    
    $
    (71
    )
    
    $
    206,450
    
    
    $
    224,130
    
    
    $
    7,027
    
    
    $
    (624
    )
    
    $
    230,533
 (1)
    
    Government-sponsored enterprise obligations include investment securities issued by
government sponsored enterprises (GSEs) 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 Treasury.  8




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Less Than 12 Months
    
    
    12 Months or Longer
    
    
    TotalUnrealized
    
    
    
    
    
    
    Unrealized
    
    
    
    
    
    
    UnrealizedFair Value
     
    

    Losses
     
    
    Fair Value
     
    

    Losses
     
    
    Fair Value
      
    

    Losses(In thousands)Debt securities:Government-sponsored
enterprise obligations
    
    $
    15,365
    
    
    $
    (16
    )
    
    $
    
    
    
    $
    
    
    
    $
    15,365
    
    
    $
    (16
    )Residential mortgage-
backed securities
    
    
    
    
    
    
    
    
    
    
    1,267
    
    
    
    (6
    )
    
    
    1,267
    
    
    
    (6
    )Residential collateralized
mortgage obligations
    
    
    10,327
    
    
    
    (14
    )
    
    
    
    
    
    
    
    
    
    
    10,327
    
    
    
    (14
    )Total debt securities
    
    
    25,692
    
    
    
    (30
    )
    
    
    1,267
    
    
    
    (6
    )
    
    
    26,959
    
    
    
    (36
    )Equity securities:Mutual funds
    
    
    
    
    
    
    
    
    
    
    975
    
    
    
    (25
    )
    
    
    975
    
    
    
    (25
    )Equity securities
    
    
    
    
    
    
    
    
    
    
    2,030
    
    
    
    (10
    )
    
    
    2,030
    
    
    
    (10
    )Total equity securities
    
    
    
    
    
    
    
    
    
    
    3,005
    
    
    
    (35
    )
    
    
    3.005
    
    
    
    (35
    )Total temporarily impaired
securities
    
    $
    25,692
    
    
    $
    (30
    )
    
    $
    4,272
    
    
    $
    (41
    )
    
    $
    29,964
    
    
    $
    (71
    )
   Amortized Cost
    
    
    Fair Value(In thousands)Debt securities:Within 1 year
    
    $
    978
    
    
    $
    978After 1 year through 5 years
    
    
    44,945
    
    
    
    45,565After 5 years through 10 years
    
    
    22,656
    
    
    
    23,066After 10 years
    
    
    127,500
    
    
    
    133,409Total debt securities
    
    $
    196,079
    
    
    $
    203,018
    9




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##### Table of Contents



March 31, 2010
    
    
    December 31, 2009Carrying
    
    
    Fair
    
    
    Carrying
    
    
    FairValue
    
    
    Value
    
    
    Value
    
    
    Value(In thousands)Financial assets:Cash and due from banks
    
    $
    7,940
    
    
    $
    7,940
    
    
    $
    8,615
    
    
    $
    8,615Short-term investments
    
    
    13,423
    
    
    
    13,423
    
    
    
    6,597
    
    
    
    6,597Investment securities available for sale
    
    
    206,450
    
    
    
    206,450
    
    
    
    230,533
    
    
    
    230,533Federal Home Loan Bank stock
    
    
    11,825
    
    
    
    11,825
    
    
    
    11,825
    
    
    
    11,825Accrued interest receivable
    
    
    2,593
    
    
    
    2,593
    
    
    
    2,727
    
    
    
    2,727Loans, net
    
    
    537,176
    
    
    
    536,693
    
    
    
    529,451
    
    
    
    526,087Financial liabilities:Core deposits
    
    
    277,762
    
    
    
    277,762
    
    
    
    252,389
    
    
    
    252,389Certificates of deposit
    
    
    226,556
    
    
    
    230,326
    
    
    
    240,405
    
    
    
    244,002Borrowed funds
    
    
    236,025
    
    
    
    249,788
    
    
    
    259,082
    
    
    
    272,320Mortgagors escrow accounts
    
    
    1,028
    
    
    
    1,028
    
    
    
    776
    
    
    
    776Accrued interest payable
    
    
    882
    
    
    
    882
    
    
    
    987
    
    
    
    987
    10




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##### Table of Contents



2010
    
    Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    Fair Value(In thousands)Investment securities available for sale:U.S. Treasury obligations
    
    $
    5,806
    
    
    $
    
    
    
    $
    
    
    
    $
    5,806All other debt securities
    
    
    
    
    
    
    197,212
    
    
    
    
    
    
    
    197,212Equity securities
    
    
    2,030
    
    
    
    977
    
    
    
    425
    
    
    
    3,432Total recurring assets
    
    $
    7,836
    
    
    $
    198,189
    
    
    $
    425
    
    
    $
    206,450
 2009
    
    Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    Fair Value(In thousands)Investment securities available for sale:U.S. Treasury obligations
    
    $
    5,794
    
    
    $
    
    
    
    $
    
    
    
    $
    5,794All other debt securities
    
    
    
    
    
    
    221,584
    
    
    
    
    
    
    
    221,584Equity securities
    
    
    1,760
    
    
    
    970
    
    
    
    425
    
    
    
    3,155Total recurring assets
    
    $
    7,554
    
    
    $
    222,554
    
    
    $
    425
    
    
    $
    230,533
   Three months endedMarch 31, 20102010
    
    Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    Total Losses(In thousands)Impaired loans
    
    $
    
    
    
    $
    
    
    
    $
    2,786
    
    
    $
    280
 Year endedDecember 31, 20092009
    
    Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    Total Losses(In thousands)Impaired loans
    
    $
    
    
    
    $
    
    
    
    $
    2,781
    
    
    $
    415
     11




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##### Table of Contents



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 FORWARD-LOOKING STATEMENTS
  CRITICAL ACCOUNTING POLICIES AND ESTIMATES
  EXECUTIVE LEVEL OVERVIEW
  12




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##### Table of Contents



FINANCIAL CONDITION
 SUMMARY
  Investments:
   13




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##### Table of Contents



Loans:
   3/31/10
    
    
    12/31/09(In thousands)Residential real estate
    
    $
    133,962
    
    
    $
    131,441Home equity lines and second mortgages
    
    
    27,707
    
    
    
    27,003Consumer
    
    
    588
    
    
    
    657Retail loans
    
    
    162,257
    
    
    
    159,101Construction and land development
    
    
    61,313
    
    
    
    62,772Commercial real estate
    
    
    283,448
    
    
    
    282,716Commercial business
    
    
    37,435
    
    
    
    32,030Corporate loans
    
    
    382,196
    
    
    
    377,518Total loans
    
    
    544,453
    
    
    
    536,619Allowance for loan losses
    
    
    (7,277
    )
    
    
    (7,168
    )Net loans
    
    $
    537,176
    
    
    $
    529,451
 Allowance For Loan Losses:
  Three months ended3/31/10
    
    
    3/31/09(Dollars in thousands)Beginning balance
    
    $
    7,168
    
    
    $
    5,885Provision for loan losses
    
    
    700
    
    
    
    240Recoveries on loans previously charged-off
    
    
    1
    
    
    
    1Loans charged-off
    
    
    (592
    )
    
    
    (37
    )Ending balance
    
    $
    7,277
    
    
    $
    6,089Ratios:Annualized
net charge-offs to average loans outstanding
    
    
    0.44
    %
    
    
    0.03
    %Allowance
for loan losses to total loans at end of period
    
    
    1.34
    %
    
    
    1.27
    %
  14




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##### Table of Contents



Risk Assets:
    15




---



##### Table of Contents



3/31/10
    
    
    12/31/09
    
    
    3/31/09(Dollars in thousands)Non-performing loans:Residential real estate
    
    $
    1,176
    
    
    $
    1,211
    
    
    $
    209Construction and land development
    
    
    2,027
    
    
    
    2,527
    
    
    
    349Commercial real estate
    
    
    797
    
    
    
    1,528
    
    
    
    1,951Commercial business
    
    
    728
    
    
    
    683
    
    
    
    Equity
    
    
    39
    
    
    
    54
    
    
    
    67Total non-performing loans
    
    
    4,767
    
    
    
    6,003
    
    
    
    2,576Other real estate owned
    
    
    
    
    
    
    
    
    
    
    120Total risk assets
    
    $
    4,767
    
    
    $
    6,003
    
    
    $
    2,696Restructured loans  accruing
    
    $
    6,224
    
    
    $
    2,634
    
    
    $
    859Risk assets as a percent of total loans and OREO
    
    
    0.88
    %
    
    
    1.12
    %
    
    
    0.56
    %Risk assets as a percent of total assets
    
    
    0.59
    %
    
    
    0.74
    %
    
    
    0.35
    %
 Deposits:
    3/31/10
    
    
    12/31/09(In thousands)NOW accounts
    
    $
    23,147
    
    
    $
    20,739Demand deposit accounts
    
    
    34,187
    
    
    
    34,368Savings accounts
    
    
    101,061
    
    
    
    90,642Money market accounts
    
    
    119,367
    
    
    
    106,640Core deposits
    
    
    277,762
    
    
    
    252,389Brokered certificates of deposit
    
    
    20,411
    
    
    
    29,344Certificates of deposit
    
    
    206,145
    
    
    
    211,061Term deposits
    
    
    226,556
    
    
    
    240,405Total deposits
    
    $
    504,318
    
    
    $
    492,794
 16




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##### Table of Contents



Borrowed Funds:
   3/31/10
    
    
    12/31/09(In thousands)Long-term borrowed funds:FHLBB long-term advances
    
    $
    186,930
    
    
    $
    205,971Subordinated debt
    
    
    6,000
    
    
    
    6,000Wholesale repurchase agreements
    
    
    40,000
    
    
    
    40,000232,930
    
    
    
    251,971Short-term borrowed funds:FHLBB short-term borrowings
    
    
    
    
    
    
    Customer repurchase agreements
    
    
    3,095
    
    
    
    7,1113,095
    
    
    
    7,111Total borrowed funds
    
    $
    236,025
    
    
    $
    259,082
 RESULTS OF OPERATIONS
 THREE MONTHS ENDED MARCH 31, 2010 and 2009
 SUMMARY
  Net Interest Income:
  17




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##### Table of Contents



Interest and Dividend Income:
    Interest Expense:
    Provision for Loan Losses:
  Non-Interest Income :
  18




---



##### Table of Contents



Non-Interest Expense:
  Income Taxes:
  19




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##### Table of Contents



Three months ended
    
    
    
    
    
    
    
    
    
    
    Three months ended3/31/10
    
    
    3/31/09Average
    
    
    
    
    
    
    
    
    
    
    AverageAverage
    
    
    
    
    
    
    Interest
    
    
    Average
    
    
    
    
    
    
    InterestBalance
    
    
    Interest
    
    
    Rate
    
    
    Balance
    
    
    Interest
    
    
    Rate(Dollars in thousands)AssetsInvestment securities:Short-term investments
    
    $
    13,530
    
    
    $
    8
    
    
    
    0.24
    %
    
    $
    8,718
    
    
    $
    4
    
    
    
    0.19
    %U. S. Treasury and government-
sponsored enterprise obligations
    
    
    39,723
    
    
    
    218
    
    
    
    2.23
    
    
    
    21,626
    
    
    
    191
    
    
    
    3.58Other bonds and equity securities
    
    
    17,101
    
    
    
    79
    
    
    
    1.87
    
    
    
    20,040
    
    
    
    128
    
    
    
    2.59Collateralized mortgage
obligations and mortgage-
backed securities
    
    
    180,426
    
    
    
    2,082
    
    
    
    4.68
    
    
    
    231,389
    
    
    
    3,045
    
    
    
    5.34Total investment securities
    
    
    250,780
    
    
    
    2,387
    
    
    
    3.86
    
    
    
    281,773
    
    
    
    3,368
    
    
    
    4.85Loans:Residential real estate
    
    
    132,958
    
    
    
    1,771
    
    
    
    5.40
    
    
    
    116,158
    
    
    
    1,613
    
    
    
    5.63Home equity
    
    
    27,253
    
    
    
    260
    
    
    
    3.87
    
    
    
    23,795
    
    
    
    249
    
    
    
    4.24Consumer
    
    
    673
    
    
    
    11
    
    
    
    6.63
    
    
    
    780
    
    
    
    13
    
    
    
    6.76Total retail loans
    
    
    160,884
    
    
    
    2,042
    
    
    
    5.15
    
    
    
    140,733
    
    
    
    1,875
    
    
    
    5.40Construction and land
    
    
    63,085
    
    
    
    841
    
    
    
    5.41
    
    
    
    58,942
    
    
    
    764
    
    
    
    5.26Commercial real estate
    
    
    282,228
    
    
    
    4,417
    
    
    
    6.35
    
    
    
    233,099
    
    
    
    3,667
    
    
    
    6.38Commercial
    
    
    33,144
    
    
    
    406
    
    
    
    4.97
    
    
    
    31,917
    
    
    
    371
    
    
    
    4.71Total corporate loans
    
    
    378,457
    
    
    
    5,664
    
    
    
    6.07
    
    
    
    323,958
    
    
    
    4,802
    
    
    
    6.01Total loans
    
    
    539,341
    
    
    
    7,706
    
    
    
    5.79
    
    
    
    464,691
    
    
    
    6,677
    
    
    
    5.83Total interest-earning assets
    
    
    790,121
    
    
    
    10,093
    
    
    
    5.18
    %
    
    
    746,464
    
    
    
    10,045
    
    
    
    5.46
    %Allowance for loan losses
    
    
    (7,385
    )
    
    
    
    
    
    
    
    
    
    
    (5,965
    )Other assets
    
    
    35,622
    
    
    
    
    
    
    
    
    
    
    
    30,515Total assets
    
    $
    818,358
    
    
    
    
    
    
    
    
    
    
    $
    771,014Liabilities and Stockholders EquityDeposits:NOW accounts
    
    $
    21,216
    
    
    $
    19
    
    
    
    0.36
    %
    
    $
    18,183
    
    
    $
    9
    
    
    
    0.20
    %Regular savings accounts
    
    
    95,006
    
    
    
    247
    
    
    
    1.05
    
    
    
    59,686
    
    
    
    219
    
    
    
    1.49Money market accounts
    
    
    114,209
    
    
    
    339
    
    
    
    1.20
    
    
    
    77,753
    
    
    
    353
    
    
    
    1.84Certificates of deposit
and escrow
    
    
    235,580
    
    
    
    1,626
    
    
    
    2.80
    
    
    
    238,094
    
    
    
    2,078
    
    
    
    3.54Total interest-bearing deposits
    
    
    466,011
    
    
    
    2,231
    
    
    
    1.94
    
    
    
    393,716
    
    
    
    2,659
    
    
    
    2.74Borrowed funds:Long-term borrowed funds
    
    
    247,322
    
    
    
    2,624
    
    
    
    4.30
    
    
    
    259,003
    
    
    
    2,774
    
    
    
    4.34Short-term borrowed funds
    
    
    5,543
    
    
    
    3
    
    
    
    0.22
    
    
    
    15,324
    
    
    
    40
    
    
    
    1.06Total borrowed funds
    
    
    252,865
    
    
    
    2,627
    
    
    
    4.21
    
    
    
    274,327
    
    
    
    2,814
    
    
    
    4.16Total interest-bearing liabilities
    
    
    718,876
    
    
    
    4,858
    
    
    
    2.74
    
    
    
    668,043
    
    
    
    5,473
    
    
    
    3.32
    %Non-interest-bearing deposits
    
    
    35,134
    
    
    
    
    
    
    
    
    
    
    
    28,267Other liabilities
    
    
    2,983
    
    
    
    
    
    
    
    
    
    
    
    2,934Total liabilities
    
    
    756,993
    
    
    
    
    
    
    
    
    
    
    
    699,244Stockholders equity
    
    
    61,365
    
    
    
    
    
    
    
    
    
    
    
    71,770Total liabilities and
stockholders equity
    
    $
    818,358
    
    
    
    
    
    
    
    
    
    
    $
    771,014Net interest rate spread
    
    
    
    
    
    
    
    
    
    
    2.44
    %
    
    
    
    
    
    
    
    
    
    
    2.14
    %Net interest income
    
    
    
    
    
    $
    5,235
    
    
    
    
    
    
    
    
    
    
    $
    4,572Net interest margin on average earning assets
    
    
    
    
    
    
    
    
    2.69
    %
    
    
    
    
    
    
    
    
    
    
    2.48
    %
 20




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##### Table of Contents



LIQUIDITY AND CAPITAL RESOURCES:
         Regulatory Thresholdfor Well CapitalizedCategory
    
    
    03/31/10
    
    
    12/31/09
    
    
    03/31/09LSB Corporation Tier 1 risk-based
    
    
    6.0
    %
    
    
    10.02
    %
    
    
    9.74
    %
    
    
    12.87
    %River Bank Tier 1 leverage ratio
    
    
    5.0
    %
    
    
    7.03
    %
    
    
    6.85
    %
    
    
    8.00
    %River Bank Tier 1 risk-based
    
    
    6.0
    %
    
    
    9.91
    %
    
    
    9.57
    %
    
    
    11.59
    %River Bank total risk-based
    
    
    10.0
    %
    
    
    12.20
    %
    
    
    11.84
    %
    
    
    12.73
    %
  
 ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
  21




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##### Table of Contents



ITEM 4T: CONTROLS AND PROCEDURES
   
 PART II  OTHER INFORMATION
 
   
   
  Number
    
    Description2
    
    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, (File Number 000-32955) 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, (File Number 000-32955) and incorporated 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(i).3
    
    Articles of Amendment to the Articles of Organization of LSB Corporation, establishing the
fixed rate cumulative perpetual preferred stock, Series B (Filed as Exhibit 3.1 to the
Companys Current Report of Form 8-K filed December 17, 2008, and incorporated herein by
reference)3(ii)
    
    Amended and Restated By-Laws of LSB Corporation (Filed as Exhibit 3.1 to the Companys
Current Report on Form 8-K filed October 31, 2007, 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)
 22




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##### Table of Contents



Number
    
    Description4.1
    
    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, (File Number 000-32955) 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)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.
 23




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##### Table of Contents



LSB CORPORATIONMay 12, 2010
    /s/ Gerald T. MulliganGerald T. MulliganPresident and
Chief Executive OfficerMay 12, 2010
    /s/ Diane L. WalkerDiane L. WalkerExecutive Vice President, Treasurer and
Chief Financial Officer 24




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##### Table of Contents



LSB CORPORATION AND SUBSIDIARY
 
 EXHIBIT INDEX
 Page31.1 Certification of Chief Executive Officer under Section 302 of the
Sarbanes-Oxley Act of 2002
    
    
    2631.2 Certification of Chief Financial Officer under Section 302 of the
Sarbanes-Oxley Act of 2002
    
    
    2732.1 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
    
    
    2832.2 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
    
    
    29
 25