##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, DC 20529
 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, 2009
 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
    
    04-3557612(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification Number)
 30 Massachusetts Avenue, North Andover, MA
    
    01845(Address of principal executive offices)
    
    (Zip Code)
 
 (978) 725-7500
 þ o
 o o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer   o
(Do not check if a smaller reporting company)
    
    Smaller Reporting Company þ
 o þ
  Class
    
    Outstanding as of May 8, 2009Common Stock, par value $.10 per share
    
    4,470,941 shares




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##### 



PagePART 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
    
    
    7-9ITEM 2 MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
    
    
    9-19ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
    
    
    19ITEM 4. CONTROLS AND PROCEDURES
    
    
    19-20PART II  OTHER INFORMATIONITEM 1 LEGAL PROCEEDINGS
    
    
    21ITEM 1A RISK FACTORS
    
    
    21ITEM 2 UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
    
    
    21ITEM 3 DEFAULTS UPON SENIOR SECURITIES
    
    
    21ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
    
    
    21-22ITEM 5 OTHER INFORMATION
    
    
    22ITEM 6 EXHIBITS
    
    
    22SIGNATURES
    
    
    23EXHIBIT INDEX
    
    
    24Ex-31.1 Section 302 Certification of CEOEx-31.2 Section 302 Certification of CFOEx-32.1 Section 906 Certification of CEOEx-32.2 Section 906 Certification of CFO
  2




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##### Table of Contents



PART 1   FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
  
   March 31,
    
    
    December 31,2009
    
    
    2008(In thousands, except share data)ASSETSAssets:Cash and due from banks
    
    $
    7,341
    
    
    $
    6,859Federal funds sold
    
    
    11,041
    
    
    
    6,469Total cash and cash equivalents
    
    
    18,382
    
    
    
    13,328Investment securities available for sale (amortized cost of
$243,070 in 2009 and $259,057 in 2008)
    
    
    249,945
    
    
    
    264,561Federal Home Loan Bank stock, at cost
    
    
    11,825
    
    
    
    11,825Loans, net of allowance for loan losses
    
    
    473,857
    
    
    
    446,736Premises and equipment
    
    
    5,637
    
    
    
    5,528Accrued interest receivable
    
    
    2,781
    
    
    
    2,720Deferred income tax asset, net
    
    
    3,838
    
    
    
    4,447Bank-owned life insurance
    
    
    10,765
    
    
    
    10,641Other real estate owned
    
    
    120
    
    
    
    120Other assets
    
    
    1,322
    
    
    
    1,418Total assets
    
    $
    778,472
    
    
    $
    761,324LIABILITIES AND STOCKHOLDERS EQUITYLiabilities:Core deposits
    
    $
    189,033
    
    
    $
    177,639Term deposits
    
    
    244,654
    
    
    
    231,024Total deposits
    
    
    433,687
    
    
    
    408,663Long-term borrowed funds
    
    
    257,189
    
    
    
    259,228Short-term borrowed funds
    
    
    9,896
    
    
    
    17,262Advance payments by borrowers for taxes and insurance
    
    
    751
    
    
    
    619Other liabilities
    
    
    3,743
    
    
    
    3,410Total liabilities
    
    
    705,266
    
    
    
    689,182Stockholders equity:Preferred stock, Series A, $.10 par value per share: 5,000,000 shares authorized, none issued
    
    
    
    
    
    
    Cumulative perpetual preferred stock, Series B,
(liquidation preference $1,000 per share)
15,000 shares authorized and issued
    
    
    14,483
    
    
    
    14,455Common stock, $.10 par value per share; 20,000,000 shares authorized;
4,470,941 and 4,470,941 shares issued and outstanding at
March 31, 2009 and December 31, 2008, respectively
    
    
    447
    
    
    
    447Additional paid-in capital
    
    
    60,187
    
    
    
    60,179Accumulated deficit
    
    
    (6,116
    )
    
    
    (6,250
    )Accumulated other comprehensive income, net of tax
    
    
    4,205
    
    
    
    3,311Total stockholders equity
    
    
    73,206
    
    
    
    72,142Total liabilities and stockholders equity
    
    $
    778,472
    
    
    $
    761,324
  3




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##### Table of Contents



Three months endedMarch 31,2009
    
    
    2008(In thousands, except share data)Interest and dividend income:Loans
    
    $
    6,677
    
    
    $
    6,018Investment securities available for sale
    
    
    3,364
    
    
    
    3,051Federal Home Loan Bank stock
    
    
    
    
    
    
    154Short-term interest income
    
    
    4
    
    
    
    59Total interest and dividend income
    
    
    10,045
    
    
    
    9,282Interest expense:Deposits
    
    
    2,659
    
    
    
    2,612Long-term borrowed funds
    
    
    2,774
    
    
    
    2,745Short-term borrowed funds
    
    
    40
    
    
    
    36Total interest expense
    
    
    5,473
    
    
    
    5,393Net interest income
    
    
    4,572
    
    
    
    3,889Provision for loan losses
    
    
    240
    
    
    
    105Net interest income after provision for loan losses
    
    
    4,332
    
    
    
    3,784Non-interest income:Deposit account fees
    
    
    223
    
    
    
    245Loan servicing fees, net
    
    
    52
    
    
    
    39Gains on sales of investments
    
    
    227
    
    
    
    Income on bank-owned life insurance
    
    
    124
    
    
    
    96Other income
    
    
    105
    
    
    
    114Total non-interest income
    
    
    731
    
    
    
    494Non-interest expense:Salaries and employee benefits
    
    
    1,743
    
    
    
    1,640Occupancy and equipment
    
    
    374
    
    
    
    352Data processing
    
    
    241
    
    
    
    234Professional
    
    
    185
    
    
    
    131Marketing
    
    
    142
    
    
    
    53Other real estate owned
    
    
    1
    
    
    
    11Deposit insurance
    
    
    391
    
    
    
    14Other
    
    
    546
    
    
    
    387Total non-interest expense
    
    
    3,623
    
    
    
    2,822Income before income tax expense
    
    
    1,440
    
    
    
    1,456Income tax expense
    
    
    476
    
    
    
    540Net income before preferred stock dividends and accretion
    
    
    964
    
    
    
    916Preferred stock dividends and accretion
    
    
    (159
    )
    
    
    Net income available to common shareholders
    
    $
    805
    
    
    $
    916Average common shares outstanding
    
    
    4,470,941
    
    
    
    4,493,523Common stock equivalents
    
    
    73
    
    
    
    25,025Average diluted common shares outstanding
    
    
    4,471,014
    
    
    
    4,518,548Basic common earnings per share
    
    $
    0.18
    
    
    $
    0.20Diluted common earnings per share
    
    $
    0.18
    
    
    $
    0.20
  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, 2007
    
    $
    
    
    
    $
    452
    
    
    $
    60,382
    
    
    $
    (934
    )
    
    $
    398
    
    
    $
    60,298Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,723
    )
    
    
    
    
    
    
    (2,723
    )Other comprehensive income -
Unrealized gain on securities
available for sale,
(tax effect $1,935)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,913
    
    
    
    2,913Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    190Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    156
    
    
    
    
    
    
    
    
    
    
    
    156Issuance of preferred stock,
net of discount $549
    
    
    14,451
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14,451Accretion of discount on
preferred stock
    
    
    4
    
    
    
    
    
    
    
    
    
    
    
    (4
    )
    
    
    
    
    
    
    Fair value of warrants issued with preferred stock
    
    
    
    
    
    
    
    
    
    
    549
    
    
    
    
    
    
    
    
    
    
    
    549Exercise of stock options
and tax benefits (9,500 shares)
    
    
    
    
    
    
    1
    
    
    
    120
    
    
    
    
    
    
    
    
    
    
    
    121Common stock repurchased
(64,620 shares)
    
    
    
    
    
    
    (6
    )
    
    
    (1,028
    )
    
    
    
    
    
    
    
    
    
    
    (1,034
    )Dividends declared and paid
($0.58 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,589
    )
    
    
    
    
    
    
    (2,589
    )Balance at December 31, 2008
    
    
    14,455
    
    
    
    447
    
    
    
    60,179
    
    
    
    (6,250
    )
    
    
    3,311
    
    
    
    72,142Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    964
    
    
    
    
    
    
    
    964Other comprehensive income -
Unrealized gain on securities
available for sale, (tax effect $476)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    894
    
    
    
    894Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,858Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    8
    
    
    
    
    
    
    
    
    
    
    
    8Accretion of discount on
preferred stock
    
    
    28
    
    
    
    
    
    
    
    
    
    
    
    (28
    )
    
    
    
    
    
    
    Dividends paid on Series B
preferred stock 5%
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (131
    )
    
    
    
    
    
    
    (131
    )Dividends declared and paid
($0.15 per common share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (671
    )
    
    
    
    
    
    
    (671
    )Balance at March 31, 2009
    
    $
    14,483
    
    
    $
    447
    
    
    $
    60,187
    
    
    $
    (6,116
    )
    
    $
    4,205
    
    
    $
    73,206
  5




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##### Table of Contents



Three months ended March 31,2009
    
    
    2008(In thousands)Cash flows from operating activities:Net income before preferred stock dividends and accretion
    
    $
    964
    
    
    $
    916Adjustments to reconcile net income to net cash provided by operating activities:Provision for loan losses
    
    
    240
    
    
    
    105Gains on sales of investments
    
    
    (227
    )
    
    
    Net accretion of investment securities
    
    
    (202
    )
    
    
    (136
    )Depreciation and amortization of premises and equipment
    
    
    137
    
    
    
    150Increase in accrued interest receivable
    
    
    (61
    )
    
    
    (30
    )Deferred income tax provision (benefit)
    
    
    132
    
    
    
    (172
    )Stock-based compensation
    
    
    8
    
    
    
    16Increase in cash surrender value of Bank-owned life insurance
    
    
    (124
    )
    
    
    (96
    )Decrease (increase) in other assets
    
    
    96
    
    
    
    (108
    )Increase in other liabilities
    
    
    333
    
    
    
    455Net cash provided by operating activities
    
    
    1,296
    
    
    
    1,100Cash flows from investing activities:Proceeds from sales of investment securities available for sale
    
    
    3,457
    
    
    
    Purchases of investment securities available for sale
    
    
    (7,173
    )
    
    
    (40,876
    )Purchases of FHLBB stock
    
    
    
    
    
    
    (1,385
    )Principal payments of investment securities available for sale
    
    
    20,132
    
    
    
    10,339Loan originations, net of principal payments
    
    
    (20,524
    )
    
    
    (15,155
    )Loans purchased
    
    
    (6,837
    )
    
    
    Purchases of premises and equipment
    
    
    (246
    )
    
    
    (715
    )Net cash used in investing activities
    
    
    (11,191
    )
    
    
    (47,792
    )Cash flows from financing activities:Net increase in deposits
    
    
    25,024
    
    
    
    8,281Additions to long-term borrowed funds
    
    
    
    
    
    
    52,000Payments on long-term borrowed funds
    
    
    (2,039
    )
    
    
    (8,037
    )Net decrease in short-term borrowed funds
    
    
    (7,366
    )
    
    
    (298
    )Increase in advance payments by borrowers
    
    
    132
    
    
    
    139Dividends paid to preferred shareholders
    
    
    (131
    )
    
    
    Dividends paid to common shareholders
    
    
    (671
    )
    
    
    (628
    )Proceeds from exercise of stock options
    
    
    
    
    
    
    18Common stock repurchased
    
    
    
    
    
    
    (751
    )Net cash provided by financing activities
    
    
    14,949
    
    
    
    50,724Net increase in cash and cash equivalents
    
    
    5,054
    
    
    
    4,032Cash and cash equivalents, beginning of period
    
    
    13,328
    
    
    
    7,550Cash and cash equivalents, end of period
    
    $
    18,382
    
    
    $
    11,582Cash paid during the period for:Interest on deposits
    
    $
    2,666
    
    
    $
    2,612Interest on borrowed funds
    
    
    2,849
    
    
    
    2,732Income taxes
    
    
    367
    
    
    
    431Supplemental noncash investing and financing activities:Transfers to other real estate owned
    
    
    
    
    
    
    612
  6




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##### Table of Contents



Fair Value Measurements
  7




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##### Table of Contents



TotalLevel 1
    
    
    Level 2
    
    
    Level 3
    
    
    Fair Value(In thousands)March 31, 2009:Investment securities available for sale
    
    $
    6,770
    
    
    $
    242,750
    
    
    $
    425
    
    
    $
    249,945December 31, 2008:Investment securities available for sale
    
    $
    7,504
    
    
    $
    256,632
    
    
    $
    425
    
    
    $
    264,561
  Three months ended2009
    
    
    2008(In thousands)Balance as of beginning of period
    
    $
    425
    
    
    $
    425Total realized/unrealized gains (losses)
included in net income
    
    
    
    
    
    
    Balance as of end of period
    
    $
    425
    
    
    $
    425Change in unrealized gains/(losses) relating to
instruments still held at the reporting date
    
    $
    
    
    
    $
    
  Assets measured at fair value on a non-recurring basis
  8




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##### Table of Contents



Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    Total Losses(In thousands)March 31, 2009:Impaired loans
    
    $
    
    
    
    $
    
    
    
    $
    1,751
    
    
    $
    (200
    )Other real estate owned
    
    
    
    
    
    
    
    
    
    
    120
    
    
    
    $
    
    
    
    $
    
    
    
    $
    1,871
    
    
    $
    (200
    )December 31, 2008:Other real estate owned
    
    $
    
    
    
    $
    
    
    
    $
    120
    
    
    $
    (70
    )
      
 ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 FORWARD-LOOKING STATEMENTS
  9




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##### Table of Contents



CRITICAL ACCOUNTING POLICIES AND ESTIMATES
  EXECUTIVE LEVEL OVERVIEW
      10




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##### Table of Contents



FINANCIAL CONDITION
 SUMMARY
  Investments:
    11




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##### Table of Contents



3/31/09
    
    
    12/31/08Amortized
    
    
    Unrealized
    
    
    Fair
    
    
    Amortized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    Losses
    
    
    Value
    
    
    Cost
    
    
    Gains
    
    
    Losses
    
    
    Value(In thousands)U.S. Treasury obligations
    
    $
    5,572
    
    
    $
    383
    
    
    $
    
    
    
    $
    5,955
    
    
    $
    5,578
    
    
    $
    426
    
    
    $
    
    
    
    $
    6,004Government-sponsored
enterprise obligations
    
    
    15,381
    
    
    
    243
    
    
    
    
    
    
    
    15,624
    
    
    
    15,485
    
    
    
    240
    
    
    
    (3
    )
    
    
    15,722Mortgage-backed securities
    
    
    173,622
    
    
    
    7,830
    
    
    
    (13
    )
    
    
    181,439
    
    
    
    181,367
    
    
    
    5,919
    
    
    
    (80
    )
    
    
    187,206Collateralized mortgage obligations
    
    
    38,579
    
    
    
    726
    
    
    
    (111
    )
    
    
    39,194
    
    
    
    46,725
    
    
    
    379
    
    
    
    (45
    )
    
    
    47,059Corporate obligations
    
    
    6,448
    
    
    
    
    
    
    
    (926
    )
    
    
    5,522
    
    
    
    6,433
    
    
    
    
    
    
    
    (750
    )
    
    
    5,683Mutual funds
    
    
    1,000
    
    
    
    
    
    
    
    (32
    )
    
    
    968
    
    
    
    1,000
    
    
    
    
    
    
    
    (42
    )
    
    
    958Equity securities
    
    
    2,468
    
    
    
    
    
    
    
    (1,225
    )
    
    
    1,243
    
    
    
    2,469
    
    
    
    
    
    
    
    (540
    )
    
    
    1,929Total investment securities
available for sale
    
    $
    243,070
    
    
    $
    9,182
    
    
    $
    (2,307
    )
    
    $
    249,945
    
    
    $
    259,057
    
    
    $
    6,964
    
    
    $
    (1,460
    )
    
    $
    264,561
 Loans:
   3/31/09
    
    
    12/31/08(In thousands)Residential real estate
    
    $
    119,375
    
    
    $
    109,276Home equity
    
    
    24,046
    
    
    
    23,972Consumer
    
    
    589
    
    
    
    831Retail loans
    
    
    144,010
    
    
    
    134,079Construction
    
    
    55,931
    
    
    
    61,769Commercial real estate
    
    
    247,007
    
    
    
    222,977Commercial business
    
    
    32,998
    
    
    
    33,796Corporate loans
    
    
    335,936
    
    
    
    318,542Total loans
    
    
    479,946
    
    
    
    452,621Allowance for loan losses
    
    
    (6,089
    )
    
    
    (5,885
    )Net loans
    
    $
    473,857
    
    
    $
    446,736
 12




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##### Table of Contents



Allowance For Loan Losses:
  Three months ended3/31/09
    
    
    3/31/08(Dollars in thousands)Beginning balance
    
    $
    5,885
    
    
    $
    4,810Provision for loan losses
    
    
    240
    
    
    
    105Recoveries on loans previously charged-off
    
    
    1
    
    
    
    1Loans charged-off
    
    
    (37
    )
    
    
    (42
    )Ending balance
    
    $
    6,089
    
    
    $
    4,874Ratios:Annualized net charge-offs to average
loans outstanding
    
    
    0.03
    %
    
    
    0.05
    %Allowance for loan losses to total
loans at end of period
    
    
    1.27
    %
    
    
    1.31
    %
   Risk Assets:
   13




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##### Table of Contents



3/31/09
    
    
    12/31/08
    
    
    3/31/08(Dollars in thousands)Non-performing loans
    
    $
    2,576
    
    
    $
    2,606
    
    
    $
    1,000Other real estate owned
    
    
    120
    
    
    
    120
    
    
    
    612Total risk assets
    
    $
    2,696
    
    
    $
    2,726
    
    
    $
    1,612Risk assets as a percent of total loans and OREO
    
    
    0.56
    %
    
    
    0.60
    %
    
    
    0.43
    %Risk assets as a percent of total assets
    
    
    0.35
    %
    
    
    0.36
    %
    
    
    0.24
    %
 Deposits:
    3/31/09
    
    
    12/31/08(In thousands)NOW accounts
    
    $
    19,559
    
    
    $
    17,239Demand deposit accounts
    
    
    28,857
    
    
    
    27,546Savings accounts
    
    
    64,218
    
    
    
    56,251Money market accounts
    
    
    76,399
    
    
    
    76,603Core deposits
    
    
    189,033
    
    
    
    177,639Brokered certificates of deposit
    
    
    29,391
    
    
    
    32,819Certificates of deposit
    
    
    215,263
    
    
    
    198,205Term deposits
    
    
    244,654
    
    
    
    231,024Total deposits
    
    $
    433,687
    
    
    $
    408,663
 Borrowed Funds:
  14




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##### Table of Contents



3/31/09
    
    
    12/31/08(In thousands)Long-term borrowed funds:FHLBB long-term advances
    
    $
    217,189
    
    
    $
    219,228Wholesale repurchase agreements
    
    
    40,000
    
    
    
    40,000257,189
    
    
    
    259,228Short-term borrowed funds:FHLBB short-term borrowings
    
    
    5,000
    
    
    
    11,000Customer repurchase agreements
    
    
    4,896
    
    
    
    6,2629,896
    
    
    
    17,262Total borrowed funds
    
    $
    267,085
    
    
    $
    276,490
 RESULTS OF OPERATIONS
 THREE MONTHS ENDED MARCH 31, 2009 AND 2008
 SUMMARY
  Net Interest Income:
  Interest Income:
    15




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##### Table of Contents



Interest Expense:
    Provision for Loan Losses:
  Non-Interest Income:
  Non-Interest Expense:
  16




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##### Table of Contents



Income Taxes:
   17




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##### Table of Contents



Three months ended
    
    
    Three months ended3/31/09
    
    
    3/31/08Average
    
    
    
    
    
    
    
    
    
    
    AverageAverage
    
    
    
    
    
    
    Interest
    
    
    Average
    
    
    
    
    
    
    InterestBalance
    
    
    Interest
    
    
    Rate
    
    
    Balance
    
    
    Interest
    
    
    Rate(Dollars in thousands)ASSETSInvestment securities:Short-term investments
    
    $
    8,718
    
    
    $
    4
    
    
    
    0.19
    %
    
    $
    7,612
    
    
    $
    59
    
    
    
    3.12
    %U. S. Treasury and government-
sponsored enterprise obligations
    
    
    21,626
    
    
    
    191
    
    
    
    3.58
    
    
    
    23,430
    
    
    
    244
    
    
    
    4.19Corporate and other
investment securities
    
    
    20,040
    
    
    
    128
    
    
    
    2.59
    
    
    
    23,574
    
    
    
    376
    
    
    
    6.41Collateralized mortgage
obligations and mortgage-backed securities
    
    
    231,389
    
    
    
    3,045
    
    
    
    5.34
    
    
    
    204,292
    
    
    
    2,585
    
    
    
    5.09Total investment securities
    
    
    281,773
    
    
    
    3,368
    
    
    
    4.85
    
    
    
    258,908
    
    
    
    3,264
    
    
    
    5.07Loans:Residential real estate
    
    
    116,158
    
    
    
    1,613
    
    
    
    5.63
    
    
    
    82,566
    
    
    
    1,161
    
    
    
    5.66Equity
    
    
    23,795
    
    
    
    249
    
    
    
    4.24
    
    
    
    22,444
    
    
    
    321
    
    
    
    5.75Consumer
    
    
    780
    
    
    
    13
    
    
    
    6.76
    
    
    
    955
    
    
    
    17
    
    
    
    7.16Total retail loans
    
    
    140,733
    
    
    
    1,875
    
    
    
    5.40
    
    
    
    105,965
    
    
    
    1,499
    
    
    
    5.69Construction
    
    
    58,942
    
    
    
    764
    
    
    
    5.26
    
    
    
    45,765
    
    
    
    830
    
    
    
    7.29Commercial real estate
    
    
    233,099
    
    
    
    3,667
    
    
    
    6.38
    
    
    
    182,797
    
    
    
    3,208
    
    
    
    7.06Commercial
    
    
    31,917
    
    
    
    371
    
    
    
    4.71
    
    
    
    27,900
    
    
    
    481
    
    
    
    6.93Total corporate loans
    
    
    323,958
    
    
    
    4,802
    
    
    
    6.01
    
    
    
    256,462
    
    
    
    4,519
    
    
    
    7.09Total loans
    
    
    464,691
    
    
    
    6,677
    
    
    
    5.83
    
    
    
    362,427
    
    
    
    6,018
    
    
    
    6.68Total interest-earning assets
    
    
    746,464
    
    
    
    10,045
    
    
    
    5.46
    %
    
    
    621,335
    
    
    
    9,282
    
    
    
    6.01
    %Allowance for loan losses
    
    
    (5,965
    )
    
    
    
    
    
    
    
    
    
    
    (4,848
    )Other assets
    
    
    30,515
    
    
    
    
    
    
    
    
    
    
    
    24,469Total assets
    
    $
    771,014
    
    
    
    
    
    
    
    
    
    
    $
    640,956Liabilities and Stockholders
EquityDeposits:NOW and super NOW accounts
    
    $
    18,183
    
    
    $
    9
    
    
    
    0.20
    %
    
    $
    17,218
    
    
    $
    8
    
    
    
    0.19
    %Regular savings accounts
    
    
    59,686
    
    
    
    219
    
    
    
    1.49
    
    
    
    29,574
    
    
    
    44
    
    
    
    0.60Money market accounts
    
    
    77,753
    
    
    
    353
    
    
    
    1.84
    
    
    
    75,680
    
    
    
    531
    
    
    
    2.82Certificates of deposit
and escrow
    
    
    238,094
    
    
    
    2,078
    
    
    
    3.54
    
    
    
    174,209
    
    
    
    2,029
    
    
    
    4.68Total interest-bearing deposits
    
    
    393,716
    
    
    
    2,659
    
    
    
    2.74
    
    
    
    296,681
    
    
    
    2,612
    
    
    
    3.54Borrowed funds:Long-term borrowed funds
    
    
    259,003
    
    
    
    2,774
    
    
    
    4.34
    
    
    
    245,156
    
    
    
    2,745
    
    
    
    4.50Short-term borrowed funds
    
    
    15,324
    
    
    
    40
    
    
    
    1.06
    
    
    
    6,915
    
    
    
    36
    
    
    
    2.09Total borrowed funds
    
    
    274,327
    
    
    
    2,814
    
    
    
    4.16
    
    
    
    252,071
    
    
    
    2,781
    
    
    
    4.44Total interest-bearing liabilities
    
    
    668,043
    
    
    
    5,473
    
    
    
    3.32
    %
    
    
    548,752
    
    
    
    5,393
    
    
    
    3.95
    %Non-interest-bearing deposits
    
    
    28,267
    
    
    
    
    
    
    
    
    
    
    
    27,968Other liabilities
    
    
    2,934
    
    
    
    
    
    
    
    
    
    
    
    3,178Total liabilities
    
    
    699,244
    
    
    
    
    
    
    
    
    
    
    
    579,898Stockholders equity
    
    
    71,770
    
    
    
    
    
    
    
    
    
    
    
    61,058Total liabilities and
stockholders equity
    
    $
    771,014
    
    
    
    
    
    
    
    
    
    
    $
    640,956Net interest rate spread
    
    
    
    
    
    
    
    
    
    
    2.14
    %
    
    
    
    
    
    
    
    
    
    
    2.06
    %Net interest income
    
    
    
    
    
    $
    4,572
    
    
    
    
    
    
    
    
    
    
    $
    3,889Net interest margin on average
earning assets
    
    
    
    
    
    
    
    
    
    
    2.48
    %
    
    
    
    
    
    
    
    
    
    
    2.52
    %
 18




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##### Table of Contents



LIQUIDITY AND CAPITAL RESOURCES:
        Regulatory Thresholdfor Well CapitalizedCategory
    
    03/31/09
    
    12/31/08LSB Corporation Tier 1 risk-based
    
    
    6.0
    %
    
    
    12.87
    %
    
    
    13.30
    %River Bank Tier 1 leverage ratio
    
    
    5.0
    %
    
    
    8.00
    %
    
    
    8.18
    %River Bank Tier 1 risk-based
    
    
    6.0
    %
    
    
    11.59
    %
    
    
    11.83
    %River Bank total risk-based
    
    
    10.0
    %
    
    
    12.73
    %
    
    
    12.97
    %
  
 ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
  
 ITEM 4: CONTROLS AND PROCEDURES
  19




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##### Table of Contents



20




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##### Table of Contents



PART II  OTHER INFORMATION
 
   
   If the Companys investment in the Federal Home Loan Bank of Boston becomes impaired, its earnings
and stockholders equity could decrease
 
  (a)
    
    None.(b)
    
    None.
 (c)
    
    On April 26, 2007, the Company announced a common stock repurchase program to repurchase up
to 230,000 shares. During 2008 and 2007, 64,620 and 90,356 shares, respectively, were
repurchased under this program. The Company has placed no deadline on the duration of the
repurchase program. As a result of the impairment charge taken in the third quarter of 2008,
the Company suspended its stock repurchases until further notice. As a result of the
Companys participation in the Capital Purchase Program, the Company is not permitted to
re-instate the repurchase program without the U. S. Departments of the Treasurys consent
prior to December 12, 2011, unless the Company has redeemed the Senior Preferred Stock.
 
  None
 
   21




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##### Table of Contents



Proposal 1. Election of three Class A Directors for a three-year term.
 Director Nominee
    
    For
    
    WithheldKathleen Boshar Reynolds
    
    
    3,838,068
    
    
    
    191,817Thomas J. Burke
    
    
    3,820,105
    
    
    
    209,780Marsha A. McDonough
    
    
    3,838,407
    
    
    
    191,478
 Proposal 2. Approval of executive officers compensation in an advisory (non-binding) vote.
 For
    
    
    3,487,120Against
    
    
    224,018Abstain
    
    
    318,747
 Proposal 3. Ratification of Appointment of Wolf & Company, P.C.
 For
    
    
    3,995,033Against
    
    
    28,265Abstain
    
    
    6,587
 
  (a)
    
    None(b)
    
    None
 
  Number
    
    Description31.1
    
    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 2002.32.3
    
    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.
 22




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##### Table of Contents



LSB CORPORATIONMay 13, 2009
    
    /s/ Gerald T. Mulligan

Gerald T. MulliganPresident and
Chief Executive OfficerMay 13, 2009
    
    /s/ Diane L. Walker

Diane L. WalkerExecutive Vice President, Treasurer and
Chief Financial Officer
 23




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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
    
    
    2531.2
    
    Certification of Chief Financial Officer under Section 302 of the
Sarbanes-Oxley Act of 2002
    
    
    2632.1
    
    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
    
    
    2732.2
    
    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
    
    
    28
 24