|SECURITIES AND EXCHANGE
COMMISSIONWashington, D.C. 20549





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, 2005
| | ---------------------------------------------

|[   ] | OR 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
0-25070.



LSB FINANCIAL
CORP.(Exact Name of Registrant as Specified in its Charter)
|----------------------------------------------------------------------------------------------------------------------------------------------------------------

|Indiana(State or other jurisdiction ofincorporation or organization)        |  | 35-1934975(I.R.S. EmployerIdentification No.)
|--------------------------------------------------------------------------- |  | ---------------------------------------------
|                                                                           
|101 Main Street, Lafayette, Indiana(Address of principal executive offices) |  | 47902
(Zip Code)                             
|                                                                           
|(765) 742-1064(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 reports), and (2) has been subject to such
filing requirements for the past 90 days. YES [X]     NO [   ]


Indicate by check mark  whether the
 registrant  is an  accelerated  filer (as defined in Rule 12b-2 of the Exchange  Act).
 YES [   ]     NO [X]


State the number of shares
outstanding of each of the issuers classes of common equity, as of the latest
practicable date:
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|CLASSCommon stock, par value $.01 per share | OUTSTANDING AT MAY 1, 20051,472,818
|------------------------------------------- | -----------------------------------

|LSB FINANCIAL CORP.


INDEX
|---------------------------

|                                                                                               |   
|---------------------------------------------------------------------------------------------- | --
|PART I.   FINANCIAL INFORMATION                                                                | 1 
|                                                                                              
|Item 1.  Financial Statements (Unaudited)                                                      | 1 
|Consolidated Balance Sheets                                                                    | 1 
|Consolidated Statements of Income                                                              | 2 
|Consolidated Statements of Changes in Shareholders' Equity                                     | 3 
|Consolidated Statements of Cash Flows                                                          | 4 
|Notes to Consolidated Financial Statements                                                     | 5 
|                                                                                              
|Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations | 7 
|                                                                                              
|Item 3.  Quantitative and Qualitative Disclosures About Market Risk                            | 16
|                                                                                              
|Item 4.  Controls and Procedures                                                               | 17
|                                                                                              
|                                                                                              
|PART II.  OTHER INFORMATION                                                                    | 18
|                                                                                              
|Item 1.  Legal Proceedings                                                                     | 18
|Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds                           | 18
|Item 3.  Defaults Upon Senior Securities                                                       | 18
|Item 4.  Submission of Matters to a Vote of Security Holders                                   | 18
|Item 5.  Other Information                                                                     | 18
|Item 6.  Exhibits                                                                              | 18
|                                                                                              
|SIGNATURES                                                                                     | 19
|                                                                                              
|EXHIBIT INDEX                                                                                  | 20

|PART I FINANCIAL
INFORMATIONItem 1.  Financial Statements


LSB FINANCIAL CORP.CONSOLIDATED CONDENSED
BALANCE SHEETS(Dollars in thousands
except per share data)
|----------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                     | March 31,2005 | December 31,2004
|---------------------------------------------------- | ------------- | ----------------
|
|Assets                                               |               |                 
|Cash and due from banks                              |               | $1,861          
|Short-term investments                               |               | 10,943          
|                                                     |               |                 
|Cash and cash equivalents                            |               | 12,804          
|                                                    
|Available-for-sale securities                        |               | 7,932           
|Loans held for sale                                  |               | 715             
|Total loans                                          |               | 327,233         
|Less: Allowance for loan losses                      |               | (2,239          
|                                                     |               |                 
|Net loans                                            |               | 324,994         
|Premises and equipment, net                          |               | 6,715           
|Federal Home Loan Bank stock, at cost                |               | 4,154           
|Bank owned life insurance                            |               | 2,649           
|Interest receivable and other assets                 |               | 6,087           
|                                                     |               |                 
|Total Assets                                         |               | 366,050         
|                                                     |               |                 
|                                                     |              
|Liabilities and Shareholders' Equity                 |              
|Liabilities                                          |              
|Deposits                                             |               | 266,047         
|Federal Home Loan Bank advances                      |               | 66,808          
|Interest payable and other liabilities               |               | 1,937           
|                                                     |               |                 
|Total liabilities                                    |               | 334,792         
|                                                     |               |                 
|                                                     |              
|Commitments and Contingencies                        |              
|                                                     |              
|Shareholders' Equity                                 |              
|Common stock, $.01 par value                         |              
|Authorized - 7,000,000 shares                        |              
|Issued and outstanding 2005 - 1,469,382 shares,      |              
|2004 - 1,437,250 shares                              |               | 14              
|Additional paid-in-capital                           |               | 8,599           
|Retained earnings                                    |               | 22,837          
|Unearned recognition and retention plan (RRP) shares |               | (44             
|Unearned ESOP compensation                           |               | (88             
|Accumulated other comprehensive income (loss)        |               | (60             
|                                                     |               |                 
|Total shareholders' equity                           |               | 31,258          
|                                                     |               |                 
|                                                     |              
|Total liabilities and shareholders' equity           |               | $366,050        
|                                                     |               |                 

|See notes to consolidated condensed
financial statements.




1
LSB FINANCIAL
CORP.Consolidated Condensed
Statements of Income(Dollars in thousands, except
per share data)(Unaudited)
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                    | Three months EndedMarch 31,
|--------------------------------------------------- | ---------------------------
|
|Interest and Dividend Income                        |                            
|Loans                                               |                            
|Securities                                          |                            
|Taxable                                             |                            
|Tax-exempt                                          |                            
|Other                                               |                            
|                                                    |                            
|Total interest and dividend income                  |                            
|                                                    |                            
|                                                   
|Interest Expense                                    |                            
|Deposits                                            |                            
|Borrowings                                          |                            
|                                                    |                            
|Total interest expense                              |                            
|                                                    |                            
|                                                   
|Net Interest Income                                 |                            
|                                                   
|Provision for Loan Losses                           |                            
|                                                    |                            
|Net Interest Income After Provision for Loan Losses |                            
|                                                    |                            
|                                                   
|Noninterest Income                                  |                            
|Deposit account service charges and fees            |                            
|Net gains on loan sales                             |                            
|Other                                               |                            
|                                                    |                            
|Total noninterest income                            |                            
|                                                    |                            
|                                                   
|Noninterest Expense                                 |                            
|Salaries and employee benefits                      |                            
|Net occupancy and equipment expense                 |                            
|Computer service                                    |                            
|Advertising                                         |                            
|Other                                               |                            
|                                                    |                            
|Total noninterest expense                           |                            
|                                                    |                            
|                                                   
|Income Before Income Taxes                          |                            
|Provision for Income Taxes                          |                            
|                                                    |                            
|Net Income                                          |                            
|                                                    |                            
|Basic Earnings Per Share                            |                            
|                                                    |                            
|Diluted Earnings Per Share                          |                            
|                                                    |                            

|See notes to consolidated financial
statements.






2
LSB FINANCIAL CORP.Consolidated Condensed
Statements of Changes in Shareholders EquityFor the Three Months
Ended March 31, 2005 and 2004(Dollars in thousands)(Unaudited)
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                 | CommonStock | AdditionalPaid-InCapital | RetainedEarnings | BenefitPlansCompensation | AccumulatedOtherComprehensiveIncome (Loss) | Total   
|-------------------------------- | ----------- | ------------------------ | ---------------- | ------------------------ | ------------------------------------------ | --------
|Balance, January 1, 2004         |             | $    14                  |                  | $ 8,020                  |                                            | $ 19,841
|Comprehensive income             |            
|Net income                       |             |                          |                  |                          |                                            | 720     
|Change in unrealized             |            
|appreciation (depreciation)      |            
|on available-for-sale            |            
|securities, net of taxes         |             |                          |                  |                          |                                            |         
|Total  comprehensive income      |             |                          |                  |                          |                                            |         
|Dividends on common              |            
|stock, $0.145 per share          |             |                          |                  |                          |                                            | (197    
|Stock options exercised          |             |                          |                  | 7                        |                                            |         
|(681 shares)                     |            
|Amortization of RRP expense      |             |                          |                  |                          |                                            |         
|ESOP shares earned               |             |                          |                  | 48                       |                                            |         
|                                 |             |                          |                  |                          |                                            |         
|Balance, March 31, 2004          |             | $    14                  |                  | $ 8,075                  |                                            | $ 20,364
|                                 |             |                          |                  |                          |                                            |         
|Balance, January 1, 2005         |             | 14                       |                  | 8,235                    |                                            | 22,304  
|Comprehensive income             |            
|Net income                       |             |                          |                  |                          |                                            | 767     
|Change in unrealized             |            
|appreciation (depreciation)      |            
|on available-for-sale            |            
|securities, net of taxes         |             |                          |                  |                          |                                            |         
|Total  comprehensive income      |             |                          |                  |                          |                                            |         
|Dividends on common              |            
|stock, $0.16 per share           |             |                          |                  |                          |                                            | (234    
|Purchase and retirement of stock |            
|(9,087 shares)                   |             |                          |                  | (240                     | )                                          |         
|Stock options exercised          |            
|(51,390 shares)                  |             |                          |                  | 219                      |                                            |         
|Stock option and RRP             |             |                          |                  | 339                      |                                            |         
|tax benefit                      |            
|Amortization of RRP              |            
|expense                          |             |                          |                  |                          |                                            |         
|ESOP shares earned               |             |                          |                  | 46                       |                                            |         
|                                 |             |                          |                  |                          |                                            |         
|Balance, March 31, 2005          |             | $    14                  |                  | $ 8,599                  |                                            | $ 22,837
|                                 |             |                          |                  |                          |                                            |         

|See notes to consolidated condensed
financial statements.




3
LSB FINANCIAL CORP.
Consolidated Condensed Statements of Cash Flows
(Dollars in thousands)(Unaudited)
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                                       | Three months endedMarch 31,
|---------------------------------------------------------------------- | ---------------------------
|
|Operating Activities                                                   |                            
|Net income                                                             |                            
|Items not requiring (providing) cash                                   |                            
|Depreciation                                                           |                            
|Provision for loan losses                                              |                            
|Amortization of premiums and discounts on securities                   |                            
|Federal Home Loan Bank stock dividend                                  |                            
|ESOP shares earned                                                     |                            
|Gain on sale of loans                                                  |                            
|Loans originated for sale                                              |                            
|Proceeds on loans sold                                                 |                            
|Changes in                                                             |                            
|Interest receivable and other assets                                   |                            
|Interest payable and other liabilities                                 |                            
|                                                                       |                            
|Net cash provided by operating activities                              |                            
|                                                                       |                            
|Investing Activities                                                   |                            
|Purchases of available-for-sale securities                             |                            
|Proceeds from maturities of available-for-sale securities              |                            
|Net change in loans                                                    |                            
|Purchase of premises and equipment                                     |                            
|                                                                       |                            
|Net cash from investing activities                                     |                            
|                                                                       |                            
|Financing Activities                                                   |                            
|                                                                       |                            
|Net change in demand deposits, money market, NOW  and savings accounts |                            
|Net change in certificates of deposit                                  |                            
|Proceeds from Federal Home Loan Bank advances                          |                            
|Repayment of Federal Home Loan Bank advances                           |                            
|Proceeds from stock options exercised                                  |                            
|Tax benefit related to stock option and RRP                            |                            
|Repurchase of stock                                                    |                            
|Dividends paid                                                         |                            
|                                                                       |                            
|Net cash provided by financing activities                              |                            
|                                                                       |                            
|                                                                      
|Increase (Decrease) in Cash and Cash Equivalents                       |                            
|Cash and Cash Equivalents, Beginning of Period                         |                            
|                                                                       |                            
|Cash and Cash Equivalents, End of Period                               |                            
|                                                                       |                            
|                                                                      
|Supplemental Cash Flows Information                                    |                            
|Interest paid                                                          |                            
|Income taxes paid                                                      |                            
|                                                                      
|Supplemental Non-Cash Disclosures                                      |                            
|Capitalization of mortgage servicing rights                            |                            

|See notes to consolidated condensed
financial statements






4
LSB FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTSMARCH 31, 2005



Note 1  General


The financial statements were
prepared in accordance with the instructions for Form 10-Q and, therefore, do not include
all of the disclosures necessary for a complete presentation of financial position,
results of operations and cash flows in conformity with accounting principles generally
accepted in the United States of America. These interim financial statements have been
prepared on a basis consistent with the annual financial statements and include, in the
opinion of management, all adjustments, consisting of only normal recurring adjustments,
necessary for a fair presentation of the results of operations and financial position for
and at the end of such interim periods. All outstanding shares and per share figures have
been adjusted to reflect a 5% stock dividend payable by LSB Financial Corp. to
shareholders of record on October 8, 2004. The consolidated condensed balance sheet of LSB
Financial Corp. as of December 31, 2004 has been derived from the audited consolidated
balance sheet of LSB Financial Corp. as of that date.


Certain information and note
disclosures normally included in the companys annual financial statements prepared
in accordance with generally accepted accounting principles have been condensed or
omitted. These condensed (consolidated) financial statements should be read in conjunction
with the (consolidated) financial statements and notes thereto included in the
companys Form 10-KSB annual report for 2004 filed with the Securities and Exchange
Commission. The results of operations for the period are not necessarily indicative of the
results to be expected for the full year.


Stock Options: Employee
compensation expense under stock options is reported using the intrinsic value method. No
stock-based compensation cost for stock options is reflected in net income, as all options
granted had an exercise price equal to or greater than the market price of the underlying
common stock at date of grant. The following table illustrates the effect on net income
and earnings per share if expense was measured using the fair value recognition provisions
of FASB Statement No. 123, Accounting for Stock-Based Compensation.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                                                  | Three months ended
|--------------------------------------------------------------------------------- | ------------------
|
|Net income as reported                                                            |                   
|Deduct: Stock-based compensation expense determined under fair value based method |                   
|                                                                                  |                   
|Pro forma net income                                                              |                   
|                                                                                  |                   
|                                                                                  |                   
|Basic earnings per share as reported                                              |                   
|Pro forma basic earnings per share                                                |                   
|Diluted earnings per share as reported                                            |                   
|Pro forma diluted earnings per share                                              |                   

|5
Note 2  Principles
of Consolidation


The accompanying financial statements
include the accounts of LSB Financial Corp., its wholly owned subsidiary Lafayette Savings
Bank, FSB, and Lafayette Savings wholly owned subsidiaries, LSB Service Corporation
and Lafayette Insurance and Investments, Inc. All significant intercompany transactions
have been eliminated upon consolidation.



Note 3  Earnings
per share


Earnings per share are based upon the
weighted average number of shares outstanding during the period. Diluted earnings per
share further assume the issuance of any potentially dilutive shares. 11,500 shares were
not included in the diluted earnings per share calculation as their effect would be
antidilutive. Unearned ESOP shares are not considered to be outstanding for the earnings
per share computation. The following table presents information about the number of shares
used to compute earnings per share and the results of the computations:
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                                     | Quarter ended March 31
|-------------------------------------------------------------------- | ----------------------
|
|Weighted average shares outstanding (excluding unearned ESOP shares) |                       
|Shares used to compute diluted earnings per share                    |                       
|Earnings per share                                                   |                       
|Diluted earnings per share                                           |                       

|6
|-

|Item 2. |  | MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION
|------- |  | ------------------------------------------------------------------------------------

|Executive Summary


LSB Financial Corp. is an Indiana
corporation which was organized in 1994 by Lafayette Savings Bank, FSB for the purpose of
becoming a thrift institution holding company. Lafayette Savings is a federally chartered
stock savings bank headquartered in Lafayette, Indiana. References in this Form 10-Q to
we, us, and our refer to LSB Financial and/or
Lafayette Savings as the context requires.


Lafayette Savings has been, and
intends to continue to be, a community-oriented financial institution. Our principal
business consists of attracting retail deposits from the general public and investing
those funds primarily in permanent first mortgage loans secured by owner-occupied, one- to
four-family residences, and to a lesser extent, non-owner occupied one- to four-family
residential, commercial real estate, multi-family, construction and development, consumer
and commercial business loans. Our revenues are derived principally from interest on
mortgage and other loans and interest on securities.


Tippecanoe County and the eight
surrounding counties comprise Lafayette Savings primary market area. Lafayette is
the county seat of Tippecanoe County, and West Lafayette is the home of Purdue University.
The Greater Lafayette area typically shows better growth and lower unemployment rates than
Indiana or the national economy because of the diverse employment base. The unemployment
rate at December 2004 was 3.7% in the greater Lafayette area and 5.0% for the State of
Indiana compared to February 2005, the most recent data, which showed unemployment rates
of 6.4% and 5.5%, respectively. There is frequently an increase in the unemployment rates
in the months following the holiday season.


Our primary source of revenue is
interest income primarily on loans and to a much lesser extent, on investments which we
hold mainly as a source of liquidity, and on Federal Home Loan Bank stock. In periods of
very low interest rates when many borrowers refinance their mortgages, often to fixed rate
products, we typically generate income by selling these loans on the secondary market at a
gain. While we forego future interest income by selling these mortgages, we also avoid the
risk of having a large portfolio of low rate, fixed rate loans should interest rates rise
and remain high. Our loan portfolio typically consists of about 75% variable rate
products.


Our primary source of income is net
interest income, which is the difference between the interest income earned on our loan
and investment portfolios and the interest expense incurred on deposits and borrowings.
Our net interest income depends on the balance of our loan and investment portfolios and
the size of our net interest margin, which is the difference between the income generated
from loans and the cost of the funding. A major area of concern in the growth of net
interest income is the continuing flattening of the yield curve. Short-term rates
increased steadily over 2004 and are expected to continue to increase in 2005. Long-term
rates, however, have remained flat. Because deposits are generally tied to shorter-term
market rates, and loans are generally tied to longer-term rates, the shrinking spread
between the two has made it more difficult to maintain desired operating income levels.
Our expectation is that short-term rates will continue to rise as the Federal Reserve
Board responds to inflation concerns and the growing strength of the economy. Long-term
rates have remained low because the purchase of U.S. government bonds has driven up the
price of long-term bonds and kept their returns low. Until this situation changes we
expect the yield curve to remain fairly flat.




7
Rate changes could be expected to
have an impact on interest income. Rising rates generally increase borrower preference for
variable rate products which we typically keep in our portfolio. Additionally, existing
adjustable rate loans can be expected to reprice to higher rates, both of which could be
expected to have a favorable impact on interest income. Alternatively, continuing low
interest rates could have a negative impact on our interest income as new loans are put on
the books at comparatively low rates and our existing adjustable rate loans reprice to
lower rates. Even if rates do fall, because so many borrowers refinanced their mortgages
in the last few years, we dont expect to see a return to a high volume of
refinancing. However, low rates may be expected to encourage borrowers to initiate
additional real estate related purchases.


Our primary expense is interest on
deposits and Federal Home Loan Bank advances which are used to fund loan growth. We offer
customers in our market area time deposits for terms ranging from three months to five
years, checking accounts and savings accounts. We also purchase brokered deposits and
Federal Home Loan Bank advances as needed to provide funding or to improve our interest
rate risk position. Generally, when interest rates are low, depositors will choose
shorter-term products and conversely when rates are high, depositors will choose
longer-term products.


We consider expected changes in
interest rates when structuring our interest earning assets and our interest bearing
liabilities. If rates are expected to increase we try to book shorter-term assets that
will reprice relatively quickly to higher rates over time, and book longer-term
liabilities that will remain for a longer time at lower rates. Conversely, if rates are
expected to fall, we intend to structure our balance sheet such that loans will reprice
more slowly to lower rates and deposits will reprice more quickly. We currently offer a
three year and a five year certificate of deposit that allows depositors one opportunity
to have their rate adjusted to the market rate at a future date to encourage them to
choose longer-term deposit products. However, since we are not able to predict market
interest rate fluctuations, our asset-liability management strategy may not prevent
interest rate changes from having an adverse affect on our results of operations and
financial condition.


Our results of operations may also be
affected by general and local competitive conditions, particularly those with respect to
changes in market interest rates, government policies and actions of regulatory
authorities.




Critical Accounting
Policies


Generally accepted accounting
principles are complex and require management to apply significant judgments to various
accounting, reporting and disclosure matters. Management of LSB Financial Corp. must use
assumptions and estimates to apply these principles where actual measurement is not
possible or practical. For a complete discussion of LSB Financial Corp.s
significant accounting policies, see Note 1 to the Consolidated Financial Statements as
of March 31, 2005. Certain policies are considered critical because they are highly
dependent upon subjective or complex judgments, assumptions and estimates. Changes in
such estimates may have a significant impact on the financial statements. Management has
reviewed the application of these policies with the Audit Committee of LSB Financial Corp.s
Board of Directors. Those policies include the following:




8
Allowance
for Loan Losses


The
allowance for loan losses represents managements estimate of probable losses
inherent in Lafayette Savings loan portfolios. In determining the appropriate amount
of the allowance for loan losses, management makes numerous assumptions, estimates and
assessments.


The
strategy also emphasizes diversification on an industry and customer level, regular credit
quality reviews and quarterly management reviews of large credit exposures and loans
experiencing deterioration of credit quality.


Lafayette
Savings allowance consists of three components: probable losses estimated from
individual reviews of specific loans, probable losses estimated from historical loss
rates, and probable losses resulting from economic or other deterioration above and beyond
what is reflected in the first two components of the allowance.


Larger
commercial loans that exhibit probable or observed credit weaknesses are subject to
individual review. Where appropriate, reserves are allocated to individual loans based on
managements estimate of the borrowers ability to repay the loan given the
availability of collateral, other sources of cash flow and legal options available to
Lafayette Savings. Included in the review of individual loans are those that are impaired
as provided in SFAS No. 114, Accounting by Creditors for Impairment of aLoan. Any
allowances for impaired loans are determined by the present value of expected future cash
flows discounted at the loans effective interest rate or fair value of the
underlying collateral. Historical loss rates are applied to other commercial loans not
subject to specific reserve allocations.


Homogenous
smaller balance loans, such as consumer installment and residential mortgage loans are not
individually risk graded. Reserves are established for each pool of loans based on the
expected net charge-offs for one year. Loss rates are based on the average net charge-off
history by loan category.


Historical
loss rates for commercial and consumer loans may be adjusted for significant factors that,
in managements judgment, reflect the impact of any current conditions on loss
recognition. Factors which management considers in the analysis include the effects of the
national and local economies, trends in the nature and volume of loans (delinquencies,
charge-offs and nonaccrual loans), changes in mix, asset quality trends, risk management
and loan administration, changes in the internal lending policies and credit standards,
collection practices and examination results from bank regulatory agencies and Lafayette
Savings Banks internal loan review.


An
unallocated reserve is maintained to recognize the imprecision in estimating and measuring
loss when evaluating reserves for individual loans or pools of loans. Allowances on
individual loans are reviewed quarterly and historical loss rates are reviewed annually
and adjusted as necessary based on changing borrower and/or collateral conditions and
actual collection and charge-off experience.


Lafayette
Savings primary market area for lending is Tippecanoe County, Indiana. When
evaluating the adequacy of allowance, consideration is given to this regional geographic
concentration and the closely associated effect changing economic conditions have on
Lafayette Savings customers.




9
Mortgage
Servicing Rights


Mortgage
servicing rights (MSRs) associated with loans originated and sold, where servicing is
retained, are capitalized and included in other intangible assets in the consolidated
balance sheet. The value of the capitalized servicing rights represents the present value
of the future servicing fees arising from the right to service loans in the portfolio.
Critical accounting policies for MSRs relate to the initial valuation and subsequent
impairment tests. The methodology used to determine the valuation of MSRs requires the
development and use of a number of estimates, including anticipated principal amortization
and prepayments of that principal balance. Events that may significantly affect the
estimates used are changes in interest rates, mortgage loan prepayment speeds and the
payment performance of the underlying loans. The carrying value of the MSRs is
periodically reviewed for impairment based on a determination of fair value. For purposes
of measuring impairment, the servicing rights are compared to a valuation prepared based
on a discounted cash flow methodology, utilizing current prepayment speeds and discount
rates. Impairment, if any, is recognized through a valuation allowance and is recorded as
amortization of intangible assets.



Financial Condition



Comparison
of Financial Condition at March 31, 2005 and December 31, 2004.


Our
total assets increased $11.0 million or 3.10% during the three months from December 31,
2004 to March 31, 2005. This increase was primarily due to a $7.1 million increase in
total net loans and a $4.1 million increase in short-term investments. Management
attributes the increase in loans primarily to rising interest rates to which borrowers
responded by selecting lower rate, adjustable rate mortgage products which we keep in our
portfolio. The balance in short-term investments typically fluctuates in response to
funding needs. The increase in assets was funded by a $9.4 million increase in deposits.
Management attributes the increase in deposits to its success in attracting borrowers to
its CD products as well as to the purchase of brokered deposits as needed to provide
funding or to improve our interest rate risk position. $7.3 million of the increase in
deposits was from brokered funds. Shareholders equity increased from $30.4 million
at December 31, 2004 to $31.3 million at March 31, 2005, an increase of $526,000, due
primarily to net income and the tax benefit from the exercise of stock options, offset in
part by the payment of a cash dividend.


Non-performing
assets, which include non-accruing loans, accruing loans 90 days past due and foreclosed
assets, increased from $5.9 million at December 31, 2004 to $8.5 million at March 31,
2005. Non-performing loans at March 31, 2005 consisted of $4.4 million or 59.93% of loans
on one- to four-family residential real estate with an average loan-to-appraised value of
66.64%, $2.6 million or 34.99% of loans on land or commercial property with an average
loan-to-appraised value of 55.91%, $320,000 of commercial business loans and $57,000 of
non-accruing consumer loans. Non-performing assets also include $1.1 million in foreclosed
assets. At March 31, 2005, our allowance for loan losses equaled 0.68% of total loans
(including loans held for sale) compared to 0.66% at December 31, 2004. The allowance for
loan losses at March 31, 2005 totaled 26.23% of non-performing assets compared to 35.38%
at December 31, 2004, and 30.17% of non-performing loans at March 31, 2005 compared to
44.66% at December 31, 2004. Our non-performing assets equaled 2.33% of total assets at
March 31, 2004 compared to 1.67% at December 31, 2004. Non-performing assets totaling
$51,000 were charged off in the first three months of 2005. These charge-offs were largely
covered by existing reserves and there was no need for additional provisions to the
allowance for the amounts charged off. Although we believe we use the best information
available to determine the adequacy of our allowance for loan losses, future adjustments
to the allowance may be necessary, and net income could be significantly affected, if
circumstances and/or economic conditions cause substantial changes in the estimates we use
in making the determinations about the levels of the allowance for losses. Additionally,
various regulatory agencies, as an integral part of their examination process,
periodically review our allowance for loan losses. These agencies may require the
recognition of additions to the allowance based upon their judgments of information
available at the time of their examination.


Shareholders
equity increased $865,000, or 2.85%, during the first three months of 2005 primarily as a
result of net income of $767,000 and a $339,000 tax benefit from the exercise of 51,390 stock
options, partially offset by our payment of dividends on common stock, and the repurchase of 9,087 shares of our stock as part of a stock
repurchase plan. Shareholders equity to total assets was 8.54% at March 31, 2005
compared to 8.57% at December 31, 2004.



10
Results of Operations



Comparison
of Operating Results for the Three Months Ended March 31, 2005 and March 31, 2004.


General.  Net
income for the three months ended March 31, 2005 was $767,000, an increase           of
$47,000 or 6.13%, over the three months ended March 31, 2004. This increase           was
primarily due to a $209,000 increase in net interest income and a $99,000
          decrease in taxes on income, partially offset by a $63,000 decrease in the gain
          on sale of loans due to the decreased originations and refinancings of
          fixed-rate mortgage loans and the sale of such loans on the secondary market
          caused by an increase in mortgage rates, a $181,000 increase in non-interest
          expenses, and a $50,000 increase in the provision for loan losses.


Net
Interest Income.  Net interest income for the three months ended March 31,
2005 increased $209,000, or 7.26%, over the same period in 2004. This increase was
primarily due to a $41.2 million increase in average loans receivable. Our net interest
margin (net interest income divided by average interest-earning assets) increased
slightly from 3.42% for the three months ended March 31, 2004 to 3.34% for the three
months ended March 31, 2005. The increase in net interest margin is primarily the result
of a $1.5 million increase in net interest earning assets partially offset by a decrease
in the average rate earned on interest earning assets from 5.98% for the three months
ended March 31, 2004 to 5.94% for the three months ended March 31, 2005 and an increase
in the average rate paid on interest earning liabilities from 2.68% for the three months
ended March 31, 2004 to 2.73% for the three months ended March 31, 2005 The decrease in
the net interest margin was partially offset by a $9.9 million increase in average
balance of interest-earning assets.


Interest
income on loans increased $502,000 or 10.05% for the three months ended March 31, 2005
compared to the same three months in 2004. This increase was the result of a $41.2
million increase in average loans outstanding partially offset by a decrease in the
average yield on loans from 6.34% for the first three months of 2004 to 6.15% for the
first three months of 2005, due to continuing low long-term interest rates in the
economy. The increase in the loan portfolio was due largely to borrowers continuing to
take advantage of relatively low market interest rates to refinance existing mortgages
and initiate other real estate related purchases. The increase in interest rates
triggered interest in lower rate, adjustable rate mortgage products which we typically
hold in our loan portfolio.


Interest
earned on other investments and Federal Home Loan Bank stock decreased by $41,000 for the
three months ended March 31, 2005 compared to the same period in 2004. This was primarily
the result of a $8.0 million decrease in average balances partially offset by an increase
in the average yield on the average balance of other investments and Federal Home Loan
Bank stock from 2.38% for the first three months of 2004 to 2.51% over the same period in
2005. The decrease in the average balance was generally due to those funds being
reinvested into longer term loans or investments.


Interest
expense for the three months ended March 31, 2005 increased $252,000 or 11.22% over the
same period in 2004. This increase was due to a $31.7 million increase in average
interest-bearing liabilities as well as an increase in the average rate paid on
interest-bearing liabilities from 2.68% for the first three months of 2004 to 2.73% for
the first three months of 2005.



11
Provision
for Loan Losses.  We establish our provision for loan losses based on a
systematic analysis of risk factors in the loan portfolio. The analysis includes
consideration of concentrations of credit, past loss experience, current economic
conditions, the amount and composition of the loan portfolio, estimated fair value of the
underlying collateral, delinquencies and industry standards. On at least a quarterly
basis, a formal analysis of the adequacy of the allowance is prepared and reviewed by
management and the Board of Directors. This analysis serves as a point in time assessment
of the level of the allowance and serves as a basis for provisions for loan losses.


Our
analysis of the loan portfolio begins at the time the loan is originated, when each loan
is assigned a risk rating. If the loan is a commercial credit, the borrower will also be
assigned a similar rating. Loans that continue to perform as agreed will be included in
one of ten non-classified loan categories. Portions of the allowance are allocated to
loan portfolios in the various risk grades, based upon a variety of factors, including
historical loss experience, trends in the type and volume of the loan portfolios, trends
in delinquent and non-performing loans, and economic trends affecting our market. Loans
no longer performing as agreed are assigned a lower risk rating, eventually resulting in
their being regarded as classified loans. A collateral re-evaluation is completed on all
classified loans. This process results in the allocation of specific amounts of the
allowance to individual problem loans, generally based on an analysis of the collateral
securing those loans. These components are added together and compared to the balance of
our allowance at the evaluation date.


Non-classified
loan categories include first mortgage loans on the following types of properties: one-
to four-family owner occupied, one- to four-family non-owner occupied, multi-family,
non-residential, land and land development, and construction. Additional categories
include: second mortgage and home equity loans, unsecured commercial business loans,
secured commercial business loans, and consumer loans.


We
recorded a $175,000 provision for loan losses for the three months ended March 31, 2005
as a result of our analysis of our current loan portfolios compared to $125,000 for the
same period in 2004. The increased provision during 2005 was necessary to maintain the
allowance for loan losses at a level considered adequate to absorb losses inherent in the
loan portfolio and cover anticipated charge-offs. During the first three months of 2005
we recorded charge-offs of $51,000. The $175,000 provision for loan losses for the first
quarter of 2005 was considered adequate to cover further charge-offs based on our
evaluation and our loan mix.


At
March 31, 2005, non-performing assets, consisting of non-accruing loans, accruing loans
90 or more days delinquent and other real estate owned, totaled $8.5 million compared to
$5.9 million at December 31, 2004. In addition to our non-performing assets, we
identified $6.8 million other loans of concern, down from $9.8 million at December 31,
2004, where known information about possible credit problems of borrowers causes
management to have doubts as to the ability of the borrowers to comply with present
repayment terms, and that may result in disclosure of such loans as non-performing assets
in the future. The vast majority of these loans, as well as our non-performing assets,
are well collateralized.




12
Non-Interest
Income.  Non-interest income for the three months ended March 31, 2005
decreased by $30,000 or 5.84% compared to the same period in 2004. This was primarily due
to a $63,000 decrease in the gain on the sale of mortgage loans in the secondary marketresulting
from decreased sales due to the decrease in refinance activity. This decrease was
partially offset by a $38,000 increase in other income, primarily the result of a $44,000
increase in mortgage loan servicing fees.


Non-Interest
Expense.  Non-interest expense for the three months ended March 31, 2005
increased $181,000 over the same period in 2004. The major components of this increase
included a $129,000 increase in salaries and employee benefits partly due to increased
compliance and health insurance costs, and a $102,000 increase in other non-interest
expenses partly due to increased reporting costs and expenses related to foreclosed
properties.


Income
Tax Expense.  Our income tax provision decreased by $99,000 for the three
months ended March 31, 2005 compared to the three months ended March 31, 2004, primarily
as a result of tax savings relating to our Bank Owned Life Insurance program and
increased lending in an area in Lafayette designated as an urban enterprise zone,
qualifying for enterprise zone tax credits.


Liquidity


Our
primary sources of funds are deposits, repayment and prepayment of loans,
          interest earned on or maturation of investment securities and short-term
          investments, borrowings and funds provided from operations. While maturities
and           the scheduled amortization of loans, investments and mortgage-backed
securities           are a predictable source of funds, deposit flows and mortgage
prepayments are           greatly influenced by general market interest rates, economic
conditions and           competition.


We
monitor our cash flow carefully and strive to minimize the level of cash held in low rate
overnight accounts or in cash on hand. We also carefully track the scheduled delivery of
loans committed for sale to be added to our cash flow calculations. Our current internal
policy for liquidity requires minimum liquidity of 4.0% of total assets.


Liquidity
management is both a daily and long-term function for our senior management. We adjust
our investment strategy, within the limits established by the investment policy, based
upon assessments of expected loan demand, expected cash flows, Federal Home Loan Bank
advance opportunities, market yields and objectives of our asset/liability management
program. Base levels of liquidity have generally been invested in interest-earning
overnight and time deposits with the Federal Home Loan Bank of Indianapolis. Funds for
which a demand is not foreseen in the near future are invested in investment and other
securities for the purpose of yield enhancement and asset/liability management.


Our
liquidity ratios at December 31, 2004 and March 31, 2005 were 5.80% and 6.71%,
respectively compared to a regulatory liquidity base, and 4.38% and 4.07% compared to
total assets at the end of each period.


We
anticipate that we will have sufficient funds available to meet current funding
commitments. At March 31, 2005, we had outstanding commitments to originate loans and
available lines of credit totaling $52.4 million and commitments to provide funds to
complete current construction projects in the amount of $6.7 million. In addition we had
commitments to sell $1.8 million of fixed rate residential loans. Certificates of deposit
which will mature in one year or less at March 31, 2005 totaled $74.0 million. Based on
our experience, our certificates of deposit have been a relatively stable source of
long-term funds as such certificates are generally renewed upon maturity since we have
established long-term banking relationships with our customers. Therefore, we believe a
significant portion of such deposits will remain with us, although this cannot be
assured. At March 31, 2005, $56.0 million of our deposits were in brokered deposits,
$13.0 million of which will mature in one year or less. These deposits can be expected
not to renew at maturity and will have to be replaced with other funding upon maturity.
We also have $20.8 million of Federal Home Loan Bank advances maturing in the next twelve
months.



13
Capital Resources


Shareholders equity totaled $31.3 million at March 31,
2005 compared to $30.4 million at December 31, 2004, an increase of $865,000 or 2.85%,
due primarily to net income of $767,000 and a $339,000 tax benefit from the exercise of
51,390 stock options, partially offset by our payment of dividends on common stock, and
the repurchase of 9,087 shares of our stock as part of a stock repurchase plan.
Shareholders equity to total assets was 8.54% at March 31, 2005 compared to 8.57%
at December 31, 2004.


Federal
insured savings institutions are required to maintain a minimum level of regulatory
capital. If the requirement is not met, regulatory authorities may take legal or
administrative actions, including restrictions on growth or operations or, in extreme
cases, seizure. As of December 31, 2004 and March 31, 2005, Lafayette Savings was
categorized as well capitalized. Our actual and required capital amounts and ratios at
December 31, 2004 and March 31, 2005 are presented below:
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------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|                                                   | OTS                    | FDIC 
|-------------------------------------------------- | ---------------------- | -----
|
|
|                                                   | (Dollars in thousands)
|As of March 31, 2005                               |                        |      
|Total risk-based capital (to risk-weighted assets) | $32,318                | 11.4%
|Tier I capital (to risk-weighted assets)           | 30,294                 | 10.7%
|Tier I capital (to adjusted total assets)          | 30,294                 | 8.3% 
|Tier I capital (to adjusted tangible assets)       | 30,294                 | 8.3% 
|Tangible capital (to adjusted tangible assets)     | 30,294                 | 8.3% 
|                                                  
|As of December 31, 2004                           
|Total risk-based capital (to risk-weighted assets) | $31,657                | 11.6%
|Tier I capital (to risk-weighted assets)           | 29,797                 | 10.9%
|Tier I capital (to adjusted total assets)          | 29,797                 | 8.4% 
|Tier I capital (to adjusted tangible assets)       | 29,767                 | 8.4% 
|Tangible capital (to adjusted tangible assets)     | 29,797                 | 8.4% 

|Disclosure Regarding Forward-Looking
Statements


This
document, including information included or incorporated by reference, contains, and
future filings by LSB Financial on Form 10-K, Form 10-Q and Form 8-K and future oral and
written statements by LSB Financial and our management may contain, forward-looking
statements about LSB Financial and its subsidiaries which we believe are within the
meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking
statements include, without limitation, statements with respect to anticipated future
operating and financial performance, growth opportunities, interest rates, cost savings
and funding advantages expected or anticipated to be realized by management. Words such
as may, could, should, would, believe, anticipate, estimate, expect, intend, plan and
similar expressions are intended to identify forward-looking statements. Forward-looking
statements by LSB Financial and its management are based on beliefs, plans, objectives,
goals, expectations, anticipations, estimates and intentions of management and are not
guarantees of future performance. We disclaim any obligation to update or revise any
forward-looking statements based on the occurrence of future events, the receipt of new
information or otherwise. The important factors we discuss below and elsewhere in this
document, as well as other factors discussed under the caption Managements
Discussion of Recent Operating Results in this document and identified in our filings
with the SEC and those presented elsewhere by our management from time to time, could
cause actual results to differ materially from those indicated by the forward-looking
statements made in this document.




14
The
following factors, many of which are subject to change based on various other factors
beyond our control, could cause our financial performance to differ materially from the
plans, objectives, expectations, estimates and intentions expressed in such
forward-looking statements:
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | the
strength of the United States  economy in general and the strength           of the local
economies in which we conduct our operations;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | the
effects of, and changes in, trade, monetary and fiscal policies and laws, including
interest rate policies of the Federal Reserve Board;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | financial
market, monetary and interest rate fluctuations, particularly the relative relationship
of short-term interest rates to long-term interest rates;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | the
timely development of and acceptance of our new products and services of Lafayette
Savings and the perceived overall value of these products and services by users,
including the features, pricing and quality compared to competitors products and
services;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | the
 willingness  of users to  substitute  competitors'  products  and           services for
our products and services;
| | - |  | ------------------------------------------------------------------------------------------------------------------------

| |  |  | the
impact of changes in financial services laws and regulations (including laws
concerning taxes, accounting standards, banking, securities and insurance);
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | the
impact of technological changes;
| | - |  | ------------------------------------

| |  |  | acquisitions;
| | - |  | -------------

| |  |  | changes
in consumer spending and saving habits; and
| | - |  | ---------------------------------------------------

| |  |  | our
success at managing the risks involved in the foregoing.
| | - |  | ------------------------------------------------------------

|15
|--

|Item 3. |  | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|------- |  | ----------------------------------------------------------

|We,
like other financial institutions, are subject to interest rate risk to the extent that
our interest-bearing liabilities reprice on a different basis than our interest-earning
assets. The Office of Thrift Supervision (OTS), our primary regulator,
supports the use of a net portfolio value (NPV) approach to the quantification
of interest rate risk. In essence, this approach calculates the difference between the
present value of expected cash flows from assets and the present value of expected cash
flows from liabilities, as well as cash flows from off balance sheet contracts. An NPV
ratio, in any interest rate scenario, is defined as the NPV in that rate scenario divided
by the market value of assets in the same scenario, essentially a market value adjusted
capital ratio.


It
has been and continues to be a priority of the Board and management to manage interest
rate risk to maintain an acceptable level of potential changes to interest income as a
result of interest rate changes. Our asset/liability policy, established by the board of
directors, sets forth acceptable limits on the amount of change in net portfolio value
given certain changes in interest rates. We have an asset/liability management committee
which meets quarterly to review our interest rate position, and an investment committee
which reviews the interest rate risk position and other related matters with the Board,
and makes recommendations for adjusting this position to the full Board of Directors. In
addition, the investment committee of the Board meets semi-annually with our outside
investment advisors to review our investment portfolio and strategies relating to interest
rate risk. Specific strategies have included the sale of long-term, fixed rate loans to
reduce the average maturity of our interest-earning assets and the use of Federal Home
Loan Bank advances to lengthen the effective maturity of our interest-bearing liabilities.
In the future, our community banking emphasis, including the origination of commercial
business loans, is intended to further increase our portfolio of short-term and/or
adjustable rate loans.


Presented
below, as of December 31, 2004 and 2003, is an analysis of our interest rate risk as
measured by the effect on NPV caused by instantaneous and sustained parallel shifts in the
yield curve, in 100 basis point increments, up and down 300 basis points, and compared to
Board policy limits. The Board Limit column indicates the lowest allowable limits for NPV
after each interest rate shock. Assumptions used in calculating the amounts in this table
are OTS assumptions. No information is provided for a negative 200 or 300 basis point
shift in interest rates, due to a low prevailing interest rate environment making such
scenarios unlikely.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Change in | Board Limit | At December 31, 2004 | At December 31, 2003
|--------- | ----------- | -------------------- | --------------------
|
|         
|300       | bp          | 6                    | .00%                
|200       |             | 7                    | .00                 
|100       |             | 8                    | .00                 
|0         |             | 8                    | .00                 
|-100      |             | 8                    | .00                 

|16
In
evaluating our exposure to interest rate risk, certain shortcomings inherent in the method
of analysis presented in the foregoing table must be noted. For example, although certain
assets and liabilities may have similar maturities or periods to repricing, they may react
in different degrees to changes in market interest rates. Also, the interest rates on
certain types of assets and liabilities may fluctuate in advance of changes in market
interest rates, while interest rates on other types may lag behind changes in market
rates. Further, in the event of a change in interest rates, prepayments and early
withdrawal levels may deviate significantly from those assumed in calculating the table.
Finally, the ability of many borrowers to service their debt may decrease in the event of
an interest rate increase. As a result, the actual effect of changing interest rates may
differ from that presented in the foregoing table.


Management
believes that at March 31, 2005 there have been no material changes in Lafayette
Savings interest rate sensitivity which would cause a material change in the market
risk exposures that affect the quantitative and qualitative risk disclosures as presented
above, from the Companys Annual Report on Form 10-KSB for the period ended December
31, 2004.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Item 4. |  | CONTROLS AND PROCEDURES.
|------- |  | ------------------------

|An
evaluation of the Companys disclosure controls and procedures (as defined in Rule
13(a)-15(e) of the Securities Exchange Act of 1934 (the Act)), as of March
31, 2005, was carried out under the supervision and with the participation of the Companys
Chief Executive Officer, Chief Financial Officer and several other members of the Companys
senior management. The Companys Chief Executive Officer and Chief Financial Officer
concluded that the Companys disclosure controls and procedures currently in effect
are effective in ensuring that the information required to be disclosed by the Company in
the reports it files or submits under the Act is (i) accumulated and communicated to the
Companys management (including the Chief Executive Officer and Chief Financial
Officer) in a timely manner and (ii) recorded, processed, summarized and reported within
the time periods specified in the Securities and Exchange Commissions rules and
forms. There have been no changes in our internal control over financial reporting (as
defined in Rule 13a-15(f) of the Act) that occurred during the quarter ended March 31,
2005, that has materially affected, or is reasonably likely to affect, our internal
control over the financial reporting.


The
Company intends to continually review and evaluate the design and effectiveness of its
disclosure controls and procedures and to improve its controls and procedures over time
and to correct any deficiencies that it may discover in the future. The goal is to ensure
that senior management has timely access to all material financial and non-financial
information concerning the Companys business. While the Company believes the present
design of its disclosure controls and procedures is effective to achieve its goal, future
events affecting its business may cause the Company to modify its disclosure controls and
procedures.




17
PART II  OTHER
INFORMATION


Item 1. LEGAL PROCEEDINGS


The
Company, from time to time, is involved as plaintiff or defendant in various legal
actions arising in the normal course of business. While the ultimate outcome of these
proceedings cannot be predicted with certainty, it is the opinion of management, after
consultation with counsel representing the Company in the proceedings, that the
resolution of any prior and pending proceedings should not have a material effect on the
Company or the Banks financial condition or results of operations.


Item 2. UNREGISTERED SALES OF
EQUITY SECURITIES AND USE OF PROCEEDS


The
following table sets forth the number and prices paid for repurchased           shares.



Issuer Purchases of
Equity Securities
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Month of Purchase              | Total Number of Shares Purchased (1) | Average PricePaid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plan (2) | Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plan
|------------------------------ | ------------------------------------ | --------------------------- | ----------------------------------------------------------------------- | -----------------------------------------------------------------------------------------------
|January 1 - January 31, 2005   |                                      | 1,472                       |                                                                         | 26                                                                                             
|February 1 - February 28, 2005 |                                      | 4,200                       |                                                                         | 26                                                                                             
|March 1 - March 31, 2005       |                                      | 3,415                       |                                                                         | 26                                                                                             
|Total                          |                                      | 9,087                       |                                                                         | 26                                                                                             

|
|

|(1) |  | There
were no shares repurchased other than through a publicly announced plan or program.
|--- |  | -----------------------------------------------------------------------------------------

|(2) |  | We
have in place a plan, announced September 27, 2004, to repurchase 5% of our common stock.
|--- |  | --------------------------------------------------------------------------------------------

|Item 3. DEFAULTS UPON SENIOR
SECURITIES


None
to be reported.


Item 4. SUBMISSION OF MATTERS TO A
VOTE OF SECURITY HOLDERS


None
to be reported.



Item 5. OTHER INFORMATION



None.



Item 6. EXHIBITS



Exhibits:


The
exhibits listed in the Exhibit Index are incorporated herein by reference.


18
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 FINANCIAL CORP.(Registrant)
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Date:   May 9, 2005
            |  | /s/ Randolph F. Williams

Randolph F. Williams, President(Principal Executive Officer)
|--------------------------------------------- |  | ----------------------------------------------------------------------------------------------------

|Date:   May 9, 2005
            |  | /s/ Mary Jo David

Mary Jo David, Treasurer(Principal Financial and Accounting Officer)
|--------------------------------------------- |  | -----------------------------------------------------------------------------------------------------

|19
INDEX
TO EXHIBITS
|--------------------

|RegulationS-K ExhibitNumber |  | Document
|--------------------------- |  | --------

| | 31.1 |  | Rule
13(a)-14(a) Certification (Chief Executive Officer)
| | ---- |  | --------------------------------------------------------

| | 31.2 |  | Rule
13(a)-14(a) Certification (Chief Financial Officer)
| | ---- |  | --------------------------------------------------------

| | 32 |  | Section
1350 Certifications
| | -- |  | ---------------------------

|20
|--