<PAGE>
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                             ----------------------


                                   FORM 10-QSB

[X]               QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                    For the quarterly period ended June 30, 1997

[  ]              TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
                                  EXCHANGE ACT

                    For the transition period from ______ to ________

                         Commission file number 0-25070.

                               LSB FINANCIAL CORP.
        (Exact Name of Small Business Issuer as Specified in its Charter)

            Indiana                                              35-1934975
(State or other jurisdiction of                               (I.R.S. Employer
Incorporation or organization)                               Identification No.)

 101 Main Street, Lafayette, Indiana                                47902
(Address or principal executive offices)                         (Zip Code)

Issuer's telephone number, including area code: (765) 742-1064

         Check whether the Issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the Issuer was required to file such reports), and (2) has
been subject to such requirements for the past 90 days.
 YES [X] NO[ ]

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

         CLASS                                    OUTSTANDING AT AUGUST 8, 1997
         -----                                    -----------------------------

Common stock, par value $.01 per share                          916,350

            Transitional Small Business Disclosure Format:      YES [ ]  NO [X]

<PAGE>

                              L S B FINANCIAL CORP.
                  (Dollars in thousands, except per shar data)
                        SELECTED FINANCIAL CONDITION DATA

                                            December 31,          June 30,
Dollars in thousands                            1996                1997

Total Assets                                  $184,607            $194,117
Loans Receivable, net                          159,216             170,692
Available-for-Sale Securities                    6,546               8,152
Short-term Investments                           5,410               1,040
Deposits                                       116,949             130,793
Total Borrowings                                50,220              45,705
Shareholders' Equity (net)                      16,796              17,184


                            SELECTED OPERATIONS DATA
<TABLE>
<CAPTION>

                                                               Three months ended June 30:        Six months ended June 30:
                                                                 1996                1997            1996            1997

<S>                                                            <C>                 <C>             <C>             <C>   
Total Interest Income                                          $3,218              $3,753          $6,342          $7,294
Total Interest Expense                                          1,840               2,147           3,547           4,149
                                                              -----------------------------------------------------------
  Net Interest Income                                           1,378               1,606           2,795           3,145
Provision for Loan Losses                                         800                  24             800              48
                                                              -----------------------------------------------------------
Net Interest Income after provision                               578               1,582           1,995           3,097

Deposit Account Service Charges                                    94                 108             164             188
Gain(loss) on Sale of Securities                                    0                   0               9               0
Gain(loss) on Mortgage Loans Originated for Sale                    5                  37              37             105
Other Non-interest Income                                          43                  55              86             106
                                                              -----------------------------------------------------------
  Total Non-Interest Income                                       142                 200             296             399

Total Non-Interest Expense                                        987               1,188           2,005           2,314
                                                              -----------------------------------------------------------
Income/(loss) before Income Taxes                                (267)                594             286           1,182
Income Tax Expense/(Benefit)                                     (111)                233              99             463
                                                              -----------------------------------------------------------
  Net Income/(loss)                                             ($156)               $361            $187            $719

Earnings per Share                                             ($0.17)              $0.41           $0.21           $0.82
Book value per share                                           $18.33              $19.80          $18.33          $19.80
</TABLE>

<PAGE>




                               LSB FINANCIAL CORP.
                 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
                             (Dollars in thousands)
<TABLE>
<CAPTION>

                                                                        December 31,          June 30,
                                                                            1996                1997
                                                                       ---------------------------------
Assets
<S>                                                                        <C>                 <C>   
Cash and cash equivalents                                                  $9,798              $6,001
Available-for-sale securities                                               6,546               8,152
Loans held for sale                                                         6,230               1,062
Total loans                                                               154,701             171,075
  Less: Allowance for loan losses                                          (1,715)             (1,445)
                                                                       ---------------------------------
    Net loans                                                             152,986             169,630

Premises and equipment, net                                                 4,570               4,436
FHLB stock, at cost                                                         2,575               2,600
Accrued interest receivable                                                 1,006               1,097
Other assets                                                                  896               1,139
                                                                       ---------------------------------
  Total assets                                                           $184,607            $194,117
                                                                       =================================
Liabilities and Shareholders' Equity

Liabilities
Deposits                                                                 $116,949            $130,793
Advances from FHLB                                                         50,000              45,500
Note payable                                                                  220                 205
Accrued interest payable                                                      197                 186
Advances from borrowers for taxes and insurance                               178                 156
Accrued expenses and other liabilities                                        267                  93
                                                                       ---------------------------------
  Total liabilities                                                       167,811             176,933


Shareholders' Equity
Common stock                                                                   11                  11
Additional paid-in-capital                                                 10,143              11,163
Retained earnings                                                          10,289               9,879
Unearned ESOP shares                                                         (653)               (612)
Unamortized cost of recognition and retention plan                           (332)               (287)
Treasury stock, at cost                                                    (2,629)             (2,942)
Net unrealized loss on available-for-sale-securities                          (33)                (28)
                                                                       ---------------------------------
  Total shareholders' equity                                               16,796              17,184
                                                                       ---------------------------------
Total liabilities and shareholders' equity                               $184,607            $194,117
                                                                       =================================
</TABLE>

           See accompanying notes to consolidated financial statements
<PAGE>

                               LSB FINANCIAL CORP.
                        CONSOLIDATED STATEMENTS OF INCOME
                  (Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
                                                                   Three months ended                 Six months ended
                                                                         June 30,                          June 30,
                                                                1996                1997            1996            1997
                                                               ----------------------------------------------------------
Interest Income
<S>                                                            <C>                 <C>             <C>             <C>   
  Loans, including related fees                                $3,020              $3,533          $5,919          $6,867
  Available-for-sale securities                                   168                 170             358             327
  FHLB stock                                                       30                  50              65             100
                                                               ----------------------------------------------------------
    Total interest income                                       3,218               3,753           6,342           7,294

Interest Expense
  Deposits                                                      1,333               1,479           2,628           2,855
  Borrowings                                                      507                 668             919           1,294
                                                               ----------------------------------------------------------
    Total interest expense                                      1,840               2,147           3,547           4,149

Net interest income                                             1,378               1,606           2,795           3,145
  Provision for loan losses                                       800                  24             800              48
                                                               ----------------------------------------------------------
Net interest income after provision for loan losses               578               1,582           1,995           3,097

Noninterest Income
  Service charges and fees                                         94                 108             164             188
  Net gain on mortgage loans originated for sale                    5                  37              37             105
  Gain on sale of securities                                        0                   0               9               0
  Other income                                                     43                  55              86             106
                                                               ----------------------------------------------------------
    Total noninterest income                                      142                 200             296             399


Noninterest Expense
  Salaries and benefits                                           494                 598           1,014           1,185
  Occupancy and equipment, net                                    158                 192             312             380
  FDIC insurance                                                    1                   4               1               7
  Computer service                                                 54                  65             121             126
  Advertising                                                      56                  77             105             140
  Other                                                           224                 252             452             476
                                                               ----------------------------------------------------------
    Total noninterest expense                                     987               1,188           2,005           2,314

Income/(loss) before income taxes                                (267)                594             286           1,182
  Less: income taxes                                             (111)                233              99             463
                                                               ----------------------------------------------------------
Net income/(loss)                                               ($156)               $361            $187            $719
                                                               ==========================================================
Earnings per share (Note 3)                                    ($0.17)              $0.41           $0.21           $0.82
Book value per share
</TABLE>

           See accompanying notes to consolidated financial statements

<PAGE>

                              LBS FINANCIAL CORP.
                       CONSOLIDATED STATEMENTS OF CHANGES
                            IN SHAREHOLDERS' EQUITY
                             (Dollars in thousands)
<TABLE>
<CAPTION>
                                                                                  Unamortized                  
                                                                                 Cost of Bank                  Unrealized
                                            Additional               Unearned     Recognition                  Gain/(Loss)
                                   Common    Paid-In     Retained      ESOP      and Retention     Treasury      on APS     
                                   Stock     Capital     Earnings     Shares         Plan            Stock     Securities    Total 
                                    -----------------------------------------------------------------------------------------------
<S>                                <C>      <C>          <C>          <C>            <C>           <C>          <C>        <C>    
Balance at January 1, 1996          $11      $10,063      $9,626       ($739)         ($399)        ($466)       ($28)      $18,068

Issuance of common stock for RRP                  22                                    (22)
ESOP shares earned                                27                      44                                                     71
RRP expense                                                                              44                                      44
Treasury stock acquired                                                                            (1,665)                   (1,665)
Net income                                                   187                                                                187
Change in net unrealized loss                                                                                     (45)          (45)
Cash dividends paid                                          (72)                                                               (72)
                                    -----------------------------------------------------------------------------------------------
  Balance at June 30, 1996          $11      $10,112      $9,741       ($695)         ($377)      ($2,131)       ($73)      $16,588
                                    ===============================================================================================


Balance at January 1, 1997          $11      $10,143     $10,289       ($653)         ($332)      ($2,629)       ($33)      $16,796

Exercise of stock option                           3                                                                              3
ESOP shares earned                                41                      41                                                     82
RRP expense                                                                              45                                      45
Treasury stock acquired                                                                              (313)                     (313)
Net income                                                   719                                                                719
Change in unrealized loss                                                                                           5             5
Cash dividends paid                                        (151)                                                               (151)
Stock dividends paid                             868       (870)                                                                 (2)
                                    ----------------------------------------------------------------------------------------------- 
Balance at June 30, 1997            $11      $11,055      $9,987       ($612)         ($287)      ($2,942)       ($28)      $17,184
                                    ===============================================================================================
</TABLE>

       See accompanying notes to financial statements

<PAGE>

                               LSB FINANCIAL CORP.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (Dollars in thousands)
<TABLE>
<CAPTION>
                                                                        For the 6 months ended June 30, 
                                                                             1996              1997
                                                                        ------------------------------
<S>                                                                         <C>                <C>
Cash Flows from Operating Activities 
Net Income                                                                  $187               $719
Adjustments to reconcile net income to net
  cash from operating activities
    Depreciation and amortization                                            130                 172
    Net amortization on securities                                            36                  23
    Gain on sale of securities                                                (9)                  0
    Writedown of loans held for sale                                          29                   0
    Gain on sale of loans                                                    (66)               (105)
    Loans originated for sale, net of sales proceeds                      (1,294)              5,273
    Deferred loan fees, net                                                   44                 (40)
    Provision for loan losses                                                800                  48
    Employee stock ownership plan shares earned                               71                  82
    Change in assets and liabilities
      Accrued interest receivable                                            (92)                (91)
      Other assets                                                           (99)               (202)
      Accrued interest payable                                                12                 (11)
      Other liabilities                                                   (1,003)               (174)
                                                                        ------------------------------
Net cash from operating activities                                        (1,254)              5,694

Cash Flows from Investing Activities
Purchases of available-for-sale securities                                (2,442)             (3,476)
Proceeds from paydowns and maturities of
  available-for-sale securities                                            5,543               1,856
Sales of available-for-sale securities                                       804                   0
Purchase of Federal Home Loan Bank stock                                    (600)                (25)
Loans made to customers net of payments received                         (17,513)            (16,652)
Property and equipment expenditures                                         (615)                (38)
                                                                        ------------------------------
Net cash from investing activities                                       (14,823)            (18,335)

Cash Flows from Financing Activities
Net change in deposits                                                     4,387              13,844
Proceeds from Federal Home Loan Bank advances                             22,000              21,000
Payments on Federal Home Loan Bank advances                              (10,864)            (25,500)
Net change in advances from borrowers
   for taxes and insurance                                                    (4)                (22)
Payments on note payable                                                     (15)                (15)
Treasury Stock Purchased                                                  (1,665)               (313)
Cash dividends paid                                                          (72)               (153)
Stock options exercised                                                        0                   3
                                                                        ------------------------------
Net cash from financing activities                                        13,767               8,844

Net change in cash and equivalents                                        (2,310)             (3,797)
Cash and equivalents at January 1                                          7,795               9,798
                                                                        ------------------------------
Cash and equivalents at June 30                                           $5,485              $6,001
                                                                        ==============================
</TABLE>

           See accompanying notes to consolidated financial statements
<PAGE>

                               LSB FINANCIAL CORP.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (Dollars in thousands)
<TABLE>
<CAPTION>
                                                                        For the 6 months ended June 30,
                                                                             1996              1997
                                                                        ------------------------------
<S>                                                                         <C>                <C>
Cash Flows from Operating Activities 
Net Income                                                                  $187               $719
Adjustments to reconcile net income to net
  cash from operating activities
    Depreciation and amortization                                            130                 172
    Net amortization on securities                                            36                  23
    Gain on sale of securities                                                (9)                  0
    Writedown of loans held for sale                                          29                   0
    Gain on sale of loans                                                    (66)               (105)
    Loans originated for sale, net of sales proceeds                      (1,294)              5,273
    Deferred loan fees, net                                                   44                 (40)
    Provision for loan losses                                                800                  48
    Employee stock ownership plan shares earned                               71                  82
    Change in assets and liabilities
      Accrued interest receivable                                            (92)                (91)
      Other assets                                                           (99)               (202)
      Accrued interest payable                                                12                 (11)
      Other liabilities                                                   (1,003)               (174)
                                                                        ------------------------------
Net cash from operating activities                                        (1,254)              5,694

Cash Flows from Investing Activities
Purchases of available-for-sale securities                                (2,442)             (3,476)
Proceeds from paydowns and maturities of
  available-for-sale securities                                            5,543               1,856
Sales of available-for-sale securities                                       804                   0
Purchase of Federal Home Loan Bank stock                                    (600)                (25)
Loans made to customers net of payments received                         (17,513)            (16,652)
Property and equipment expenditures                                         (615)                (38)
                                                                        ------------------------------
Net cash from investing activities                                       (14,823)            (18,335)

Cash Flows from Financing Activities
Net change in deposits                                                     4,387              13,844
Proceeds from Federal Home Loan Bank advances                             22,000              21,000
Payments on Federal Home Loan Bank advances                              (10,864)            (25,500)
Net change in advances from borrowers
   for taxes and insurance                                                    (4)                (22)
Payments on note payable                                                     (15)                (15)
Treasury Stock Purchased                                                  (1,665)               (313)
Cash dividends paid                                                          (72)               (153)
Stock options exercised                                                        0                   3
                                                                        ------------------------------
Net cash from financing activities                                        13,767               8,844

Net change in cash and equivalents                                        (2,310)             (3,797)
Cash and equivalents at January 1                                          7,795               9,798
                                                                        ------------------------------
Cash and equivalents at June 30                                           $5,485              $6,001
                                                                        ==============================
</TABLE>

           See accompanying notes to consolidated financial statements

<PAGE>

                               LSB FINANCIAL CORP.
                          NOTES TO FINANCIAL STATEMENTS
                                  JUNE 30, 1997

Note 1 - General

The financial statements were prepared in accordance with the instructions for
Form 10-QSB 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 generally accepted accounting principles. Except for
the adoption of required accounting changes, 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.

Note 2 - Principles of Consolidation

The accompanying financial statements include the accounts of LSB Financial
Corp. (the Company), its wholly owned subsidiary Lafayette Savings Bank, FSB
(the Bank) and the Bank's wholly owned subsidiaries, LSB Service Corporation and
Lafayette Insurance and Investments, Inc. Lafayette Insurance and Investments,
Inc. was formed December 30, 1996 and began operations in May of 1997. All
significant intercompany transactions have been eliminated upon consolidation.

Note 3 - Earnings per share

Earnings per share are computed based upon the weighted average number of shares
outstanding during the period. Unearned ESOP shares are not considered to be
outstanding for the earnings per share computation. On June 30, 1997, a 5.00%
stock dividend was paid to shareholders of record on June 3, 1997. This dividend
resulted in the issuance of 44,792 shares with a value at the record date of
$868,000. All share and per share data has been restated to reflect the effect
of this dividend. The following table presents share data used to compute
earnings per share.

<TABLE>
<CAPTION>
                                                Quarter ended                    Year-to-date
                                                    June 30                         June 30
                                              1997         1996               1997         1996
                                              ----         ----               ----         ----

<S>                                         <C>           <C>               <C>           <C>    
Weighted average shares outstanding         936,733       956,763           941,884       978,845

Shares used to compute
    earnings per share                      871,399       886,138           875,466       907,141
</TABLE>

The options outstanding at June 30, 1997 were not dilutive.

<PAGE>

Note 4 - Accounting Changes

Effective January 1, 1997, the Company adopted Financial Accounting Standard No.
125, "Accounting for Transfers and Servicing of Financial Assets and
Extinguishment of Liabilities." This standard revises the accounting for
transfers of financial assets, such as loans and securities, and for
distinguishing between sales and secured borrowings. It is effective for some
transactions in 1997 and others in 1998. Management does not expect the effect
on LSB's financial position and results of operations to be significant.


<PAGE>

               MANAGEMENT'S DISCUSSION OF RECENT OPERATING RESULTS

Forward Looking Statements

         Certain statements in this report that relate to LSB Financial Corp.'s
plans, objectives or future performance may be deemed to be forward-looking
statements within the meaning of the Private Securities Litigation Act of 1995.
Such statements are based on Management's current expectations. Actual
strategies and results in future periods may differ materially from those
currently expected because of various risks and uncertainties. Additional
discussion of factors affecting LSB Financial's business and prospects is
contained in the Company's periodic filings with the Securities and Exchange
Commission.

Financial Condition

         Comparison of Financial Condition at June 30, 1997 and December 31, 
1996.

         Total assets increased $9.5 million during the six months from December
31, 1996 to June 30, 1997. This increase was primarily due to a $16.6 million
increase in the Company's loan portfolio offset by a $5.2 million decrease in
the Company's loans held for sale as the Company continued its efforts to
restructure its balance sheet by increasing the size of its higher-yielding
multi-family, land and land development, construction, commercial real estate
and commercial business loan and consumer loan portfolios. A $13.8 million
increase in deposits was used to fund loan growth and to decrease borrowings
from the Federal Home Loan Bank by $4.5 million. Non-performing loans decreased
from $2.5 million at December 31, 1996 to $2.3 million at June 30, 1997.
Non-performing loans at June 30, 1997 consisted of $2.1 million of purchased
equipment leases, one single family residence and one credit card loan.
Shareholders' equity increased from $16.8 million at December 31, 1996 to $17.2
million at June 30, 1997, an increase of $388,000 primarily due to $719,000 in
net income partially offset by the repurchase of an additional $313,000 of the
Company's stock as part of an ongoing 5.00% stock buy-back program and by
$153,000 in cash dividends to shareholders.


Results of Operations

Comparison of Operating Results for the Six Months and the Quarter Ended June
30, 1996 and June 30, 1997.

         General. Net income for the six months ended June 30, 1997 was
$719,000, an increase of $532,000 or 284.49% over net income of $187,000 for the
six months ended June 30, 1996. This increase was due primarily to an $800,000
provision for loan losses in the second quarter of 1996 intended to proactively
address the possibility of losses on $2.4 million in purchased equipment leases.
Without this provision, net income for the first six months of 1996 would have
been approximately $670,000, and 1997's year-to-date net income of $719,000
would represent an increase of $49,000 or 7.31%. This $49,000 increase was
primarily due to a $350,000 increase in net interest income and a $103,000
increase in non- interest income in the first six months of 1997, offset by a
$48,000


<PAGE>

recurring provision for loan losses and a $309,000 increase in operating
expenses. Net income for the second quarter of 1996 was ($156,000) due primarily
to the $800,000 provision for loan losses in the second quarter of 1996,
compared to $361,000 for the same period in 1997.

         Net Interest Income. Net interest income for the six months ended June
30, 1997 increased $350,000, or 12.52%, over the same period in 1996. Net
interest income for the second quarter of 1997 similarly increased $228,000, or
16.55%, over the same period in 1996. These increases were primarily
attributable to the success of management's continuing efforts to grow and
restructure the Company's balance sheet by investing funds in higher-yielding
loans, particularly commercial real estate and consumer loans, as opposed to the
lower yielding securities portfolio. The Company's net interest margin (net
interest income divided by average interest-earning assets) decreased from 3.58%
for the six months ended June 30, 1996 to 3.55% for the six months ended June
30, 1997. The decline in yield was offset by increased volume as average
interest-earning assets increased from $156.2 million for the first six months
of 1996 to $177.2 million for the six months of 1997. The interest rate spread
for the first six months increased from 3.29% for 1996 to 3.37% for 1997.

         Interest income on loans increased $948,000 or 16.02% for the six
months ended June 30, 1997 compared to the same six months in 1996, primarily
the result of an increase of $20.6 million in average loans outstanding. This
increase was primarily due to an active residential real estate market in 1997
due to continued relatively low interest rate environment and a strong local
economy, and the ongoing success of the Company's focus on higher-yielding
multi-family, land and land development, construction, commercial real estate
and commercial business loan and consumer loan production. These higher-yielding
portfolios increased from $62.2 million, or 39.07% of the total loan portfolio
at December 31, 1996 to $69.0 million, or 40.42% of the total loan portfolio at
June 30, 1997. This increase in volume was also augmented by an increase in the
average yield on loans from 8.32% for the first six months of 1996 to 8.43% for
the first six months of 1997, also a result of the loan portfolio restructuring.
Both the net interest margin and the average yield on loans in 1997 were
negatively impacted by the placement of the purchased equipment leases on
non-accrual status effective April 1, 1996. Interest income on loans increased
$513,000 for the second quarter of 1997 compared to the second quarter of 1996
due primarily to a $19.2 million increase in average loans.

         Interest earned on securities, money market investments and FHLB stock
increased $4,000 for the six months ended June 30, 1997 compared to the same six
months in 1996. This was the result of a very slight $386,000 increase in
average investments offset by a slight decrease in the average yield from 7.17%
in 1996 to 7.06% for 1997. Interest earned on these investments for the second
quarter increased $22,000 due to a $2.3 million increase in average investments
offset by a decrease in average yields from 6.33% to 5.96%.

         Interest expense for the six months ended June 30, 1997 increased
$602,000 over the same period in 1996. This increase was primarily due to an
increase of $24.0 million in average interest-bearing liabilities, consisting of
an additional $12.2 million in the average balance of customer deposit accounts
and a $11.8 million increase in the average balance of Federal Home Loan Bank
advances drawn to fund loan demand. The average rate paid on interest-bearing
liabilities increased from 4.84% for the first six months of 1996 to 4.86% for
the first six months of 1997. Interest expense

<PAGE>

equipment expense. The increase in salaries and employee benefits, and occupancy
and equipment expenses were incurred in connection with the opening of the
Company's fourth branch in October of 1996.

         Income Tax Expense. The Company's income tax provision increased by
$364,000 for the six months ended June 30, 1997 compared to the same period in
1996. This was primarily due to the increase in income before income taxes.

         Liquidity. Liquidity management is both a daily and long-term function
for the Bank's senior management. The Bank adjusts its investment strategy,
within the limits established by the investment policy, based upon assessments
of expected loan demand, expected cash flows, FHLB advance opportunities, market
yields and objectives of its asset/liability management program. Base levels of
liquidity have generally been invested in interest-earning overnight and time
deposits with the FHLB 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.

         The Bank is required to maintain minimum levels of liquidity as defined
by regulatory agencies. The liquidity requirement, which can vary, is based upon
a percentage of deposits and short term borrowings and is currently 5.0%. The
Bank's internal policy for liquidity is approximately 8%. The Company's
liquidity ratios at December 31, 1996 and June 30, 1997 were 7.31% and 10.02%,
respectively.

         Capital Resources. Shareholders' equity totaled $17.2 million at June
30, 1997 compared to $16.8 million at December 31, 1996, an increase of $388,000
or 2.31%, primarily due to an increase in net income of $719,000 partially
offset by a stock repurchase of $313,000 and cash dividends of $153,000. Federal
regulations require the Bank to maintain certain minimum levels of regulatory
capital. The regulations currently require tangible capital as defined by
regulation to be at least 1.5% of total assets, as also defined by regulation,
that core capital as defined be 3.0% of total assets, and that risk based
capital be at least 8.0% of risk-based assets as defined by regulations. At June
30, 1997 the Bank's capital ratios were as follows:

                                      Amount              Percent of
                                       (000)           applicable assets
                                    ------------------------------------
         Tangible capital             $15,779                  8.15%
         Requirement                    2,903                  1.50
                                      -------                  ----
         Excess                       $12,876                  6.65%
                                      =======                  ====


         Core capital                 $15,779                  8.15%
         Requirement                    5,806                  3.00
                                     --------                  ----
         Excess                      $  9,973                  5.15%
                                     ========                  ====


         Risk-based Capital          $ 16,573                 11.12%
         Requirement                   11,927                  8.00
                                     --------                 -----
         Excess                      $  4,646                  3.12%
                                     ========                 =====


<PAGE>

increased $307,000 for the second quarter of 1997 over the same period in 1996
primarily due to a $23.3 million increase in average interest-bearing
liabilities with no substantive change in the average rate for the three month
period.

         Provision for Loan Losses. The Company establishes its provision for
loan losses based on a systematic analysis of risk factors in the loan
portfolio. The analysis includes evaluation of concentration of credit, past
loss experience, current economic conditions, the amount and composition of the
loan portfolio, estimated fair value of the underlying collateral, loan
commitments outstanding, delinquencies, industry standards and using the
services of a consultant to assist in the evaluation of its growing commercial
loan portfolio. Management's analysis results in the allocations of allowance
amounts for each loan type. Based on this analysis, during the quarter ended
June 30, 1996 the Company recorded an $800,000 provision for loan losses
primarily in response to the situation involving Bennett Funding Group (Bennett)
of Syracuse, New York through which the Company owned $2.4 million of equipment
leases. On March 29, 1996, the Securities and Exchange Commission filed civil
and criminal complaints against an officer of Bennett and shortly thereafter,
Bennett sought Chapter 11 bankruptcy protection. The Company had been paid
interest through March 31, 1996. The Company's $2.4 million investment is
comprised of numerous small dollar equipment leases. A settlement involving the
restructuring of these loans was reached during the second quarter of 1997 and
resulted in a write down of $319,000 charged to the allowance for loan losses.
Management continues to allocate $651,000 of the allowance to the remaining
leases and loans to cover any potential losses in collecting on the outstanding
leases. It is believed that this reserve allocation will be sufficient to cover
any losses. In addition, the Company provided an additional $48,000 provision
for loan losses during the first six months of 1997. In addition to the Bennett
leases there were $197,000 of non-performing loans at June 30, 1997, consisting
of one single family residence and a $5,000 credit card loan. The allowance for
loan losses to total loans was 1.08% at December 31, 1996 and 0.85% at June 30,
1997. Non-performing loans totaled $2.5 million at December 31, 1996,
representing 1.35% of total assets, and $2.3 million at June 30, 1997,
representing 1.17% of total assets.

         Non-Interest Income. Non-interest income for the six months ended June
30, 1997 increased by $103,000, or 34.80%, over the same period in 1996. This
was primarily due to a $24,000 increase in service charges and fees on deposit
accounts due to the increased number of these accounts, and a $68,000 increase
in the gain on the sale of loans in the secondary market. This increase in the
gain on the sale of loans resulted from the increased sales activity and the
absence of a market value adjustment at June 30, 1997. On June 30, 1996, the
Company held $2.3 million of fixed rate mortgage loans in its held for sale
portfolio. The required adjustment to mark these loans to market, which is
recorded as a component of non-interest expense, was ($28,000). There was no
comparable adjustment needed at June 30, 1997. Non-interest income for the
second quarter of 1997 increased by $58,000 over the same period in 1996,
primarily due to a $14,000 increase in service charges and fees on transaction
accounts and a $32,000 increase in the gain on the sale of loans in the
secondary market.

         Non-Interest Expense. Non-interest expense for the six months ended
June 30, 1997 increased $309,000 over the same period in 1996. The major
components of this increase included a $171,000 increase in salaries and
employee benefits and a $68,000 increase in occupancy and

<PAGE>


                           PART II - OTHER INFORMATION



Item 1.  LEGAL PROCEEDINGS
         -----------------

         The Company and the Bank, from time to time, are 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 Bank 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.  CHANGES IN SECURITIES
         ---------------------

None to be reported.

Item 3.  DEFAULTS UPON SENIOR SECURITIES
         -------------------------------

None to be reported.

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

         (a) On April 16, 1997, LSB Financial Corp. held its Annual Meeting of
Stockholders ("Meeting").

         (b) The following directors were elected: John W. Corey, James A.
Andrew, Philip W. Kemmer and John C. Shen by the following votes 705,726,
710,526, 706,001 and 704,296 respectively.

         (c) Stockholders of the Company voted on the following matter at the
meeting.

                           Votes        Votes                         Broker
                            For         Against      Abstentions     Non-votes
                            ---         -------      -----------     ---------

Ratification of            715,027       1,025          3,567           -0-
the appointment
of Crowe, Chizek
and Company LLP
as auditors of the
Company for the
fiscal year ended
December 31, 1996.



<PAGE>



Item 5. OTHER INFORMATION
        -----------------

None to be reported.

Item 6. EXHIBITS AND REPORTS ON FORM 8-K
        --------------------------------

         (a)   Exhibits:

                  Exhibit 27 -  Financial Data Schedule


         (b)   Reports on Form 8-K

                  None to be reported.






<PAGE>



                                   SIGNATURES

         In accordance with the requirements of the Exchange Act, the Registrant
has caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.



                                            LSB FINANCIAL CORP.
                                               (Registrant)



Date   August 8, 1997                       /s/JOHN W. COREY
       ---------------------                ------------------------------
                                            John W. Corey, President
                                            (Principal Executive Officer)


Date   August 8, 1997                       /s/MARY JO DAVID
       ---------------------                ------------------------------
                                            Mary Jo David, Treasurer
                                  (Principal Financial and Accounting Officer)


<PAGE>


                                INDEX TO EXHIBITS


Exhibit
Number
------

    27            Financial Data Schedule