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, 1998

[ ]            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 JULY 17, 1998 
                 -----                             ---------------------------- 
                                                                                
Common stock, par value $.01 per share                        950,852           

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



<PAGE>



LSB FINANCIAL CORP.

INDEX


PART I.   FINANCIAL INFORMATION...........................................     1
Item 1.   Financial Statements (Unaudited)................................     1

Consolidated Statements of Financial Condition ...........................     1
Consolidated Statements of Income.........................................     2
Consolidated Statements of Changes in Shareholders' Equity................     3
Consolidated Statements of Cash Flow......................................     4
Notes to Consolidated Financial Statements................................   5-6

Item 2.   Management's Discussion of Recent Operating Results.............  7-11

PART II.  OTHER INFORMATION............................................... 12-13

          SIGNATURES......................................................    14

          EXHIBIT INDEX...................................................    15


<PAGE>


                        STATEMENTS OF FINANCIAL CONDITION
                             (Dollars in thousands)

                                                       December 31,    June 30,
                                                          1997           1998
                                                       -------------------------
Assets
  Cash and cash equivalents                            $   9,938      $   8,616
  Available-for-sale securities                            7,863         10,782
  Loans held for sale                                      1,265          2,271
   Total loans                                           178,745        188,276
  Less: Allowance for loan losses                         (1,478)        (1,532)
                                                       -------------------------
    Net loans                                            177,267        186,744
                                                                    
  Premises and equipment, net                              4,912          4,943
  FHLB stock, at cost                                      2,600          2,825
  Accrued interest receivable and other assets             2,739          2,452
                                                       -------------------------
   Total Assets                                        $ 206,584      $ 218,633
                                                       =========================
                                                                    
Liabilities and Shareholders' Equity                                
                                                                    
Liabilities                                                         
  Deposits                                             $ 137,686      $ 147,456
  Advances from FHLB                                      50,000         51,500
  Note payable                                               189            173
  Accrued interest payable and other liabilities             975          1,128
                                                       -------------------------
    Total liabilities                                    188,850        200,257
                                                                    
                                                                    
Shareholders' Equity                                                
  Common stock                                                 9             10
  Additional paid-in-capital                               7,854          9,033
  Retained earnings                                       10,677         10,040
  Unearned ESOP shares                                      (570)          (530)
  Unamortized cost of recognition and retention plan        (242)          (197)
  Accumulated other comprehensive income                       6             20
                                                       -------------------------
    Total shareholders' equity                            17,734         18,376
                                                       -------------------------
Total liabilities and shareholders' equity             $ 206,584      $ 218,633
                                                       =========================
                                                                    

     See accompanying notes
                                                                      
<PAGE>


                               LSB FINANCIAL CORP.
                              STATEMENTS OF INCOME
                  (Dollars in thousands, except per share data)

<TABLE>
<CAPTION>
                                                     Three months ended     Six months ended
                                                          June 30,               June 30,
                                                       1997     1998          1997     1998
                                                     ---------------------------------------
<S>                                                   <C>      <C>           <C>      <C>   
Interest Income                                                           
  Loans, including related fees                       $3,533   $3,931        $6,867   $7,771
  Available-for-sale securities                          170      202           327      419
  FHLB stock                                              50       50           100      101
                                                     ---------------------------------------
    Total interest income                              3,753    4,183         7,294    8,291
                                                                          
Interest Expense                                                          
  Deposits                                             1,479    1,633         2,855    3,242
  Borrowings                                             668      758         1,294    1,501
                                                     ---------------------------------------
    Total interest expense                             2,147    2,391         4,149    4,743
                                                                          
Net interest income                                    1,606    1,792         3,145    3,548
  Provision for loan losses                               24       30            48       54
                                                     ---------------------------------------
Net interest income after provision for loan losses    1,582    1,762         3,097    3,494
                                                                          
Noninterest Income                                                        
  Service charges and fees                               108      147           188      270
  Net gain on mortgage loans originated for sale          37      154           105      239
  Gain on sale of securities                               0        0             0        0
  Other                                                   55       87           106      185
                                                     ---------------------------------------
    Total noninterest income                             200      388           399      694
                                                                          
                                                                          
Noninterest Expense                                                       
  Salaries and benefits                                  598      681         1,185    1,360
  Occupancy and equipment, net                           192      210           380      407
  Computer service                                        65       63           126      125
  Advertising                                             77       92           140      177
  Other                                                  256      302           483      577
                                                     ---------------------------------------
    Total noninterest expense                          1,188    1,348         2,314    2,646
                                                                          
Income before income taxes                               594      802         1,182    1,542
  Less: income taxes                                     233      332           463      628
                                                     ---------------------------------------
Net income                                            $  361   $  470        $  719   $  914
                                                     =======================================
                                                                          
Earnings per share (Note 3)                           $ 0.39   $ 0.52        $ 0.78   $ 1.02
Diluted Earnings per Share                            $ 0.39   $ 0.50        $ 0.76   $ 0.98
Book value per share                                  $18.81   $20.46        $18.81   $20.46
</TABLE>


     See accompanying notes
                                                                          

                                                                         
<PAGE>


                               LSB FINANCIAL CORP.
                       CONSOLIDATED STATEMENTS OF CHANGES
                             IN SHAREHOLDERS' EQUITY
                             (Dollars in thousands)

<TABLE>
<CAPTION>
                                                                                   Unamortized
                                                                                     Cost of              Accumulated
                                               Additional                Unearned  Recognition                 Other
                                      Common    Paid-In      Retained      ESOP   and Retention   Treasury Comprehensive
                                       Stock    Capital      Earnings     Shares       Plan         Stock     Income        Total
                                     ----------------------------------------------------------------------------------------------
<S>                                  <C>         <C>         <C>         <C>           <C>         <C>         <C>         <C>     
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)
Cash dividends paid                                              (151)                                                         (151)
Stock dividends paid                                  868        (870)                                                           (2)
  Comprehensive income                                                                                                   
    Net income                                                    719                                                           719
    Change in unrealized gain/(loss)                                                                              5               5
                                                                                                                           --------
Total comprehensive income                                                                                                      724
                                                                                                                         
                                     ----------------------------------------------------------------------------------------------
Balance at June 30, 1997             $ 11        $ 11,055    $  9,987    ($612)        ($287)      ($2,942)    ($28)       $ 17,184
                                     ==============================================================================================
                                                                                                                         
                                                                                                                         
Balance at January 1, 1998           $  9        $  7,854    $ 10,677    ($570)        ($242)      $     0     $  6        $ 17,734
Exercise of stock option                1               4                                                                         5
ESOP shares earned                                     84                   40                                                  124
RRP expense                                                                               45                                     45 
Treasury stock acquired and retired                  (268)                                                                     (268)
Cash Dividends paid                                              (184)                                                         (184)
Stock Dividends paid                                 1359      (1,366)                                                           (7)
  Comprehensive income                                                                                                   
    Net income                                                    914                                                           914
    Change in unrealized loss                                                                                    14              14
                                                                                                                           --------
Total comprehensive income                                                                                                      928
                                                                                                                         
                                     ----------------------------------------------------------------------------------------------
Balance at June 30, 1998             $ 10        $  9,033    $ 10,041    ($530)        ($197)      $     0     $ 20        $ 18,377
                                     ==============================================================================================
</TABLE>                                                          
                                         
     See accompanying notes                   
                                                                         

<PAGE>

                               LSB FINANCIAL CORP.
                            STATEMENTS OF CASH FLOWS
                             (Dollars in thousands)

                                                              For the 6 months
                                                               ended June 30,
                                                              1997        1998
                                                           ---------------------
Cash Flows from Operating Activities
Net Income                                                 $    719    $    914
Adjustments to reconcile net income to net
  cash from operating activities
    Depreciation and amortization                               172         192
    Net amortization/(accretion) on securities                   23          (8)
    Gain on sale of securities                                    0           0
    Writedown  of loans held for sale                             0           0
    Gain on sale of loans                                      (105)       (239)
    Loans originated for sale, net of sales proceeds          5,273        (767)
    Deferred loan fees, net                                     (40)        (52)
    Provision for loan losses                                    48          54
    Employee stock ownership plan shares earned                  82         124
    Change in assets and liabilities
      Accrued interest receivable                               (91)        (80)
      Other assets                                             (202)        397
      Accrued interest payable                                  (11)         (7)
      Other liabilities                                        (174)        116
                                                           ---------------------
Net cash from operating activities                            5,694         644

Cash Flows from Investing Activities
Purchases of available-for-sale securities                   (3,476)     (5,462)
Proceeds from paydowns and maturities of
  available-for-sale securities                               1,856       2,574
Sales of available-for-sale securities                            0           0
Purchase of Federal Home Loan Bank stock                        (25)       (225)
Loans made to customers net of payments received            (16,652)     (9,475)
Property and equipment expenditures                             (38)       (223)
                                                           ---------------------
Net cash from investing activities                          (18,335)    (12,811)

Cash Flows from Financing Activities
Net change in deposits                                       13,844       9,771
Proceeds from Federal Home Loan Bank advances                21,000       6,000
Payments on Federal Home Loan Bank advances                 (25,500)     (4,500)
Net change in advances from borrowers
  for taxes and insurance                                       (22)         44
Payments on note payable                                        (15)        (16)
Treasury Stock Purchased                                       (313)       (268)
Dividends paid                                                 (153)       (191)
Stock options exercised                                           3           5
                                                           ---------------------
Net cash from financing activities                            8,844      10,845

Net change in cash and equivalents                           (3,797)     (1,322)
Cash and equivalents at January 1                             9,798       9,938
                                                           ---------------------

Cash and equivalents at June 30                            $  6,001    $  8,616
                                                           =====================


     See accompanying notes

<PAGE>


                               LSB FINANCIAL CORP.
                          NOTES TO FINANCIAL STATEMENTS
                                  JUNE 30, 1998

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.  Diluted  earnings per share further  assume the
issuance  of any  potentially  dilutive  shares.  Unearned  ESOP  shares are not
considered to be outstanding for the earnings per share computation. On June 30,
1998, a 5.00% stock dividend was paid to shareholders of record on June 8, 1998.
This  dividend  resulted in the  issuance  of 45,289  shares with a value at the
record date of $1.4  million.  All share and per share data has been restated to
reflect the effect of this dividend.  The following  table presents  information
about the number of shares used to compute earnings per share and the results of
the computations:

                                            Quarter ended        Year-to-date
                                                June 30            June 30
                                            1997      1998      1997      1998
                                            ----      ----      ----      ----

Weighted average shares outstanding        914,969   897,053   919,239   898,378
(excluding unearned ESOP shares)

Shares used to compute diluted
    earnings per share                     937,436   934,993   941,706   934,887

Earnings per share                           $0.39     $0.52     $0.78     $1.02
                                                                           
                                                                           
<PAGE>                                                                     
                                                                           
                                                                           
                                                                           
Diluted earnings per share                   $0.39     $0.50     $0.76     $0.98
                                                                         
Note 4 - Accounting Changes                                    

Effective  January 1, 1997, the Company adopted a new accounting  standard which
requires  disclosure  of  comprehensive  income for all  periods.  Comprehensive
income  includes  both  net  income  and  other  comprehensive   income.   Other
comprehensive  income  includes  the  change in  unrealized  gains and losses on
securities  available for sale, foreign currency  translation  adjustments,  and
additional minimum pension liability adjustments.



<PAGE>


         MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
                              RESULTS OF OPERATION


Forward Looking Statements

     Except  for  the  historical  information  contained  herein,  the  matters
discussed  in this report may be deemed to be  forward-looking  statements  that
involve risks and  uncertainties.  Words or phrases "will likely  result",  "are
expected to", "will  continue",  "is  anticipated",  "estimate",  "project",  or
similar expressions are intended to identify "forward-looking statements" within
the meaning of the Private  Securities  Litigation  Reform Act of 1995.  Factors
which  could cause  actual  results to differ  include,  but are not limited to,
fluctuations in interest rates,  changes in economic conditions in the Company's
market area, changes in policies by regulatory  agencies,  the acceptance of new
products,  the impact of competitive  products and pricing,  and the other risks
detailed from time to time in the Company's's SEC reports,  including the report
on Form 10-KSB for the year ended  December  31,  1997.  These  forward  looking
statements  represent the Company's judgement as of the date of this report. The
Company   disclaims,   however,   any  intent  or  obligation  to  update  these
forward-looking statements.

Impact of the Year 2000

     The Company has conducted a comprehensive review of its computer systems to
identify  applications  that could be affected by the "Year 2000" issue, and has
developed  an  implementation  plan to address  the issue.  The  Company's  data
processing  and other  critical  systems are  supplied by outside  vendors.  The
Company has already  contacted  each vendor to request  timetables for Year 2000
compliance  and expected  costs,  if any, to be passed along to the Company.  To
date, the Company has been informed that most of its primary  service  providers
anticipate  that all  reprogramming  efforts will be completed in enough time to
allow for testing.  The Company  plans to test the mission  critical  systems by
June 1999.  Certain other  vendors have not yet  certified  their system as Year
2000  compliant.  The Company will pursue other options if it appears that these
vendors will be unable to comply. The Company has prepared contingency plans for
all mission critical  systems.  Management does not expect these costs to have a
significant impact on its financial position or results of operations,  however,
there can be no assurance that the vendors' systems will be Year 2000 compliant,
consequently  the Company  could incur  incremental  costs to convert to another
vendor.  The Company has  identified  certain of its hardware and software  that
will not be Year 2000  compliant  and has already  purchased  new  equipment and
software.  These  capital  expenditures  are  expected  to  total  approximately
$170,000.

Financial Condition

     Comparison of Financial Condition at June 30, 1998 and December 31, 1997.

     Total assets  increased  $12.0 million  during the six months from December
31, 1997 to June 30, 1998.  This  increase was  primarily  due to a $9.5 million
increase in the Company's loan portfolio


<PAGE>



augmented by a $1.0 million increase in the Company's loans held for sale as the
Company  continued  its efforts to grow and migrate its balance sheet toward the
higher-yielding  multi-family  and commercial real estate,  land development and
consumer loan portfolios. A $9.8 million increase in deposits and a $1.5 million
increase in  borrowings  from the Federal  Home Loan Bank were used to fund loan
growth. Non-performing loans increased from $2.1 million at December 31, 1997 to
$2.6 million at June 30, 1998.  Non-performing  loans at June 30, 1998 consisted
of $2.1  million  of  purchased  equipment  leases,  $413,000  in  single-family
residences and $131,000 in non-mortgage  loans.  Shareholders'  equity increased
from $17.7  million at December 31, 1997 to $18.4  million at June 30, 1998,  an
increase of $642,000 primarily due to $914,000 in net income partially offset by
the  repurchase of an additional  $268,000 of the Company's  stock as part of an
ongoing  5.00% stock  buy-back  program and by  $191,000  in cash  dividends  to
shareholders. Results of Operations

Comparison  of Operating  Results for the Six Months and the Quarter  Ended June
30, 1997 and June 30, 1998.

     General. Net income for the six months ended June 30, 1998 was $914,000, an
increase of  $195,000  or 27.12% over net income of $719,000  for the six months
ended June 30, 1997.  This increase was primarily due to a $403,000  increase in
net interest income and a $295,000 increase in non- interest income in the first
six months of 1998,  offset by a $332,000  increase in operating  expenses and a
$165,000  increase in the provision for income taxes.  Net income for the second
quarter of 1998 was  $470,000  compared to $361,000  for the same period in 1997
due  primarily  to a $186,000  increase  in net  interest  income and a $188,000
increase in non-interest  income,  offset by a $160,000 increase in non-interest
expenses and a $99,000 increase in the provision for income taxes.

     Net Interest Income.  Net interest income for the six months ended June 30,
1998 increased  $403,000,  or 12.81%, over the same period in 1997. Net interest
income for the second quarter of 1998 similarly increased  $186,000,  or 11.58%,
over the same period in 1997. These increases were primarily attributable to the
success of management's  continuing efforts to grow and focus on higher-yielding
multi-family  and commercial real estate,  land  development and consumer loans.
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,
1997 to 3.51% for the six months ended June 30,  1998.  The decline in yield was
offset by increased  volume as average  interest-earning  assets  increased from
$177.2  million  for the first six months of 1997 to $201.9  million for the six
months of 1998. The interest rate spread for the first six months decreased from
3.37% for 1997 to 3.36% for 1998.

     Interest  income on loans  increased  $904,000 or 13.16% for the six months
ended  June 30,  1998  compared  to the same six months in 1997,  primarily  the
result of an  increase  of $21.2  million in  average  loans  outstanding.  This
increase was primarily due to an active  residential  real estate market in 1998
due to a continued low interest rate environment, a strong local economy and the
ongoing  success of the Company's  focus on  multi-family  and  commercial  real
estate,  land  development and consumer loan production.  These  higher-yielding
portfolios increased from $80.7 million at December 31, 1997 to $92.7 million at
June 30, 1998. The average yield on loans


<PAGE>



remained  virtually constant at 8.43% for the first six months of 1997 and 8.44%
for the first six months of 1998,  as the  higher  yield due to the type of loan
was offset by the lower rates on one-to-four  family loans.  Interest  income on
loans  increased  $398,000 for the second quarter of 1998 compared to the second
quarter of 1997 due primarily to a $19.5 million increase in average loans.

     Interest  earned on other  investments  and FHLB stock increased by $93,000
for the six months ended June 30, 1998  compared to the same six months in 1997.
This was the result of an overall $3.5 million  increase in the average  balance
of other  investments  primarily  due to the  Company's  efforts to rebuild  its
liquidity  portfolio  with an eye  toward  addressing  its  relatively  high tax
burden,  offset by a  decrease  in the  average  yield  from 5.98% for the first
quarter of 1997 to 5.84% over the same period in 1998.  Interest earned on these
investments  for the second  quarter  increased  $32,000  due to a $1.4  million
increase in average investments  augmented by an increase in average yields from
5.95% to 6.24% as some short  term  investments  were  invested  in longer  term
securities.

     Interest expense for the six months ended June 30, 1998 increased  $594,000
over the same period in 1997.  This increase was primarily due to an increase of
$24.9  million  in  average  interest-bearing  liabilities,   consisting  of  an
additional $19.7 million in the average balance of customer deposit accounts and
a $5.2  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  was 4.86% for the first six  months of 1997 and 4.85% for the first
six months of 1998.  Interest expense increased  $244,000 for the second quarter
of 1998 over the same period in 1997  primarily due to a $20.4 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,  and industry standards.  From time to time, management also uses
the  services  of a  consultant  to  assist  in the  evaluation  of its  growing
multi-family  and commercial real estate loan portfolio.  Management's  analysis
results in the allocations of allowance  amounts for each loan type. During 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.  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.  Management  continues  to
allocate  $651,000 of the $1.5 million allowance to the remaining leases and the
restructured  loan to provide for  potential  losses.  It is believed  that this
reserve  allocation will be sufficient to cover any losses. The Company recorded
a $54,000  provision  for loan  losses  during the first six months of 1998 as a
result of its analysis of the Company's  current loan portfolio.  In addition to
the $2.1 million of Bennett  leases  there were  $544,000 of  non-performing  or
restructured loans at June 30, 1998, consisting of four single family residences
and five non-mortgage  loans. The Company's allowance equaled 0.80% and 0.84% of
total loans receivable, including loans held for sale, at June 30, 1998 and June
30, 1997


<PAGE>



respectively. Non-performing loans totaled $2.1 million at December 31, 1997 and
$2.6 million at June 30, 1998,  representing  representing 1.02% of total assets
1.20% of total assets respectively.

     Non-Interest Income.  Non-interest income for the six months ended June 30,
1998 increased by $295,000,  or 73.93%,  over the same period in 1997.  This was
primarily due to a $134,000  increase in the gain on the sale of mortgage  loans
in the secondary market resulting from the increased sales activity,  an $82,000
increase in service  charges and fees on deposit  accounts due to the  increased
number of these  accounts,  and a $40,000  increase in fees on various debit and
credit  card  products.  Non-interest  income  for the  second  quarter  of 1998
increased by $188,000 over the same period in 1997,  primarily due to a $117,000
increase in the gain on the sale of loans in the secondary  market and a $39,000
increase in service charges and fees on transaction accounts.

     Non-Interest  Expense.  Non-interest  expense for the six months ended June
30, 1998 increased  $332,000 over the same period in 1997. The major  components
of this increase  included a $175,000 increase in salaries and employee benefits
and a $37,000  increase in  advertising  expense.  The increases  were primarily
incurred  in  connection  with  the  opening  of the  Company's  fourth  branch.
Non-interest  expense for the second  quarter of 1998 increased by $160,000 over
the same period in 1997,  primarily  due to an $83,000  increase in salaries and
employee  benefits,  a $15,000  increase in  advertising  expense and an $18,000
increase in occupancy expenses as a result of the additional branch office.

     Income Tax  Expense.  The  Company's  income  tax  provision  increased  by
$165,000 for the six months  ended June 30, 1998  compared to the same period in
1997. This was primarily due to the increase in income before income taxes.  The
Company's income tax provision for the second quarter of 1998 increased  $99,000
over the same period in 1997 for the same reason.

     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  4.0%.  The
Bank's internal policy for liquidity is 6% to 8%. The Company's liquidity ratios
at December 31, 1997 and June 30, 1998 were 7.76% and 8.40%, respectively.

     Capital Resources.  Shareholders'  equity totaled $18.4 million at June 30,
1998  compared to $17.7 million at December 31, 1997, an increase of $642,000 or
3.62%,  due to net income of $914,000,  and an $85,000 decrease in unearned ESOP
shares and unamortized cost of Bank


<PAGE>



Recognition and Retention Plan shares, offset by $184,000 of cash dividends paid
to  shareholders  and $268,000 used to repurchase  and retire  Treasury  shares.
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 4.0% of total assets, and that risk
based capital be at least 8.0% of risk-based  assets as defined by  regulations.
At June 30, 1998 the Bank's capital ratios were as follows:

                                               Amount           Percent of
                                               (000)        applicable assets
                                              -------------------------------
      Tangible capital                        $16,778             7.70%
      Requirement                               3,269             1.50
                                              -------            -----
      Excess                                  $13,509             6.19%
                                              =======            =====
      
      
      Core capital                            $16,778             7.70%
      Requirement                               8,718             4.00
                                              -------            -----
      Excess                                  $ 8,060             3.70%
                                              =======            =====
      
      
      Risk-based Capital                      $17,826            12.39%
      Requirement                              11,510             8.00
                                              -------            -----
      Excess                                  $ 6,316             4.39%
                                              =======            =====



<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 15,  1998,  LSB  Financial  Corp.  held its Annual  Meeting of
Stockholders ("Meeting").

     (b) Not applicable.

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

Election of the following persons as directors of the Company for terms of three
years:

<TABLE>
<CAPTION>
                               Votes             Votes                              Broker
                                For             Withheld         Abstentions       Non-votes
                               -----            --------         -----------       ---------
<S>                            <C>               <C>                 <C>              <C>
Mariellen M. Neudeck           665,462           2,719               -0-              -0-
Harry A. Dunwoody              666,206           1,975               -0-              -0-
C. Wesley Shook                663,536           4,645               -0-              -0-

<CAPTION>
                               Votes             Votes                              Broker
                                For             Against          Abstentions       Non-votes
                               -----            -------          -----------       ---------
<S>                            <C>               <C>                <C>               <C>
Ratification of                665,965           1,196              1,020             -0-
the appointment
</TABLE>


<PAGE>



of Crowe,  Chizek 
and Company LLP 
as auditors of the
Company for the 
fiscal year ended 
December 31, 1998.


Item 5. OTHER INFORMATION

     If a  stockholder  proposal is not  received by the Company by November 19,
1998, but otherwise meets the Company's eligibility requirements to be presented
at the next Annual meeting of  Stockholders,  the persons named in the Company's
form of proxy and acting  thereon will have the  discretion  to vote on any such
proposal in  accordance  with their best judgment if the proposal is received at
the Company's main office later than February 2, 1999.

Item 6. EXHIBITS AND REPORTS ON FORM 8-K

     (a)  Exhibits:

             See Exhibit Index


     (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 5, 1998                         /S/JOHN W. COREY
                                              ----------------------------------
                                              John W. Corey, President
                                              (Principal Executive Officer)


Date   August 5, 1998                         /S/MARY JO DAVID
                                              ----------------------------------
                                              Mary Jo David, Treasurer          
                                    (Principal Financial and Accounting Officer)
                 



<PAGE>


                                INDEX TO EXHIBITS


Exhibit
Number
------

  11           Computation of Per Share Earnings
  27           Financial Data Schedule