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, 2003                                      |
| [  ] | 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(State or other jurisdiction ofIncorporation or organization)        |  | 35-1934975(I.R.S. EmployerIdentification No.) |
|-----------------------------------------------------------------------------|--|-----------------------------------------------|
| 101 Main Street, Lafayette, Indiana(Address or principal executive offices) |  | 47902(Zip Code)                               |

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

       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 31, 2003 |
|----------------------------------------|--|------------------------------|
| Common stock, par value $.01 per share |  | 1,356,200                    |

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

NEXT 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 and Comprehensive Income | 2                                                   |
| Consolidated Statements of Changes in Shareholders' Equity | 3                                                   |
| Consolidated Statements of Cash Flows                      | 4                                                   |
| Notes to Consolidated Financial Statements                 | 5-6                                                 |
| Item 2.                                                    | Management's Discussion of Recent Operating Results | 7-12  |
| Item 3.                                                    | Controls and procedures                             | 13    |
| PART II.                                                   | OTHER INFORMATION                                   | 13-14 |
|                                                            | SIGNATURES                                          | 15    |
|                                                            | EXHIBIT INDEX                                       | 16    |

NEXT PAGE
**PART I.          Financial Information**

**LSB FINANCIAL CORP.STATEMENTS OF FINANCIAL CONDITION(Dollars in thousands)**
|                                                                                  | June 30,2003 (unaudited) | December 31,2002 |
|----------------------------------------------------------------------------------|-------------------------------|-----------------------|
|                                                                                  |                               |
| Assets                                                                           |                               |                       |  |  |
| Cash and due from banks                                      | $2,419                        |                       | $1,627 |  |
| Short-term investments                                                      | 16,482                        |                       | 14,357 |  |
|                                                                                  |                               |
|     Cash and cash equivalents                 | 18,901                        |                       | 15,984 |  |
| Securities available-for-sale                                               | 18,134                        |                       | 11,779 |  |
| Loans held for sale                                               | 3,558                         |                       | 8,063 |  |
| Total loans                                                                 | 258,797                       |                       | 271,830 |  |
|     Less: Allowance for loan losses      | (2,631                        | )                     | (1,996 | ) |
|                                                                                  |                               |
|       Net loans                               | 256,166                       |                       | 269,834 |  |
| Premises and equipment, net                                       | 7,050                         |                       | 7,039 |  |
| FHLB stock, at cost                                               | 3,832                         |                       | 3,782 |  |
| Accrued interest receivable and other assets            | 3,291                         |                       | 2,615 |  |
|                                                                                  |                               |
|     Total Assets                                        | $310,932                      |                       | $319,096 |  |
|                                                                                  |                               |
| Liabilities and Shareholders' Equity                              |                               |                       |  |  |
| Liabilities                                                                      |                               |                       |  |  |
| Deposits                                                                         | $221,985                      |                       | 221,590 |  |
| Advances from FHLB                                                     | 61,473                        |                       | 70,473 |  |
| Accrued interest payable and other liabilities          | 972                           |                       | 1,531 |  |
|                                                                                  |                               |
|       Total liabilities                       | 284,430                       |                       | 293,594 |  |
| Shareholders' Equity                                                        |                               |                       |  |  |
| Common stock                                                                | 14                            |                       | 14 |  |
| Additional paid-in-capital                                                  | 7,926                         |                       | 8,100 |  |
| Retained earnings                                                           | 18,631                        |                       | 17,550 |  |
| Unearned ESOP shares                                                   | (188                          | )                     | (218 | ) |
| Unamortized cost of recognition and retention plan | (95                           | )                     | (109 | ) |
| Accumulated other comprehensive income                            | 214                           |                       | 165 |  |
|                                                                                  |                               |
|       Total shareholders' equity         | 26,502                        |                       | 25,502 |  |
|                                                                                  |                               |
| Total liabilities and shareholders' equity                   | $310,932                      |                       | $319,096 |  |
|                                                                                  |                               |
| Book value (shareholder's equity) per share             | $20.00                        |                       | $19.20 |  |

**1**
Next Page

**LSB FINANCIAL CORP.CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME(Dollars in thousands, except per share data)(Unaudited)**
|                                                                                                           | Three months endedJune 30, | Six months endedJune 30, |
|-----------------------------------------------------------------------------------------------------------|-------------------------------------------|-----------------------------------------|
|                                                                                                           | 2003                                      | 2002                                    | 2003 | 2002 |
|                                                                                                           |                                           |
| Interest Income                                                                                      |                                           |                                         |  |  |
|     Loans, including related fees                                      | $4,385                                    | $4,753                                  | $9,175 | $9,437 |
|     Available-for-sale securities                                                | 177                                       | 173                                     | 321 | 342 |
|     FHLB stock                                                                   | 50                                        | 55                                      | 104 | 107 |
|                                                                                                           |                                           |
|        Total interest income                                 | 4,612                                     | 4,981                                   | 9,600 | 9,886 |
| Interest Expense                                                                                     |                                           |                                         |  |  |
|     Deposits                                                                          | 1,313                                     | 1,525                                   | 2,667 | 3,190 |
| Borrowings                                                                                                | 853                                       | 959                                     | 1,777 | 1,859 |
|                                                                                                           |                                           |
|        Total interest expense                                | 2,166                                     | 2,484                                   | 4,444 | 5,049 |
| Net interest income                                                                             | 2,446                                     | 2,497                                   | 5,156 | 4,837 |
|     Provision for loan losses                                          | 450                                       | 75                                      | 700 | 150 |
|                                                                                                           |                                           |
| Net interest income after provision for loan losses                    | 1,996                                     | 2,422                                   | 4,456 | 4,687 |
| Noninterest Income                                                                                   |                                           |                                         |  |  |
|     Service charges and fees                                           | 217                                       | 188                                     | 439 | 349 |
|     Net gain on mortgage loans originated for sale | 515                                       | 191                                     | 1,080 | 426 |
|     Gain on sale of securities                                    | 0                                         | 0                                       | 0 | 0 |
|     Other income                                                                 | 100                                       | 133                                     | 67 | 317 |
|                                                                                                           |                                           |
|            Total noninterest income      | 832                                       | 512                                     | 1,586 | 1,092 |
| Noninterest Expense                                                                                  |                                           |                                         |  |  |
|     Salaries and benefits                                                   | 1,107                                     | 982                                     | 2,192 | 2,019 |
|     Occupancy and equipment, net                                       | 259                                       | 266                                     | 560 | 524 |
|     Computer service                                                             | 75                                        | 82                                      | 167 | 160 |
|     Advertising                                                                       | 72                                        | 103                                     | 194 | 199 |
|     Other                                                                             | 290                                       | 294                                     | 606 | 639 |
|                                                                                                           |                                           |
|        Total noninterest expense                             | 1,803                                     | 1,727                                   | 3,719 | 3,541 |
| Income before income taxes                                                                 | 1,025                                     | 1,207                                   | 2,323 | 2,238 |
|       Less: income taxes                                          | 400                                       | 468                                     | 913 | 813 |
|                                                                                                           |                                           |
| Net income                                                                                           | $625                                      | $739                                    | $1,410 | $1,425 |
|                                                                                                           |                                           |
| Total Comprehensive Income                                                                      | $698                                      | $823                                    | $1,459 | $1,474 |
|                                                                                                           |                                           |
| Earnings per share                                                                              | $0.47                                     | $0.55                                   | $1.06 | $1.07 |
| Diluted Earnings per share                                                                 | $0.45                                     | $0.53                                   | $1.02 | $1.03 |

**2**
Next Page
**LSB FINANCIAL CORP.CONSOLIDATED STATEMENTS OF CHANGESIN SHAREHOLDERS' EQUITY(Dollars in thousands)(Unaudited)**
|                                                                                                 | **CommonStock** | **AdditionalPaid-InCapital** | **RetainedEarnings** | **UnearnedESOPShares** | **UnamortizedCost of BankRecognitionand RetentionPlan** | **AccumulatedOtherComprehensiveIncome** | **Total** |
|-------------------------------------------------------------------------------------------------|-----------------|------------------------------|----------------------|------------------------|------------------------------------------------------------------------|-----------------------------------------|-----------|
|                                                                                                 |                 |
| Balance at January 1, 2002                                                  | $14             | $8,279                       | $15,422              | ($282)                 | ($138)                                                                 | $93                                     | $23,388   |
| Exercise of stock options                                                        |                 | 6                            |                      |                        |                                                                        |                                         | 6         |
| ESOP shares earned                                                                    |                 | 62                           |                      | 33                     |                                                                        |                                         | 95        |
| RRP expense                                                                                |                 |                              |                      |                        | 14                                                                     |                                         | 14        |
| Dividends paid                                                                             |                 |                              | (294)                |                        |                                                                        |                                         | (294)     |
|     Comprehensive income                                               |                 |                              |                      |                        |                                                                        |                                         |           |
|         Net income                                 |                 |                              | 1,425                |                        |                                                                        |                                         | 1,425     |
|         Change in unrealized gain/(loss)                |                 |                              |                      |                        |                                                                        | 49                                      | 49        |
| Total comprehensive income                                                            |                 |                              |                      |                        |                                                                        |                                         | 1,474     |
|                                                                                                 |                 |
| Balance at June 30, 2002                                                    | $14             | $8,347                       | $16,553              | ($249)                 | ($124)                                                                 | $142                                    | $24,683   |
|                                                                                                 |                 |
|                                                                                       |                 |                              |                      |                        |                                                                        |                                         |           |
|                                                                                                 |                 |                              |                      |                        |                                                                        |                                         |           |
|                                                                                                 |                 |                              |                      |                        |                                                                        |                                         |           |
| Balance at January 1, 2003                                                  | $14             | $8,100                       | $17,550              | ($218)                 | ($109)                                                                 | $165                                    | $25,502   |
| Exercise of stock options                                                        |                 | 65                           |                      |                        |                                                                        |                                         | 65        |
| ESOP shares earned                                                                    |                 | 78                           |                      | 30                     |                                                                        |                                         | 108       |
| RRP expense                                                                                |                 |                              |                      |                        | 14                                                                     |                                         | 14        |
| Treasury stock acquired and retired                                         |                 | (317)                        |                      |                        |                                                                        |                                         | (317)     |
| Dividends paid                                                                             |                 |                              | (329)                |                        |                                                                        |                                         | (329)     |
|     Comprehensive income                                               |                 |                              |                      |                        |                                                                        |                                         |           |
|         Net income                                 |                 |                              | 1,410                |                        |                                                                        |                                         | 1,410     |
|         Change in unrealized gain/(loss) |                 |                              |                      |                        |                                                                        | 49                                      | 49        |
| Total comprehensive income                                                            |                 |                              |                      |                        |                                                                        |                                         | 1,459     |
|                                                                                                 |                 |
| Balance at June 30, 2003                                                    | $14             | $7,926                       | $18,631              | ($188)                 | ($95)                                                                  | $214                                    | $26,502   |
|                                                                                                 |                 |

**3Next PageLSB FINANCIAL CORP.CONSOLIDATED STATEMENTS OF CASH FLOWS(Dollars in thousands)(Unaudited)For the 6 months ended June 30,20032002Cash Flows from Operating ActivitiesNet Income$1,410$1,425Adjustments to reconcile net income to net    cash from operating activities        Depreciation and amortization283258Net amortization/(accretion) on securities7848        Gain on sale of securities00        Changes in loans held for sale4,5051,850        Provision for loan losses700150        Employee stock ownership plan shares earned10895        Change in assets and liabilities            Accrued interest receivable and other assets(980)(898)            Accrued interest payable and other liabilities(274)231Net cash provided by operating activities5,8303,159Cash Flows from Investing ActivitiesPurchases of securities available-for-sale(8,908)(3,885)Proceeds from paydowns and maturities of    securities available-for-sale2,557959Sales of available-for-sale securities030Purchase of Federal Home Loan Bank stock(50)0Loans made to customers net of payments received12,968(20,871)Property and equipment expenditures(294)(87)Net cash (used in) provided by investing activities6,273(23,854)Cash Flows from Financing ActivitiesNet change in deposits39510,379Proceeds from Federal Home Loan Bank advances2,00012,000Payments on Federal Home Loan Bank advances(11,000)(4,000)Treasury Stock Purchased(317)0Dividends paid(329)(294)Stock options exercised656Net cash (used in) provided by financing activities(9,186)18,091Net change in cash and equivalents2,917(2,604)Cash and equivalents at January 115,98414,792Cash and equivalents at June 30$18,901$12,188See accompanying notes4NextPageLSB FINANCIAL CORP.NOTES TO FINANCIAL STATEMENTSJUNE 30, 2003Note 1 - GeneralThe 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 presentationof financial position, results of operations and cash flows in conformity with accounting principles generally accepted in the United States of America. These interim financial statements have beenprepared 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 fairpresentation of the results of operations and financial position for and at the end of such interim periods.Stock Compensation: Employee compensation expense under stock options is reported using the intrinsic value method. No stock-based compensation cost is reflected in net income, as alloptions granted had an exercise price equal to or greater that the market price of the underlying common stock at date of grant. The following table illustrates the effect on net income and earningsper share if expense was measured using the fair value recognition provisions of FASB Statement No. 123, *Accounting for Stock-Based Compensation*.   3 months ended June 30,6 months ended June 30,   2003200220032002Net income as reported$625$739$1,410$1,425Deduct: Stock-based compensationexpense determined under fair valuebased method(3)(5)(9)(11)Pro forma net income$622$734$1,401$1,414Basic earnings per share as reported0.470.551.061.07Pro forma basic earnings per share0.470.551.061.06Diluted earnings per share asreported0.450.531.021.03Pro forma diluted earnings per share0.450.531.021.035Next PageNote 2 - Principles of ConsolidationThe accompanying financial statements include the accounts of LSB Financial Corp., its wholly owned subsidiary Lafayette Savings Bank, FSB, and Lafayette Savings' wholly ownedsubsidiaries, LSB Service Corporation and Lafayette Insurance and Investments, Inc. All significant intercompany transactions have been eliminated upon consolidation.Note 3 - Earnings per shareEarnings per share are based upon the weighted average number of shares outstanding during the period. Diluted earnings per share further assume the issuance of any potentiallydelusive shares. Unearned ESOP shares are not considered to be outstanding for the earnings per share computation. The following table presents information about the number of shares used to computeearnings per share and the results of the computations:   **Quarter ended June 30,****Year-to-Date June 30,**   **2003****2002****2003****2002**Weighted average shares outstanding  (excluding unearned ESOP shares)1,334,1361,336,5261,321,6291,335,119Shares used to compute diluted  earnings per share1,386,8461,382,3791,372,1591,378,128Earnings per share$0.47$0.55$1.06$1.07Diluted earnings per share$0.45$0.53$1.02$1.03Note 4 - New and proposed accounting standards:The Financial Accounting Standards Board (FASB) recently issued two new accounting standards, Statement 149, *Amendment of Statement 133 on Derivative Instruments and HedgingActivities*, and Statement 150, *Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equities*, both of which generally become effective in thequarter beginning July 1, 2003.Because the Company does not have these instruments or is only nominally involved in these instruments, the new accounting standards will not materially affect the Company's operatingresults or financial condition.6Next Page**MANAGEMENT'S DISCUSSION OF RECENT OPERATING RESULTS**            All references in this quarterly report to "we," "us," "our," and the "Company" refer to LSB Financial Corp.and/or Lafayette Savings Bank, FSB, as the context requires.**Financial Condition**            ***Comparison of Financial Condition at June 30, 2003 and December 31, 2002.***            Our total assets decreased $8.2 million from December 31, 2002 to June 30, 2003. This decrease was primarilydue to an $18.2 million decrease in total net loans, primarily due to the large volume of refinancing resulting from the continuing low interest rate environment. Many borrowers continue to refinanceto fixed rate products which we generally sell on the secondary market as part of our interest rate risk strategy. Short term investments increased $2.1 million and securities available for saleincreased $6.4 million as excess funding was invested in interest earning securities until it was able to be invested in higher yielding loan products or longer term investments. The decrease inassets was accompanied by a $9.0 million decrease in Federal Home Loan Bank advances as management is also taking the opportunity to pay off Federal Home Loan Bank advances as they come due whilethere is no imminent funding need. Deposits remained constant. Shareholders' equity increased from $25.5 million at December 31, 2002 to $26.5 million at June 30, 2003, an increase of $1.0 milliondue primarily to net income, offset in part by the payment of a cash dividend.            Non-performing assets increased from $3.6 million at December 31, 2002 to $5.5 million at June 30, 2003.Non-performing loans at June 30, 2003 consisted of $2.5 million of non-accruing loans on residential real estate, $2.2 million of non-accruing loans on land or commercial property, $202,000 ofnon-accruing commercial business loans, and $58,000 of non-accruing consumer loans. Non-performing assets also include $600,000 in foreclosed or repossessed assets. At June 30, 2003, our $2.6 millionallowance for loan losses represented 1.01% of total loans compared to 0.72% at December 31, 2002, and 53.77% of non-performing loans at June 30, 2003 compared to 60.30% at December 31, 2002.Although we believe we use the best information available to determine the adequacy of our allowance for loan losses, future adjustments to the allowance may be necessary, and net income could besignificantly affected, if circumstances and/or economic conditions cause substantial changes in the estimates we use in making the determinations about the levels of the allowance for losses.Additionally, various regulatory agencies, as an integral part of their examination process, periodically review our allowance for loan losses. These agencies may require the recognition of additionsto the allowance based upon their judgements of information available at the time of their examination. Following an examination by the Office of Thrift Supervision completed in June, 2003, we added $300,000 to the allocation for loan losses.7Next Page**Results of Operations*****Comparison of Operating Results for the Six Months and the Quarter Ended June 30, 2003 and June 30, 2002.***            ***General.***            Net income for the six months ended June 30, 2003 was $1.4 million, a decrease of $15,000 or 1.05%, over the six monthsended June 30, 2002. Net income for the quarter ended June 30, 2003 was $625,000, a decrease of $114,000 or 15.43% over the comparable quarter in 2002. The decrease in net income for the three andsix month periods ended June 30, 2003, compared to the same periods the prior year were primarily the result of increases in the provision for loan losses and increases in non-interest expense.The increase in net interest income year to date was primarily the result of a decline in rates paid on interest bearing liabilities.  The increased expenses were partially offset by continued gains on mortgage loan sales.  The details of these changes are set forth below.            ***Net InterestIncome.***Net interest income for the six months ended June 30, 2003 increased $319,000, or 6.59%, over the same period in 2002. This increase was primarily due to lowerinterest rates paid on interest bearing liabilities. Our net interest margin (net interest income divided by average interest-earning assets) decreased from 3.45% for the six months ended June 30,2002 to 3.43% for the six months ended June 30, 2003. The decrease in net interest margin is primarily the result of the continued low market interest rates which is reflected in the decrease in theaverage rate paid on deposits from 3.78% for the six months ended June 30, 2002 to 3.12% for the six months ended June 30, 2003. The decrease in the net interest margin was accompanied by a $2.0million increase in average net interest earning assets. Net interest income for the second quarter of 2003 remained relatively constant, decreasing $51,000, or 2.04%, compared to the same period in2002, also primarily due to rates. While our net interest margin decreased from 3.52% to 3.27% from the second quarter of 2002 compared to the same period in 2003, average interest-earning assetsincreased from $283.9 million for the second quarter of 2002 to $298.8 million for the second quarter of 2003. The decrease in net interest margin is primarily the result of the continuing decline inmarket interest rates in the second half of 2002 which decreased the average rate paid on interest earning assets from 7.02% for the three months ended June 30, 2002 to 6.12% for the three monthsended June 30, 2003 while the average rate paid in interest earning liabilities decreased from 3.67% for the three months ended June 30, 2002 to 3.06% for the three months ended June 30, 2003.            Interest income on loans decreased $262,000 or 2.78% for the six months ended June 30, 2003 compared to thesame six months in 2002. This decrease was primarily the result of a $12.6 million decrease in average loans outstanding due largely to borrowers continuing to take advantage of relatively low marketinterest rates to refinance existing mortgages, often to fixed rate mortgage loans which are typically sold in the secondary market, as well as a decrease in the average yield on loans, from 7.51%for the first six months of 2002 to 6.95% for the first six months of 2003, due to lower interest rates in the economy.Interest income on loans decreased $368,000 for the second quarter of 2003 compared to the second quarter of 2002 due primarily to the reasons noted above.8Next Page*            * Interest earned on other investments and Federal Home Loan Bank stock decreased by $24,000 for thesix months ended June 30, 2003 compared to the same period in 2002. This was the result of a decrease in the average yield on the average balance of other investments and Federal Home Loan Bank stockfrom 3.10% for the first six months of 2002 to 2.33% over the same period in 2003, offset by an increase in average balances of $7.6 million. The yield decrease was generally due to the temporaryincrease in lower yielding short-term investments as the increase in deposits and the funds received from the sale of fixed rate loans is held in short term investments until they can be reinvestedin longer term loans or investments. Interest income on other investments and Federal Home Loan Bank stock decreased $1,000 for the second quarter of 2003 compared to the second quarter of 2002 dueto a decrease in the average yield on the average balance of other investments and Federal Home Loan Bank stock from 3.30% for the second quarter of 2002 to 2.38% over the same period in 2003, offsetby an increase in average balances of $10.6 million.            Interest expense for the six months ended June 30, 2003 decreased $605,000, or11.98%, over the same period in2002. This decrease was primarily due to a decrease in the average rate paid on interest bearing liabilities from 3.78% for the first six months of 2002 to 3.12% for the first six months of 2003 andto a restructuring of the composition of average interest-bearing liabilities as a $15.5 million increase in lower rate deposits allowed us to reduce the average balance in higher rate, longer termFederal Home Loan Bank advances by $2.8 million. While we generally use deposit increases to fund new loans, many borrowers continue to refinance to fixed rate products which we generally sell on thesecondary market. Interest expense decreased $318,000 for the second quarter of 2003 from the same period in 2002 primarily due to a decrease in the average rate paid on average interest-bearingliabilities from 3.67% for the three month period in 2002 to 3.06% for the same period in 2003, offset by a $12.5 million increase in average interest-bearing liabilities for same period.            ***Provision for Loan Losses***.            We establish our provision for loan losses based on a systematic analysis of risk factors in the loan portfolio. The analysisincludes consideration of concentrations of credit, past loss experience, current economic conditions, the amount and composition of the loan portfolio, estimated fair value of the underlyingcollateral, loan commitments outstanding, delinquencies and industry standards. From time to time, we also use the services of a consultant to assist in the evaluation of our growing commercial loanportfolio**.** On at least a quarterly basis, a formal analysis of the adequacy of the allowance is prepared and reviewed by management and the Board of Directors. This analysis servesas a point in time assessment of the level of the allowance and serves as a basis for provisions for loan losses.            More specifically, our analysis of the loan portfolio will begin at the time the loan is originated, when eachloan is assigned a risk rating. If the loan is a commercial credit, the borrower will also be assigned a similar rating. Loans that continue to perform as agreed will be included in one of tennon-classified loan categories. Portions of the allowance are allocated to loan portfolios in the various risk grades, based upon a variety of factors including, historical loss experience, trends inthe type and volume of the loan portfolios, trends in delinquent and non-performing loans, and economic trends affecting our market. Loans no longer performing as agreed are assigned a lower9Next Pagerisk rating, eventually resulting in their being regarded as classified loans. A collateral re-evaluation form is completed on all classified loans. This process results in the allocation of specific amounts of the allowance to individual problem loans, generally based on an analysis of the collateral securing those loans. These components are added together and compared to the balance of our allowance at the evaluation date.            Non-classified loan categories include first mortgage loans on the following types of properties: one-to-fourfamily owner occupied, one-to-four family non-owner occupied, multi family, non-residential, land and land development, and construction. Additional categories include: second mortgage and homeequity loans, unsecured commercial business loans, secured commercial business loans, and consumer loans.            The provision for loan losses for the six months ended June 30, 2003 was $700,000 compared to $150,000 for thesame period in 2002. The provision for loan losses for the three months ended June 30, 2003 was $450,000 compared to $75,000 for the same period in 2002. The increase in the provision in 2003 wasbased on our analysis of our loan portfolios and was primarily due to the higher level of non-performing and classified loans at June 30, 2003 compared to June 30, 2002. Nonperforming loans increasedfrom $2.5 million on June 30, 2002 to $5.5 million on June 30, 2003. Classified loans increased from $2.4 million on June 30, 2002 to $8.4 million on June 30, 2003.            ***Non-Interest Income***. Non-interest income for the six months endedJune 30, 2003 increased by $494,000, or 45.24%, compared to the same period in 2002. This was primarily due to a $654,000 increase in the gain on the sale of mortgage loans in the secondary marketresulting from the increased sales of mortgage loans partially offset by a $250,000 decrease in other noninterest income which was primarily the result of increased amortization and impairment onoriginated mortgage servicing rights caused by increased mortgage loan prepayments in the low interest rate environment. Non-interest income for the second quarter of 2003 increased by $370,000 overthe same period in 2002, due primarily to the same reason set forth above.            ***Non-InterestExpense.***Non-interest expense for the six months ended June 30, 2003 increased $178,000 over the same period in 2002, due to a $173,000 increase in salaries and benefitspartly caused by commissions paid to our loan originators in connection with the higher volume of loan originations and refinances, and various other small increases resulting generally from theincreased loan activity. Non-interest expense for the second quarter of 2003 increased by $76,000 over the same period in 2002, due largely to increase in salaries and benefits.            ***Income Tax Expense.***Our income tax provision increased by $100,000for the six months ended June 30, 2003 compared to the six months ended June 30, 2002 primarily due to the increase in income before income taxes, somewhat offset by the effect of apportionment onstate tax. Our income tax provision decreased by $68,000 for the second quarter of 2003 compared to the same periodin2002 primarily due to the decrease in incomebefore income taxes.10Next Page***            Liquidity.***Liquidity management is both a daily and long-termfunction for our senior management. We adjust our investment strategy, within the limits established by the investment policy, based upon assessments of expected loan demand, expected cash flows,Federal Home Loan Bank advance opportunities, market yields and objectives of our asset/liability management program. Base levels of liquidity have generally been invested in interest-earningovernight and time deposits with the Federal Home Loan Bank of Indianapolis. Funds for which a demand is not foreseen in the near future are invested in investment and other securities for thepurpose of yield enhancement and asset/liability management.            Our current internal policy for liquidity, defined as cash and salable investment securities with terms up tofive years divided by deposits and Federal Home Loan Bank advances with a remaining maturity of one year or less, is for a minimum of 6%. Our liquidity ratios at December 31, 2002 and June 30, 2003were 12.02% and 8.42%, respectively. We expect the liquidity level to remain relatively high until market interest rates increase enough to make it less beneficial for borrowers to refinance to fixedrate loan products, then gradually decline as short-term investment are used to repay Federal Home Loan Bank advances or are used to fund loans or purchase longer term investments.            ***Capital Resources.***Shareholders' equity totaled $26.5 million at June30, 2003 compared to $25.5 million at December 31, 2002, an increase of $1.0 million or 3.92%, due to net income of $1.4 million, offset by $329,000 of cash dividends paid to shareholders.            Federal insured savings institutions arerequired to maintain a minimum level of regulatory capital. If the requirement is not met, regulatory authorities may take legal or administrative actions, including restrictions on growth oroperations or, in extreme cases, seizure. As of June 30, 2003 and December 31, 2002, Lafayette Savings Bank was categorized as well capitalized. Our actual and required capital amounts and ratios atJune 30, 2003 and December 31, 2002 are presented below:11Next PageActualOTSFor CapitalAdequacyPurposesFDICTo Be WellCapitalized UnderCorrective ActionProvisionsAmountRatioAmountRatioAmountRatio(Dollars in thousands)**As of June 30, 2003**Total Capital (to risk-weighted assets)$27,46612.29%$17,8728.00%$22,34110.00%Tier 1 (Core) Capital (to risk weighted assets)25,41511.38%8,9364.00%13,4046.00%Tier 1 (Core) Capital (to adjusted total assets)25,4158.16%9,3473.00%15,5785.00%Tangible Capital (to adjusted assets)25,4158.16%4,6731.50%N/AN/A**As of December 31, 2002**Total Capital (to risk-weighted assets)$26,50911.64%$18,2168.00%$22,77010.00%Tier 1 (Core) Capital (to risk weighted assets)24,53310.77%9,1084.00%13,6626.00%Tier 1 (Core) Capital (to adjusted total assets)24,5337.67%9,5933.00%15,9885.00%Tangible Capital (to adjusted assets)24,5337.67%4,7961.50%N/AN/A**Disclosure regarding Forward-Looking Statements**            This document, including information included or incorporated by reference, contains, and future filings by LSBFinancial on Form 10-KSB, Form 10-QSB and Form 8-K and future oral and written statements by LSB Financial and our management may contain, forward-looking statements about LSB Financial and itssubsidiaries which we believe are within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, without limitation, statements with respect toanticipated future operating and financial performance, growth opportunities, interest rates, cost savings and funding advantages expected or anticipated to be realized by management. Words such asmay, could, should, would, believe, anticipate, estimate, expect, intend, plan and similar expressions are intended to identify forward-looking statements. Forward-looking statements by LSB Financialand its management are based on beliefs, plans, objectives, goals, expectations, anticipations, estimates and intentions of management and are not guarantees of future performance. We disclaim anyobligation to update or revise any forward-looking statements based on the occurrence of future events, the receipt of new information or otherwise. The important factors we discuss below andelsewhere in this document, as well as other12Next Pagefactors discussed under the caption Management's Discussion of Recent Operating Results in this document and identified in our filings with the SEC andthose presented elsewhere by our management from time to time, could cause actual results to differ materially from those indicated by the forward-looking statements made in this document.            The following factors, many of which are subject to change based on various other factors beyond our control, could causeour financial performance to differ materially from the plans, objectives, expectations, estimates and intentions expressed in such forward-looking statements:- the strength of the United States economy in general and the strength of the local economies in which we conduct our operations;the effects of, and changes in, trade, monetary and fiscal policies and laws, including interest rate policies of the Federal Reserve Board;financial market, monetary and interest rate fluctuations, particularly the relative relationship of short-term interest rates to long-term interest rates;the timely development of and acceptance of our new products and services of Lafayette Savings and the perceived overall value of these products and services by users, including the features,pricing and quality compared to competitors' products andservices;the willingness of users to substitute competitors' products and services for our products and services;the impact of changes in financial services' laws and regulations (including laws concerning taxes, accounting standards, banking, securities and insurance);the impact of technological changes;acquisitions;changes in consumer spending and saving habits; andour success at managing the risks involved in the foregoing.13Next Page**Item 3. CONTROLS AND PROCEDURES**.            An evaluation of the Company's disclosure controls and procedures (as defined in Rule 13(a)-15(e) of theSecurities Exchange Act of 1934 (the "Act")), as of June 30, 2003, was carried out under the supervision and with the participation of the Company's Chief Executive Officer, Chief Financial Officerand several other members of the Company's senior management. The Company's Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedurescurrently in effect are effective in ensuring that the information required to be disclosed by the Company in the reports it files or submits under the Act is (i) accumulated and communicated to theCompany's management (including the Chief Executive Officer and Chief Financial Officer) in a timely manner and (ii) recorded, processed, summarized and reported within the time periods specified inthe SEC's rules and forms. There have been no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) of the Act) that occurred during the quarter ended June 30, 2003,that has materially affected, or is reasonably likely to affect, our internal control over the financial reporting.            The Company intends to continually review and evaluate the design and effectiveness of its disclosure controlsand procedures and to improve its controls and procedures over time and to correct any deficiencies that it may discover in the future. The goal is to ensure that senior management has timely accessto all material financial and non-financial information concerning the Company's business. While the Company believes the present design of its disclosure controls and procedures is effective toachieve its goal, future events affecting its business may cause the Company to modify its disclosure controls and procedures.14Next Page**PART II - OTHER INFORMATION**Item 1.LEGAL PROCEEDINGS  The Company, from time to time, is involved as plaintiff or defendant in various legal actions arising in the normal course of business. While the ultimate outcome of theseproceedings cannot be predicted with certainty, it is the opinion of management, after consultation with counsel representing the Company in the proceedings, that the resolution of any prior andpending 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),(b) and (c)On April 16, 2003, LSB Financial Corp. held its Annual Meeting of Stockholders ("Meeting").  The directors who were elected at the Meeting for a term to expire in 2006, are as follows:         VotesForVotesWithheld      James A. Andrew1,002,52716,363Kenneth P. Burns1,002,27016,620Philip W. Kemmer1,004,60314,287Randolph F. Williams1,007,12511,765      The directors whose terms continued after the Meeting are as follows: Mary Jo David, Harry A. Dunwoody, Thomas R. McCully, Peter Neisel, Mariellen M. Neudeck, JeffreyA. Poxon and Charles W. Shook.      Stockholders of the Company also voted on the following matter at the meeting.  15Next Page  VotesForVotesAgainstAbstentionsBrokerNon-votesRatification ofthe appointmentof Crowe Chizekand Company LLCas auditors of theCompany for thefiscal year endingDecember 31, 2003.1,009,7163,9165,258-0-  Item 5.OTHER INFORMATION  None.  Item 6.EXHIBITS AND REPORTS ON FORM 8-K  (a)Exhibits:      See Exhibit Index  (b)Reports on Form 8-K  On April 16, 2003, the Company filed a Form 8-K dated April 16, 2003, with the SEC containing the Company's earnings release for the three months ended March 31,2003.16Next Page**SIGNATURES**            In accordance with the requirements of the Exchange Act, the Registrant has caused this report to be signed onits behalf by the undersigned, thereunto duly authorized.LSB FINANCIAL CORP.    (Registrant) Date:August 13, 2003    /s/ RANDOLPH F. WILLIAMSRandolph F. Williams, President(Principal Executive Officer) Date:August 13, 2003    /s/ MARY JO DAVIDMary Jo David, Treasurer(Principal Financial and Accounting Officer)17Next Page**INDEX TO EXHIBITS**Regulation S-K ExhibitNumberDocument  3.1Registrant's Articles of Incorporation, filed on March 21, 1994, as an exhibit to Registrant's Registration Statement on Form S-1 (File No. 33-84266), are incorporated byreference.  3.2Registrant's Bylaws, as amended and restated, filed as Exhibit 3.2 to Registrant's Report on Form 10-KSB for the fiscal year ended December 31, 2002 (File No. 0-25070), isincorporated herein by reference.  4  Registrant's Specimen Stock Certificate, filed on March 21, 1994 as exhibits to Registrant's Registration Statement on Form S-1 (File No. 33-84266), is incorporated byreference.10.1Registrant's 1995 Stock Option and Incentive Plan, filed on July 11, 1995 as Appendix A to Registrant's Proxy Statement on Schedule 14A (File No. 0-25070), is incorporated hereinby reference.10.3Registrant's 1995 Recognition and Retention Plan, filed on July 11, 1995 as Appendix B to Registrant's Proxy Statement on Schedule 14A (File No. 0-25070), is incorporated hereinby reference.10.4Employment Agreement by and between the Registrant and Randolph F. Williams, filed as Exhibit 10.4 to the Registrant's Quarterly Report on Form 10-QSB for the quarter endedSeptember 30, 2001 (File No. 0-25070), is incorporated by reference.11  Statement re computation of per share earnings31.1Rule 13(a)-14(a) Certification for President and Chief Executive Officer31.2Rule 13(a)-14(a) Certification for Vice President and Chief Financial Officer32  Rule 1350 Certifications

**