<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
EXCHANGE ACT
For the transition period from ______ to ________
Commission file number 0-25070.
LSB FINANCIAL CORP.
(Exact Name of Small Business Issuer as Specified in its Charter)
Indiana 35-1934975
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification No.)
101 Main Street, Lafayette, Indiana 47902
(Address or principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (765) 742-1064
Check whether the Issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the Issuer was required to file such reports), and (2) has
been subject to such requirements for the past 90 days.
YES [X] NO[ ]
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date:
CLASS OUTSTANDING AT MARCH 31, 1997
----- -----------------------------
Common stock, par value $.01 per share 900,166
Transitional Small Business Disclosure Format: YES [ ] NO [X]
<PAGE>
L S B FINANCIAL CORP.
(Dollars in thousands, except per share data)
SELECTED FINANCIAL CONDITION DATA
December 31, March 31,
Dollars in thousands 1996 1997
Total Assets $184,607 $188,027
Loans Receivable, net 159,216 161,389
Available-for-Sale Securities 6,546 8,590
Short-term Investments 5,410 4,016
Deposits 116,949 126,432
Total Borrowings 50,220 43,713
Shareholders' Equity (net) 16,796 17,068
SELECTED OPERATIONS DATA
Three months ended March 31:
1996 1997
Total Interest Income $3,125 $3,541
Total Interest Expense 1,707 2,002
----------------------
Net Interest Income 1,418 1,539
Provision for Loan Losses 0 24
----------------------
Net Interest Income after provision 1,418 1,515
Deposit Account Service Charges 70 80
Gain(loss) on Sale of Securities 9 0
Gain(loss) on Mortgage Loans Originated for Sale 32 68
Other Non-interest Income 43 51
----------------------
Total Non-Interest Income 154 199
Total Non-interest Expense 1,019 1,126
----------------------
Income before Income Taxes 553 588
Income Tax Expense 210 230
----------------------
Net Income $ 343 $ 358
Earnings per Share $ 0.37 $ 0.43
Book value per share $19.40 $20.39
<PAGE>
LSB FINANCIAL CORP.
STATEMENTS OF FINANCIAL CONDITION
(Dollars in thousands)
December 31, March 31,
1996 1997
--------------------------
Assets
Cash and cash equivalents $ 9,798 $ 8,995
Available-for-sale securities 6,546 8,590
Loans held for sale 6,230 944
Total loans 154,701 162,185
Less: Allowance for loan losses (1,715) (1,740)
--------------------------
Net loans 152,986 160,445
Premises and equipment, net 4,570 4,504
FHLB stock, at cost 2,575 2,575
Accrued interest receivable 1,006 1,021
Other assets 896 953
--------------------------
$ 184,607 $ 188,027
==========================
Liabilities and Shareholders' Equity
Liabilities
Deposits $ 116,949 $ 126,432
Advances from FHLB 50,000 43,500
Note payable 220 213
Accrued interest payable 197 179
Advances from borrowers for taxes and insurance 178 366
Accrued expenses and other liabilities 267 269
--------------------------
Total liabilities 167,811 170,959
Shareholders' Equity
Common stock 11 11
Additional paid-in-capital 10,143 10,166
Retained earnings 10,289 10,574
Unearned ESOP shares (653) (633)
Unamortized cost of recognition and retention plan (332) (309)
Treasury stock (155,895 and 158,695 shares, at cost) (2,629) (2,684)
Net unrealized holding loss on
available-for-sale securities (33) (57)
--------------------------
Total shareholders' equity 16,796 17,068
--------------------------
Total liabilities and shareholders' equity $ 184,607 $ 188,027
==========================
See accompanying notes to consolidated financial statements
<PAGE>
LSB FINANCIAL CORP.
STATEMENTS OF INCOME
(Dollars in thousands, except per share data)
Three months ended
March 31,
1996 1997
--------------------------
Interest Income
Loans, including related fees $2,899 $3,334
Available-for-sale securities 196 157
FHLB stock 30 50
--------------------------
Total interest income 3,125 3,541
Interest Expense
Deposits 1,295 1,376
Borrowings 412 626
--------------------------
Total interest expense 1,707 2,002
Net interest income 1,418 1,539
Provision for loan losses 0 24
--------------------------
Net interest income after provision for loan losses 1,418 1,515
Noninterest Income
Service charges and fees 70 80
Net gain on mortgage loans originated for sale 32 68
Gain on sale of securities 9 0
Other income 43 51
--------------------------
Total noninterest income 154 199
Noninterest Expense
Salaries and benefits 519 587
Occupancy and equipment, net 154 188
FDIC insurance 0 3
Computer service 66 61
Advertising 49 63
Other 231 224
--------------------------
Total noninterest expense 1,019 1,126
Income before income taxes 553 588
Less: income taxes 210 230
--------------------------
Net income $343 $358
==========================
Earnings per share (Note 3) $0.37 $0.43
Book value per share $19.40 $20.39
See accompanying notes to consolidated financial statements
<PAGE>
LSB FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF CHANGES
IN SHAREHOLDERS' EQUITY
(Dollars in thousands)
<TABLE>
<CAPTION>
Unamortized
Cost of Bank Unrealized
Additional Unearned Recognition Gain/(Loss)
Common Paid-in Retained ESOP and Retention Treasury on APS
Stock Capital Earnings Shares Plan Stock Securities Total
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance January 1, 1996 $11 $10,063 $9,626 ($739) ($399) ($466) ($28) $18,068
Issuance of shares for RRP 22 (22) 0
RRP expense 22 22
ESOP shares earned 14 22 36
Treasury stock acquired 0 (1,111) (1,111)
Net income 343 343
Change in net unrealized loss (30) (30)
-------------------------------------------------------------------------------------
Balance at March 31, 1996 $11 $10,099 $9,969 ($717) ($399) ($1,577) ($58) $17,328
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 20 20 40
RRP expense 23 23
Treasury stock acquired (55) (55)
Net income 358 358
Change in unrealized loss (24) (24)
Dividends paid (73) (73)
-------------------------------------------------------------------------------------
Balance at March 31, 1997 $11 $10,166 $10,574 ($633) ($309) ($2,684) ($57) $17,068
=====================================================================================
</TABLE>
See accompanying notes to financial statements
<PAGE>
LSB FINANCIAL CORP.
STATEMENTS OF CASH FLOWS
(Dollars in thousands)
For the 3 months ended March 31
1996 1997
-------------------------------
Cash Flows from Operating Activities
Net Income $343 $358
Adjustments to reconcile net income to net
cash from operating activities
Depreciation and amortization 65 82
Net amortization on securities 22 13
Gain on sale of securities (9) 0
Writedown of loans held for sale 23 0
Gain on sale of loans (55) (68)
Loans originated for sale, net of sales proceeds 60 5,354
Deferred loan fees, net 23 (27)
Provision for loan losses 0 24
Employee stock ownership plan shares earned 36 40
Change in assets and liabilities
Accrued interest receivable (32) (15)
Other assets 32 (19)
Accrued interest payable (6) (18)
Other liabilities (307) 2
-------------------------------
Net cash from operating activities 195 5,726
Cash Flows from Investing Activities
Purchases of available-for-sale securities (1,028) (2,485)
Proceeds from paydowns and maturities of
available-for-sale securities 3,362 389
Sales of available-for-sale securities 804 0
Purchase of Federal Home Loan Bank stock (150) 0
Loans made to customers net of payments received (8,336) (7,456)
Property and equipment expenditures (521) (16)
-------------------------------
Net cash from investing activities (5,869) (9,568)
Cash Flows from Financing Activities
Net change in deposits 2,309 9,483
Proceeds from Federal Home Loan Bank advances 6,000 7,000
Payments on Federal Home Loan Bank advances (3,864) (13,500)
Net change in advances from borrowers
for taxes and insurance 162 188
Payments on note payable (7) (7)
Treasury Stock Purchased (1,111) (55)
Dividends paid 0 (73)
Stock options exercised 0 3
-------------------------------
Net cash from financing activities 3,489 3,039
Net change in cash and equivalents (2,185) (803)
Cash and equivalents at January 1 7,795 9,798
-------------------------------
Cash and equivalents at March 31 $5,610 $8,995
===============================
See accompanying notes to consolidated financial statements
<PAGE>
LSB FINANCIAL CORP.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1997
Note 1 - General
The financial statements were prepared in accordance with the instructions for
Form 10-QSB and, therefore, do not include all of the disclosures necessary for
a complete presentation of financial position, results of operations and cash
flows in conformity with generally accepted accounting principles. Except for
the adoption of required accounting changes, these interim financial statements
have been prepared on a basis consistent with the annual financial statements
and include, in the opinion of management, all adjustments, consisting of only
normal recurring adjustments, necessary for a fair presentation of the results
of operations and financial position for and at the end of such interim periods.
Note 2 - Principles of Consolidation
The accompanying financial statements include the accounts of LSB Financial
Corp. (the Company), its wholly owned subsidiary Lafayette Savings Bank, FSB
(the Bank) and the Bank's wholly owned subsidiary, LSB Service Corporation. All
significant intercompany transactions have been eliminated upon consolidation.
Note 3 - Earnings per share
Earnings per share are computed based upon the weighted average number of shares
outstanding during the period. Unearned ESOP shares are not considered to be
outstanding for the earnings per share computation. The following table presents
share data used to compute earnings per share.
Quarter ended
March 31,
1997 1996
---- ----
Weighted average shares outstanding 901,928 1,002,574
Shares used to compute
earnings per share 900,166 929,774
The options outstanding at March 31, 1997 were not dilutive.
Note 4 - Accounting Changes
Effective January 1, 1997, the Company adopted Financial Accounting Standard No.
125, "Accounting for Transfers and Servicing of Financial Assets and
Extinguishment of Liabilities." This standard revises the accounting for
transfers of financial assets, such as loans and securities, and for
distinguishing between sales and secured borrowings. It is effective for some
transactions in 1997 and others in 1998. Management does not expect the effect
on LSB's financial position and results of operations to be significant.
<PAGE>
MANAGEMENT'S DISCUSSION OF RECENT OPERATING RESULTS
Forward Looking Statements
Certain statements in this report that relate to LSB Financial Corp.'s
plans, objectives or future performance may be deemed to be forward-looking
statements within the meaning of the Private Securities Litigation Act of 1995.
Such statements are based on Management's current expectations. Actual
strategies and results in future periods may differ materially from those
currently expected because of various risks and uncertainties. Additional
discussion of factors affecting LSB Financial's business and prospects is
contained in the Company's periodic filings with the Securities and Exchange
Commission.
Financial Condition
Comparison of Financial Condition at March 31, 1997 and December 31,
1996.
Total assets increased $3.4 million during the three months from
December 31, 1996 to March 31, 1997. This increase was primarily due to a $7.5
million increase in the Company's loan portfolio offset by a $5.3 million
decrease in the Company's loans held for sale as the Company continued its
efforts to restructure its balance sheet by increasing the size of its
higher-yielding multi-family, land and land development, construction,
commercial real estate and commercial business loan and consumer loan
portfolios. A $9.5 million increase in deposits was used to fund loan growth and
to decrease borrowings from the Federal Home Loan Bank by $6.5 million.
Non-performing loans remained at $2.5 million at December 31, 1996 and at March
31, 1997, consisting of $2.3 million of purchased equipment leases and two
single family residences. Shareholders' equity increased from $16.8 million at
December 31, 1996 to $17.1 million at March 31, 1997, an increase of $272,000
primarily due to $358,000 in net income partially offset by the repurchase of an
additional $55,000 of the Company's stock as part of an ongoing 5.00% stock
buy-back program and by a $73,000 cash dividend to shareholders.
Results of Operations
Comparison of Operating Results for the Three Months Ended March 31, 1996 and
March 31, 1997.
General. Net income for the three months ended March 31, 1997 was
$358,000, an increase of $15,000 or 4.37% from net income of $343,000 for the
three months ended March 31, 1996. This increase was primarily due to a $121,000
increase in net interest income and a $45,000 increase in non- interest income
in the first quarter of 1997, offset by a $24,000 provision for loan losses and
a $107,000 increase in operating expenses.
Net Interest Income. Net interest income for the three months ended
March 31, 1997 increased $121,000, or 8.53% over the same period in 1996. This
increase was primarily attributable to the success of management's continuing
efforts to restructure the Company's balance sheet by
<PAGE>
investing funds in higher-yielding loans, particularly commercial real estate
and consumer loans from the lower yielding securities portfolio. The Company's
net interest margin (net interest income divided by average interest-earning
assets) decreased from 3.73% for the three months ended March 31, 1996 to 3.56%
for the three months ended March 31, 1997. The decline in yield was offset by
increased volume as average interest-earning assets increased from $152.1
million for the first quarter of 1996 to $172.7 million for the first quarter of
1997.
Interest income on loans increased $435,000 or 15.01% for the three
months ended March 31, 1997 compared to the same three months in 1996, primarily
the result of an increase of $22.1 million in average loans outstanding. This
increase was primarily due to an active residential real estate market in 1996
due to continued relatively low interest rates and a strong local economy, and
the ongoing success of the Company's focus on higher-yielding multi-family, land
and land development, construction, commercial real estate and commercial
business loan and consumer loan production. These higher-yielding portfolios
increased from $62.2 million at December 31, 1996 to $65.6 million at March 31,
1997. This increase in volume was partially offset by a decrease in the average
yield on loans from 8.47% for the first three months of 1996 to 8.39% for the
first three months of 1997, caused primarily by the increasing competitiveness
of the local loan origination market. Both the net interest margin and the
average yield on loans in 1997 were negatively impacted by the placement of the
Bennett Funding leases on non-accrual status effective April 1, 1996. Management
estimates that interest lost during the first quarter of 1997 from those leases
was approximately $57,000.
Interest earned on securities, money market investments and FHLB stock
decreased $19,000 for the three months ended March 31, 1997 compared to the same
three months in 1996. This was the result of an overall $1.5 million decrease in
average investments offset by a slight increase in the average yield from 5.92%
to 6.01% over the same period.
Interest expense for the three months ended March 31, 1997 increased
$295,000 over the same period in 1996. This increase was primarily due to an
increase of $24.5 million in average interest-bearing liabilities, consisting of
an additional $11.4 million in the average balance of customer deposit accounts
and a $13.1 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 remained at 4.83% for both the first quarter of 1996 and the first
quarter of 1997.
Provision for Loan Losses. The Company establishes its provision for
loan losses based on a systematic analysis of risk factors in the loan
portfolio. The analysis includes evaluation of concentration of credit, past
loss experience, current economic conditions, the amount and composition of the
loan portfolio, estimated fair value of the underlying collateral, loan
commitments outstanding , delinquencies, industry standards and using the
services of a consultant to assist in the evaluation of its growing commercial
loan portfolio. Management's analysis results in the allocations of allowance
amounts for each loan type. Based on this analysis, during the year ended
December 31, 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 owns $2.4 million of equipment
leases. On March 29, 1996, the Securities and Exchange Commission filed civil
and criminal complaints against an officer of
<PAGE>
Bennett and shortly thereafter, Bennett sought Chapter 11 bankruptcy protection.
The Bank has been paid interest through March 31, 1996. Based upon the
bankruptcy filing and the uncertainty about when principal and interest payments
might resume, the leases were placed on non-accrual status as of April 1, 1996
and the Bank has allocated $970,000 of its $1.7 million allowance for loan
losses to these receivables. The Bank's $2.4 million investment is comprised of
numerous small dollar equipment leases. While management believes that the Bank
holds original lease documents, the complaint alleges various fraudulent actions
including allegations that Bennett may have sold the same leases to two or more
buyers. To date management has not been notified of duplication of any leases it
owns. Management is currently evaluating settlement offers and believes that its
reserve allocation will be sufficient to cover any losses. In addition, the
Company provided an additional $24,000 provision for loan losses during the
first quarter of 1997. In addition to the Bennett leases there were $131,000 of
non-performing loans at March 31, 1997, consisting of two single family
residences, one of which has been sold and is awaiting a scheduled closing. The
allowance for loan losses to total loans was 1.08% at December 31, 1996 and
1.06% at March 31, 1997. Non-performing loans totaled $2.5 million at December
31, 1996, representing 1.35% of total assets, and $2.5 million at March 31,
1997, representing 1.34% of total assets.
Non-Interest Income. Non-interest income for the three months ended
March 31, 1997 increased by $45,000, or 29.22%, over the same period in 1996.
This was primarily due to a $10,000 increase in service charges and fees on
deposit accounts due to the increasing number of these accounts, and a $36,000
increase in the gain on the sale of mortgage loans in the secondary market. The
increase in the gain on the sale of loans resulted from the increased sales
activity and the absence of a market value adjustment at March 31, 1997. On
March 31, 1996, the Company held $964,000 of fixed rate mortgage loans in its
held for sale portfolio. The required adjustment to mark these loans to market
was ($23,000). There was no comparable adjustment needed at March 31, 1997.
Non-Interest Expense. Non-interest expense for the three months ended
March 31, 1997 increased $107,000 over the same period in 1996. The major
components of this increase included a $68,000 increase in salaries and employee
benefits and a $34,000 increase in occupancy and equipment expense. The increase
in salaries and employee benefits, and occupancy and equipment expenses were
incurred in connection with the opening of the Company's fourth branch.
Income Tax Expense. The Company's income tax provision
increased by $20,000 for the quarter ended March 31, 1997 compared to the
quarter ended March 31, 1996. This was primarily due to the increase in income
before income taxes.
Liquidity. Liquidity management is both a daily and long-term function
for the Bank's senior management. The Bank adjusts its investment strategy,
within the limits established by the investment policy, based upon assessments
of expected loan demand, expected cash flows, FHLB advance opportunities, market
yields and objectives of its asset/liability management program. Base levels of
liquidity have generally been invested in interest-earning overnight and time
deposits with the FHLB of Indianapolis. Funds for which a demand is not foreseen
in the near future are invested in investment and other securities for the
purpose of yield enhancement and asset/liability management.
<PAGE>
The Bank is required to maintain minimum levels of liquidity as defined
by regulatory agencies. The liquidity requirement, which can vary, is based upon
a percentage of deposits and short term borrowings and is currently 5.0%. The
Bank's internal policy for liquidity is approximately 8%. The Company's
liquidity ratios at December 31, 1996 and March 31, 1997 were 7.31% and 8.09%,
respectively.
Capital Resources. Shareholders' equity totaled $17.1 million at March
31, 1997 compared to $16.8 million at December 31, 1996, an increase of $272,000
or 1.62%, primarily due to an increase in net income of $358,000 partially
offset by a stock repurchase of $55,000 and the Company's first cash dividend of
$73,000. Federal regulations require the Bank to maintain certain minimum levels
of regulatory capital. The regulations currently require tangible capital as
defined by regulation to be at least 1.5% of total assets, as also defined by
regulation, that core capital as defined be 3.0% of total assets, and that risk
based capital be at least 8.0% of risk-based assets as defined by regulations.
At March 31, 1997 the Bank's capital ratios were as follows:
Amount Percent of
(000) applicable assets
------------------------------
Tangible capital $15,533 8.29%
Requirement 2,810 1.50
------- -----
Excess $12,723 6.79%
======= =====
Core capital $15,533 8.29%
Requirement 5,625 3.00
------- -----
Excess $ 9,908 5.29%
======= =====
Risk-based Capital $16,303 11.69%
Requirement 11,154 8.00
------- -----
Excess $ 5,149 3.69%
======= =====
<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
None to be reported.
Item 5. OTHER INFORMATION
None to be reported.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
A. Exhibits: Exhibit 27 - Financial Data Schedule
B. Reports on Form 8-K:
None to be reported.
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant
has caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
LSB FINANCIAL CORP.
(Registrant)
Date May 9, 1997 /S/JOHN W. COREY
--------------- ----------------------------------------
John W. Corey, President
(Principal Executive Officer)
Date May 9, 1997 /S/MARY JO DAVID
--------------- ----------------------------------------
Mary Jo David, Treasurer
(Principal Financial and Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
The schedule contains summary information extracted from the quarterly report on
Form 10-QSB for the quarter ended March 31, 1997 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 4,979
<INT-BEARING-DEPOSITS> 4,016
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 8,590
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 162,185
<ALLOWANCE> 1,740
<TOTAL-ASSETS> 188,027
<DEPOSITS> 126,432
<SHORT-TERM> 43,500
<LIABILITIES-OTHER> 814
<LONG-TERM> 213
0
0
<COMMON> 11
<OTHER-SE> 17,057
<TOTAL-LIABILITIES-AND-EQUITY> 170,959
<INTEREST-LOAN> 3,334
<INTEREST-INVEST> 164
<INTEREST-OTHER> 43
<INTEREST-TOTAL> 3,541
<INTEREST-DEPOSIT> 1,376
<INTEREST-EXPENSE> 2,003
<INTEREST-INCOME-NET> 1,539
<LOAN-LOSSES> 24
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1,126
<INCOME-PRETAX> 588
<INCOME-PRE-EXTRAORDINARY> 588
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 358
<EPS-PRIMARY> 0.43
<EPS-DILUTED> 0.43
<YIELD-ACTUAL> 3.56
<LOANS-NON> 2,522
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 1,148
<ALLOWANCE-OPEN> 1,715
<CHARGE-OFFS> 0
<RECOVERIES> 1
<ALLOWANCE-CLOSE> 1,740
<ALLOWANCE-DOMESTIC> 1,740
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
