ITEM 1. BUSINESS
The response is incorporated herein by reference from the discussion respectively under the captions entitled "FINANCIAL HIGHLIGHTS" on page 4, "BUSINESS" on pages 5 through 7, "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" on pages 8 through 21 and Consolidated Financial Statements and Notes to Consolidated Financial Statements on pages 24 through 45 of the Annual Report.
ITEM 2.
ITEM 2. PROPERTIES
The Company conducts its business at its Corporate offices in North Andover and multiple branch locations listed here. The Company believes that all of its properties are well maintained and are suitable for banking needs and operations. Rent expense for 2002 totaled $152,000. The following table sets forth the locations of the offices of the Lawrence Savings Bank (the "Bank"), the wholly owned bank subsidiary of the Company, as well as certain information relating to these offices as of December 31, 2002:
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
The Bank is involved in various legal proceedings incidental to its business. After review with legal counsel, management does not believe resolution of such litigation will have a material adverse effect on the financial condition and operating results of the Bank.
In one litigation matter, the Bank was awarded a $4.2 million judgment in 1997. The Bank prevailed on this appeal. The Bank expects to collect this judgment, at least in substantial part, which would have a material favorable impact on the Bank's financial statements. Post judgment interest accrues from the date of this judgment and approximates $2.3 million at December 31, 2002. However, collectibility of post judgment interest in addition to the $4.2 million award has not yet been determined.
In another litigation matter, the Bank was awarded $1.1 million by a jury verdict, during the fourth quarter 1999, in a legal case where the Bank sought to recover damages from loans previously charged off. In 2000, the court entered final judgment for approximately $1.8 million, which includes post judgment accrued interest. This award has been appealed by defendants and collectibility of this award is subject to this appeal and other contingencies. This case was heard by the appellate court on December 11, 2002. A decision by the court has not been rendered as of March 31, 2002.
It is management's opinion that the timing and final amounts to be collected cannot be determined at this time. Accordingly, no recognition of these judgments has been recorded in the Consolidated Financial Statements.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK EQUITY AND RELATED STOCKHOLDER MATTERS
The response is incorporated herein by reference from the discussion under the caption "STOCKHOLDERS' INFORMATION" on page 46, the discussion under the subcaption "Capital Adequacy" of the caption "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" on page 18 of the Annual Report, and from the table titled "Financial Highlights" on page 4 of the Annual Report.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
The response is incorporated herein by reference from the table titled "FINANCIAL HIGHLIGHTS" on page 4 of the Annual Report.
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The response is incorporated herein by reference from the discussion under the caption "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" on pages 8 through 21 of the Annual Report.
ITEM 7A.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The response is incorporated herein by reference from the discussion under the subcaption "Interest Rate Sensitivity" of the caption "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" on pages 18 through 20 of the Annual Report.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The response is incorporated herein by reference from the LSB Corporation and Subsidiary Consolidated Financial Statements and Notes thereto on pages 24 through 45 of the Annual Report.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES
None.
PART III
ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The response is incorporated herein by reference from the discussion under the caption "INFORMATION REGARDING DIRECTORS" on pages 5 through 6, the discussion under the caption "EXECUTIVE OFFICERS" on page 9 and the discussion under the caption "SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE" on page 18 of the Proxy Statement.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
The response is incorporated herein by reference from the section entitled "EXECUTIVE COMPENSATION" on pages 10 through 14 of the Proxy Statement.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The response is incorporated herein by reference from the discussion under the caption entitled "EQUITY COMPENSATION PLAN INFORMATION" on page 16 and "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT" on pages 16 through 18 of the Proxy Statement.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The response is incorporated herein by reference from the discussion under the caption entitled "INDEBTEDNESS OF DIRECTORS AND MANAGEMENT AND CERTAIN TRANSACTIONS WITH MANAGEMENT AND OTHERS" on page 15 and 16 of the Proxy Statement.
PART IV
ITEM 14.
ITEM 14. CONTROLS AND PROCEDURES
The Company's chief executive officer and chief financial officer, after evaluating the effectiveness of the company's "disclosure controls and procedures" (as defined in the Securities Exchange Act of 1934 Rules 13a-14(c) and 15-d-14(c)) as of December 31, 2002 (the "Evaluation Date"), have concluded that as of the Evaluation Date, the company's disclosure controls and procedures were adequate and designed to ensure that material information relating to the Company and its subsidiaries would be made known to them by others within those entities.
There were no significant changes in the Company's internal controls or, to the company's knowledge, in other factors that could significantly affect the Company's disclosure controls and procedures subsequent to the Evaluation Date.
ITEM 15.
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) (1) Financial Statements: The following LSB Corporation and Subsidiary Consolidated Financial Statements are incorporated herein by reference from the Annual Report, listed below and attached as Exhibit (13).
PAGE NUMBER(S) IN ANNUAL REPORT ------ Report of Management Responsibility 22 Independent Auditors' Report 23 Consolidated Balance Sheets as of 24 December 31, 2002 and 2001 Consolidated Statements of Operations 25 for the years ended December 31, 2002, 2001 and 2000 Consolidated Statements of Changes 26 in Stockholders' Equity for the years ended December 31, 2002, 2001 and 2000 Consolidated Statements of Cash Flows 27 for the years ended December 31, 2002, 2001 and 2000 Notes to Consolidated Financial Statements 28-45
(a) (2) Financial Statement Schedules:
None.
(b) Reports on Form 8-K:
There were no reports filed on Form 8-K during the last quarter of the period covered by this Form 10-K.
(c) List of Exhibits:
Exhibits to the Form 10-K have been included (unless otherwise noted) only with the copies of the Form 10-K filed with the SEC. Upon request to Investors Relations, LSB Corporation, 30 Massachusetts Avenue, North Andover, MA 01845, copies of the individual exhibits will be furnished upon payment of a reasonable reproduction fee.
Exhibits:
(2) Plan of Reorganization*
(3)(i) Articles of incorporation*
(3)(ii) Corporate By-Laws, as amended*
(3)(iii) Certificate of vote of directors establishing a series of a class of stock*
(4.1) Specimen certificate of shares of common stock of the Company*
(4.2) Rights Agreement dated as of December 12, 1996*
(10.1) Employment Agreement by and between the Bank and Paul A. Miller dated April 21, 1989*
(10.2) Amendment dated December 23, 1992 to Employment Agreement dated April 21, 1989*
(10.3) Amendment dated May 25, 2000 to Employment Agreement dated April 21, 1989*
(10.4) Employment Agreement by and between the Bank and Robert P. Perreault dated May 9, 1986*
(10.5) Amendment dated December 23, 1992 to Employment Agreement dated May 9, 1986*
(10.6) Special Termination Agreement by and between the Bank and Robert P. Perreault dated May 9, 1986*
(10.7) Amendment dated May 25, 2000 to Special Termination Agreement dated May 9, 1986*
(10.8) Supplemental Retirement Agreement by and between the Bank and Paul A. Miller dated April 21, 1989*
(10.9) Supplemental Retirement Agreement by and between the Bank and Paul A. Miller dated April 21, 1996*
(10.10) Employment Agreement by and between the Bank and Jeffrey W. Leeds dated February 24, 2000*
(10.11) Employment Agreement by and between the Bank and Timothy L. Felter dated February 24, 2000*
(10.12) Employment Agreement by and between the Bank and John E. Sharland dated February 24, 2000*
(10.13) Employment Agreement by and between the Bank and Richard J. D'Ambrosio dated February 24, 2000*
(10.14) Lawrence Savings Bank 1986 Stock Option Plan*
(10.15) Lawrence Savings Bank 1997 Stock Option Plan*
(13) 2002 Annual Report to Shareholders of LSB Corporation
(20) 2003 Proxy Statement
(21) Subsidiary of LSB Corporation and subsidiaries of Lawrence Savings Bank
(23.1) Consent of KPMG LLP
* Incorporated herein by reference from LSB Corporation Form 8-K filed July 2, 2001.
(d) Financial Statement Schedules:
None.
Pursuant to the requirements of Section 13 of the Securities Exchange Act of 1934, the LSB Corporation has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
LSB Corporation
By: /s/ Paul A. Miller --------------------------------- Paul A. Miller, President and Chief Executive Officer
DATE: March 27, 2003
Pursuant to the requirement of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the LSB Corporation and in the capacities and on the dates indicated.
CERTIFICATIONS I, Paul A. Miller, certify that:
1. I have reviewed this annual report on Form 10-K of LSB Corporation;
2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;
3. Based on my knowledge, the Consolidated Financial Statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
Date: March 27, 2003
/s/ Paul A. Miller ------------------------- Paul A. Miller President and Chief Executive Officer
I, John E. Sharland, certify that:
1. I have reviewed this annual report on Form 10-K of LSB Corporation;
2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;
3. Based on my knowledge, the Consolidated Financial Statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
Date: March 27, 2003
/s/ John E. Sharland ------------------------ John E. Sharland Senior Vice President Chief Financial Officer
INDEX TO EXHIBITS ATTACHED TO FORM 10-K
ITEM DESCRIPTION - ----------------
(13) 2002 Annual Report to Shareholders of LSB Corporation
(20) 2003 Proxy Statement
(21) Subsidiary of the LSB Corporation and Lawrence Savings Bank
(23.1) Consent of KPMG LLP