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                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549
                                  -------------
                                    FORM 10-K

                       FOR ANNUAL AND TRANSITION REPORTS
                     PURSUANT TO SECTIONS 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

(MARK ONE)
[x]  ANNUAL REPORT  PURSUANT TO SECTION 13 OR 15(d) OF THE  SECURITIES  EXCHANGE
     ACT OF 1934

For the fiscal year ended December 31, 2001
                                                        OR

[ ]  TRANSITION  REPORT  PURSUANT  TO  SECTION  13 OR  15(d)  OF THE  SECURITIES
     EXCHANGE ACT OF 1934

For the transition period from                to
                               --------------    --------------

                         Commission File Number: 0-18392

                                AMERIANA BANCORP
             ------------------------------------------------------
             (Exact Name of Registrant as Specified in Its Charter)

       INDIANA                                                    35-1782688
--------------------------------                             -------------------
 (State or Other Jurisdiction of                               (I.R.S. Employer
Incorporation or Organization)                               Identification No.)

2118 BUNDY AVENUE, NEW CASTLE, INDIANA                            47362-1048
--------------------------------------                       -------------------
  (Address of Principal Executive Offices)                        (Zip Code)

       Registrant's telephone number, including area code: (765) 529-2230
                                                           --------------

        Securities registered pursuant to Section 12(b) of the Act: NONE
                                                                    ----

           Securities registered pursuant to Section 12(g) of the Act:
                     COMMON STOCK, PAR VALUE $1.00 PER SHARE
                     ---------------------------------------

Indicate  by check  mark  whether  the  registrant:  (l) has filed  all  reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days. YES  X     NO
                                             -----     ------

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]

The  aggregate  market value of the voting stock held by  non-affiliates  of the
registrant based on the closing sales price of the registrant's  common stock as
quoted on the Nasdaq National  Market(SM) on March 20, 2002 was $41,408,545 (for
purposes of this calculation,  directors and executive  officers are not treated
as "non-affiliates").

As of March 21, 2002, there were issued and outstanding  3,147,463 shares of the
registrant's common stock.

                       DOCUMENTS INCORPORATED BY REFERENCE

1.   Portions of Proxy  Statement  for the 2002 Annual  Meeting of  Shareholders
     ("Proxy Statement") (Part III).

================================================================================

<PAGE>
                                     PART I


ITEM 1.  BUSINESS
-----------------

FORWARD-LOOKING STATEMENTS

     When used in this Annual  Report on Form 10-K (the  "Annual  Report"),  the
words or phrases "will likely  result," "are expected to," "will  continue," "is
anticipated,"  "estimate,"  "project"  or similar  expressions  are  intended to
identify  "forward-looking   statements"  within  the  meaning  of  the  Private
Securities Litigation Reform Act of 1995. Such statements are subject to certain
risks  and  uncertainties  including  changes  in  economic  conditions  in  the
Company's market area, changes in policies by regulatory agencies,  fluctuations
in  interest  rates,  demand  for  loans  in  the  Company's  market  area,  and
competition that could cause actual results to differ materially from historical
earnings and those  presently  anticipated  or projected.  The Company wishes to
caution  readers  not  to  place  undue  reliance  on any  such  forward-looking
statements,  which speak only as of the date made.  The Company wishes to advise
readers  that the factors  listed  above could  affect the  Company's  financial
performance  and could cause the Company's  actual results for future periods to
differ  materially  from any opinions or  statements  expressed  with respect to
future periods in any current statements.

     The Company does not undertake,  and specifically disclaims any obligation,
to  publicly  release  the  result  of any  revisions  which  may be made to any
forward-looking  statements to reflect events or circumstances after the date of
such  statements or to reflect the occurrence of  anticipated  or  unanticipated
events.

GENERAL

     THE COMPANY.  Ameriana  Bancorp (the  "Company") is a bank holding  company
subject to regulation  and  supervision by the Board of Governors of the Federal
Reserve System (the "Federal  Reserve Board") under the Bank Holding Company Act
of 1956 ("BHCA"). The Company's principal subsidiary is Ameriana Bank and Trust,
SB, an Indiana chartered savings bank headquartered in New Castle,  Indiana (the
"Bank").  The Company  also holds a minority  interest in a limited  partnership
organized  to acquire  and manage  real  estate  investments  which  qualify for
federal tax credits.

     The Company  became the holding  company for the Bank in 1990. In 1992, the
Company acquired Deer Park Financial  Corporation,  the holding company for Deer
Park Federal  Savings and Loan  Association  ("Deer  Park"),  a federal  savings
association with its main office in Cincinnati, Ohio. After the acquisition, the
Company  operated  Deer Park as a  separate  subsidiary.  In 1998,  the  Company
acquired Cardinal State Bank  ("Cardinal"),  an



                                       1
<PAGE>

Ohio-chartered commercial bank with its main office in Maineville, Ohio, through
a merger  with Deer  Park.  Following  the  acquisition,  Deer Park was  renamed
Ameriana Bank of Ohio,  F.S.B.  ("Ameriana-Ohio")  and continued to operate as a
separate subsidiary.  In October 2000, the Company merged Ameriana-Ohio into the
Bank.

     Effective June 29, 2001, the Bank converted to an Indiana  savings bank and
adopted  its present  name,  "Ameriana  Bank and Trust,  SB." As a result of the
conversion,  the Bank become subject to regulation by the Indiana  Department of
Financial  Institutions and the Federal Deposit Insurance  Corporation  ("FDIC")
rather than by the Office of Thrift  Supervision,  and the Company became a bank
holding company.  Since the lending and investment activities of Indiana savings
banks are  similar to those of  federal  savings  bank,  the  conversion  is not
expected to have a material  effect on the range of activities in which the Bank
may engage.

     THE BANK. The Bank began  operations in 1890. Since 1935, the Bank has been
a member of the FHLB  ("FHLB")  System.  Its deposits are insured to  applicable
limits by the Savings Association  Insurance Fund ("SAIF"),  administered by the
FDIC.  The Bank's  main  office is located at 2118  Bundy  Avenue,  New  Castle,
Indiana.  The Bank also conducts  business  through eight Indiana branch offices
located  in  New  Castle,  Middletown,   Knightstown,   Morristown,  Greenfield,
Anderson, Avon and New Palestine, Indiana and two Ohio branch offices located in
Cincinnati and Maineville,  Ohio. The Bank,  through a wholly owned  subsidiary,
Ameriana Financial  Services,  Inc., has ownership interests in a life insurance
underwriting  firm located in New  Orleans,  Louisiana  and in an Indiana  title
insurance agency, and offers a full line of investments and securities  products
through its brokerage center located in New Castle,  Indiana. The Bank maintains
a website at www.ameriana.com.

     The business of the Bank consists primarily of attracting deposits from the
general public and originating mortgage loans on single-family  residences,  and
to a lesser extent on  multi-family  housing and commercial  property.  The Bank
also makes home improvement  loans and consumer loans and through its subsidiary
engages in insurance and brokerage  activities.  In 1999, the Bank established a
Business  Services  Division to provide  specialized  lending and other  banking
services for business customers.  As a result of the Business Services Division,
commercial real estate loans have increased  significantly during 2001, 2000 and
1999.  Commercial  mortgage and other  commercial  loans totaled $104.6 million,
$57.2  million  and  $31.9  million  at  December  31,  2001,   2000  and  1999,
respectively. The Bank also began operating a Trust Department during 1999 which
provides trust,  investment and estate planning services.  The principal sources
of funds for the Bank's lending  activities  include deposits  received from the
general  public,  funds  borrowed  from the  FHLB,  principal  amortization  and
prepayment of loans.  The Bank's

                                       2
<PAGE>

primary  sources  of  income  are  interest  and fees on loans and  interest  on
investments.   The  Bank  has  from  time  to  time  purchased  loans  and  loan
participations in the secondary market. The Bank also invests in various federal
and government agency obligations and other investment  securities  permitted by
applicable  laws and  regulations,  including  mortgage-backed  securities.  The
Bank's  principal  expenses are interest  paid on deposit  accounts and borrowed
funds and operating expenses incurred in the operation of the Bank.

LENDING AND INVESTMENT ACTIVITIES

     GENERAL.   The  principal  lending  activity  of  the  Bank  has  been  the
origination of conventional first mortgage loans secured by residential property
and to a lesser  extent  commercial  real  estate,  equity  lines of credit  and
consumer loans. The residential  mortgage loans have been predominantly  secured
by single family homes and have included construction loans.

     The Bank may  originate  or  purchase  whole  loans or loan  participations
secured by real estate located in any part of the United States. Notwithstanding
this  nationwide  lending  authority,  the majority of the Bank's  mortgage loan
portfolio  is  secured by real  estate  located  in Henry,  Hancock,  Hendricks,
Madison,  Shelby,  Delaware  and Marion  counties in the state of Indiana and in
Hamilton, Butler, Clermont and Warren counties in the state of Ohio.

                                       3
<PAGE>

         The following table sets forth information concerning the Company's
aggregate loans by type of loan at the dates indicated. Residential mortgage
loans held for sale are included in this table, and mortgage-backed securities
are not included in this table.
<TABLE>
<CAPTION>
                                                                 AT DECEMBER 31,
                                            ----------------------------------------------------------------
                                                    2001               2000                        1999
                                            -----------------   -------------------     -------------------
                                            AMOUNT        %     AMOUNT          %       AMOUNT          %
                                            ------      -----   ------        -----     ------        -----
                                                                (DOLLARS IN THOUSANDS)
<S>                                         <C>          <C>      <C>           <C>       <C>           <C>
Real estate mortgage loans:
  Commercial.............................   $  61,678    17.04%   $  35,615     8.57%     $  22,411     6.53%
  Residential loans.......................    208,683    57.66      295,573    71.17        249,704    72.72
  Construction loans......................     42,045    11.62       43,287    10.42         42,971    12.51
Commercial loans..........................     18,536     5.12        8,764     2.11          1,209     0.35
Consumer loans:
  Mobile home and auto loans..............     15,941     4.41       20,767     5.00         16,373     4.77
  Loans secured by deposits...............      1,348     0.37        1,598     0.38          1,392     0.40
  Home improvement loans..................        403     0.11          321     0.08          1,577     0.46
  Other...................................     13,294     3.67        9,431     2.27          7,762     2.26
                                            ---------    -----    ---------   ------      ---------    -----
     Total................................    361,928   100.00%     415,356   100.00%       343,399   100.00%
                                            ---------   ======    ---------   ======      ---------   ======

Less:
  Loans in process........................     12,725                16,724                  16,723
  Deferred loan fees......................          8                  (143)                   (129)
  Loan loss reserve.......................      1,730                 1,489                   1,534
                                            ---------             ---------               ---------
   Sub Total..............................     14,463                18,070                  18,128
                                            ---------             ---------               ---------
     Total................................  $ 347,465             $ 397,286               $ 325,271
                                            =========             =========               =========

<CAPTION>
                                                           AT DECEMBER 31,
                                               ----------------------------------------
                                                       1998                 1997
                                               ---------------------   ----------------
                                               AMOUNT          %        AMOUNT       %
                                               ------        -----     --------   -----
                                                     (DOLLARS IN THOUSANDS)
<S>                                             <C>           <C>     <C>          <C>
Real estate mortgage loans:
  Commercial..............................      $ 15,282      5.55%   $  4,930     1.65%
  Residential loans.......................       205,636     74.69     249,818    83.53
  Construction loans......................        23,176      8.42       4,354     1.46
Commercial loans..........................           862      0.31          19     0.01
Consumer loans:
  Mobile home and auto loans..............        21,854      7.94      31,818    10.64
  Loans secured by deposits...............         1,351      0.49       1,308     0.44
  Home improvement loans..................         2,774      1.01       5,629     1.88
  Other...................................         4,387      1.59       1,177     0.39
                                                --------     -----    --------    -----
     Total................................       275,322    100.00%    299,053   100.00%
                                                --------    ======    --------   ======

Less:
  Loans in process........................        12,123                 4,876
  Deferred loan fees......................           102                    44
  Loan loss reserve.......................         1,284                 1,163
                                                --------              --------
   Sub Total..............................        13,509                 6,083
                                                --------              --------
     Total................................      $261,813              $292,970
                                                ========              ========
</TABLE>

                                       4
<PAGE>

     The following  table shows,  at December 31, 2001, the Company's  aggregate
loans based on their contractual terms to maturity  (mortgage-backed  securities
are not included).  Demand loans,  loans having no stated schedule of repayments
and no stated maturity,  and overdrafts are reported as due in one year or less.
Contractual  principal repayments of loans do not necessarily reflect the actual
term of the loan portfolio.  The average life of mortgage loans is substantially
less than their  contractual  terms because of loan  prepayments  and because of
enforcement of due-on-sale  clauses,  which give the Bank the right to declare a
loan  immediately  due and payable in the event,  among other  things,  that the
borrower  sells the real  property  subject to the  mortgage and the loan is not
repaid.  The average  life of mortgage  loans tends to increase,  however,  when
current  mortgage  loan rates  substantially  exceed rates on existing  mortgage
loans.
<TABLE>
<CAPTION>
                                                      AMOUNTS OF LOANS WHICH MATURE IN
                                -------------------------------------------------------------------------------
                                                                                2007 AND
                                    2002              2003 - 2006               THEREAFTER             TOTAL
                                  --------            -----------              ------------          ----------
                                                                     (IN THOUSANDS)
<S>                             <C>                    <C>                      <C>                  <C>
Type of Loan:
   Real estate mortgage.......  $   33,798             $   53,473               $ 225,135            $  312,406
   Other......................       9,642                 35,664                   4,216                49,522
                                ----------             ----------               ---------            ----------
      Total...................  $   43,440             $   89,137               $ 229,351            $  361,928
                                ==========             ==========               =========            ==========
</TABLE>

     The following table sets forth the dollar amount of the Company's aggregate
loans due after  one year  from  December  31,  2001  which  have  predetermined
interest   rates  and  which  have   floating  or  adjustable   interest   rates
(mortgage-backed securities are not included).
<TABLE>
<CAPTION>

                                                      FIXED             ADJUSTABLE
                                                       RATE                RATE                  TOTAL
                                                   ----------           -----------            ---------
                                                                       (IN THOUSANDS)
          <S>                                      <C>                    <C>                  <C>
          Real estate mortgage loans.............  $   93,399             $ 185,209            $ 278,608
          Other loans............................      39,880                    --               39,880
                                                   ----------             ---------            ---------
            Total................................  $  133,279             $ 185,209            $ 318,488
                                                   ==========             =========            =========
</TABLE>

     RESIDENTIAL REAL ESTATE LENDING.  The Bank's primary lending activities are
the origination of loans on one-to-four family  residential  dwelling units. The
Bank  currently  offers  fixed-rate,   first  and  second  mortgage  loans.  The
fixed-rate  mortgage  loans provide for a maturity of ten to thirty years,  with
the thirty-year  loan bearing a slightly  higher rate of interest.  The terms of
the first mortgage loans generally conform to the guidelines  established by the
Federal Home Loan Mortgage Corporation ("FHLMC") and are, therefore, saleable in
the secondary  mortgage  market.  The Bank's  fixed-rate  second  mortgage loans
provide for a maturity of ten years and bear interest at a rate slightly  higher
than  that  borne by the  first  mortgage  loans.  At the time the Bank  makes a
fixed-rate

                                       5
<PAGE>

mortgage loan, it determines whether the loan will be held in portfolio or sold,
based  primarily  on the  interest  rate and term of the  loan.  Once  placed in
portfolio,  loans are not sold.  Loans  originated for sale are promptly sold in
the secondary market.  Fixed-rate  mortgage loans in the amount of $91.5 million
were  originated  for sale during 2001 and $86.8  million were sold at a gain of
$804,000.  Mortgage loans held for sale are those loans that have been committed
to be sold,  but have not closed as of the end of the year and were $5.3 million
at December 31, 2001.

     The Bank emphasizes the origination of  adjustable-rate  mortgages ("ARMs")
for  portfolio.  The Bank  currently  offers  several  types of ARMs  either  as
first-lien mortgage loans or as second-lien  mortgage loans which are adjustable
semi-annually, annually, or on three-year, five-year or seven-year intervals and
indexed to the yields on comparable United States Treasury securities.

     The Bank  limits the  maximum  loan-to-value  ratio on  one-to-four  family
residential  first  mortgages to 95% of the appraised value with the requirement
that private mortgage insurance normally be obtained for loan-to-value ratios in
excess  of 80%.  The Bank  limits  the  loan-to-value  ratio to 89.9% on  second
mortgages on one-to-four family dwellings.

     The Bank's  residential  lending  activities  also include loans secured by
multi-family  residential  structures,  which are structures  consisting of over
four separate dwelling units. This has not constituted a significant  portion of
the Bank's lending activities to date.  Multi-family  residential structures are
generally  income producing  properties.  The Bank generally does not lend above
80% of the appraised values of multi-family residences on first mortgage loans.

     CONSTRUCTION AND COMMERCIAL REAL ESTATE LENDING.  The Bank originates loans
secured by existing commercial  properties and construction loans on residential
real estate.  The Bank's  commercial  real estate loans are secured by churches,
nursing homes, hotels/motels, multi-family properties and other income-producing
properties. The Bank's commercial real estate loans have increased significantly
due to the establishment of the new Business Services Division during 1999. This
operation makes direct  commercial loans and, more  importantly,  purchases loan
participations  from  other  financial  institutions.  These  participations  in
commercial  real estate  loans are  reviewed  and  approved  based upon the same
credit  standards  as direct  commercial  loans at the Bank.  Loans  secured  by
commercial  real estate  properties  are generally  larger and involve a greater
degree of credit  risk than one-  to-four  family  residential  mortgage  loans.
Because payments on loans secured by commercial real estate properties are often
dependent on the successful operation or management of the properties, repayment
of such loans may be

                                       6
<PAGE>

subject to adverse  conditions in the real estate market or by general  economic
conditions. If the cash flow from the project is reduced (for example, if leases
are not obtained or renewed),  the  borrower's  ability to repay the loan may be
impaired.  To minimize the risks  involved in originating  such loans,  the Bank
considers,  among other  things,  the credit  worthiness  of the  borrower,  the
location of the real estate,  the condition and occupancy levels of the security
and the quality of the organization managing the property.

     The Bank originates  and/or purchases  construction  loans on single-family
residential  properties in its primary  market  areas.  The loans are secured by
real estate,  and most of the homes to be constructed  are already  subject to a
sales  contract  at  the  time  the  construction   loan  is  made.  The  Bank's
construction  loans generally range in size between  $100,000 and $500,000,  and
the Bank's  commercial  real  estate  loans range from  $100,000 to  $3,000,000.
Substantially  all of the commercial and construction  loans  originated  and/or
purchased by the Bank have either  adjustable  interest rates with maturities of
30 years or less or are loans with fixed  interest  rates and  maturities of ten
years or less.

     Loans involving construction financing present a greater level of risk than
loans for the purchase of existing homes since collateral value and construction
costs  can only be  estimated  at the time  the loan is  approved.  The Bank has
sought to  minimize  this risk by  limiting  construction  lending to  qualified
borrowers  in its market area and by limiting the number of  construction  loans
outstanding at any time to individual builders. In addition,  most of the Bank's
construction  loans are made on homes which are  pre-sold,  for which  permanent
financing is already arranged.

     The Bank's underwriting  criteria are designed to evaluate and minimize the
risks of each construction loan. Among other things, the Bank considers evidence
of the  availability  of  permanent  financing  or a takeout  commitment  to the
borrower; the reputation of the borrower and his or her financial condition; the
amount of the borrower's equity in the project; independent appraisal and review
of cost estimates;  preconstruction sale and leasing information;  and cash flow
projections of the borrower.

     CONSUMER LOANS.  The consumer loans granted by the Bank have included loans
on  automobiles  and other consumer  goods,  as well as education  loans,  loans
secured by savings accounts and secured and unsecured lines of credit.  In 2001,
the Company  continued to originate  automobile loans. Such loans are originated
both directly with customers and indirectly  through  automobile  dealers in the
Company's lending areas.

                                       7
<PAGE>

     Management believes that the shorter terms and the normally higher interest
rates  available  on  various  types of  consumer  loans  have been  helpful  in
maintaining  profitable  spreads between average loan yields and costs of funds.
Consumer  loans  do,  however,  pose  additional  risks of  collectibility  when
compared to traditional  types of loans granted by thrift  institutions  such as
residential  first  mortgage  loans.  The Bank has sought to reduce this risk by
primarily granting secured consumer loans.

     COMMERCIAL BUSINESS LENDING. Under applicable law, the Bank is permitted to
make  secured  and  unsecured  loans for  commercial,  corporate,  business  and
agricultural  purposes,  including  issuing  letters of credit and  engaging  in
inventory financing and commercial leasing  activities.  The Bank does not, as a
common practice,  make unsecured  commercial loans. The Company began making and
purchasing  the  collaterized  commercial  loans in 1998.  The  total  lease and
commercial portfolio at December 31, 2001 was $104.6 million.

     ORIGINATIONS,  PURCHASES  AND  SALES.  Historically,  all  residential  and
commercial real estate loans have been  originated  directly by the Bank through
salaried loan officers.  Residential loan originations have been attributable to
referrals  from  real  estate  brokers  and  builders,  depositors  and  walk-in
customers,  and  commissioned  loan agents.  The Bank also obtains  consumer and
commercial  loans from paid brokers.  The Bank  obtained  $49.5 million of loans
from brokers and other financial  institutions  through loan  participations  in
2001.  Commercial real estate and construction  loan originations have also been
obtained by direct solicitation.  Consumer loan originations are attributable to
walk-in customers who have been made aware of the Bank's programs by advertising
as well as direct solicitation.

     The Bank has previously  sold whole loans to other  financial  institutions
and  institutional  investors.  Sales of loans generate  income (or loss) at the
time of sale,  produce future  servicing income and provide funds for additional
lending and other  purposes.  When the Bank  retains the  servicing  of loans it
sells,  the Bank  retains  responsibility  for  collecting  and  remitting  loan
payments,  inspecting the properties,  making certain insurance and tax payments
on behalf of borrowers and otherwise  servicing those loans.  The Bank typically
receives  a fee of between  0.25% and  0.375% per annum of the loan's  principal
amount for  performing  this  service.  The right to service a loan has economic
value and the Company carries capitalized servicing rights on its books based on
comparable market values and expected cash flows. At December 31, 2001, the Bank
was servicing  $162.0  million of loans for others.  The aggregate fair value of
capitalized servicing rights at December 31, 2001 was $1.0 million.

                                       8
<PAGE>

     Management  believes that  purchases of loans and loan  participations  are
generally desirable, primarily when area mortgage demand is less than the supply
of funds  available  for  local  mortgage  origination  or when  loan  terms are
available  in areas  outside  the  Bank's  local  lending  areas  which are more
favorable to their investment requirements. Additionally, purchases of loans may
be made in order to  diversify  the Bank's  lending  portfolio.  The Bank's loan
purchasing activities fluctuate significantly.  The servicing of purchased loans
is  generally  performed by the seller.  In order to cover  servicing  costs,  a
portion of the interest  being paid by the borrower is retained by the servicer.
In  addition  to whole loan  purchases,  the Bank also  purchases  participation
interests in loans. Both whole loans and participations are purchased on a yield
basis.

     For additional  information,  see "Management's  Discussion and Analysis --
Results of Operations" included in Item 7 of this Annual Report.

     LOAN UNDERWRITING. During the loan approval process, the Bank assesses both
the  borrower's  ability to repay the loan and the  adequacy  of the  underlying
security.  Potential  residential  borrowers  complete an  application  which is
submitted to a salaried loan officer.  As part of the loan application  process,
the  Bank  obtains  information  concerning  the  income,  financial  condition,
employment  and  credit  history  of  the  applicant.  In  addition,   qualified
appraisers  inspect and  appraise  the  property  which is offered to secure the
loan.

     The  Bank's  loan  officers  and/or  loan   committees   analyze  the  loan
application and the property to be used as collateral and subsequently  approves
or denies the loan request.  Individual  salaried  employees  are  authorized to
approve  loans up to  their  individual  lending  limits  and  loan  parameters.
Residential  loans of $500,000 or more and commercial  loans of $350,000 or more
but less than $1,000,000  must be approved by a committee  consisting of certain
members of senior  management.  The Board of Directors must approve all loans in
excess of  $1,000,000.  In connection  with the  origination  of  single-family,
residential  ARMs,  borrowers are  qualified at a rate of interest  equal to the
second year rate, assuming the maximum increase.  It is the policy of management
to make  loans to  borrowers  who not only  qualify at the low  initial  rate of
interest,  but  who  would  also  qualify  following  an  upward  interest  rate
adjustment.

     LOAN  COMMITMENTS.  Conventional loan commitments by the Bank are generally
granted for periods of up to 60 days.  The total amount of the Bank's  aggregate
outstanding commitments to originate real estate loans at December 31, 2001, was
approximately $5.2 million of residential mortgage commitments and approximately
$6.6 million of commercial  commitments.  It has been the Bank's experience that
few commitments expire unfunded.

                                       9
<PAGE>

     LOAN FEE AND SERVICING INCOME. In addition to interest earned on loans, the
Bank receives income through servicing of loans and fees in connection with loan
originations,  loan  modifications,   late  payments  and  changes  of  property
ownership and for miscellaneous  services related to the loan. Income from these
activities is volatile and varies from period to period with the volume and type
of loans made.

     When possible,  the Bank charges loan origination fees which are calculated
as a  percentage  of the amount  borrowed and are charged to the borrower at the
time of  origination  of the loan.  The fees  received  in  connection  with the
origination of commercial  real estate loans  generally  range from none to 1.00
point (one point being  equivalent to 1% of the  principal  amount of the loan).
The fees received in connection with the origination of conventional one-to-four
family  mortgages  typically  range from none to 1.00 point.  In accordance with
Statement  of  Financial  Accounting  Standards  No. 91,  loan  origination  and
commitment fees and certain direct loan  origination  costs are deferred and the
net amount  amortized as an adjustment of yield over the contractual life of the
related loans.

     For  additional  information,  see  Note  4 of the  Consolidated  Financial
Statements included under Item 8 of this Annual Report.

     DELINQUENCIES.  When a borrower defaults upon a required payment on a loan,
the Bank  contacts  the  borrower and attempt to induce the borrower to cure the
default. A late payment notice is mailed to the borrower and a telephone contact
is made after a payment is 15 days past due.  If the  delinquency  on a mortgage
loan  exceeds  90 days and is not cured  through  the Bank's  normal  collection
procedures or an acceptable arrangement is not worked out with the borrower, the
Bank will  institute  measures to remedy the  default,  including  commencing  a
foreclosure action.

     NON-PERFORMING  ASSETS AND ASSET  CLASSIFICATION.  Loans are  reviewed on a
regular  basis and are placed on a  non-accrual  status when,  in the opinion of
management,  the  collection  of  additional  interest is doubtful.  Residential
mortgage  loans are  placed on  non-accrual  status  when  either  principal  or
interest  is 90 days or more past due unless  they are  adequately  secured  and
there is  reasonable  assurance of full  collection  of principal  and interest.
Consumer  loans  generally  are charged off when the loan  becomes over 120 days
delinquent.  Commercial business and real estate loans are placed on non-accrual
status when the loan is 90 days or more past due. Interest accrued and unpaid at
the time a loan is placed on  non-accrual  status is  charged  against  interest
income.  Subsequent

                                       10
<PAGE>

payments are either applied to the outstanding  principal balance or recorded as
interest income,  depending on the assessment of the ultimate  collectibility of
the loan.

     Real estate  acquired by the Bank as a result of  foreclosure or by deed in
lieu of  foreclosure is classified as real estate owned until such time as it is
sold. When such property is acquired,  it is recorded at the lower of the unpaid
principal  balance  of the  related  loan  or its  fair  value.  Any  subsequent
deterioration  of the property is provided for in an allowance  for loss on real
estate owned.

     The following  table sets forth  information  with respect to the Company's
aggregate non-performing assets at the dates indicated.
<TABLE>
<CAPTION>
                                                                            AT DECEMBER 31,
                                                        -----------------------------------------------------
                                                        2001        2000        1999       1998         1997
                                                        -----      ------      ------     ------       ------
                                                                       (DOLLARS IN THOUSANDS)
<S>                                                   <C>         <C>         <C>         <C>         <C>
Loans accounted for on a non-accrual basis:
  Real Estate:
     Residential....................................  $    818    $    720    $    703    $    684    $    847
     Commercial.....................................     1,348          36         226          15          --
     Construction...................................        --          --          --          --          --
  Commercial........................................        --           8          11          --          19
  Consumer..........................................        12          37         231          46          11
                                                      --------    --------    --------    --------    --------
    Total...........................................     2,178         801       1,171         745         877
                                                      --------    --------    --------    --------    --------

Accruing loans contractually past due 90
  days or more:
  Real Estate:
     Residential....................................       268         576          16          37          61
     Commercial.....................................        --          --          --          --          57
     Construction...................................        --         158          --          --          --
  Commercial........................................        --          --          --          --          --
  Consumer..........................................       127          13           9           3           7
                                                      --------    --------    --------    --------    --------
    Total...........................................       395         747          25          40         124
                                                      --------    --------    --------    --------    --------

    Total of non-accrual and
       90 days past due loans.......................  $  2,573    $  1,548    $  1,196    $    785    $  1,002
                                                      ========    ========    ========    ========    ========

Percentage of total loans (excluding
    mortgage-backed securities).....................      0.74%       0.39%       0.37%       0.30%       0.33%
                                                      ========    ========    ========    ========    ========
Other non-performing assets (1).....................  $    606    $    125    $     --    $     96    $    160
                                                      ========    ========    ========    ========    ========
<FN>
__________
(1)  Other   non-performing   assets   represents   property   acquired  through
     foreclosure or  repossession.  This property is carried at the lower of its
     fair market value or the principal balance of the related loan.
</FN>
</TABLE>

     At December 31, 2001,  the Company had $910,000 of other problem loans with
payments  past due  between 60 and 89 days for which the Company had some doubts
as to the ability of the borrowers to comply with the existing payment terms and
conditions.  In addition,  the Company has certain other loans outstanding where
management  has some doubts as to the ability of such  borrowers  to comply with
the present loan repayment  terms

                                       11
<PAGE>

and where such loans may be accounted  for on a nonaccrual  basis in the future.
Included in this category of potential  problem loans are  participations in two
pools of lease receivables, and a condominium project in Bloomington, Indiana.

     In June and September  2001,  the Company  purchased two separate  pools of
lease  receivables  totaling  $12,003,000,  consisting  primarily  of  equipment
leases.  Each  lease  within  each  pool  includes  a surety  bond by one of two
insurers,  which guarantees  payment of all amounts due under the lease in event
of  default  by the  lessee.  Additionally,  each pool of leases is covered by a
sales and service  agreement with the insurer.  The surety on one pool of leases
has been making lease payments,  with reservation of rights, to the investors as
the lease  payments  become  due under the  surety  agreement.  The  outstanding
balance due the Company at March 20, 2002 on this lease pool totaled $5,921,000.
The second lease pool is past due for January, February and March, 2002 payments
as of March 20, 2002. At March 20, 2002,  the  outstanding  balance of this pool
totaled $5,762,000.  Demand for payment has been made against the surety for the
second pool but no payments had been received as of March 20, 2002.  The Company
believes the surety bonds on all of the leases  provide  adequate  collateral in
the event individual leases default.

     The  Company  has a  construction  loan  with  certain  borrowers  for  the
development of a condominium project in Bloomington, Indiana. While the loan was
45 days  delinquent at December 31, 2001, the Company has currently  placed this
credit on its internal watch list.  The loan totaled  $2,233,000 at December 31,
2001  and is  collateralized  both  by the  subject  real  estate  and  personal
guarantees of the borrowers.

     During 2001,  the Company  would have  recorded  gross  interest  income of
$174,000 on the loans set forth above as accounted for on a  non-accrual  basis,
if such loans had been  current in  accordance  with their terms.  Instead,  the
Company included interest income of $65,000 on those loans in its net income for
the year. For additional  information regarding the Company's problem assets and
loss provisions recorded thereon, see "Management's  Discussion and Analysis" in
the Item 7 of this Annual Report.

RESERVES FOR LOSSES ON LOANS AND REAL ESTATE

     In making loans,  management recognizes the fact that credit losses will be
experienced  and that the risk of loss will vary with,  among other things,  the
type of loan being made, the  creditworthiness  of the borrower over the term of
the loan and, in the case of a secured loan, the quality of the security for the
loan.

                                       12
<PAGE>

     It is  management's  policy to maintain  reserves for  estimated  losses on
loans and real estate  acquired.  General loan loss reserves are provided  based
on,  among other  things,  estimates  of the  historical  loan loss  experience,
evaluation  of  economic  conditions  in general  and in various  sectors of the
Bank's  customer  base, and periodic  reviews of loan  portfolio  quality by the
Bank's personnel.  Specific reserves will be provided for individual loans where
the ultimate collection is considered questionable by management after reviewing
the current status of loans which are contractually past due and considering the
net realizable  value of the security of the loan or guarantees,  if applicable.
It is management's policy to establish specific reserves for estimated losses on
delinquent  loans and real  estate  owned  when it  determines  that  losses are
anticipated to be incurred on the underlying  properties.  At December 31, 2001,
the Bank's allowance for loan losses amounted to $1,730,000.

     Future   reserves  may  be  necessary  if  economic   conditions  or  other
circumstances  differ  substantially  from the  assumptions  used in making  the
initial determinations.  There can be no assurance that regulators, in reviewing
the Bank's loan  portfolio in the future,  will not ask the Bank to increase its
allowance for loan losses,  thereby negatively affecting its financial condition
and earnings.

                                       13
<PAGE>

     The  following  table sets forth an  analysis  of the  Company's  aggregate
allowance for loan losses for the periods indicated.
<TABLE>
<CAPTION>
                                                                        YEAR ENDED DECEMBER 31,
                                                     ---------------------------------------------------------
                                                        2001        2000        1999       1998        1997
                                                       ------      ------      ------     ------      ------
                                                                       (DOLLARS IN THOUSANDS)
<S>                                                  <C>          <C>         <C>         <C>         <C>
Balance at Beginning of Period.....................   $  1,489    $  1,534    $  1,284    $  1,163    $  1,104
                                                      --------    --------    --------    --------    --------

Charge-Offs:
  Real Estate:
    Residential....................................         29          30          --          12          31
    Commercial.....................................         --         206          --          --          --
    Construction...................................         --          --          --          --          --
  Commercial business..............................         --         252          --          --          --
  Consumer.........................................        117          --          98         153         170
                                                      --------    --------    --------    --------    --------
                                                           146         488          98         165         201
                                                      --------    --------    --------    --------    --------
Recoveries:
  Real Estate:
    Residential....................................         12          --          --          --          --
    Commercial.....................................         --          --          --          --          --
    Construction...................................         --          --          --          --          --
  Commercial business..............................         --           3           4          --          --
  Consumer.........................................         15          23          16          27          18
                                                      --------    --------    --------    --------    --------
                                                            27          26          20          27          18
                                                      --------    --------    --------    --------    --------

Net Charge-Offs....................................       (119)       (462)        (78)       (138)       (183)
Increase from Acquisition..........................         --          --          --         100          --
Provision for Loan Losses..........................        360         417         328         159         242
                                                      --------    --------    --------    --------    --------

Balance at End of Period............................  $  1,730    $  1,489    $  1,534    $  1,284    $  1,163
                                                      ========    ========    ========    ========    ========

Ratio of Net Charge-Offs to Average
  Loans Outstanding During the Period..............       0.03%       0.12%       0.03%       0.05%       0.06%
                                                      ========    ========    ========    ========    ========

Ratio of Ending Allowance for
  Loan Losses to Ending Loans......................       0.50%       0.37%       0.47%       0.49%       0.40%
                                                     =========    ========    ========    ========    ========
</TABLE>

     Net charge-offs for the year ended December 31, 2001 decreased  principally
because  there  were no  large  charge-offs  of  commercial  mortgage  or  other
commercial  loans as in 2000.  During  fiscal  year 2000,  the Bank  charged-off
$172,000 on a loan which was acquired in the  acquisition of Cardinal State Bank
in 1998 and which had been fully  reserved for in 1999.  The second loan charged
off during 2000 was a real estate development loan on which the Bank charged off
$206,000.


                                       14
<PAGE>
     The  following  table sets forth a  breakdown  of the  Company's  aggregate
allowance  for loan losses by loan category at the dates  indicated.  Management
believes that the allowance can be allocated by category only on an  approximate
basis.  The  allocation  of the  allowance to each  category is not  necessarily
indicative  of future  losses and does not restrict the use of the  allowance to
absorb losses in any category.
<TABLE>
<CAPTION>
                                                                           AT DECEMBER 31,
                                            ------------------------------------------------------------------------------
                                                    2001                     2000                      1999
                                            --------------------------  ----------------------   -------------------------
                                                         PERCENT OF                PERCENT OF                 PERCENT OF
                                                        LOANS IN EACH             LOANS IN EACH              LOANS IN EACH
                                                         CATEGORY TO               CATEGORY TO                CATEGORY TO
                                            AMOUNT       TOTAL LOANS    AMOUNT     TOTAL LOANS   AMOUNT       TOTAL LOANS
                                            ------      -------------   ------    -------------  ------      -------------
                                                                         (DOLLARS IN THOUSANDS)
<S>                                         <C>              <C>       <C>             <C>       <C>              <C>
Loans:
  Real Estate Mortgage:
    Commercial............................  $     617        17%       $      76       9%        $      58        7%
    Residential...........................        417        58              635      71               649       73
    Construction..........................         90        12               93      10               112       12
  Commercial..............................        185         5                8       2                11       --
  Consumer................................        421         8              677       8               704        8
                                            ---------       ---        ---------     ---         ---------      ---
    Total Allowance for Loan Losses.......  $   1,730       100%       $   1,489     100%        $   1,534      100%
                                            =========       ===        =========     ===         =========      ===
<CAPTION>
                                                              AT DECEMBER 31,
                                            ---------------------------------------------------
                                                   1998                       1997
                                            -------------------------   -----------------------
                                                         PERCENT OF                PERCENT OF
                                                        LOANS IN EACH             LOANS IN EACH
                                                         CATEGORY TO               CATEGORY TO
                                            AMOUNT       TOTAL LOANS    AMOUNT     TOTAL LOANS
                                            ------      -------------   ------    -------------
                                                          (DOLLARS IN THOUSANDS)
<S>                                         <C>               <C>      <C>             <C>
Loans:
  Real Estate Mortgage:
    Commercial............................  $      31         6%       $       9       1%
    Residential...........................        429        75              459      84
    Construction..........................         47         8                8       1
  Commercial..............................         15        --               19      --
  Consumer................................        762        11              668      14
                                            ---------       ---        ---------     ---
    Total Allowance for Loan Losses.......  $   1,284       100%       $   1,163     100%
                                            =========       ===        =========     ===
</TABLE>

INVESTMENT ACTIVITIES

     Interest  and   dividends   on   investment   securities,   mortgage-backed
securities,   collateralized   mortgage   obligations,   FHLB  stock  and  other
investments  provide the second  largest source of income for the Company (after
interest on loans),  constituting  19.6% of the Company's  total interest income
(and  dividends) for fiscal 2001. The Bank maintains its liquid assets at levels
believed  adequate  to  meet  requirements  of  normal  banking  activities  and
potential savings outflows.

                                       15
<PAGE>
     As an  Indiana  savings  bank,  the Bank is  authorized  to invest  without
limitation  in direct or  indirect  obligations  of the  United  States,  direct
obligations  of a United  States  territory,  an insular  possession  and direct
obligations  of the  state or a  municipal  corporation  or taxing  district  in
Indiana.  The Bank is also permitted to invest in bonds or other securities of a
national  mortgage  association  and the stock and obligations of a Federal Home
Loan Bank.  Indiana  savings  banks may also invest in  collateralized  mortgage
obligations to the same extent as national  banks.  An Indiana  savings bank may
also purchase for its own account other investment  securities under such limits
as the Department of Financial Institutions prescribes by rule provided that the
savings  bank  may  not  invest  more  than  10% of its  equity  capital  in the
investment  securities  of any one  issuer.  Any  Indiana  savings  bank may not
investment in speculative  bonds,  notes or other indebtedness which are defined
as  securities  which are rated  below the first  four  rating  categories  by a
generally  recognized rating service or are in default.  An Indiana savings bank
may purchase an unrated security if it obtains financial information adequate to
document the investment quality of the security.

     The  Company's   investment   portfolio   consists  primarily  of  callable
obligations  issued by federal agencies such as FNMA, FHLMC and the FHLB System,
mortgage-backed  securities issued by FNMA and FHLMC and collateralized mortgage
obligations  issued by FHLMC,  FNMA or by private issuers  carrying AAA ratings.
The  Company has also  invested  in trust  preferred  securities  and  maintains
interest-bearing deposits in other financial institutions (primarily the FHLBs).
As a member of the FHLB System,  the Bank is also  required to hold stock in the
FHLBs of Indianapolis and Cincinnati.  At December 31, 2001, the Company did not
have investments in the securities of any single  non-governmental  issuer which
exceeded   10%  of   shareholders'   equity  other  than  its   investments   in
collateralized  mortgage pools  securitized by Credit Suisse First Boston ($20.1
million fair value) and Salomon Brothers Mortgage  Securities ($9.4 million fair
value).

     During 2001, the Company substantially  increased its portfolio of mortgage
backed securities and collateralized  mortgage obligations to offset declines in
the loan portfolio due to refinancings and calls of federal agencies  securities
attributable in both cases to the radically declining interest rate environment.
As  interest  rates  firmed  at the end of 2001,  the  estimated  lives of these
securities increased significantly,  exposing the Bank to unacceptable levels of
interest rate risk. The Company  accordingly  reclassified these securities from
held-to-maturity to available-for-sale  and marked them to fair value, recording
an accumulated  other  comprehensive  loss of

                                       16
<PAGE>

$696,000.  The Company has further determined to dispose of the  mortgage-backed
securities and  collateralized  mortgage  obligation  portfolio during the first
quarter of 2002 at an estimated after-tax loss of $1.9 million.

     The  following  table  sets  forth  the  carrying  value  of the  Company's
investments  in  federal  agency  obligations  and  mortgage-backed  securities,
collaterized mortgage obligations and other investments at the dates indicated.
<TABLE>
<CAPTION>
                                                                   AT DECEMBER 31,
                                                     ------------------------------------------
                                                      2001              2000              1999
                                                     ------            ------            ------
                                                                   (IN THOUSANDS)
<S>                                                  <C>               <C>             <C>
         Federal agencies..........................  $  28,696         $  87,901       $  87,735
         Mortgage-backed securities and
            collateral mortgage obligations........    110,393            11,806          14,970
         Interest-bearing deposits (1).............      4,283             4,422           6,795
         FHLB stock................................      7,365             7,265           4,341
         Other investments.........................      1,540                --              --
                                                     ---------         ---------       ---------
             Total investments.....................  $ 152,277         $ 111,394       $ 113,841
                                                     =========         =========       =========
<FN>
     _________
     (1)  Consist  of   overnight   deposits   and   short-term   non-negotiable
          certificates of deposit.
</FN>
</TABLE>

     The following table sets forth information  regarding maturity distribution
and average yields for the Company's investment securities portfolio at December
31, 2001.  The  Company's  federal  agencies  investment  portfolio  consists of
callable  obligations  issued  by  FNMA,  FHLMC,  and  the  FHLB  System.  Other
investments consists of trust preferred securities.
<TABLE>
<CAPTION>
                             WITHIN 1 YEAR        1-5 YEARS          5-10 YEARS         OVER 10 YEARS         TOTAL
                           ----------------    ---------------    ----------------    ----------------   ---------------
                           AMOUNT     YIELD    AMOUNT    YIELD    AMOUNT     YIELD    AMOUNT     YIELD   AMOUNT    YIELD
                           ------     -----    ------    -----    ------     -----    ------     -----   ------    -----
<S>                        <C>                <C>                 <C>                 <C>        <C>     <C>       <C>
Federal agencies........   $   --       -- %  $    --      -- %   $    --      -- %   $ 28,696   6.9%    $28,696   6.9%
Other investments.......       --       --         --      --          --      --        1,540   8.9       1,540   8.9
</TABLE>

     The  Company's  mortgage-backed   securities  and  collateralized  mortgage
obligations  include  both  fixed-  and  adjustable-rate   securities.  See  the
discussion of interest rate risk and the change, effective December 31, 2001, of
carrying  investments  from  "Held  to  Maturity"  to  "Available  for  Sale" in
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations" ("MD&A") under Item 7 of this Annual Report. Investments were marked
to fair  market  value as of December  31,  2001,  and the  Company  recorded an
accumulated  other  comprehensive  loss of $696,000 as of that date. At December
31, 2001, the Company's mortgage-backed securities consisted of the following:

                                       17
<PAGE>
<TABLE>
<CAPTION>
                                                                       CARRYING         AVERAGE
                                                                        AMOUNT            RATE
                                                                       --------         -------
                                                                        (DOLLARS IN THOUSANDS)
        <S>                                                          <C>                <C>
        Variable rate:
           Repricing in one year or less...........................  $     4,986         6.59%
           Repricing in one to five years..........................          452         6.52
        Fixed-rate:
           Maturing in five years or less..........................           51         8.11
           Maturing in five to ten years...........................        2,347         7.29
           Maturing in more than ten years.........................      102,557         6.66
                                                                     -----------
           Total...................................................  $   110,393         6.67%
                                                                     ===========
</TABLE>

SOURCES OF FUNDS

     GENERAL.  Savings  accounts and other types of deposits have  traditionally
been an  important  source of the Bank's  funds for use in lending and for other
general business  purposes.  In addition to deposit  accounts,  the Bank derives
funds  from  loan  repayments,   loan  sales,  borrowings  and  operations.  The
availability  of funds from loan sales is influenced by general  interest  rates
and other market  conditions.  Borrowings  may be used on a short-term  basis to
compensate for reductions in deposits or deposit  inflows at less than projected
levels  and may be used on a longer  term  basis  to  support  expanded  lending
activities.

     DEPOSITS. The Bank attracts both short-term and long-term deposits from the
general  public by offering a wide  assortment of deposit  accounts and interest
rates.  The Bank offers regular  savings  accounts,  NOW accounts,  money market
accounts,   fixed-interest-rate   certificates  with  varying  maturities,   and
negotiated-rate jumbo certificates with various maturities. The Bank also offers
tax-deferred  individual retirement,  Keogh retirement,  and simplified employer
plan retirement accounts.

     As of December 31, 2001,  approximately  29.33%, or $121.0 million,  of the
Bank's  aggregate  deposits  consisted  of various  savings  and demand  deposit
accounts  from which  customers  are  permitted  to  withdraw  funds at any time
without penalty.

     Interest earned on passbook and statement accounts is paid from the date of
deposit to the date of withdrawal  and  compounded  semi-annually  for the Bank.
Interest  earned on NOW and money market deposit  accounts is paid from the date
of deposit to the date of withdrawal and compounded  and credited  monthly.  The
interest rate on these accounts is established by management.

     The Bank also makes available to its depositors a number of certificates of
deposit with various terms and interest  rates to be  competitive  in its market
area. These certificates have minimum deposit requirements as well.

                                       18
<PAGE>

     The  following  table sets forth the change in dollar amount of deposits in
the  various  types of deposit  accounts  offered by the Bank  between the dates
indicated.
<TABLE>
<CAPTION>
                                                               INCREASE                        INCREASE
                                             BALANCE AT       (DECREASE)        BALANCE AT     (DECREASE)     BALANCE AT
                                           DECEMBER 31,       FROM PRIOR       DECEMBER 31,   FROM  PRIOR     DECEMBER 31,
                                               2001             YEAR              2000            YEAR             1999
                                        ----------------      ----------   -----------------  -----------    ---------------
                                                                           (DOLLARS IN THOUSANDS)
<S>                                    <C>          <C>       <C>          <C>          <C>    <C>          <C>        <C>
Savings deposits....................   $   32,647   7.92%     $  (2,040)   $ 34,687     9.44%  $  (3,973)   $ 38,660   10.87%
NOW accounts........................       40,641   9.85          2,948      37,693    10.25       3,839      33,854    9.52
Money market deposit accounts.......       47,686  11.56          9,401      38,285    10.41         206      38,079   10.70
Certificate accounts:
  Jumbo certificates................       60,363  14.64         17,324      43,039    11.71       2,995      40,044   11.26
  Fixed-rate certificates:
     12 months or less..............       61,538  14.92          6,200      55,338    15.05     (20,173)     75,511   21.22
     13-24 months...................       97,033  23.53          8,949      88,084    23.96      43,936      44,148   12.41
     25-36 months...................        7,785   1.89         (6,974)     14,759     4.02     (41,275)     56,034   15.75
     37 months or greater...........       62,182  15.08          9,408      52,774    14.36      27,464      25,310    7.11
  Variable-rate certificate:
     18 months......................        2,538   0.61           (398)      2,936     0.80      (1,183)      4,119    1.16
                                       ----------  -----      ---------    --------    -----   ---------    --------  ------
                                       $  412,413 100.00%     $  44,818    $367,595   100.00%  $  11,836    $355,759  100.00%
                                       ========== ======      =========    ========   ======   =========    =======   ======
</TABLE>

                                       19
<PAGE>

     The variety of deposit  accounts offered by the Bank has permitted it to be
competitive  in obtaining  funds and has allowed it to respond with  flexibility
to, but without eliminating the threat of,  disintermediation (the flow of funds
away from  depository  institutions  such as savings  institutions  into  direct
investment vehicles such as government and corporate  securities).  In addition,
the Bank has become  much more  subject  to  short-term  fluctuation  in deposit
flows, as customers have become more interest rate conscious. The ability of the
Bank to attract and maintain deposits and its costs of funds have been, and will
continue to be,  significantly  affected by money  market  conditions.  The Bank
currently offers a variety of deposit products as options to the customer.  They
include   non-interest-bearing   and  interest-bearing  NOW  accounts,   savings
accounts,  Money Market Deposit  Accounts  ("MMDA") and  Certificates of Deposit
ranging in terms from three  months to seven  years.  During the past year,  the
Bank has experienced a significant  increase in certificates  and MMDAs which it
attributes to funds leaving the stock markets.

     The following table sets forth the Company's average aggregate balances and
interest rates. Average balances are derived from balances which management does
not believe are materially  different from daily balances (actual daily balances
cannot be obtained without undue effort and expense).
<TABLE>
<CAPTION>
                                                        FOR THE YEAR ENDED DECEMBER 31,
                                  ------------------------------------------------------------------------
                                         2001                      2000                       1999
                                  --------------------      --------------------      --------------------
                                              AVERAGE                   AVERAGE                   AVERAGE
                                  AVERAGE       RATE        AVERAGE       RATE        AVERAGE       RATE
                                  BALANCE       PAID        BALANCE       PAID        BALANCE       PAID
                                  -------     --------      -------     --------      -------     --------
                                                            (DOLLARS IN THOUSANDS)
<S>                              <C>            <C>         <C>           <C>        <C>           <C>
Interest-bearing demand
   deposits....................  $   60,791     2.93%       $   58,598    3.49%      $   53,982    3.27%
Savings deposits...............      33,321     1.68            36,584    2.01           41,717    1.99
Time deposits..................     276,924     5.89           250,343    5.82          235,867    5.34
                                 ----------     ----        ----------    ----       ----------    ----
     Total interest-bearing
        deposits...............     371,036     5.03%          345,525    5.02%         331,566    4.58%
                                                ====                      ====                     ====
Non-interest-bearing demand
   and savings deposits........      16,494                     16,269                   14,580
                                 ----------                 ----------               ----------
     Total deposits............  $  387,530                 $  361,794               $  346,146
                                 ==========                 ==========               ==========
</TABLE>

                                       20
<PAGE>
     The following  table sets forth the aggregate  time deposits in the Company
classified by rates as of the dates indicated.
<TABLE>
<CAPTION>
                                                                   AT DECEMBER 31,
                                                     --------------------------------------------
                                                      2001              2000             1999
                                                     ------            ------           ------
                                                                   (IN THOUSANDS)
         <S>                                         <C>               <C>              <C>
         Less than 4%..............................  $  63,358         $     478        $   5,375
         4% -  5.99%...............................    109,842            84,009          176,432
         6% -  7.99%...............................    118,224           172,429           63,328
         8% -  9.99%...............................         15                14               31
                                                     ---------         ---------        ---------
                                                     $ 291,439         $ 256,930        $ 245,166
                                                     =========         =========        =========
</TABLE>

     The following  table sets forth the amount and  maturities of the Company's
time deposits at December 31, 2001.
<TABLE>
<CAPTION>
                                                         AMOUNT DUE
                                  ----------------------------------------------------------------------
                                  LESS THAN                                       MORE THAN
      RATE                        ONE YEAR        1-2 YEARS      2-3 YEARS          3 YEARS        TOTAL
      ----                        --------        ---------      ---------         ---------       -----
                                                               (IN THOUSANDS)
<S>                               <C>             <C>            <C>             <C>              <C>
Less than 4%....................  $  54,159       $    8,863     $      252      $       84     $  63,358
4% - 5.99%......................     81,897           12,982          7,294           7,669       109,842
6% - 7.99%......................     62,114           54,689          1,147             274       118,224
8% - 9.99%......................         15               --             --              --            15
                                  ---------       ----------     ----------      ----------     ---------
                                  $ 198,185       $   76,534     $    8,693      $    8,027     $ 291,439
                                  =========       ==========     ==========      ==========     =========
</TABLE>

     The following table  indicates the amount of the Company's  certificates of
deposit and other deposits of $100,000 or more by time remaining  until maturity
at December 31, 2001.
<TABLE>
<CAPTION>
                                                                                      SAVINGS, NOW
                                                            CERTIFICATES                AND MMDA
                      MATURITY PERIOD                        OF DEPOSIT                  DEPOSITS
                      ---------------                       ------------              -------------
                                                                       (IN THOUSANDS)
<S>                                                          <C>                       <C>
             Three months or less.........................   $  21,213                 $   25,919
             Over three through six months................      13,791                         --
             Over six through twelve months...............       9,387                         --
             Over twelve months...........................      15,972                         --
                                                             ---------                 ----------
                    Total.................................   $  60,363                 $   25,919
                                                             =========                 ==========
</TABLE>


                                       21
<PAGE>
     The  following  table sets forth the  aggregate  savings  activities of the
Company for the periods indicated.
<TABLE>
<CAPTION>
                                                                          YEAR ENDED DECEMBER 31,
                                                                   --------------------------------------------
                                                                    2001              2000               1999
                                                                   ------            ------            --------
                                                                                   (IN THOUSANDS)
<S>                                                               <C>               <C>              <C>
      Net increase (decrease) before interest credited..........  $   26,488        $   (3,670)      $    6,780
      Deposits sold.............................................          --            (1,649)              --
      Interest credited.........................................      18,330            17,155           14,990
                                                                  ----------        ----------       ----------
      Net increase in deposits..................................  $   44,818        $   11,836       $   21,770
                                                                  ==========        ==========       ==========
</TABLE>

     BORROWINGS.  Deposits  are the  primary  sources  of funds  for the  Bank's
lending and investment  activities and for its general  business  purposes.  The
Bank also uses advances (borrowings) from the FHLB of Indianapolis to supplement
its supply of lendable funds,  to meet deposit  withdrawal  requirements  and to
extend the terms of its liabilities.  Advances from the FHLB of Indianapolis are
typically  secured by the Bank's stock in the FHLB of Indianapolis and a portion
of its first mortgage loans. At December 31, 2001, the Bank had $71.2 million of
advances  outstanding  from the FHLB of  Indianapolis  and had $16.5  million in
long-term borrowings from the FHLB of Cincinnati,  and are secured by the Bank's
stock  in  the  FHLB  of  Cincinnati  and a  portion  of the  Bank's  investment
securities.

     The FHLBs function as central  reserve banks  providing  credit for savings
institutions and certain other member financial  institutions.  As a member, the
Bank is required to own capital stock in its FHLB and is authorized to apply for
advances on the  security of such stock and  certain of its home  mortgages  and
other assets  (principally,  securities  which are obligations of, or guaranteed
by, the United States) provided certain  standards  related to  creditworthiness
have been met.

     The Company had notes  payable in the total  amount of $930,000 at December
31, 2001.  Included in this amount was a note payable to a third party financial
institution  with a current balance of $750,000 and bearing interest at 6.25% at
December 31, 2001 the proceeds of which were used to finance  stock  repurchases
during  1999.  The  remainder  of notes  payable  with  balances of $180,000 and
$271,000 at December 31, 2001 and 2000, respectively,  are 6.0% notes payable to
former stockholders of Cardinal State Bank.


                                       22
<PAGE>
     The following  table sets forth certain  information  regarding  borrowings
from the FHLBs at the dates and for the periods indicated.
<TABLE>
<CAPTION>
                                                                               AT OR FOR THE YEAR
                                                                              YEAR ENDED DECEMBER 31,
                                                                   --------------------------------------------
                                                                    2001              2000               1999
                                                                   ------            ------            --------
                                                                            (DOLLARS IN THOUSANDS)
<S>                                                               <C>               <C>              <C>
      Amounts outstanding at end of period:
           FHLB advances........................................  $   87,653        $  138,751       $   82,511

      Weighted average rate paid on:
           FHLB advances........................................        5.58%            6.54%             5.49%

      Maximum amount of borrowings outstanding
        at any month end:
           FHLB advances........................................  $  128,497        $  138,751       $   82,511

      Approximate average amounts outstanding:
           FHLB advances........................................  $   84,080        $  106,657       $   28,402

      Approximate weighted average rate paid on:
           FHLB advances........................................        6.50%            6.73%             5.41%
</TABLE>

                                       23
<PAGE>

AVERAGE BALANCE SHEET

     The  following  table  sets  forth  certain  information  relating  to  the
Company's  aggregate average yield on assets and average cost of liabilities for
the periods  indicated and average  yields earned and rates paid at December 31,
2001.  Such yields and costs are  derived by dividing  income or expenses by the
average  balance  of  assets  or  liabilities,  respectively,  for  the  periods
presented.  Average balances are derived from balances which management does not
believe are  materially  different  from daily  balances  (actual daily balances
cannot be obtained without undue effort and expense).
<TABLE>
<CAPTION>
                                                        FOR THE YEAR ENDED DECEMBER 31,
                                    ---------------------------------------------------------------------
                                                  2001                             2000
                                    -------------------------------    ------------------------------
                                                            AVERAGE                           AVERAGE
                                    AVERAGE                  YIELD/     AVERAGE                YIELD/
                                    BALANCE     INTEREST      COST      BALANCE   INTEREST     COST
                                    -------     --------    -------     -------   --------    -------
                                                         (DOLLARS IN THOUSANDS)
<S>                                 <C>        <C>            <C>      <C>        <C>           <C>
Interest-earning assets:
 Loan portfolio (1)..............   $376,157   $29,468        7.83%    $ 371,349  $29,359       7.91%
 Mortgage-backed securities......     31,768     2,225        7.00        13,016      910       6.99
 Short-term investments and other
  interest-earning assets (2)....     74,186     4,940        6.66        98,410    6,750       6.85
                                    --------   -------       -----     ---------  -------      -----
    Total interest-earning assets    482,111    36,633        7.60       482,775   37,019       7.67

Noninterest-earning assets.......     42,722                              40,518
                                    --------                           ---------
    Total assets.................   $524,833                           $ 523,293
                                    ========                           =========

Interest-bearing liabilities:
  Deposits.......................   $371,036    18,663        5.03%    $ 345,525   17,337       5.02
  FHLB advances..................     84,080     5,466        6.50       106,657    7,187       6.73
  Notes payable..................      1,562       114        7.30         2,456      204       8.30
                                    --------   -------       -----     ---------  -------      -----
    Total interest-bearing
      liabilities................    456,678    24,243        5.31       454,638   24,728       5.44
Noninterest-bearing liabilities..     25,549   -------       -----        27,615  -------      -----
                                    --------                           ---------

    Total liabilities............    482,227                             482,253

Shareholders' equity.............     42,606                              41,040
                                    --------                           ---------

    Total liabilities and
      shareholders' equity.......   $524,833                           $ 523,293
                                    ========                           =========
Net interest income..............              $12,390                            $12,291
                                               =======                            =======
Interest rate spread.............                             2.29%                             2.23%
                                                             =====                            ======
Net yield on interest-earning
  assets........................                              2.57%                             2.55%
                                                              =====                           ======
Ratio of average interest-earning
  assets to average interest-bearing
  liabilities....................                           105.57%                           106.19%
                                                            ======                            ======
<CAPTION>

                                        FOR THE YEAR ENDED
                                             DECEMBER 31,
                                    ------------------------------
                                                1999
                                     -----------------------------
                                                           AVERAGE
                                     AVERAGE               YIELD/
                                     BALANCE   INTEREST     COST
                                     -------   --------    -------
                                       (DOLLARS IN THOUSANDS)
<S>                                  <C>       <C>        <C>
Interest-earning assets:
 Loan portfolio (1)..............    $281,943  $ 21,703    7.70%
 Mortgage-backed securities......      17,280     1,080    6.25
 Short-term investments and other
  interest-earning assets (2)....      98,345     6,300    6.41
                                     --------  --------   -----
    Total interest-earning assets     397,568    29,083    7.32

Noninterest-earning assets.......      33,488
                                     --------
    Total assets.................    $431,056
                                     ========

Interest-bearing liabilities:
  Deposits.......................    $331,566    15,194    4.58
  FHLB advances..................      28,402     1,537    5.41
  Notes payable..................         298        18    6.00
                                     --------  --------   -----
    Total interest-bearing
      liabilities................     360,266    16,749    4.65
Noninterest-bearing liabilities..      26,958  --------   -----
                                     --------

    Total liabilities............     387,224

Shareholders' equity.............      43,832
                                     --------

    Total liabilities and
      shareholders' equity.......    $431,056
                                     ========
Net interest income..............              $ 12,334
                                               ========
Interest rate spread.............                            2.67%
                                                           ======
Net yield on interest-earning
  assets........................                             3.10%
                                                           ======
Ratio of average interest-earning
  assets to average interest-bearing
  liabilities....................                          110.35%
                                                           ======
<FN>
_______________
(1)  Excludes  income  earned  on late  charges  and  inspection  fees.  Average
     balances include non-accrual loans.
(2)  Includes   interest-bearing   deposits  in  other  financial  institutions,
     investment securities and FHLB stock.
</FN>
</TABLE>

TRUST ACTIVITIES

     During 1999, the Bank began offering trust,  investment and estate planning
services through its Ameriana Trust and Investment Management Services division.
Trust  services  consist of personal  trusts,  testamentary  trusts,

                                       24
<PAGE>

investment agency accounts (discretionary and directed), guardianships, rollover
IRA's (discretionary and directed) and estates (personal representative).  These
accounts are offered to customers within the Bank's service areas in Indiana and
Ohio.  Trust account  balances of $75,000 and more can  profitably be managed by
the Bank. At December 31, 2001, the Bank had $14.6 million in trust assets under
management.

SUBSIDIARY ACTIVITIES

     The Bank has three  direct  wholly-owned  subsidiaries  Ameriana  Insurance
Agency ("AIA"),  Ameriana Financial Services, Inc. ("AFS") and Deer Park Service
Corporation  ("DPSC").  AIA provides insurance sales from offices in New Castle,
Greenfield  and  Avon,  Indiana.  AFS  offers  insurance  products  through  its
ownership  of an  interest  in Family  Financial  Life  Insurance  Company,  New
Orleans,  Louisiana  which  offers  a full  line  of  credit  related  insurance
products.  In 2002,  AFS acquired a 20.9%  ownership  interest in Indiana  Title
Insurance  Company,  LLC  through  which it  offers  title  insurance.  AFS also
operates a brokerage facility in conjunction with Linsco/Private  Ledger.  DPSC,
which operated a brokerage facility in conjunction with Money  Concepts/Pinnacle
Financial Advisors,  Inc. ceased operations in 2000 and is currently an inactive
corporation.

     At  December  31,  2001,  the  Bank's  investments  in,  and loans to,  its
subsidiaries were approximately $4.1 million, respectively, consisting of direct
equity investments.

     Indiana savings banks may acquire or establish  subsidiaries that engage in
activities  permitted to be performed by the savings bank itself or permitted to
operating  subsidiaries of national banks. Under FDIC regulations,  a subsidiary
of a state bank may not engage as  principal  in any  activity  that is not of a
type  permissible for a subsidiary of a national bank unless the FDIC determines
that the activity does not impose a significant  risk to the affected  insurance
fund.

COMPETITION

     The  Bank  experiences  substantial  competition  both  in  attracting  and
retaining savings deposits and in the making of mortgage and other loans. Direct
competition  for  savings  deposits  comes  from  other  savings   institutions,
commercial  banks,  and  credit  unions  located  in  the  Bank's  market  area.
Additional significant  competition for savings deposits comes from money market
mutual funds and corporate and government debt securities.

     The primary  factors in  competing  for loans are  interest  rates and loan
origination  fees and the range of  services  offered by the  various  financial
institutions.  Competition  for  origination of real estate loans normally

                                       25
<PAGE>

comes  from other  thrift  institutions,  commercial  banks,  mortgage  bankers,
mortgage  brokers  and  insurance  companies.  The Bank has been able to compete
effectively in its market area.

     The Bank has  offices in Henry,  Hancock,  Hendricks,  Shelby  and  Madison
Counties in Indiana and in Hamilton  County,  Ohio. In addition to the financial
institutions  which  have  offices in these  counties,  the Bank  competes  with
several commercial banks and savings institutions in surrounding counties,  many
of which have assets which are substantially larger than the Bank.

                           REGULATION AND SUPERVISION

REGULATION AND SUPERVISION OF THE COMPANY

     GENERAL. The Company is a bank holding company subject to regulation by the
Federal Reserve Board under the BHCA. As a result, the activities of the Company
are subject to certain limitations, which are described below. In addition, as a
bank  holding  company,  the Company is  required  to file annual and  quarterly
reports  with  the  Federal   Reserve  Board  and  to  furnish  such  additional
information as the Federal  Reserve Board may require  pursuant to the BHCA. The
Company is also subject to regular examination by the Federal Reserve Board.

     ACQUISITIONS.  With certain  exceptions,  the BHCA prohibits a bank holding
company from acquiring  direct or indirect  ownership or control of more than 5%
of the voting shares of a company that is not a bank or a bank holding  company,
or from  engaging  directly  or  indirectly  in  activities  other than those of
banking,   managing  or  controlling   banks,  or  providing  services  for  its
subsidiaries.  The principal  exceptions to these  prohibitions  involve certain
non-bank  activities which, by statute or by Federal Reserve Board regulation or
order,  have been  identified as activities  closely  related to the business of
banking. The activities of the Company are subject to these legal and regulatory
limitations  under the BHCA and the related Federal  Reserve Board  regulations.
Notwithstanding   the  Federal   Reserve  Board's  prior  approval  of  specific
nonbanking  activities,  the  Federal  Reserve  Board  has the  power to order a
holding company or its  subsidiaries to terminate any activity,  or to terminate
its  ownership or control of any  subsidiary,  when it has  reasonable  cause to
believe  that the  continuation  of such  activity or such  ownership or control
constitutes  a serious risk to the financial  safety,  soundness or stability of
any bank subsidiary of that holding company.

     Under the BHCA,  a bank holding  company must obtain the prior  approval of
the Federal Reserve Board before (1) acquiring  direct or indirect  ownership or
control of any voting shares of any bank or bank holding  company if, after such
acquisition,  the bank  holding  company  would  directly or  indirectly  own or
control more than

                                       26
<PAGE>

5% of such  shares;  (2)  acquiring  all or  substantially  all of the assets of
another  bank or bank  holding  company;  or (3) merging or  consolidating  with
another bank holding company.  Satisfactory  financial  condition,  particularly
with regard to capital  adequacy,  and satisfactory  Community  Reinvestment Act
("CRA") ratings  generally are  prerequisites  to obtaining  federal  regulatory
approval to make acquisitions.

     Under the BHCA,  any company  must obtain  approval of the Federal  Reserve
Board prior to acquiring control of the Company or the Bank. For purposes of the
BHCA,  "control" is defined as ownership of more than 25% of any class of voting
securities of the Company or the Bank,  the ability to control the election of a
majority of the  directors,  or the  exercise of a  controlling  influence  over
management  or policies of the Company or the Bank.  In addition,  the Change in
Bank  Control  Act and the related  regulations  of the  Federal  Reserve  Board
require any person or persons acting in concert  (except for companies  required
to make  application  under the BHCA), to file a written notice with the Federal
Reserve  Board before such person or persons may acquire  control of the Company
or the Bank.  The Change in Bank  Control  Act defines  "control"  as the power,
directly  or  indirectly,  to vote 25% or more of any  voting  securities  or to
direct the management or policies of a bank holding company or an insured bank.

     Under Indiana  banking law,  prior  approval of the Department of Financial
Institutions  is also  required  before  any person  may  acquire  control of an
Indiana stock savings bank,  bank or bank holding  company.  The Department will
issue a notice  approving  the  transaction  if it  determines  that the persons
proposing to acquire the savings bank or bank holding  company are  qualified in
character, experience and financial responsibility, and the transaction does not
jeopardize the interests of the public.

     CAPITAL  REQUIREMENTS.  The Federal  Reserve  Board has adopted  guidelines
regarding  the capital  adequacy of bank holding  companies,  which require bank
holding  companies  to  maintain  specified  minimum  ratios of capital to total
assets and capital to risk-weighted assets. See "-- Capital Requirements."

     DIVIDENDS. The Federal Reserve Board has the power to prohibit dividends by
bank holding companies if their actions  constitute unsafe or unsound practices.
The Federal  Reserve Board has issued a policy  statement on the payment of cash
dividends by bank holding companies, which expresses the Federal Reserve Board's
view that a bank holding  company  should pay cash  dividends only to the extent
that the  company's net income for the past year is sufficient to cover both the
cash  dividends and a rate of earnings  retention  that is  consistent  with the
company's capital needs,  asset quality,  and overall financial  condition.  The
Federal Reserve Board also indicated that it would be  inappropriate  for a bank
holding company  experiencing  serious financial problems to borrow funds to pay

                                       27
<PAGE>

dividends. Under the prompt corrective action regulations adopted by the Federal
Reserve Board pursuant to FDICIA,  the Federal Reserve Board may prohibit a bank
holding  company  from  paying  any  dividends  if the  holding  company's  bank
subsidiary  is  classified  as  "undercapitalized."  See "--  Prompt  Corrective
Regulatory Action."

     STOCK  REPURCHASES.  As a bank holding company,  the Company is required to
give  the  Federal  Reserve  Board  prior  written  notice  of any  purchase  or
redemption of its outstanding  equity securities if the gross  consideration for
the purchase or redemption,  when combined with the net  consideration  paid for
all such  purchases or redemptions  during the preceding 12 months,  is equal to
10% or more of the Company's  consolidated  net worth. The Federal Reserve Board
may disapprove  such a purchase or redemption if it determines that the proposal
would violate any law, regulation,  Federal Reserve Board order,  directive,  or
any condition  imposed by, or written agreement with, the Federal Reserve Board.
This   requirement   does  not  apply  to  bank  holding   companies   that  are
"well-capitalized," received one of the two highest examination ratings at their
last examination and are not the subject of any unresolved  supervisory  issues.

REGULATION AND SUPERVISION OF THE BANK

     GENERAL.  The Bank is subject to extensive  regulation by the Department of
Financial   Institutions  and  the  FDIC.  The  lending   activities  and  other
investments of the Bank must comply with various  regulatory  requirements.  The
Department of Financial  Institutions and FDIC periodically examine the Bank for
compliance with various regulatory requirements. The Bank must file reports with
the Department of Financial  Institutions and the FDIC describing its activities
and  financial   condition.   The  Bank  is  also  subject  to  certain  reserve
requirements  promulgated by the Federal  Reserve Board.  This  supervision  and
regulation is intended  primarily for the protection of  depositors.  Certain of
these regulatory requirements are referred to below or appear elsewhere herein.

     CAPITAL  REQUIREMENTS.  Under FDIC regulations,  state-chartered banks that
are not members of the Federal Reserve System are required to maintain a minimum
leverage  capital  requirement  consisting of a ratio of Tier 1 capital to total
assets of 3% if the FDIC determines that the institution is not  anticipating or
experiencing  significant  growth and has  well-diversified  risk,  including no
undue interest rate risk exposure, excellent asset quality, high liquidity, good
earnings and in general a strong banking  organization,  rated composite 1 under
the Uniform  Financial  Institutions  Rating System (the CAMELS  rating  system)
established by the Federal Financial  Institutions  Examination Council. For all
but the most highly rated  institutions  meeting the conditions set forth above,
the minimum leverage capital ratio is 3% plus an additional  "cushion" amount of
at least 100 to 200 basis

                                       28
<PAGE>
points with a minimum leverage  capital  requirement of not less than 4%. Tier 1
capital  is the sum of  common  stockholders'  equity,  noncumulative  perpetual
preferred  stock  (including  any related  surplus)  and  minority  interests in
consolidated  subsidiaries,  minus all  intangible  assets  (other than  certain
mortgage servicing assets, purchased credit card relationships, credit-enhancing
interest-only  strips and certain deferred tax assets) minus identified  losses,
investments  in  certain   financial   subsidiaries  and   nonfinancial   equity
investments.

     In  addition  to the  leverage  ratio (the ratio of Tier I capital to total
assets),  state-chartered  nonmember  banks  must  maintain  a minimum  ratio of
qualifying  total  capital  to  risk-weighted  assets of at least 8% of which at
least four percentage  points must be Tier 1 capital.  Qualifying  total capital
consists of Tier 1 capital plus Tier 2 or  supplementary  capital items.  Tier 2
capital items include  allowances for loan losses in an amount of up to 1.25% of
risk-weighted  assets,  cumulative  preferred  stock and preferred  stock with a
maturity of over 20 years,  certain other capital  instruments  and up to 45% of
pretax net unrealized holding gains on equity securities.  The includable amount
of Tier 2 capital  cannot exceed the  institution's  Tier 1 capital.  Qualifying
total  capital is further  reduced  by the amount of the bank's  investments  in
banking  and  finance  subsidiaries  that are not  consolidated  for  regulatory
capital  purposes,  reciprocal  cross-holdings  of capital  securities issued by
other banks, most intangible assets and certain other deductions. Under the FDIC
risk-weighted  system,  all of a bank's  balance  sheet  assets  and the  credit
equivalent  amounts of certain  off-balance  sheet items are  assigned to one of
four broad risk weight  categories from 0% to 100%,  based on the risks inherent
in the type of assets or item.  The aggregate  dollar amount of each category is
multiplied by risk weight  assigned to that category.  The sum of these weighted
values equals the bank's risk-weighted assets.

     At December  31,  2001,  the Bank's ratio of Tier 1 capital to total assets
was 7.5%, its ratio of Tier 1 capital to risk-weighted  assets was 12.0% and its
ratio of total risk-based capital to risk-weighted assets was 12.5%.

     DIVIDEND  LIMITATIONS.  The Bank may not pay dividends on its capital stock
if its  regulatory  capital  would  thereby  be reduced  below the  amount  then
required  for the  liquidation  account  established  for the benefit of certain
depositors of the Bank at the time of its conversion to stock form.

     Earnings of the Bank  appropriated  to bad debt  reserves  and deducted for
Federal  income tax purposes are not available for payment of cash  dividends or
other distributions to stockholders without payment of taxes at the then current
tax rate by the Bank on the amount of earnings  removed  from the  reserves  for
such distributions. See "Federal and State Taxation."

                                       29
<PAGE>

     Under FDIC  regulations,  the Bank is  prohibited  from  making any capital
distributions if after making the distribution, the Bank would have: (i) a total
risk-based  capital  ratio of less than 8.0%;  (ii) a Tier 1 risk-based  capital
ratio of less than 4.0%; or (iii) a leverage ratio of less than 4.0%.

     DEPOSIT INSURANCE.  The Bank is required to pay assessments to the FDIC for
insurance  of its  deposits  by the SAIF based on a  percentage  of its  insured
deposits.  Under the FDIA, the FDIC is required to set  semi-annual  assessments
for  SAIF-insured  institutions at a rate determined by the FDIC to be necessary
to  maintain  the  designated  reserve  ratio of the SAIF at 1.25% of  estimated
insured  deposits or at a higher  percentage  of insured  deposits that the FDIC
determines to be justified for that year by circumstances  raising a significant
risk of substantial future losses to the SAIF. In the event that the SAIF should
fail to meet its  statutory  reserve  ratio,  the FDIC would be  required to set
semi-annual  assessment  rates for SAIF members that are  sufficient to increase
the  reserve  ratio to 1.25%  within one year or in  accordance  with such other
schedule  that the FDIC adopts by regulation to restore the reserve ratio in not
more than 15 years.

     The assessment rate for an insured depository  institution is determined by
the assessment risk classification assigned to the institution by the FDIC based
on the  institution's  capital level and supervisory  evaluations.  Based on the
data reported to regulators for date closest to the last day of the fourth month
preceding the semi-annual assessment period, institutions are assigned to one of
three  capital   groups  --  well   capitalized,   adequately   capitalized   or
undercapitalized  --  using  the  same  percentage  criteria  as in  the  prompt
corrective action  regulations.  See "-- Prompt Corrective  Regulatory  Action."
Within each capital group,  institutions  are assigned to one of three subgroups
on the basis of supervisory evaluations by the institution's primary supervisory
authority and such other  information  as the FDIC  determines to be relevant to
the  institution's  financial  condition  and  the  risk  posed  to the  deposit
insurance fund.

     The FDIC has adopted an  assessment  schedule  for SAIF  deposit  insurance
pursuant to which the assessment rate for well-capitalized institutions with the
highest  supervisory  ratings have been reduced to zero and  institutions in the
worst risk  assessment  classification  will be assessed at the rate of 0.27% of
insured deposits. At December 31, 2001, the Bank is considered well capitalized.
In addition,  FDIC-insured  institutions  are required to pay assessments to the
FDIC to help fund  interest  payments on certain  bonds issued by the  Financing
Corporation ("FICO"), an agency of the federal government established to finance
takeovers of insolvent thrifts.

                                       30
<PAGE>

     PROMPT  CORRECTIVE  REGULATORY  ACTION.  Under FDICIA,  the federal banking
regulators  are  required  to  take  prompt  corrective  action  if  an  insured
depository  institution  fails to satisfy certain minimum capital  requirements,
including a leverage  limit,  a risk-based  capital  requirement,  and any other
measure deemed  appropriate by the federal banking  regulators for measuring the
capital  adequacy  of  an  insured  depository  institution.  All  institutions,
regardless  of their  capital  levels,  are  restricted  from making any capital
distribution or paying any management fees if the institution  would  thereafter
fail to satisfy  the  minimum  levels for any of its  capital  requirements.  An
institution  that  fails to meet the  minimum  level  for any  relevant  capital
measure (an  "undercapitalized  institution")  may be: (i) subject to  increased
monitoring by the appropriate federal banking regulator; (ii) required to submit
an acceptable  capital  restoration  plan within 45 days; (iii) subject to asset
growth  limits;  and (iv)  required  to obtain  prior  regulatory  approval  for
acquisitions,  branching and new lines of  businesses.  The capital  restoration
plan must  include a guarantee  by the  institution's  holding  company that the
institution  will comply with the plan until it has been adequately  capitalized
on average for four consecutive quarters,  under which the holding company would
be liable up to the lesser of 5% of the institution's total assets or the amount
necessary to bring the  institution  into capital  compliance  as of the date it
failed  to  comply  with  its  capital   restoration   plan.  A   "significantly
undercapitalized"  institution, as well as any undercapitalized institution that
does not  submit an  acceptable  capital  restoration  plan,  may be  subject to
regulatory demands for recapitalization,  broader application of restrictions on
transactions  with  affiliates,  limitations on interest rates paid on deposits,
asset  growth  and other  activities,  possible  replacement  of  directors  and
officers,  and restrictions on capital distributions by any bank holding company
controlling the institution. Any company controlling the institution may also be
required  to divest the  institution  or the  institution  could be  required to
divest   subsidiaries.   The  senior  executive   officers  of  a  significantly
undercapitalized   institution   may  not  receive   bonuses  or   increases  in
compensation  without prior  approval and the  institution  is  prohibited  from
making  payments of principal  or interest on its  subordinated  debt.  In their
discretion,  the  federal  banking  regulators  may also  impose  the  foregoing
sanctions on an  undercapitalized  institution if the regulators  determine that
such actions are  necessary  to carry out the purposes of the prompt  corrective
provisions.  If an institution's ratio of tangible capital to total assets falls
below the  "critical  capital  level"  established  by the  appropriate  federal
banking  regulator,  the  institution  will be  subject  to  conservatorship  or
receivership within specified time periods.

                                       31
<PAGE>

     Under  the  implementing   regulations,   the  federal  banking  regulators
generally  measure an  institution's  capital adequacy on the basis of its total
risk-based  capital  ratio  (the  ratio of its total  capital  to  risk-weighted
assets),  Tier 1  risk-based  capital  ratio (the  ratio of its core  capital to
risk-weighted  assets)  and  leverage  ratio (the  ratio of its core  capital to
adjusted total assets).  The following  table shows the capital ratios  required
for the various prompt corrective action categories.
<TABLE>
<CAPTION>
                                                     ADEQUATELY                                     SIGNIFICANTLY
                           WELL CAPITALIZED          CAPITALIZED         UNDERCAPITALIZED        UNDERCAPITALIZED
                           ----------------          -----------         ----------------        ----------------
<S>                        <C>                       <C>                 <C>                     <C>
Total risk-based
    capital ratio          10.0% or more             8.0% or more        Less than 8.0%          Less than 6.0%
Tier 1 risk-based
    capital ratio           6.0% or more             4.0% or more        Less than 4.0%          Less than 3.0%
Leverage ratio              5.0% or more             4.0% or more *      Less than 4.0% *        Less than 3.0%
<FN>
-----------
*  3.0% if institution has a composite 1 CAMELS rating.
</FN>
</TABLE>

A "critically  undercapitalized"  institution is defined as an institution  that
has a ratio of  "tangible  equity" to total  assets of less than 2.0%.  Tangible
equity is defined as core capital plus cumulative perpetual preferred stock (and
related  surplus) less all intangible  assets other than qualifying  supervisory
goodwill  and  certain  purchased   mortgage  servicing  rights.  The  FDIC  may
reclassify a well capitalized  depository  institution as adequately capitalized
and may require an adequately  capitalized  or  undercapitalized  institution to
comply with the supervisory actions applicable to institutions in the next lower
capital  category  (but  may not  reclassify  a  significantly  undercapitalized
institution as critically undercapitalized) if the FDIC determines, after notice
and an opportunity for a hearing,  that the savings  institution is in an unsafe
or unsound  condition or that the  institution  has received and not corrected a
less-than-satisfactory rating for any CAMELS rating category.

     SAFETY AND SOUNDNESS  GUIDELINES.  Under  FDICIA,  as amended by the Riegle
Community  Development and Regulatory  Improvement Act of 1994 (the "CDRI Act"),
each  federal  banking  agency is required  to  establish  safety and  soundness
standards  for  institutions  under  its  authority.  In 1995,  these  agencies,
including the FDIC, released interagency guidelines  establishing such standards
and adopted rules with respect to safety and  soundness  compliance  plans.  The
guidelines  require  depository  institutions to maintain  internal controls and
information  systems and internal  audit  systems that are  appropriate  for the
size,  nature  and scope of the  institution's  business.  The  guidelines  also
establish certain basic standards for loan documentation,  credit  underwriting,
interest rate risk exposure,  and asset growth.  The guidelines  further provide
that depository  institutions  should maintain safeguards to prevent the payment
of  compensation,  fees and  benefits  that are  excessive or that could lead to
material financial loss, and should take into account factors such as comparable
compensation practices at comparable institutions. If

                                       32
<PAGE>

the agency  determines  that a depository  institution is not in compliance with
the safety and soundness guidelines, it may require the institution to submit an
acceptable  plan  to  achieve  compliance  with  the  guidelines.  A  depository
institution  must submit an acceptable  compliance  plan to the agency within 30
days of receipt of a request for such a plan.  Failure to submit or  implement a
compliance plan may subject the institution to regulatory sanctions.

     Additionally  under FDICIA, as amended by the CDRI Act, the federal banking
agencies established standards relating to asset quality and earnings. Under the
guidelines a depository  institution should maintain systems,  commensurate with
its size and the nature and scope of its operations,  to identify problem assets
and prevent  deterioration  in those  assets as well as to evaluate  and monitor
earnings and ensure that earnings are  sufficient to maintain  adequate  capital
and reserves.  Management believes that the asset quality and earnings standards
will not have a material effect on the operations of the Bank.

     UNIFORM  LENDING  STANDARDS.  As  required by FDICIA,  the federal  banking
agencies  have  adopted  regulations  that  require  banks to adopt and maintain
written policies establishing appropriate limits and standards for extensions of
credit that are secured by liens or interests in real estate or are made for the
purpose of financing permanent  improvements to real estate. These policies must
establish  loan  portfolio  diversification   standards,   prudent  underwriting
standards,  including loan-to-value limits, that are clear and measurable,  loan
administration   procedures   and   documentation,    approval   and   reporting
requirements.  A bank's real estate lending policy must reflect consideration of
the  Interagency  Guidelines for Real Estate Lending  Policies (the "Real Estate
Lending  Guidelines") that have been adopted by the banking  agencies.  The Real
Estate Lending Guidelines, among other things, call upon depository institutions
to establish internal loan-to-value limits for real estate loans that should not
exceed  supervisory  loan-to-value  limits for the various  types of real estate
loans.  The  Real  Estate  Lending  Guidelines  state,  however,  that it may be
appropriate   in   individual   cases  to  originate  or  purchase   loans  with
loan-to-value ratios in excess of the supervisory loan-to-value limits. The Bank
does not believe that the Real Estate Lending  Guidelines will materially affect
its lending activities.

     RESERVE  REQUIREMENTS.  Under Federal Reserve Board  regulations,  the Bank
currently must maintain  average daily  reserves equal to 3% of net  transaction
accounts up to $41.3  million  plus 10% on the  remainder.  This  percentage  is
subject to adjustment by the Federal Reserve Board.  Because  required  reserves
must be  maintained  in the  form of  vault  cash or in a  non-interest  bearing
account at a Federal  Reserve Bank, the effect of the reserve

                                       33
<PAGE>

requirement  is to  reduce  the  amount  of the  institution's  interest-earning
assets.  At December 31, 2001,  the Bank met  applicable  Federal  Reserve Board
reserve requirements.

         FEDERAL HOME LOAN BANK SYSTEM. The Bank is a member of the Federal Home
Loan Bank System which consists of 12 regional Federal Home Loan Banks governed
and regulated by the Federal Housing Finance Board ("FHFB"). As a member, the
Bank is required to purchase and hold stock in the FHLB of Indianapolis in an
amount equal to the greater of 1% of its aggregate unpaid home loan balances at
the beginning of the year or an amount equal to 5% of FHLB advances outstanding,
whichever is greater. As of December 31, 2001, the Bank held stock in the FHLB
of Indianapolis in the amount $5.82 million and was in compliance with the above
requirement.

     The FHLB of Indianapolis serves as a reserve or central bank for the member
institutions  within its assigned  region.  It is funded primarily from proceeds
derived from the sale of consolidated obligations of FHLB System. It makes loans
(i.e.,   advances)  to  members  in  accordance  with  policies  and  procedures
established  by the  FHLB  System  and the  Board  of  Directors  of the FHLB of
Indianapolis.

     The  Bank is also a  member  of the  FHLB of  Cincinnati  due to  remaining
borrowings  after the merger of  Ameriana-Ohio  and the Bank. As of December 31,
2001,  the Bank held  stock in the FHLB of  Cincinnati  in the  amount of $1.545
million and was in compliance with requirements of membership.

     LOANS TO EXECUTIVE OFFICERS, DIRECTORS AND PRINCIPAL STOCKHOLDERS. Loans to
directors,  executive officers and principal  stockholders of a state non-member
bank  like  the  Bank  must be made on  substantially  the  same  terms as those
prevailing  for  comparable  transactions  with  persons  who are not  executive
officers, directors,  principal stockholders or employees of the Bank unless the
loan is made pursuant to a compensation or benefit plan that is widely available
to  employees  and does not  favor  insiders.  Loans to any  executive  officer,
director and principal  stockholder together with all other outstanding loans to
such person and affiliated  interests generally may not exceed 15% of the bank's
unimpaired  capital and surplus and all loans to such persons may not exceed the
institution's  unimpaired  capital and unimpaired  surplus.  Loans to directors,
executive officers and principal stockholders,  and their respective affiliates,
in  excess of the  greater  of  $25,000  or 5% of  capital  and  surplus  (up to
$500,000) must be approved in advance by a majority of the board of directors of
the bank with any "interested"  director not participating in the voting.  State
non-member  banks are  prohibited  from  paying the  overdrafts  of any of their
executive  officers or directors  unless  payment is made pursuant to a written,
pre-authorized interest-bearing extension of credit plan that specifies a method
of  repayment or transfer of funds from  another  account at the bank.

                                       34
<PAGE>

Loans to executive  officers may not be made on terms more  favorable than those
afforded  other  borrowers and are  restricted  as to type,  amount and terms of
credit. In addition,  Section 106 of the BHCA prohibits  extensions of credit to
executive officers, directors, and greater than 10% stockholders of a depository
institution  by  any  other  institution  which  has  a  correspondent   banking
relationship  with the  institution,  unless  such  extension  of  credit  is on
substantially  the same  terms as those  prevailing  at the time for  comparable
transactions  with other  persons and does not involve more than the normal risk
of repayment or present other unfavorable features.

     TRANSACTIONS  WITH AFFILIATES.  A state non-member bank or its subsidiaries
may not engage in "covered  transactions"  with any one  affiliate  in an amount
greater  than 10% of such bank's  capital  stock and  surplus,  and for all such
transactions with all affiliates a state non-member bank is limited to an amount
equal to 20% of capital stock and surplus. All such transactions must also be on
terms  substantially  the  same,  or at  least  as  favorable,  to the  bank  or
subsidiary as those provided to a non-affiliate.  The term "covered transaction"
includes the making of loans,  purchase of assets,  issuance of a guarantee  and
similar other types of transactions.  An affiliate of a state non-member bank is
any company or entity which  controls or is under common  control with the state
non-member bank and, for purposes of the aggregate  limit on  transactions  with
affiliates,  any  subsidiary  that would be deemed a financial  subsidiary  of a
national bank. In a holding  company  context,  the parent holding  company of a
state  non-member  bank  (such  as the  Company)  and any  companies  which  are
controlled by such parent holding company are affiliates of the state non-member
bank. The BHCA further prohibits a depository  institution from extending credit
to or offering any other services,  or fixing or varying the  consideration  for
such extension of credit or service,  on the condition that the customer  obtain
some additional service from the institution or certain of its affiliates or not
obtain services of a competitor of the  institution,  subject to certain limited
exceptions.

INDIANA BANKING LAW

     BRANCHING.  An Indiana  savings bank is entitled to  establish  one or more
branches de novo or by acquisition in any location or locations in Indiana.  The
savings bank is required to file an application with the Department of Financial
Institutions.  Approval of the application is contingent  upon the  Department's
determination  that after the establishment of the branch, the savings bank will
have adequate capital, sound management and adequate future earnings.

     LENDING  LIMITS.  Indiana  savings  banks are not subject to  percentage of
asset or  capital  limits  on their  commercial,  consumer  and  non-residential
mortgage  lending,  and accordingly,  have more flexibility in structuring

                                       35
<PAGE>

their portfolios than federally  chartered savings banks.  However,  the Bank is
required  to  maintain  at least 60% of its  assets in  investments  that  would
qualify  it as a  domestic  building  and loan  association  under the  Internal
Revenue  Code.  At  December  31,  2001,  the Bank was in  compliance  with this
requirement.

         OTHER ACTIVITIES. The Bank is authorized to engage in a variety of
agency and fiduciary activities including acting as executors of an estate,
transfer agent and in other fiduciary capacities. On approval from the Indiana
Department of Financial Institutions, the Bank would be permitted to exercise
any right granted to national banks.

FEDERAL AND STATE TAXATION

     The Company and its  subsidiaries  file a  consolidated  federal income tax
return  on a  calendar  year  end.  Consolidated  returns  have  the  effect  of
eliminating   intercompany   distributions,   including   dividends,   from  the
computation  of  consolidated  taxable  income for the taxable year in which the
distributions occur.

     FEDERAL TAXATION.  Thrift institutions are subject to the provisions of the
Internal  Revenue Code of 1986 (the "Code") in the same general  manner as other
corporations.   However,  institutions  such  as  the  Bank  which  met  certain
definitional  tests and other  conditions  prescribed by the Code benefited from
certain favorable  provisions regarding their deductions from taxable income for
annual additions to their bad debt reserve. For purposes of the bad debt reserve
deduction,  loans were separated into  "qualifying  real property  loans," which
generally  were  loans  secured  by  interests  in certain  real  property,  and
nonqualifying  loans, which were all other loans. The bad debt reserve deduction
with respect to nonqualifying loans was based on actual loss experience. For tax
years  beginning  before  January  1, 1996,  the amount of the bad debt  reserve
deduction  with respect to qualifying  real property loans was based upon actual
loss  experience  (the  "experience  method") or a percentage of taxable  income
determined  without regard to such deduction (the  "percentage of taxable income
method").  The Bank  historically  used whichever method resulted in the highest
bad debt reserve deduction in any given year.

     Legislation  that was effective for tax years  beginning after December 31,
1995 requires  institutions  to recapture into taxable income over a six taxable
year period the portion of the tax loan loss  reserve  that exceeds the pre-1988
tax loan loss reserve.  The Bank will no longer be allowed to use the percentage
of taxable income method for tax loan loss  provisions,  but would be allowed to
use the experience  method of accounting for bad debts.  There will be no future
effect on net income  from the  recapture  because  the taxes on these bad debts
reserves has already been accrued as a deferred tax liability.

                                       36
<PAGE>

     The  legislation  provides  for a  suspension  of  this  recapture  if  the
institution meets the "residential loan requirement." This requirement is met if
the principal amount of residential loans that the institution originates during
its first  taxable  year after  December  31,  1995,  exceeds the average of the
principal  amounts of residential  loans made by the institution  during the six
most recent taxable years  beginning  before January 1, 1996. If the requirement
is met, the recapture is suspended until a taxable year beginning after December
31, 1997.  Recapture is  mandatory no later than for tax years  beginning  after
December 31, 1997.

     Earnings appropriated to an institution's bad debt reserve and claimed as a
tax  deduction  are not  available  for the  payment  of cash  dividends  or for
distribution to  shareholders  (including  distributions  made on dissolution or
liquidation),  unless such amount is included in taxable income,  along with the
amount deemed necessary to pay the resulting federal income tax.

     The Company's federal income tax returns have been audited through 1988.

     STATE  TAXATION.  The State of  Indiana  imposes a  franchise  tax which is
assessed on  qualifying  financial  institutions,  such as the Bank.  The tax is
based upon  federal  taxable  income  before  net  operating  loss  carryforward
deductions (adjusted for certain Indiana  modifications) and is levied at a rate
of 8.5% of adjusted taxable income.

EMPLOYEES

     As of December 31, 2001, the Company and subsidiaries had approximately 160
full-time and 10 part-time  employees.  The employees are not  represented  by a
collective  bargaining  agreement.  Management  believes  the  Company  and  its
subsidiaries enjoy good relations with their personnel.

EXECUTIVE OFFICERS
<TABLE>
<CAPTION>
                                    AGE AT
NAME                          DECEMBER 31, 2001      PRINCIPAL POSITION
----                          -----------------      ------------------
<S>                                  <C>             <C>
Harry J. Bailey                      59              President and Chief Executive Officer of the Bank and the
                                                     Company

Grover F. Archer                     61              Senior Vice President - Retail Banking of the Bank

Deborah A. Bell                      49              Senior Vice President - Information Technology of the Bank

Timothy G. Clark                     51              Executive Vice President and Chief Operating Officer of
                                                     the Bank and the Company

Ronald M. Holloway                   52              Senior Vice President - Lending Services of the Bank

Nancy A. Rogers                      59              Senior Vice President - Marketing Services of
                                                     the Bank and Secretary of the Bank and the Company

                                       37
<PAGE>

Richard E. Welling                   56              Senior Vice President - Treasurer of the Bank and the
                                                     Company

Jan F. Wright                        58              Senior Vice President - Business Services of the Bank
</TABLE>

     Unless otherwise noted, all officers have held the position described below
for at least the past five years.

     HARRY J.  BAILEY has been  President  of the Company and the Bank since May
1990 and was appointed Chief Executive  Officer in December 1990. Mr. Bailey had
been the Executive  Vice  President and Chief  Operating  Officer of the Company
since its formation in 1989 and of the Bank since  February  1984. He has been a
director  of the Bank  since  1987  and a  director  of the  Company  since  its
formation.

     GROVER F. ARCHER joined the Bank as Senior Vice  President - Retail Banking
in  January  1999.  Prior  to  joining  the Bank he held  the  position  of Area
President  for one year,  as Regional  Administrative  Manager for six years and
Senior Vice  President and Director of Retail  Banking for six years at National
City Bank of Indiana and its  predecessor  in Anderson,  Indiana.  Prior to that
time Mr. Archer was in senior management positions with Indiana Lawrence Bank in
North Manchester, Indiana for 16 years.

     DEBORAH  A.  BELL was  elected  as  Senior  Vice  President  -  Information
Technology  in May 1998.  She has been  employed at the Bank since 1976 and most
recently  served as Vice  President and Director of Data  Processing  since 1991
after serving in that department since July 1985.

     TIMOTHY G. CLARK  joined the Bank as  Executive  Vice  President  and Chief
Operating  Officer on September 2, 1997. He was elected Executive Vice President
and Chief  Operating  Officer of the Company on October 23, 2000.  He previously
held the position of Regional Executive and Area President at National City Bank
of  Indiana  in  Seymour,  Indiana  for 5 years and  prior to that  held  senior
management  positions with Central  National Bank in Greencastle,  Indiana for 5
years and Hancock Bank & Trust in Greenfield, Indiana for 13 years.

     RONALD M. HOLLOWAY has been employed by the Bank since 1973 and was elected
Senior Vice President and Chief Lending  Officer in December 1995. Mr.  Holloway
previously was responsible for the Bank's loan servicing department.

     NANCY A. ROGERS was elected as Senior Vice  President - Marketing  Services
in March 1995 and was also  appointed  Secretary  of the Company and the Bank in
1998.  She has been employed at the Bank since 1964 and most recently  served as
Vice President and Director of Advertising and Public Relations.

     RICHARD E. WELLING,  a certified  public  accountant,  joined the Bank as a
Senior Vice  President on December 1, 1997,  and was appointed  Treasurer of the
Company  and the Bank in 1998.  Prior to joining  the Bank,

                                       38
<PAGE>

he was employed as Secretary,  Treasurer and Chief  Financial  Officer of AMBANC
Corp. in Vincennes, Indiana, where he had been employed for eleven years.

     JAN F. WRIGHT was elected as Senior Vice  President - Business  Services at
the Bank in January  1998 and prior to that  served as Senior  Vice  President -
Branch  Operations  since March 1995.  He  previously  held the position of Vice
President and Director of Loan  Origination and Processing and has been employed
by the Bank since 1972.


                                       39
<PAGE>

ITEM 2.  PROPERTIES
-------------------

     The  following  table  sets  forth the  location  of the  Company's  office
facilities at December 31, 2001 and certain other information  relating to these
properties at that date.
<TABLE>
<CAPTION>
                                    YEAR           TOTAL              NET          OWNED/      SQUARE
                                  ACQUIRED      INVESTMENT        BOOK VALUE       LEASED       FEET
                                  --------      ----------        ----------       ------      ------
                                                (DOLLAR AMOUNTS IN THOUSANDS)
<S>                                 <C>          <C>             <C>               <C>         <C>
  MAIN OFFICE:
  2118 Bundy Avenue
  New Castle, Indiana..........     1958         $   3,765       $    1,083         Owned      20,500

  BRANCH OFFICES:
  1311 Broad Street
  New Castle, Indiana..........     1890             1,402              374         Owned      18,000

  956 North Beechwood Street
  Middletown, Indiana..........     1971               447               89         Owned       5,500

  22 North Jefferson
  Knightstown, Indiana.........     1979               591              197         Owned       3,400

  1810 North State Street
  Greenfield, Indiana..........     1995             1,504            1,027         Owned       5,800

  99 Dan Jones Road
  Avon, Indiana................     1995             1,841            1,384         Owned      12,600

  1754 East 53rd Street
  Anderson, Indiana............     1993               659              483         Owned       1,500

  488 W. Main Street
  Morristown, Indiana..........     1998               461              345         Owned       2,600

  7435 W. U.S. 52
  New Palestine, Indiana.......     1999             1,100              970         Owned       3,300

  7200 Blue Ash Road
  Cincinnati, Ohio.............     1992             1,470              526         Owned       9,100

  2894 W. U.S. 22 & 3
  Maineville, Ohio.............     1998               113               20        Leased       3,000

  AMERIANA INSURANCE
  AGENCY, INC. AND TRUST
  DEPARTMENT OF THE BANK
  1908 Bundy Avenue
  New Castle, Indiana..........     1999               592              421         Owned       5,000
                                                 ---------       ----------

        Total..................                  $  13,945       $    6,919
                                                 =========       ==========
</TABLE>

                                       40
<PAGE>

     The Bank uses on-line processing terminals.  Most of the data processing is
done by an in-house data processing  center. At December 31, 2001, the total net
book  value  of  the  Company's  offices  and  equipment   (including  leasehold
improvements) was $6.919 million.

ITEM 3.  LEGAL PROCEEDINGS
--------------------------

         The Company and its subsidiaries are not a party to any material
pending legal proceedings.

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

         No matter was submitted to a vote of security holders during the fourth
quarter of the fiscal year covered by this Report.

                                     PART II

ITEM 5.  MARKET  FOR THE  REGISTRANT'S  COMMON  EQUITY AND  RELATED  STOCKHOLDER
         MATTERS
--------------------------------------------------------------------------------

     The Company's common stock, par value $1.00 per share (the "Common Stock"),
is traded on the Nasdaq  National  MarketSM under the symbol "ASBI." As of March
15, 2002, the Company had 3,147,463  shares of Common Stock  outstanding and had
659 stockholders of record and  approximately  2,000  beneficial  owners holding
shares in nominee or "street" name. The Company began paying quarterly dividends
during  the 4th  quarter  of fiscal  year  1987.  The  Company's  ability to pay
dividends is dependent on dividends  received from the Bank.  See Note 11 to the
Consolidated  Financial  Statements  included under Item 8 of this Annual Report
for a discussion  of the  restrictions  on the payment of cash  dividends by the
Company.

     The following  table sets forth the high,  low and closing sales prices for
the Common  Stock as  reported  on the  Nasdaq  National  MarketSM  and the cash
dividends declared on the Common Stock for each full quarterly period during the
last two fiscal years.
<TABLE>
<CAPTION>
                                        2001                                    2000
                           -----------------------------------       -------------------------------------
                                                     DIVIDENDS                                   DIVIDENDS
QUARTER ENDED:             HIGH     LOW     CLOSE    DECLARED        HIGH     LOW      CLOSE      DECLARED
-------------              ----     ---     -----    ---------       ----     ---      -----      --------
<S>                        <C>     <C>      <C>        <C>           <C>     <C>      <C>          <C>
March 31                   $13.00  $10.31   $11.06     $0.15         $14.50  $ 7.56   $  8.50      $0.15
June 30                     14.01   10.35    13.49      0.15          12.75    9.00      9.87       0.15
September 30                13.75   12.00    12.75      0.15          12.94    9.88     11.00       0.15
December 31                 13.80   11.75    13.40      0.16          13.13   10.50     10.50       0.15
</TABLE>


                                       41
<PAGE>
ITEM 6.  SELECTED FINANCIAL DATA
--------------------------------
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
                                                            (Dollars in thousands, except per share data)
                                                                         At December 31,
                                            -----------------------------------------------------------------------
Summary of Financial Condition                      2001        2000         1999         1998        1997
-------------------------------------------------------------------------------------------------------------------
<S>                                             <C>         <C>          <C>          <C>          <C>
   Cash                                         $    7,518  $  14,609    $    14,637  $     7,545  $     5,066
   Investment securities                           140,629     99,707        102,705       71,798       65,391
   Loans and loans held for sale, net of
     allowances for loan losses                    352,755    397,489        325,478      265,995      294,389
   Interest-bearing deposits, and stock
      in Federal Home Loan Bank                     11,648     11,687         11,136       45,081       13,555
   Other assets                                     39,529     33,796         32,393       15,299       12,467
-------------------------------------------------------------------------------------------------------------------
   Total assets                             $      552,079  $ 557,288    $   486,349  $   405,718  $   390,868
-------------------------------------------------------------------------------------------------------------------

   Deposits noninterest-bearing             $       24,257  $  12,927    $    16,308  $    14,633  $     8,746
   Deposits interest-bearing                       388,156    354,668        339,451      319,356      313,471
   Borrowings                                       88,583    141,172         82,872       17,551       16,016
   Other liabilities                                 8,188      6,810          7,689        8,829        8,200
-------------------------------------------------------------------------------------------------------------------
   Total liabilities                               509,184    515,577        446,320      360,369      346,433
-------------------------------------------------------------------------------------------------------------------
   Shareholders' equity                             42,895     41,711         40,029       45,349       44,435
   Total liabilities and shareholders' equity   $  552,079 $  557,288    $   486,349  $   405,718  $   390,868
===================================================================================================================
<CAPTION>

                                                                           Year Ended December 31,
                                            -------------------------------------------------------------------------------
Summary of Earnings                                 2001        2000         1999         1998        1997
-------------------------------------------------------------------------------------------------------------------
<S>                                             <C>         <C>          <C>          <C>          <C>
   Interest income                              $   36,633  $  37,019    $    29,083  $    28,301  $    29,332
   Interest expense                                 24,243     24,728         16,749       15,993       17,345
   Net interest income                              12,390     12,291         12,334       12,308       11,987
   Provision for loan losses                           360        417            328          159          242
   Other income                                      4,513      3,766          3,302        3,429        2,864
   Other expense                                    11,278     10,914         10,509        9,655        8,985
-------------------------------------------------------------------------------------------------------------------
   Income before taxes                               5,265      4,726          4,799        5,923        5,624
   Income taxes                                      1,465      1,164          1,467        2,085        1,992
-------------------------------------------------------------------------------------------------------------------
   Net income                                   $    3,800  $   3,562    $     3,332  $     3,838  $     3,632
===================================================================================================================
   Basic earnings per share (1)                 $    1.21   $    1.13    $      0.98  $      1.08  $      1.02
   Diluted earnings per share (1)               $    1.21   $    1.13    $      0.98  $      1.06  $      1.01
-------------------------------------------------------------------------------------------------------------------
   Dividends declared per share (1)             $    0.61   $    0.60    $      0.60  $      0.59  $      0.56
-------------------------------------------------------------------------------------------------------------------
   Book value per share (1)                     $   13.63   $   13.26    $     12.72  $     12.92  $     12.49
===================================================================================================================
<CAPTION>
                                                                           Year Ended December 31,
                                            -----------------------------------------------------------------------
Other Selected Data                                 2001        2000         1999         1998        1997
-------------------------------------------------------------------------------------------------------------------
<S>                                                  <C>         <C>            <C>          <C>          <C>
   Return on average assets                          0.72%       0.68%          0.77%        0.98%        0.92%
   Return on average equity                          8.92        8.68           7.60         8.48         8.28
   Ratio of average equity to average assets         8.12        7.84          10.17        11.60        11.06
   Dividend payout ratio (2)                        50.41%      53.00%         61.22%       55.66%       55.45%
   Number of full-service bank offices                 11          11             12           11            8
-------------------------------------------------------------------------------------------------------------------
<FN>

(1)      Restated to reflect the eleven-for-ten stock split in 1998.
(2)      Based on total dividends per share declared and net income per share for the year.
</FN>
</TABLE>

                                       42
<PAGE>

ITEM 7. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS
--------------------------------------------------------------------------------

GENERAL

     Ameriana Bancorp (the "Company") was incorporated under Indiana law for the
purpose of becoming the holding  company for Ameriana Bank and Trust of Indiana.
In 1990,  the Company  acquired all of Ameriana Bank and Trust of Indiana common
stock in connection  with its  reorganization  into the holding  company form of
ownership.  In 1992, the Company acquired Ameriana Bank of Ohio, F.S.B. ("ABO").
ABO was merged into  Ameriana Bank and Trust of Indiana in October 2000. On June
29, 2001,  Ameriana Bank and Trust of Indiana  converted from a Federal  Savings
Bank to an Indiana Chartered State Savings Bank and changed its name to Ameriana
Bank and Trust,  SB ("ABT").  The  conversion is not expected to have a material
effect on the Company's  business but is expected to reduce the assessments paid
for  examinations  and  supervision  of  ABT.  At the  same  time,  the  Company
contributed  Ameriana  Insurance  Agency,  Inc.  ("AIA") to ABT.  AIA operates a
general  insurance  agency in three  locations.  ABT has a  brokerage  operation
through its wholly owned subsidiary  Ameriana  Financial  Services,  Inc., which
also owns a partial interest in a life insurance  company.  In 1995, the Company
purchased a minority interest in a limited partnership  organized to acquire and
manage real estate investments, which qualify for federal tax credits.

     The largest components of the Company's total revenue and total expense are
interest income and interest expense, respectively.  Consequently, the Company's
earnings are primarily dependent on its net interest income, which is determined
by (i) the  difference  between  rates of  interest  earned on  interest-earning
assets and rates paid on interest-bearing  liabilities ("interest rate spread"),
and (ii) the relative amounts of  interest-earning  assets and  interest-bearing
liabilities.  Levels of other income and operating  expenses also  significantly
affect net income.

     The Company's investment securities increased $40,922,000 and 41.04% during
2001 and were changed to the  classification  of available  for sale at December
31, 2001, from the  classification of held to maturity at December 31, 2000. The
Company  determined  that because of its interest rate risk it would not be able
to continue  to hold its  investment  securities  to  maturity  and  recorded an
accumulated  other  comprehensive  loss of  $696,000 as of  December  31,  2001.
Federal  agencies  decreased  $59,205,000 and 67.35%  reflecting  calls totaling
$77,805,000  and net  purchases,  amortization  of discounts  and  accretions of
premiums totaling  $18,470,000 and a net increase for presenting the security at
fair value of  $130,000.  The ending  carrying  value of  federal  agencies  was
$28,696,000  and has an average yield of 6.87% at year-end  2001. The investment
securities also include trust preferred stock

                                       43
<PAGE>

investments  purchased during 2001 for $1,540,000,  including a $40,000 gain for
the fair value  adjustment  and had an average  yield of 8.87%.  Mortgage-backed
securities ("MBS") and  collateralized  mortgage  obligations  ("CMO") increased
$98,587,000  and 835% during 2001  composed of net  purchases,  amortization  of
discounts  and  accretions  of  premiums   totaling   $111,362,000   reduced  by
$11,445,000  of  principal  collections  and a net  decrease of  $1,330,000  for
presenting the securities at fair value. These purchases were used to offset the
decrease in loans and calls of federal agencies. The MBS & CMO ending balance at
fair value is  $110,393,000  and the portfolio has an average return of 6.67% at
year-end 2001. The Company has determined to dispose of its CMO portfolio during
the first quarter of 2002 at an estimated  loss of $1.9  million.  Proceeds from
the  disposition  will be used to pay  down  Federal  Home  Loan  Bank  ("FHLB")
advances.

     The Company's portfolio of loans before deducting undisbursed loan proceeds
and deferred loan fees has decreased  $53,428,000  and 12.86% in 2001 over 2000.
Residential mortgage loans decreased $94,463,000 and 28.94%, commercial mortgage
loans and commercial loans increased  $47,438,000 and 83.00%,  installment loans
decreased $6,153,000 and 20.38% and loans secured by deposits decreased $250,000
and 15.64%.  Residential  mortgages  decreased as customers  refinanced loans in
portfolio for fixed-rate loans which were then sold in the secondary  market. As
rates decreased  during 2001, the demand for fixed-rate  mortgages  increased to
the point that the majority of  residential  mortgages,  other than jumbo loans,
were made at fixed rates.  The  substantial  percentage  increase in  commercial
loans was due to  increased  purchases  of  commercial  participation  loans and
leases along with increases in direct  commercial real estate loans.  The mix of
fixed-rate to  adjustable-rate  and  short-term  balloon loans was 49% to 51% at
year-end  2001,  compared to 40% to 60% at year-end 2000 and year-end 1999 being
43% to 57%. The increase in  fixed-rate  loans was caused by the  preference  of
borrowers to request  fixed-rate  loans in the lower  interest rate  environment
during 2001 as compared to the year 2000 when the customer's  preference was for
variable-rate  loans  during the higher rate  environment.  The  increase in the
fixed-rate loan demand and sales to the secondary market resulted in the gain on
sales of loans increasing to $804,000 in 2001 from $103,000 in 2000 and $381,000
in 1999.  Total loan volume was  $198,671,000 in 2001,  $179,705,000 in 2000 and
$192,155,000  in 1999. The Company sold  $91,515,000  of fixed-rate  residential
mortgage loans in 2001 compared to $9,238,000 in 2000 and $23,303,000 in 1999.

     Total deposits increased $44,818,000 and 12.19% to $412,413,000 at December
31, 2001, from $367,595,000 at December 31, 2000. All types of deposits,  except
for savings,  increased.  Demand  deposits

                                       44
<PAGE>

increased  $12,349,000  and 16.25% to  $88,327,000  at  December  31,  2001 from
$75,978,000 at December 31, 2000,  with the increase being in both NOW and money
market rate accounts.  Total  certificates of deposit increased  $34,509,000 and
13.43% to  $291,439,000  at December 31, 2001 from  $256,930,000 at December 31,
2000,  and were due to  increases of  $29,132,000  in regular  certificates  and
increases of $5,377,000 in  negotiated-rate  certificates  primarily  from local
county governmental entities. Savings deposits decreased $2,040,000 and 5.88% to
$32,647,000  at December 31, 2001,  from  $34,487,000  at December 31, 2000, due
mostly to movement to higher  interest-bearing  demand deposit rate products. On
December 15, 2000, ABT sold  $1,649,000 of demand and savings  deposits with the
Loveland  Branch in Ohio,  and a gain of $89,000 was  recorded on the sale.  The
balance sheet decreased  $5,209,000 and 0.93% at December 31, 2001,  compared to
December  31,  2000.  The  increase  in total  deposits  and the funds  from the
decrease  in the  balance  sheet  were used to reduce the FHLB  advances,  which
decreased  $51,098,000  and 36.83% to  $87,653,000  at December 31,  2001,  from
$138,751,000 at December 31, 2000. The Company has a note payable of $750,000 at
6.25% as of December 31,  2001,  and it had a balance of  $2,100,000  at 8.0% at
December 31, 2000. These proceeds were used to repurchase the Company's stock in
1999.  The Company also has notes payable with balances of $180,000 and $271,000
at December  31, 2001 and 2000,  respectively,  which are 6.0% and relate to the
Cardinal State Bank purchase.  The Company  continues to experience  competitive
forces on its  deposits  from other  institutions  in the  marketplace,  but the
Company  was able to compete  with these  investing  alternatives  by  providing
additional  investment  choices  for its  customers  through its  brokerage  and
insurance products.

     The Company has  continued to increase the level of  non-interest-sensitive
fee income producing  assets.  These activities  include an equity interest in a
life insurance company and ownership of a full-service general line property and
casualty  insurance  agency and brokerage  services.  In January 2002,  the Bank
invested in a Limited Liability Company,  with two other financial  institutions
that will operate a title insurance company.

     As noted above,  loans sold  increased  in 2001 over 2000 after  decreasing
during  2000 over 1999 and  servicing  of sold  loans as of  December  31,  2001
increased to $162,000,000  from  $144,000,000  and  $154,000,000 at December 31,
2000 and 1999,  respectively.  ABO sold $19,572,000 of loan servicing for a gain
of $67,000 in May 1999.  No sales or  purchases of loan  servicing  were done in
2001 or 2000.

                                       45
<PAGE>
INTEREST SENSITIVITY

     The following table presents the Company's interest sensitivity gap between
interest-earning  assets (at fair  value) and  interest-bearing  liabilities  at
December 31, 2001.  This table assumes no  prepayments of loans or MBS & CMO, no
early  redemption  of  securities  at  call  dates,  no  early   withdrawals  of
certificates of deposit and no extension of deposit account sensitivity relating
to core deposit stability.
<TABLE>
<CAPTION>
==============================================================================================================================
                                              (Dollars in thousands)
------------------------------------------------------------------------------------------------------------------------------
                                6            6                                                             More
                             Months       Months       1 to 3        3 to 5       5 to 10     10 to 20     Than
                             Or Less     To 1 Year      Years        Years         Years       Years     20 Years     Total
<S>                            <C>          <C>          <C>           <C>          <C>           <C>        <C>      <C>
Rate Sensitive Assets:
------------------------------------------------------------------------------------------------------------------------------
   Balloon and
    adjustable-
     rate loans (1)            $61,063      $18,901      $46,158       $46,109      $16,393    $      -   $      -    $188,624
   Fixed-rate loans (1)         38,907           96        6,977         3,508       11,215      32,239     36,433     129,375
   Other loans                   9,034          403        9,932        24,146        2,641       3,062          -      49,219
   MBS & CMO-
       Variable-rate             3,503        1,493          452                          -           -          -       5,438
        Fixed-rate                   1           29           21         2,347        1,695     100,862          -     104,955
   Other investments(2)         11,648            -            -             -       28,696       1,540          -      41,884
------------------------------------------------------------------------------------------------------------------------------
     Total                     124,156       20,884       63,548        73,784       32,596      65,692    138,835     519,495
------------------------------------------------------------------------------------------------------------------------------
Rate Sensitive Liabilities:
------------------------------------------------------------------------------------------------------------------------------
   Deposits:
     Certificate accounts      139,113       59,072       85,227         7,909          118           -          -     291,439
      Money market
         deposit accounts       47,686            -            -             -            -           -          -      47,686
      Passbook accounts         36,620            -            -             -            -           -          -      36,620
      NOW accounts              16,411            -            -             -            -           -          -      16,411
------------------------------------------------------------------------------------------------------------------------------
          Total deposits       235,830       59,072       85,227         7,909          118           -          -     388,156
   Notes payable                   840           90                          -            -           -          -         930
   FHLB advances                35,890       28,363       18,185         5,017          198           -          -      87,653
------------------------------------------------------------------------------------------------------------------------------
     Total                     272,560       87,525      103,412        12,926          316           -          -     476,739
------------------------------------------------------------------------------------------------------------------------------
     Asset/liability gap     $(148,404)   $ (66,641)   $ (39,864)    $  60,858     $ 32,280    $ 65,692   $138,835    $ 42,756
------------------------------------------------------------------------------------------------------------------------------
Additional Gap Information:
------------------------------------------------------------------------------------------------------------------------------
     Gap as a percentage
          of total assets       (26.82)%     (12.05)%      (7.21)%       11.00%        5.83%      11.87%     25.09%       7.73%
     Cumulative gap          $(148,404)   $(215,045)   $(254,909)    $(194,051)    $(161,771)  $(96,079)  $ 42,756
     Cumulative gap as
          a percentage of
          total assets          (26.82)%     (38.87)%     (46.08)%      (35.08)%      (29.24)%   (17.37)%     7.73%
===============================================================================================================================
<FN>
(1)  Amounts are stated without reductions of $12.733 million for deferred fees,
     unearned   income   and   undisbursed    loan   proceeds.    (2)   Includes
     interest-bearing demand deposits, investment securities, and FHLB stock.
</FN>
</TABLE>

                                       46
<PAGE>

INTEREST RATE RISK

     ABT  is  subject   to   interest   rate  risk  to  the   degree   that  its
interest-bearing  liabilities,  primarily deposits and borrowings from the FHLB,
mature or reprice at different rates than its interest-earning  assets. Although
having liabilities that mature or reprice less frequently on average than assets
will be beneficial in times of rising  interest rates,  such an  asset/liability
structure will result in lower net income during  periods of declining  interest
rates, unless offset by other factors.

     The  Asset/Liability  Committee  and the Board of  Directors  review  ABT's
exposure to interest  rate  changes and market risk on a quarterly  basis.  This
review is accomplished by the use of a cash flow simulation model using detailed
securities,  loan and deposit,  and market information to estimate the potential
impact of interest  rate  increases  and  decreases  on the  earning  assets and
liabilities. The model tests the impact on the net interest income under various
interest rate scenarios by estimating the interest rate sensitivity  position at
each interest rate  interval.  The change in the net portfolio  value ("NPV") is
also  calculated at each interest  rate  interval.  This tests the interest rate
risk exposure from  movements in interest  rates by using  interest  sensitivity
analysis to determine the change in the NPV of discounted cash flows from assets
and liabilities.

     NPV  represents  the market value of  portfolio  equity and is equal to the
estimated   market  value  of  assets  minus  the  estimated   market  value  of
liabilities.  The model uses a number of  assumptions,  including  the  relative
levels of market  interest  rates and  prepayments  or extension in maturity and
repayment  in  mortgage  loans,   MBS  &  CMO  and  certain  types  of  callable
investments. These computations did not contemplate actions management undertook
to reposition the assets and liabilities as discussed  below,  and should not be
relied upon as indicative of actual results. In addition,  certain  shortcomings
are  inherent in the model of computing  NPV.  Should  interest  rates remain or
decrease  below  present  levels,  the  portion of  adjustable  rate loans could
decrease in future periods due to loan  refinancing or payoff  activity.  In the
event of an interest rate change,  pre-payment  levels would likely be different
from those  assumed in the model and the  ability of  borrowers  to repay  their
adjustable rate loans may decrease during rising interest rate environments.


                                       47
<PAGE>
     The ABT information  below provides an assessment of the risk of NPV in the
event of sudden and  sustained  200 basis point  increases  and decreases in the
prevailing interest rates as of December 31, 2001.
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------
                                                                                NPV as Percent of
                                   Net Portfolio Value                       Present Value of Assets
-------------------------------------------------------------------------------------------------------
 Change           Dollar                Dollar                Percent
in Rates          Amount                Change                Change        NPV Ratio          Change
-------------------------------------------------------------------------------------------------------
                                        (Dollars in thousands)
<S>              <C>                   <C>                      <C>            <C>              <C>
 +200  bp *      $ 6,035               $-31,953                -84.11%         1.19%           -5.70 bp
Base or 0%        37,988                                                       6.89
-200   bp         40,989                  3,001                + 7.90          7.23            +0.34 bp

* basis points
</TABLE>

     As with any method of measuring  interest rate risk,  certain  shortcomings
are inherent in the methods of analysis  presented above. For example,  although
certain  assets  and  liabilities  may have  similar  maturities  or  periods to
repricing,  they may react in  different  degrees to changes in market  interest
rates.  Also, the interest rates on certain types of assets and  liabilities may
fluctuate in advance of changes in market interest  rates,  while interest rates
on other types may lag behind  changes in market  rates.  Additionally,  certain
assets, such as adjustable-rate loans, have features,  which restrict changes in
interest rates on a short-term basis and over the life of the asset. Further, in
the event of a change in interest rates,  expected rates of prepayments on loans
and early withdrawals from certificates could likely deviate  significantly from
those assumed in calculating the table.  Finally,  the ability of many borrowers
to service their debt may decrease in the event of an interest rate increase.

     Upon review of the above  information  and certain other interest rate risk
reports for the period ending  December 31, 2001,  management  determined that a
significant  deterioration had occurred in Company's  portfolio  holdings of CMO
resulting in a large increase in the Company's  exposure to future  increases in
interest rate risk. Upon further review, management determined that the increase
in the exposure  was  significant  enough to call into  question the prudence of
continuing to hold the  securities  to maturity.  In order to take the necessary
action to reduce this exposure, management decided to move the entire securities
portfolio  from  the  "Held  to  Maturity"  accounting   classification  to  the
"Available for Sale" classification as of December 31, 2001.

     The Company has determined  that most of its  investments no longer fit its
risk profile given the  unsettled,  uncertain and volatile  nature of the market
and the  possibility  that interest rates could move against the portfolio.  The
decelerating  speed of prepayments on these instruments during the first quarter
of 2002 has been remarkable;  significantly  extending the practical maturity of
the portfolio to a level that is now  unacceptable.  The  alternatives to

                                       48
<PAGE>

taking immediate action to mitigate the potential  losses,  including  long-term
funding strategies, hedging strategies and partial liquidations, were felt to be
inadequate in the  circumstances.  The Company decided to liquidate the majority
of the investment portfolio during the first quarter of 2002.

     The proceeds from the liquidation of the Company's investments will be used
first to repay  short-term  borrowings  from the FHLB.  This will  increase  the
Company's  flexibility to retain more of its self-originated  loans in portfolio
and to purchase loan participations in the region, as they become available. The
balance of the proceeds will be used to purchase  short-term liquid investments,
including limited maturity MBS, which present little in the way of interest rate
risk compared with the  liquidated  investments.  The Company also will use some
proceeds  to  invest  in  intermediate-term  MBS to  provide  a  balance  to its
portfolio  between  interest rate risk  reduction and  maintenance of higher net
interest income levels.

YIELDS EARNED AND RATES PAID

     The following  tables set forth the weighted  average  yields earned on the
Company's  interest-earning  assets and the weighted average interest rates paid
on the Company's  interest-bearing  liabilities,  together with the net yield on
interest-earning assets.
<TABLE>
<CAPTION>
                                                                                   Year Ended December 31,
                                                                              ----------------------------------
Weighted Average Yield:                                                       2001          2000         1999
-------------------------------------------------------------------------------------------------------------------
<S>                                                                            <C>          <C>          <C>
     Loans                                                                     7.83%        7.91%        7.70%
     MBS & CMO                                                                 7.00         6.99         6.25
     Other interest-earning assets                                             6.66         6.85         6.41
     All interest-earning assets                                               7.60         7.67         7.32
Weighted Average Cost:
-------------------------------------------------------------------------------------------------------------------
     Deposits                                                                  5.03         5.02         4.58
     Federal Home Loan Bank advances                                           6.50         6.73         5.41
     Notes payable                                                             7.30         8.30         6.00
     All interest-bearing liabilities                                          5.31         5.44         4.65
-------------------------------------------------------------------------------------------------------------------
Interest Rate Spread (spread between weighted average yield on all
     interest-earning assets and all interest-bearing liabilities)             2.29         2.23         2.67
-------------------------------------------------------------------------------------------------------------------
Net Yield (net interest income as a percentage of average
     interest-earning assets)                                                  2.57         2.55         3.10
<CAPTION>

                                                                                       At December 31,
                                                                                       ---------------
Weighted Average Interest Rates:                                              2001          2000         1999
-------------------------------------------------------------------------------------------------------------------
<S>                                                                            <C>          <C>          <C>
     Loans                                                                     7.74%        8.16%        7.70%
     MBS & CMO                                                                 6.35         6.94         6.75
     Total interest-earning assets                                             7.39         7.91         7.49
     Deposits                                                                  4.40         5.25         4.71
     Federal Home Loan Bank advances                                           5.58         6.54         5.49
     Notes payable                                                             6.20         8.67         6.00
     Total interest-bearing liabilities                                        4.62         5.63         4.86
     Interest rate spread                                                      2.77         2.28         2.63
-------------------------------------------------------------------------------------------------------------------
</TABLE>

                                       49
<PAGE>

RATE/VOLUME ANALYSIS

     The following  table sets forth certain  information  regarding  changes in
interest income, interest expense and net interest income of the Company for the
periods   indicated.   For  each   category  of   interest-earning   assets  and
interest-bearing  liabilities,  information is provided on changes  attributable
to: (1)  changes in volume  (changes in volume  multiplied  by old rate) and (2)
changes in rate (changes in rate multiplied by old volume).  No material amounts
of loan fees or out-of-period  interest is included in the table. Dollars are in
thousands.
<TABLE>
<CAPTION>
                                                                Year Ended December 31
                                                  2001   vs.    2000               2000    vs.      1999
-------------------------------------------------------------------------------------------------------------------
                                                    Increase (Decrease)             Increase (Decrease)
                                                    Due to Changes in               Due to Changes in
-------------------------------------------------------------------------------------------------------------------
                                                                    Net                             Net
                                               Volume        Rate   Change      Volume        Rate  Change
-------------------------------------------------------------------------------------------------------------------
<S>                                            <C>       <C>       <C>           <C>       <C>      <C>
Interest income:
   Loans and MBS & CMO                         $ 1,835   $  (411)  $ 1,424       $ 6,680   $   806  $  7,486
   Other interest-earning assets                (1,618)     (192)   (1,810)            4       446       450
-------------------------------------------------------------------------------------------------------------------
   Total interest-earning assets               $   217   $  (603)  $  (386)      $ 6,684   $ 1,252  $  7,936
-------------------------------------------------------------------------------------------------------------------
Interest Expense:
   Deposits                                    $ 1,283   $    43   $ 1,326       $   658   $ 1,485  $  2,143
   FHLB advances and notes payable              (1,538)     (273)   (1,811)        5,358       478     5,836
-------------------------------------------------------------------------------------------------------------------
   Total interest-bearing liabilities          $  (255)  $  (230)  $  (485)      $ 6,016   $ 1,963  $  7,979
-------------------------------------------------------------------------------------------------------------------
   Change in net interest income               $   472   $  (373)  $    99       $   668   $  (711) $    (43)
-------------------------------------------------------------------------------------------------------------------
</TABLE>

RESULTS OF OPERATIONS

     NET  INCOME:  The  Company's  net income  increased  $238,000  and 6.68% to
$3,800,000  ($1.21  basic and  diluted  earnings  per  share) for the year ended
December 31, 2001,  compared to $3,562,000 ($1.13 basic and diluted earnings per
share) for the year ended December 31, 2000. The improvement in year 2001 income
was  primarily  due to  increases  in net  interest  income and other income due
mostly to gains on loans sold.  Net income for the year ended December 31, 2000,
had  increased  $230,000  and 6.90%,  from  $3,332,000  ($0.98 basic and diluted
earnings  per  share) in the year 1999 due to an  increase  in other  income and
lower tax expense both of which were  attributable  in large part to an increase
in the cash surrender value of the Company-owned life insurance policies.

     NET  INTEREST  INCOME:  Net  interest  income  increased by $99,000 in 2001
compared to 2000 and was due to a greater  decrease in interest costs,  $485,000
and 1.96% compared to a decrease in interest  income of $386,000 and 1.04%.  The
average-interest  earning assets  decreased only 0.14% to  $482,111,000  in 2001
from $482,775,000 in 2000 and the  interest-bearing  liabilities  increased only
0.45% to $456,678,000 in 2001 from $454,638,000 in 2000. The total interest rate
on average  earning assets  decreased 6 basis points to 7.60% in 2001 from 7.67%
in 2000.  The  decrease in interest  expense was due to  increased  volume and a
small increase in costs of deposits while

                                       50
<PAGE>
correspondingly  reducing FHLB advances and notes  payable.  The total  interest
rate on average interest-bearing  liabilities decreased 13 basis points to 5.31%
in 2001 from  5.44% in 2000.  The  decrease  in  interest  income was due to the
increase  in loans  and MBS & CMO at lower  interest  rates  offset  by calls on
agency  investment  securities.  The Company's net interest  spread  increased 6
basis  points to 2.29% in 2001  from  2.23% in 2000.  Net  interest  income  was
essentially even between 2000 and 1999, declining by $43,000.  Although interest
income  increased by  $7,936,000  and 27.29%,  interest  expense  increased by a
greater amount,  $7,979,000 and 47.64%. The 2000 increase in interest income and
interest   expense   were  driven   primarily   by  growth  in  the  volumes  of
interest-earning assets and interest-bearing  liabilities,  respectively, as the
Company has sought to better  leverage its balance sheet.  Also  contributing to
the  greater  increase  in  interest  expense  was the  higher  average  cost of
interest-bearing  liabilities,  which  jumped 79 basis  points while the average
yield on interest-earning  assets increased by only 35 basis points. As a result
of the greater  increase in average  costs,  the Company's  net interest  spread
narrowed 44 basis points to 2.23% in 2000 from 2.67% for 1999.

     The  Company's  average  portfolio  balance  of  loans  increased  1.29% to
$376,157,000  for the year  2001,  from  $371,349,000  for the year  2000.  This
average  loan  portfolio  had  increased  31.71%  for the  year  2000  over  the
$281,943,000  average  for the year  1999.  The  ending  balance  of  loans  was
$349,195,000,   $398,775,000   and   $326,804,000   for  2001,  2000  and  1999,
respectively.  Loan originations and purchases were up 10.55% to $198,671,000 in
2001 compared to  $179,705,000  in 2000.  Sold loans,  which are all  fixed-rate
residential  mortgage loans, were up 890% to $91,515,000  compared to $9,238,000
in 2000 and were down 60.36% in 2000 compared to  $23,303,000  in 1999. The loan
portfolio  decreased in 2001 because the volume of  residential  mortgage  loans
were  mostly  fixed-rate  loans,  which are sold to the  secondary  market.  The
commercial  loans,  both  mortgage  and other  commercial  loans,  did  increase
$47,438,000   and  83%  in  2001.   This  is  due  to  both  purchases  of  loan
participations,  lease  purchases  and an  increase  in  the  volume  of  direct
commercial loans. The installment  loans decreased  $6,153,000 and 20.38% due to
reduced loan volume as market competitive rates were below minimums  established
by the Company.  The loan  portfolio had grown in 2000 because more of the loans
were  commercial  and  variable-rate  residential  mortgage  loans,  which  were
retained  as  compared  to  1999.  Purchased  loans  were  $49,498,000  in 2001,
$47,884,000 in 2000 and $60,355,000 in 1999.

     The Company's  average  portfolio balance of MBS & CMO increased 144.07% in
2001 to $31,768,000  and had decreased  24.68% to $13,016,000  for the year 2000
from  $17,280,000  for  the  year  1999.  The  ending  balance  of

                                       51
<PAGE>
MBS & CMO was $110,393,000, $11,806,000 and $14,970,000 for 2001, 2000 and 1999,
respectively.  Purchases  were  $111,505,000  in 2001 in an  attempt to keep the
Company  leveraged.  Purchases  were  $611,000 in 2000 and were  mortgage-backed
securities designed to meet requirements of the Community Reinvestment Act.

     The average short-term investments and other  interest-earning  assets were
$74,186,000,  $98,410,000 and 98,345,000 for 2001, 2000 and 1999,  respectively.
The decrease in 2001 included  purchases of $19,925,000 and calls of $77,805,000
of callable  agency bonds held to maturity after these  investments had remained
outstanding without calls or purchases in 2000.

     Average interest-earning assets decreased $664,000 or 0.14% to $482,111,000
in 2001 from  $482,775,000  in 2000. The increases were  $4,808,000 and 1.29% in
average  loans and  $18,752,000  and  144.06% in MBS & CMO while  other  average
investments decreased $24,224,000 and 24.62%.  Average  interest-earning  assets
increased  $85,207,000 or 21.43% to  $482,775,000  in 2000 from  $397,568,000 in
1999.  The 2000  increase  was  $89,406,000  and 31.71% in average  loans  while
average  mortgage-back  securities  decreased  $4,264,000  and  24.68% and other
interest-earning   assets   remained  the  same.   Total  interest   income  was
$36,633,000,  $37,019,000 and $29,083,000 for 2001, 2000 and 1999, respectively.
The  $386,000  decrease in interest  income in 2001 over 2000 was an increase of
$217,000 due to net volume changes offset by a $603,000 decrease due to net rate
changes.  The  $7,936,000  increase  in  interest  income  in 2000 over 1999 was
increases of $6,684,000  related to volume  increases and $1,252,000  related to
rate increases.

     Average  interest-bearing  liabilities  increased  $2,040,000  or  0.45% to
$456,678,000  in 2001 from  $454,638,000  in 2000.  The increase was composed of
average  interest-bearing  deposits increasing  $25,511,000 and 7.38%, offset by
average  borrowings  from the FHLB  decreasing  $22,577,000 and 21.17% and notes
payable decreasing  $894,000 and 36.40%.  Average  interest-bearing  liabilities
increased  $94,372,000 or 26.20% to  $454,638,000  in 2000 from  $360,266,000 in
1999. The increase was composed of average interest-bearing  deposits increasing
$13,959,000 and 4.21%,  average borrowings from the FHLB increasing  $78,255,000
and 275.53% and notes payable increasing $2,158,000.  Total interest expense was
$24,243,000,  $24,728,000 and $16,749,000 for 2001, 2000 and 1999, respectively.
The  $485,000  decrease  of  interest  expense  in 2001  was due to  volume  net
decreases  of  $255,000  and rate net  decreases  of  $230,000.  The  $7,979,000
increase of interest  expense in 2000 was due to volume  increases of $6,016,000
and rate increases of $1,963,000.

                                       52
<PAGE>

     The net interest spread,  which is the mathematical  difference between the
yield  on  average   interest-earning   assets  and  cost  of   interest-bearing
liabilities,  was 2.29% in 2001,  2.23% in 2000 and 2.67% in 1999. The net yield
on  interest-earning  assets,  which is interest  income as a percent of average
earning assets, was 2.57% in 2001, 2.55% in 2000 and 3.10% in 1999.

     PROVISION  FOR LOAN LOSSES:  The  provision for loan losses was $360,000 in
2001, $417,000 in 2000 and $328,000 in 1999. The provision is the amount that is
added  to the  allowance  for loan  losses  for  future  loan  charge-offs.  The
allowance  for loan losses as a percent of loans was 0.50% at December 31, 2001,
0.37% at December  31,  2000 and 0.47% at  December  31,  1999,  and  represents
management's  best estimate of expected  charge-offs in the loan portfolio.  Net
loan charge-offs have  historically been less than the annual provision for loan
losses and were  $119,000,  $462,000  and $78,000  for the years 2001,  2000 and
1999, respectively.  Non-performing assets (e.g., real estate owned, non-accrual
loans  and  loans 90 days or more past  due)  were  $3,179,000,  $1,673,000  and
$1,196,000  at  December  31,  2001,  2000  and  1999,  respectively.  The  2001
non-performing assets include $606,000 of real estate repossessed by the Company
and carried on the books at their book value or fair market value less estimated
selling  costs,  whichever  is lower.  Comparable  repossessed  real  estate was
$125,000  at  December  31,  2000,  and  zero at  December  31,  1999.  The 2001
non-performing assets also include $1,348,000 for a loan on an apartment complex
that  has an  appraisal  for 130% of its  carrying  value.  The  1999  provision
includes  $172,000 for a  non-performing  loan that was acquired in the Cardinal
State Bank purchase. This loan was written-off during the first quarter of 2000.
If this loan is deleted  from the 2000 net  charge-offs,  the 2000  provision of
$417,000 exceeds the $290,000 of charged-offs by $127,000.  The Company believes
it has  established  an adequate  allowance for loan losses in  accordance  with
generally  accepted  accounting  principles.  The  variation  in the  amount  of
provision  charged  against  income  is  directly  related  to  changes  in loan
charge-offs,  non-performing  loans, loan delinquencies,  economic conditions in
the Company's lending area and loan growth or reduction during each year.

     OTHER INCOME:  Other income was  $4,513,000,  $3,766,000 and $3,302,000 for
2001,  2000  and  1999,  respectively.  The 2001  gains  on  sales of loans  and
servicing rights of $804,000 were significantly higher than $103,000 in 2000 and
$381,000 in 1999.  In 1999 a gain of $67,000 from the sale of  servicing  rights
was included and no servicing  rights were sold in 2001 or 2000.  These  changes
reflect the change in demand for fixed-rate  real estate loans.  In 2001,  rates
were  decreasing  all year and the  consumer  wanted  a  fixed-rate  residential
mortgage  loan which is sold in the secondary  market,  but in 2000 and 1999 the
average  mortgage rates were higher and the

                                       53
<PAGE>

consumer preferred a variable-rate  residential  mortgage loan which is normally
retained in portfolio.  The net loan  servicing  fees of $329,000,  $293,000 and
$266,000 for the years 2001,  2000 and 1999,  respectively,  have  increased and
reflect the retention and increase of average loans serviced.  Operating  losses
associated with the limited  partnership  amounted to $172,000 in 2001, $101,000
in 2000 and $192,000 in 1999. At the same time as these losses are reflected the
Company also  reflected  federal  income tax credits of  $210,000,  $213,000 and
$210,000 for the years ended  December 31,  2001,  2000 and 1999,  respectively.
Brokerage and insurance  commissions  have  decreased  slightly each of the last
three years with $995,000 in 2001,  $1,056,000  in 2000 and  $1,199,000 in 1999.
The recession  had a direct  influence on this income during 2001 and the latter
part of 2000. ABT invested in life insurance on employees and directors,  with a
balance or cash surrender  value of $18,035,000  and $17,089,000 at December 31,
2001 and 2000, respectively.  The majority of the policies were purchased during
1999, and  accordingly  the nontaxable  increase in cash surrender value of life
insurance was $945,000 in 2001,  $972,000 in 2000 and $447,000 in 1999. The 2000
income  included  a  one-time  adjustment  of  $197,000  related to the value of
insurance policies on two retired employees.

     OTHER  EXPENSE:  Operating  expenses  were  $11,278,000,   $10,914,000  and
$10,509,000 for 2001, 2000 and 1999,  respectively.  These yearly increases were
due to normal  increases  and to  additional  expense of  operating  a new trust
department,  commercial  loan department and a new branch that ABT opened during
December 1999. The 1999 expenses also included  additional  costs related to the
Year 2000 compliance.  The conversion of both banks to the same mainframe system
had provided  for a reduction  of data  processing  expense  during  1999.  This
reduction was offset in 2000 by  improvements  made in data  processing  and the
initial expense of implementing check imaging. Data processing expense and other
expenses in 2000 include some additional  costs related to the merger of the two
banks during that year.  The merger of the banks is expected to reduce  expenses
in future years.

     INCOME TAX EXPENSE:  Income tax expense was $1,465,000 in 2001,  $1,164,000
in 2000 and $1,467,000 in 1999. The effective tax rate was 27.8% in 2001,  24.6%
in 2000 and 30.6% in 1999.  The  increase  in 2001 was due to lower  non-taxable
insurance  income  and to higher  state  taxes and  higher  pretax  income.  The
decrease in tax expense in 2000 from 1999 is due to slightly lower pretax income
and to a lower effective tax rate due to the nontaxable  insurance income and to
lower  state  income  taxes  due to  change  in  state  law.  See  note 9 to the
consolidated financial statements for detail of income taxes.

                                       54
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES

     Historically,  funds provided by operations,  loan principal repayments and
new deposits  have been the  Company's  principal  sources of liquid  funds.  In
addition,  the Company has the ability to obtain  funds  through the sale of new
mortgage  loans and through  borrowings  from the FHLB  system.  At December 31,
2001,  the  Company's  commitments  for loans in  process  totaled  $11,756,000.
Management believes that the Company's liquidity and other sources of funds will
be  sufficient  to fund all  outstanding  commitments  and other cash  needs.  A
portion of these  commitments is for fixed-rate  mortgage  loans,  which will be
sold immediately into the secondary market.

     An amendment of the 1996 Stock Option Plan, which provides for the granting
of incentive and non-qualified  stock options,  was approved by the shareholders
in April 1998 and extended the plan's term to ten years and increased the number
of shares reserved under the plan from 176,000 to 352,000 shares. No options for
exercise of shares  were done in 2001.  Options for 825 shares in 2000 and 9,235
shares  in  1999  were  exercised.  See  note 10 to the  consolidated  financial
statements for option activity and the pro forma effect on net income.

     In April 1999,  the  Company's  Board of Directors  approved an  additional
one-year and $5,000,000 for a stock  repurchase  program.  The stock  repurchase
program,  which  began  in July  1998,  was a  one-year  repurchase  program  of
$5,000,000 to acquire up to 10% of the Company's  outstanding  common stock. The
Company  repurchased  374,130  shares in 1999 and  201,388  shares in 1998 at an
aggregate cost of $6,747,000 and $3,358,000,  respectively.

IMPACT OF INFLATION AND CHANGING PRICES

     The  consolidated  financial  statements and related data presented in this
report have been  prepared in  accordance  with  generally  accepted  accounting
principles.  This requires the  measurement of financial  position and operating
results in terms of historical  dollars without  consideration of changes in the
relative purchasing power of money over time due to inflation.

     Virtually all of the assets and liabilities of a financial  institution are
monetary in nature. As a result,  interest rates have a more significant  impact
on a financial  institution's  performance than the effects of general levels of
inflation.  Interest rates do not  necessarily  move in the same direction or at
the same rate as changes in the prices of goods and services, which are directly
affected by  inflation,  although  interest  rates may  fluctuate in response to
perceived changes in the rate of inflation.

                                       55
<PAGE>

CURRENT ACCOUNTING ISSUES

     In July 2001, the Financial  Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 141 and 142. SFAS No. 141, "Business
Combinations"  requires the use of the  purchase  method of  accounting  for all
business combinations initiated after June 30, 2001, thereby eliminating the use
of the pooling of interests method. It also provides new criteria that determine
whether an acquisition involving acquired intangible assets should be recognized
separately from goodwill.  This Statement does not presently  affect the Company
but would be followed in any future acquisitions.

     SFAS No. 142,  "Goodwill and Other Intangible Assets" will be effective for
fiscal years beginning after December 15, 2001, and requires that upon adoption,
any goodwill recorded on an entity's balance sheet would no longer be amortized.
This would include  existing  goodwill  recorded at the date of adoption and any
future  goodwill.  Goodwill  will  not be  amortized  but will be  reviewed  for
impairment at least once a year and adjusted by reduction of the carrying  value
of goodwill if the asset is  impaired.  At December  31,  2001,  the Company had
$1,511,000  of  goodwill on its balance  sheet that was  amortized  at a rate of
$159,000 in 2001. This goodwill is composed of $1,290,000 that will no longer be
amortized  but will be tested  for  impairment  of  carrying  value on an annual
basis. The $221,000 balance classified as core deposit intangibles,  at the time
of the Cardinal State Bank  acquisition,  will continue to be amortized over 6.5
years at a rate of $35,000 in 2002.

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
-------------------------------------------------------------------

     Reference  is made to  discussions  captioned  "Interest  Sensitivity"  and
"Interest Rate Risk" in Item 7 of this Annual Report.


                                       56
<PAGE>

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
----------------------------------------------------

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

                                                                            PAGE
                                                                            ----

Report of Independent Auditors                                               58

Consolidated Balance Sheets at December 31, 2001 and 2000                    59

Consolidated Statements of Income for Each of the Three
     Years in the Period Ended December 31, 2001                             60

Consolidated Statements of Shareholders' Equity for Each of
     the Three Years in the Period Ended December 31, 2001                   61

Consolidated Statements of Cash Flows for Each of the Three
     Years in the Period Ended December 31, 2001                             62

Notes to Consolidated Financial Statements                                   63


                                       57
<PAGE>

                            [LETTERHEAD OF BKD, LLP]

                         Independent Accountants' Report


To the Shareholders and
Board of Directors
Ameriana Bancorp
New Castle, Indiana


We have audited the accompanying consolidated balance sheets of Ameriana Bancorp
as of December 31, 2001 and 2000,  and the related  consolidated  statements  of
income,  shareholders'  equity and cash flows for each of the three years in the
period ended December 31, 2001. These consolidated  financial statements are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the  United  States of  America.  Those  standards  require  that we plan and
perform the audits to obtain  reasonable  assurance  about whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion.

In our opinion,  the consolidated  financial  statements described above present
fairly,  in all  material  respects,  the  consolidated  financial  position  of
Ameriana  Bancorp  as of  December  31,  2001 and 2000,  and the  results of its
operations  and its cash flows for each of the three  years in the period  ended
December 31, 2001, in conformity with accounting  principles  generally accepted
in the United States of America.

BKD, LLP

/s/ BKD, LLP

Indianapolis, Indiana
February 8, 2002

                                       58
<PAGE>

                                Ameriana Bancorp
                           Consolidated Balance Sheets
                        (in thousands, except share data)
<TABLE>
<CAPTION>

----------------------------------------------------------------------------------------------------------------------------
                                                                                                December 31
----------------------------------------------------------------------------------------------------------------------------
                                                                                            2001                 2000
----------------------------------------------------------------------------------------------------------------------------
<S>                                                                                     <C>                  <C>
ASSETS
   Cash on hand and in other institutions                                               $   7,518            $  14,609
   Interest-bearing demand deposits                                                         4,283                4,422
----------------------------------------------------------------------------------------------------------------------------
     Cash and cash equivalents                                                             11,801               19,031
   Investment securities held to maturity (fair value of $97,863)                              --               99,707
   Investment securities available for sale                                               140,629                   --
   Loans, net of allowance for loan losses of $1,730 and $1,489                           347,465              397,286
   Premises and equipment                                                                   6,919                7,097
   Stock in Federal Home Loan Bank                                                          7,365                7,265
   Intangible assets                                                                        1,511                1,670
   Cash surrender value of life insurance                                                  18,035               17,089
   Other assets                                                                            18,354                8,143
----------------------------------------------------------------------------------------------------------------------------
         Total assets                                                                    $552,079             $557,288
============================================================================================================================

LIABILITIES AND SHAREHOLDERS' EQUITY
   Liabilities
     Deposits
       Noninterest-bearing                                                              $  24,257            $  12,927
       Interest-bearing                                                                   388,156              354,668
----------------------------------------------------------------------------------------------------------------------------
         Total deposits                                                                   412,413              367,595
     Borrowings                                                                            88,583              141,172
     Drafts payable                                                                         6,092                3,039
     Other liabilities                                                                      2,096                3,771
----------------------------------------------------------------------------------------------------------------------------
         Total liabilities                                                                509,184              515,577
----------------------------------------------------------------------------------------------------------------------------
   Commitments and contingencies
   Shareholders' equity
     Preferred stock  - 5,000,000 shares authorized and unissued
     Common stock, $1.00 par value
         Authorized 15,000,000 shares
         Issued and outstanding - 3,146,616 shares                                          3,147                3,147
     Additional paid-in capital                                                               499                  499
     Retained earnings                                                                     39,945               38,065
     Accumulated other comprehensive loss                                                    (696)                  --
-----------------------------------------------------------------------------------------------------------------------------
         Total shareholders' equity                                                         42,895               41,711
-----------------------------------------------------------------------------------------------------------------------------
         Total liabilities and shareholders' equity                                       $552,079             $557,288
=============================================================================================================================
</TABLE>


See notes to consolidated financial statements.


                                      59
<PAGE>
                                Ameriana Bancorp
                        Consolidated Statements of Income
                        (in thousands, except share data)
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
                                                                       Year Ended December 31
----------------------------------------------------------------------------------------------------------------
                                                             2001               2000               1999
----------------------------------------------------------------------------------------------------------------
<S>                                                          <C>                 <C>                <C>
INTEREST INCOME
   Interest on loans                                         $29,468             $29,359            $21,703
   Interest on mortgage-backed securities                      2,225                 910              1,080
   Interest on investment securities                           4,066               6,055              5,107
   Other interest and dividend income                            874                 695              1,193
----------------------------------------------------------------------------------------------------------------
         Total interest income                                36,633              37,019             29,083
----------------------------------------------------------------------------------------------------------------
INTEREST EXPENSE
   Interest on deposits                                       18,663              17,337             15,194
   Interest on borrowings                                      5,580               7,391              1,555
----------------------------------------------------------------------------------------------------------------
         Total interest expense                               24,243              24,728             16,749
----------------------------------------------------------------------------------------------------------------
NET INTEREST INCOME                                           12,390              12,291             12,334
   Provision for loan losses                                     360                 417                328
----------------------------------------------------------------------------------------------------------------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES           12,030              11,874             12,006
----------------------------------------------------------------------------------------------------------------
OTHER INCOME
   Net loan servicing fees                                       329                 293                266
   Other fees and service charges                              1,301               1,194              1,067
   Brokerage and insurance commissions                           995               1,056              1,199
   Gains on sales of loans and servicing rights                  804                 103                381
   Increase in cash surrender value of life insurance            945                 972                447
   Other                                                         139                 148                (58)
----------------------------------------------------------------------------------------------------------------
         Total other income                                    4,513               3,766              3,302
----------------------------------------------------------------------------------------------------------------
OTHER EXPENSE
   Salaries and employee benefits                              6,935               6,613              6,052
   Net occupancy expense                                       1,467               1,541              1,465
   Federal insurance premium                                      71                  74                182
   Data processing expense                                       313                 308                275
   Printing and office supplies                                  330                 290                346
   Other                                                       2,162               2,088              2,189
----------------------------------------------------------------------------------------------------------------
         Total other expense                                  11,278              10,914             10,509
----------------------------------------------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES                                     5,265               4,726              4,799
   Income taxes                                                1,465               1,164              1,467
----------------------------------------------------------------------------------------------------------------
NET INCOME                                                  $  3,800            $  3,562           $  3,332
================================================================================================================
BASIC AND DILUTED EARNINGS PER SHARE                        $   1.21            $   1.13           $    .98
================================================================================================================
</TABLE>

See notes to consolidated financial statements.


                                      60
<PAGE>


                                Ameriana Bancorp
                 Consolidated Statements of Shareholders' Equity
                      (in thousands, except per share data)
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------
                                                                                           Accumulated
                                                           Additional                         Other
                                             Common         Paid-in         Retained      Comprehensive
                                             Stock          Capital         Earnings          Loss             Total
---------------------------------------------------------------------------------------------------------------------------
<S>                                            <C>             <C>             <C>         <C>                  <C>
Balance at January 1, 1999                     $3,511          $6,775          $35,063      $      --           $45,349
Net income                                         --              --            3,332             --             3,332
Dividends declared ($.60 per share)                --              --           (2,004)            --            (2,004)
Purchase of common stock                         (374)         (6,373)              --             --            (6,747)
Exercise of stock options                           9              90               --             --                99
---------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1999                    3,146             492           36,391             --            40,029
Net income                                         --              --            3,562             --             3,562
Dividends declared ($.60 per share)                --              --           (1,888)            --            (1,888)
Exercise of stock options                           1               7               --             --                 8
---------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 2000                    3,147             499           38,065             --            41,711
Net income                                         --              --            3,800             --             3,800
Change in unrealized depreciation on
   available-for-sale securities, net
   of income tax benefit of $464                   --              --              --             (696)            (696)
                                        -----------------------------------------------------------------------------------
    Comprehensive income                                                                                          3,104
Dividends declared ($.61 per share)                --              --           (1,920)            --            (1,920)
---------------------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 2001                   $3,147            $499          $39,945      $     (696)         $42,895
===========================================================================================================================

</TABLE>

See notes to consolidated financial statements.

                                      61
<PAGE>

                                Ameriana Bancorp
                      Consolidated Statements of Cash Flows
                                 (in thousands)
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------
                                                                                         Year Ended December 31
------------------------------------------------------------------------------------------------------------------------------
                                                                                2001             2000             1999
------------------------------------------------------------------------------------------------------------------------------
<S>                                                                             <C>           <C>                <C>
OPERATING ACTIVITIES
------------------------------------------------------------------------------------------------------------------------------
   Net income                                                                   $ 3,800       $  3,562           $  3,332
   Items not requiring (providing) cash
     Provision for losses on loans                                                  360            417                328
     Depreciation and amortization                                                  804            677                574
     Increase in cash surrender value                                              (945)          (972)              (447)
     Mortgage loans originated for sale                                         (91,515)        (9,238)           (23,303)
     Proceeds from sale of mortgage loans                                        86,814          9,298             27,411
     Gains on sale of loans and servicing rights                                   (804)          (103)              (381)
     Increase  in other assets                                                   (4,690)          (714)              (885)
     Increase (decrease) in drafts payable                                        3,053           (862)              (452)
     Increase (decrease) in other liabilities                                    (1,012)            61               (702)
     Other adjustments                                                              488            291                728
------------------------------------------------------------------------------------------------------------------------------
         Net cash provided by (used in)  operating activities                    (3,647)         2,417              6,203
------------------------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
------------------------------------------------------------------------------------------------------------------------------
   Net change in interest-bearing time deposits                                      --          1,499              1,988
   Purchase of investment securities held to maturity                          (131,430)          (606)           (43,061)
   Proceeds from maturities/calls of securities held to maturity                 77,805             --              6,993
   Principal collected on mortgage-backed securities held to maturity            11,445          3,720              5,151
   Net change in loans                                                           48,628        (72,769)           (63,884)
   Net purchases of premises and equipment                                         (425)          (636)            (1,587)
   Premiums paid on life insurance                                                   --             --            (15,461)
   Purchase of Federal Home Loan Bank stock                                        (100)        (2,924)              (754)
   Other investing activities                                                       153         (1,509)               415
------------------------------------------------------------------------------------------------------------------------------
         Net cash provided by (used in) investing activities                      6,076        (73,225)          (110,200)
------------------------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
------------------------------------------------------------------------------------------------------------------------------
   Net change in demand and passbook deposits                                    10,309          1,722              4,718
   Net change in certificates of deposit                                         34,509         11,764             17,052
   Proceeds from borrowings                                                      93,500        329,600             88,000
   Repayment of borrowings                                                     (146,089)      (271,300)           (22,680)
   Purchase of common stock                                                          --             --             (6,747)
   Cash dividends paid                                                           (1,888)        (1,888)            (2,063)
   Other financing activities                                                        --              8                 99
------------------------------------------------------------------------------------------------------------------------------
         Net cash provided by (used in) financing activities                     (9,659)        69,906             78,379
------------------------------------------------------------------------------------------------------------------------------
CHANGE IN CASH AND CASH EQUIVALENTS                                              (7,230)          (902)           (25,618)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR                                   19,031         19,933             45,551
------------------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF YEAR                                        $11,801        $19,031            $19,933
==============================================================================================================================
</TABLE>

See notes to consolidated financial statements.

                                      62
<PAGE>
                                Ameriana Bancorp
                   Notes to Consolidated Financial Statements
             (table dollar amounts in thousands, except share data)


1.   NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation:  The consolidated  financial statements include the
accounts of Ameriana  Bancorp (the "Company") and its  wholly-owned  subsidiary:
Ameriana  Bank and  Trust,  SB  ("ABT"),  and  ABT's  wholly-owned  subsidiaries
Ameriana Financial Services,  Inc., Indiana Title Insurance Company ("ITIC") and
Ameriana Insurance Agency, Inc. A previously separate subsidiary,  Ameriana Bank
of Ohio,  FSB  ("ABO"),  was  merged  into ABT in  October,  2000.  ITIC  ceased
operations  at the close of business  on  December  31,  2000.  All  significant
intercompany accounts and transactions have been eliminated.

The preparation of financial statements in conformity with accounting principles
generally  accepted in the United States of America requires  management to make
estimates  and  assumptions  that  affect  the  reported  amounts  of assets and
liabilities  and disclosure of contingent  assets and liabilities at the date of
the  financial  statements  and the  reported  amounts of revenues  and expenses
during the reporting period. Actual results could differ from those estimates.

The  Company  is a  thrift  holding  company  whose  principal  activity  is the
ownership  and  management  of ABT and its  subsidiaries.  The Company  provides
various banking services and engages in loan servicing  activities for investors
and operates in a single  significant  business  segment.  ABT is subject to the
regulation of the Indiana  Department of Financial  Institutions and the Federal
Deposit  Insurance  Corporation.  The Company's gross revenues are substantially
earned from the various banking services provided by ABT. The Company also earns
brokerage  and  insurance  commissions  from the services  provided by the other
subsidiaries.

ABT generates loans and receives  deposits from customers  located  primarily in
east central  Indiana and  southwestern  Ohio.  Loans are  generally  secured by
specific items of collateral  including real property and consumer  assets.  The
Company has sold  various  loans to  investors  while  retaining  the  servicing
rights.

Cash and cash equivalents  consist of cash on hand and in other institutions and
interest-bearing demand deposits.

Investment  Securities:  Debt securities are classified as held to maturity when
the  Company  has the  positive  intent and  ability to hold the  securities  to
maturity.  Securities  held to maturity  are  carried at  amortized  cost.  Debt
securities  not  classified as held to maturity are  classified as available for
sale.  Securities  available for sale are carried at fair value with  unrealized
gains and losses reported separately in accumulated other comprehensive  income,
net of tax.

Amortization  of premiums  and  accretion of  discounts  are recorded  using the
interest  method as interest income from  securities.  Realized gains and losses
are  recorded  as net  security  gains  (losses).  Gains and  losses on sales of
securities are determined on the specific-identification method.

Stock in  Federal  Home Loan Bank  ("FHLB")  is stated at cost and the amount of
stock the Company is required to own is determined by regulation.

Loans are carried at the principal amount outstanding.  A loan is impaired when,
based on current  information or events, it is probable that the Company will be
unable to collect all amounts due  (principal  and  interest)  according  to the
contractual terms of the loan agreement.  Payments with insignificant delays not
exceeding 90 days outstanding are not considered  impaired.  Certain  nonaccrual
and substantially delinquent loans may be considered to be impaired. The Company
considers its investment in one-to-four family residential loans and installment
loans to be homogeneous and therefore  excluded from separate  identification of
evaluation of impairment.  Interest income is accrued on the principal  balances
of  loans.  The  accrual  of  interest  on  impaired  and  nonaccrual  loans  is
discontinued when, in management's  opinion,  the borrower may be unable to meet
payments as they become due. When interest accrual is  discontinued,  all unpaid
accrued interest is reversed when considered  uncollectible.  Interest income is
subsequently  recognized only to the extent cash payments are received.  Certain
loan fees and direct costs are being  deferred and amortized as an adjustment of
yield on the loans over the contractual  lives of the loans. When a loan is paid
off or sold, any unamortized loan origination fee balance is credited to income.

                                      63
<PAGE>

Ameriana Bancorp
Notes to Consolidated Financial Statements
(table dollar amounts in thousands, except share data)


Allowance  for  Loan  Losses  is  maintained  at a level  believed  adequate  by
management  to  absorb  inherent  losses  in the  loan  portfolio.  Management's
determination  of the adequacy of the allowance is based on an evaluation of the
portfolio including consideration of past loan loss experience, current economic
conditions,   volume,  growth  and  composition  of  the  loan  portfolio,   the
probability of collecting all amounts due, and other relevant factors.  Impaired
loans are measured by the present  value of expected  future cash flows,  or the
fair value of the collateral of the loan, if collateral dependent. The allowance
is increased by provisions for loan losses charged against income.

The  determination  of the adequacy of the allowance for loan losses is based on
estimates  that are  particularly  susceptible  to  significant  changes  in the
economic  environment  and market  conditions.  Management  believes  that as of
December  31,  2001,  the  allowance  for  loan  losses  is  adequate  based  on
information  currently available.  A worsening or protracted economic decline in
the areas within which the Company  operates  would  increase the  likelihood of
additional  losses due to credit and market  risks and could create the need for
additional loss reserves.

Premises  and  Equipment  are  stated  at cost  less  accumulated  depreciation.
Depreciation  is  computed  principally  by the  straight-line  method  over the
estimated  useful  lives of the  related  assets.  Maintenance  and  repairs are
expensed as incurred while major additions and improvements are capitalized.

Intangible  Assets are being amortized on an accelerated or straight-line  basis
not exceeding a period of up to 15 years. Such assets are periodically evaluated
as to the recoverability of their carrying value.

Earnings  per Share is computed by dividing  net income by the  weighted-average
number of common and potential common shares outstanding during each year.

Mortgage  Servicing Rights on originated loans are capitalized by estimating the
fair value of the  streams of net  servicing  revenues  that will occur over the
estimated life of the servicing arrangement. Capitalized servicing rights, which
include purchased  servicing rights, are amortized in proportion to and over the
period of estimated servicing revenues.

Stock  Options  are  generally  granted  for a fixed  number of  shares  with an
exercise  price equal to the fair value of the shares at the date of grant.  The
Company  accounts for and will continue to account for these stock option grants
in  accordance  with  Accounting   Principles  Board  ("APB")  Opinion  No.  25,
Accounting  for Stock  Issued to  Employees,  and,  accordingly,  recognizes  no
compensation expense for the stock option grants.

Income Tax in the consolidated statements of income includes deferred income tax
provisions or benefits for all significant  temporary differences in recognizing
income and expenses for financial reporting and income tax purposes. The Company
and its  subsidiaries  file  consolidated  tax returns.  The parent  company and
subsidiaries  are charged or given  credit for income  taxes as though  separate
returns were filed.


2.   RESTRICTION ON CASH AND DUE FROM BANKS

The Bank is required to maintain  reserve  funds in cash and/or on deposit  with
the  Federal  Reserve  Bank.  The  reserve  required  at  December  31, 2001 was
$1,303,000.

                                      64
<PAGE>

Ameriana Bancorp
Notes to Consolidated Financial Statements
(table dollar amounts in thousands, except share data)


3.   INVESTMENT SECURITIES
<TABLE>
<CAPTION>
                                                                   GROSS        GROSS
                                                 AMORTIZED      UNREALIZED    UNREALIZED        FAIR
                                                   COST            GAINS        LOSSES         VALUE
-------------------------------------------------------------------------------------------------------
<S>                                                <C>               <C>        <C>          <C>
Available for sale at December 31, 2001
    Mortgage-backed securities and
      collateralized mortgage obligations          $111,723          $269       $(1,599)     $110,393
    Federal agencies                                 28,566           176           (46)       28,696
    Other                                             1,500            40            --         1,540
-------------------------------------------------------------------------------------------------------
                                                   $141,789          $485       $(1,645)     $140,629
=======================================================================================================

Held to maturity at December 31, 2000
    Mortgage-backed securities and
      collateralized mortgage obligations          $ 11,806          $ 44      $   (139)     $ 11,711
    Federal agencies                                 87,901             9        (1,758)       86,152
-------------------------------------------------------------------------------------------------------
                                                   $ 99,707          $ 53       $(1,897)     $ 97,863
=======================================================================================================

</TABLE>

Federal  agency and other  securities  at December  31, 2001 had  maturities  of
greater than ten years.

Investment securities with a total amortized cost of $52,344,000 and $44,535,000
were pledged at December 31, 2001 and 2000 to secure FHLB advances.

In 2002, the Company determined that because of its interest rate risk, it would
not be  able  to  continue  to  hold  its  investment  securities  to  maturity.
Accordingly,   the  Company  transferred  its  held-to-maturity  investments  to
available for sale as of December 31, 2001,  and recorded an  accumulated  other
comprehensive loss of $696,000 as of that date.

4.   LOANS
<TABLE>
<CAPTION>
----------------------------------------------------------------------------
                                                 December 31
----------------------------------------------------------------------------
                                             2001                2000
----------------------------------------------------------------------------
<S>                                       <C>                  <C>
Residential mortgage loans                $231,940             $326,403
Commercial mortgage loans                   78,435               48,393
Installment loans                           24,045               30,198
Commercial loans                            26,160                8,764
Loans secured by deposits                    1,348                1,598
----------------------------------------------------------------------------
                                           361,928              415,356
-----------------------------------------------------------------------------
Deduct
----------------------------------------------------------------------------
   Undisbursed loan proceeds                12,725               16,724
   Deferred loan costs, net                      8                 (143)
   Allowance for loan losses                 1,730                1,489
-----------------------------------------------------------------------------
                                            14,463               18,070
-----------------------------------------------------------------------------
                                          $347,465             $397,286
============================================================================
</TABLE>

                                      65
<PAGE>

Ameriana Bancorp
Notes to Consolidated Financial Statements
(table dollar amounts in thousands, except share data)


Loans being  serviced by the Company for  investors,  primarily the Federal Home
Loan Mortgage  Corporation and Federal National  Mortgage  Association,  totaled
approximately  $162,017,000,  $144,000,000  and  $154,000,000 as of December 31,
2001, 2000 and 1999, respectively.  Such loans are not included in the preceding
table.

The aggregate fair value of capitalized  mortgage  servicing  rights at December
31, 2001 and 2000 is based on comparable  market values and expected cash flows,
with impairment  assessed based on portfolio  characteristics  including product
type,  investor type and interest rates. No valuation allowance was necessary at
December 31, 2001 and 2000.
<TABLE>
<CAPTION>
------------------------------------------------------------------------------
                                             Year Ended December 31
------------------------------------------------------------------------------
                                           2001       2000        1999
------------------------------------------------------------------------------
<S>                                       <C>         <C>         <C>
Mortgage servicing rights
   Balance at beginning of year           $   847     $   910     $1,076
   Servicing rights capitalized               416          44        180
   Servicing rights sold                       --          --       (155)
   Amortization of servicing rights          (251)       (107)      (191)
------------------------------------------------------------------------------
   Balance at end of year                  $1,012      $  847    $   910
==============================================================================
</TABLE>

At December  31,  2001 and 2000,  the Company  had  outstanding  commitments  to
originate  loans  of  approximately  $11,756,000  and  $5,379,000,   which  were
primarily for  adjustable-rate  mortgages  with rates that are  determined  just
prior to closing or fixed-rate  mortgage  loans with rates locked in at the time
of loan commitment.  In addition, the Company had $19,949,000 and $19,842,000 of
conditional commitments for lines of credit receivables at December 31, 2001 and
2000.  Exposure to credit loss in the event of nonperformance by the other party
to the financial  instruments for commitments to extend credit is represented by
the  contractual  or  notional  amount  of those  instruments.  The same  credit
policies are used in making such  commitments as are used for  instruments  that
are included in the  consolidated  balance sheets.  Commitments to extend credit
are  agreements  to lend to a customer as long as there is no  violation  of any
condition  established  in  the  contract.   Commitments  generally  have  fixed
expiration dates or other termination  clauses and may require payment of a fee.
Since many of the  commitments  are expected to expire without being drawn upon,
the  total  commitment   amounts  do  not  necessarily   represent  future  cash
requirements.  Each customer's  credit worthiness is evaluated on a case-by-case
basis. The amount of collateral obtained,  if deemed necessary upon extension of
credit, is based on management's  credit evaluation.  Collateral held varies but
may  include  accounts  receivable,   inventory,  real  estate,  equipment,  and
income-producing commercial properties.

5.   ALLOWANCE FOR LOSSES
<TABLE>
<CAPTION>
------------------------------------------------------------------------
                                       Year Ended December 31
------------------------------------------------------------------------
                                   2001          2000        1999
------------------------------------------------------------------------
<S>                                 <C>           <C>          <C>
Loans
   Balance at beginning of year     $1,489        $1,534       $1,284
   Provision for losses                360           417          328
   Net charge-offs
     Charge-offs                      (146)         (488)         (98)
     Recoveries                         27            26           20
------------------------------------------------------------------------
     Net charge-offs                  (119)         (462)         (78)
------------------------------------------------------------------------
   Balance at end of year           $1,730        $1,489       $1,534
========================================================================
</TABLE>

                                      66
<PAGE>

Ameriana Bancorp
Notes to Consolidated Financial Statements
(table dollar amounts in thousands, except share data)


6.   PREMISES AND EQUIPMENT
<TABLE>
<CAPTION>
----------------------------------------------------------------------------
                                                   December 31
----------------------------------------------------------------------------
                                              2001              2000
----------------------------------------------------------------------------
<S>                                          <C>                <C>
Land                                         $ 1,396            $ 1,398
Land improvements                                513                513
Office buildings                               7,415              7,157
Furniture and equipment                        4,551              4,384
Automobiles                                       70                 70
----------------------------------------------------------------------------
                                              13,945             13,522
Less accumulated depreciation                  7,026              6,425
----------------------------------------------------------------------------
                                             $ 6,919            $ 7,097
============================================================================
</TABLE>

7.   DEPOSITS
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------
                                                    December 31
-------------------------------------------------------------------------------
                                              2001                2000
-------------------------------------------------------------------------------
<S>                                         <C>                  <C>
Demand                                      $  88,327            $  75,978
Savings                                        32,647               34,687
Certificates of $100,000 or more               60,363               43,039
Other certificates                            231,076              213,891
--------------------------------------------------------------------------------
                                             $412,413             $367,595
===============================================================================
</TABLE>


Certificates maturing in years ending after December 31, 2001:

---------------------------------------------------
2002                                $196,822
2003                                  76,534
2004                                  10,056
2005                                   5,729
2006                                   2,298
---------------------------------------------------
                                    $291,439
===================================================

Interest paid on deposits approximated interest expense in 2001, 2000 and 1999.


                                      67
<PAGE>

Ameriana Bancorp
Notes to Consolidated Financial Statements
(table dollar amounts in thousands, except share data)


8.   BORROWINGS

Borrowings at December 31, 2001 and 2000 include Federal Home Loan Bank advances
totaling $87,653,000 and $138,751,000 with a weighted-average  rate of 5.51% and
6.54%, respectively. The advances are secured by a combination of first-mortgage
loans and investment  securities.  Some advances are subject to  restrictions or
penalties in the event of prepayment.

Borrowings  at  December  31,  2001 and 2000,  also  include a note  payable for
$750,000 and $2,150,000  respectively,  to another financial  institution with a
rate of 6.25%  and 9%,  respectively.  The note is  secured  by the  outstanding
common  stock of ABT.  The note was due at January  24,  2002 and was renewed at
that date to July 24, 2002 at a rate of 4.25%.

A promissory note of $180,000 and $271,000 is included in borrowings at December
31, 2001 and 2000. The interest rate on the note is 6.0%.

Interest paid on borrowings was $5,881,000, $7,064,000, and $1,361,000 for 2001,
2000 and 1999.

---------------------------------------------------------------------
Maturities in years ending December 31
   2002                                                    $65,093
   2003                                                     17,360
   2004                                                        915
   2005                                                      4,801
   2006                                                        216
   Thereafter                                                  198
---------------------------------------------------------------------
                                                           $88,583
=====================================================================


9.   INCOME TAXES
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------
                                                                   December 31
------------------------------------------------------------------------------------------
                                                               2001            2000
------------------------------------------------------------------------------------------
<S>                                                            <C>          <C>
Deferred tax assets
  Deferred compensation                                       $    163        $      92
   General loan loss reserves                                      669              550
   Net unrealized loss on securities available for sale            464               --
   Other                                                           186              155
------------------------------------------------------------------------------------------
                                                                 1,482              797
------------------------------------------------------------------------------------------
Deferred tax liabilities
   FHLB stock dividends                                           (477)            (443)
   Tax bad debt reserves                                          (146)            (218)
   Purchase accounting adjustments                                (153)            (101)
   Deferred loan fees                                              (97)            (225)
   Mortgage servicing rights                                      (358)            (283)
   Other                                                          (146)            (115)
------------------------------------------------------------------------------------------
                                                                (1,377)          (1,385)
------------------------------------------------------------------------------------------
         Net deferred tax asset (liability)                    $   105        $    (588)
==========================================================================================
</TABLE>

                                      68
<PAGE>

Ameriana Bancorp
Notes to Consolidated Financial Statements
(table dollar amounts in thousands, except share data)


The effective income tax rate on income from continuing operations is reconciled
to the statutory corporate tax rate as follows:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------
                                                                 Year Ended December 31
-------------------------------------------------------------------------------------------------------
                                                         2001             2000             1999
-------------------------------------------------------------------------------------------------------
<S>                                                      <C>               <C>              <C>
Statutory federal tax rate                               34.0%             34.0%            34.0%
State income taxes, net of federal tax benefit            2.8               1.4              4.4
Tax credits                                              (4.0)             (4.5)            (4.3)
Cash surrender value of life insurance                   (6.1)             (7.0)            (3.2)
Other                                                     1.1                .7              (.3)
--------------------------------------------------------------------------------------------------------
Effective tax rate                                       27.8%             24.6%            30.6%
=======================================================================================================
</TABLE>

The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------
                                   Year Ended December 31
-------------------------------------------------------------------------
                           2001             2000             1999
-------------------------------------------------------------------------
<S>                         <C>              <C>              <C>
Federal
   Current                  $1,448           $1,172           $1,094
   Deferred                   (205)            (111)              55
-------------------------------------------------------------------------
                             1,243            1,061            1,149
-------------------------------------------------------------------------
State
   Current                     246               71              297
   Deferred                    (24)              32               21
-------------------------------------------------------------------------
                               222              103              318
--------------------------------------------------------------------------
                            $1,465           $1,164           $1,467
=========================================================================
</TABLE>

The Company paid $969,000, $1,624,000 and $1,749,000 of state and federal income
taxes in 2001, 2000 and 1999.


10.  EMPLOYEE BENEFITS

The  Company is a  participating  employer in a  multi-employer  defined-benefit
pension  plan and a 401(k) plan.  The plans cover  substantially  all  full-time
employees  of  the  Company.  Since  the  defined-benefit   pension  plan  is  a
multi-employer  plan, no separate actuarial  valuations are made with respect to
each  participating  employer.  Contributions  are not required because the plan
reached the Internal Revenue Service's full funding limitation.  Pension expense
for the plans  totaled  $5,000,  $38,000  and  $39,000  in 2001,  2000 and 1999,
respectively.

The Company has  arrangements  that  provide  retirement  and death  benefits to
certain  officers  and  directors.  The  accrual of benefits  totaled  $420,000,
$235,000 and $47,000 for 2001, 2000 and 1999. In connection with these and other
benefits,  life insurance has been purchased with the proceeds from the policies
to be utilized for the payment of benefits.

The Company has entered into employment  agreements  with certain  officers that
provide  for the  continuation  of salary and certain  benefits  for a specified
period of time  under  certain  conditions.  Under the terms of the  agreements,
these  payments  could occur in the event of a change in control of the Company,
as defined, along with other specific conditions. The contingent liability under
these agreements is generally three times the annual salary of the officer.

                                      69
<PAGE>

Ameriana Bancorp
Notes to Consolidated Financial Statements
(table dollar amounts in thousands, except share data)


Under the 1987 Stock  Option Plan and the 1996 Stock Option and  Incentive  Plan
("1996 Plan"), the Company has granted options to individuals to purchase common
stock at a price equal to the fair market value at the date of grant, subject to
the terms and conditions of the plans.  Plan terms permit  certain  nonincentive
stock  options  to be  granted  at less  than  market  value  at plan  committee
discretion.  Options  vest and are fully  exercisable  when  granted  or over an
extended period subject to continuous  employment or under other  conditions set
forth in the plans. The period for exercising options shall not exceed ten years
from the date of  grant.  The plans  also  permit  grants of stock  appreciation
rights. An amendment of the 1996 Plan extended the plan's term by five years and
increased the number of shares  reserved  under the plan from 176,000 to 352,000
shares.

The following is a summary of the status of the Company's stock option plans and
changes in those plans as of and for the years ended December 31, 2001, 2000 and
1999.
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------
                                                                     Year Ended December 31
----------------------------------------------------------------------------------------------------------------------------
                                                  2001                        2000                         1999
----------------------------------------------------------------------------------------------------------------------------
                                                     WEIGHTED-                     Weighted-                   Weighted-
                                                      AVERAGE                       Average                     Average
                 OPTIONS                 SHARES    EXERCISE PRICE     Shares    Exercise Price    Shares    Exercise Price
----------------------------------------------------------------------------------------------------------------------------
<S>                                       <C>           <C>           <C>             <C>          <C>           <C>
Outstanding at beginning of year          226,786       $14.31        255,505         $14.43       256,481       $14.18
Granted                                        --           --          1,000          10.63         9,800        16.78
Exercised                                      --           --           (825)          9.43        (9,235)       10.11
Forfeited/expired                         (23,276)       13.81        (28,894)         14.01        (1,541)       14.32
                                      -----------                 -----------                  -----------

Outstanding at end of year                203,510        14.37        226,786          14.31       255,505        14.43
                                      ===========                 ===========                  ===========

Options exercisable at year end           201,750       $14.35        215,082         $14.32       216,169       $14.16
Weighted-average fair value of
   options granted during the year             --           --                         $2.35                      $3.80

</TABLE>

As of December 31, 2001, other  information in exercise price ranges for options
outstanding and exercisable is as follows:
<TABLE>
<CAPTION>
                                Outstanding                                                       Exercisable
-----------------------------------------------------------------------------------       -------------------------------
                                             Weighted-           Weighted-Average                            Weighted-
    Exercise Price          Number            Average         Remaining Contractual            Number         Average
         Range             of Shares      Exercise Price               Life                  of Shares     Exercise Price
-----------------------------------------------------------------------------------       -------------------------------
<S>                    <C>                    <C>                    <C>                         <C>            <C>
$9.43 - 12.53          65,090                 $12.46                 4.1 years                   65,090         $12.46
14.32 - 18.30          138,420                 15.26                 5.4 years                  136,660          15.25
</TABLE>

There were 171,326  shares under the 1996 Plan  available  for grant at December
31, 2001.

SFAS No. 123, Stock-Based Compensation, established a fair value based method of
accounting for stock-based  compensation plans. Although the Company has elected
to follow APB No. 25, SFAS No. 123 requires pro forma  disclosures of net income
and earnings per share as if the Company had  accounted  for its employee  stock
options under that Statement.  The fair value of each option grant was estimated
on the grant date using an option-pricing model with the following assumptions:
<TABLE>
<CAPTION>
                                                                                                2000            1999
                                                                                          ------------------------------
<S>                                                                                             <C>            <C>
Risk-free interest rates                                                                        6.4%           5.0-6.0%
Dividend yields                                                                                 5.3%            3.7%
Expected volatility factors of market price of common stock                                    27.9%           23.4%

Weighted-average expected life of the options                                                  8 years         8 years

</TABLE>

                                      70
<PAGE>

Ameriana Bancorp
Notes to Consolidated Financial Statements
(table dollar amounts in thousands, except share data)


Under SFAS No. 123, compensation cost is recognized in the amount of the
estimated fair value of the options and amortized to expense over the options'
vesting period. The pro forma effect on net income and earnings per share of
this Statement are as follows:
<TABLE>
<CAPTION>
                                                                              2001           2000             1999
                                                                       -----------------------------------------------
<S>                                                   <C>                   <C>             <C>              <C>
Net income                                            As reported           $3,800          $3,562           $3,332
                                                      Pro forma              3,800           3,529            3,231

Basic and diluted earnings per share                  As reported             1.21            1.13              .98
                                                      Pro forma               1.21            1.12              .95
</TABLE>

11.  SHAREHOLDERS' EQUITY

The payment of dividends by the Company  depends  substantially  upon receipt of
dividends from ABT, which is subject to various  regulatory  restrictions on the
payment of  dividends.  Under current  regulations  ABT may not declare or pay a
cash dividend or repurchase any of its capital stock if the effect thereof would
cause  the net worth of this  entity  to be  reduced  below  regulatory  capital
requirements or the amount required for its liquidation accounts.

In  addition,  without  prior  approval,  current  regulations  allow ABT to pay
dividends to the Company not  exceeding  retained net income for the  applicable
calendar  year to date,  plus  retained net income for the  preceding two years.
Application  is required by ABT to pay dividends in excess of this  restriction.
At December 31, 2001, the  shareholder's  equity of ABT was $43,592,000 of which
$41,442,000 was restricted from dividend distribution to the Company.


12.  EARNINGS PER SHARE
<TABLE>
<CAPTION>
                                                                     Year Ended December 31
------------------------------------------------------------------------------------------------------------------------------
                                               2001                          2000                           1999
------------------------------------------------------------------------------------------------------------------------------
                                            WEIGHTED-                      Weighted-                      Weighted-
                                             AVERAGE  PER SHARE             Average  Per Share             Average  Per
                                    INCOME   SHARES     AMOUNT    Income    Shares     Amount    Income    Shares   Share
                                                                                                                     Amount
------------------------------------------------------------------------------------------------------------------------------

Basic Earnings Per Share
<S>                                 <C>    <C>           <C>     <C>      <C>           <C>      <C>     <C>            <C>
   Income available to common       $3,800 3,146,616     $1.21   $3,562   3,146,451     $1.13    $3,332  3,386,444      $.98
     shareholders                                        =====                          =====                           ====
Effect Of Dilutive Stock Options        --     1,352                 --         110                  --     30,291
                                    ----------------             ------------------            -------------------
Diluted Earnings Per Share
   Income available to common
     shareholders and assumed       $3,800 3,147,968     $1.21   $3,562   3,146,561     $1.13    $3,332  3,416,735      $.98
     conversions                    ==========================================================================================
</TABLE>

Options to purchase  138,420 shares of common stock at exercise prices of $14.32
to $18.30 per share were  outstanding at December 31, 2001 but were not included
in  the  computation  of  diluted   earnings  per  share  because  the  options'
exercisable  price was  greater  than the  average  market  price of the  common
shares.

13.  REGULATORY CAPITAL

ABT is subject to various  regulatory capital  requirements  administered by the
federal  banking  agencies and is assigned to a capital  category.  The assigned
capital  category is largely  determined  by three  ratios  that are  calculated
according  to the  regulations.  The ratios  are  intended  to  measure  capital
relative to assets and credit risk  associated with those assets and off-balance
sheet  exposures.  The  capital  category  assigned  can  also  be  affected  by
qualitative judgments made by regulatory agencies about the risk inherent in the
entity's activities that are not part of the calculated ratios.

                                      71
<PAGE>

Ameriana Bancorp
Notes to Consolidated Financial Statements
(table dollar amounts in thousands, except share data)


There are five capital categories defined in the regulations,  ranging from well
capitalized  to  critically  undercapitalized.  Classification  in  any  of  the
undercapitalized  categories can result in actions by regulators that could have
a material effect on a bank's operations.  At December 31, 2001 and 2000, ABT is
categorized  as  well   capitalized  and  met  all  subject   capital   adequacy
requirements.  There are no conditions or events since  December 31, 2001,  that
management believes have changed this classification.

Actual and required capital amounts and ratios for ABT are as follows:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------
                                                                                         DECEMBER 31, 2001
-------------------------------------------------------------------------------------------------------------------------------
                                                                              REQUIRED FOR
                                                                            ADEQUATE CAPITAL(1)          ACTUAL CAPITAL
------------------------------------------------------------------------------------------------------------------------------
                                                                           RATIO        AMOUNT       RATIO         AMOUNT
------------------------------------------------------------------------------------------------------------------------------
<S>                                                                        <C>        <C>           <C>         <C>
Total risk-based capital (1) (to risk-weighted assets)                      8.0%       $27,521       12.5%       $42,923
Tier 1 capital (to risk-weighted assets)                                    4.0         13,760       12.0         41,193
Core capital (1) (to adjusted total assets)                                 3.0         16,481        7.5         41,193
Core capital (1) (to adjusted tangible assets)                              2.0         10,988        7.5         41,193
Tangible capital (to adjusted total assets)                                 1.0          8,241        7.5         41,193

<FN>
(1) As defined by regulatory agencies
</FN>
</TABLE>

<TABLE>
<CAPTION>

------------------------------------------------------------------------------------------------------------------------------
                                                                                         DECEMBER 31, 2000
-------------------------------------------------------------------------------------------------------------------------------
                                                                              REQUIRED FOR
                                                                           ADEQUATE CAPITAL(1)          ACTUAL CAPITAL
------------------------------------------------------------------------------------------------------------------------------
                                                                          RATIO        AMOUNT       RATIO         AMOUNT
------------------------------------------------------------------------------------------------------------------------------
<S>                                                                         <C>        <C>           <C>         <C>
Total risk-based capital (1) (to risk-weighted assets)                      8.0%       $25,258       13.1%       $41,270
Tier 1 capital (to risk-weighted assets)                                    4.0         12,629       12.8         40,315
Core capital (1) (to adjusted total assets)                                 3.0         16,669        7.3         40,315
Core capital (1) (to adjusted tangible assets)                              2.0         11,113        7.3         40,315
Tangible capital (to adjusted total assets)                                 1.5          8,335        7.3         40,315

<FN>
(1) As defined by regulatory agencies
</FN>
</TABLE>

ABT has qualified under  provisions of the Internal  Revenue Code that permit it
to deduct from taxable  income a provision  for bad debts which differs from the
provision for such losses charged against income. Accordingly, retained earnings
at December 31, 2001, includes an allocation of income to bad debt deductions of
approximately  $11,883,000  for which no provision for federal  income taxes has
been made. If, in the future,  this portion of retained earnings is used for any
purpose other than to absorb bad debt losses, including redemption of bank stock
or excess  dividends,  or loss of "bank"  status,  federal  income  taxes may be
imposed  at the then  applicable  rates.  The  unrecorded  deferred  income  tax
liability on the above amount was approximately $4,000,000.


14.  FAIR VALUE OF FINANCIAL INSTRUMENTS

Fair  values are based on  estimates  using  present  value and other  valuation
techniques  in instances  where quoted market  prices are not  available.  These
techniques  are  significantly  affected  by  the  assumptions  used,  including
discount  rates and  estimates of future cash flows.  As such,  the derived fair
value estimates cannot be compared to independent markets and, further,  may not
be realizable in an immediate  settlement of the instruments.  Accordingly,  the
aggregate  fair value  amounts  presented  do not  represent,  and should not be
construed to represent, the underlying value of the Company.

                                      72
<PAGE>

Ameriana Bancorp
Notes to Consolidated Financial Statements
(table dollar amounts in thousands, except share data)


The following table presents the estimates of fair value of financial
instruments:
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------
                                                                     December 31
----------------------------------------------------------------------------------------------------------
                                                          2001                          2000
----------------------------------------------------------------------------------------------------------
                                                CARRYING         FAIR         Carrying         Fair
                                                  VALUE          VALUE          Value          Value
----------------------------------------------------------------------------------------------------------
<S>                                              <C>           <C>             <C>           <C>
Assets
   Cash and cash equivalents                     $  11,801     $  11,801       $  19,031     $  19,031
   Investment securities                           140,629       140,629          99,707        97,863
   Loans                                           347,465       343,478         397,286       398,717
   Interest receivable                               3,263         3,263           4,496         4,496
   Stock in FHLB                                     7,365         7,365           7,265         7,265
   Cash surrender value of life insurance           18,035        18,035          17,089        17,089

Liabilities
   Deposits                                        412,413       414,413         367,595       369,477
   Borrowings                                       88,583        90,642         141,172       142,182
   Notes payable                                       930           930           2,421         2,421
   Interest payable                                    982           982             950           950
   Drafts payable                                    6,092         6,092           3,039         3,039
</TABLE>

The following  methods and  assumptions  were used to estimate the fair value of
each class of financial instrument:

Cash and Cash  Equivalents,  Stock  in FHLB  and  Cash  Surrender  Value of Life
Insurance:  The carrying  amounts  reported in the  consolidated  balance sheets
approximate those assets' fair values.

Investment Securities: Fair values are based on quoted market prices.

Loans:  The fair values for loans are  estimated  using a  discounted  cash flow
calculation  that applies  interest  rates used to price new similar  loans to a
schedule of aggregated expected monthly maturities on loans.

Interest    Receivable/Payable:    The   fair   value   of   accrued    interest
receivable/payable approximates carrying values.

Deposits:  The fair values of  interest-bearing  demand and savings accounts are
equal to the amount payable on demand at the balance sheet date. Fair values for
certificates of deposit are estimated  using a discounted cash flow  calculation
that applies interest rates currently being offered on deposits to a schedule of
aggregated  expected monthly  maturities on deposits.  A core deposit intangible
component in the fair value  estimate is not included,  and although it would be
impractical  from a cost-benefit  standpoint to estimate that value, the Company
realizes that the dollar amount could be significant.

Borrowings:  The fair value of borrowings is estimated  using a discounted  cash
flow  calculation,  based on  borrowing  rates  for  periods  comparable  to the
remaining terms to maturity of the borrowings.

Drafts Payable: The fair value approximates carrying value.


                                      73
<PAGE>
Ameriana Bancorp
Notes to Consolidated Financial Statements
(table dollar amounts in thousands, except share data)


15.  PARENT COMPANY FINANCIAL INFORMATION

The  following  are  condensed  financial  statements  for the  parent  company,
Ameriana Bancorp, only:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------
                                                                                  December 31
------------------------------------------------------------------------------------------------------------
BALANCE SHEETS                                                                 2001             2000
------------------------------------------------------------------------------------------------------------
<S>                                                                          <C>                <C>
Assets
   Cash                                                                      $     1            $     2
   Advances to subsidiaries                                                    1,341              1,825
   Investment in ABT                                                          42,896             41,867
   Investments in other subsidiaries and affiliates                              371              1,230
   Other assets                                                                    6                174
-------------------------------------------------------------------------------------------------------------
                                                                             $44,615            $45,098
============================================================================================================
Liabilities and shareholders' equity
   Notes payable to subsidiaries                                             $   243            $   465
   Notes payable, other                                                          930              2,421
   Other liabilities                                                             547                501
   Shareholders' equity                                                       42,895             41,711
-------------------------------------------------------------------------------------------------------------
                                                                             $44,615            $45,098
============================================================================================================
</TABLE>

<TABLE>
------------------------------------------------------------------------------------------------------------
                                                                     Year Ended December 31
------------------------------------------------------------------------------------------------------------
STATEMENTS OF INCOME                                        2001              2000              1999
------------------------------------------------------------------------------------------------------------
<S>                                                          <C>               <C>              <C>
Dividends from subsidiaries                                  $3,000            $2,888           $5,150
Interest income                                                  47                30               84
-------------------------------------------------------------------------------------------------------------
                                                              3,047             2,918            5,234
Operating expense                                               594               664              538
------------------------------------------------------------------------------------------------------------
   Income before income tax benefit and equity
     in undistributed income of subsidiaries                  2,453             2,254            4,696
Income tax benefit                                              511               521              480
-------------------------------------------------------------------------------------------------------------
                                                              2,964             2,775            5,176
Equity in undistributed income of subsidiaries
   and affiliates (distributions in excess of
   equity in income)                                            836               787           (1,844)
-------------------------------------------------------------------------------------------------------------
Net Income                                                   $3,800            $3,562           $3,332
============================================================================================================
</TABLE>


                                      74
<PAGE>

Ameriana Bancorp
Notes to Consolidated Financial Statements
(table dollar amounts in thousands, except share data)

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------
                                                                         Year Ended December 31
---------------------------------------------------------------------------------------------------------------
STATEMENTS OF CASH FLOWS                                        2001              2000             1999
---------------------------------------------------------------------------------------------------------------
<S>                                                              <C>              <C>               <C>
Operating Activities
   Net income                                                    $3,800           $3,562            $3,332
   Items not requiring (providing) cash
     Equity in undistributed income of subsidiaries
       and affiliates                                              (866)            (787)            1,844
     Amortization                                                    28               49                67
     Decrease in other assets                                       147               50                56
     Increase (decrease) in other liabilities                        35               42               (25)
----------------------------------------------------------------------------------------------------------------
         Net cash provided by operating activities                3,144            2,916             5,274
---------------------------------------------------------------------------------------------------------------
Investing Activities
   Advance to subsidiaries                                          484             (722)               --
   Repayment of advances to subsidiaries                             --               --             1,654
   Purchase of premises and equipment                                --               --              (176)
   Proceeds from sale of premises and equipment                      --              176                --
----------------------------------------------------------------------------------------------------------------
         Net cash provided by (used in) investing activities        484             (546)            1,478
---------------------------------------------------------------------------------------------------------------
Financing Activities
   Proceeds from note payable to subsidiary                          --               --             2,300
   Repayment of notes payable to subsidiaries                      (250)          (2,550)             (250)
   Proceeds from other borrowings                                    --            2,500                --
   Repayment of other borrowings                                 (1,491)            (440)              (90)
   Cash dividends paid                                           (1,888)          (1,888)           (2,063)
   Purchase of common stock                                          --               --            (6,747)
   Proceeds from exercise of stock options                           --                8                99
----------------------------------------------------------------------------------------------------------------
         Net cash used in financing activities                   (3,629)          (2,370)           (6,751)
---------------------------------------------------------------------------------------------------------------
Change in cash                                                       (1)              --                 1
Cash at beginning of year                                             2                2                 1
---------------------------------------------------------------------------------------------------------------
Cash at end of year                                           $       1        $       2          $      2
===============================================================================================================
</TABLE>


                                      75
<PAGE>

Ameriana Bancorp
Notes to Consolidated Financial Statements
(table dollar amounts in thousands, except share data)


16.  QUARTERLY DATA (UNAUDITED)
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------
                                            FIRST            SECOND            THIRD            FOURTH
                                            QUARTER          QUARTER          QUARTER           QUARTER
------------------------------------------------------------------------------------------------------------
2001
<S>                                          <C>              <C>              <C>               <C>
   TOTAL INTEREST INCOME                     $9,883           $9,113           $8,565            $9,072
   TOTAL INTEREST EXPENSE                     6,651            6,211            5,768             5,613
   NET INTEREST INCOME                        3,232            2,902            2,797             3,459
   PROVISION FOR LOAN LOSSES                     90               90               90                90
   NET INCOME                                 1,053              780              751             1,216
------------------------------------------------------------------------------------------------------------
   BASIC AND DILUTED EARNINGS PER SHARE       .33               .25              .24               .39
------------------------------------------------------------------------------------------------------------
   DIVIDENDS DECLARED PER SHARE               .15               .15              .15               .16
------------------------------------------------------------------------------------------------------------
   STOCK PRICE RANGE
     HIGH                                    13.00             14.01           13.75              13.80
     LOW                                     10.31             10.35           12.00              11.75
------------------------------------------------------------------------------------------------------------
2000
   Total interest income                     $8,501           $9,152           $9,579            $9,787
   Total interest expense                     5,386            5,989            6,565             6,788
   Net interest income                        3,115            3,163            3,014             2,999
   Provision for loan losses                     70              109              119               119
   Net income                                 1,065              876              863               758
------------------------------------------------------------------------------------------------------------
   Basic and diluted earnings per share         .34              .28              .27               .24
------------------------------------------------------------------------------------------------------------
   Dividends declared per share                 .15              .15              .15               .15
------------------------------------------------------------------------------------------------------------
   Stock price range
     High                                     14.50            12.75           12.94              13.13
     Low                                       7.56             9.00            9.88              10.50
------------------------------------------------------------------------------------------------------------
</TABLE>


17.  NEW ACCOUNTING PRONOUNCEMENT

The FASB recently adopted SFAS No. 142,  Goodwill and Other  Intangible  Assets.
This Statement  establishes new accounting and reporting  standards for acquired
goodwill and other  intangible  assets.  The Statement  addresses how intangible
assets that are acquired  individually  or with a group of other assets (but not
those acquired in a business  combination)  should be accounted for in financial
statements  upon their  acquisition.  It also  addresses  how goodwill and other
intangible assets (including those acquired in a business combination) should be
accounted  for after  they  have  been  initially  recognized  in the  financial
statements. SFAS No. 142 is effective for the Company beginning January 1, 2002.
Upon  adoption of SFAS No.  142,  the Company  will no longer  amortize  certain
goodwill it currently has recorded in the consolidated balance sheets.  Goodwill
that is no longer  amortized will be reviewed for  impairment.  Amortization  of
goodwill for 2001 totaled $159,000.


                                      76

<PAGE>

ITEM  9.  CHANGES  IN AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
          FINANCIAL DISCLOSURE
--------------------------------------------------------------------------------

     Not applicable.

                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
------------------------------------------------------------

     For  information  concerning the directors of the Company,  the information
contained under the section  captioned  "Proposal I -- Election of Directors" in
the Proxy  Statement  is  incorporated  herein  by  reference.  For  information
concerning  the  executive  officers of the  Company,  see "Item 1.  Business --
Executive  Officers"  under Part I of the Annual Report,  which is  incorporated
herein by reference.

     For  information  concerning  compliance with Section 16(a) of the Exchange
Act,  see the section  titled  "Section  16(a)  Beneficial  Ownership  Reporting
Compliance" in the Proxy Statement, which is incorporated herein by reference.

ITEM 11.  EXECUTIVE COMPENSATION
--------------------------------

     The  information  contained  under the  section  captioned  "Proposal  I --
Election of  Directors  --  Executive  Compensation"  in the Proxy  Statement is
incorporated herein by reference.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
------------------------------------------------------------------------

     (a)  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

          Information  required by this item is incorporated herein by reference
          to the section captioned "Voting Securities and Security Ownership" in
          the Proxy Statement.

     (b)  SECURITY OWNERSHIP OF MANAGEMENT

          Information  required by this item is incorporated herein by reference
          to the section captioned "Voting Securities and Security Ownership" in
          the Proxy Statement.

     (c)  CHANGES IN CONTROL

          The Company is not aware of any arrangements,  including any pledge by
          any person of securities of the Company, the operation of which may at
          a subsequent date result in a change in control of the Company.


                                       77
<PAGE>


ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
--------------------------------------------------------

     The information  required by this item is incorporated  herein by reference
to the section captioned "Transactions with Management" in the Proxy Statement.

                                     PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
--------------------------------------------------------------------------

     (a)  LIST OF DOCUMENTS FILED AS PART OF THIS REPORT
          ----------------------------------------------

          (1)  Financial  Statements.   The  following   consolidated  financial
statements are filed under Item 8 hereof:

               Report of Independent Auditors

               Consolidated Balance Sheets at December 31, 2001 and 2000

               Consolidated  Statements of Income for Each of the Three Years in
               the Period Ended December 31, 2001

               Consolidated  Statements of Shareholders'  Equity for Each of the
               Three Years in the Period Ended December 31, 2001

               Consolidated Statements of Cash Flows for Each of the Three Years
               in the Period Ended December 31, 2001

               Notes to Consolidated Financial Statements

          (2) Financial Statement  Schedules.  All schedules for which provision
is made in the applicable  accounting  regulations are either not required under
the related instructions or are inapplicable, and therefore have been omitted.

          (3)  Exhibits.  The  following  is a list of  exhibits as part of this
Report and is also the Exhibit Index.

                  NO.      DESCRIPTION
                  ---      -----------
                  3        Ameriana Bancorp Articles of Incorporation and Bylaws
                           -- incorporated herein by reference to the Company's
                           Registration Statement on Form S-4 filed with the SEC
                           on September 18, 1989

                  10.1*    Ameriana Bancorp 1987 Stock Option Plan incorporated
                           herein by reference to the Company's Registration
                           Statement on Form S-8 filed with the SEC on March 30,
                           1990;


                                       78
<PAGE>
                           other option agreements with Charles M. Drackett,
                           Jr., Michael E. Kent and Ronald R. Pritzke
                           incorporated herein by reference to the Company's
                           Registration Statement on Form S-8 filed with the SEC
                           on May 17, 1996

                  10.2*    Employment Agreement, dated February 26, 2001,
                           between Ameriana Bank & Trust and Harry J. Bailey --
                           incorporated herein by reference to the Company's
                           Annual Report on Form 10-K filed with the SEC on
                           March 29, 2001

                  10.3*    Employment Agreement, dated February 26, 2001,
                           between Ameriana Bank & Trust and Timothy G. Clark --
                           incorporated herein by reference to the Company's
                           Annual Report on Form 10-K filed with the SEC on
                           March 29, 2001

                  10.4*    Employment Agreement, dated February 26, 2001,
                           between Ameriana Bank & Trust and Richard E. Welling
                           -- incorporated herein by reference to the Company's
                           Annual Report on Form 10-K filed with the SEC on
                           March 29, 2001

                  10.6*    Ameriana Bank of Indiana,  F.S.B.  Director
                           Supplemental  Retirement  Program  Director Agreement
                           --  incorporated  herein by reference to the
                           Company's  Annual Report on Form 10-K filed with
                           the SEC on March 30, 2000

                  10.7*    Ameriana Bank of Indiana, F.S.B. Director
                           Supplemental Retirement  Program  Director Agreement,
                           dated June 4, 1999, between Ameriana Bank of Indiana,
                           F.S.B. and Paul W. Prior --  incorporated  herein by
                           reference to the Company's  Annual Report on Form
                           10-K filed with the SEC on March 30, 2000

                  10.8*    Executive  Supplemental  Retirement Plan Agreement,
                           dated May 6, 1999, between Ameriana Bank of Indiana,
                           F.S.B. and Harry J. Bailey -- incorporated  herein by
                           reference to the Company's Annual Report on Form 10-K
                           filed with the SEC on March 30, 2000

                  10.9*    Executive  Supplemental  Retirement Plan Agreement,
                           dated May 6, 1999, between Ameriana Bank of Indiana,
                           F.S.B.  and Timothy G. Clark --  incorporated  herein
                           by  reference to the Company's Annual Report on Form
                           10-K filed with the SEC on March 29, 2001

                  10.10*   Executive  Supplemental  Retirement Plan Agreement,
                           dated May 6, 1999, between Ameriana Bank of Indiana,
                           F.S.B.  and Richard E. Welling -- incorporated
                           herein by reference to the Company's Annual Report
                           on Form 10-K filed with the SEC on March 29, 2001

                                       79
<PAGE>

                  10.11*   Change-in-Control Severance Agreement, dated February
                           26, 2001, between Ameriana Bank and Trust and Nancy
                           A. Rogers -- incorporated herein by reference to the
                           Company's Annual Report on Form 10-K filed with the
                           SEC on March 29, 2001

                  10.12*   Change-in-Control Severance Agreement, dated February
                           26, 2001, between Ameriana Bank and Trust and Jan F.
                           Wright -- incorporated herein by reference to the
                           Company's Annual Report on Form 10-K filed with the
                           SEC on March 29, 2001

                  10.13*   Change-in-Control Severance Agreement, dated February
                           26, 2001, between Ameriana Bank and Trust and Deborah
                           Bell - incorporated by reference to the Company's
                           Quarterly Report on Form 10-Q for the quarter ended
                           March 31, 2001

                  10.14*   Change-in-Control Severance Agreement, dated February
                           26, 2001, between Ameriana Bank and Trust and Ronald
                           M. Holloway -- incorporated by reference to the
                           Company's Quarterly Report on Form 10-Q for the
                           quarter ended March 31, 2001

                  21       Subsidiaries

                  23       Consent of BKD, LLP
         -------
         *  Management contract or compensation plan or arrangement

          (b) REPORTS ON FORM 8-K. The Company did not file any Current  Reports
              -------------------
on Form 8-K during the fourth quarter of the fiscal year covered by this Report.

          (c) EXHIBITS.  The exhibits required by Item 601 of Regulation S-K are
              --------
either filed as part of this Report or incorporated by reference herein.

          (d) FINANCIAL  STATEMENTS  AND SCHEDULES  EXCLUDED FROM ANNUAL REPORT.
              ------------------------------------------------------------------
There  are no other  financial  statements  and  financial  statement  schedules
required  by  Regulation  S-X  which  are  excluded  from the  Annual  Report to
Stockholders  pursuant  to Rule  14a-3(b)(1)  which are  required to be included
herein.

                                       80
<PAGE>

                                   SIGNATURES

         Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                        AMERIANA BANCORP


Date:    March 25, 2002                 By:/s/ Harry J. Bailey
                                           ------------------------------------
                                           Harry J. Bailey
                                           President and Chief Executive Officer
                                           (Duly Authorized Representative)

         Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons on behalf of the registrant
in the capacities and on the dates indicated.


By: /s/ Harry J. Bailey                                       March 25, 2002
    -------------------------------------------------
    Harry J. Bailey
    President, Chief Executive Officer
    and Director
    (Principal Executive Officer)


By: /s/ Richard E. Welling                                    March 25, 2002
    -------------------------------------------------
    Richard E. Welling
    Senior Vice President - Treasurer
    (Principal Financial and Accounting Officer)


By: /s/ Paul W. Prior                                         March 25, 2002
    -------------------------------------------------
    Paul W. Prior
    Chairman of the Board and Director


By: /s/ Donald C. Danielson                                   March 27, 2002
    -------------------------------------------------
    Donald C. Danielson
    Director


By:
    -------------------------------------------------
       Charles M. Drackett, Jr.
       Director


By: /s/ R. Scott Hayes                                        March 27, 2002
    -------------------------------------------------
    R. Scott Hayes
    Director


By: /s/ Michael E. Kent                                       March 27, 2002
    -------------------------------------------------
    Michael E. Kent
    Director


By:
    -------------------------------------------------
       Ronald R. Pritzke
       Director