<PAGE>
 
                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 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, 1998

[_]  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
                    ---------------------------------------
                               (Title of Class)

     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. [_]

     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 System on March 17, 1999 was $49,517,000
(for purposes of this calculation, directors and executive officers are not
treated as "non-affiliates").

     As of March 15, 1999, there were issued and outstanding 3,471,386 shares of
the registrant's common stock.

                       DOCUMENTS INCORPORATED BY REFERENCE

1.   Portions of Annual Report to Shareholders for the Fiscal Year Ended
     December 31, 1998 ("Annual Report") (Part II).

2.   Portions of Proxy Statement for the 1999 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 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 the holding company
for Ameriana Bank of Indiana, F.S.B., New Castle, Indiana ( "Ameriana-Indiana")
and "Ameriana Bank of Ohio, F.S.B," Cincinnati, Ohio ("Ameriana-Ohio").
Ameriana-Indiana and Ameriana-Ohio, both Federally chartered savings banks, are
collectively referred to as the "Institutions."

         The Company holds all of the stock of the Institutions and, through
them, operates two separate savings banks. In addition, the Company owns Indiana
Title Insurance Company, which provides title insurance services in Central
Indiana. The Company owns Ameriana Insurance Agency, Inc. ("AIA"), which provide
insurance sales with offices

                                       1
<PAGE>
 
in New Castle, Greenfield, and Avon, Indiana. The Company also maintains a
minority interest in a limited partnership organized to acquire and manage real
estate investments which qualify for federal tax credits.

         Ameriana-Indiana. Ameriana-Indiana is a federally chartered stock
savings bank which began operations in 1890. Since 1935, Ameriana-Indiana has
been a member of the Federal Home Loan Bank System and its savings deposits are
federally insured by the Savings Association Insurance Fund ("SAIF"),
administered by the Federal Deposit Insurance Corporation ("FDIC"). Ameriana-
Indiana's main office is located at 2118 Bundy Avenue, New Castle, Indiana. It
also conducts business through seven branch offices located in New Castle,
Middletown, Knightstown, Morristown, Greenfield, Anderson and Avon, Indiana.
Ameriana-Indiana, through a wholly owned subsidiary, Ameriana Financial
Services, Inc., has an ownership interest in a life insurance underwriting firm
located in New Orleans, Louisiana, and offers a full line of investments and
securities products through its brokerage centers located in New Castle,
Greenfield and Avon, Indiana. Ameriana-Indiana recently began the construction
of a new full service banking facility in New Palestine, Indiana to extend its
reach southeast of the greater Indianapolis area. This new branch is expected to
open in the second half of 1999.

         The business of Ameriana-Indiana 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. Ameriana-Indiana also makes home improvement loans and consumer loans
and through its subsidiary engages in insurance and brokerage activities.
Ameriana-Indiana recently established a new Business Services Division to
provide specialized lending and other banking services for business customers.
The principal sources of funds for Ameriana-Indiana's lending activities include
deposits received from the general public, principal amortization and prepayment
of loans. Ameriana-Indiana's primary sources of income are interest and fees on
loans and interest on investments. Ameriana-Indiana has from time to time
purchased loans and loan participations in the secondary market. Ameriana-
Indiana also invests in various federal and government agency obligations and
other investment securities permitted by applicable laws and regulations,
including mortgage-backed securities. Ameriana-Indiana's principal expenses are
interest paid on deposit accounts and operating expenses incurred in the
operation of Ameriana-Indiana.

         Ameriana-Ohio. Ameriana-Ohio is a federally chartered stock savings
bank which began operations in 1915. Ameriana-Ohio has been a member of the
Federal Home Loan Bank System since 1933, and its savings deposits have

                                       2
<PAGE>
 
been federally insured since 1952. Ameriana-Ohio's main office is located at
7200 Blue Ash Road, Cincinnati, Ohio. Ameriana-Ohio's primary market area
includes Deer Park and nearby communities in Hamilton county, as well as
adjoining Butler, Clermont and Warren counties. On July 1, 1998, Ameriana-Ohio
acquired Cardinal State Bank, an Ohio-chartered commercial bank which conducted
business through a main office and one branch office located in the Cincinnati,
Ohio area. With the Cardinal acquisition and merger into Ameriana-Ohio,
Ameriana-Ohio now has two branch offices in Maineville and Loveland, Ohio.

         The business of Ameriana-Ohio consists primarily of attracting deposits
from the general public and originating permanent and construction first
mortgage loans on one- to four-family residences, as well as second mortgage
loans on such properties and other types of consumer loans. Ameriana-Ohio also
invests in mortgage-backed securities. The principal sources of funds for
Ameriana-Ohio's lending activities include deposits received from the general
public, principal amortization and prepayment of loans. Ameriana-Ohio's primary
sources of income are interest and fees on loans and interest on investments.
Ameriana-Ohio's principal expenses are interest paid on deposit accounts and
operating expenses.

Proposed Legislative Changes

         Legislation has been reintroduced in the U.S. House of Representatives
which calls for the modernization of the banking system and which would
significantly affect the operations and regulatory structure of the financial
services industry, including savings institutions like Ameriana-Indiana and
Ameriana-Ohio. Management cannot predict at this time what form the final
legislation might take, or if enacted into law, whether such legislation would
result in any significant adverse financial and tax effects. For additional
information, see "-- Regulation -- Proposed Legislative and Regulatory Changes."

Lending and Investment Activities

         General. The principal lending activity of the Institutions 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.

                                       3
<PAGE>
 
         The Institutions 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 Ameriana-
Indiana'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 the majority of Ameriana-Ohio's mortgage loan portfolio is
secured by real estate located in Hamilton, Butler, Clermont and Warren counties
in the state of Ohio.

                                       4
<PAGE>
 
         The following table sets forth information concerning the Company's
aggregate loans by type of loan and security 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,                                 
                                    -----------------------------------------------------------------------------
                                              1998                      1997                       1996
                                    -----------------------    -----------------------    -----------------------    
                                      Amount        Percent      Amount        Percent      Amount        Percent    
                                      ------        -------      ------        -------      ------        -------
                                                               (Dollars in thousands)
<S>                                 <C>               <C>      <C>             <C>         <C>            <C>
Type of Loan:
  Conventional real estate loans:
  Non-residential loans .........   $ 15,282           5.47%   $  4,930           1.64%   $  3,096           1.07%   
  Residential loans .............    232,993          83.36     255,591          85.06     240,948          83.58    

Commercial loans ................        862            .31          19            .01          24            .01    

Consumer Loans:
  Mobile home and auto loans ....     21,854           7.82      31,818          10.39      31,706          11.00    
  Education loans ...............         --             --          --             --          --             --    
  Loans secured by deposits .....      1,351            .48       1,308            .44       1,395            .48    
  Home improvement loans ........      2,774            .99       5,629           1.87       5,645           1.96    
  Other .........................      4,387           1.57       1,177            .59       5,486           1.90    
                                    --------   ------------    --------   ------------    --------   ------------    
     Total ......................    279,503         100.00%    300,472         100.00%    288,300         100.00%   
                                    --------   ============    --------   ============    --------   ============    

Less:
  Loans in process ..............     12,123                      4,876                      4,495                   
  Deferred loan fees ............        102                         44                        100                   
  Loan loss reserve .............      1,284                      1,163                      1,104                   
                                    --------                   --------                   --------                   
   Sub Total ....................     13,509                      6,083                      5,699                   
                                    --------                   --------                   --------                   
     Total ......................   $265,994                   $294,389                   $282,601                   
                                    ========                   ========                   ========                   

Type of Security:
 Residential
   Single Family (1-4 units) ....   $227,574          81.42%    252,153          83.92%   $238,440          82.71%   
   5 or more dwelling units .....      5,419           1.94       3,438           1.14       2,508            .87    
 Other improved real estate .....     15,282           5.47       4,930           1.16       3,096           1.07    
 Commercial or industrial leases         862            .31          19            .01          24            .01    
 Deposit accounts ...............      1,351            .48       1,308            .44       1,395            .48    
 Mobile home and auto ...........     21,854           7.82      31,218          10.39      31,706          11.00    
 Other ..........................      7,161           2.56       7,406           2.46      11,131           3.86    
                                    --------   ------------    --------   ------------    --------   ------------    
     Total ......................    279,503         100.00%    300,472         100.00%    288,300         100.00%   
                                    --------   ============    --------   ============    --------   ============    
Less:
  Loans in process ..............     12,123                      4,876                      4,495                   
  Deferred loan fees ............        102                         44                        100                   
  Loan loss reserve .............      1.284                      1,163                      1,104                   
                                    --------                   --------                   --------                   
   Sub Total ....................     13,509                      6,083                      5,699                   
                                    --------                   --------                   --------                   
     Total ......................   $265,994                   $294,389                   $282,601                   
                                    ========                   ========                   ========                   
<CAPTION> 
                                              1995                    1994              
                                    -----------------------   -----------------------   
                                      Amount        Percent     Amount        Percent   
                                      ------        -------     ------        -------
                                                  (Dollars in thousands)                                          
<S>                                <C>              <C>        <C>            <C>
Type of Loan:                                                                           
  Conventional real estate loans:                                                       
  Non-residential loans .........   $  3,670           1.35%  $  5,795           2.18%  
  Residential loans .............    230,992          84.69    237,579          89.34   
                                                                                        
Commercial loans ................         29            .01         39            .01   
                                                                                        
Consumer Loans:                                                                         
  Mobile home and auto loans ....     29,735          10.90     15,671           5.89   
  Education loans ...............         --             --        255            .10   
  Loans secured by deposits .....      1,318            .48      1,249            .47   
  Home improvement loans ........         56            .02        109            .04   
  Other .........................      6,947           2.55      5,231           1.97   
                                    --------   ------------   --------   ------------   
     Total ......................    272,747         100.00%   265,928         100.00%  
                                    --------   ============   --------   ============   
                                                                                        
Less:                                                                                   
  Loans in process ..............      5,463                     5,389                  
  Deferred loan fees ............        215                       398                  
  Loan loss reserve .............      1,076                     1,022                  
                                    --------                  --------                  
   Sub Total ....................      6,754                     6,809                  
                                    --------                  --------                  
     Total ......................   $265,993                  $259,119                  
                                    ========                  ========                  
                                                                                        
Type of Security:                                                                       
 Residential                                                                            
   Single Family (1-4 units) ....   $227,045          83.24%  $234,601          88.22%  
   5 or more dwelling units .....      3,947           1.45      2,978           1.12   
 Other improved real estate .....      3,670           1.35      5,795           2.18   
 Commercial or industrial leases          29            .01         39            .01   
 Deposit accounts ...............      1,318            .48      1,249            .47   
 Mobile home and auto ...........     29,735          10.90     15,671           5.89   
 Other ..........................      7,003           2.57      5,595           2.11   
                                    --------   ------------   --------   ------------   
     Total ......................    272,747         100.00%   265,928         100.00%  
                                    --------   ============   --------   ============   

Less:                                                                                   
  Loans in process ..............      5,463                     5,389                  
  Deferred loan fees ............        215                       398                  
  Loan loss reserve .............      1,076                     1,022                  
                                    --------                  --------                  
   Sub Total ....................      6,754                     6,809                  
                                    --------                  --------                  
     Total ......................   $265,993                  $259,119                  
                                    ========                  ========                  
</TABLE> 

                                       5
<PAGE>
 
       The following table shows, at December 31, 1998, 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 Institutions 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
                              -----------------------------------------------
                                                        2004 and
                                1999     2000 - 2003   Thereafter     Total  
                              --------   -----------  ------------  ---------
                                              (In thousands)
<S>                           <C>          <C>          <C>          <C>
Type of Loan:
Real estate mortgage .......  $  4,695     $ 20,494     $223,086     $248,275
Other ......................     4,292       21,365        5,571       31,228
                              --------     --------     --------     --------
  Total ....................  $  8,987     $ 41,859     $228,657     $279,503
                              ========     ========     ========     ========
</TABLE> 

       The following table sets forth the dollar amount of the Company's
aggregate loans due after one year from December 31, 1998 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 ...........      $ 87,227      $156,353      $243,580
Other loans ..........................        25,787         1,149        26,936
                                            --------      --------      --------
  Total ..............................      $113,014      $157,502      $270,516
                                            ========      ========      ========
</TABLE> 

       Residential Real Estate Lending. The Institutions' primary lending
activities are the origination of loans on one-to-four family residential
dwelling units. The Institutions currently offer fixed-rate first mortgage 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

                                       6
<PAGE>
 
mortgage market. The 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 Institutions make a fixed-rate mortgage
loan, they determine 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 $116.594 million were
originated for sale during 1998 and $93.498 million were sold at a gain of
$1,055,000. 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.

       The Institutions emphasize the origination of ARMs for portfolio. The
Institutions currently offer 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 or five-year intervals and indexed to the yields on
comparable United States Treasury securities.

       The Institutions limit 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 be obtained for loan-to-value ratios
in excess of 80%. The Institutions limit the loan-to-value ratio to 80% on
second mortgages on one-to-four family dwellings.

       The Institutions' 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 Institutions' lending activities to date. Multi-family
residential structures are generally income producing properties. The
Institutions generally do not lend above 75% of the appraised values of multi-
family residences on first mortgage loans or above 70% on second mortgage loans
(including in the 70% amount any first mortgage loan outstanding against the
property).

       Construction and Commercial Real Estate Lending. The Institutions
originate loans secured by existing commercial properties and construction loans
on residential real estate. The Institutions' commercial real estate loans are
secured by churches, nursing homes, hotels/motels, and other income-producing
properties. The Institutions originate construction loans on single family
residential properties in their primary market areas, and during fiscal 1998
construction loan originations amounted to $39.737 million. The loans are
secured by real estate, and most of the homes

                                       7
<PAGE>
 
to be constructed are already subject to a sales contract at the time the
construction loan is made. The Institutions' construction loans generally range
in size between $50,000 and $500,000, and the Institutions' commercial real
estate loans range from $100,000 to $3,000,000. Substantially all of the
commercial and construction loans originated by the Institutions 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. At December 31, 1998,
Ameriana-Indiana had $21.049 million in outstanding construction loans;
Ameriana-Ohio had $2.127 million in outstanding construction loans.

       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
Institutions have sought to minimize this risk by limiting construction lending
to qualified borrowers in their respective market areas and by limiting the
number of construction loans outstanding at any time to individual builders. In
addition, most of the Institutions' construction loans are made on homes which
are pre-sold, for which permanent financing is already arranged.

       The Institutions' underwriting criteria are designed to evaluate and
minimize the risks of each construction loan. Among other things, the
Institutions consider 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.

       The aggregate amount of loans which a federally chartered savings
institution may make on the security of liens on non-residential real property
generally may not exceed 400% of the institution's regulatory capital. These
limits on non-residential real property lending have not materially affected the
Institutions' respective lending activities.

       Consumer Loans. Federally chartered thrift institutions are authorized to
make secured and unsecured consumer loans up to 35% of the institution's assets.
In addition, a federal thrift institution has lending authority above the 35%
category for certain consumer loans, such as home equity loans, property
improvement loans, mobile home loans and loans secured by savings accounts. The
consumer loans granted by the Institutions have included loans on automobiles
and other consumer goods, as well as education loans, loans secured by savings
accounts, credit cards, and secured and unsecured lines of credit. In 1998, the
Company continued to originate automobile loans. Such loans are

                                       8
<PAGE>
 
originated both directly with customers and through automobile dealers in the
Company's lending areas. The volume of automobile loans has decreased due to low
competitive rates and the Company not being willing to meet these low rates.
    
       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 Institutions have sought to reduce this
risk by primarily granting secured consumer loans.

       Commercial Business Lending. Under applicable law, the Institutions are
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 aggregate
outstanding amount of such loans generally may not exceed 10% of the
Institutions' respective assets. The Institutions do not, as a common practice,
make unsecured commercial loans. Ameriana-Indiana entered asset-based commercial
lending, primarily commercial leasing, in 1986 but discontinued originations in
this type of lending during 1989. The Company began making and purchasing the
collateralized commercial loans in 1998. The total lease and commercial
portfolio at December 31, 1998 was $862,000.

       Originations, Purchases and Sales. Historically, all residential and
commercial real estate loans have been originated directly by the Institutions
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 Institutions also obtain
loans from paid brokers. The Institutions obtained $17.256 million of loans from
brokers in 1998. Commercial real estate and construction loan originations have
been obtained by direct solicitation. Consumer loan originations are
attributable to walk-in customers who have been made aware of the Institutions'
programs by advertising, as well as direct solicitation.

       The Institutions have 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 Institutions retain the
servicing of loans they sell, the Institutions retain

                                       9
<PAGE>
 
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 Institutions typically receive a fee of
between .25% and .50% per annum of the loans' principal amount for performing
this service. At December 31, 1998, the Institutions were servicing $181.336
million of loans for others.

       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 Institutions' respective local lending areas
which are more favorable to their investment requirements. Additionally,
purchases of loans may be made in order to diversify the Institutions' lending
portfolios. The Institutions' 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 Institutions also purchase participation interests in loans. Both
whole loans and participations are purchased on a yield basis. As of December
31, 1998, $5.629 million, or 2.12%, of the Institutions' aggregate loans
consisted of purchased loans which were serviced by others.

       The following table shows aggregate loans originated, purchased and sold
by the Company during the periods indicated.

<TABLE> 
<CAPTION> 
                                                   Year Ended December 31,  
                                              -------------------------------
                                                1998        1997        1996 
                                              --------    -------     -------
                                                     (In thousands)
<S>                                           <C>         <C>        <C>
Loans Originated:
  Conventional real estate loans:
    Construction loans .....................  $ 39,737    $ 22,607    $ 14,885
    Loans on existing property .............    72,390      28,508      32,115
    Loans refinanced .......................    49,791      37,846      42,178
  Other loans ..............................    27,406      32,988      29,275
                                              --------    --------    --------
       Total loans originated ..............   189,324     121,949     118,453
                                              --------    --------    --------
Loans Purchased:
  Real estate loans:
    Conventional ...........................     3,938       3,710          --
    Mortgage-backed securities .............        --          --       2,532
  Commercial-other collateral ..............     2,500          --          --
                                              --------    --------    --------
       Total loans purchased ...............     6,438       3,710       2,532
                                              --------    --------    --------

Total loans originated and purchased .......  $195,762    $125,659    $120,985
                                              ========    ========    ========
Mortgage loans and leases sold .............  $ 93,498    $ 29,862    $ 18,359
                                              ========    ========    ========
</TABLE> 

                                       10
<PAGE>
 
       For additional information, see "Management's Discussion and Analysis--
Results of Operations" included in the Annual Report to Stockholders for the
fiscal year ended December 31, 1998 (the "Annual Report"), which is filed as
Exhibit 13 to this report.

       Loan Underwriting. During the loan approval process, the Institutions
assess 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 Institutions obtain 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.

       Ameriana-Indiana'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. Loans
of $300,000 or more but less than $750,000 must be approved by a committee
consisting of certain members of senior management. The Board of Directors must
approve all loans in excess of $750,000. In connection with the origination of
single family residential adjustable-rate mortgages ("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. Ameriana-Ohio's loan committee,
consisting of authorized officers, may approve loan applications up to $250,000.
Ameriana-Ohio's Board of Directors reviews and approves loan applications in
excess of $250,000.

       Loan Commitments. Conventional loan commitments by the Institutions are
granted for periods of up to 60 days. The total amount of the Institutions'
aggregate outstanding commitments to originate real estate loans at December 31,
1998, was approximately $6.612 million. It has been the Institutions' experience
that few commitments expire unfunded.

       Loan Fee and Servicing Income. In addition to interest earned on loans,
the Institutions receive 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.

                                       11
<PAGE>
 
       When possible, the Institutions charge 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 in the Annual Report.

       Delinquencies. When a borrower defaults upon a required payment on a
loan, the Institutions contact the borrower and attempt to induce the borrower
to cure the default. A late payment notice is mailed to the borrower after a
payment is 10 days past due. An additional 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
Institutions' normal collection procedures or an acceptable arrangement is not
worked out with the borrower, the Institutions 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 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 Institutions 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

                                       12
<PAGE>
 
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. At December 31, 1998,
the Company had $701,000 of other problem loans for which the Company had
serious doubts as to the ability of the borrowers to comply with the existing
payment terms and conditions.

<TABLE> 
<CAPTION> 
                                                                At December 31,
                                             -----------------------------------------------
                                               1998      1997      1996      1995      1994 
                                              ------    ------    ------    ------    ------
                                                          (Dollars in thousands)
<S>                                           <C>       <C>       <C>       <C>      <C>
Loans accounted for on a non-accrual basis:
  Real Estate:
   Residential ............................   $  684    $  847    $  694    $  754    $  339
   Commercial .............................       15        --        --        --       144
  Commercial business leases ..............       --        19        24        29        39
  Consumer ................................       46        11         3         6         4
                                              ------    ------    ------    ------    ------
    Total .................................      745       877       721       789       526
                                              ------    ------    ------    ------    ------

Accruing loans contractually past due 90
  days or more:
  Real Estate:
   Residential ............................       37        61       279       515       122
   Commercial .............................       --        57        --        --        --
  Commercial business leases ..............       --        --        --        --        --
  Consumer ................................        3         7        36        25        15
                                              ------    ------    ------    ------    ------
    Total .................................       40       124       315       540       137
                                              ------    ------    ------    ------    ------

     Total of non-accrual and
       90 days past due loans .............   $  785    $1,002    $1,036    $1,329    $  663
                                              ======    ======    ======    ======    ======

Percentage of total loans (excluding
    mortgage-backed securities) ...........      .30%      .33%      .36%      .50%      .25%
                                              ======    ======    ======    ======    ======
Other non-performing assets (1) ...........   $   96    $  160    $  101    $  145    $  182
                                              ======    ======    ======    ======    ======
</TABLE> 

------------------
(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.

       During 1998, the Company would have recorded gross interest income of
$39,000 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 $6,000 on those loans in its net income for the
year. For additional information

                                       13
<PAGE>
 
regarding the Company's problem assets and loss provisions recorded thereon, see
"Management's Discussion and Analysis" in the Annual Report, Exhibit 13 hereto.
    
       Federal regulations require that each savings institution shall classify
its assets on a regular basis. In addition, in connection with examinations of
savings institutions, OTS examiners have authority to identify problem assets
and, if appropriate, classify them. The regulation provides for three asset
classification categories (i.e., Substandard, Doubtful and Loss). The
regulations also have a Special Mention category, described as assets which do
not currently expose a savings institution to a sufficient degree of risk to
warrant classification but do possess credit deficiencies or potential
weaknesses deserving management's close attention. Assets classified as
Substandard or Doubtful require the institution to establish general allowances
for loan losses. If an asset or portion thereof is classified Loss, the savings
institution must either establish specified allowances for loan losses in the
amount of 100% of the portion of the asset classified Loss, or charge off such
amount. General loss allowances established to cover possible losses related to
assets classified Substandard or Doubtful may be included in determining an
institution's regulatory capital, while specific valuation allowances for loan
losses do not qualify as regulatory capital. OTS examiners may disagree with the
savings institution's classifications and amounts reserved. Based on
management's review of the Institutions' assets at December 31, 1998, $365,000
and $41,000 of Ameriana-Indiana's assets were classified as Substandard and
Doubtful, $672,000 and $1,000 of Ameriana-Ohio's assets were classified as
Substandard and Doubtful, and $104,000 and $1,750,000 of Ameriana-Indiana's and
Ameriana-Ohio's assets were designated as Special Mention, respectively.

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.

       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
Institutions' respective customer bases, and periodic reviews of loan portfolio
quality by the Institutions' 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

                                       14
<PAGE>
 
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, 1998, Ameriana-Indiana's and
Ameriana-Ohio's allowances for loan losses amounted to $984,000 and $300,000,
respectively.

       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 Institutions' loan portfolios in the future, will not ask the Institutions
to increase their allowance for loan losses, thereby negatively affecting their
financial condition and earnings.

       The following table sets forth an analysis of the Company's aggregate
allowance for possible loan losses for the periods indicated.

<TABLE> 
<CAPTION> 
                                                              Year Ended December 31,
                                             -----------------------------------------------------
                                               1998       1997        1996        1995        1994 
                                             -------    -------     -------     -------     -------
                                                              (Dollars in thousands)
<S>                                          <C>       <C>          <C>         <C>         <C>
Balance at Beginning of Period ..........    $ 1,163    $ 1,104     $ 1,076     $ 1,022     $   968
                                         
Charge Offs:                             
  Real Estate:                           
    Residential .........................         12         31           1          44          66
    Commercial ..........................         --         --          --          --          --
  Commercial business leases ............         --         --          --          --          78
  Consumer ..............................        153        170          51          42          27
                                             -------    -------     -------     -------     -------
                                                 165        201          52          86         171
                                             -------    -------     -------     -------     -------
Recoveries:                              
  Real Estate:                           
    Residential .........................         --         --          --           2          17
    Commercial ..........................         --         --          --          --          10
  Commercial business leases ............         --         --          10          --           2
  Consumer ..............................         27         18           4          21          15
                                             -------    -------     -------     -------     -------
                                                  27         18          14          23          44
                                             -------    -------     -------     -------     -------
                                         
Net Loans Charged-Off ...................       (138)      (183)        (38)        (63)       (127)
Increase from acquisition ...............        100         --          --          --          --
Provision for Possible Loan Losses ......        159        242          66         117         181
                                             -------    -------     -------     -------     -------
                                         
Balance at End of Period ................    $ 1,284    $ 1,163     $ 1,104     $ 1,076     $ 1,022
                                             =======    =======     =======     =======     =======
                                         
Ratio of Net Charge-Offs to Average      
  Loans Outstanding During the Period....        .05%       .06%        .01%        .02%        .05%
                                             =======    =======     =======     =======     =======
                                        
Ratio of Ending Allowance for           
  possible loan losses to ending loans...        .49%       .40%        .39%        .40%        .39%
                                             =======    =======     =======     =======     =======
</TABLE> 

                                       15
<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 further losses and does not restrict the use of the allowance to
absorb losses in any category.

<TABLE> 
<CAPTION> 

                                                                             At December 31,
                                           ----------------------------------------------------------------------------------
                                                   1998                           1997                     1996 
                                           -----------------------     -------------------------   --------------------------    
                                                        Percent of                  Percent of                     Percent of    
                                                        Total Loans                 Total Loans                    Total Loans    
                                                          in Each                     in Each                        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 ..................   $  507            89%        $  476            86%        $  496            85%
  Commercial business leases ............       15            --             19            --             24            -- 
  Consumer ..............................      762            11            668            14            584            15
                                            ------        ------         ------        ------         ------        ------
    Total Allowance for Loan
     Losses .............................   $1,284           100%        $1,163           100%        $1,104           100%
                                            ======        ======         ======        ======         ======        ======
</TABLE> 

<TABLE> 
<CAPTION> 

                                                1995                        1994       
                                        ------------------------    ----------------------       
                                                     Percent of                Percent of       
                                                    Total Loans               Total Loans       
                                                       in Each                   in Each        
                                                    Category to               Category to       
                                         Amount     Total Loans     Amount    Total Loans       
                                         ------     -----------     ------    -----------       
                                                  (Dollars in thousands)
<S>                                      <C>          <C>          <C>          <C>
Loans
  Real Estate Mortgage ...............    $  486        86%         $  508        92%
  Commercial business leases .........        34        --              34        -- 
  Consumer ...........................       556        14             480         8
                                          ------    ------          ------    ------
    Total Allowance for Loan
     Losses ..........................    $1,076       100%         $1,022       100%
                                          ======    ======          ======    ======
</TABLE> 

                                       16
<PAGE>
 
Investment Activities

       Interest and dividends on investment securities, Federal Home Loan Bank
stock and interest-bearing deposits provides the second largest source of income
for the Company (after interest on loans and mortgage-backed securities),
constituting 14.56% of the Company's total interest income (and dividends) for
fiscal 1998. The Institutions maintain their liquid assets in excess of the
minimum requirements imposed by regulation at levels believed adequate to meet
requirements of normal banking activities and potential savings outflows. At
December 31, 1998, Ameriana-Indiana's and Ameriana-Ohio's liquidity ratios
(liquid assets as a percentage of net withdrawable savings and short-term
borrowings) were 29.40% and 17.65%, respectively.

       The Institutions have the authority to invest in various types of liquid
assets, including short-term United States Treasury obligations and securities
of various federal agencies, certificates of deposit at insured savings and
loans and banks, bankers' acceptances, and federal funds. The Institutions may
also invest a portion of their assets in certain commercial paper and corporate
debt securities. The Institutions are also authorized to invest in mutual funds
and stocks whose assets conform to the investments that the Institutions are
authorized to make directly.

       At December 31, 1998, the market values of the Company's aggregate
investment securities, Federal Home Loan Bank stock and mortgage-backed
securities were approximately $51.512 million, $3.588 million and $20.437
million, respectively. The following table sets forth the carrying value of the
Company's short-term investments, Federal Home Loan Bank stock, and mortgage-
backed securities at the dates indicated.

<TABLE> 
<CAPTION> 

                                                      At December 31,
                                          ------------------------------------
                                            1998          1997          1996
                                          ---------     --------      --------
                                                      (In thousands)
<S>                                       <C>           <C>           <C>
Investment securities ................    $ 51,581      $ 35,395      $ 50,744
Interest-bearing deposits (1) ........      41,493        10,143         4,005
FHLB stock ...........................       3,588         3,412         3,311
Mortgage-backed securities ...........      20,217        29,996        38,542
                                          --------      --------      --------
  Total investments ..................    $116,879      $ 78,946      $ 96,602
                                          ========      ========      ========
</TABLE> 

--------------------
(1)  Consist of overnight deposits and short-term non-negotiable certificates of
     deposit.

                                       17
<PAGE>
 
       The following table sets forth information regarding maturity
distribution and average yields for the Company's investment securities
portfolio at December 31, 1998.

<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>          <C>     <C>        <C>
Federal agencies...   $  --          --%    $1,700      6.21%    $15,922      6.12%    $33,959      6.44%   $51,581    6.33%
</TABLE> 

                                       18
<PAGE>
 
       The Company's mortgage-backed securities include both fixed- and
adjustable-rate securities, though the Company emphasizes adjustable-rate
investments in order to enhance the interest rate sensitivity of its interest-
earning assets. At December 31, 1998, the Company's mortgage-backed securities
consisted of the following:

<TABLE> 
<CAPTION> 
                                                              Carrying      Average
                                                               Amount        Rate
                                                             ----------    ---------
                                                             (Dollars in thousands)
<S>                                                          <C>           <C>
Variable rate:                                                            
  Repricing in one year or less ..........................      $10,731        7.45%
  Repricing in one to five years .........................        2,179        7.60
Fixed rate:                                                                 
  Maturing in five years or less .........................        1,941        6.09
  Maturing in five to ten years ..........................          189        8.32
  Maturing in more than ten years ........................        5,177        7.91
                                                                -------
    Total ................................................      $20,217        7.46%
                                                                =======        ==== 
</TABLE> 

       As members of the Federal Home Loan Bank System, the Institutions must
maintain minimum levels of liquid assets which vary from time to time. See
"--Regulation -- Federal Home Loan Bank System." Liquidity may increase or
decrease depending upon the availability of funds and comparative yields on
investments in relation to return on loans.

Sources of Funds

       General. Savings accounts and other types of deposits have traditionally
been an important source of the Institutions' funds for use in lending and for
other general business purposes. In addition to deposit accounts, the
Institutions derive 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 Institutions attract both short-term and long-term deposits
from the general public by offering a wide assortment of deposit accounts and
interest rates. The Institutions offer regular savings accounts, NOW accounts,
money market accounts, fixed-interest-rate certificates with varying maturities,
and negotiated-rate jumbo certificates with various maturities. The Institutions
also offer tax-deferred individual retirement, Keogh retirement, and simplified
employer plan retirement accounts.

                                       19
<PAGE>
 
       As of December 31, 1998, approximately 31.70%, or $105.875 million, of
the Institutions' 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 Ameriana-
Indiana and quarterly for Ameriana-Ohio. 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 Institutions also make available to their depositors a number of
certificates of deposit with various terms and interest rates to be competitive
in their respective market areas. These certificates have minimum deposit
requirements as well.

                                       20
<PAGE>
 
         The following table sets forth the change in dollar amount of deposits
in the various types of deposit accounts offered by the Institutions 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,
                                              1998             Year               1997            Year                1996 
                                     --------------------   ----------   --------------------   ----------   ---------------------
                                                                         (Dollars in thousands)
<S>                                  <C>          <C>       <C>          <C>          <C>       <C>          <C>           <C> 
Savings deposits ..................  $  44,178     13.23%   $    (536)   $  44,714     13.88%   $  (2,072)   $  46,786      14.68%
NOW accounts ......................     32,419      9.71       10,222       22,197      6.89        1,812       20,385       6.40
Money market deposit accounts .....     29,278      8.77       21,480        7,798      2.42         (133)       7,931       2.49
                                                                                                
Certificate accounts:                                                                           
  Jumbo certificates ..............     28,153      8.43        4,121       24,032      7.46        6,827       17,205       5.40
  Fixed rate certificates:                                                                      
   12 months or less ..............     60,367     18.07      (15,673)      76,040     23.60      (12,590)      88,630      27.81
   13-24 months ...................     42,183     12.63       11,326       30,857      9.58       (2,926)      33,783      10.60
   25-36 months ...................     68,973     20.65        8,477       60,496     18.77       27,226       33,270      10.44
   37 months or greater ...........     23,789      7.12      (26,679)      50,468     15.66      (13,760)      64,228      20.14
  Variable rate certificate:                                                                    
   18 months ......................      4,649      1.39         (966)       5,615      1.74         (872)       6,487       2.04
                                     ---------    ------    ---------    ---------    ------    ---------    ---------     ------
                                     $ 333,989    100.00%      11,772    $ 322,217    100.00%   $   3,512    $ 318,705     100.00%
                                     =========    ======    =========    =========    ======    =========    =========     ======
</TABLE> 

                                       21
<PAGE>
 
     The variety of deposit accounts offered by the Institutions has permitted
them to be competitive in obtaining funds and has allowed them 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 Institutions have become much more subject to short-term
fluctuation in deposit flows, as customers have become more interest rate
conscious. The ability of the Institutions to attract and maintain deposits and
their costs of funds have been, and will continue to be, significantly affected
by money market conditions. The Institutions currently offer a variety of
deposit products as options to the customer. They include noninterest-bearing
and interest-bearing NOW accounts, Passbook accounts, Money Market Demand
Accounts, ("MMDA") and Certificates of Deposit ranging in terms from three
months to seven years.

     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,                               
                                  -----------------------------------------------------------------------
                                         1998                      1997                    1996            
                                  --------------------      -------------------      --------------------
                                              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....................  $   36,274     3.12%       $   19,579    2.30%      $   28,691     1.66%
Savings deposits...............      45,626     2.13            45,529    2.50           48,556     2.59
Time deposits..................     231,141     5.69           251,670    5.77          233,330     5.76
                                 ----------                 ----------               ----------
                                 $  313,041     4.88        $  316,778    5.09       $  310,577     4.89
                                 ==========                 ==========               ==========
</TABLE> 
     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,                       
                                    ------------------------------------------
                                      1998             1997             1996 
                                    --------         --------         --------
                                                  (In thousands)
<S>                                 <C>              <C>              <C> 
Less than 4% ................       $    757         $    101         $    224
 4% - 5.99% .................        169,194          153,211          161,862
 6% - 7.99% .................         57,754           92,849           77,787
 8% - 9.99% .................            409            1,346            3,730
                                    --------         --------         --------
                                    $228,114         $247,507         $243,603
                                    ========         ========         ========
</TABLE> 

                                       22
<PAGE>
 
     The following table sets forth the amount and maturities of the Company's
time deposits at December 31, 1998.

<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%....................  $     688       $       26     $       41      $        2       $      757
4% - 5.99%......................    102,986           43,386         14,032           8,790          169,194
6% - 7.99%......................     18,971           33,995          1,355           3,433           57,754
8% - 9.99%......................        391               18             --              --              409
                                  ---------       ----------     ----------      ----------       ----------
                                  $ 123,036       $   77,425     $   15,428      $   12,225       $  228,114
                                  =========       ==========     ==========      ==========       ==========
</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, 1998.

<TABLE> 
<CAPTION> 
                                                                  
                                                                  Passbook, NOW
                                               Certificates         and MMDA   
Maturity Period                                 of Deposit          Deposits   
---------------                                ------------      --------------
                                                         (In thousands)
<S>                                             <C>              <C> 
Three months or less.........................   $   5,398          $   15,209
Over three through six months................       5,448                  --
Over six through twelve months...............       7,151                  --
Over twelve months...........................      10,156                  --
                                                ---------          ----------
     Total...................................   $  28,153          $   15,209
                                                =========          ==========
</TABLE> 

     The following table sets forth the aggregate savings activities of the
Company for the periods indicated.

<TABLE> 
<CAPTION> 
                                                                 Year Ended December 31,              
                                                     ----------------------------------------------
                                                          1998             1997             1996 
                                                          ----             ----             ----
                                                                      (In thousands)
<S>                                                   <C>               <C>              <C> 
Net increase (decrease) before interest credited....  $   (2,815)       $  (12,690)      $   12,928
Interest credited...................................      14,587            16,202           14,992
                                                      ----------        ----------       ----------
  Net increase (decrease) in deposits...............  $   11,772        $    3,512       $   27,920
                                                      ==========        ==========       ==========
</TABLE> 

     Borrowings. Deposits are the primary sources of funds for the Institutions'
lending and investment activities and for their general business purposes.
Ameriana-Indiana and Ameriana-Ohio can also use advances (borrowings) from the
Federal Home Loan Banks of Indianapolis and Cincinnati, respectively, to
supplement their supplies of lendable funds, to meet deposit withdrawal
requirements and to extend the terms of their liabilities. Advances from the
Federal Home Loan Bank are typically secured by the Institutions' stock in its
Federal Home Loan Bank and a portion

                                       23
<PAGE>
 
of the Institutions' first mortgage loans or investment securities. At December
31, 1998, Ameriana-Ohio had $17.01 million of advances outstanding from the
Federal Home Loan Bank of Cincinnati and Ameriana-Indiana had no advances
outstanding.

     The Federal Home Loan Banks function as central reserve banks providing
credit for savings institutions and certain other member financial institutions.
As members, the Institutions are required to own capital stock in their Federal
Home Loan Bank and are authorized to apply for advances on the security of such
stock and certain of their 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.

                                       24
<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,
1998. 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> 
                                                                                               Year Ended December 31,        
                                                                    ----------------------------------------------------------------
                                               At December 31,                    1998                             1997
                                                     1998           -------------------------------  -------------------------------
                                               ----------------                          Average                          Average  
                                               Balance    Rate     Balance    Interest  Yield/Cost  Balance    Interest  Yield/Cost
                                               -------   ------    -------    --------  ----------  -------    --------  ----------
                                                                                                     (Dollars in thousands)
<S>                                           <C>        <C>       <C>        <C>        <C>        <C>        <C>       <C> 
Interest-earning assets:                                                    
 Loan portfolio (1) ........................  $265,994     7.92%   $277,233   $ 22,517      8.12%   $290,922   $ 23,234      7.99%  
 Mortgage-backed securities ................    20,217     7.35      25,236      1,663      6.59      34,005      2,319      6.82   
 Short term investments and other                                           
  interest-earning assets (2) ..............    96,662     5.72      67,716      4,121      6.08      54,816      3,780      6.90   
                                                                            
                                              --------  -------    --------   --------   -------    --------   --------   -------   
    Total interest-earning assets ..........   382,873     7.36     370,185     28,301      7.64     379,743     29,333      7.72   
                                                                            
Noninterest-earning assets .................    22,845               20,002                           16,940                        
                                              --------             --------                         --------                        
    Total assets ...........................  $405,718             $390,187                         $396,683                        
                                              ========             ========                         ========                        
                                                                            
Interest-bearing liabilities:                                               
  Deposits .................................  $319,356     4.71    $313,041     15,265      4.88    $316,778     16,114      5.09   
  FHLB advances ............................    17,101     5.34      12,379        728      5.88      19,791      1,231      6.22   
                                              --------  -------    --------   --------   -------    --------   --------   -------   
    Total interest-bearing liabilities: ....   336,457     4.74     325,420     15,993      4.91     336,569     17,345      5.15   
                                                        -------               --------   -------               --------   -------   
Noninterest-bearing liabilities ............    23,912               19,522                           16,253                        
                                              --------             --------                         --------                        
    Total liabilities ......................   360,369              344,942                          352,822                        
                                                                            
Shareholders' equity .......................    45,349               45,245                           43,861                        
                                              --------             --------                         --------                        
    Total liabilities and shareholders'                                     
      equity ...............................  $405,718             $390,187                         $396,683                        
                                              ========             ========                         ========                        
                                                                            
Net interest income ........................                                  $ 12,308                         $ 11,988             
                                                                              ========                         ========             
Interest rate spread .......................               2.62%                            2.73%                            2.57%  
                                                        =======                         ========                         ========   
Net yield on interest-earning assets .......                                                3.32%                            3.16%  
                                                                                        ========                         ========   
Ratio of average interest-earning assets                                    
  to average interest-bearing liabilities ..                                              113.76%                          112.83%  
                                                                                        ========                         ========
<CAPTION>
                                             ----------------------------------
                                                           1996                                      
                                             ---------------------------------- 
                                                          Average     Average                    
                                              Balance    Interest    Yield/Cost       
                                              -------    --------    ----------
<S>                                           <C>        <C>         <C> 
Interest-earning assets:                     
 Loan portfolio (1) ........................  $276,752   $ 22,060       7.97%    
 Mortgage-backed securities ................    42,326      2,880       6.80     
 Short term investments and other                                                
  interest-earning assets (2) ..............    54,846      3,627       6.61     
                                              --------   --------   --------     
    Total interest-earning assets ..........   373,924     28,567       7.64     
                                                                                 
Noninterest-earning assets .................    16,483                           
                                              --------                           
    Total assets ...........................  $390,407                           
                                              ========                           
                                                                                 
Interest-bearing liabilities:                                                    
  Deposits .................................  $310,577     15,183       4.89     
  FHLB advances ............................    25,987      1,522       5.86     
                                              --------   --------   --------     
    Total interest-bearing liabilities: ....   336,564     16,705       4.96     
                                              --------   --------   --------     
Noninterest-bearing liabilities ............     9,289                           
                                              --------                           
    Total liabilities ......................   345,853                           
Shareholders' equity .......................    44,554                           
                                              --------                           
    Total liabilities and shareholders'                                          
      equity ...............................  $390,407                           
                                              ========                           
                                                                                 
Net interest income ........................             $ 11,862                
                                                         ========                
Interest rate spread .......................                            2.68%    
                                                                    ========     
Net yield on interest-earning assets .......                            3.17%    
                                                                    ========     
Ratio of average interest-earning assets                                         
  to average interest-bearing liabilities ..                          111.10%    
                                                                    ========     
</TABLE> 
-------------
(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.

                                       25
<PAGE>
 
Subsidiary Activities

     As federally chartered savings institutions, the Institutions are permitted
to invest an amount equal to 2% of their respective assets in subsidiaries with
an additional investment of 1% of assets where such investment serves primarily
community, inner-city and community-development purposes. Under such limitations
at December 31, 1998, Ameriana-Indiana and Ameriana-Ohio were authorized to
invest up to approximately $9.395 million and $2.758 million, respectively, in
the stock of or loans to subsidiaries. In addition, institutions meeting
regulatory capital requirements and certain other tests, which the Institutions
do, may invest up to 50% of their regulatory capital in conforming first
mortgage loans to subsidiaries.

     The Company owns all of the stock of Ameriana-Indiana and Ameriana-Ohio and
operates as a multiple thrift holding company. The Company also owns all of the
stock of Indiana Title Insurance Company, which provides title insurance
services in the communities it serves and all the stock of AIA, which provides
insurance products to the communities it serves. AIA was dividended to the
Company on December 31, 1998 by Ameriana-Indiana. The Company recently expanded
its title services by opening a second location in the Avon, Indiana branch.

     Ameriana-Indiana has one direct wholly-owned subsidiary, Ameriana Financial
Services, Inc. ("AFS"). 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. AFS also operates
a brokerage facility in conjunction with Linsco/Private Ledger. Ameriana-Ohio
has one direct wholly owned subsidiary, Deer Park Service Corporation, which
operates a brokerage facility in conjunction with Money Concepts/Pinnacle
Financial Advisors, Inc.
    
     At December 31, 1998, Ameriana-Indiana's and Ameriana-Ohio's investments
in, and loans to, their subsidiaries were approximately $2.976 million and
$9.397, respectively, consisting of direct equity investments and lines of
credit.
   
     Savings institutions whose deposits are insured by the SAIF are required to
give the FDIC and the OTS 30 days' prior notice before establishing or acquiring
a new subsidiary, or commencing any new activity through an existing subsidiary.
Both the FDIC and the Director of the OTS have authority to order termination of
subsidiary activities determined to pose a risk to the safety or soundness of
the institution.

                                       26
<PAGE>
 
Competition

     The Institutions experience 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 Institutions' respective
market areas. 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 comes
from other thrift institutions, commercial banks, mortgage bankers, mortgage
brokers and insurance companies. The Institutions have been able to compete
effectively in their respective market areas.
   
     The Institutions have 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 Institutions
compete with several commercial banks and savings institutions in surrounding
counties, many of which have assets which are substantially larger than the
Institutions.

Regulation

     General. As federally chartered savings banks, the Institutions are subject
to extensive regulation by the OTS. The lending activities and other investments
of the Institutions must comply with various federal regulatory requirements.
The OTS periodically examines the Institutions for compliance with various
regulatory requirements. The FDIC also has the authority to conduct special
examinations of SAIF members. The Institutions must file reports with the OTS
describing their activities and financial condition. The Institutions are also
subject to certain reserve requirements promulgated by the Board of Governors of
the Federal Reserve System (the "Federal Reserve Board"). This supervision and
regulation is intended primarily for the protection of depositors. As a savings
and loan holding company, the Company is subject to the OTS' regulation,
examination, supervision and reporting requirements. Certain of these regulatory
requirements are referred to below or appear elsewhere herein.
    
     Proposed Legislative and Regulatory Changes. The U.S. Congress is in the
process of drafting legislation which may have a profound effect on the
financial services industry. On January 6, 1999 legislation restructuring the
activities and regulations oversight of the financial services industry ("H.R.
10"), was reintroduced in the U.S. House

                                       27
<PAGE>
 
of Representatives. The stated purposes of the legislation are to enhance
consumer choice in the financial services marketplace, level the playing field
among providers of financial services and increase competition. H.R. 10 would
permit affiliations between commercial banks, securities firms, insurance
companies and, subject to certain limitations, other commercial enterprises
allowing holding companies to offer new services and products. H.R. 10 removes
many of the statutory restrictions contained in current laws regulating the
financial services industry. In particular, H.R. 10 repeals the Glass-Steagall
Act prohibitions on banks affiliating with securities firms and thereby allowing
holding companies to engage in securities underwriting and dealing without
limits and to sponsor and act as distributor for mutual funds and also removes
the Bank Holding Company Act's prohibitions on insurance underwriting allowing
holding companies to underwrite and broker any type of insurance product. H.R.
10 also calls for a new regulatory framework of financial institutions and their
holding companies. The legislation preserves the thrift charter and all existing
thrift powers, but would restrict the activities of new unitary thrift holding
companies. At this time, it is unknown how H.R. 10 will be modified, or if
enacted into law, what form the final version of the legislation might take and
how the legislation may affect the business and operations and competitive
environment of the Company and the Institutions.

     Prompt Corrective Regulatory Action. Under the Federal Deposit Insurance
Corporation Improvement Act ("FDICIA"), the federal banking regulators are
required to take prompt corrective action if an insured depository institution
fails to satisfy certain minimum capital requirements. 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
did not submit an

                                       28
<PAGE>
 
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 could 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 action provisions. If an institution's
ratio of tangible capital to total assets falls below a "critical capital
level," the institution will be subject to conservatorship or receivership
within 90 days unless periodic determinations are made that forbearance from
such action would better protect the deposit insurance fund. Unless appropriate
findings and certifications are made by the appropriate federal bank regulatory
agencies, a critically undercapitalized institution must be placed in
receivership if it remains critically undercapitalized on average during the
calendar quarter beginning 270 days after the date it became critically
undercapitalized.

     Under implementing regulations, the federal banking regulators, including
the OTS, generally will measure a depository institution's capital adequacy on
the basis of the institution's 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). Under the regulations, a savings
institution that is not subject to an order or written directive to meet or
maintain a specific capital level will be deemed "well capitalized" if it also
has: (i) a total risk-based capital ratio of 10% or greater; (ii) a Tier 1
risk-based capital ratio of 6.0% or greater; and (iii) a leverage ratio of 5.0%
or greater. An "adequately capitalized" savings institution is an institution
that does not meet the definition of well capitalized and has: (i) a total
risk-based capital ratio of 8.0% or greater; (ii) a Tier 1 capital risk-based
ratio of 4.0% or greater; and (iii) a leverage ratio of 4.0% or greater (or 3.0%
or greater if the institution has a CAMELS 1 rating). An "undercapitalized"
savings institution is an institution that has (i) a total risk-based capital
ratio less than 8.0%; or (ii) a Tier 1 risk-based capital ratio of less than
4.0%; or (iii) a

                                       29
<PAGE>
 
leverage ratio of less than 4.0% (or 3.0% if the institution has a CAMELS 1
rating). A "significantly undercapitalized" savings institution is defined as an
institution that has: (i) a total risk-based capital ratio of less than 6.0%; or
(ii) a Tier 1 risk-based capital ratio of less than 3.0%; or (iii) a leverage
ratio of less than 3.0%. A "critically undercapitalized" savings institution is
defined as an institution that has a ratio of "tangible equity" core capital 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 intangibles
other than qualifying supervisory goodwill and certain purchased mortgage
servicing rights. The OTS may reclassify a well capitalized savings 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 OTS determines, after notice and an opportunity for a hearing, that the
institution is in an unsafe or unsound condition or that the institution has
received and not corrected a less-than-satisfactory rating for any composite
rating category. The Institutions are classified as well capitalized under the
regulations.

     Standards for Safety and Soundness. FDICIA requires each federal bank
regulatory agency to prescribe, by regulation, safety and soundness standards
for institutions under its authority. In 1995, these agencies, including the
OTS, released Interagency Guidelines Establishing Standards for Safety and
Soundness and published a final rule establishing deadlines for submission and
review of safety and soundness compliance plans. The guidelines require savings
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 savings 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 the OTS determines that a savings 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 savings institution must submit an acceptable compliance plan to
the OTS 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. Management believes that the Institutions meet substantially all the
standards

                                       30
<PAGE>
 
adopted in the interagency guidelines and, therefore, does not believe that the
implementation of these regulatory standards will materially affect their
operations.

     Additionally, the FDICIA required each federal banking agency to establish
standards relating to the adequacy of asset and earnings quality. In 1995, these
agencies, including the OTS, issued guidelines relating to asset and earnings
quality. Under these guidelines, a savings 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 does not believe that the
asset quality and earnings standards have a material effect on the Institutions.
    
     Year 2000 Readiness Disclosure. The federal banking agencies, including the
OTS, have also established Year 2000 readiness safety and soundness guidelines
requiring all insured depository institutions to implement procedures by
specified key dates to ensure the institution can continue business operations
after January 1, 2000. Every institution must identify its internal and external
"mission-critical" systems (i.e., those systems vital to the continuance of a
core business activity) and develop a written plan establishing priorities,
oversight and reasonable deadlines to complete the testing and renovation of
mission-critical systems. In addition, an institution must prepare a written
business resumption contingency plan that defines scenarios where
mission-critical systems might fail, evaluates contingency options to keep
business operations going and provides for testing of the contingency plan by an
independent party. Every depository institution must also identify among its
customers those persons that represent a material risk to the institution in the
event the customer is not Year 2000 compliant and implement appropriate risks
controls to manage and mitigate the customer's Year 2000 risk to the
institution.

     The federal banking agencies will examine the institution's overall
progress in meeting the Year 2000 readiness guidelines. In the event an
institution has failed to renovate its mission-critical systems or is not on
schedule with key dates, the institution must draft a remediation contingency
plan outlining alternative strategies to comply with the guidelines and locate
available third party providers. The agencies, in their sole discretion, may
take actions under the FDICIA, the safety and soundness guidelines or any other
action available to them, including enforcement action, to ensure an
institution's Year 2000 readiness. For information regarding the Institutions'
Year 2000 readiness, see

                                       31
<PAGE>
 
"Management's Discussion and Analysis and Results of Operations -- Year 2000
Readiness Disclosure" in the Annual Report.

     Federal Home Loan Bank System. The Institutions are members of the Federal
Home Loan Bank System. The Federal Home Loan Bank System consists of 12 regional
Federal Home Loan Banks subject to supervision and regulation by the Federal
Housing Finance Board ("FHFB"). The Federal Home Loan Banks provide a central
credit facility primarily for member institutions. As members of the Federal
Home Loan Banks of Indianapolis and Cincinnati, the Institutions are required to
acquire and hold shares of capital stock in their respective Federal Home Loan
Banks amounts at least equal to the greater of 1% of the aggregate unpaid
principal of their residential mortgage loans, home purchase contracts and
similar obligations at the beginning of each year, or 5% of outstanding advances
(borrowings) from the Federal Home Loan Banks, whichever is greater.
Ameriana-Indiana and Ameriana-Ohio were in compliance with this requirement at
December 31, 1998, with investments in Federal Home Loan Bank stock of $2.404
million and $1.184 million, respectively.

     The Federal Home Loan Banks serve as reserve or central banks for their
member institutions within their assigned regions. They are funded primarily
from proceeds derived from the sale of consolidated obligations of the Federal
Home Loan Bank System. They make advances to members in accordance with policies
and procedures established by the FHFB and their Boards of Directors. At
December 31, 1998, Ameriana-Ohio had $17.01 million, of advances outstanding
from the Federal Home Loan Bank of Cincinnati and Ameriana-Indiana had no
advances outstanding.

     Liquidity Requirements. The Institutions are required to maintain average
daily balances of liquid assets (cash, certain time deposits, bankers'
acceptances, specified obligations of the United States government, states or
federal agencies, shares in mutual funds with certain restricted investment
policies and highly-rated corporate debt, and commercial paper) equal to a
monthly average of not less than a specified percentage (currently 4%) of their
respective net withdrawable savings deposits plus short-term borrowings.
Monetary penalties may be imposed for failure to meet liquidity requirements.
The liquidity ratios of Ameriana-Indiana and Ameriana-Ohio at December 31, 1998
were 29.40% and 17.65%, respectively.

                                       32
<PAGE>
 
     Insurance of Accounts. The Institutions are required to pay assessments
based on a percentage of their insured deposits to the FDIC for insurance of
their accounts by the FDIC through the SAIF. Under the Federal Deposit Insurance
Act, the FDIC sets semi-annual assessments for SAIF-insured institutions at a
level necessary to maintain the designated reserve ratio of the SAIF to 1.25% of
estimated insured deposits or to a higher percentage of estimated insured
deposits that the FDIC determines to be justified for that year by circumstances
indicating a significant risk of substantial future losses to the SAIF.
 
     Under the FDIC's risk-based deposit insurance assessment system, the
assessment rate for an insured depository institution depends on the assessment
risk classification assigned to the institution by the FDIC, which is based on
the institution's capital level and supervisory evaluations. Based on the data
reported to regulators, 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. Subgroup A consists of financially
sound institutions with only a few minor weaknesses. Subgroup B consists of
institutions that demonstrate weaknesses which, if not corrected, could result
in significant deterioration of the institution and increased risk of loss to
the deposit insurance fund. Subgroup C consists of institutions that pose a
substantial probability of loss to the deposit insurance fund unless effective
corrective action is taken.
 
     The FDIC has adopted an assessment schedule for SAIF deposit insurance
premiums where the assessment rate for well-capitalized institutions with the
highest supervisory ratings is zero and institutions in the worst risk
assessment category are assessed at the rate of 0.27% of insured deposits. Until
December 31, 1999, however, SAIF-insured institutions, will be required to pay
assessments to the FDIC at the rate of 6.5 basis points 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. During this period, BIF members will be assessed for these obligations
at the rate of 1.3 basis points. After December 31, 1999, both BIF and SAIF
members will be assessed at the same rate for FICO payments.

                                       33
<PAGE>
 
     Qualified Thrift Lender Test. The Institutions are subject to OTS
regulations which use the concept of a Qualified Thrift Lender to determine
eligibility for Federal Home Loan Bank advances and for certain other purposes.
A savings institution that does not meet the Qualified Thrift Lender test must
either convert to a bank charter or comply with the following restrictions on
its operations: (i) the institution may not engage in any new activity or make
any new investment, directly or indirectly, unless such activity or investment
is permissible for a national bank; (ii) the branching powers of the institution
shall be restricted to those of a national bank; (iii) the institution shall not
be eligible to obtain any advances from its Federal Home Loan Bank; and (iv)
payment of dividends by the institution shall be subject to the rules regarding
payment of dividends by a national bank. Upon the expiration of three years from
the date the institution ceases to be a Qualified Thrift Lender, it must cease
any activity, and not retain any investment not permissible for a national bank
and immediately repay any outstanding Federal Home Loan Bank advances (subject
to safety and soundness considerations).

     To qualify as a Qualified Thrift Lender, a savings institution must either
qualify as a "domestic building and loan association" under the Internal Revenue
Code or maintain at least 65% of its "portfolio" assets in Qualified Thrift
Investments. Portfolio assets are defined as total assets less intangibles,
property used by a savings institution in its business and liquidity investments
in an amount not exceeding 20% of assets. Qualified Thrift Investments consist
of: (i) loans, equity positions or securities related to domestic, residential
real estate or manufactured housing and educational, small business and credit
card loans and (ii) 50% of the dollar amount of residential mortgage loans
subject to sale under certain conditions but do not include any intangible
assets. Subject to a 20% of portfolio assets limit, however, savings
institutions are able to treat as Qualified Thrift Investments 200% of their
investments in loans to finance "starter homes" and loans for construction,
development or improvement of housing and community service facilities or for
financing small businesses in "credit-needy" areas. A savings institution must
maintain its status as a Qualified Thrift Lender for nine out of every 12
months. A savings institution that fails to maintain Qualified Thrift Lender
status will be permitted to requalify once and if it fails the Qualified Thrift
Lender Test a second time, it will become immediately subject to all penalties
as if all time limits on such penalties had expired. Failure to qualify as a
Qualified Thrift Lender results in a number of sanctions, including the
imposition of certain operating restrictions imposed on national banks and a
restriction on obtaining additional advances from the Federal Home Loan Bank

                                       34
<PAGE>
 
System. Upon failure to qualify as a Qualified Thrift Lender for two years, a
savings institution must convert to a commercial bank.

     At December 31, 1998, approximately 94.28% and 89.98% of Ameriana-Indiana's
and Ameriana Ohio's respective assets were invested in Qualified Thrift
Investments as currently defined.

     Regulatory Capital Requirements. Under OTS regulations, savings
institutions must maintain "tangible" capital equal to at least 1.5% of adjusted
total assets, "core" capital equal to at least 3% of adjusted total assets and
"total" capital, a combination of core and "supplementary" capital, equal to at
least 8% of "risk-weighted" assets. In addition, the OTS has adopted regulations
which impose certain restrictions on savings institutions that have a total
risk- based capital ratio that is less than 8.0%, a ratio of Tier 1 capital to
risk-weighted assets of less than 4.0% or a ratio of Tier 1 capital to adjusted
total assets of less than 4.0% (or 3.0% if the institution has a CAMELS 1
rating). See "-- Prompt Corrective Regulatory Action." For purposes of the
regulation, Tier 1 capital has the same definition as core capital which is
defined as common shareholders' equity (including retained earnings),
noncumulative perpetual preferred stock and related surplus, minority interests
in the equity accounts of fully consolidated subsidiaries, certain
nonwithdrawable accounts and pledged deposits and "qualifying supervisory
goodwill." Core capital is generally reduced by the amount of the savings
institution's intangible assets for which no market exists. Limited exceptions
to the deduction of intangible assets are provided for purchased mortgage
servicing rights and qualifying supervisory goodwill. Tangible capital is given
the same definition as core capital but does not include qualifying supervisory
goodwill and is reduced by the amount of all the savings institution's
intangible assets with only a limited exception for purchased mortgage servicing
rights. Both core and tangible capital are further reduced by an amount equal to
the savings institution's debt and equity investments in subsidiaries engaged in
activities not permissible for national banks, unless the subsidiaries are
engaged in activities undertaken as agent for customers or in mortgage banking
activities, or the subsidiaries are depository institutions or holding companies
therefor.

     Adjusted total assets are a savings institution's consolidated total
assets, as determined under generally accepted accounting principles, adjusted
for certain goodwill amounts, by a prorated portion of the assets of
subsidiaries in which the savings institution holds a minority interest and
which are not engaged in activities for which the capital rules require
deduction of its debt and equity investments. Adjusted total assets are reduced
by the amount of assets that have been

                                       35
<PAGE>
 
deducted from capital, the portion of the savings institution's investments in
subsidiaries that must be netted against capital under the capital rules and,
for purposes of the core capital requirement, by qualifying supervisory
goodwill.

     In determining compliance with the risk-based capital requirement, a
savings institution is allowed to use both core capital and supplementary
capital provided the amount of supplementary capital used does not exceed its
core capital. Supplementary capital is defined to include certain preferred
stock issues, nonwithdrawable accounts and pledged deposits that do not qualify
as core capital, certain approved subordinated debt, certain other capital
instruments, a portion of the savings institution's general loss allowances and
up to 45% of unrealized gains on equity securities. Total core and supplementary
capital are reduced by the amount of certain high loan-to-value ratio land loans
and non-residential construction loans, and equity investments other than those
deducted from core and tangible capital.

     The risk-based capital requirement is measured against the amount of
risk-weighted assets which equals the sum of the amount of each asset and
credit-equivalent amount of each off-balance sheet item after such asset or item
is multiplied by an assigned risk weight. Under the OTS risk-weighting system,
cash and securities backed by the full faith and credit of the U.S. government
are given a 0% risk weight. Mortgage-backed securities that qualify under the
Secondary Mortgage Enhancement Act, including those issued, or fully guaranteed
as to principal and interest, by the Federal National Mortgage Association or
the FHLMC are assigned a 20% risk weight. Single-family first mortgages not more
than 90 days past due with loan-to-value ratios under 80%, multi-family
mortgages (maximum 36 dwelling units) with loan-to-value ratios under 80% and
average annual occupancy rates over 80%, and certain qualifying loans for the
construction of one- to four-family residences pre-sold to home purchasers are
assigned a risk weight of 50%. Consumer loans and residential construction loans
are assigned a risk weight of 100%.

     In determining compliance with the regulatory capital standards, all of a
savings institution's investments in and extensions of credit to any subsidiary
engaged in activities not permissible for a national bank are to be deducted
from the savings institution's capital. Certain subsidiaries are exempted from
this treatment, including any subsidiary engaged in impermissible activities
solely as agent for its customers (unless the FDIC determines otherwise),
subsidiaries engaged solely in mortgage banking, and subsidiary depository
institutions and holding companies therefor that were acquired prior to May 1,
1989. At December 31, 1998, Ameriana-Indiana had $2.976 million, or 9.0% of its
total regulatory capital, invested in or lent to its subsidiary, AFS, which is
indirectly engaged in insurance underwriting

                                       36
<PAGE>
 
activities not permissible to national banks. Due to the relatively small
percentage of Ameriana-Indiana's capital invested in or lent to its subsidiary,
Ameriana-Indiana does not anticipate that the required deductions described
above will have a material effect on Ameriana-Indiana's capital.

     The table below represents the Institutions' historical capital position
relative to their various minimum regulatory capital requirements at December
31, 1998.

<TABLE>
<CAPTION> 
                                       Ameriana-Indiana             Ameriana-Ohio         
                                     ---------------------      ---------------------   
                                                Percent of                 Percent of
                                     Amount     Assets (1)      Amount     Assets (1)
                                     ------     ----------      ------     ----------
                                                    (Dollars in thousands)     
<S>                                  <C>           <C>          <C>        <C> 
Tangible Capital ................    $32,551       10.4%        $ 7,842        8.7%
Tangible Capital Requirement ....      4,688        1.5           1,360        1.5
                                     -------       ----         -------       ----
  Excess ........................    $27,863        8.9%        $ 6,482        7.2%
                                     =======       ====         =======       ====
                                                                             
Core Capital ....................    $32,551       10.4%        $ 7,842        8.7%
Core Capital Requirement ........      9,376        3.0           2,720        3.0
                                     -------       ----         -------       ----
  Excess ........................    $23,175        7.4%        $ 5,122        5.7%
                                     =======       ====         =======       ====
                                                                             
Total Capital (i.e., Core and                                                
  Supplementary Capital) ........    $33,052       22.0%        $ 8,100       17.5%
Risk-Based Capital Requirement ..     12,011        8.0           3,705        8.0
                                     -------       ----         -------       ----
  Excess ........................    $21,041       14.0%        $ 4,395        9.5%
                                     =======       ====         =======       ====
</TABLE>

---------------
(1)  Based on adjusted total assets for purposes of the tangible capital and
     core capital requirements, and risk-weighted assets for purposes of the
     risk-based capital requirement.

     The OTS requires savings institutions with more than a "normal" level of
interest rate risk to maintain additional total capital. A savings institution's
interest rate risk is measured in terms of the sensitivity of its "net portfolio
value" to changes in interest rates. Net portfolio value is defined, generally,
as the present value of expected cash inflows from existing assets and
off-balance sheet contracts less the present value of expected cash outflows
from existing liabilities. A savings institution will be considered to have a
"normal" level of interest rate risk exposure if the decline in its net
portfolio value after an immediate 200 basis point increase or decrease in
market interest rates (whichever results in the greater decline) is less than
two percent of the current estimated economic value of its assets. A savings
institution with a greater than normal interest rate risk is required to deduct
from total capital, for purposes of calculating its risk-based capital
requirement, an amount (the "interest rate risk component") equal to one-half
the

                                       37
<PAGE>
 
difference between the institution's measured interest rate risk and the normal
level of interest rate risk, multiplied by the economic value of its total
assets.

     The OTS calculates the sensitivity of a savings institution's net portfolio
value based on data submitted by the institution in a schedule to its quarterly
Thrift Financial Report and using the interest rate risk measurement model
adopted by the OTS. The amount of the interest rate risk component, if any, to
be deducted from a savings institution's total capital will be based on the
institution's Thrift Financial Report filed two quarters earlier. Savings
institutions with less than $300 million in assets and a risk-based capital
ratio above 12% are generally exempt from filing the interest rate risk schedule
with their Thrift Financial Reports. However, the OTS may require any exempt
savings institution that it determines may have a high level of interest rate
risk exposure to file such schedule on a quarterly basis. Based upon
Ameriana-Indiana's current level of interest rate risk exposure, it is subject
to additional capital requirements.

     The 200 basis point immediate increase in rates would create a net
portfolio decrease of $7,620,000. Based upon 2% of assets from the June 30, 1998
Thrift Financial Report, Ameriana-Indiana would be required to reduce capital by
50% of the difference or $754,000. The excess risk-based capital would be
reduced to an excess of $20,287,000 from the previously calculated excess of
$21,041,000. Based on Ameriana-Ohio's current level of interest rate risk
exposure it is not subject to additional capital requirements.

     In addition to requiring generally applicable capital standards for savings
institutions, the Director of OTS is authorized to establish the minimum level
of capital for a savings institution at such amount or at such ratio of
capital-to-assets as the Director determines to be necessary or appropriate for
such institution in light of the particular circumstances of the institution.
The Director of OTS may treat the failure of any savings institution to maintain
capital at or above such level as an unsafe or unsound practice and may issue a
directive requiring any savings institution which fails to maintain capital at
or above the minimum level required by the Director to submit and adhere to a
plan for increasing capital. Such an order may be enforced in the same manner as
an order issued by the FDIC.

     Loans-to-One-Borrower Limitations. Savings institutions generally are
subject to the lending limits applicable to national banks. With certain limited
exceptions, an institution's loans and extensions of credit outstanding at one
time to a person and not fully secured shall not exceed 15% of the unimpaired
capital and surplus of the savings institution on an unsecured basis. Loans and
extensions of credit fully secured by certain readily marketable collateral

                                       38
<PAGE>
 
may represent an additional 10% of unimpaired capital and surplus. Savings
institutions are additionally authorized to make loans to one borrower, for any
purpose, in an amount not to exceed $500,000 or, by order of the Director of
OTS, in an amount not to exceed the lesser of $30,000,000 or 30% of unimpaired
capital and surplus to develop residential housing, provided: (i) the purchase
price of each single-family dwelling in the development does not exceed
$500,000; (ii) the savings institution is in compliance with its regulatory
capital standards; (iii) the loans comply with applicable loan-to-value
requirements; and (iv) the aggregate amount of loans made under this authority
does not exceed 150% of unimpaired capital and surplus. A savings institution is
also authorized to make loans to one borrower to finance the sale of real
property acquired in satisfaction of debts in an amount up to 15% of unimpaired
capital and surplus. Certain types of loans are exempted from the lending
limits, including loans secured by savings deposits.

     At December 31, 1998, the maximum amounts Ameriana-Indiana and
Ameriana-Ohio could lend to one borrower under the 15% standard were $4.957
million and $1.215 million, respectively. At that date, Ameriana- Indiana's and
Ameriana-Ohio's largest loans to one borrower were $4.472 million and $565,000,
respectively.

     Federal Reserve System. Pursuant to regulations of the Federal Reserve
Board, a thrift institution must maintain average daily reserves equal to 3% net
transaction accounts from $4.9 million to $46.5 million, plus 10% of the
remainder. These percentages are subject to adjustment by the Federal Reserve
Board. Because required reserves must be maintained in the form of vault cash or
in a noninterest-bearing account at a Federal Reserve Bank, the effect of the
reserve requirement is to reduce the amount of the institution's
interest-earning assets. At December 31, 1998, the Institutions met their
respective reserve requirements.

     Savings and Loan Holding Companies. Since its acquisition of all of
Ameriana-Indiana's stock in March 1990, the Company has been a savings and loan
holding company within the meaning of the Home Owners' Loan Act. As such, the
Company is registered with the OTS and is subject to regulation, examination,
supervision and reporting requirements. Upon its acquisition of Ameriana-Ohio in
1992, the Company became a multiple savings and loan holding company subject to
additional regulatory requirements. As subsidiaries of the Company, the
Institutions are subject to certain restrictions in their dealings with the
Company and its affiliates.

     The Home Owners' Loan Act generally prohibits a savings and loan holding
company, without prior approval of the Director of the OTS, from (i) acquiring
control of any other savings institution or savings and loan holding

                                       39
<PAGE>
 
company or acquiring all or substantially all of the assets thereof, or (ii)
acquiring or retaining more than 5% of the voting shares of a savings
institution or holding company thereof which is not a subsidiary. A savings and
loan holding company may not acquire as a separate subsidiary savings
institution which has principal offices outside of the state where the principal
office of its subsidiary institution is located, except (i) in the case of
certain emergency acquisitions approved by the FDIC, (ii) if the holding company
controlled (as defined) such institution as of March 5, 1987, or (iii) when the
statutes of the state where an institution to be acquired is located
specifically permit such an acquisition. Under certain circumstances a savings
and loan holding company is permitted to acquire, with the approval of the
Director of the OTS, up to 15% of previously unissued voting shares of an
undercapitalized savings institution for cash without that savings institution
being deemed controlled by the holding company. Except with the prior approval
of the Director of the OTS, no director or officer of a savings and loan holding
company or person owning or controlling by proxy or otherwise more than 25% of
such company's stock, may also acquire control of any savings institution, other
than a subsidiary of such holding company, or any other savings and loan holding
company.

     A bank holding company, upon receipt of appropriate approvals from the
Federal Reserve Board and the Director of the OTS, is authorized to acquire
control of any savings institution or holding company thereof wherever located.
Similarly, a savings and loan holding company may acquire control of a bank. A
savings institution acquired by a bank holding company (i) may, so long as the
thrift continues to meet the qualified thrift lender test, continue to branch to
the same extent as permitted to other non-affiliated savings institutions
similarly chartered in the state, and (ii) cannot continue any non-banking
activities not authorized for bank holding companies. Savings institutions
acquired by a bank holding company may, if located in a state where
Ameriana-Indiana holding company is legally authorized to acquire a bank, be
converted to the status of a bank but deposit insurance assessments and payments
continue to be paid by the institution to the SAIF. A savings institution so
converted to a bank becomes subject to the branching restrictions applicable to
banks. Under certain circumstances, a savings institution acquired by a bank
holding company may be merged with an existing bank subsidiary of the holding
company (deposit insurance assessments and payments attributable to the merged
savings institution will continue to be those of and paid to SAIF pursuant to a
prescribed formula).

                                       40
<PAGE>
 
     Transactions between savings institutions and any affiliate are governed by
Sections 23A and 23B of the Federal Reserve Act. An affiliate of a savings
institution is any company or entity which controls, is controlled by or is
under common control with the savings institution. In a holding company context,
the parent holding company of a savings institution and any companies (including
other savings institutions) which are controlled by such parent holding company
are affiliates of the savings institution. Generally, Sections 23A and 23B (i)
limit the extent to which the savings institution or its subsidiaries may engage
in "covered transactions" with any one affiliate to an amount equal to 10% of
such institution's capital stock and surplus, and contain an aggregate limit on
all such transactions with all affiliates to an amount equal to 20% of such
capital stock and surplus, and (ii) require that all such transactions be on
terms substantially the same, or at least as favorable, to the institution 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. In addition to the restrictions imposed by
Section 23A and 23B, no savings institution may (i) loan or otherwise extend
credit to an affiliate, except for an affiliate which engages only in activities
which are permissible for bank holding companies, or (ii) purchase or invest in
any stocks, bonds, debentures, notes or similar obligations of any affiliate,
except for affiliates which are subsidiaries of the savings institution. The
Director of the OTS is granted the authority to impose more stringent
restrictions when appropriate for reasons of safety and soundness.

     Extensions of credit by savings institutions to executive officers,
directors and principal shareholders are subject to the restrictions set forth
in Section 22(h) of the Federal Reserve Act and the Federal Reserve Board's
Regulation O. Under Section 22(h), loans to an executive officer and to holders
of more than 10% of any class of a savings institution's voting stock, and
certain affiliated entities of either, may not exceed together with all other
outstanding loans to such person and affiliated entities the institution's loan
to one borrower limit (generally equal to 15% of the institution's unimpaired
capital and surplus and an additional 10% of such capital and surplus for loans
fully secured by certain readily marketable collateral). Section 22(h) also
prohibits loans, above amounts prescribed by the appropriate federal banking
agency, to directors, executive officers and holders of more than 10% of any
class of a savings institution's voting stock, and their respective affiliates,
unless such is approved in advance by a majority of the board of directors of
the institution with an "interested" director not participating in the voting.
The Federal Reserve Board has prescribed the loan amount (which includes all
other outstanding loans to such person), as to which such prior

                                       41
<PAGE>
 
board of director approval is required, as being the greater of $25,000 or 5% of
capital and surplus (up to $500,000). Further, Section 22(h) and Regulation O
require that loans to directors, executive officers and principal shareholders
be made on terms substantially the same as offered in comparable transactions to
other persons. Section 22(h) also generally prohibits a savings institution from
paying the overdrafts of any of its executive officers or directors.

     Section 22(g) of the Federal Reserve Act requires that loans to executive
officers or depository institutions not be made on terms more favorable than
those afforded other borrowers, requires approval by the board of directors of a
depository institution for extensions of credit to executive officers of the
institution, and imposes reporting requirements for and additional restrictions
on the type, amount and terms of credits to such officers. In addition, Section
106 of the Bank Holding Company Act 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.

     Prior to its acquisition of Ameriana-Ohio in August 1992, the Company
operated as a unitary savings and loan holding company. There generally were no
restrictions on the business activities of the Company as a unitary savings and
loan holding company, or those of the Company's nonbanking subsidiaries. Upon
the Company's acquisition of Ameriana-Ohio, the Company became a multiple
savings and loan holding company. As a result, the activities of the Company and
any of its subsidiaries (other than the Institutions) have thereafter been
subject to certain restrictions. The Home Owners' Loan Act limits the business
activities of multiple savings and loan holding companies and their nonbanking
subsidiaries to (i) furnishing or performing management services for a
subsidiary savings institution, (ii) conducting an insurance agency or escrow
business, (iii) holding, managing, or liquidating assets owned by or acquired
from a subsidiary savings institution, (iv) holding or managing properties used
or occupied by a subsidiary savings institution, (v) acting as trustee under
deeds of trust, (vi) those activities previously directly authorized by
regulation as of March 6, 1987 to be engaged in by multiple savings and loan
holding companies, or (vii) subject to prior approval of the OTS, those
activities authorized by the Federal Reserve Board as permissible for bank
holding companies, unless the OTS prohibits or limits such activities for
savings and loan holding companies. The activities authorized by the OTS

                                       42
<PAGE>
 
for multiple savings and loan holding companies as of March 6, 1987 include a
variety of activities including, among other things, the origination, purchase,
sale and servicing of various loans, the provision of clerical services
primarily for affiliates, the provision of certain other management services to
affiliates and other multiple holding companies and the underwriting or
reinsuring of credit life insurance in connection with extensions of credit by a
savings association subsidiary or another savings and loan holding company or
subsidiary thereof. The OTS has also approved various real estate-related
activities for multiple holding companies including the acquisition of
unimproved lots or the acquisition of unimproved real estate for prompt
development and subdivision, the development, subdivision and construction of
improvement of acquired real estate for sale or rental, the acquisition of
improved real estate and mobile homes to be held for rental or sale, the
acquisition of improved real estate for remodeling, rehabilitation,
modernization, renovation or demolition or rebuilding for sale or rental and the
maintenance and management of improved real estate. In the event any savings
association subsidiary of a multiple savings and loan holding company fails to
satisfy the Qualified Thrift Lender test and does not requalify within one year,
the holding company would be required to register as a bank holding company and
would become subject to the more stringent activity limitations applicable to
bank holding companies.

     In addition to the foregoing restrictions, if the Director of the OTS
determines that there is reasonable cause to believe that the continuation by a
savings and loan holding company of an activity constitutes a serious risk to
the financial safety, soundness, or stability of its subsidiary savings
institutions, the Director of the OTS may impose such restrictions as deemed
necessary to address such risk, including limiting (i) payment of dividends by
the savings institution(s), (ii) transactions between the savings institution(s)
and their affiliates, and (iii) any activities of the savings institution(s)
that might create a serious risk that the liabilities of the holding company and
its affiliates may be imposed on the savings institution. 

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 Ameriana-Indiana and

                                       43
<PAGE>
 
Ameriana-Ohio which met certain definitional tests and other conditions
prescribed by the Code benefitted 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"). Ameriana-Indiana and
Ameriana-Ohio 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. Ameriana-Indiana and Ameriana-Ohio 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.

     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.

                                       44
<PAGE>
 
     State Taxation. The State of Indiana imposes a franchise tax which is
assessed on qualifying financial institutions, such as Ameriana-Indiana. 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. Ameriana-Ohio is subject to an Ohio
franchise tax based on its net worth plus certain reserve amounts. Total net
worth for this purpose is reduced by certain exempt assets. The resulting net
taxable value is taxed at a rate of 1.4% for 1999. The Company's Indiana income
tax returns have been audited through 1989, and its Ohio franchise tax returns
have not been audited during the past five years. For additional information,
see Note 10 of the Consolidated Financial Statements included in the Annual
Report and appearing at Exhibit 13 to this report.

Employees

     As of December 31, 1998, the Company and subsidiaries had approximately 162
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.

                                       45
<PAGE>
 
Executive Officers

                         Age at
Name                December 31, 1998     Principal Position
----                -----------------     ------------------

Harry J. Bailey            56             President and Chief Executive Officer
                                          of Ameriana-Indiana and the Company
                                       
Timothy G. Clark           48             Executive Vice President and Chief 
                                          Operating Officer of Ameriana-Indiana
                                       
Ronald M. Holloway         49             Senior Vice President and Chief 
                                          Lending Officer of Ameriana-Indiana
                                       
Ralph E. Kerwin            62             Senior Vice President, Deposit 
                                          Services of Ameriana-Indiana
                                       
Michael C. Olson           49             President and Chief Executive Officer
                                          of Ameriana-Ohio
                                       
Nancy A. Rogers            56             Senior Vice President - Marketing 
                                          Services of Ameriana-Indiana and 
                                          Secretary of Ameriana-Indiana and the
                                          Company (since retirement of 
                                          Mr. Pruim effective January 1, 1998 
                                          -- see above).
                                       
Richard E. Welling         53             Senior Vice President - Treasurer of
                                          Ameriana-Indiana and Company (since 
                                          retirement of Mr. Pruim effective 
                                          January 1, 1998.
                                       
Edward J. Wooton           45             Senior Vice President - Subsidiaries  
                                          of Ameriana-Indiana and Senior Vice 
                                          President of the Company
                                       
Jan F. Wright              55             Senior Vice President - Branch 
                                          Operations of Ameriana-Indiana

     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 Ameriana-Indiana
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 Ameriana-Indiana since February 1984.
He has been a director of Ameriana-Indiana since 1987 and a director of the
Company since its formation.
       
     Timothy G. Clark joined Ameriana-Indiana as Executive Vice President and
Chief Operating Officer on September 2, 1997. He previously held the position of
Regional Executive and Area President at National City Bank

                                       46
<PAGE>
 
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 Ameriana-Indiana since 1973 and was
elected Senior Vice President and Chief Lending Officer in December 1995. Mr.
Holloway previously was responsible for the loan servicing department of
Ameriana-Indiana.

     Ralph E. Kerwin has been employed by Ameriana-Indiana since 1964 and heads
the funds acquisition function as Senior Vice President - Deposit Services.

     Michael C. Olson was elected to the position of President and Chief
Executive Officer of Ameriana-Ohio in March 1995. He was formerly Senior Vice
President - Branch Operations and Marketing of Ameriana-Indiana and the Chief
Executive Officer of Citizens Federal prior to its merger with Ameriana-Indiana
in 1988. He has been employed in the thrift industry since 1974.

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

     Richard E. Welling, a certified public accountant, joined Ameriana-Indiana
as a Senior Vice President on December 1, 1997, and was appointed Treasurer of
the Company and Ameriana-Indiana in 1998. Prior to joining Ameriana-Indiana, he
was employed as Secretary, Treasurer and Chief Financial Officer of AMBANC Corp.
in Vincennes, Indiana, where he had been employed for eleven years.

     Edward J. Wooton joined the staff of Ameriana-Indiana in August 1985 as
Senior Vice President Subsidiaries and directs diversified operations of
Ameriana-Indiana. He came to Ameriana-Indiana from the Management Advisory
Services Group of Deloitte and Touche, and prior to that he was an operations
officer of a thrift institution in the Chicago area. He was appointed Senior
Vice President of the Company in 1989.

     Jan F. Wright was elected as Senior Vice President - Branch Operations in
March 1995 and has been employed by Ameriana-Indiana since 1972. He previously
held the position of Vice President and Director of Loan Origination and
Processing.

                                       47
<PAGE>
 
Item 2.  Properties
-------------------

     Offices and Other Material Properties

     The following table sets forth the location of the Company's office
facilities at December 31, 1998 and certain other information relating to these
properties at that date.

<TABLE>
<CAPTION> 
                                         Year           Total             Net          Owned/       Square
                                       Acquired      Investment       Book Value       Leased        Feet 
                                       --------      ----------       ----------       ------       ------
<S>                                    <C>           <C>              <C>              <C>          <C> 
Ameriana-Indiana:

  Main Office
  2118 Bundy Avenue                     
  New Castle, Indiana.............       1958      $   3,313,338      $   1,046,702     Owned        20,500

  1311 Broad Street
  New Castle, Indiana.............       1890          1,364,654            442,712     Owned        18,000

  956 North Beechwood Street
  Middletown, Indiana.............       1971            441,803            111,158     Owned         5,500

  22 North Jefferson
  Knightstown, Indiana............       1979            572,297            200,516     Owned         3,400

  1810 North State Street
  Greenfield, Indiana.............       1995          1,469,709          1,142,867     Owned         5,800

  99 Dan Jones Road
  Avon, Indiana...................       1995          1,826,738          1,637,300     Owned        12,600

  1754 East 53rd Street
  Anderson, Indiana...............       1993            424,658            313,437     Owned         1,500

  488 W. Main Street
  Morristown, Indiana.............       1998            451,053            396,498     Owned         2,600

Ameriana-Ohio:

  7200 Blue Ash Road
  Cincinnati, Ohio................       1992          1,379,102            605,627     Owned         9,100

  2894 W. U.S. 22 & 3
  Maineville, Ohio................       1998            126,711             60,963    Leased         3,000

  6385 Branch Hill-Guinea Pike
  Loveland, Ohio..................       1998             71,145             48,354    Leased         1,500

Ameriana Insurance Agency, Inc.
  2020 S. Memorial Drive
  New Castle, Indiana.............       1987            223,034             82,251    Leased         1,200

Indiana Title Insurance Company
  1309 Broad Street
  New Castle, Indiana.............       1991             11,540              3,559    Leased         1,000
                                                   -------------       ------------

        Total.....................                 $  11,675,782       $  6,091,944
                                                   =============       ============
</TABLE>

                                       48
<PAGE>
 
     The Institutions use on-line processing terminals. Most of the data
processing is done by an in-house data processing center. At December 31, 1998,
the total net book value of the Company's offices and equipment (including
leasehold improvements) was $6.092 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 Stock and Related Security Holder 
----------------------------------------------------------------------------
        Matters
        -------
      
     The information set forth (i) in Note 18 of the Notes to Consolidated
Financial Statements under "Item 7. Financial Statements" and (ii) under the
section titled "Market Information" in the Annual Report, which section is
included in the information furnished as Exhibit 13 hereof, is incorporated
herein by reference.

Item 6.  Selected Financial Data
--------------------------------

     The information set forth under the section titled "Selected Financial
Data" in the Annual Report, which section is included in the information
furnished as Exhibit 13 hereof, is incorporated herein by reference.

Item 7.  Management's Discussion and Analysis of Financial Condition and
------------------------------------------------------------------------
         Results of Operations 
         ---------------------

     The information set forth under the section titled "Management's Discussion
and Analysis" in the Annual Report, which section is included in the information
furnished as Exhibit 13 hereof, is incorporated herein by reference.

                                       49
<PAGE>
 
Item 7A.  Quantitative and Qualitative Disclosure About Market Risk
-------------------------------------------------------------------
   
     The information required by this item contained in the section titled
"Management's Discussion and Analysis" in the Annual Report, which section is
included in the information furnished as Exhibit 13 hereof, is incorporated
herein by reference.

Item 8.  Financial Statements and Supplementary Data
----------------------------------------------------
   
     The Independent Auditor's Report and related Consolidated Financial
Statements and Notes in the Annual Report, which report, statements and notes
are included in the information furnished as Exhibit 13 hereof, are incorporated
herein by reference.

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 Report, 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

                                       50
<PAGE>
 
          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.

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
--------------------------------------------------------------------------
   
     1.   Report of Independent Auditor

     2.   Financial Statements

          (a)  Consolidated Statements of Condition at December 31, 1998 and
               1997

          (b)  Consolidated Statements of Income for Each of the Three Years in
               the Period Ended December 31, 1998

          (c)  Consolidated Statements of Shareholders' Equity for Each of the
               Three Years in the Period Ended December 31, 1998

          (d)  Consolidated Statements of Cash Flows for Each of the Three Years
               in the Period Ended December 31, 1998

          (e)  Notes to Consolidated Financial Statements

          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

          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

                                       51
<PAGE>
 
     10.1 Ameriana Bancorp stock option plans and other option agreements --
          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; 1996 Stock Option and Incentive Plan incorporated
          herein by reference to the Company's Registration Statement on Form
          S-8 filed with the SEC on May 17, 1996; 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 Ameriana-Indiana Employment Agreements with Harry J. Bailey and Edward
          J. Wooton -- agreements with Mr. Bailey incorporated herein by
          reference to the Company's Annual Report on Form 10-K filed with the
          SEC on March 25, 1994; agreement with Mr. Wooton incorporated herein
          by reference to the Company's Annual Report on Form 10-K filed with
          the SEC on March 28, 1995

     10.3 Form of Employment Agreement with Senior Officers, Richard E. Welling,
          Timothy G. Clark and Michael C. Olson incorporated herein by reference
          to Exhibit 10.2 hereto

     10.4 Ameriana Bancorp 1996 Stock Option and Incentive Plan, as amended in
          1998

     13   Annual Report to Stockholders

     21   Subsidiaries

     23   Consent of Olive LLP

     27   Financial Data Schedule

4.   Reports on Form 8-K

     The Company did not file a current report on Form 8-K during the fourth
quarter of the fiscal year covered by this report.

                                       52
<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, as of the date set
forth below.

                                           AMERIANA BANCORP

Date: March 30, 1999                   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 indicated as of the date set forth above.

By:                                    By: /s/ Harry J. Bailey
    ---------------------------------      ----------------------------------
    Paul W. Prior                          Harry J. Bailey
    Chairman of the Board                  President, Chief Executive Officer
                                            and Director
                                           (Principal Executive Officer)

By: /s/ Richard E. Welling             By: /s/ Donald C. Danielson
    --------------------------------       ----------------------------------
    Richard E. Welling                     Donald C. Danielson
    Senior Vice President - Treasurer      Director
    (Principal Financial and 
     Accounting Officer)

By: /s/ Charles M. Drackett, Jr.       By: /s/ R. Scott Hayes
    --------------------------------       ----------------------------------
    Charles M. Drackett, Jr.               R. Scott Hayes
    Director                               Director

By: /s/ Michael E. Kent                By: /s/ Ronald R. Pritzke 
    --------------------------------       ----------------------------------
    Michael E. Kent                        Ronald R. Pritzke
    Director                               Director

                                       53
<PAGE>
 
                                 EXHIBIT INDEX
Exhibit
-------

   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 stock option plans and other option agreements --
          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; 1996 Stock Option and Incentive Plan incorporated
          herein by reference to the Company's Registration Statement on Form
          S-8 filed with the SEC on May 17, 1996; 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   Ameriana-Indiana Employment Agreements with Harry J. Bailey, and
          Edward J. Wooton -- agreements with Mr. Bailey incorporated herein by
          reference to the Company's Annual Report on Form 10-K filed with the
          SEC on March 25, 1994; agreement with Mr. Wooton incorporated herein
          by reference to the Company's Annual Report on Form 10-K filed with
          the SEC on March 28, 1995
        
   10.3   Form of Employment Agreement with Senior Officers, Richard E. Welling,
          Timothy G. Clark and Michael C. Olson incorporated herein by reference
          to Exhibit 10.2 hereto
        
   10.4   Ameriana Bancorp 1996 Stock Option and Incentive Plan, as amended in
          1998
        
   13     Annual Report to Stockholders
        
   21     Subsidiaries
        
   23     Consent of Olive LLP
        
   27     Financial Data Schedule

                                       54