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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549





FORM 10-K/A

(Amendment No. 1)

(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, 2011

OR



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

For the transition period from              to

Commission file number: 0-18392





AMERIANA BANCORP

(Exact Name of Registrant as Specified in Its Charter)



|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Indiana                                                        |  | 35-1782688                          
|(State or Other Jurisdiction of
Incorporation or Organization) |  | (I.R.S. Employer 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:



|                                        |  |                                          
|--------------------------------------- |  | -----------------------------------------
|Title of each class                     |  | Name of each exchange on which registered
|Common Stock, par value $1.00 per share |  | The NASDAQ Stock Market LLC              

Securities registered pursuant to Section 12(g) of the Act: None





Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act.    YES   ̈    NO  x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the
Act.    YES   ̈    NO  x

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 whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File
required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    YES  x    NO   ̈

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):



|                        |  |                                                  |  |                           |  |  
|----------------------- |  | ------------------------------------------------ |  | ------------------------- |  | -
|Large accelerated filer |  |  ̈                                                |  | Accelerated filer         |  |  ̈
|                        |  |                                                  | 
|Non-accelerated filer   |  |  ̈  (Do not check if a smaller reporting company) |  | Smaller reporting company |  | x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act).    YES   ̈    NO  x

The aggregate market value of the registrants common stock held by nonaffiliates of the registrant at June 30, 2011 was approximately $13.6 million. For purposes of this calculation,
shares held by the directors and executive officers of the registrant are deemed to be held by affiliates.

At March 27, 2012, the
registrant had 2,988,952 shares of its common stock outstanding.





DOCUMENTS
INCORPORATED BY REFERENCE

Portions of Proxy Statement for the 2012 Annual Meeting of Shareholders are incorporated by reference in Part
III of this Form 10-K.









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EXPLANATORY NOTE

Ameriana Bancorp is filing this Annual Report on Form 10-K/A for the year ended December 31, 2011 to file Managements Report on
Internal Control Over Financial Reporting, which report was inadvertently omitted from Ameriana Bancorps Annual Report on Form 10-K for the year ended December 31, 2011 filed with the Securities and Exchange Commission on March 29, 2012. Item
15 has also been amended to incorporate by reference other exhibits filed with the 10-K into this Form 10-K/A. No other changes have been made to the Form 10-K as previously filed.



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INDEX



|         |  |                                                                                                              |  |      |     | 
|-------- |  | ------------------------------------------------------------------------------------------------------------ |  | ---- | --- | 
|         |  |                                                                                                              |  | Page |    
|PART I   | 
|Item 1.  |  | Business                                                                                                     |  |      | 1   | 
|Item 1A. |  | Risk Factors                                                                                                 |  |      | 25  | 
|Item 1B. |  | Unresolved Staff Comments                                                                                    |  |      | 30  | 
|Item 2.  |  | Properties                                                                                                   |  |      | 31  | 
|Item 3.  |  | Legal Proceedings                                                                                            |  |      | 32  | 
|Item 4.  |  | Mine Safety Disclosures                                                                                      |  |      | 32  | 
|        
|PART II  | 
|         |  |                                                                                                             
|Item 5.  |  | Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |  |      | 32  | 
|Item 6.  |  | Selected Financial Data                                                                                      |  |      | 34  | 
|Item 7.  |  | Managements Discussion and Analysis of Financial Condition and Results of
Operation                         |  |      | 36  | 
|Item 7A. |  | Quantitative and Qualitative Disclosures About Market Risk                                                   |  |      | 54  | 
|Item 8.  |  | Financial Statements and Supplementary Data                                                                  |  |      | 55  | 
|Item 9.  |  | Changes in and Disagreements With Accountants on Accounting and Financial
Disclosure                         |  |      | 98  | 
|Item 9A. |  | Controls and Procedures                                                                                      |  |      | 98  | 
|Item 9B. |  | Other Information                                                                                            |  |      | 98  | 
|        
|PART III | 
|         |  |                                                                                                             
|Item 10. |  | Directors, Executive Officers and Corporate Governance                                                       |  |      | 99  | 
|Item 11. |  | Executive Compensation                                                                                       |  |      | 99  | 
|Item 12. |  | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters               |  |      | 99  | 
|Item 13. |  | Certain Relationships and Related Transactions, and Director Independence                                    |  |      | 100 | 
|Item 14. |  | Principal Accountant Fees and Services                                                                       |  |      | 100 | 
|        
|PART IV  | 
|         |  |                                                                                                             
|Item 15. |  | Exhibits and Financial Statement Schedules                                                                   |  |      | 100 | 



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Forward-Looking Statements

This report contains certain forward-looking statements within the meaning of the federal securities laws. These statements are not historical facts, rather statements based on Ameriana
Bancorps current expectations regarding its business strategies, intended results and future performance. Forward-looking statements are preceded by terms such as expects, believes, anticipates,
intends and similar expressions. Such statements are subject to certain risks and uncertainties including changes in economic conditions in the Companys market area, including real estate values, changes in policies by regulatory
agencies, the outcome of litigation, 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. Additional factors that may affect our results are discussed in this annual report on Form 10-K under Part I - Item 1A- Risk Factors, and in the quarterly report on Form 10-Q for the period ended June 30, 2011
under Part II  Item 1A  Risk Factors. The Company cautions readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. The Company advises 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, that 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.

PART I

Item 1. Business

General

The Company. Ameriana Bancorp (the Company) is an Indiana chartered bank holding company subject to regulation and supervision by the Board of Governors of the Federal Reserve System
(the Federal Reserve Board) under the Bank Holding Company Act of 1956 (the BHCA). The Company became the holding company for Ameriana Bank (the Bank) in 1990. The Company also holds a minority interest in a
limited partnership organized to acquire and manage real estate investments, which qualify for federal tax credits. References to we, us and our refer to Ameriana Bancorp and/or the Bank, as appropriate.

The Bank. The Bank began operations in 1890. Since 1935, the Bank has been a member of the Federal Home Loan Bank (the
FHLB) System. Its deposits are insured to applicable limits by the Deposit Insurance Fund, administered by the FDIC (the FDIC). On June 29, 2002, the Bank converted to an Indiana savings bank and adopted the name
Ameriana Bank and Trust, SB. On July 31, 2006, the Bank closed its Trust Department and adopted the name Ameriana Bank, SB. On June 1, 2009, the Bank converted from an Indiana savings bank to an Indiana commercial bank
and adopted its present name, Ameriana Bank. The Bank is subject to regulation by the Indiana Department of Financial Institutions (the DFI) and the FDIC. The Bank conducts business through its main office at 2118 Bundy
Avenue, New Castle, Indiana and through twelve branch offices located in New Castle, Middletown, Knightstown, Morristown, Greenfield, Anderson, Avon, McCordsville, Carmel, Fishers, Westfield and New Palestine, Indiana. The Bank offers a wide range
of consumer and commercial banking services, including: (1) accepting deposits; (2) originating commercial, mortgage, consumer and construction loans; and (3) through its subsidiaries, providing investment and brokerage services and
insurance services.

The Bank has two wholly-owned subsidiaries, Ameriana Insurance Agency (AIA) and Ameriana
Financial Services, Inc. (AFS). AIA provides insurance sales from offices in New Castle, Greenfield and Avon, Indiana. AFS operates a brokerage facility in conjunction with LPL Financial.

The principal sources of funds for the Banks lending activities include deposits received from the general public, funds borrowed
from the FHLB of Indianapolis, principal amortization and prepayment of loans. The Banks primary sources of income are interest and fees on loans and interest on investments. The Bank has from time to time purchased loans and loan
participations in the secondary market. The Bank also invests in various



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federal and government agency obligations and other investment securities permitted by applicable laws and regulations, including mortgage-backed, municipal and mutual fund securities. The
Banks principal expenses are interest paid on deposit accounts and borrowed funds and operating expenses.

Competition.The geographic markets we serve are highly competitive for deposits, loans and other financial services, including
retail brokerage services and insurance. Our direct competitors include traditional banking and savings institutions, as well as other non-bank providers of financial services, such as insurance companies, brokerage firms, mortgage companies and
credit unions located in the Banks market area. Additional significant competition for deposits comes from money market mutual funds and corporate and government debt securities, and internet banks.

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 loans normally comes from commercial banks, savings institutions, mortgage bankers, mortgage brokers and insurance companies.

The Bank has banking offices in Henry, Hancock, Hendricks, Shelby, Madison, and Hamilton Counties in Indiana. The Bank competes with
several commercial banks and savings institutions in the Banks primary service area and in surrounding counties, many of which have capital and assets that are substantially larger than the Bank.

The Company expects competition to increase in the future as a result of legislative, regulatory and technological changes and the
continuing trend of consolidation in the financial services industry. Technological advances, for example, have lowered barriers to entry into the industry, allowed banks to expand their geographic reach by providing services over the Internet and
made it possible for non-depository institutions to offer products and services that traditionally have been provided by banks. Changes in federal law permit affiliation among banks, securities firms and insurance companies, which promotes a
competitive environment in the financial services industry. Competition for deposits and the origination of loans could limit the Companys growth in the future.

Available Information

The Companys annual report on Form 10-K,
quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments to such reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, are made available free of
charge on the Companys website, www.ameriana.com, as soon as reasonably practicable after such reports are electronically filed with, or furnished to, the Securities and Exchange Commission. Information on the Companys website
should not be considered a part of this Form 10-K.

Lending Activities

General. The principal lending activity of the Bank has been the origination of conventional first mortgage loans secured by
residential property and commercial real estate, and commercial loans and consumer loans. The residential mortgage loans have been predominantly secured by single-family homes and have included construction loans.

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



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The following table sets forth information concerning the Banks loans by type of loan at the dates
indicated.



|                                   |  |                        |         |  |      |  |        |        |  |   |         |  |  |        |        |   |   |   |         |        |  |  |        |   |  |        |         |   |   |  |        |   |  |   |         |   |  |  |        |  
|---------------------------------- |  | ---------------------- | ------- |  | ---- |  | ------ | ------ |  | - | ------- |  |  | ------ | ------ | - | - | - | ------- | ------ |  |  | ------ | - |  | ------ | ------- | - | - |  | ------ | - |  | - | ------- | - |  |  | ------ | -
|                                   |  | At December 31,        |        
|                                   |  | 2011                   |         |  | 2010 |  |        | 2009   |  |   | 2008    |  |  | 2007   |       
|                                   |  | Amount                 |         |  | %    |  |        | Amount |  |   | %       |  |  | Amount |        |   | % |   |         | Amount |  |  | %      |   |  | Amount |         |   | % | 
|                                   |  | (Dollars in thousands) |        
|Real estate loans:                 |  |                        |         |  |      |  |        |        |  |   |         |  |  |        |        |   |   |   |         |        |  |  |        |   |  |        |         |   |   |  |        |   |  |   |         |  
|Commercial                         |  | $                      | 100,126 |  |      |  | 31.58  | %      |  | $ | 94,595  |  |  |        | 29.79  | % |   | $ | 104,231 |        |  |  | 31.92  | % |  | $      | 98,173  |   |   |  | 30.13  | % |  | $ | 83,282  |   |  |  | 27.88  | %
|Residential                        |  |                        | 164,420 |  |      |  | 51.86  |        |  |   | 169,274 |  |  |        | 53.30  |   |   |   | 163,179 |        |  |  | 49.96  |   |  |        | 160,553 |   |   |  | 49.27  |   |  |   | 139,980 |   |  |  | 46.86  |  
|Construction                       |  |                        | 17,980  |  |      |  | 5.67   |        |  |   | 24,705  |  |  |        | 7.77   |   |   |   | 28,799  |        |  |  | 8.82   |   |  |        | 39,281  |   |   |  | 12.05  |   |  |   | 48,880  |   |  |  | 16.36  |  
|Commercial loans and leases        |  |                        | 30,961  |  |      |  | 9.76   |        |  |   | 22,360  |  |  |        | 7.04   |   |   |   | 23,580  |        |  |  | 7.22   |   |  |        | 21,215  |   |   |  | 6.51   |   |  |   | 18,665  |   |  |  | 6.25   |  
|Municipal loans                    |  |                        | 740     |  |      |  | 0.23   |        |  |   | 2,718   |  |  |        | 0.86   |   |   |   | 2,781   |        |  |  | 0.85   |   |  |        | 2,218   |   |   |  | 0.68   |   |  |   | 2,945   |   |  |  | 0.99   |  
|Consumer loans                     |  |                        | 2,860   |  |      |  | 0.90   |        |  |   | 3,943   |  |  |        | 1.24   |   |   |   | 4,003   |        |  |  | 1.23   |   |  |        | 4,424   |   |   |  | 1.36   |   |  |   | 4,959   |   |  |  | 1.66   |  
|                                   |  |                        |         |  |      |  |        |        |  |   |         |  |  |        |        |   |   |   |         |        |  |  |        |   |  |        |         |   |   |  |        |   |  |   |         |   |  |  |        |  
|Total                              |  | $                      | 317,087 |  |      |  | 100.00 | %      |  |   | 317,595 |  |  |        | 100.00 | % |   |   | 326,573 |        |  |  | 100.00 | % |  |        | 325,864 |   |   |  | 100.00 | % |  |   | 298,711 |   |  |  | 100.00 | %
|                                   |  |                        |         |  |      |  |        |        |  |   |         |  |  |        |        |   |   |   |         |        |  |  |        |   |  |        |         |   |   |  |        |   |  |   |         |   |  |  |        |  
|                                   |  |                        |         |  |      |  |        |        | 
|Less:                              |  |                        |         |  |      |  |        |        |  |   |         |  |  |        |        |   |   |   |         |        |  |  |        |   |  |        |         |   |   |  |        |   |  |   |         |  
|Undisbursed loan proceeds          |  |                        | 12      |  |      |  |        |        |  |   | 443     |  |  |        |        |   |   |   | 1,005   |        |  |  |        |   |  |        | 386     |   |   |  |        |   |  |   | 1,892   |   |  |  |        |  
|Deferred loan fees (expenses), net |  |                        | 434     |  |      |  |        |        |  |   | 225     |  |  |        |        |   |   |   | 19      |        |  |  |        |   |  |        | (48     | ) |   |  |        |   |  |   | (131    | ) |  |  |        |  
|Allowance for loan losses          |  |                        | 4,132   |  |      |  |        |        |  |   | 4,212   |  |  |        |        |   |   |   | 4,005   |        |  |  |        |   |  |        | 2,991   |   |   |  |        |   |  |   | 2,677   |   |  |  |        |  
|                                   |  |                        |         |  |      |  |        |        |  |   |         |  |  |        |        |   |   |   |         |        |  |  |        |   |  |        |         |   |   |  |        |   |  |   |         |   |  |  |        |  
|Subtotal                           |  |                        | 4,578   |  |      |  |        |        |  |   | 4,880   |  |  |        |        |   |   |   | 5,029   |        |  |  |        |   |  |        | 3,329   |   |   |  |        |   |  |   | 4,438   |   |  |  |        |  
|                                   |  |                        |         |  |      |  |        |        |  |   |         |  |  |        |        |   |   |   |         |        |  |  |        |   |  |        |         |   |   |  |        |   |  |   |         |   |  |  |        |  
|Total                              |  | $                      | 312,509 |  |      |  |        |        |  | $ | 312,715 |  |  |        |        |   |   | $ | 321,544 |        |  |  |        |   |  | $      | 322,535 |   |   |  |        |   |  | $ | 294,273 |   |  |  |        |  
|                                   |  |                        |         |  |      |  |        |        |  |   |         |  |  |        |        |   |   |   |         |        |  |  |        |   |  |        |         |   |   |  |        |   |  |   |         |   |  |  |        |  



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The following table shows, at December 31, 2011, the Banks loans based on their
contractual terms to maturity. Demand loans, loans having no stated schedule of repayments and no stated maturity and overdrafts are reported as due in one year or less. Contractual principal repayments of loans do not necessarily reflect the actual
term of the loan portfolio. The average life of mortgage loans is substantially less than their contractual terms because of loan prepayments and because of enforcement of due-on-sale clauses, which give the Bank the right to declare a loan
immediately due and payable if, among other things, 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.



|                                                |  |                                  |        |  |             |   |        |                    |  |   |         |  |  |   |         | 
|----------------------------------------------- |  | -------------------------------- | ------ |  | ----------- | - | ------ | ------------------ |  | - | ------- |  |  | - | ------- | 
|                                                |  | Amounts of Loans Which Mature in |       
|                                                |  | 2012                             |        |  | 2013  2016 |   |        | 2017 andThereafter |  |   | Total   | 
|                                                |  | (In thousands)                   |       
|Type of Loan:                                   |  |                                  |        |  |             |   |        |                    |  |   |         |  |  |   |         | 
|Residential and commercial real estate mortgage |  | $                                | 18,216 |  |             | $ | 14,122 |                    |  | $ | 232,208 |  |  | $ | 264,546 | 
|Construction                                    |  |                                  | 7,717  |  |             |   | 2,262  |                    |  |   | 8,001   |  |  |   | 17,980  | 
|Other                                           |  |                                  | 10,508 |  |             |   | 13,603 |                    |  |   | 10,450  |  |  |   | 34,561  | 
|                                                |  |                                  |        |  |             |   |        |                    |  |   |         |  |  |   |         | 
|Total                                           |  | $                                | 36,441 |  |             | $ | 29,987 |                    |  | $ | 250,659 |  |  | $ | 317,087 | 
|                                                |  |                                  |        |  |             |   |        |                    |  |   |         |  |  |   |         | 

The following table sets forth the dollar amount of the Companys aggregate loans due after one year
from December 31, 2011, which have predetermined interest rates and which have floating or adjustable interest rates.



|                                                |  |                |         |  |                |   |        |       |  |   |         | 
|----------------------------------------------- |  | -------------- | ------- |  | -------------- | - | ------ | ----- |  | - | ------- | 
|                                                |  | FixedRate      |         |  | AdjustableRate |   |        | Total | 
|                                                |  | (In thousands) |        
|Residential and commercial real estate mortgage |  | $              | 165,770 |  |                | $ | 80,560 |       |  | $ | 246,330 | 
|Construction                                    |  |                | 5,481   |  |                |   | 4,782  |       |  |   | 10,263  | 
|Other loans                                     |  |                | 22,196  |  |                |   | 1,857  |       |  |   | 24,053  | 
|                                                |  |                |         |  |                |   |        |       |  |   |         | 
|Total                                           |  | $              | 193,447 |  |                | $ | 87,199 |       |  | $ | 280,646 | 
|                                                |  |                |         |  |                |   |        |       |  |   |         | 

Residential Real Estate and Residential Construction Lending. The Bank originates loans on one-to
four-family residences. The original contractual loan payment period for residential mortgage loans originated by the Bank generally ranges from ten to 30 years. Because borrowers may refinance or prepay their loans, they normally remain outstanding
for a shorter period. The Bank normally sells a portion of its newly originated fixed-rate mortgage loans in the secondary market and retains all adjustable-rate loans in its portfolio. The decision to sell fixed-rate mortgage loans is determined by
management based on available pricing and balance sheet considerations. The Bank also originates hybrid mortgage loans. Hybrid mortgage loans carry a fixed-rate for the first three to ten years, and then convert to an adjustable-rate thereafter. The
residential mortgage loans originated and retained by the Bank in 2011 were composed primarily of fixed-rate loans and, to a lesser extent, hybrid loans that have a fixed-rate for five or seven years and adjust annually to the one-year constant
maturity treasury rate thereafter. The overall strategy is to maintain a low risk mortgage portfolio that helps to diversify the Banks overall asset mix.

The Bank makes construction/permanent loans to borrowers to build one-to four-family owner-occupied residences with terms of up to 30 years. These loans are made as interest-only loans for a period
typically of 12 months, at which time the loan converts to an amortized loan for the remaining term. The loans are made typically as adjustable-rate mortgages, which may be converted to a fixed-rate loan for sale in the secondary market at the
request of the borrower if secondary market guidelines have been met. One-to four-family residential construction loans were $2.2 million, or 12.2% of the construction loan portfolio, at December 31, 2011 compared to $3.3 million, or 13.4%, at
December 31, 2010. Additionally, at December 31, 2011, the Bank held loans on $2.2 million of residential land and building lots, which represented 12.2% of the construction loan portfolio, compared to $3.2 million, or 12.9%, at
December 31, 2010.

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



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Home equity lines of credit have adjustable rates of interest that are indexed to the prime
rate as published in The Wall Street Journal for terms of up to 10 years. The loans are originated with a total maximum loan-to-value ratio of 85% (including the first mortgage) of the appraised value of the property, and the Bank requires
that it has a second lien position on the property.

In 2011, the Bank originated $31.5 million in non-construction
residential real estate loans. The total included $1.1 million in adjustable-rate residential first mortgage loans, including hybrids, $25.7 million of fixed-rate first mortgage loans, $4.4 million of home equity credit lines and $294,000 of closed
end second mortgage loans. Sales of fixed-rate residential mortgage loans into the secondary market in 2011 and 2010 were $8.6 million and $17.0 million, respectively. Gains on residential loan sales, including imputed gains on servicing rights,
were $225,000 in 2011 compared with $923,000 in 2010. $560,000 of the 2010 gains resulted from a bulk sale of $10.9 million of seasoned loans.

Commercial Real Estate and Commercial Real Estate Construction Lending. The Bank originates loans secured by both owner-occupied and nonowner-occupied properties. The Bank originates commercial
real estate loans and purchases loan participations from other financial institutions. These participations are reviewed and approved based upon the same credit standards as commercial real estate loans originated by the Bank. At December 31,
2011, the Banks individual commercial real estate loan balances ranged from $1,000 to $5.1 million. The Banks commercial real estate loans may have a fixed or variable interest rate.

Loans secured by commercial real estate properties are generally larger and involve a greater degree of credit risk than one-to
four-family residential mortgage loans. Because payments on loans secured by commercial real estate properties are often dependent on the successful operation or management of the properties, repayment of such loans may be subject to adverse
conditions in the real estate market or by general economic conditions. If the cash flows from the project are reduced (for example, if leases are not obtained or renewed), the borrowers ability to repay the loan may be impaired. To minimize
the risks involved in originating such loans, the Bank considers, among other things, the creditworthiness of the borrower, the location of the real estate, the condition and occupancy levels of the security, the projected cash flows of the
business, the borrowers ability to service the debt and the quality of the organization managing the property.

Commercial real estate construction loans are made to developers for the construction of commercial properties, owner-occupied
facilities, nonowner-occupied facilities and for speculative purposes. These construction loans are granted based on a reasonable estimate of the time to complete the projects. Commercial real estate construction loans made up $13.6 million, or
75.9% of the construction loan portfolio, at December 31, 2011 compared to $18.2 million, or 73.7%, at December 31, 2010. As these loans mature they will either pay-off or roll to a permanent commercial real estate loan.

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

At December 31, 2011, the largest commercial real estate lending relationship was a credit secured by commercial office space, with an original commitment of $5.8 million, a current commitment of
$5.1 million and an outstanding balance of $5.1 million. This credit was performing according to its original terms at December 31, 2011.

Municipal Lending. At December 31, 2011, the Banks loan portfolio included two municipal loans with approved credit limits totaling $1.7 million and outstanding balances totaling
$740,000.



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##### Table of Contents

Consumer Lending. The consumer lending portfolio includes automobile loans and other
consumer products. The collateral is generally the asset defined in the purpose of the request. The policies of the Bank are adhered to in our underwriting of consumer loans.

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 may entail greater risk than do residential mortgage loans, particularly in the case of consumer loans that are unsecured or secured by assets that depreciate rapidly. In such cases, repossessed collateral
for a defaulted consumer loan may not provide an adequate source of repayment for the outstanding loan and the remaining deficiency often does not warrant further substantial collection efforts against the borrower. In addition, consumer loan
collections depend on the borrowers continuing financial stability, and therefore, are more likely to be adversely affected by job loss, divorce, illness or personal bankruptcy. Furthermore, the application of various federal and state laws,
including federal and state bankruptcy and insolvency laws, may limit the amount that can be recovered on such loans. The Bank has sought to reduce this risk by primarily granting secured consumer loans.

Commercial Lending. The Bank lends to business entities for the short-term working capital, inventory financing, equipment
purchases and other business financing needs. The loans can be in the form of revolving lines of credit, commercial lines of credit or term debt. The Bank also matches the term of the debt to the estimated useful life of the assets.

At December 31, 2011, the largest commercial relationship included seven credits with total commitments of $6.7 million and
outstanding balances totaling $4.9 million that were secured by all business assets of the borrower. One of the credits with a $5.0 million commitment and outstanding balance of $3.5 million was approved under the Small Business Administration
(SBA) 7(a) CAPLine program and carries a 75% SBA guarantee. All of the individual credits were performing according to their original terms at December 31, 2011.

Unlike residential mortgage loans, which generally are made on the basis of the borrowers ability to make repayment from his or her
employment or other income, and which are secured by real property the value of which tends to be more easily ascertainable, commercial loans are of higher risk and typically are made on the basis of the borrowers ability to make repayment
from the cash flows of the borrowers business. As a result, the availability of funds for the repayment of commercial loans may depend substantially on the success of the business itself. Further, any collateral securing such loans may
depreciate over time, may be difficult to appraise and may fluctuate in value.

Originations, Purchases and Sales.
Historically, most residential and commercial real estate loans have been originated directly by the Bank through salaried and commissioned loan officers. Residential loan originations have been attributable to referrals from real estate brokers and
builders, banking center staff, and commissioned loan agents. In 2011, the Bank acquired two loans totaling $3.8 million from other financial institutions, a $3.0 million whole loan purchase of a commercial credit to a construction company in the
oil and gas industry, and a $798,000 participation loan involving an apartment complex in the Indianapolis area. At December 31, 2011, balances outstanding for all loans acquired as participations or whole loan purchases totaled $23.8 million.
Commercial real estate and construction loan originations have also been obtained by direct solicitation. Consumer loan originations are attributable to walk-in customers who have been made aware of the Banks programs by advertising as well as
direct solicitation.

The Bank has previously sold whole loans and loan participations to other financial institutions and
institutional investors, and sold $8.6 million of loans in 2011. Sales of loans generate income (or loss) at the time of sale, produce future servicing income and provide funds for additional lending and other purposes. When the Bank retains the
servicing of loans it sells, the Bank retains responsibility for collecting and remitting loan payments, inspecting the properties, making certain insurance and tax payments on behalf of borrowers and otherwise servicing those loans. The Bank
typically receives a fee of between 0.25% and 0.375% per annum of the loans principal amount for performing these services. The right to service a loan has economic value and the Bank carries capitalized servicing rights on its books
based on comparable market values and expected cash flows. At December 31, 2011, the Bank was servicing $95.7 million of loans for others. The aggregate book value of capitalized servicing rights at December 31, 2011, net of a $32,000
valuation allowance, was $577,000.



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Management believes that purchases of loans and loan participations are desirable when local
mortgage demand is less than the local supply of funds available for mortgage originations or when loan terms available outside the Banks local lending areas are favorable to those available locally. Additionally, purchases of loans may be
made to diversify the Banks lending portfolio. The Banks loan purchasing activities fluctuate significantly. The seller generally performs the servicing of purchased loans. The Bank utilizes the same underwriting and monitoring processes
and standards for loans it purchases as it would for internally generated loans. To cover servicing costs, the service provider retains a portion of the interest being paid by the borrower. In addition to whole loan purchases, the Bank also
purchases participation interests in loans. Both whole loans and participations are purchased on a yield basis.

For
additional information, see Managements Discussion and Analysis of Financial Condition and Results of Operations included in Item 7 of this Form 10-K.

Loan Underwriting.During the loan approval process, the Bank assesses both the borrowers ability to repay the loan and the
adequacy of the underlying security. Potential residential borrowers complete an application that is submitted to a commissioned loan originator. As part of the loan application process, the Bank obtains information concerning the income, financial
condition, employment and credit history of the applicant. In addition, qualified appraisers inspect and appraise the property that is offered to secure the loan. The Banks underwriter or the Senior Vice President of Mortgage Banking approves
or denies the loan request.

Consumer loan applications are evaluated using a multi-factor based scoring system or by direct
underwriting.

Commercial loans that are part of a lending relationship exceeding $250,000 are submitted to the Banks
credit analysts for review, financial analysis and for preparation of a Loan Approval Memorandum. The Loan Committee, consisting of members of the Board or management appointed by the Board of Directors, must approve secured and unsecured loans over
$500,000 and $100,000, respectively, and all loans that have a variance to loan procedure.

In connection with the origination
of single-family, residential adjustable-rate loans with the initial rate fixed for three years or less, borrowers are qualified at a rate of interest equal to the new rate at the first re-pricing date, assuming the maximum increase. It is the
policy of management to make loans to borrowers who not only qualify at the low initial rate of interest, but who would also qualify following an upward interest rate adjustment.

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

When possible, the Bank charges loan origination fees on commercial loans that are calculated
as a percentage of the amount borrowed and are charged to the borrower at the time of origination of the loan. These fees generally range up to one point (one point being equivalent to 1% of the principal amount of the loan). In accordance with
Accounting Standards Codification 310, 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 to the Consolidated Financial Statements included under Item 8 of this Form 10-K.

Delinquencies. When a borrower defaults on a required payment on a non-commercial loan, the Bank contacts the borrower and
attempts to induce the borrower to cure the default. A late payment notice is mailed to the borrower and a telephone contact is made after a payment is fifteen days past due. If the delinquency on a mortgage loan exceeds 90 days and is not cured
through the Banks normal collection procedures or an acceptable arrangement is not worked out with the borrower, the Bank will institute measures to remedy the default, including commencing foreclosure action. In the case of default related to
a commercial loan, the contact is initiated by the commercial lender after a payment is ten days past due. The Loan Committee reviews delinquency reports weekly and the Criticized Assets Committee reviews classified delinquent loans monthly.



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The Bank follows the collection processes required by Freddie Mac, Fannie Mae and the
Federal Home Loan Bank of Indianapolis to manage residential loans underwritten for the secondary market. The collection practices for all other loans adhere with the Banks loan policies and regulatory requirements. It is the Banks
intention to be proactive in its collection of delinquent accounts while adhering to state and federal guidelines.

Nonperforming Assets and Asset Classification. Loans are reviewed regularly and are placed on nonaccrual status when, in the
opinion of management, the collection of additional interest is doubtful. Residential mortgage loans are placed on nonaccrual status when principal or interest payments are 90 days or more past due unless it is adequately secured and there is
reasonable assurance of full collection of principal and interest. Consumer loans generally are charged off when the loan delinquency exceeds 120 days. Commercial real estate loans and commercial loans are generally placed on nonaccrual status when
the loan is 90 days or more past due. Interest accrued and unpaid at the time a loan is placed on nonaccrual status is charged against interest income. Subsequent payments are applied to the outstanding principal balance.

Real estate acquired by the Bank as a result of foreclosure or by deed-in-lieu of foreclosure is classified as real estate owned until
such time as it is sold. When such property is acquired, it is recorded at its fair value. Any subsequent deterioration of the property is charged off directly to income, reducing the value of the asset.

The following table sets forth information with respect to the Companys aggregate nonperforming assets at the dates indicated.



|                                                                                           |  |                        |        |   |      |   |        |      |  |   |        |   |  |      |        |   |  |   |       |  
|------------------------------------------------------------------------------------------ |  | ---------------------- | ------ | - | ---- | - | ------ | ---- |  | - | ------ | - |  | ---- | ------ | - |  | - | ----- | -
|                                                                                           |  | At December 31,        |       
|                                                                                           |  | 2011                   |        |   | 2010 |   |        | 2009 |  |   | 2008   |   |  | 2007 |       
|                                                                                           |  | (Dollars in thousands) |       
|Loans accounted for on a nonaccrual basis:                                                 |  |                        |        |   |      |   |        |      |  |   |        |   |  |      |        |   |  |   |       |  
|Real Estate:                                                                               |  |                        |        |   |      |   |        |      |  |   |        |   |  |      |        |   |  |   |       |  
|Residential                                                                                |  | $                      | 4,500  |   |      | $ | 6,258  |      |  | $ | 3,810  |   |  | $    | 2,960  |   |  | $ | 1,465 |  
|Commercial                                                                                 |  |                        |       |   |      |   |       |      |  |   | 841    |   |  |      | 1,766  |   |  |   | 303   |  
|Construction                                                                               |  |                        | 3,432  |   |      |   | 4,184  |      |  |   | 4,219  |   |  |      | 1,454  |   |  |   | 870   |  
|Commercial and leases                                                                      |  |                        | 644    |   |      |   | 731    |      |  |   |       |   |  |      |       |   |  |   |      |  
|Consumer                                                                                   |  |                        |       |   |      |   | 14     |      |  |   | 12     |   |  |      | 38     |   |  |   |      |  
|                                                                                           |  |                        |        |   |      |   |        |      |  |   |        |   |  |      |        |   |  |   |       |  
|Total                                                                                      |  |                        | 8,576  |   |      |   | 11,187 |      |  |   | 8,882  |   |  |      | 6,218  |   |  |   | 2,638 |  
|                                                                                           |  |                        |        |   |      |   |        |      |  |   |        |   |  |      |        |   |  |   |       |  
|                                                                                           |  |                        |        |   |     
|Accruing loans contractually past due 90 days or more:                                     |  |                        |        |   |      |   |        |      |  |   |        |   |  |      |        |   |  |   |       |  
|Real Estate:                                                                               |  |                        |        |   |      |   |        |      |  |   |        |   |  |      |        |   |  |   |       |  
|Residential                                                                                |  |                        | 243    |   |      |   | 60     |      |  |   | 170    |   |  |      |       |   |  |   |      |  
|Consumer                                                                                   |  |                        | 9      |   |      |   |       |      |  |   | 1      |   |  |      | 1      |   |  |   |      |  
|                                                                                           |  |                        |        |   |      |   |        |      |  |   |        |   |  |      |        |   |  |   |       |  
|Total                                                                                      |  |                        | 252    |   |      |   | 60     |      |  |   | 171    |   |  |      | 1      |   |  |   |      |  
|                                                                                           |  |                        |        |   |      |   |        |      |  |   |        |   |  |      |        |   |  |   |       |  
|Total of nonaccrual and 90 days or more past due loans (1)                                 |  | $                      | 8,828  |   |      | $ | 11,247 |      |  | $ | 9,053  |   |  | $    | 6,219  |   |  | $ | 2,638 |  
|                                                                                           |  |                        |        |   |      |   |        |      |  |   |        |   |  |      |        |   |  |   |       |  
|                                                                                           |  |                        |        |   |     
|Percentage of total loans                                                                  |  |                        | 2.79   | % |      |   | 3.54   | %    |  |   | 2.78   | % |  |      | 1.91   | % |  |   | 0.88  | %
|                                                                                           |  |                        |        |   |      |   |        |      |  |   |        |   |  |      |        |   |  |   |       |  
|                                                                                           |  |                        |        |   |     
|Other nonperforming assets (2)                                                             |  | $                      | 7,571  |   |      | $ | 9,082  |      |  | $ | 5,517  |   |  | $    | 4,169  |   |  | $ | 2,517 |  
|                                                                                           |  |                        |        |   |      |   |        |      |  |   |        |   |  |      |        |   |  |   |       |  
|                                                                                           |  |                        |        |   |     
|Total nonperforming assets                                                                 |  | $                      | 16,399 |   |      | $ | 20,329 |      |  | $ | 14,570 |   |  | $    | 10,388 |   |  | $ | 5,155 |  
|                                                                                           |  |                        |        |   |      |   |        |      |  |   |        |   |  |      |        |   |  |   |       |  
|                                                                                           |  |                        |        |   |     
|Percentage of total assets                                                                 |  |                        | 3.82   | % |      |   | 4.73   | %    |  |   | 3.30   | % |  |      | 2.24   | % |  |   | 1.21  | %
|                                                                                           |  |                        |        |   |      |   |        |      |  |   |        |   |  |      |        |   |  |   |       |  
|                                                                                           |  |                        |        |   |     
|Troubled debt restructurings in total of nonaccrual and 90 days or more past due loans (1) |  | $                      | 1,783  |   |      | $ | 2,245  |      |  | $ |       |   |  | $    |       |   |  | $ |      |  
|                                                                                           |  |                        |        |   |      |   |        |      |  |   |        |   |  |      |        |   |  |   |       |  
|                                                                                           |  |                        |        |   |     
|Total troubled debt restructurings                                                         |  | $                      | 9,016  |   |      | $ | 8,393  |      |  | $ | 268    |   |  | $    |       |   |  | $ |      |  
|                                                                                           |  |                        |        |   |      |   |        |      |  |   |        |   |  |      |        |   |  |   |       |  



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|(1) | Total nonaccrual loans and 90 days or more past due loans at December 31, 2011 included $1.8 million of troubled debt restructurings, which consisted of a $1.1
million residential construction loan, five residential non-construction loans totaling $445,000 and a $225,000 commercial loan.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Other nonperforming assets represent 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.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Although the Companys nonperforming loans decreased by $2.4
million in 2011 from $11.2 million at December 31, 2010 to $8.8 million at December 31, 2011, the total still represents an elevated level as a result of continued weakness in the economy. Nonaccrual residential real estate loans decreased
by approximately $1.8 million for the year to $4.5 million at December 31, 2011, and was primarily due to the payoff of two loans totaling $1.6 million. We have analyzed our collateral position on these nonperforming loans using current
appraisals and valuations, and have established reserves accordingly. Nonperforming loans increased by $2.2 million in 2010. The increase was primarily due to four credits totaling $4.0 million that included a $1.3 million commercial development
loan, a $1.1 million residential condominium construction loan and two loans totaling $1.6 million on section 42 low-income housing tax credit properties.

Troubled debt restructurings (TDRs) increased from $8.4 million at December 31, 2010 to $9.0 million at December 31, 2011. This increase was primarily a result of continuing weak
economic conditions and the Banks proactive efforts in instituting workout programs that maintain the borrowers ability to generate cash flows sufficient to pay on a modified basis, and also project the ability to ultimately repay the
entire debt under an improved business environment. The total of $9.0 million at December 31, 2011 included a $4.5 million loan on a hotel in northern Indiana, a $1.1 million construction loan on a residential condominium project, twenty-three
single-family home loans totaling $2.6 million, two commercial real estate loans totaling $628,000, and a commercial loan for $225,000. The total of $8.4 million at December 31, 2010 included the $4.5 million loan on a hotel in northern Indiana
and the loan on a residential condominium project for $1.2 million, three land development loans totaling $1.5 million, and nine single-family home loans totaling $1.2 million. As of December 31, 2011, the Bank had classified the $1.1 million
construction loan on a residential condominium project and the commercial loan for $225,000 as doubtful, and all of the commercial real estate TDRs, including the hotel loan, as substandard. Three other residential real estate TDRs totaling $318,000
were classified as doubtful, and fifteen totaling $1.8 million were classified as substandard.

Interest income that would
have been recorded for 2011 had nonaccruing loans been current in accordance with their original terms and had been outstanding throughout the period was $774,000. The amount of interest related to nonaccrual loans included in interest income for
2011 was $166,000, of which $140,000 was paid by borrowers when the loans were not in a nonaccrual status.

For additional
information regarding the Banks problem assets and loss provisions recorded thereon, see Managements Discussion and Analysis of Financial Condition and Results of Operations in Item 7 of this Form 10-K.

Reserves for Losses on Loans and Real Estate

In making loans, management recognizes 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 incurred losses on loans. The Banks management establishes general loan loss reserves based on, among other things, historical loan loss experience, evaluation of economic conditions
in general and in various sectors of the Banks customer base, and periodic reviews of loan portfolio quality. Specific reserves are provided for individual loans where the ultimate collection is considered questionable by management after
reviewing the current status of loans that 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
inherent losses on delinquent loans when it determines that losses are anticipated to be incurred on the underlying properties. At December 31, 2011, the Banks allowance for loan losses amounted to $4.1 million. Management believes that
the allowance for loan losses is adequate to cover all incurred and probable losses inherent in the portfolio at December 31, 2011.



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Future reserves may be necessary if economic conditions or other circumstances differ
substantially from the assumptions used in making the initial determinations. Regulators, in reviewing the Banks loan portfolio, may require the Bank to increase its allowance for loan losses, thereby negatively affecting its financial
condition and earnings.

The following table sets forth an analysis of the Banks aggregate allowance for loan losses for
the periods indicated:



|                                                                                    |  |                         |        |   |      |   |        |      |  |   |        |   |  |      |       |   |  |   |        |   
|----------------------------------------------------------------------------------- |  | ----------------------- | ------ | - | ---- | - | ------ | ---- |  | - | ------ | - |  | ---- | ----- | - |  | - | ------ | --
|                                                                                    |  | Year Ended December 31, |       
|                                                                                    |  | 2011                    |        |   | 2010 |   |        | 2009 |  |   | 2008   |   |  | 2007 |      
|                                                                                    |  | (Dollars in thousands)  |       
|                                                                                    |  |                         |        |   |     
|Balance at beginning of period                                                      |  | $                       | 4,212  |   |      | $ | 4,005  |      |  | $ | 2,991  |   |  | $    | 2,677 |   |  | $ | 2,616  |   
|                                                                                    |  |                         |        |   |      |   |        |      |  |   |        |   |  |      |       |   |  |   |        |   
|                                                                                    |  |                         |        |   |     
|Charge-offs:                                                                        |  |                         |        |   |      |   |        |      |  |   |        |   |  |      |       |   |  |   |        |   
|Real estate loans:                                                                  |  |                         |        |   |      |   |        |      |  |   |        |   |  |      |       |   |  |   |        |   
|Commercial                                                                          |  |                         | 11     |   |      |   | 238    |      |  |   | 127    |   |  |      |      |   |  |   | 1      |   
|Residential                                                                         |  |                         | 605    |   |      |   | 737    |      |  |   | 200    |   |  |      | 413   |   |  |   | 14     |   
|Construction                                                                        |  |                         | 536    |   |      |   | 525    |      |  |   | 637    |   |  |      |      |   |  |   | 488    |   
|Commercial loans                                                                    |  |                         | 301    |   |      |   | 398    |      |  |   | 212    |   |  |      | 503   |   |  |   | 538    |   
|Consumer loans                                                                      |  |                         | 107    |   |      |   | 72     |      |  |   | 54     |   |  |      | 135   |   |  |   | 72     |   
|                                                                                    |  |                         |        |   |      |   |        |      |  |   |        |   |  |      |       |   |  |   |        |   
|Total charge-offs                                                                   |  |                         | 1,560  |   |      |   | 1,970  |      |  |   | 1,230  |   |  |      | 1,051 |   |  |   | 1,113  |   
|                                                                                    |  |                         |        |   |      |   |        |      |  |   |        |   |  |      |       |   |  |   |        |   
|                                                                                    |  |                         |        |   |     
|Recoveries:                                                                         |  |                         |        |   |      |   |        |      |  |   |        |   |  |      |       |   |  |   |        |   
|Real estate loans:                                                                  |  |                         |        |   |      |   |        |      |  |   |        |   |  |      |       |   |  |   |        |   
|Residential                                                                         |  |                         | 76     |   |      |   | 16     |      |  |   | 1      |   |  |      | 9     |   |  |   | 1      |   
|Commercial                                                                          |  |                         | 1      |   |      |   |       |      |  |   |       |   |  |      | 75    |   |  |   |       |   
|Construction                                                                        |  |                         | 1      |   |      |   | 206    |      |  |   | 1      |   |  |      |      |   |  |   |       |   
|Commercial loans and leases                                                         |  |                         | 2      |   |      |   | 4      |      |  |   | 47     |   |  |      |      |   |  |   | 2,772  |   
|Consumer loans                                                                      |  |                         | 15     |   |      |   | 18     |      |  |   | 15     |   |  |      | 31    |   |  |   | 28     |   
|                                                                                    |  |                         |        |   |      |   |        |      |  |   |        |   |  |      |       |   |  |   |        |   
|Total recoveries                                                                    |  |                         | 95     |   |      |   | 244    |      |  |   | 64     |   |  |      | 115   |   |  |   | 2,801  |   
|                                                                                    |  |                         |        |   |      |   |        |      |  |   |        |   |  |      |       |   |  |   |        |   
|                                                                                    |  |                         |        |   |     
|Net (charge-offs) recoveries                                                        |  |                         | (1,465 | ) |      |   | (1,726 | )    |  |   | (1,166 | ) |  |      | (936  | ) |  |   | 1,688  |   
|                                                                                    |  |                         |        |   |     
|Provision (credit) for loan losses                                                  |  |                         | 1,385  |   |      |   | 1,933  |      |  |   | 2,180  |   |  |      | 1,250 |   |  |   | (1,627 | ) 
|                                                                                    |  |                         |        |   |      |   |        |      |  |   |        |   |  |      |       |   |  |   |        |   
|                                                                                    |  |                         |        |   |     
|Balance at end of period                                                            |  | $                       | 4,132  |   |      | $ | 4,212  |      |  | $ | 4,005  |   |  | $    | 2,991 |   |  | $ | 2,677  |   
|                                                                                    |  |                         |        |   |      |   |        |      |  |   |        |   |  |      |       |   |  |   |        |   
|                                                                                    |  |                         |        |   |     
|Ratio of net charge-offs (recoveries) to average loan outstanding during the period |  |                         | 0.47   | % |      |   | 0.54   | %    |  |   | 0.35   | % |  |      | 0.30  | % |  |   | (0.62  | )%
|                                                                                    |  |                         |        |   |      |   |        |      |  |   |        |   |  |      |       |   |  |   |        |   
|                                                                                    |  |                         |        |   |     
|Allowance for loan losses to loans                                                  |  |                         | 1.30   | % |      |   | 1.33   | %    |  |   | 1.23   | % |  |      | 0.92  | % |  |   | 0.90   | % 
|                                                                                    |  |                         |        |   |      |   |        |      |  |   |        |   |  |      |       |   |  |   |        |   

The Company had a provision for loan losses of $1.4 million for 2011 compared to a provision of $1.9
million in 2010, primarily due to lower net charge-offs and nonperforming loans. The amount of provision necessary to maintain the allowance for loan losses as a percentage of total loans at a level required pursuant to the Companys
methodology was less in 2011, due to a larger provision in 2010 to increase the allowance for loan losses to an amount commensurate with the Companys level of credit risk at that time.

The 2010 provision increased the allowance as a percentage of total loans by 10 basis points from 1.23% at December 31, 2009 to
1.33% at December 31, 2010. The 2011 provision resulted in a 3 basis points decrease in the allowance as a percentage of total loans to 1.30% at December 31, 2011. Both the 2011 and the 2010 provisions were primarily due to a continuing
elevated level of charge-offs and non-performing loans.

Charge-offs totaled $1.6 million for 2011, and included partial
charge-offs of the following credits: $501,000 related to an Indianapolis area golf course that was sold in December 2011 with a $121,000 gain



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recognized, $300,000 related to a commercial loan secured by oil and gas rights, and $145,000 related to a single family home located in the Indianapolis area. These charge-offs resulted from
further deterioration of general economic conditions that occurred in 2011 as reflected by new appraisals or new valuations. Total charge-offs were $2.0 million for 2010, which included partial charge-offs of the following credits, all in the
Indianapolis market: $338,000 related to a high-end single family home, $216,000 related to one investors four residential rental properties, $180,000 securing business assets of a flooring retailer, $160,000 related to a strip retail center
and adjacent lots, and $158,000 related to a loan for a multi-use commercial building. See also Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations  Loans  Credit Quality.

The following table sets forth a breakdown of the Companys aggregate allowance for loan losses by loan category at the
dates indicated. Management believes that the allowance can be allocated by category only on an approximate basis. The allocation of the allowance to each category is not necessarily indicative of future losses and does not restrict the use of the
allowance to absorb losses in any category.



|                                |  |                        |       |  |                                                |  |        |        |  |   |                                                |  |  |        |        |   |                                                |   |       |  |  |  |        |  
|------------------------------- |  | ---------------------- | ----- |  | ---------------------------------------------- |  | ------ | ------ |  | - | ---------------------------------------------- |  |  | ------ | ------ | - | ---------------------------------------------- | - | ----- |  |  |  | ------ | -
|                                |  | At December 31,        |      
|                                |  | 2011                   |       |  | 2010                                           |  |        | 2009   | 
|                                |  | Amount                 |       |  | Percent ofLoans in 
EachCategory toTotal Loans |  |        | Amount |  |   | Percent ofLoans in 
EachCategory toTotal Loans |  |  | Amount |        |   | Percent ofLoans in 
EachCategory toTotal Loans |  
|                                |  | (Dollars in thousands) |      
|Real estate loans:              |  |                        |       |  |                                                |  |        |        |  |   |                                                |  |  |        |        |   |                                                |   |       |  |  |  |        |  
|Commercial                      |  | $                      | 736   |  |                                                |  | 31.58  | %      |  | $ | 639                                            |  |  |        | 29.79  | % |                                                | $ | 661   |  |  |  | 31.92  | %
|Residential                     |  |                        | 1,605 |  |                                                |  | 51.86  |        |  |   | 1,584                                          |  |  |        | 53.30  |   |                                                |   | 1,262 |  |  |  | 49.96  |  
|Construction                    |  |                        | 940   |  |                                                |  | 5.67   |        |  |   | 1,254                                          |  |  |        | 7.77   |   |                                                |   | 1,269 |  |  |  | 8.82   |  
|Commercial loans and leases     |  |                        | 788   |  |                                                |  | 9.76   |        |  |   | 657                                            |  |  |        | 7.04   |   |                                                |   | 686   |  |  |  | 7.22   |  
|Municipal loans                 |  |                        |      |  |                                                |  | 0.23   |        |  |   |                                               |  |  |        | 0.86   |   |                                                |   |      |  |  |  | 0.85   |  
|Consumer loans                  |  |                        | 63    |  |                                                |  | 0.90   |        |  |   | 78                                             |  |  |        | 1.24   |   |                                                |   | 127   |  |  |  | 1.23   |  
|                                |  |                        |       |  |                                                |  |        |        |  |   |                                                |  |  |        |        |   |                                                |   |       |  |  |  |        |  
|Total allowance for loan losses |  | $                      | 4,132 |  |                                                |  | 100.00 | %      |  | $ | 4,212                                          |  |  |        | 100.00 | % |                                                | $ | 4,005 |  |  |  | 100.00 | %
|                                |  |                        |       |  |                                                |  |        |        |  |   |                                                |  |  |        |        |   |                                                |   |       |  |  |  |        |  



|                                |  |                        |       |  |                                                |  |        |        |  |   |                                                |  |  |  |        |  
|------------------------------- |  | ---------------------- | ----- |  | ---------------------------------------------- |  | ------ | ------ |  | - | ---------------------------------------------- |  |  |  | ------ | -
|                                |  | At December 31,        |      
|                                |  | 2008                   |       |  | 2007                                           | 
|                                |  | Amount                 |       |  | Percent ofLoans in 
EachCategory toTotal Loans |  |        | Amount |  |   | Percent ofLoans in 
EachCategory toTotal Loans | 
|                                |  | (Dollars in thousands) |      
|Real estate loans:              |  |                        |       |  |                                                |  |        |        |  |   |                                                |  |  |  |        |  
|Commercial                      |  | $                      | 760   |  |                                                |  | 30.13  | %      |  | $ | 550                                            |  |  |  | 27.88  | %
|Residential                     |  |                        | 521   |  |                                                |  | 49.27  |        |  |   | 348                                            |  |  |  | 46.86  |  
|Construction                    |  |                        | 686   |  |                                                |  | 12.05  |        |  |   | 999                                            |  |  |  | 16.36  |  
|Commercial loans and leases     |  |                        | 729   |  |                                                |  | 6.51   |        |  |   | 571                                            |  |  |  | 6.25   |  
|Municipal loans                 |  |                        |      |  |                                                |  | 0.68   |        |  |   |                                               |  |  |  | 0.99   |  
|Consumer loans                  |  |                        | 295   |  |                                                |  | 1.36   |        |  |   | 209                                            |  |  |  | 1.66   |  
|                                |  |                        |       |  |                                                |  |        |        |  |   |                                                |  |  |  |        |  
|Total allowance for loan losses |  | $                      | 2,991 |  |                                                |  | 100.00 | %      |  | $ | 2,677                                          |  |  |  | 100.00 | %
|                                |  |                        |       |  |                                                |  |        |        |  |   |                                                |  |  |  |        |  

Investment Activities

Interest and dividends on investment securities, mortgage-backed securities, FHLB stock and other investments provide the second largest source of income for the Bank (after interest on loans),
constituting 7.5% of the Banks total interest income (and dividends) for 2011. The Bank maintains its liquid assets at levels believed adequate to meet requirements of normal banking activities and potential savings outflows.

As an Indiana commercial bank, the Bank is authorized to invest without limitation in direct or indirect obligations of the United
States, direct obligations of a United States territory, and direct obligations of the state or a municipal corporation or taxing district in Indiana. The Bank is also permitted to invest in bonds or other securities of a national mortgage
association and the stock and obligations of a Federal Home Loan Bank. Indiana commercial banks may also invest in collateralized mortgage obligations to the same extent as national banks. An Indiana



11



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commercial bank may also purchase for its own account other investment securities under such limits as the Department of Financial Institutions prescribes by rule, provided that the commercial
bank may not invest more than 10% of its equity capital in the investment securities of any one issuer. An Indiana commercial bank may not invest in speculative bonds, notes or other indebtedness that are defined as securities and that are rated
below the first four rating categories by a generally recognized rating service, or are in default. An Indiana commercial bank may purchase an unrated security if it obtains financial information adequate to document the investment quality of the
security.

The Banks investment portfolio consists primarily of mortgage-backed securities issued by Ginnie Mae, Fannie
Mae and Freddie Mac.The Bank has also invested in municipal securities and mutual funds and maintains interest-bearing deposits in other financial institutions (primarily the FHLB of Indianapolis and the Federal Reserve Bank of Chicago). As
a member of the FHLB System, the Bank is also required to hold stock in the FHLB of Indianapolis. The Bank did not own any security of a single issuer that had an aggregate book value in excess of 10% of its equity at December 31, 2011.

The following table sets forth the market value of the Banks investments in federal agency obligations, mortgage-backed
securities, mutual funds, and municipal securities at the dates indicated. All of these investments were available for sale:



|                                                           |  |                 |        |  |      |   |        | 
|---------------------------------------------------------- |  | --------------- | ------ |  | ---- | - | ------ | 
|                                                           |  | At December 31, |       
|                                                           |  | 2011            |        |  | 2010 |  
|                                                           |  | (In thousands)  |       
|                                                           |  |                
|Ginnie Mae and GSE mortgage-backed pass-through securities |  | $               | 39,714 |  |      | $ | 29,436 | 
|Ginnie Mae collateralized mortgage obligations             |  |                 |       |  |      |   | 5,341  | 
|Municipal securities                                       |  |                 | 2,351  |  |      |   | 2,164  | 
|Mutual funds                                               |  |                 | 1,782  |  |      |   | 1,667  | 
|                                                           |  |                 |        |  |      |   |        | 
|Total investment                                           |  | $               | 43,847 |  |      | $ | 38,608 | 
|                                                           |  |                 |        |  |      |   |        | 

The following table sets forth information regarding maturity distribution and average yields for the
Banks investment securities portfolio at December 31, 2011:



|                         |  |                        |       |  |           |  |      |            |  |   |               |  |  |        |      |   |       |   |     |        |  |  |       |   |  |        |  |   |       |  |  |  |      |   |  |   |       |  |  |  |      |  
|------------------------ |  | ---------------------- | ----- |  | --------- |  | ---- | ---------- |  | - | ------------- |  |  | ------ | ---- | - | ----- | - | --- | ------ |  |  | ----- | - |  | ------ |  | - | ----- |  |  |  | ---- | - |  | - | ----- |  |  |  | ---- | -
|                         |  | Within 1 Year          |       |  | 1-5 Years |  |      | 5-10 Years |  |   | Over 10 Years |  |  | Total  |     
|                         |  | Amount                 |       |  | Yield     |  |      | Amount     |  |   | Yield         |  |  | Amount |      |   | Yield |   |     | Amount |  |  | Yield |   |  | Amount |  |   | Yield | 
|                         |  | (Dollars in thousands) |      
|                         |  |                        |       |  |           |  |      |            |  |   |              
|Municipal securities (1) |  | $                      |      |  |           |  |     | %          |  | $ | 105           |  |  |        | 7.95 | % |       | $ | 381 |        |  |  | 7.95  | % |  |        |  | $ | 1,865 |  |  |  | 7.95 | % |  | $ | 2,351 |  |  |  | 7.95 | %
|Mutual funds (2)         |  |                        | 1,782 |  |           |  | 2.61 |            |  |   |              |  |  |        |     |   |       |   |    |        |  |  |      |   |  |        |  |   |      |  |  |  |     |   |  |   | 1,782 |  |  |  | 2.61 |  



|(1) | Presented on a tax-equivalent basis using a tax rate of 34%.
|--- | ------------------------------------------------------------

|(2) | Mutual funds have no stated maturity date.
|--- | ------------------------------------------



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The Banks mortgage-backed securities, Ginnie Mae and GSE pass-throughs, include both
fixed and adjustable-rate securities. At December 31, 2011, the Banks mortgage-backed securities consisted of the following:



|                                |  |                        |        |  |              |  |      |  
|------------------------------- |  | ---------------------- | ------ |  | ------------ |  | ---- | -
|                                |  | CarryingAmount         |        |  | AverageYield | 
|                                |  | (Dollars in thousands) |       
|Adjustable-rate:                |  |                        |        |  |              |  |      |  
|Repricing in one year or less   |  | $                      | 2,318  |  |              |  | 2.00 | %
|Repricing in more than one year |  |                        |       |  |              |  |     |  
|                                |  |                       
|Fixed-rate:                     |  |                        |        |  |              |  |      |  
|Maturing in five years or less  |  |                        | 13,273 |  |              |  | 2.35 |  
|Maturing in five to ten years   |  |                        | 14,787 |  |              |  | 2.68 |  
|Maturing in more than ten years |  |                        | 9,336  |  |              |  | 3.21 |  
|                                |  |                        |        |  |              |  |      |  
|Total                           |  | $                      | 39,714 |  |              |  | 2.66 | %
|                                |  |                        |        |  |              |  |      |  

Sources of Funds

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

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

As of December 31, 2011, approximately 55.4%, or $187.0 million, of the Banks aggregate deposits consisted of various savings and demand deposit accounts from which customers are permitted to
withdraw funds at any time without penalty.

Interest earned on statement accounts is paid from the date of deposit to the
date of withdrawal and compounded semi-annually for the Bank. Interest earned on NOW and money market deposit accounts is paid from the date of deposit to the date of withdrawal and compounded and credited monthly. Management establishes the
interest rate on these accounts weekly.

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

In addition to retail deposits, the Bank may obtain certificates of deposit from the brokered market. The Bank held no brokered certificates at December 31, 2011 and $10.4 million of brokered
certificates with a weighted average cost of 0.74% at December 31, 2010.



13



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The following table sets forth the change in dollar amount of deposits in the various types
of deposit accounts offered by the Bank between the dates indicated:



|                                  |  |                             |         |  |                             |  |        |                                    |  |   |         |  |  |  |        |   |  |   |         |   |  |  |         |   
|--------------------------------- |  | --------------------------- | ------- |  | --------------------------- |  | ------ | ---------------------------------- |  | - | ------- |  |  |  | ------ | - |  | - | ------- | - |  |  | ------- | --
|                                  |  | Balance atDecember 
31,2011 |         |  | Balance atDecember 
31,2010 |  |        | Increase (Decrease)from 
PriorYear | 
|                                  |  |                             |         |  | (Dollars in thousands)      |  |        |                                    |  |   |         |  |  |  |       
|                                  |  |                             |         |  |                             | 
|Noninterest-bearing deposits      |  | $                           | 40,197  |  |                             |  | 11.92  | %                                  |  | $ | 34,769  |  |  |  | 10.29  | % |  | $ | 5,428   |   |  |  | 15.61   | % 
|Interest-bearing checking         |  |                             | 88,632  |  |                             |  | 26.28  |                                    |  |   | 77,012  |  |  |  | 22.78  |   |  |   | 11,620  |   |  |  | 15.09   |   
|Money market deposits             |  |                             | 29,084  |  |                             |  | 8.62   |                                    |  |   | 24,551  |  |  |  | 7.26   |   |  |   | 4,533   |   |  |  | 18.46   |   
|Savings deposits                  |  |                             | 29,043  |  |                             |  | 8.61   |                                    |  |   | 28,836  |  |  |  | 8.53   |   |  |   | 207     |   |  |  | 0.72    |   
|Certificate accounts:             |  |                             |         |  |                             |  |        |                                    |  |   |         |  |  |  |        |   |  |   |         |   |  |  |         |   
|Certificates of $100,000 and more |  |                             | 42,610  |  |                             |  | 12.63  |                                    |  |   | 44,481  |  |  |  | 13.16  |   |  |   | (1,871  | ) |  |  | (4.21   | ) 
|Fixed-rate certificates:          |  |                             |         |  |                             |  |        |                                    |  |   |         |  |  |  |        |   |  |   |         |   |  |  |         |   
|12 months or less                 |  |                             | 62,483  |  |                             |  | 18.53  |                                    |  |   | 68,221  |  |  |  | 5.29   |   |  |   | (5,738  | ) |  |  | (8.41   | ) 
|13-24 months                      |  |                             | 19,820  |  |                             |  | 5.88   |                                    |  |   | 25,404  |  |  |  | 17.87  |   |  |   | (5,584  | ) |  |  | (21.98  | ) 
|25-36 months                      |  |                             | 12,224  |  |                             |  | 3.63   |                                    |  |   | 5,749   |  |  |  | 1.01   |   |  |   | 6,475   |   |  |  | 112.63  |   
|37 months or greater              |  |                             | 12,616  |  |                             |  | 3.74   |                                    |  |   | 18,013  |  |  |  | 10.57  |   |  |   | (5,397  | ) |  |  | (29.96  | ) 
|Brokered certificates             |  |                             |        |  |                             |  |       |                                    |  |   | 10,363  |  |  |  | 3.07   |   |  |   | (10,363 | ) |  |  | (100.00 | ) 
|Variable-rate certificates:       |  |                             |         |  |                             |  |        |                                    |  |   |         |  |  |  |        |   |  |   |         |   |  |  |         |   
|18 months                         |  |                             | 541     |  |                             |  | 0.16   |                                    |  |   | 579     |  |  |  | 0.17   |   |  |   | (38     | ) |  |  | (6.56   | ) 
|                                  |  |                             |         |  |                             |  |        |                                    |  |   |         |  |  |  |        |   |  |   |         |   |  |  |         |   
|Total                             |  | $                           | 337,250 |  |                             |  | 100.00 | %                                  |  | $ | 337,978 |  |  |  | 100.00 | % |  | $ | (728    | ) |  |  | (0.22   | )%
|                                  |  |                             |         |  |                             |  |        |                                    |  |   |         |  |  |  |        |   |  |   |         |   |  |  |         |   

The variety of deposit accounts offered by the Bank has permitted it to be competitive in obtaining funds
and has allowed it to respond with flexibility to, but not eliminate, disintermediation (the flow of funds away from depository institutions such as savings institutions into direct investment vehicles such as government and corporate securities).
In addition, the Bank has become increasingly subject to short-term fluctuation in deposit flows, as customers have become more interest rate conscious. The ability of the Bank to attract and maintain deposits and its costs of funds have been, and
will continue to be, significantly affected by money market conditions. The Bank currently offers a variety of deposit products, including noninterest-bearing and interest-bearing NOW accounts, savings accounts, money market deposit accounts
(MMDA) and certificates of deposit ranging in terms from three months to seven years.

The following table sets
forth the Banks average aggregate balances and interest rates. Average balances in 2011, 2010 and 2009 are calculated from actual daily balances.



|                                                |  |                                  |         |  |                 |  |      |                |  |   |                 |  |  |                |      |   |                 |   |         |  |  |  |      |  
|----------------------------------------------- |  | -------------------------------- | ------- |  | --------------- |  | ---- | -------------- |  | - | --------------- |  |  | -------------- | ---- | - | --------------- | - | ------- |  |  |  | ---- | -
|                                                |  | For the Years Ended December 31, |        
|                                                |  | 2011                             |         |  | 2010            |  |      | 2009           | 
|                                                |  | AverageBalance                   |         |  | AverageRatePaid |  |      | AverageBalance |  |   | AverageRatePaid |  |  | AverageBalance |      |   | AverageRatePaid |  
|                                                |  | (Dollars in thousands)           |        
|                                                |  |                                  |         |  |                 | 
|Interest-bearing checking                       |  | $                                | 81,602  |  |                 |  | 0.36 | %              |  | $ | 73,598          |  |  |                | 0.47 | % |                 | $ | 79,064  |  |  |  | 0.82 | %
|Money market deposits                           |  |                                  | 28,449  |  |                 |  | 0.38 |                |  |   | 25,698          |  |  |                | 0.48 |   |                 |   | 29,259  |  |  |  | 0.74 |  
|Savings deposits                                |  |                                  | 29,705  |  |                 |  | 0.09 |                |  |   | 26,810          |  |  |                | 0.10 |   |                 |   | 23,983  |  |  |  | 0.13 |  
|Time deposits                                   |  |                                  | 168,164 |  |                 |  | 1.66 |                |  |   | 173,889         |  |  |                | 2.12 |   |                 |   | 194,046 |  |  |  | 2.84 |  
|                                                |  |                                  |         |  |                 |  |      |                |  |   |                 |  |  |                |      |   |                 |   |         |  |  |  |      |  
|Total interest-bearing deposits                 |  |                                  | 307,920 |  |                 |  | 1.05 |                |  |   | 299,995         |  |  |                | 1.40 |   |                 |   | 326,352 |  |  |  | 1.96 |  
|Noninterest-bearing demand and Savings deposits |  |                                  | 39,217  |  |                 |  |      |                |  |   | 32,892          |  |  |                |      |   |                 |   | 27,235  |  |  |  |      |  
|                                                |  |                                  |         |  |                 |  |      |                |  |   |                 |  |  |                |      |   |                 |   |         |  |  |  |      |  
|Total deposits                                  |  | $                                | 347,137 |  |                 |  |      |                |  | $ | 332,887         |  |  |                |      |   |                 | $ | 353,587 |  |  |  |      |  
|                                                |  |                                  |         |  |                 |  |      |                |  |   |                 |  |  |                |      |   |                 |   |         |  |  |  |      |  



14



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##### Table of Contents

The following table sets forth the aggregate time deposits in the Bank classified by rates
as of the dates indicated:



|                |  |                 |         |  |      |   |         |      |  |   |         | 
|--------------- |  | --------------- | ------- |  | ---- | - | ------- | ---- |  | - | ------- | 
|                |  | At December 31, |        
|                |  | 2011            |         |  | 2010 |   |         | 2009 | 
|                |  | (In thousands)  |        
|                |  |                 |        
|Less than 2.00% |  | $               | 107,972 |  |      | $ | 113,193 |      |  | $ | 76,024  | 
|2.00% - 3.99    |  |                 | 36,860  |  |      |   | 51,774  |      |  |   | 94,919  | 
|4.00% - 5.99    |  |                 | 5,462   |  |      |   | 7,839   |      |  |   | 11,935  | 
|6.00% - 7.99    |  |                 |        |  |      |   | 4       |      |  |   | 15      | 
|                |  |                 |         |  |      |   |         |      |  |   |         | 
|                |  | $               | 150,294 |  |      | $ | 172,810 |      |  | $ | 182,893 | 
|                |  |                 |         |  |      |   |         |      |  |   |         | 

The following table sets forth the amount and maturities of the Banks time deposits at
December 31, 2011:



|                |  |                   |        |  |           |   |        |           |  |   |                  |  |  |       |        |  |  |   |         | 
|--------------- |  | ----------------- | ------ |  | --------- | - | ------ | --------- |  | - | ---------------- |  |  | ----- | ------ |  |  | - | ------- | 
|                |  | Amount Due        |       
|                |  | Less ThanOne Year |        |  | 1-2 Years |   |        | 2-3 Years |  |   | More Than3 Years |  |  | Total |       
|                |  | (In thousands)    |       
|                |  |                   |        |  |          
|Less than 1.00% |  | $                 | 52,565 |  |           | $ | 11,630 |           |  | $ | 865              |  |  | $     | 49     |  |  | $ | 65,109  | 
|1.00% - 1.99    |  |                   | 23,818 |  |           |   | 9,915  |           |  |   | 3,448            |  |  |       | 5,682  |  |  |   | 42,863  | 
|2.00% - 3.99    |  |                   | 7,599  |  |           |   | 3,448  |           |  |   | 12,782           |  |  |       | 13,031 |  |  |   | 36,860  | 
|4.00% - 5.99    |  |                   | 3,774  |  |           |   | 758    |           |  |   | 930              |  |  |       |       |  |  |   | 5,462   | 
|                |  |                   |        |  |           |   |        |           |  |   |                  |  |  |       |        |  |  |   |         | 
|                |  | $                 | 87,756 |  |           | $ | 25,751 |           |  | $ | 18,025           |  |  | $     | 18,762 |  |  | $ | 150,294 | 
|                |  |                   |        |  |           |   |        |           |  |   |                  |  |  |       |        |  |  |   |         | 

The following table indicates the amount of the Banks certificates of deposit of $100,000 or more
by time remaining until maturity at December 31, 2011:



|                               |  |                                 |        | 
|------------------------------ |  | ------------------------------- | ------ | 
|Maturity Period                |  | Certificates of$100,000 or more |       
|                               |  | (In thousands)                  |       
|                               | 
|Three months or less           |  | $                               | 4,654  | 
|Over three through six months  |  |                                 | 5,197  | 
|Over six through twelve months |  |                                 | 14,969 | 
|Over twelve months             |  |                                 | 17,790 | 
|                               |  |                                 |        | 
|Total                          |  | $                               | 42,610 | 
|                               |  |                                 |        | 

Borrowings. Deposits are the primary sources of funds for the Banks lending and investment
activities and for its general business purposes. The Bank also uses advances from the FHLB to supplement its supply of lendable funds, to meet deposit withdrawal requirements and to extend the terms of its liabilities. FHLB advances are typically
secured by the Banks FHLB stock, a portion of first mortgage loans, investment securities and overnight deposits. At December 31, 2011, the Bank had $32.0 million of FHLB advances outstanding.

The Federal Home Loan Banks function as central reserve banks providing credit for member financial institutions. As a member, the Bank
is required to own capital stock in the FHLB and is authorized to apply for advances on the security of such stock and certain of its home mortgages and other assets (principally, securities which are obligations of, or guaranteed by, the United
States) provided certain standards related to creditworthiness have been met. Borrowings decreased $2.0 million in 2011, as the Bank repaid a maturing $6.0 million Federal Home Loan Bank note in February, but added a $4.0 million short-term Federal
Home Loan Bank borrowing in December, with the proceeds being used primarily to fund a temporary withdrawal of funds from a municipal checking account.

On March 8, 2006, the Company formed Ameriana Capital Trust I (Trust I), a wholly owned statutory business trust. The Company purchased 100% of the common stock of Trust I for $310,000.
Trust I issued $10.0



15



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##### Table of Contents

million in trust preferred securities and those proceeds, combined with the $310,000 in proceeds of the common stock, were used to purchase $10.3 million in subordinated debentures issued by the
Company. The subordinated debentures are unconditionally guaranteed by the Company and are the sole asset of Trust I. The subordinated debentures had a rate equal to the average of 6.71% and the three-month London Interbank Offered Rate
(LIBOR) plus 150 basis points for the first five years following the offering. Effective March 15, 2011, the fixed rate converted to a floating rate and the subordinated debentures now bear a rate equal to 150 basis points over the
three-month LIBOR rate. At December 31, 2011, the debentures had an interest rate of 2.05%.

The following table sets
forth certain information regarding borrowings at the dates and for the periods indicated:



|                                                             |  |                                            |        |   |      |   |        |      |  |   |        |  
|------------------------------------------------------------ |  | ------------------------------------------ | ------ | - | ---- | - | ------ | ---- |  | - | ------ | -
|                                                             |  | At or for the 
YearYear Ended December 31, |       
|                                                             |  | 2011                                       |        |   | 2010 |   |        | 2009 | 
|                                                             |  | (Dollars in thousands)                     |       
|                                                             |  |                                            |       
|Amounts outstanding at end of period:                        |  |                                            |        |   |      |   |        |      |  |   |        |  
|FHLB advances                                                |  | $                                          | 32,000 |   |      | $ | 34,000 |      |  | $ | 46,375 |  
|Subordinated debentures                                      |  |                                            | 10,310 |   |      |   | 10,310 |      |  |   | 10,310 |  
|Repurchase agreement                                         |  |                                            | 7,500  |   |      |   | 7,500  |      |  |   | 7,500  |  
|Weighted average rate paid on:                               |  |                                            |        |   |      |   |        |      |  |   |        |  
|FHLB advances at end of period                               |  |                                            | 3.15   | % |      |   | 3.70   | %    |  |   | 3.84   | %
|Subordinated debentures                                      |  |                                            | 2.05   |   |      |   | 4.26   |      |  |   | 4.23   |  
|Repurchase agreement                                         |  |                                            | 4.42   |   |      |   | 4.42   |      |  |   | 4.42   |  
|Maximum amount of borrowings outstanding at any month end:   |  |                                            |        |   |      |   |        |      |  |   |        |  
|FHLB advances                                                |  | $                                          | 34,000 |   |      | $ | 46,375 |      |  | $ | 79,925 |  
|Subordinated debentures                                      |  |                                            | 10,310 |   |      |   | 10,310 |      |  |   | 10,310 |  
|Repurchase agreement                                         |  |                                            | 7,500  |   |      |   | 7,500  |      |  |   | 7,500  |  
|Approximate average amounts outstanding during period:       |  |                                            |        |   |      |   |        |      |  |   |        |  
|FHLB advances                                                |  | $                                          | 28,897 |   |      | $ | 41,779 |      |  | $ | 61,244 |  
|Subordinated debentures                                      |  |                                            | 10,310 |   |      |   | 10,310 |      |  |   | 10,310 |  
|Repurchase agreement                                         |  |                                            | 7,500  |   |      |   | 7,500  |      |  |   | 7,500  |  
|Approximate weighted average rate during the period paid on: |  |                                            |        |   |      |   |        |      |  |   |        |  
|FHLB advances                                                |  |                                            | 3.69   | % |      |   | 3.85   | %    |  |   | 3.97   | %
|Subordinated debentures                                      |  |                                            | 2.35   |   |      |   | 4.32   |      |  |   | 4.64   |  
|Repurchase agreement                                         |  |                                            | 4.42   |   |      |   | 4.42   |      |  |   | 4.42   |  



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##### Table of Contents

Average Balance Sheet

The following table sets forth certain information relating to the Banks average yield on assets and average cost of liabilities for the periods indicated. Such yields and costs are derived by
dividing income or expenses by the average balance of assets or liabilities, respectively, for the periods presented. Interest/dividends from tax-exempt municipal loans and tax-exempt municipal securities have been increased by $72,000, $100,000 and
$256,000 for 2011, 2010 and 2009, respectively, from the amount listed on the income statement to reflect interest income on a tax-equivalent basis. Average balances for 2011, 2010 and 2009 are calculated from actual daily balances.



|                                                                                    |  |                          |         |  |                    |   |        |                   |  |  |                |   |  |                   |         |  |                   |   |        |                |  |  |                    |   |  |                   |         |  |  |   |        |  |  |  |        |  
|----------------------------------------------------------------------------------- |  | ------------------------ | ------- |  | ------------------ | - | ------ | ----------------- |  |  | -------------- | - |  | ----------------- | ------- |  | ----------------- | - | ------ | -------------- |  |  | ------------------ | - |  | ----------------- | ------- |  |  | - | ------ |  |  |  | ------ | -
|                                                                                    |  | Years Ended December 31, |        
|                                                                                    |  | 2011                     |         |  | 2010               |   |        | 2009              | 
|                                                                                    |  | AverageBalance           |         |  | Interest/Dividends |   |        | AverageYield/Cost |  |  | AverageBalance |   |  | InterestDividends |         |  | AverageYield/Cost |   |        | AverageBalance |  |  | Interest/Dividends |   |  | AverageYield/Cost |        
|                                                                                    |  | (Dollars in thousands)   |        
|Interest-earning assets:                                                            |  |                          |         |  |                    |   |        |                   |  |  |                |   |  |                   |         |  |                   |   |        |                |  |  |                    |   |  |                   |         |  |  |   |        |  |  |  |        |  
|                                                                                    |  |                          |         |  |                    |   |        |                   | 
|Loan portfolio (1)                                                                  |  | $                        | 311,842 |  |                    | $ | 17,421 |                   |  |  | 5.59           | % |  | $                 | 317,226 |  |                   | $ | 18,519 |                |  |  | 5.84               | % |  | $                 | 335,522 |  |  | $ | 19,434 |  |  |  | 5.79   | %
|Mortgage-backed securities                                                          |  |                          | 34,733  |  |                    |   | 1,096  |                   |  |  | 3.16           |   |  |                   | 31,604  |  |                   |   | 1,210  |                |  |  | 3.83               |   |  |                   | 48,078  |  |  |   | 2,258  |  |  |  | 4.70   |  
|Other securities:                                                                   |  |                          |         |  |                    |   |        |                   |  |  |                |   |  |                   |         |  |                   |   |        |                |  |  |                    |   |  |                   |         |  |  |   |        |  |  |  |        |  
|Taxable                                                                             |  |                          | 1,963   |  |                    |   | 70     |                   |  |  | 3.57           |   |  |                   | 1,907   |  |                   |   | 70     |                |  |  | 3.67               |   |  |                   | 3,208   |  |  |   | 133    |  |  |  | 4.15   |  
|Tax-exempt (2)                                                                      |  |                          | 1,588   |  |                    |   | 105    |                   |  |  | 6.61           |   |  |                   | 2,604   |  |                   |   | 149    |                |  |  | 5.72               |   |  |                   | 9,765   |  |  |   | 575    |  |  |  | 5.89   |  
|                                                                                    |  |                          |         |  |                    |   |        |                   | 
|Short-term investments and other interest-earning assets (3)                        |  |                          | 24,416  |  |                    |   | 174    |                   |  |  | 0.71           |   |  |                   | 18,910  |  |                   |   | 137    |                |  |  | 0.72               |   |  |                   | 23,622  |  |  |   | 197    |  |  |  | 0.83   |  
|                                                                                    |  |                          |         |  |                    |   |        |                   |  |  |                |   |  |                   |         |  |                   |   |        |                |  |  |                    |   |  |                   |         |  |  |   |        |  |  |  |        |  
|Total interest-earning assets                                                       |  |                          | 374,542 |  |                    |   | 18,866 |                   |  |  | 5.04           |   |  |                   | 372,251 |  |                   |   | 20,085 |                |  |  | 5.40               |   |  |                   | 420,195 |  |  |   | 22,597 |  |  |  | 5.38   |  
|Noninterest-earning assets                                                          |  |                          | 60,476  |  |                    |   |        |                   |  |  |                |   |  |                   | 60,702  |  |                   |   |        |                |  |  |                    |   |  |                   | 54,627  |  |  |   |        |  |  |  |        |  
|                                                                                    |  |                          |         |  |                    |   |        |                   |  |  |                |   |  |                   |         |  |                   |   |        |                |  |  |                    |   |  |                   |         |  |  |   |        |  |  |  |        |  
|                                                                                    |  |                          |         |  |                    |   |        |                   | 
|Total assets                                                                        |  | $                        | 435,018 |  |                    |   |        |                   |  |  |                |   |  | $                 | 432,953 |  |                   |   |        |                |  |  |                    |   |  | $                 | 474,822 |  |  |   |        |  |  |  |        |  
|                                                                                    |  |                          |         |  |                    |   |        |                   |  |  |                |   |  |                   |         |  |                   |   |        |                |  |  |                    |   |  |                   |         |  |  |   |        |  |  |  |        |  
|                                                                                    |  |                          |         |  |                    |   |        |                   | 
|Interest-bearing liabilities:                                                       |  |                          |         |  |                    |   |        |                   |  |  |                |   |  |                   |         |  |                   |   |        |                |  |  |                    |   |  |                   |         |  |  |   |        |  |  |  |        |  
|Demand deposits and savings                                                         |  | $                        | 139,756 |  |                    |   | 427    |                   |  |  | 0.31           |   |  | $                 | 126,106 |  |                   |   | 498    |                |  |  | 0.39               |   |  | $                 | 132,306 |  |  |   | 894    |  |  |  | 0.68   |  
|Certificate of deposits                                                             |  |                          | 168,164 |  |                    |   | 2,798  |                   |  |  | 1.66           |   |  |                   | 173,889 |  |                   |   | 3,687  |                |  |  | 2.12               |   |  |                   | 194,046 |  |  |   | 5,512  |  |  |  | 2.84   |  
|                                                                                    |  |                          |         |  |                    |   |        |                   |  |  |                |   |  |                   |         |  |                   |   |        |                |  |  |                    |   |  |                   |         |  |  |   |        |  |  |  |        |  
|Total interest-bearing deposits                                                     |  |                          | 307,920 |  |                    |   | 3,225  |                   |  |  | 1.05           |   |  |                   | 299,995 |  |                   |   | 4,185  |                |  |  | 1.40               |   |  |                   | 326,352 |  |  |   | 6,406  |  |  |  | 1.96   |  
|Borrowings                                                                          |  |                          | 46,712  |  |                    |   | 1,645  |                   |  |  | 3.52           |   |  |                   | 59,589  |  |                   |   | 2,389  |                |  |  | 4.01               |   |  |                   | 79,054  |  |  |   | 3,246  |  |  |  | 4.11   |  
|                                                                                    |  |                          |         |  |                    |   |        |                   |  |  |                |   |  |                   |         |  |                   |   |        |                |  |  |                    |   |  |                   |         |  |  |   |        |  |  |  |        |  
|Total interest-bearing liabilities                                                  |  |                          | 354,632 |  |                    |   | 4,870  |                   |  |  | 1.37           |   |  |                   | 359,584 |  |                   |   | 6,574  |                |  |  | 1.83               |   |  |                   | 405,406 |  |  |   | 9,652  |  |  |  | 2.38   |  
|                                                                                    |  |                          |         |  |                    |   |        |                   |  |  |                |   |  |                   |         |  |                   |   |        |                |  |  |                    |   |  |                   |         |  |  |   |        |  |  |  |        |  
|Noninterest-bearing liabilities                                                     |  |                          | 46,635  |  |                    |   |        |                   |  |  |                |   |  |                   | 40,126  |  |                   |   |        |                |  |  |                    |   |  |                   | 35,946  |  |  |   |        |  |  |  |        |  
|                                                                                    |  |                          |         |  |                    |   |        |                   |  |  |                |   |  |                   |         |  |                   |   |        |                |  |  |                    |   |  |                   |         |  |  |   |        |  |  |  |        |  
|Total liabilities                                                                   |  |                          | 401,267 |  |                    |   |        |                   |  |  |                |   |  |                   | 399,710 |  |                   |   |        |                |  |  |                    |   |  |                   | 441,352 |  |  |   |        |  |  |  |        |  
|Stockholders equity                                                                |  |                          | 33,751  |  |                    |   |        |                   |  |  |                |   |  |                   | 33,243  |  |                   |   |        |                |  |  |                    |   |  |                   | 33,470  |  |  |   |        |  |  |  |        |  
|                                                                                    |  |                          |         |  |                    |   |        |                   |  |  |                |   |  |                   |         |  |                   |   |        |                |  |  |                    |   |  |                   |         |  |  |   |        |  |  |  |        |  
|Total liabilities and stockholders equity                                          |  | $                        | 435,018 |  |                    |   |        |                   |  |  |                |   |  | $                 | 432,953 |  |                   |   |        |                |  |  |                    |   |  | $                 | 474,822 |  |  |   |        |  |  |  |        |  
|                                                                                    |  |                          |         |  |                    |   |        |                   |  |  |                |   |  |                   |         |  |                   |   |        |                |  |  |                    |   |  |                   |         |  |  |   |        |  |  |  |        |  
|                                                                                    |  |                          |         |  |                    |   |        |                   | 
|Net interest income                                                                 |  |                          |         |  |                    | $ | 13,996 |                   |  |  |                |   |  |                   |         |  |                   | $ | 13,511 |                |  |  |                    |   |  |                   |         |  |  | $ | 12,945 |  |  |  |        |  
|                                                                                    |  |                          |         |  |                    |   |        |                   |  |  |                |   |  |                   |         |  |                   |   |        |                |  |  |                    |   |  |                   |         |  |  |   |        |  |  |  |        |  
|Interest rate spread                                                                |  |                          |         |  |                    |   |        |                   |  |  | 3.67           | % |  |                   |         |  |                   |   |        |                |  |  | 3.57               | % |  |                   |         |  |  |   |        |  |  |  | 3.00   | %
|                                                                                    |  |                          |         |  |                    |   |        |                   |  |  |                |   |  |                   |         |  |                   |   |        |                |  |  |                    |   |  |                   |         |  |  |   |        |  |  |  |        |  
|Net tax-equivalent yield (4)                                                        |  |                          |         |  |                    |   |        |                   |  |  | 3.74           | % |  |                   |         |  |                   |   |        |                |  |  | 3.63               | % |  |                   |         |  |  |   |        |  |  |  | 3.08   | %
|                                                                                    |  |                          |         |  |                    |   |        |                   |  |  |                |   |  |                   |         |  |                   |   |        |                |  |  |                    |   |  |                   |         |  |  |   |        |  |  |  |        |  
|Ratio of average interest-earning assets to to average interest-bearing liabilities |  |                          |         |  |                    |   |        |                   |  |  | 105.61         | % |  |                   |         |  |                   |   |        |                |  |  | 103.52             | % |  |                   |         |  |  |   |        |  |  |  | 103.65 | %
|                                                                                    |  |                          |         |  |                    |   |        |                   |  |  |                |   |  |                   |         |  |                   |   |        |                |  |  |                    |   |  |                   |         |  |  |   |        |  |  |  |        |  



|(1) | Interest and average yield presented on a tax-equivalent basis using a tax-effective tax rate of 32% for municipal bank qualified tax-exempt loans subject to the Tax
Equity and Fiscal Responsibility Act of 1982 penalty. Nonaccrual loans are included in average loans outstanding.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Interest and average yield presented on a tax-equivalent basis using a tax rate of 34%.
|--- | ---------------------------------------------------------------------------------------

|(3) | Includes interest-bearing deposits in other financial institutions, mutual funds, trust preferred securities and FHLB stock.
|--- | ----------------------------------------------------------------------------------------------------------------------------

|(4) | Net interest income is presented on a tax-equivalent basis as a percentage of average interest-earning assets.
|--- | --------------------------------------------------------------------------------------------------------------



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Subsidiary Activities

The Company maintains two wholly owned subsidiaries, the Bank and Ameriana Capital Trust I. The Company also holds a minority interest in a limited partnership organized to acquire and manage real
estate-investments, which qualify for federal tax credits. The Bank has two wholly owned subsidiaries: AIA, which sells insurance products and AFS, which operates a brokerage facility. At December 31, 2011, the Banks investments in its
subsidiaries were approximately $1.0 million, consisting of direct equity investments.

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

REGULATION AND SUPERVISION

Certain of the regulatory requirements that are or will be applicable to the Company or the Bank are described below. The description of statutes and regulations is not intended to be a complete
explanation of such statutes and regulations and their effects on the Company and the Bank and is qualified in its entirety by reference to the actual statutes and regulations.

Regulation and Supervision of the Company

General.As a bank
holding company, the Company is subject to Federal Reserve Board regulations, examinations, supervision, reporting requirements and regulations concerning its activities. In addition, the Federal Reserve Board has enforcement authority over the
Company. As a public reporting company registered with the Securities and Exchange Commission (the SEC), the Company is required to file annual, quarterly and current reports with the SEC. The Company is also subject to regular
examination by the Federal Reserve Board.

The Gramm-Leach-Bliley Act of 1999 authorized a bank holding company that meets
specified conditions, including its depository institution subsidiaries being well-capitalized and well managed, to opt to become a financial holding company, and thereby engage in a broader array of financial activities than previously
permitted. Such activities can include insurance underwriting and investment banking. The Dodd-Frank Act added the requirements that the holding company itself be well-capitalized and well managed. The Company has not opted to become a
financial holding company. The Federal Reserve Board has the power to order a holding company or its subsidiaries to terminate any activity, or to terminate its ownership or control of any subsidiary, when it has reasonable cause to believe that the
continuation of such activity or such ownership or control constitutes a serious risk to the financial safety, soundness or stability of any bank subsidiary of that holding company.

Dividends.The Federal Reserve Board has the power to prohibit dividends by bank holding companies if their actions constitute
unsafe or unsound practices. The Federal Reserve Board has issued a policy statement on the payment of cash dividends by bank holding companies, which expresses the Federal Reserve Boards view that a bank holding company should pay cash
dividends only to the extent that the companys net income for the past year is sufficient to cover both the cash dividends and a rate of earnings retention that is consistent with the companys capital needs, asset quality and overall
financial condition. The Federal Reserve Board also indicated that it would be inappropriate for a bank holding company experiencing serious financial problems to borrow funds to pay dividends. Under the prompt corrective action regulations adopted
by the Federal Reserve Board, the Federal Reserve Board may prohibit a bank holding company from paying any dividends if the holding companys bank subsidiary is classified as undercapitalized. See Regulation and
Supervision of the Bank  Prompt Corrective Regulatory Action.The Federal Reserve Board has long had a policy under which bank holding companies are required to serve as a source of strength for their depository subsidiaries by
providing capital, liquidity and other resources in times of financial distress. The Dodd-Frank Act codified the source of strength doctrine and required the issuance of implementing regulations.

Stock Repurchases.As a bank holding company, the Company is required to give the Federal Reserve Board prior written notice of
any purchase or redemption of its outstanding equity securities if the gross



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consideration for the purchase or redemption, when combined with the net consideration paid for all such purchases or redemptions during the preceding 12 months, is equal to 10% or more of the
Companys consolidated net worth. The Federal Reserve Board may disapprove such a purchase or redemption if it determines that the proposal would violate any law, regulation, Federal Reserve Board order, directive, or any condition imposed by,
or written agreement with, the Federal Reserve Board. This requirement does not apply to bank holding companies that are well-capitalized, well-managed and are not the subject of any unresolved supervisory issues.

Acquisitions. The Company is required to obtain the prior approval of the Federal Reserve Board to acquire all, or substantially
all, of the assets of any bank or bank holding company or merge with another bank holding company. Prior Federal Reserve Board approval will also be required for the Company to acquire direct or indirect ownership or control of any voting securities
of any bank or bank holding company if, after giving effect to such acquisition, the Company would, directly or indirectly, own or control more than 5% of any class of voting shares of such bank or bank holding company. In evaluating such
transactions, the Federal Reserve Board considers the financial and managerial resources of and future prospects of the companies involved, competitive factors and the convenience and needs of the communities to be served. Bank holding companies may
acquire additional banks in any state, subject to certain restrictions such as deposit concentration limits. With certain exceptions, the Bank Holding Company Act (the BHCA) prohibits a bank holding company from acquiring direct or
indirect ownership or control of more than 5% of the voting shares of a company that is not a bank or a bank holding company, or from engaging directly or indirectly in activities other than those of banking, managing or controlling banks, or
providing services for its subsidiaries. The principal exceptions to these prohibitions involve certain non-bank activities, which, by statute or by Federal Reserve Board regulation or order, have been identified as activities closely related to the
business of banking. The activities of the Company are subject to these legal and regulatory limitations under the BHCA and the related Federal Reserve Board regulations.

Under the Change in Bank Control Act of 1978 (the CBCA), notice must be submitted to the Federal Reserve Board if any person (including a company), or any group acting in concert, seeks to
acquire 10% of any class of the Companys outstanding voting securities, unless the Federal Reserve Board determines that such acquisition will not result in a change of control of the bank. Under the CBCA, the Federal Reserve Board has 60 days
within which to act on such notice taking into consideration certain factors, including the financial and managerial resources of the proposed acquiror, the convenience and needs of the community served by the bank and the antitrust effects of an
acquisition.

Under the BHCA, any company would be required to obtain prior approval from the Federal Reserve Board before it
may obtain control of the Company within the meaning of the BHCA. Control for BHCA purposes generally is defined to mean the ownership or power to vote 25% or more of any class of the Companys voting securities or the ability to
control in any manner the election of a majority of the Companys directors.

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

Capital Requirements. The Federal Reserve Board maintains guidelines regarding the capital adequacy of bank holding companies,
which require bank holding companies to maintain on a consolidated basis, specified minimum ratios of capital to total assets and capital to risk-weighted assets. These requirements, which generally apply to bank holding companies with consolidated
assets of $500 million or more, are substantially similar to, but somewhat more generous than, those applicable to the Bank. See  Regulation and Supervision of the Bank  Capital Requirements.The Dodd-Frank Act
required the Federal Reserve Board to adopt consolidated capital requirements for holding companies that are equally as stringent as those applicable to the depository institution subsidiaries. That means that certain instruments that had previously
been includable in Tier 1 capital for bank holding companies, such as trust preferred securities, will no longer be eligible for inclusion. The revised capital requirements are subject to certain grandfathering and transition rules.



19



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##### Table of Contents

Regulation and Supervision of the Bank

General. The Bank, as an Indiana chartered commercial bank, is subject to extensive regulation, examination and supervision by the
Indiana Department of Financial Institutions and the FDIC. The Bank must file reports with the Indiana Department of Financial Institutions and the FDIC describing its activities and financial condition. The Bank is also subject to certain reserve
requirements promulgated by the Federal Reserve Board. This supervision and regulation is intended primarily for the protection of depositors.

The Dodd-Frank Act provides for the establishment of the Consumer Financial Protection Bureau as an independent bureau of the Federal Reserve Board. The Consumer Financial Protection Bureau will assume
responsibility for implementing federal consumer financial protection and fair lending laws and regulations, a function currently handled by federal bank regulatory agencies. However, institutions of $10 billion or less in total assets will continue
to be examined for compliance by, and subject to the enforcement authority of, the federal bank regulator.

Federal Banking Law

Capital Requirements. The Bank is required to maintain a 4% minimum leverage capital requirement consisting of a
ratio of Tier 1 capital to total assets (3% for institutions receiving the highest rating on the CAMELS rating system). Tier 1 capital is the sum of common stockholders equity, noncumulative perpetual preferred stock (including any related
surplus) and minority interests in consolidated subsidiaries, minus all intangible assets (other than certain mortgage and certain other servicing assets, purchased credit card relationships, credit-enhancing interest-only strips and certain
deferred tax assets), identified losses, investments in certain financial subsidiaries and non-financial equity investments.

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

At December 31, 2011, the Banks ratio of Tier 1 capital to average total assets was 9.23%, its ratio of Tier 1 capital to
risk-weighted assets was 12.32% and its ratio of total risk-based capital to risk-weighted assets was 13.58%.

Investment
Activities. State-chartered FDIC-insured banks are generally limited in their activities as principal and their equity investments to the type and amount authorized for national banks, notwithstanding state law. Federal law and regulations
permit exceptions to these limitations. The FDIC is authorized to permit institutions to engage in state authorized activities or investments not permissible for national banks (other than non-subsidiary equity investments) if they meet all
applicable capital requirements and it is determined that such activities or investments do not pose a significant risk to the Deposit Insurance Fund. The FDIC has adopted regulations governing the procedures for institutions seeking approval to
engage in such activities or investments. The Gramm-Leach-Bliley Act of 1999 specifies that a non-member bank may control a subsidiary that engages in activities as principal that would only be permitted for a national bank to conduct in a
financial subsidiary if a bank meets specified conditions and deducts its investment in the subsidiary for regulatory capital purposes.



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Interstate Banking and Branching. The Riegle-Neal Interstate Banking and Branching
Efficiency Act of 1994 permitted bank holding companies to acquire banks in any state subject to specified concentration limits and other conditions. The Interstate Banking Act also authorizes the interstate merger of banks. In addition, among other
things, the Interstate Banking Act, as amended by the Dodd-Frank Act, permits banks to establish de novo branches on an interstate basis provided that state banks chartered by the target state are permitted to establish de novo branches in the
state.

Dividend Limitations. The Bank may not pay dividends on its capital stock if its regulatory capital would be
reduced below the amount then required for the liquidation account established for the benefit of certain depositors of the Bank at the time of its conversion to stock form. In addition, the Bank may not pay dividends that exceed retained net income
for the applicable calendar year to date, plus retained net income for the preceding two years without prior approval from the Indiana Department of Financial Institutions. On July 26, 2010, following a joint examination by and discussions with
the FDIC and the Indiana Department of Financial Institutions, the Board of Directors of the Bank adopted a resolution agreeing to, among other things, receive prior approval of the FDIC and the Indiana Department of Financial Institutions before
declaring or paying any dividends.

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

Under FDIC regulations, the Bank is prohibited from making any capital distributions if, after making the distribution, the Bank would
fail to meet any applicable capital requirements. For additional information about dividend limitations see Note 11 in the Consolidated Financial Statements.

Insurance of Deposit Accounts. Under the FDICs risk-based assessment system, insured institutions are assigned to one of four risk categories based on supervisory evaluations,
regulatory capital levels and certain other factors, with less risky institutions paying lower assessments. An institutions assessment rate depends upon the category to which it is assigned. Effective April 1, 2009, assessment rates
ranged from seven to 77.5 basis points. On February 7, 2011, the FDIC issued final rules, effective April 1, 2011, implementing changes to the assessment rules resulting from the Dodd-Frank Act. Initially, the base assessment rates will
range from two and one half to 45 basis points. The rate schedules will automatically adjust in the future when the Deposit Insurance Fund reaches certain milestones. No institution may pay a dividend if in default of the federal deposit insurance
assessment.

The FDIC imposed on all insured institutions a special emergency assessment of five basis points of total assets
minus Tier 1 capital, as of June 30, 2009, (capped at ten basis points of an institutions deposit assessment base) to cover losses to the Deposit Insurance Fund. That special assessment, in the amount of $193,000 was collected on
September 30, 2009. In lieu of further special assessments, the FDIC required insured institutions to prepay estimated quarterly risk-based assessments for the fourth quarter of 2009 through the fourth quarter of 2012. Such amount was $2.7
million for the Bank. The estimated assessments, which include an assumed annual assessment base increase of 5%, were recorded as a prepaid expense asset as of December 30, 2009. As of December 31, 2009, and each quarter thereafter, a
charge to earnings is recorded for each regular assessment with an offsetting credit to the prepaid asset.

Due to the
difficult economic conditions, deposit insurance per account owner was raised to $250,000. That limit was made permanent by the Dodd-Frank Act. In addition, the FDIC adopted an optional Temporary Liquidity Guarantee Program by which, for a fee,
noninterest-bearing transaction accounts would receive unlimited insurance coverage until December 31, 2010, with an additional extension to December 31, 2012, and certain senior unsecured debt issued by institutions and their holding
companies between October 13, 2008 and June 30, 2010 would be guaranteed by the FDIC through June 30, 2012, or in some cases, December 31, 2012. The Bank initially elected to participate in the unlimited noninterest-bearing
transaction account coverage program, but opted out effective December 31, 2009. The Bank and the Company both participated in the unsecured debt guarantee program, but issued no debt under the program. The Dodd-Frank Act adopted mandatory
unlimited coverage for certain noninterest-bearing transaction accounts from January 1, 2011 until December 31, 2012.

The Dodd-Frank Act increased the minimum target Deposit Insurance Fund ratio from 1.15% of estimated insured deposits to 1.35% of
estimated insured deposits. The FDIC must seek to achieve the 1.35% ratio by September 30, 2020. Insured institutions with assets of $10 billion or more are supposed to fund the increase. The Dodd-Frank Act eliminated the 1.5% maximum fund
ratio, instead leaving it to the discretion of the FDIC.



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Prompt Corrective Regulatory Action.The federal banking regulators are required to
take prompt corrective action if an insured depository institution fails to satisfy certain minimum capital requirements, including a leverage limit, a risk-based capital requirement and any other measure deemed appropriate by the federal banking
regulators for measuring the capital adequacy of an insured depository institution. All institutions, regardless of their capital levels, are restricted from making any capital distribution or paying any management fees if the institution would
thereafter fail to satisfy the minimum levels for any of its capital requirements. An institution that fails to meet the minimum level for any relevant capital measure (an undercapitalized institution) may be: (1) subject to
increased monitoring by the appropriate federal banking regulator; (2) required to submit an acceptable capital restoration plan within 45 days; (3) subject to asset growth limits; and (4) required to obtain prior regulatory approval
for acquisitions, branching and new lines of businesses. The capital restoration plan must include a guarantee by the institutions holding company that the institution will comply with the plan until it has been adequately capitalized on
average for four consecutive quarters, under which the holding company would be liable up to the lesser of 5% of the institutions total assets or the amount necessary to bring the institution into capital compliance as of the date it failed to
comply with its capital restoration plan. A significantly undercapitalized institution, as well as any undercapitalized institution that does not submit an acceptable capital restoration plan, may be subject to regulatory demands for
recapitalization, broader application of restrictions on transactions with affiliates, limitations on interest rates paid on deposits, asset growth and other activities, possible replacement of directors and officers, and restrictions on capital
distributions by any bank holding company controlling the institution. Any company controlling the institution may also be required to divest the institution or the institution could be required to divest subsidiaries. The senior executive officers
of a significantly undercapitalized institution may not receive bonuses or increases in compensation without prior approval and the institution is prohibited from making payments of principal or interest on its subordinated debt. At their
discretion, the federal banking regulators may also impose the foregoing sanctions on an undercapitalized institution if the regulators determine that such actions are necessary to carry out the purposes of the prompt corrective provisions. If an
institutions ratio of tangible capital to total assets falls below the critically undercapitalized level established by law, i.e., a ratio of tangible equity to total assets of 2% or less, the institution will be subject to
conservatorship or receivership within specified time periods. Tangible equity is defined as core capital plus cumulative perpetual preferred stock (and related surplus) less all intangible assets other than qualifying supervisory goodwill and
certain purchased mortgage servicing rights.

Under the implementing regulations, the federal banking regulators generally
measure an institutions capital adequacy on the basis of its total risk-based capital ratio (the ratio of its total capital to risk-weighted assets), Tier 1 risk-based capital ratio (the ratio of its core capital to risk-weighted assets) and
leverage ratio (the ratio of its core capital to adjusted total assets). The following table shows the capital ratios required for the various prompt corrective action categories.



|                                |  |                  |  |                       |  |                  |  |                              
|------------------------------- |  | ---------------- |  | --------------------- |  | ---------------- |  | -----------------------------
|                                |  | Well Capitalized |  | AdequatelyCapitalized |  | Undercapitalized |  | SignificantlyUndercapitalized
|Total risk-based capital ratio  |  | 10.0% or more    |  | 8.0% or more          |  | Less than 8.0%   |  | Less than 6.0%               
|Tier 1 risk-based capital ratio |  | 6.0% or more     |  | 4.0% or more          |  | Less than 4.0%   |  | Less than 3.0%               
|Tier 1 leverage ratio           |  | 5.0% or more     |  | 4.0% or more *        |  | Less than 4.0% * |  | Less than 3.0%               



|* | 3.0% if institution has a composite 1 CAMELS rating.
|- | ----------------------------------------------------

The FDIC may reclassify a well-capitalized depository institution as adequately capitalized and may require an adequately capitalized or undercapitalized institution to comply with the supervisory actions
applicable to institutions in the next lower capital category (but may not reclassify a significantly undercapitalized institution as critically undercapitalized) if the FDIC determines, after notice and an opportunity for a hearing, that the
savings institution is in an unsafe or unsound condition or that the institution has received and not corrected a less-than-satisfactory rating for any CAMELS rating category.



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Enforcement. The FDIC has extensive enforcement authority over nonmember insured
state banks, including the Bank. This enforcement authority includes, among other things, the ability to assess civil money penalties, issue cease and desist orders and remove directors and officers. In general, these enforcement actions may be
initiated in response to violations of laws and regulations and unsafe or unsound practices. The FDIC has authority under federal law to appoint a conservator or receiver for an insured bank under certain circumstances, including on the basis of the
institutions financial condition or upon the occurrence of other events, including (1) insolvency; (2) substantial dissipation of assets or earnings through violations of law or unsafe or unsound practices; (3) existence of an
unsafe or unsound condition to transact business; and (4) insufficient capital, or the incurring of losses that will deplete substantially all of the institutions capital with no reasonable prospect of replenishment without federal
assistance.

Reserve Requirements. Under Federal Reserve Board regulations, the Bank currently must maintain average
daily reserves equal to 3% on aggregate transaction accounts up to and including $71.0 million, plus 10% on the remainder. The first $11.5 million of transaction accounts are exempt. This percentage is subject to adjustment by the Federal Reserve
Board. Because required reserves must be maintained in the form of vault cash or in a 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, 2011, the Bank met applicable Federal Reserve Board reserve requirements.

Federal Home Loan
Bank System.The Bank is a member of the Federal Home Loan Bank System, which consists of 12 regional Federal Home Loan Banks governed and regulated by the Federal Housing Finance Board (FHFB). As a member, the Bank is required to
purchase and hold stock in the FHLB of Indianapolis. As of December 31, 2011, the Bank held stock in the FHLB of Indianapolis in the amount of $4.5 million and was in compliance with the above requirement.

Loans to Executive Officers, Directors and Principal Stockholders.Loans to directors, executive officers and principal
stockholders of a state nonmember bank must be made on substantially the same terms as those prevailing for comparable transactions with persons who are not executive officers, directors, principal stockholders or employees of the Bank unless the
loan is made pursuant to a compensation or benefit plan that is widely available to employees and does not favor insiders. Loans to any executive officer, director and principal stockholder together with all other outstanding loans to such person
and affiliated interests generally may not exceed 15% of the Banks unimpaired capital and surplus and all loans to such persons may not exceed the institutions unimpaired capital and unimpaired surplus. Loans to directors, executive
officers and principal stockholders, and their respective affiliates, in excess of the greater of $25,000 or 5% of capital and surplus (on any loans where the total outstanding amounts to $500,000 or more) must be approved in advance by a majority
of the Board of Directors of the Bank with any interested director not participating in the voting. State nonmember banks are prohibited from paying the overdrafts of any of their executive officers or directors unless payment is made
pursuant to a written, pre-authorized interest-bearing extension of credit plan that specifies a method of repayment or transfer of funds from another account at the bank.

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



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Indiana Banking Law

Branching. An Indiana bank is entitled to establish one or more branches de novo or by acquisition in any location or locations in Indiana and in other states (subject to the requirements of
federal law for interstate banking). The Bank is required to file an application with the Department of Financial Institutions. Approval of the application is contingent upon the Departments determination that after the establishment of the
branch, the Bank will have adequate capital, sound management and adequate future earnings. An application to branch must also be approved by the FDIC.

Lending Limits. Indiana banks are not subject to percentage of asset or capital limits on their commercial, consumer and non-residential mortgage lending, and accordingly, have more flexibility in
structuring their portfolios than federally chartered savings banks. Indiana law provides that a bank may not make a loan or extend credit to a borrower or group of borrowers in excess of 15% of its unimpaired capital and surplus. An additional 10%
of capital and surplus may be lent if secured by specified readily marketable collateral.

Enforcement. The Department
has authority to take enforcement action against an Indiana bank in appropriate cases, including the issuance of cease and desist orders, removal of directors or officers, issuance of civil money penalties and appointment of a conservator or
receiver.

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

Federal Taxation. The Company and its subsidiaries file a consolidated federal income tax return on a calendar year end. Banks are
subject to the provisions of the Internal Revenue Code of 1986 (the Code) in the same general manner as other corporations. However, institutions, such as the Bank, which met certain definitional tests and other conditions prescribed by
the Code benefited from certain favorable provisions regarding their deductions from taxable income for annual additions to their bad debt reserve.

The Companys federal income tax returns have not been audited in the past five years.

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

The Companys state income tax returns have not been audited since 2008.

EXECUTIVE OFFICERS OF THE REGISTRANT



|                    |  |                         |  |                                                                                         
|------------------- |  | ----------------------- |  | ----------------------------------------------------------------------------------------
|Name                |  | Age atDecember 31, 2011 |  | Principal Position                                                                      
|                    |  |                        
|Jerome J. Gassen    |  | 61                      |  | President and Chief Executive Officer of the Bank and the Company                       
|                    |  |                        
|Timothy G. Clark    |  | 61                      |  | Executive Vice President and Chief Operating Officer of the Bank and the Company        
|                    |  |                        
|John J. Letter      |  | 66                      |  | Senior Vice President, Treasurer and Chief Financial Officer of the Bank and the Company
|                    |  |                        
|Michael L. Wenstrup |  | 54                      |  | Senior Vice President, Chief Credit Officer and Chief Lending Officer of the Bank       

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



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Jerome J. Gassenwas appointed President and Chief Executive Officer and director of
the Company and the Bank on June 1, 2005. Before joining the Company, Mr. Gassen served as Executive Vice President of Banking of Old National Bank, Evansville, Indiana from August 2003 until January 2005. Before serving as Executive Vice
President, Mr. Gassen was the Northern Region President of Old National Bank from January 2000 to August 2003. Mr. Gassen also served on Old National Banks Board of Directors from January 2000 until January 2005. Mr. Gassen
served as President and Chief Operating Officer of American National Bank and Trust Company, Muncie, Indiana from 1997 until January 2000, when American National was acquired by Old National Bank.

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

John J. Letter was appointed Senior Vice President, Treasurer and Chief Financial Officer of the Company and the Bank on
January 22, 2007. Before joining the Company, Mr. Letter served as Regional President with Old National Bank in Muncie, Indiana from September 2004 to April 2005. Before being named Regional President, Mr. Letter also served as
District President with Old National Bank from November 2003 to September 2004 and Regional Chief Financial Officer  Old National Bank from August 2000 to November 2003. Mr. Letter was also Chief Financial Officer and Controller with
American National Bank in Muncie from March 1997 to August 2000.

Michael L. Wenstrupwas named Senior Vice President
and Chief Credit Officer of the Bank effective March 1, 2010. Mr. Wenstrup assumed the additional responsibilities of Chief Lending Officer of the Bank effective August 1, 2011. Before joining Ameriana, Mr. Wenstrup was
Executive Vice President  Chief Credit Officer and Director of Parkway Bank Arizona, Phoenix, Arizona from November 2005 to December 2008. Mr. Wenstrup was Executive Vice President of Parkway Bank and Trust, Harwood Heights, Illinois
from June 1999 to November 2005 and served as Vice President  Portfolio Manager, Commercial Real Estate with LaSalle National Bank, Chicago, Illinois from January 1994 to June 1999.

Item 1A. Risk Factors

An
investment in shares of our common stock involves various risks. Before deciding to invest in our common stock, you should carefully consider the risks described below in conjunction with the other information in this Form 10-K, including the items
included as exhibits. Our business, financial condition and results of operations could be harmed by any of the following risks or by other risks that have not been identified or that we may believe are immaterial or unlikely. The value or market
price of our common stock could decline due to any of these risks. The risks discussed below also include forward-looking statements, and our actual results may differ substantially from those discussed in these forward-looking statements.

Our increased emphasis on commercial lending may expose us to increased lending risk.At December 31, 2011,
our loan portfolio consisted of $100.1 million, or 31.6%, of commercial real estate loans, $18.0 million, or 5.7%, of construction loans (primarily commercial properties) and $31.0 million, or 9.8%, of commercial and industrial loans and leases. We
intend to continue to maintain our emphasis on the origination of commercial loans. However, these types of loans generally expose a lender to greater risk of non-payment and loss than one- to four-family residential mortgage loans because repayment
of the loans often depends on the successful operation of the property, the income stream of the borrowers and, for construction loans, the accuracy of the estimate of the propertys value at completion of construction and the estimated cost of
construction. Commercial and construction loans typically involve larger loan balances compared to one- to four-family residential mortgage loans. Commercial and industrial loans expose us to additional risks since they typically are made on the
basis of the borrowers ability to make repayments from the cash flows of the borrowers business and are secured by non-real estate collateral that may depreciate over time. In addition, since such loans generally entail greater risk than
one to four-family residential mortgage loans, we may need to increase our allowance for loan losses to account for the likely increase in probable incurred credit losses associated with the growth of such loans. Also, many of our commercial and
construction borrowers have more than one loan outstanding with us. Consequently, an adverse development with respect to one loan or one credit relationship can expose us to a significantly greater risk of loss compared to an adverse development
with respect to a one- to four-family residential mortgage loan.



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Our nonperforming assets remain elevated and we may be required to increase our provision
for loan losses and to charge-off additional loans in the future, each of which could adversely affect our results of operations. Further, our allowance for loan losses may prove to be insufficient to absorb losses in our loan portfolio. For
2011, we recorded a provision for loan losses of $1.4 million. We also recorded net loan charge-offs of $1.5 million. The continued weakness of the economy has contributed to relatively high levels of loan delinquencies and other nonperforming
assets as of December 31, 2011. Our non-performing loans totaled $8.8 million, representing 2.79% of total loans, at December 31, 2011. In addition, loans that we have classified as special mention, substandard, doubtful or loss totaled
$21.5 million, representing 6.8% of total loans, at December 31, 2011. If these loans do not perform according to their terms and the collateral is insufficient to pay any remaining loan balance, we may be required to add further reserves to
our allowance for loan losses or we may experience loan losses, which could have a material effect on our operating results. Like all financial institutions, we maintain an allowance for loan losses to provide for loans in our portfolio that may not
be repaid in their entirety. We believe that our allowance for loan losses is maintained at a level adequate to absorb probable losses inherent in our loan portfolio as of the corresponding balance sheet date. However, our allowance for loan losses
may not be sufficient to cover actual loan losses, and future provisions for loan losses could materially adversely affect our operating results.

In evaluating the adequacy of our allowance for loan losses, we consider numerous quantitative factors, including our historical charge-off experience, growth of our loan portfolio, changes in the
composition of our loan portfolio and the volume of delinquent and classified loans. In addition, we use information about specific borrower situations, including their financial position and estimated collateral values, to estimate the risk and
amount of loss for those borrowers. Finally, we also consider many qualitative factors, including general and economic business conditions, current general market collateral valuations, trends apparent in any of the factors we take into account and
other matters, which are by nature more subjective and fluid. Our estimates of the risk of loss and amount of loss on any loan are complicated by the significant uncertainties surrounding our borrowers abilities to successfully execute their
business models through changing economic environments, competitive challenges and other factors. Because of the degree of uncertainty and susceptibility of these factors to change, our actual losses may vary from our current estimates.

At December 31, 2011, our allowance for loan losses as a percentage of total loans was 1.30%. Our regulators, as an integral part of
their examination process, periodically review our allowance for loan losses and may require us to increase our allowance for loan losses by recognizing additional provisions for loan losses charged to expense, or to decrease our allowance for loan
losses by recognizing loan charge-offs. Any such additional provisions for loan losses or charge-offs, as required by these regulatory agencies, could have a material adverse effect on our financial condition and results of operations.

A return to recessionary conditions could result in increases in our level of nonperforming loans and/or reduce demand for our
products and services, which would lead to lower revenue, higher loan losses and lower earnings.Following a national home price peak in mid-2006, falling home prices and sharply reduced sales volumes, along with the collapse of the United
States subprime mortgage industry in early 2007, significantly contributed to a recession that officially lasted until June 2009, although the effects continued thereafter. Dramatic declines in real estate values and high levels of
foreclosures resulted in significant asset write-downs by financial institutions, which have caused many financial institutions to seek additional capital, to merge with other institutions and, in some cases, to fail. Concerns over the United
States credit rating (which was recently downgraded by Standard & Poors), the European sovereign debt crisis, and continued high unemployment in the United States, among other economic indicators, have contributed to increased
volatility in the capital markets and diminished expectations for the economy.

A return of recessionary conditions and/or
continued negative developments in the domestic and international credit markets may significantly affect the markets in which we do business, the value of our loans and investments, and our ongoing operations, costs and profitability. Further
declines in real estate values and sales volumes and continued high unemployment levels may result in higher than expected loan delinquencies, increases in our levels of nonperforming and classified assets and a decline in demand for our products
and services. These negative events may cause us to incur losses and may adversely affect our capital, liquidity, and financial condition.



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Our cost of operations is high relative to our assets. Our failure to maintain or reduce
our operating expenses costs could hurt our profits. Our operating expenses, which consist primarily of salaries and employee benefits, occupancy, furniture and equipment expense, professional fees, data processing expense, FDIC insurance
premiums and assessments, and marketing, totaled $17.0 million for the year ended December 31, 2011 compared to $16.8 million for the year ended December 31, 2010. We continue our concerted effort to effectively manage our expenses. Our
efficiency ratio totaled 86.6% for the year ended December 31, 2011 compared to 87.8% for the year ended December 31, 2010. Failure to control our expenses could hurt future profits.

Changes in interest rates could reduce our net interest income and earnings.Our net interest income is the interest we earn on
loans and investment less the interest we pay on our deposits and borrowings. Our interest rate spread is the difference between the yield we earn on our assets and the interest rate we pay for deposits and our other sources of funding. Changes in
interest rates could adversely affect our interest rate spread and, as a result, our net interest income and net interest margin. Although the yield we earn on our assets and our funding costs tend to move in the same direction in response to
changes in interest rates, one can rise or fall faster than the other, causing our net interest margin to expand or contract. Our liabilities tend to be shorter in duration than our assets, so they may adjust faster in response to changes in
interest rates. As a result, when interest rates rise, our funding costs may rise faster than the yield we earn on our assets, causing our net interest margin to contract until the yield catches up. Changes in the slope of the yield
curveor the spread between short-term and long-term interest ratescould also reduce our net interest margin. Normally, the yield curve is upward sloping, meaning short-term rates are lower than long-term rates. Because our
liabilities tend to be shorter in duration than our assets, when the yield curve flattens or even inverts, we could experience pressure on our net interest margin as our cost of funds increases relative to the yield we can earn on our assets.
Changes in interest rates can also affect: (1) our ability to originate loans; (2) the value of our interest-earning assets; (3) our ability to obtain and retain deposits in competition with other investment alternatives; and
(4) the ability of our borrowers to repay adjustable-rate loans.

The building of market share through our branching
strategy could cause our expenses to increase faster than revenues.We opened a full-service banking center in Fishers, Indiana in October 2008, a second banking center in Carmel in December 2008 and a third in Westfield in May 2009. We also
purchased property in Plainfield in 2008 with the expectation to begin construction on a new full-service banking center, but those plans were put on hold until it is determined that the economy and other conditions warrant the required investment.
There are considerable costs involved in opening branches and new branches generally require a period of time to generate sufficient revenues to offset their costs, especially in areas in which we do not have an established presence. Accordingly,
any new branch can be expected to negatively impact our earnings for some period of time until the branch reaches certain economies of scale.

Recently enacted regulatory reform may have a material impact on our operations.On July 21, 2010, the President signed into law The Dodd-Frank Wall Street Reform and Consumer Protection Act
(the Dodd-Frank Act). The Dodd-Frank Act contains various provisions designed to enhance the regulation of depository institutions and prevent the recurrence of a financial crisis such as occurred in 2008-2009. These include provisions
strengthening holding company capital requirements, requiring retention of a portion of the risk of securitized loans and regulating debit card interchange fees. The Dodd-Frank Act also created a new federal agency to administer consumer protection
and fair lending laws, a function that is now performed by the depository institution regulators. The full impact of the Dodd-Frank Act on our business and operations will not be known for years until regulations implementing the statute are written
and adopted. The Dodd-Frank Act may have a material impact on our operations, particularly through increased regulatory burden and compliance costs.

In addition to the enactment of the Dodd-Frank Act, the federal regulatory agencies recently have begun to take stronger supervisory actions against financial institutions that have experienced increased
loan losses and other weaknesses as a result of the recent economic crisis. The actions include the entering into written agreements and cease and desist orders that place certain limitations on their operations. Federal bank regulators recently
have also been using with more frequency their ability to impose individual minimal capital requirements on banks, which requirements may be higher than those imposed under the Dodd-Frank Act or which would otherwise qualify the bank as being
well capitalized under the FDICs prompt corrective action regulations. If we were to become



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subject to a supervisory agreement or higher individual capital requirements, such action may have a negative impact on our ability to execute our business plan, as well as our ability to grow,
pay dividends or engage in mergers and acquisitions and may result in restrictions in our operations.

Increased and/or
special FDIC assessments will hurt our earnings. The recent economic recession has caused a high level of bank failures, which has dramatically increased FDIC resolution costs and led to a significant reduction in the balance of the Deposit
Insurance Fund. As a result, the FDIC has significantly increased the initial base assessment rates paid by financial institutions for deposit insurance. Increases in the base assessment rate have increased our deposit insurance costs and negatively
impacted our earnings. In addition, in May 2009, the FDIC imposed a special assessment on all insured institutions. Our special assessment, which was reflected in earnings for the quarter ended June 30, 2009, was $225,000. In lieu of
imposing an additional special assessment, the FDIC required all institutions to prepay their assessments for all of 2010, 2011 and 2012, which for us totaled $2.7 million. Additional increases in the base assessment rate or additional special
assessments would negatively impact our earnings.

We may not be able to realize the full value of our deferred tax asset.We recognize deferred tax assets and liabilities based on differences between the financial statement carrying amounts and the tax bases of assets and liabilities, coupled with unused tax credits and tax benefits from operating loss
carryforwards. At December 31, 2011, our net deferred tax asset was $5.2 million. The net deferred tax asset was composed of approximately $3.2 million of tax benefit from both state and federal net operating loss carryforwards, approximately
$1.7 million of tax benefit from temporary differences between book and tax income and an unused federal tax credit of $1.4 million, reduced by a valuation allowance of $1.1 million.

We regularly review our deferred tax asset for recoverability based on our history of earnings, expectations for future earnings and
expected timing of reversals of temporary differences, as well as tax strategies available to expedite the use of both the deferred state tax asset and the deferred federal tax asset. Realization of our deferred tax asset ultimately depends on the
existence of sufficient future taxable income. We currently expect that it is more likely than not that our net deferred tax asset at December 31, 2011 will be fully realizable based on our expected future earnings. Realization of our deferred
tax asset would significantly improve our earnings and capital through a related reversal of the current valuation allowance.

Any reduction in the corporate tax rate for federal or state income taxes would immediately result in partial impairment of the book
value of the deferred tax asset, and require a write-down that would be charged against earnings in the year of the enactment of the related tax law.

Strong competition within our market area could hurt our profits and slow growth.We face intense competition both in making loans and attracting deposits. This competition has made it more
difficult for us to make new loans and has occasionally forced us to offer higher deposit rates. Price competition for loans and deposits might result in us earning less on our loans and paying more on our deposits, which reduces net interest
income. Competition also makes it more difficult to grow loans and deposits. According to the FDIC, as of June 30, 2011, we held 33.2% of the deposits in Henry County, Indiana, which was the largest market share of deposits out of the six
financial institutions that held deposits in this county. We also held 10.3% of the deposits in Hancock County, Indiana, which was the fourth largest market share of deposits out of the ten financial institutions that held deposits in this county.
We also maintain offices in four other counties in which we held between 0.4% and 3.2% of the deposits in those counties as of June 30, 2011. Some of the institutions with which we compete have substantially greater resources and lending limits
than we have and may offer services that we do not provide. We expect competition to increase in the future as a result of legislative, regulatory and technological changes and the continuing trend of consolidation in the financial services
industry. Technological advances, for example, have lowered barriers to entry, allowed banks to expand their geographic reach by providing services over the Internet and made it possible for non-depository institutions to offer products and services
that traditionally have been provided by banks. Changes in federal law permit affiliation among banks, securities firms and insurance companies, which promotes a competitive environment in the financial services industry. Competition for deposits
and the origination of loans could limit the Companys growth in the future. Our profitability depends upon our continued ability to compete successfully in our market area.



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We operate in a highly regulated environment and we may be adversely affected by changes
in laws and regulations.The Bank is subject to extensive regulation, supervision and examination by the Indiana Department of Financial Institutions, its chartering authority, and by the FDIC, as insurer of its deposits. The Company is subject
to regulation and supervision by the Federal Reserve Board. Such regulation and supervision govern the activities in which an institution and its holding company may engage, and are intended primarily for the protection of the insurance fund and for
the depositors and borrowers of the Bank. The regulation and supervision by the Indiana Department of Financial Institutions and the FDIC are not intended to protect the interests of investors in the Companys common stock. Regulatory
authorities have extensive discretion in their supervisory and enforcement activities, including the imposition of restrictions on our operations, the classification of our assets and determination of the level of our allowance for loan losses. Any
change in such regulation and oversight, whether in the form of regulatory policy, regulations, legislation or supervisory action, may have a material impact on our operations.

The trading history of our common stock is characterized by low trading volume. Our common stock may be subject to sudden decreases.Although our common stock trades on the NASDAQ Global Market, it has not been regularly traded. We cannot predict whether a more active trading market in our common stock will occur or how liquid that market might become. A public trading market
having the desired characteristics of depth, liquidity and orderliness depends upon the presence in the marketplace of willing buyers and sellers of our common stock at any given time, which presence is dependent upon the individual decisions of
investors, over which we have no control.

The market price of our common stock may be highly volatile and subject to wide
fluctuations in response to numerous factors, including, but not limited to, the factors discussed in other risk factors and the following:



| |  |  | actual or anticipated fluctuations in our operating results;
| | - |  | ------------------------------------------------------------



| |  |  | changes in interest rates;
| | - |  | --------------------------



| |  |  | changes in the legal or regulatory environment in which we operate;
| | - |  | -------------------------------------------------------------------



| |  |  | press releases, announcements or publicity relating to us or our competitors or relating to trends in our industry;
| | - |  | -------------------------------------------------------------------------------------------------------------------



| |  |  | changes in expectations as to our future financial performance, including financial estimates or recommendations by securities analysts and investors;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | future sales of our common stock;
| | - |  | ---------------------------------



| |  |  | changes in economic conditions in our marketplace, general conditions in the U.S. economy, financial markets or the banking industry; and
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------



| |  |  | other developments affecting our competitors or us.
| | - |  | ---------------------------------------------------

These factors may adversely affect the trading price of our common stock, regardless of our actual operating performance, and could prevent you from selling your common stock at or above the price you
desire. In addition, the stock markets, from time to time, experience extreme price and volume fluctuations that may be unrelated or disproportionate to the operating performance of companies. These broad fluctuations may adversely affect the market
price of our common stock, regardless of our trading performance.

Failure to comply with the restrictions and conditions
in the resolutions adopted by our board at the request of our regulators could result in additional enforcement action against us.On September 28, 2009, the Board of Directors of the Bank adopted a resolution agreeing to higher capital
requirements, requirements to reduce the level of our classified and criticized assets and restrictions on dividend payments. On July 26, 2010, following a joint examination by and discussions with the FDIC and the Indiana Department of
Financial Institutions, the Board of Directors of the Bank adopted a resolution with the same requirements, except for an additional 0.50% increase in the Tier 1 Leverage Ratio to 8.50%. These restrictions may impede our ability to operate our
business.



29



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Additionally, on December 17, 2009, the Board of Directors of the Company, at the
request of the Federal Reserve Bank of Chicago, adopted a resolution requiring the Board to obtain the approval of the Federal Reserve Bank at least thirty days before taking any of the following actions:



| |  |  | The payment of corporate dividends;
| | - |  | -----------------------------------



| |  |  | The payment of interest on trust preferred securities;
| | - |  | ------------------------------------------------------



| |  |  | Any increase in debt or issuance of trust preferred obligations (the request for approval should include a written debt service plan indicating how
payments will be made without causing further strain on Ameriana Banks capital position); and
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The redemption of Ameriana Bancorp stock.
| | - |  | -----------------------------------------

The resolution will remain in effect until the Federal Reserve Bank authorizes the Board to rescind the resolution. If we fail to comply with the terms and conditions of the board resolutions, our
regulators could take enforcement action against us, including the imposition of further operating restrictions. These enforcement actions could take the form of a memorandum of understanding or a cease and desist order. Any informal or
formal enforcement action could harm our reputation and our ability to retain or attract customers or employees and impact the trading price of our common stock.

We may require additional capital in the future, but that capital may not be available when it is needed.We anticipate that we have adequate capital for the foreseeable future. However, we may at
some point need to raise additional capital to support our continued growth or if we incur significant loan or securities impairment. Our ability to raise additional capital, if needed, will depend on conditions in the capital markets at that time,
which are outside our control, and on our financial performance. Accordingly, we cannot assure you of our ability to raise additional capital, if needed, on terms acceptable to us. If we cannot raise additional capital when needed, our ability to
further expand our operations through internal growth could be materially impaired.

Provisions of our articles of
incorporation, bylaws and Indiana law, as well as state and federal banking regulations, could delay or prevent a takeover of us by a third party.Provisions in our articles of incorporation and bylaws and the corporate law of the State of
Indiana could delay, defer or prevent a third party from acquiring us, despite the possible benefit to our shareholders, or otherwise adversely affect the price of our common stock. These provisions include: supermajority voting requirements for
certain business combinations; the election of directors to staggered terms of three years; and advance notice requirements for nominations for election to our board of directors and for proposing matters that shareholders may act on at shareholder
meetings. In addition, we are subject to Indiana laws, including one that prohibits us from engaging in a business combination with any interested shareholder for a period of five years from the date the person became an interested shareholder
unless certain conditions are met. These provisions may discourage potential takeover attempts, discourage bids for our common stock at a premium over market price or adversely affect the market price of, and the voting and other rights of the
holders of, our common stock. These provisions could also discourage proxy contests and make it more difficult for you and other shareholders to elect directors other than the candidates nominated by our Board of Directors.

Item 1B. Unresolved Staff Comments

None.



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Item 2. Properties

The following table sets forth the location of the Companys office facilities at December 31, 2011 and certain other
information relating to these properties at that date.



|                                                 |  |              |      |  |                        |   |        |               |  |   |              |  |  |            |        |     |  |  |        | 
|------------------------------------------------ |  | ------------ | ---- |  | ---------------------- | - | ------ | ------------- |  | - | ------------ |  |  | ---------- | ------ | --- |  |  | ------ | 
|                                                 |  | YearAcquired |      |  | TotalInvestment        |   |        | NetBook Value |  |   | Owned/Leased |  |  | SquareFeet |       
|                                                 |  |              |      |  | (Dollars in thousands) |   |        |               | 
|Main Office:                                     |  |              |      |  |                        |   |        |               |  |   |              |  |  |            |        |     |  |  |        | 
|2118 Bundy Avenue
New Castle, Indiana            |  |              | 1958 |  |                        | $ | 1,789  |               |  | $ | 280          |  |  |            | Owned  |     |  |  | 20,500 | 
|                                                 |  |              |      |  |                       
|Branch Offices:                                  |  |              |      |  |                        |   |        |               |  |   |              |  |  |            |        |     |  |  |        | 
|1311 Broad Street
New Castle, Indiana            |  |              | 1890 |  |                        |   | 1,158  |               |  |   | 162          |  |  |            | Owned  |     |  |  | 18,000 | 
|                                                 |  |              |      |  |                       
|956 North Beechwood Street
Middletown, Indiana   |  |              | 1971 |  |                        |   | 334    |               |  |   | 6            |  |  |            | Owned  |     |  |  | 5,500  | 
|                                                 |  |              |      |  |                       
|22 North Jefferson Street
Knightstown, Indiana   |  |              | 1979 |  |                        |   | 430    |               |  |   | 139          |  |  |            | Owned  |     |  |  | 3,400  | 
|                                                 |  |              |      |  |                       
|1810 North State Street
Greenfield, Indiana      |  |              | 1995 |  |                        |   | 2,597  |               |  |   | 2,008        |  |  |            | Owned  |     |  |  | 7,600  | 
|                                                 |  |              |      |  |                       
|99 South Dan Jones Road
Avon, Indiana            |  |              | 1995 |  |                        |   | 1,743  |               |  |   | 1,221        |  |  |            | Owned  |     |  |  | 12,600 | 
|                                                 |  |              |      |  |                       
|1724 East 53rdStreet Anderson, Indiana           |  |              | 1993 |  |                        |   | 734    |               |  |   | 525          |  |  |            | Owned  |     |  |  | 3,000  | 
|                                                 |  |              |      |  |                       
|488 West Main Street
Morristown, Indiana         |  |              | 1998 |  |                        |   | 364    |               |  |   | 243          |  |  |            | Owned  |     |  |  | 2,600  | 
|                                                 |  |              |      |  |                       
|7435 West U.S. 52
New Palestine, Indiana         |  |              | 1999 |  |                        |   | 944    |               |  |   | 639          |  |  |            | Owned  |     |  |  | 3,300  | 
|                                                 |  |              |      |  |                       
|6653 West Broadway
McCordsville, Indiana         |  |              | 2004 |  |                        |   | 1,140  |               |  |   | 986          |  |  |            | Owned  |     |  |  | 3,400  | 
|                                                 |  |              |      |  |                       
|11521 Olio Road
Fishers, Indiana                 |  |              | 2008 |  |                        |   | 2,148  |               |  |   | 1,992        |  |  |            | Owned  |     |  |  | 2,500  | 
|                                                 |  |              |      |  |                       
|3975 West 106thStreet Carmel, Indiana            |  |              | 2008 |  |                        |   | 2,097  |               |  |   | 1,961        |  |  |            | Owned  |     |  |  | 3,500  | 
|                                                 |  |              |      |  |                       
|3333 East State Road 32
Westfield, Indiana       |  |              | 2008 |  |                        |   | 619    |               |  |   | 563          |  |  |            | Leased | (1) |  |  | 5,000  | 
|                                                 |  |              |      |  |                       
|Land Acquired for Future Branch Office:          |  |              |      |  |                        |   |        |               |  |   |              |  |  |            |        |     |  |  |        | 
|2437 East Main Street
Plainfield, Indiana        |  |              | 2008 |  |                        |   | 1,402  |               |  |   | 1,402        |  |  |            | Owned  |     |  |  |       | 
|                                                 |  |              |      |  |                       
|Loan Production Office:                          |  |              |      |  |                        |   |        |               |  |   |              |  |  |            |        |     |  |  |        | 
|11711 N. Pennsylvania, Suite 100
Carmel, Indiana |  |              | 2007 |  |                        |   | 34     |               |  |   | 18           |  |  |            | Leased | (2) |  |  | 2,100  | 
|                                                 |  |              |      |  |                       
|Ameriana Insurance Agency, Inc.:                 |  |              |      |  |                        |   |        |               |  |   |              |  |  |            |        |     |  |  |        | 
|1908 Bundy Avenue
New Castle, Indiana            |  |              | 1999 |  |                        |   | 386    |               |  |   | 285          |  |  |            | Owned  |     |  |  | 5,000  | 
|                                                 |  |              |      |  |                        |   |        |               |  |   |              |  |  |            |        |     |  |  |        | 
|                                                 |  |              |      |  |                       
|Total                                            |  |              |      |  |                        | $ | 17,919 |               |  | $ | 12,430       |  |  |            |        |     |  |  |        | 
|                                                 |  |              |      |  |                        |   |        |               |  |   |              |  |  |            |        |     |  |  |        | 



|(1) | The initial lease expires on May 31, 2029 and the Bank has options for four additional terms of five years each.
|--- | ----------------------------------------------------------------------------------------------------------------

|(2) | The initial lease expires on June 30, 2012 and the Bank has options for two additional terms of three years each.
|--- | -----------------------------------------------------------------------------------------------------------------



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The total net book value of $12.4 million shown above for the Companys office
facilities is $2.2 million less than the total of $14.6 million shown for premises and equipment on the consolidated balance sheet. This difference represents the net book value as of December 31, 2011 for furniture, equipment and automobiles.

Item 3. Legal Proceedings

Neither the Company nor the Bank is involved in any pending legal proceedings other than those occurring in the ordinary course of
business. Such routine legal proceedings, in the aggregate, are believed by management to be immaterial to the financial condition and results of operation of the Company.

Item 4. Mine Safety Disclosures

Not applicable.

PART II

Item 5.Market for the Registrants Common Equity, Related Stockholder Matters and Issuer Purchasers of Equity Securities

Market for Common Equity and Related Stockholder Matters

The Companys common stock, par value $1.00 per share, is traded on the NASDAQ Global Market under the symbol
ASBI. On March 8, 2012, there were 402 holders of record of the Companys common stock. The Companys ability to pay dividends depends on a number of factors including our capital requirements, our financial condition and
results of operations, tax considerations, statutory and regulatory limitations and general economic conditions. No assurance can be given that we will continue to pay dividends or that they will not be reduced in the future. See Note 11 to the
Consolidated Financial Statements included under Item 8 of this Form 10-K for a discussion of the restrictions on the payment of cash dividends by the Company.

The following table sets forth the high and low sales prices for the common stock as reported on the NASDAQ Global Market and the cash dividends declared on the common stock for each full quarterly period
during the last two fiscal years.



|               |  |      |      |  |      |   |      |                   |  |   |      |  |  |     |      |  |                   |   |      |  |  |   |      | 
|-------------- |  | ---- | ---- |  | ---- | - | ---- | ----------------- |  | - | ---- |  |  | --- | ---- |  | ----------------- | - | ---- |  |  | - | ---- | 
|               |  | 2011 |      |  | 2010 |  
|Quarter Ended: |  | High |      |  | Low  |   |      | DividendsDeclared |  |   | High |  |  | Low |      |  | DividendsDeclared |  
|               |  |      |      |  |      |  
|March 31       |  | $    | 5.75 |  |      | $ | 3.92 |                   |  | $ | 0.01 |  |  | $   | 3.30 |  |                   | $ | 2.50 |  |  | $ | 0.01 | 
|June 30        |  |      | 5.01 |  |      |   | 3.67 |                   |  |   | 0.01 |  |  |     | 6.70 |  |                   |   | 2.50 |  |  |   | 0.01 | 
|September 30   |  |      | 5.25 |  |      |   | 3.66 |                   |  |   | 0.01 |  |  |     | 4.47 |  |                   |   | 3.46 |  |  |   | 0.01 | 
|December 31    |  |      | 4.19 |  |      |   | 3.33 |                   |  |   | 0.01 |  |  |     | 4.50 |  |                   |   | 3.33 |  |  |   | 0.01 | 



32



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Purchases of Equity Securities

We did not repurchase any of our common stock during the quarter ended December 31, 2011 and at December 31, 2011 we had no
publicly announced repurchase plans or programs.



33



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Item 6. Selected Financial Data



|                                                              |  |                                               |         |   |      |   |         |      |  |   |         |    |  |      |         |   |  |   |         |  
|------------------------------------------------------------- |  | --------------------------------------------- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | -- |  | ---- | ------- | - |  | - | ------- | -
|                                                              |  | (Dollars in thousands, except per share data) |        
|                                                              |  | At December 31,                               |        
|Summary of Financial Condition                                |  | 2011                                          |         |   | 2010 |   |         | 2009 |  |   | 2008    |    |  | 2007 |        
|Cash                                                          |  | $                                             | 6,204   |   |      | $ | 3,673   |      |  | $ | 6,283   |    |  | $    | 3,810   |   |  | $ | 4,445   |  
|Investment securities                                         |  |                                               | 43,847  |   |      |   | 38,608  |      |  |   | 35,841  |    |  |      | 75,371  |   |  |   | 66,692  |  
|Loans, net of allowances for loan losses                      |  |                                               | 312,509 |   |      |   | 312,715 |      |  |   | 321,544 |    |  |      | 322,535 |   |  |   | 294,273 |  
|Interest-bearing deposits and stock in Federal Home Loan Bank |  |                                               | 7,977   |   |      |   | 13,175  |      |  |   | 18,934  |    |  |      | 10,268  |   |  |   | 18,357  |  
|Other assets                                                  |  |                                               | 59,254  |   |      |   | 61,486  |      |  |   | 58,961  |    |  |      | 51,518  |   |  |   | 43,024  |  
|                                                              |  |                                               |         |   |      |   |         |      |  |   |         |    |  |      |         |   |  |   |         |  
|Total assets                                                  |  | $                                             | 429,791 |   |      | $ | 429,657 |      |  | $ | 441,563 |    |  | $    | 463,502 |   |  | $ | 426,791 |  
|                                                              |  |                                               |         |   |      |   |         |      |  |   |         |    |  |      |         |   |  |   |         |  
|Deposits noninterest-bearing                                  |  | $                                             | 40,197  |   |      | $ | 34,769  |      |  | $ | 29,531  |    |  | $    | 22,070  |   |  | $ | 20,429  |  
|Deposits interest-bearing                                     |  |                                               | 297,053 |   |      |   | 303,209 |      |  |   | 308,850 |    |  |      | 302,336 |   |  |   | 294,317 |  
|Borrowings                                                    |  |                                               | 49,810  |   |      |   | 51,810  |      |  |   | 64,185  |    |  |      | 97,735  |   |  |   | 68,513  |  
|Other liabilities                                             |  |                                               | 8,226   |   |      |   | 6,618   |      |  |   | 6,422   |    |  |      | 7,585   |   |  |   | 9,886   |  
|                                                              |  |                                               |         |   |      |   |         |      |  |   |         |    |  |      |         |   |  |   |         |  
|Total liabilities                                             |  |                                               | 395,286 |   |      |   | 396,406 |      |  |   | 408,988 |    |  |      | 429,726 |   |  |   | 393,145 |  
|Stockholders equity                                          |  |                                               | 34,505  |   |      |   | 33,251  |      |  |   | 32,575  |    |  |      | 33,776  |   |  |   | 33,646  |  
|                                                              |  |                                               |         |   |      |   |         |      |  |   |         |    |  |      |         |   |  |   |         |  
|Total liabilities and stockholders equity                    |  | $                                             | 429,791 |   |      | $ | 429,657 |      |  | $ | 441,563 |    |  | $    | 463,502 |   |  | $ | 426,791 |  
|                                                              |  |                                               |         |   |      |   |         |      |  |   |         |    |  |      |         |   |  |   |         |  
|                                                              | 
|                                                              |  | Year Ended December 31,                       |        
|Summary of Earnings                                           |  | 2011                                          |         |   | 2010 |   |         | 2009 |  |   | 2008    |    |  | 2007 |        
|Interest income                                               |  | $                                             | 18,794  |   |      | $ | 19,985  |      |  | $ | 22,341  |    |  | $    | 23,581  |   |  | $ | 23,900  |  
|Interest expense                                              |  |                                               | 4,870   |   |      |   | 6,574   |      |  |   | 9,652   |    |  |      | 11,788  |   |  |   | 14,078  |  
|                                                              |  |                                               |         |   |      |   |         |      |  |   |         |    |  |      |         |   |  |   |         |  
|Net interest income                                           |  |                                               | 13,924  |   |      |   | 13,411  |      |  |   | 12,689  |    |  |      | 11,793  |   |  |   | 9,822   |  
|Provision (credit) for loan losses                            |  |                                               | 1,385   |   |      |   | 1,933   |      |  |   | 2,180   |    |  |      | 1,250   |   |  |   | (1,627  | )
|Other income                                                  |  |                                               | 5,628   |   |      |   | 5,650   |      |  |   | 5,536   |    |  |      | 3,801   |   |  |   | 3,494   |  
|Other expense                                                 |  |                                               | 17,004  |   |      |   | 16,817  |      |  |   | 17,119  |    |  |      | 14,384  |   |  |   | 13,978  |  
|                                                              |  |                                               |         |   |      |   |         |      |  |   |         |    |  |      |         |   |  |   |         |  
|Income (loss) before taxes                                    |  |                                               | 1,163   |   |      |   | 311     |      |  |   | (1,074  | )  |  |      | (40     | ) |  |   | 965     |  
|Income tax (benefit)                                          |  |                                               | 21      |   |      |   | (242    | )    |  |   | (810    | )  |  |      | (781    | ) |  |   | (219    | )
|                                                              |  |                                               |         |   |      |   |         |      |  |   |         |    |  |      |         |   |  |   |         |  
|Net income (loss)                                             |  | $                                             | 1,142   |   |      | $ | 553     |      |  | $ | (264    | )  |  | $    | 741     |   |  | $ | 1,184   |  
|                                                              |  |                                               |         |   |      |   |         |      |  |   |         |    |  |      |         |   |  |   |         |  
|Basic earnings (loss) per share                               |  | $                                             | 0.38    |   |      | $ | 0.19    |      |  | $ | (0.09   | )  |  | $    | 0.25    |   |  | $ | 0.39    |  
|Diluted earnings (loss) per share                             |  | $                                             | 0.38    |   |      | $ | 0.19    |      |  | $ | (0.09   | )  |  | $    | 0.25    |   |  | $ | 0.39    |  
|                                                              |  |                                               |         |   |      |   |         |      |  |   |         |    |  |      |         |   |  |   |         |  
|Dividends declared per share                                  |  | $                                             | 0.04    |   |      | $ | 0.04    |      |  | $ | 0.10    |    |  | $    | 0.16    |   |  | $ | 0.16    |  
|                                                              |  |                                               |         |   |      |   |         |      |  |   |         |    |  |      |         |   |  |   |         |  
|Book value per share                                          |  | $                                             | 11.54   |   |      | $ | 11.12   |      |  | $ | 10.90   |    |  | $    | 11.30   |   |  | $ | 11.26   |  
|                                                              |  |                                               |         |   |      |   |         |      |  |   |         |    |  |      |         |   |  |   |         |  
|                                                              | 
|                                                              |  | Year Ended December 31,                       |        
|Other Selected Data                                           |  | 2011                                          |         |   | 2010 |   |         | 2009 |  |   | 2008    |    |  | 2007 |        
|Return on average assets                                      |  |                                               | 0.26    | % |      |   | 0.13    | %    |  |   | (0.06   | )% |  |      | 0.16    | % |  |   | 0.28    | %
|Return on average equity                                      |  |                                               | 3.38    |   |      |   | 1.66    |      |  |   | (0.79   | )  |  |      | 2.23    |   |  |   | 3.63    |  
|Ratio of average equity to average assets                     |  |                                               | 7.76    |   |      |   | 7.68    |      |  |   | 7.05    |    |  |      | 7.40    |   |  |   | 7.67    |  
|Dividend payout ratio (1)                                     |  |                                               | 10.47   |   |      |   | 21.70   |      |  |   | NM      |    |  |      | 64.56   |   |  |   | 41.03   |  



|(1) | Dividends per share declared divided by net income per share.
|--- | -------------------------------------------------------------

NM = not meaningful.



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|                             |  |              |       |  |               |   |       |              |  |   |               |  |  |   |       | 
|---------------------------- |  | ------------ | ----- |  | ------------- | - | ----- | ------------ |  | - | ------------- |  |  | - | ----- | 
|Quarterly Data               |  | FirstQuarter |       |  | SecondQuarter |   |       | ThirdQuarter |  |   | FourthQuarter | 
|2011                         |  |              |       |  |               |   |       |              |  |   |               |  |  |   |       | 
|Total interest income        |  | $            | 4,766 |  |               | $ | 4,823 |              |  | $ | 4,673         |  |  | $ | 4,532 | 
|Total interest expense       |  |              | 1,337 |  |               |   | 1,255 |              |  |   | 1,187         |  |  |   | 1,091 | 
|Net interest income          |  |              | 3,429 |  |               |   | 3,568 |              |  |   | 3,486         |  |  |   | 3,441 | 
|Provision for loan losses    |  |              | 360   |  |               |   | 255   |              |  |   | 255           |  |  |   | 515   | 
|Net income                   |  |              | 121   |  |               |   | 270   |              |  |   | 298           |  |  |   | 453   | 
|Securities gains - net       |  |              | 52    |  |               |   | 448   |              |  |   | 206           |  |  |   | 213   | 
|                             |  |              |       |  |               |   |       |              |  |   |               |  |  |   |       | 
|Basic earnings per share     |  |              | 0.04  |  |               |   | 0.09  |              |  |   | 0.10          |  |  |   | 0.15  | 
|                             |  |              |       |  |               |   |       |              |  |   |               |  |  |   |       | 
|Diluted earnings per share   |  |              | 0.04  |  |               |   | 0.09  |              |  |   | 0.10          |  |  |   | 0.15  | 
|                             |  |              |       |  |               |   |       |              |  |   |               |  |  |   |       | 
|Dividends declared per share |  |              | 0.01  |  |               |   | 0.01  |              |  |   | 0.01          |  |  |   | 0.01  | 
|                             |  |              |       |  |               |   |       |              |  |   |               |  |  |   |       | 
|Stock price range            |  |              |       |  |               |   |       |              |  |   |               |  |  |   |       | 
|High                         |  |              | 5.75  |  |               |   | 5.01  |              |  |   | 5.25          |  |  |   | 4.19  | 
|Low                          |  |              | 3.92  |  |               |   | 3.67  |              |  |   | 3.66          |  |  |   | 3.33  | 
|                             |  |              |       |  |               |   |       |              |  |   |               |  |  |   |       | 
|                             |  |              |       | 
|2010                         |  |              |       |  |               |   |       |              |  |   |               |  |  |   |       | 
|Total interest income        |  | $            | 5,083 |  |               | $ | 5,117 |              |  | $ | 4,904         |  |  | $ | 4,881 | 
|Total interest expense       |  |              | 1,800 |  |               |   | 1,745 |              |  |   | 1,590         |  |  |   | 1,439 | 
|Net interest income          |  |              | 3,283 |  |               |   | 3,372 |              |  |   | 3,314         |  |  |   | 3,442 | 
|Provision for loan losses    |  |              | 360   |  |               |   | 658   |              |  |   | 360           |  |  |   | 555   | 
|Net income                   |  |              | 80    |  |               |   | 229   |              |  |   | 142           |  |  |   | 102   | 
|Securities gains - net       |  |              | 104   |  |               |   | 1     |              |  |   | 104           |  |  |   | 94    | 
|                             |  |              |       |  |               |   |       |              |  |   |               |  |  |   |       | 
|Basic earnings per share     |  |              | 0.03  |  |               |   | 0.08  |              |  |   | 0.05          |  |  |   | 0.03  | 
|                             |  |              |       |  |               |   |       |              |  |   |               |  |  |   |       | 
|Diluted earnings per share   |  |              | 0.03  |  |               |   | 0.08  |              |  |   | 0.05          |  |  |   | 0.03  | 
|                             |  |              |       |  |               |   |       |              |  |   |               |  |  |   |       | 
|Dividends declared per share |  |              | 0.01  |  |               |   | 0.01  |              |  |   | 0.01          |  |  |   | 0.01  | 
|                             |  |              |       |  |               |   |       |              |  |   |               |  |  |   |       | 
|Stock price range            |  |              |       |  |               |   |       |              |  |   |               |  |  |   |       | 
|High                         |  |              | 3.30  |  |               |   | 6.70  |              |  |   | 4.47          |  |  |   | 4.50  | 
|Low                          |  |              | 2.50  |  |               |   | 2.50  |              |  |   | 3.46          |  |  |   | 3.33  | 
|                             |  |              |       |  |               |   |       |              |  |   |               |  |  |   |       | 



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##### Table of Contents

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

Who We Are

Ameriana Bancorp (the Company) is an Indiana chartered bank holding company organized in 1987 by Ameriana Bank (the Bank). The Company is subject to regulation and supervision by
the Federal Reserve Bank. The Bank began banking operations in 1890. In June 2002, the Bank converted to an Indiana savings bank and adopted the name, Ameriana Bank and Trust, SB. In July 2006, the Bank closed its Trust Department and adopted the
name Ameriana Bank, SB. On June 1, 2009, the Bank converted to an Indiana commercial bank and adopted its present name, Ameriana Bank. The Bank is subject to regulation and supervision by the FDIC (the FDIC),
and the Indiana Department of Financial Institutions (the DFI). Our deposits are insured to applicable limits by the Deposit Insurance Fund administered by the FDIC. References in this Form 10-K to we, us, and
our refer to Ameriana Bancorp and/or the Bank, as appropriate.

We are headquartered in New Castle, Indiana. We
conduct business through our main office at 2118 Bundy Avenue, New Castle, Indiana, through 12 branch offices located in New Castle, Middletown, Knightstown, Morristown, Greenfield, Anderson, Avon, McCordsville, Fishers, Carmel, Westfield and New
Palestine, Indiana, and through our loan production office in Carmel, Indiana. In December 2011, lending personnel were relocated from the Carmel loan production office to the Banks Indianapolis metropolitan area banking centers. The Bank does
not plan to renew the Carmel loan production office lease when it expires in June.

The Bank has two wholly-owned
subsidiaries, Ameriana Insurance Agency (AIA) and Ameriana Financial Services, Inc. (AFS). AIA provides insurance sales from offices in New Castle, Greenfield and Avon, Indiana. On July 1, 2009, AIA purchased the book of
business of Chapin-Hayworth Insurance Agency Inc. located in New Castle, Indiana. AFS had offered insurance products through its ownership of an interest in Family Financial Life Insurance Company (Family Financial), New Orleans,
Louisiana, which offers a full line of credit-related insurance products. On May 22, 2009, the Company announced that AFS had liquidated its 16.67% interest in Family Financial, and recorded a pre-tax gain of $192,000 from the transaction.
AFS also operates a brokerage facility in conjunction with LPL Financial that provides non-bank investment product alternatives to its customers and the general public. A third Bank subsidiary, Ameriana Investment Management, Inc.
(AIMI), had managed part of the Companys investment portfolio. Following a cost/benefit analysis, AIMI was liquidated effective December 31, 2009, and the portfolio under management was transferred to the Bank. The Company
holds a minority interest in a limited partnership, House Investments, organized to acquire and manage real estate investments which qualify for federal tax credits.

What We Do

The Bank is a community-oriented financial institution.
Our principal business consists of attracting deposits from the general public and investing those funds primarily in mortgage loans on single-family residences, multi-family loans, construction loans, commercial real estate loans, and, to a lesser
extent, commercial and industrial loans, small business loans, home improvement loans, and consumer loans. We have from time to time purchased loans and loan participations in the secondary market. We also invest in various federal and government
agency obligations and other investment securities permitted by applicable laws and regulations, including mortgage-backed, municipal and equity securities. We offer customers in our market area time deposits with terms from three months to seven
years, interest-bearing and noninterest-bearing checking accounts, savings accounts and money market accounts. Our primary source of borrowings is FHLB advances. Through our subsidiaries, we engage in insurance and investment and brokerage
activities.

Our primary source of income is net interest income, which is the difference between the interest income earned
on our loan and investment portfolios and the interest expense incurred on our deposits and borrowing portfolios. Our loan portfolio typically earns more interest than the investment portfolio, and our deposits typically have a lower average rate
than FHLB advances. Several factors affect our net interest income. These factors include the loan, investment, deposit, and borrowing portfolio balances, their composition, the length of their maturity, re-pricing characteristics, liquidity,
credit, and interest rate risk, as well as market and competitive conditions.



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Financial Challenges and Expansion in Recent Years

To diversify the balance sheet and provide new avenues for loan and deposit growth, the Bank further expanded into Indianapolis, adding
three full-service offices in 2008 and 2009 in the suburban markets of Carmel, Fishers and Westfield. As a result, half of the banking centers are located in Indianapolis. These banking centers are focused on generating commercial lending and
relationship business, where significant opportunities exist to win market share from smaller institutions lacking capital strength and resources, and large institutions that have concentrated on large business customers.

Although the expansion strategy initially negatively affected earnings, the Banks expansion into new markets is critical for its
long-term sustainable growth. Additional expansion in Indianapolis, including construction of a new full-service banking center in Plainfield on property purchased by the Bank in early 2008, was put on hold primarily due to the economic environment.

The economic climate became progressively difficult through most of 2008, as the world-wide financial crisis reached a peak
in the second half of the year, and the subsequent economic recovery moved slowly through 2011. The severity of this environment and its consequences to the industry created many new formidable challenges for bankers.

Executive Overview of 2011

The Company recorded net income of $1.1 million, or $0.38 per share, for 2011, compared to net income of $553,000, or $0.19 per share, for 2010. The results for 2011 reflected an improvement in net
interest income, but the Bank continued to be negatively impacted by high credit costs related to weak economic conditions, which were partly offset by gains realized on sales of investment securities. Following is additional summary information for
the year:



| |  |  | Consistent with its capital contingency plan, the Company paid only a de minimis quarterly dividend of $0.01 per share, or $0.04 per share for the
year.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The Companys tangible common equity ratio at December 31, 2011 was 7.73%.
| | - |  | --------------------------------------------------------------------------



| |  |  | At December 31, 2011, the Banks tier 1 leverage ratio was 9.23%, the tier 1 risk-based capital ratio was 12.32%, and the total risk-based
capital ratio was 13.58%. All three ratios were considerably above the levels required under regulatory guidelines to be considered well capitalized, and exceeded the higher standards established by the Board resolution addressed below.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | A $485,000, or 3.6% increase for 2011 in net interest income on a fully tax-equivalent basis was achieved with growth of only 0.6% in average earnings
assets, as the net interest margin of 3.74% represented an 11 basis points improvement over 2010. The net interest margin improvement resulted mostly from a significant reduction in the Banks average cost of deposits.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The Bank recorded a $1.4 million provision for loan losses in 2011 compared to a $1.9 million provision in 2010 due to a continuing, but reduced
elevated level of charge-offs and non-performing loans that resulted from weak economic conditions.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Total nonperforming loans of $8.8 million, or 2.79% of total loans at December 31, 2011, represented a $2.4 million decrease from $11.2 million,
or 3.54% of total loans at December 31, 2010.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The allowance for loan losses was $4.1 million, or 1.30% of total loans at December 31, 2011, compared with $4.2 million, or 1.33% of total loans
at December 31, 2010.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Other income of $5.6 million for 2011 was $22,000 lower than the total for the prior year.
| | - |  | ------------------------------------------------------------------------------------------



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##### Table of Contents

| |  |  | The total for 2011 was reduced by a $1.0 million net loss from sales and write-downs of other real estate owned, that was $668,000 greater than the net
loss for 2010, but 2011 benefited from $919,000 in gains on sales of investment securities, a $616,000 increase over 2010.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Gains on sales of loans and servicing rights of $225,000 for 2011 were $698,000 less than the total for 2010 that included a $560,000 gain from a bulk
sale of $10.9 million of seasoned performing residential mortgage loans.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The 2011 totals for fees and service charges on deposit accounts and brokerage and insurance commissions reflected improvements over 2010 of 6.8% and
11.5%, respectively.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Other expense for 2011 of $17.0 million was $187,000, or 1.1%, higher than 2010.
| | - |  | --------------------------------------------------------------------------------



| |  |  | The 2011 total included a $135,000 increase in salaries and employee benefits that resulted primarily from higher incentive awards related to
achievement of production goals, and a $124,000 increase in funding costs for the frozen multi-employer defined benefit retirement plan, partly offset by an $84,000 decrease in employee health insurance expense.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The Company had income before income taxes of $1.2 million for 2011, but recorded an income tax expense of only $21,000, which was due primarily to a
significant amount of tax-exempt bank-owned life insurance.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The Companys total assets of $429.8
million at December 31, 2011 changed slightly during 2011 from $429.7 million at December 31, 2010:



| |  |  | Net loans receivable were $312.5 million at December 31, 2011, a decrease of $206,000 from $312.7 million at the end of 2010. The lack of growth
was due primarily to limited loan demand resulting from continuing weak economic conditions in the markets the Bank serves.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The composition of the portfolio changed in 2011, with a $5.5 million increase in commercial real estate loans and a $8.6 million increase in
commercial loans, while the totals for residential real estate loans, construction loans, municipal loans and consumer loans all declined during the year.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Reflective of a low interest rate environment coupled with competitive pricing pressures, the 5.59% average yield on the loan portfolio for 2011
represented a 25 basis points decrease from 5.84% for 2010.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The $5.2 million growth in the investment securities portfolio during 2011 to $43.8 million resulted primarily from a $4.9 million increase in
mortgage-backed securities to $39.7 million, or 90.6%, of the portfolio.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Other real estate owned of $7.5 million at December 31, 2011 represented a decrease of $1.5 million from December 31, 2010, with the addition
of fourteen properties totaling $3.3 million, the sale of twelve properties with a total book value of $3.6 million, and $1.2 million in write-downs during the year.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Total deposits of $337.3 million at December 31, 2011 represented a decrease of $728,000 for the year, due to the elimination of all brokered
certificates of deposit, which totaled $10.4 million at the prior year end. The Bank also experienced a significant change in the mix of deposits from the prior year end. Non-maturity deposits increased $21.8 million, or 13.2%, to $187.0 million,
while certificates of deposit declined $22.5 million, or 13.0%, to $150.3 million.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

| |  |  | The Bank achieved a 26 basis points reduction in the weighted average cost of total deposits to 0.79% at December 31, 2011 from 1.05% at the end
of 2010.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Total borrowings were reduced by $2.0 million in 2011 to $49.8 million, or 14.8% of total deposits.
| | - |  | ---------------------------------------------------------------------------------------------------

Regulatory Action

On December 17, 2009, following an off-site review by the Federal Reserve Bank of Chicago, the Board of Directors of the Company
adopted a resolution agreeing to, among other things, seek and obtain the approval of the Federal Reserve Bank at least thirty days before taking any of the following actions:



| |  |  | The payment of corporate dividends;
| | - |  | -----------------------------------



| |  |  | The payment of interest on trust preferred securities beginning after the interest payment due December 15, 2009;
| | - |  | -----------------------------------------------------------------------------------------------------------------



| |  |  | Any increase in debt or issuance of trust preferred obligations; and
| | - |  | --------------------------------------------------------------------



| |  |  | The redemption of Company stock.
| | - |  | --------------------------------

On July 26, 2010, following a joint examination by and discussions with the FDIC and the Indiana Department of Financial Institutions, the Board of Directors of the Bank adopted a resolution agreeing
to, among other things:



| |  |  | Adopt a capital plan to increase its Tier 1 Leverage Ratio to 8.50% by June 30, 2010 and to maintain a Total Risk-Based Capital Ratio of 12.00%;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Adopt a written plan to lower classified assets;
| | - |  | ------------------------------------------------



| |  |  | Formulate and implement a written profit plan;
| | - |  | ----------------------------------------------



| |  |  | Receive prior written consent from the FDIC and the Indiana Department of Financial Institutions before declaring or paying any dividends;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Strive to reduce total holdings of bank-owned life insurance; and
| | - |  | -----------------------------------------------------------------



| |  |  | Furnish quarterly progress reports regarding the Banks compliance with all provisions of the resolution.
| | - |  | ---------------------------------------------------------------------------------------------------------

The Bank is currently in compliance with the provisions of the resolution.

Strategic Summary

The current economic downturn has created a
challenging operating environment for all businesses, and, in particular, the financial services industry. Earnings pressure is expected to continue as the weak economy continues to cause stress on credit quality. Deposit acquisition continues to be
competitive; however, the Banks disciplined pricing has resulted in a significant reduction in its cost of deposits. The Banks pricing strategies, combined with the low interest rate environment, has positively impacted interest rate
spread and net interest income. Reducing noninterest expense has been a priority of Management, and the Bank has reduced noninterest expense through aggressive cost control measures including freezing hiring, job restructuring and eliminating
certain discretionary expenditures.

With the Banks mantra of Soundness. Profitability. Growth  in that
order, no exceptions, the priorities, culture and risk strategy of the Bank are focused on asset quality and credit risk management. Despite the current economic pressures, as well as the industrys challenges related to compliance and
regulatory requirements, tightened credit standards, and capital preservation, Management remains cautiously optimistic that business conditions will improve over the longer term and is steadfast in the belief that the Company is well positioned to
grow and enhance shareholder value as this recovery occurs.



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With a community banking history stretching back over 120 years, the Bank has built its
strong reputation with community outreach programs and being a workplace of choice. By combining its rich tradition with its ability to provide its customers with financial advice and solutions, the Bank will accomplish its mission by:



| |  |  | being our customers first choice for financial advice and solutions;
| | - |  | ---------------------------------------------------------------------



| |  |  | informing and educating customers on the basics of money management; and
| | - |  | ------------------------------------------------------------------------



| |  |  | understanding and meeting customers financial needs throughout their life cycle.
| | - |  | ---------------------------------------------------------------------------------

Serving customers requires the commitment of all Ameriana Bank associates to provide exceptional service and sound financial advice. We
believe these qualities will differentiate us from our competitors and increase profitability and shareholder value.

To meet
these long-term goals, we have undertaken the following strategies:

Build Relationships with Our Customers.Banking is
essentially a transaction business. Nevertheless, numerous industry studies have shown that customers want a relationship with their bank and banker based on trust and sound advice. Based on this information, we are focusing our efforts on expanding
customer relationships and improving our products and services per household.

Achieve Superior Customer Service.Programs and initiatives have been implemented to deliver value-added services and amenities to support our corporate strategy and Brand Promise, which speak to our commitment to our customers. Customer satisfaction surveys are conducted after a
new account is opened. Our evaluations include telephone as well as in-person surveys with both consumer loans and deposit customers, as well as other in-store performance metrics.We have enhanced our efforts to improve our customer service
by developing a 3-Year Training and Development Plan and formalizing our service standards and job performance evaluations.

Develop and Deliver Fully Integrated Financial Advice and Comprehensive Solutions to Meet Customer Life Events.The Banks
retail banking business has a full range of banking products, as well as affiliated insurance, brokerage and asset management services. Products and services are packaged and recommended around customer needs and life events such as
planning for retirement, buying a home and saving for college education rather than traditional transaction accounts, savings and consumer loan products.

Establish Strong Brand Awareness.We believe it is important to create a value proposition that is relevant, understood and valued by our customers. To differentiate the Bank among its competitors
and support its premium service brand, Ameriana developed a brand strategy which surrounds the customer with 360 Degrees of Service. New logo, signage, facility design, web design, service training, marketing and public relations efforts were
developed to support the brand strategy and brand concepts.

Use Technology to Expand Our Customer Base.Ameriana
utilizes a fully integrated, real-time information technology platform. We continuously seek opportunities to enhance our electronic delivery of products and services to our customers, and the Banks technology plan has included upgrades to our
ancillary support systems, such as business sweep products, cash management services, business remote item capture and on-line mortgage loan applications. In addition, the Bank has introduced mobile banking, mobile check deposit, FinanceWorks
and other technology to remain competitive in its markets.

Develop an Innovative Delivery System.We believe our
banking centers must evolve into Financial Stores that showcase our financial products and offer our customers an environment and unique experience that is conducive to interacting with knowledgeable Ameriana Bank associates.
Amerianas strategy focuses on enhancing the customer experience and demonstrating our community banking spirit with value-added services, such as space for community meetings, business and financial planning seminars, community outreach
programs and small special interest events.



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Increase Market Share in Existing Markets and Expand into New Markets. Tremendous
opportunity exists to expand our products and services per household with existing customers, and attract new customers in both our existing and new markets. The Banks expansion strategy in Indianapolis is well underway as a result of opening
three well-situated locations in Hamilton County in 2008 and 2009, located just north of Marion County and Indianapolis. In addition, the Company purchased a site in Plainfield, which will enhance our presence on the west side of Indianapolis and
our existing office in Avon. Construction plans of the Plainfield office have been put on hold until the surrounding retail development is underway. The Bank will continue the strategy of acquiring additional locations for development of
full-service banking centers to increase our footprint in Marion County and surrounding Indianapolis metropolitan area and to boost our visibility in this market.

Critical Accounting Policies

The accounting and reporting policies
of the Company are maintained in accordance with accounting principles generally accepted in the United States and conform to general practices within the banking industry. The Companys significant accounting policies are described in detail
in the Notes to the Companys Consolidated Financial Statements. The preparation of financial statements in conformity with generally accepted accounting principles (GAAP) requires management to make estimates and assumptions. The
financial position and results of operations can be affected by these estimates and assumptions, and such estimates and assumptions are integral to the understanding of reported results. Critical accounting policies are those policies that
management believes are the most important to the portrayal of the Companys financial condition and results, and they require management to make estimates that are difficult, subjective or complex.

Allowance for Loan Losses. The allowance for loan losses provides coverage for probable losses in the Companys loan
portfolio. Management evaluates the adequacy of the allowance for credit losses each quarter based on changes, if any, in underwriting activities, the loan portfolio composition (including product mix and geographic, industry or customer-specific
concentrations), trends in loan performance, regulatory guidance and economic factors. This evaluation is inherently subjective, as it requires the use of significant management estimates. Many factors can affect managements estimates of
specific and expected losses, including volatility of default probabilities, rating migrations, loss severity and economic and political conditions. The allowance is increased through provisions charged to operating earnings and reduced by net
charge-offs.

The Company determines the amount of the allowance based on relative risk characteristics of the loan portfolio.
The allowance recorded for commercial loans is based on reviews of individual credit relationships and an analysis of the migration of commercial loans and actual loss experience. The allowance recorded for noncommercial loans is based on an
analysis of loan mix, risk characteristics of the portfolio, fraud loss and bankruptcy experiences and historical losses, adjusted for current trends, for each loan category or group of loans. The allowance for loan losses relating to impaired loans
is based on the loans observable market price, the collateral for certain collateral-dependent loans, or the discounted cash flows using the loans effective interest rate.

Regardless of the extent of the Companys analysis of customer performance, portfolio trends or risk management processes, certain
inherent but undetected losses are probable within the loan portfolio. This is due to several factors, including inherent delays in obtaining information regarding a customers financial condition or changes in their unique business conditions,
the subjective nature of individual loan evaluations, collateral assessments and the interpretation of economic trends. Volatility of economic or customer-specific conditions affecting the identification and estimation of losses for larger,
nonhomogeneous credits and the sensitivity of assumptions utilized to establish allowances for homogenous groups of loans are among other factors. The Company estimates a range of inherent losses related to the existence of these exposures. The
estimates are based upon the Companys evaluation of risk associated with the commercial and consumer allowance levels and the estimated impact of the current economic environment.

Mortgage Servicing Rights.Mortgage servicing rights (MSRs) associated with loans originated and sold, where servicing
is retained, are capitalized and included in other intangible assets in the consolidated balance sheet. The value of the capitalized servicing rights represents the present value of the future servicing fees arising



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from the right to service loans in the portfolio. Critical accounting policies for MSRs relate to the initial valuation and subsequent impairment tests. The methodology used to determine the
valuation of MSRs requires the development and use of a number of estimates, including anticipated principal amortization and prepayments of that principal balance. Events that may significantly affect the estimates used are changes in interest
rates, mortgage loan prepayment speeds and the payment performance of the underlying loans. The carrying value of the MSRs is periodically reviewed for impairment based on a determination of fair value. Impairment, if any, is recognized through a
valuation allowance and is recorded as amortization of intangible assets.

Valuation Measurements. Valuation
methodologies often involve a significant degree of judgment, particularly when there are no observable active markets for the items being valued. Investment securities and residential mortgage loans held for sale are carried at fair value, as
defined by FASB fair value guidance, which requires key judgments affecting how fair value for such assets and liabilities is determined. In addition, the outcomes of valuations have a direct bearing on the carrying amounts for goodwill and
intangible assets. To determine the values of these assets and liabilities, as well as the extent to which related assets may be impaired, management makes assumptions and estimates related to discount rates, asset returns, prepayment rates and
other factors. The use of different discount rates or other valuation assumptions could produce significantly different results, which could affect the Companys results of operations.

Income Tax Accounting.We file a consolidated federal income tax return. The provision for income taxes is based upon income in
our consolidated financial statements. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of a change in
tax rates on our deferred tax assets and liabilities is recognized as income or expense in the period that includes the enactment date.

Under U.S. GAAP, a valuation allowance is required to be recognized if it is more likely than not that a deferred tax asset will not be realized. The determination of the realizability of the
deferred tax asset is highly subjective and dependent upon judgment concerning our evaluation of both positive and negative evidence, our forecasts of future income, applicable tax planning strategies, and assessments of current and future economic
and business conditions. Positive evidence includes the existence of taxes paid in available carry-back years as well as the probability that taxable income will be generated in future periods, while negative evidence includes any cumulative losses
in the current year and prior two years and general business and economic trends. At December 31, 2011 and December 31, 2010, we determined that our existing valuation allowance was adequate, largely based on available tax planning
strategies and our projections of future taxable income. Any reduction in estimated future taxable income may require us to increase the valuation allowance against our deferred tax assets. Any required increase to the valuation allowance would
result in additional income tax expense in the period and could have a significant impact on our future earnings.

Positions
taken in our tax returns may be subject to challenge by the taxing authorities upon examination. The benefit of an uncertain tax position is initially recognized in the financial statements only when it is more likely than not the position will be
sustained upon examination by the tax authorities. Such tax positions are both initially and subsequently measured as the largest amount of tax benefit that is more likely than not of being realized upon settlement with the tax authority, assuming
full knowledge of the position and all relevant facts. Differences between our position and the position of tax authorities could result in a reduction of a tax benefit or an increase to a tax liability, which could adversely affect our future
income tax expense.

We believe our tax policies and practices are critical accounting policies because the determination of
our tax provision and current and deferred tax assets and liabilities have a material impact our net income and the carrying value of our assets. We believe our tax liabilities and assets are adequate and are properly recorded in the consolidated
financial statements at December 31, 2011.



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FINANCIAL CONDITION

Total assets increased by $134,000 to $429.8 million at December 31, 2011 from $429.7 million at December 31, 2010, as balance sheet growth efforts were limited primarily by economic conditions
that resulted in continuing weak loan demand.

Cash and Cash Equivalents

Cash and cash equivalents decreased $2.0 million to $9.7 million at December 31, 2011 from $11.7 million at December 31, 2010.
Cash on hand and in other institutions increased $2.5 million, or 68.9%, to $6.2 million at December 31, 2011. This change was primarily due to a $2.3 million increase in our book balance for the noninterest-earning piece of our Federal Reserve
Bank account, which represents electronic deposits not yet credited. Interest-bearing deposits decreased $4.6 million, or 56.6%, to $3.5 million at December 31, 2011, with the totals for both year end dates consisting almost totally of balances
with the Federal Reserve Bank of Chicago.

Securities

Investment securities available for sale increased 13.6% to $43.8 million at December 31, 2011 from $38.6 million at December 31, 2010. The increase was due primarily to purchases of
mortgage-backed securities that exceeded the total for sales and principal repayments on mortgage-backed securities during 2011. Mortgage-backed securities purchases of $55.5 million, mostly offset by principal repayments and sales, resulted in an
increase in the total fair value of Ginnie Mae and GSE mortgage-backed pass-through securities of $4.9 million to $39.7 million at December 31, 2011.

All mortgage-backed securities at December 31, 2011 are insured by either Ginnie Mae, Fannie Mae or Freddie Mac. At December 31, 2011, all investments remained classified as available for sale.
All of our investments are evaluated for other-than-temporary impairment, and such impairment, if any, is recognized as a charge to earnings. There were no other than temporarily impaired investment securities as of December 31, 2011.

The following table identifies changes in the investment securities carrying values:



|                                                           |  |      |        |  |      |   |        |          |  |   |          |   |  |  |         |  
|---------------------------------------------------------- |  | ---- | ------ |  | ---- | - | ------ | -------- |  | - | -------- | - |  |  | ------- | -
|(Dollars in thousands)                                     |  |      |        |  |      |   |        |          |  |   |          |  
|                                                           |  | 2011 |        |  | 2010 |   |        | $ Change |  |   | % Change |  
|December 31:                                               |  |      |        |  |      |   |        |          |  |   |          |   |  |  |         |  
|Ginnie Mae and GSE mortgage-backed pass-through securities |  | $    | 39,714 |  |      | $ | 29,436 |          |  | $ | 10,278   |   |  |  | 34.92   | %
|Ginnie Mae collateralized mortgage obligations             |  |      |       |  |      |   | 5,341  |          |  |   | (5,341   | ) |  |  | (100.00 | )
|Municipal securities                                       |  |      | 2,351  |  |      |   | 2,164  |          |  |   | 187      |   |  |  | 8.64    |  
|Mutual funds                                               |  |      | 1,782  |  |      |   | 1,667  |          |  |   | 115      |   |  |  | 6.90    |  
|                                                           |  |      |        |  |      |   |        |          |  |   |          |   |  |  |         |  
|Totals                                                     |  | $    | 43,847 |  |      | $ | 38,608 |          |  | $ | 5,239    |   |  |  | 13.57   | %
|                                                           |  |      |        |  |      |   |        |          |  |   |          |   |  |  |         |  

The following table identifies the percentage composition of the investment securities:



|                                                           |  |      |       |   |      |  |       |      |  |  |       |  
|---------------------------------------------------------- |  | ---- | ----- | - | ---- |  | ----- | ---- |  |  | ----- | -
|                                                           |  | 2011 |       |   | 2010 |  |       | 2009 | 
|December 31:                                               |  |      |       |   |      |  |       |      |  |  |       |  
|Ginnie Mae and GSE mortgage-backed pass-through securities |  |      | 90.6  | % |      |  | 76.3  | %    |  |  | 69.7  | %
|Ginnie Mae collateralized mortgage obligations             |  |      |      |   |      |  | 13.8  |      |  |  | 16.2  |  
|Municipal securities                                       |  |      | 5.3   |   |      |  | 5.6   |      |  |  | 9.6   |  
|Mutual funds                                               |  |      | 4.1   |   |      |  | 4.3   |      |  |  | 4.5   |  
|                                                           |  |      |       |   |      |  |       |      |  |  |       |  
|Totals                                                     |  |      | 100.0 | % |      |  | 100.0 | %    |  |  | 100.0 | %
|                                                           |  |      |       |   |      |  |       |      |  |  |       |  

See Note 3 to the Consolidated Financial Statement for more information on investment securities.



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##### Table of Contents

Loans

Net loans receivable totaled $312.5 million at December 31, 2011, a decrease of $206,000 from $312.7 million at December 31, 2010. The lack of portfolio growth was due primarily to the impact of
the weak economy on loan demand, coupled with managements decision to sell a significant portion of new single-family mortgage loans in the secondary market.

Residential real estate loans decreased $4.9 million to $164.4 million at December 31, 2011, from $169.3 million at December 31, 2010. New production involved a mix of owner-occupied
single-family and investment property loans, as well as a blend of products that included both fixed-rate and a small number of variable-rate pricing. During 2011, the Bank originated $30.7 million in non-construction residential real estate loans,
including home equity loans, and sold $8.5 million into the secondary market. Additionally, the Bank acquired a $798,000 interest in a participation loan for an apartment complex in the Indianapolis area.

Commercial real estate loans increased $5.6 million to $100.1 million at December 31, 2011, from $94.6 million at December 31,
2010. Commercial loans and leases increased $8.6 million to $31.0 million at December 31, 2011 from $22.4 million at December 31, 2010. The overall growth in these two categories of commercial loans for 2011 was reflective of greater
demand resulting from improvement in the balance sheets of potential borrowers after sustaining the impact of weak economic conditions for several years. Non-construction commercial real estate loans totaling $10.0 million and $8.9 million in other
commercial loans were added in 2011, with one purchase for $3.0 million of a loan to a construction company in the oil and gas industry.

Construction loans decreased $6.7 million to $18.0 million during 2011, primarily as a result of a reduced emphasis on this product by the Bank that was due mostly to considerations related to the state
of the economy. Construction loan originations in 2011 totaled $6.8 million, and included a $3.2 million loan for a medical office building and a $2.0 million loan for a Section 42 low income apartment complex.

On December 31, 2011, the Bank had $740,000 in loans to local municipalities, compared to $2.7 million at December 31, 2010.
Municipal loans are usually added through a competitive bid process. New municipal loans totaled $590,000 for 2011.

Consumer
loans declined $1.1 million to $2.9 million at December 31, 2011 from $4.0 million at December 31, 2010. This decrease reflected the impact of the economy on the Banks lending growth objectives. The Bank originated $1.2 million of
consumer loans in 2011.

New loan volume in 2011 totaled $61.8 million, including purchases totaling $3.8 million, compared to
$79.4 million in 2010 with no purchases. New residential loan originations and purchases, including $2.9 million of construction loans, decreased to $34.3 million in 2011 from $53.0 million in 2010. Commercial loan, commercial real estate,
commercial construction and municipal loan additions in 2011 totaled $26.3 million, compared to $24.0 million in 2010. New consumer loans totaled $1.2 million in 2011 compared to $2.4 million in 2010.

We generally retain loan servicing on loans sold. Loans we serviced for investors, primarily Freddie Mac, Fannie Mae and the Federal Home
Loan Bank of Indianapolis, totaled approximately $95.7 million at December 31, 2011 compared to $115.9 million at December 31, 2010. The decrease was due primarily to weak new loan demand in 2011 that resulted in a net paydown in the
Banks portfolio of serviced one-to four-family residential mortgage loans. Loans sold that we service generate a steady source of fee income, with servicing fees ranging from 0.25% to 0.375% per annum of the loan principal amount.

Credit Quality

Nonperforming loans decreased $2.4 million to $8.8 million at December 31, 2011 from $11.2 million at December 31, 2010. The decrease was primarily due to the payoff of two loans totaling $1.6
million on section 42 low income housing tax credit properties.



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##### Table of Contents

We recorded net charge-offs of $1.5 million in 2011, compared to net charge-offs of $1.7
million in 2010. Total charge-offs were $1.6 million and $2.0 million in 2011 and 2010, respectively. Total recoveries in 2011 were $95,000 while total recoveries were $244,000 in 2010.

The allowance for loan losses as a percent of loans was 1.30% at December 31, 2011 and 1.33% at December 31, 2010. The
significant reduction in nonperforming loans in the Banks portfolio during 2011 supports the decrease in the allowance for loans losses to total loans ratio, and as a result of our review of collateral positions and historic loss ratios,
management believes that the allowance for loan losses is adequate to cover all incurred and probable losses inherent in the portfolio at December 31, 2011.

Premises and Equipment

Premises and equipment of $14.6 million at
December 31, 2011 represented an $86,000 decrease from $14.7 million at December 31, 2010. The net decrease was a result of $977,000 of depreciation exceeding net capital expenditures of $891,000 during the period.

Stock in Federal Home Loan Bank

The $629,000 decrease in Federal Home Loan Bank stock to $4.5 million at December 31, 2011 was the result of a stock repurchase program initiated by the Federal Home Loan Bank in 2011.

Goodwill

Goodwill of $656,000 at December 31, 2011 represented a $7,000 increase from December 31, 2010 and resulted from an acquisition
of an insurance business. $457,000 of the total goodwill relates to deposits associated with a banking center acquired on February 27, 1998, and $199,000 is the result of three separate acquisitions of insurance businesses. The results of the
Banks impairment tests have reflected a fair value for the deposits at this banking center that exceeds the goodwill, and a fair value of the three insurance agency books of business purchased that exceeds the associated goodwill.

Cash Value of Life Insurance

We have investments in life insurance on employees and directors, with a balance or cash surrender value of $26.2 million and $25.4 million, respectively, at December 31, 2011 and 2010. The majority
of these policies were purchased in 1999. Some policies with lower returns were exchanged in 2007 as part of a restructuring of the program. The nontaxable increase in cash surrender value of life insurance was $836,000 in 2011, compared to $875,000
in 2010.

Other Real Estate Owned

Other real estate owned of $7.5 million at December 31, 2011 represented a decrease of $1.5 million from December 31, 2010, with fourteen additions totaling $3.3 million and twelve sales of
properties with an aggregate book value of $3.6 million during 2011. The additions included twelve single-family homes or building lots, a commercial building, and an operating golf course and residential real estate development project with a book
value at its June 30, 2011 acquisition date of $2.0 million. The sales consisted of eight single-family properties, two commercial properties, the golf course with a book value of $1.1 million that was sold at a $121,000 gain, and an apartment
complex with a book value of $1.7 million that was sold at a $72,000 gain. Write-downs of other real estate owned during 2011 totaled $1.2 million, of which $845,000 was related to a strip commercial center and $277,000 to an uncompleted apartment
project, with both write-downs due to further deterioration of the propertys market value during the year.



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##### Table of Contents

Other Assets

Other assets were $9.9 million at December 31, 2011, compared to $11.5 million at December 31, 2010. The decrease of $1.6 million resulted primarily from the receipt of a $676,000 transfer
related to the Banks commercial sweep investment product, and a $612,000 reduction of our prepaid FDIC insurance premiums balance.

Deposits

The
following table shows deposit changes by category:





|                               |  |      |         |  |      |   |         |          |  |   |          |   |  |  |         |   
|------------------------------ |  | ---- | ------- |  | ---- | - | ------- | -------- |  | - | -------- | - |  |  | ------- | --
|(Dollars in thousands)         |  |      |         |  |      |   |         |          |  |   |          |  
|December 31,                   |  | 2011 |         |  | 2010 |   |         | $ Change |  |   | % Change |  
|Noninterest-bearing deposits   |  | $    | 40,197  |  |      | $ | 34,769  |          |  | $ | 5,428    |   |  |  | 15.61   | % 
|Savings deposits               |  |      | 29,043  |  |      |   | 28,836  |          |  |   | 207      |   |  |  | 0.72    |   
|Interest-bearing checking      |  |      | 88,632  |  |      |   | 77,012  |          |  |   | 11,620   |   |  |  | 15.09   |   
|Money market deposits          |  |      | 29,084  |  |      |   | 24,551  |          |  |   | 4,533    |   |  |  | 18.46   |   
|Certificates $100,000 and more |  |      | 42,610  |  |      |   | 44,481  |          |  |   | (1,871   | ) |  |  | (4.21   | ) 
|Brokered Certificates          |  |      |        |  |      |   | 10,363  |          |  |   | (10,363  | ) |  |  | (100.00 | ) 
|Other certificates             |  |      | 107,684 |  |      |   | 117,966 |          |  |   | (10,282  | ) |  |  | (8.72   | ) 
|                               |  |      |         |  |      |   |         |          |  |   |          |   |  |  |         |   
|Totals                         |  | $    | 337,250 |  |      | $ | 337,978 |          |  | $ | (728     | ) |  |  | (0.22   | )%
|                               |  |      |         |  |      |   |         |          |  |   |          |   |  |  |         |   

Nonmaturity deposits increased $21.8 million, or 13.2%, to $187.0 million at December 31, 2011 from
$165.2 million at December 31, 2010. $17.0 million of the 2011 increase related to checking accounts, noninterest-bearing and interest-bearing, and included a $1.2 million increase in public funds checking balances. The growth in retail
nonmaturity deposits resulted primarily from the Banks increased focus on sales activities coupled with its banking center expansion strategy, and the reaction of individuals to market conditions related to the depressed economic environment.

Non-brokered certificates of deposit decreased $10.3 million, due to certain customers transferring their funds to
non-maturity products, coupled with a result of Bank strategies that were designed to not pursue the retention of the more rate sensitive non-core deposits.

$10.4 million in brokered certificates of deposit were added in December 2010 and an additional $6.1 million during the first two months of 2011, as they were found to be more attractive than other
wholesale funding alternatives with regard to cost and collateral considerations. $5.2 million of the brokered certificates of deposit had 2011 maturities and $11.3 million had call options, and they were all subsequently replaced with core deposits
in 2011.

Borrowings

Borrowings decreased $2.0 million to $49.8 million at December 31, 2011 from $51.8 million at December 31, 2010, as the Bank had a $6.0 million long-term Federal Home Loan Bank note mature in
February and added a $4.0 million short-term Federal Home Loan Bank borrowing in late December. At December 31, 2011, our borrowings consisted of FHLB advances totaling $32.0 million, one $7.5 million repurchase agreement, and subordinated
debentures of $10.3 million. The subordinated debentures were issued on March 7, 2006, and mature on March 7, 2036.



46



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##### Table of Contents

Yields Earned and Rates Paid

The following tables set forth the weighted average yields earned on interest-earning assets and the weighted average interest rates paid
on the interest-bearing liabilities, together with the net yield on interest-earning assets. Yields are calculated on a tax-equivalent basis. The tax-equivalent adjustment was $72,000, $100,000 and $256,000 for the years ended December 31,
2011, 2010 and 2009, respectively.



|                                                                                                                                   |  |                         |      |   |      |  |      |      |  |  |      |  
|---------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------- | ---- | - | ---- |  | ---- | ---- |  |  | ---- | -
|                                                                                                                                   |  | Year Ended December 31, |     
|Weighted Average Yield:                                                                                                            |  | 2011                    |      |   | 2010 |  |      | 2009 | 
|                                                                                                                                   |  |                         |     
|Loans                                                                                                                              |  |                         | 5.59 | % |      |  | 5.84 | %    |  |  | 5.79 | %
|Mortgage-backed pass through and collateralized mortgage obligations                                                               |  |                         | 3.16 |   |      |  | 3.83 |      |  |  | 4.70 |  
|Securities  taxable                                                                                                               |  |                         | 3.57 |   |      |  | 3.67 |      |  |  | 4.15 |  
|Securities  tax-exempt                                                                                                            |  |                         | 6.61 |   |      |  | 5.72 |      |  |  | 5.89 |  
|Other interest-earning assets                                                                                                      |  |                         | 0.71 |   |      |  | 0.72 |      |  |  | 0.83 |  
|All interest-earning assets                                                                                                        |  |                         | 5.04 |   |      |  | 5.40 |      |  |  | 5.38 |  
|Weighted Average Cost:                                                                                                             |  |                         |      |   |      |  |      |      |  |  |      |  
|                                                                                                                                   |  |                         |      |   |      |  |      |      |  |  |      |  
|Demand deposits, money market deposit accounts, and savings                                                                        |  |                         | 0.31 |   |      |  | 0.39 |      |  |  | 0.68 |  
|Certificates of deposit                                                                                                            |  |                         | 1.66 |   |      |  | 2.12 |      |  |  | 2.84 |  
|Federal Home Loan Bank advances, Federal Reserve Bank discount window borrowings, repurchase agreement and subordinated
debentures |  |                         | 3.52 |   |      |  | 4.01 |      |  |  | 4.11 |  
|All interest-bearing liabilities                                                                                                   |  |                         | 1.37 |   |      |  | 1.83 |      |  |  | 2.38 |  
|                                                                                                                                   |  |                         |      |   |      |  |      |      |  |  |      |  
|Interest Rate Spread (spread between weighted average yield on all Interest-earning assets and all interest-bearing
liabilities)   |  |                         | 3.67 |   |      |  | 3.57 |      |  |  | 3.00 |  
|                                                                                                                                   |  |                         |      |   |      |  |      |      |  |  |      |  
|Net Tax Equivalent Yield (net interest income as a percentage of average interest-earning assets)                                  |  |                         | 3.74 |   |      |  | 3.63 |      |  |  | 3.08 |  



|                                                                                   |  |                 |      |   |      |  |      |      |  |  |      |  
|---------------------------------------------------------------------------------- |  | --------------- | ---- | - | ---- |  | ---- | ---- |  |  | ---- | -
|                                                                                   |  | At December 31, |     
|Weighted Average Interest Rates:                                                   |  | 2011            |      |   | 2010 |  |      | 2009 | 
|                                                                                   |  |                 |     
|Loans                                                                              |  |                 | 5.43 | % |      |  | 5.75 | %    |  |  | 5.91 | %
|Mortgage-backed pass through and collateralized mortgage obligations               |  |                 | 2.66 |   |      |  | 3.01 |      |  |  | 4.35 |  
|Other securities  taxable                                                         |  |                 | 2.61 |   |      |  | 3.05 |      |  |  | 3.61 |  
|Other securities  tax-exempt                                                      |  |                 | 7.95 |   |      |  | 5.94 |      |  |  | 6.00 |  
|Other earning assets                                                               |  |                 | 1.51 |   |      |  | 0.93 |      |  |  | 0.77 |  
|Total interest-earning assets                                                      |  |                 | 5.05 |   |      |  | 5.31 |      |  |  | 5.52 |  
|Demand deposits, money market deposit accounts, and savings                        |  |                 | 0.23 |   |      |  | 0.38 |      |  |  | 0.45 |  
|Certificates of deposit                                                            |  |                 | 1.55 |   |      |  | 1.77 |      |  |  | 2.46 |  
|Federal Home Loan Bank advances, repurchase agreement, and subordinated debentures |  |                 | 3.11 |   |      |  | 3.92 |      |  |  | 3.97 |  
|Total interest-bearing liabilities                                                 |  |                 | 1.22 |   |      |  | 1.57 |      |  |  | 2.04 |  
|Interest rate spread                                                               |  |                 | 3.83 |   |      |  | 3.74 |      |  |  | 3.48 |  



47



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##### Table of Contents

Rate/Volume Analysis

The following table sets forth certain information regarding changes in interest income, interest expense and net interest income for the periods indicated. For each category of interest-earning assets
and interest-bearing liabilities, information is provided on changes attributable to: (1) changes in volume (changes in volume multiplied by old rate) and (2) changes in rate (changes in rate multiplied by old volume). For purposes of this
table, changes attributable to changes in both rate and volume that cannot be segregated have been allocated proportionally based on the changes due to the rate and the changes due to volume. No material amounts of loan fees or out-of-period
interest are included in the table. Nonaccrual loans were not excluded in the calculations. The information shown below was adjusted for the tax-equivalent benefit of bank qualified non-taxable municipal securities and municipal loans. The tax
equivalent adjustment was $72,000, $100,000 and $256,000 for the years ended December 31, 2011, 2010 and 2009, respectively.



|                                                                                                                 |  |                                      |      |   |                                      |   |        |           |  |   |        |   |  |      |        |   |           |   |        |   |  |   |        |  
|---------------------------------------------------------------------------------------------------------------- |  | ------------------------------------ | ---- | - | ------------------------------------ | - | ------ | --------- |  | - | ------ | - |  | ---- | ------ | - | --------- | - | ------ | - |  | - | ------ | -
|                                                                                                                 |  | Year Ended December 31,              |     
|                                                                                                                 |  | 2011 vs. 2010                        |      |   | 2010 vs. 2009                        |  
|                                                                                                                 |  | Increase (Decrease)Due to Changes
in |      |   | Increase (Decrease)Due to Changes
in |  
|                                                                                                                 |  | Volume                               |      |   | Rate                                 |   |        | NetChange |  |   | Volume |   |  | Rate |        |   | NetChange |  
|                                                                                                                 |  | (In thousands)                       |     
|Interest income:                                                                                                 |  |                                      |      |   |                                      |   |        |           |  |   |        |   |  |      |        |   |           |   |        |   |  |   |        |  
|Loans                                                                                                            |  | $                                    | (316 | ) |                                      | $ | (782   | )         |  | $ | (1,098 | ) |  | $    | (1,072 | ) |           | $ | 157    |   |  | $ | (915   | )
|Mortgage-backed securities                                                                                       |  |                                      | 119  |   |                                      |   | (233   | )         |  |   | (114   | ) |  |      | (773   | ) |           |   | (275   | ) |  |   | (1,048 | )
|Securities  taxable                                                                                             |  |                                      | 2    |   |                                      |   | (2     | )         |  |   |       |   |  |      | (54    | ) |           |   | (9     | ) |  |   | (63    | )
|Securities  tax-exempt                                                                                          |  |                                      | (58  | ) |                                      |   | 14     |           |  |   | (44    | ) |  |      | (422   | ) |           |   | (4     | ) |  |   | (426   | )
|Other interest-earning assets                                                                                    |  |                                      | 39   |   |                                      |   | (2     | )         |  |   | 37     |   |  |      | (42    | ) |           |   | (18    | ) |  |   | (60    | )
|                                                                                                                 |  |                                      |      |   |                                      |   |        |           |  |   |        |   |  |      |        |   |           |   |        |   |  |   |        |  
|Total interest-earning assets                                                                                    |  |                                      | (214 | ) |                                      |   | (1,005 | )         |  |   | (1,219 | ) |  |      | (2,363 | ) |           |   | (149   | ) |  |   | (2,512 | )
|                                                                                                                 |  |                                      |      |   |                                      |   |        |           |  |   |        |   |  |      |        |   |           |   |        |   |  |   |        |  
|Interest expense:                                                                                                |  |                                      |      |   |                                      |   |        |           |  |   |        |   |  |      |        |   |           |   |        |   |  |   |        |  
|Demand deposits and savings                                                                                      |  |                                      | 53   |   |                                      |   | (124   | )         |  |   | (71    | ) |  |      | (41    | ) |           |   | (355   | ) |  |   | (396   | )
|Certificates of deposits                                                                                         |  |                                      | (121 | ) |                                      |   | (768   | )         |  |   | (889   | ) |  |      | (572   | ) |           |   | (1,253 | ) |  |   | (1,825 | )
|FHLB advances, Federal Reserve Bank discount window borrowings, repurchase agreement and subordinated debentures |  |                                      | (516 | ) |                                      |   | (228   | )         |  |   | (744   | ) |  |      | (798   | ) |           |   | (59    | ) |  |   | (857   | )
|                                                                                                                 |  |                                      |      |   |                                      |   |        |           |  |   |        |   |  |      |        |   |           |   |        |   |  |   |        |  
|Total interest-bearing liabilities                                                                               |  | $                                    | (584 | ) |                                      | $ | (1,120 | )         |  | $ | (1,704 | ) |  | $    | (1,411 | ) |           | $ | (1,667 | ) |  | $ | (3,078 | )
|                                                                                                                 |  |                                      |      |   |                                      |   |        |           |  |   |        |   |  |      |        |   |           |   |        |   |  |   |        |  
|Change in net interest income                                                                                    |  | $                                    | 370  |   |                                      | $ | 115    |           |  | $ | 485    |   |  | $    | (952   | ) |           | $ | 1, 518 |   |  | $ | 566    |  
|                                                                                                                 |  |                                      |      |   |                                      |   |        |           |  |   |        |   |  |      |        |   |           |   |        |   |  |   |        |  

Drafts Payable

Drafts payable of $2.5 million at December 31, 2011 represented an increase of $938,000 from $1.6 million at December 31, 2010. This difference will vary and is a function of the dollar amount
of checks issued near period end and the time required for those checks to clear.

Other Liabilities

Other liabilities increased $670,000 to $5.7 million at December 31, 2011, primarily due to a $153,000 increase in escrow balances
for mortgage loans, and increases in accrued expenses and accounts payable related to normal operating expenses.

Shareholders
Equity

Total shareholders equity of $34.5 million at December 31, 2011 was $1.3 million higher than the
total at December 31, 2010. This increase resulted primarily from $1.1 million in net income and a $229,000 increase in the accumulated other comprehensive income component of equity, partially offset by $120,000 in dividends to shareholders.



48



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RESULTS OF OPERATIONS

2011 Compared to 2010

Net income

The Company recorded net income of $1.1 million for 2011, or $0.38 per diluted share, compared to net income of $553,000, or $0.19 per
diluted share, for 2010. This increase of $589,000 resulted primarily from an improvement in net interest income, and a significant reduction in the provision for loans losses for 2011. The following is a summary of changes in the components of net
income for 2011 compared to 2010:



| |  |  | The Company produced a $513,000, or 3.8%, increase in net interest income, with growth of only 0.6% in average interest-earning assets that was limited
by weak loan demand in 2011. The $513,000 increase in net interest income, $485,000 on a tax-equivalent basis, resulted primarily from an improvement in net interest spread, as shown in the table below.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | A provision for loan losses of $1.4 million was recorded during 2011, compared to $1.9 million for the same period of 2010, a decrease of $548,000.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Other income for 2011 was $5.6 million, or a decrease of $22,000 from the total for 2010.
| | - |  | -----------------------------------------------------------------------------------------



| |  |  | $17.0 million in other expense for 2011 represented a $187,000, or 1.1%, increase from $16.8 million for 2010.
| | - |  | --------------------------------------------------------------------------------------------------------------



| |  |  | The income tax expense of only $21,000 on $1.2 million of pre-tax income for 2011 resulted primarily from approximately $998,000 of tax-exempt income
from bank-owned life insurance, municipal securities and municipal loans. The income tax benefit of $242,000 for 2010 resulted from approximately $1.1 million of tax-exempt income from bank-owned life insurance, municipal securities and municipal
loans.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

For a quarterly breakdown of earnings, see Quarterly Data under Item 6.
Selected Financial Data.

Net Interest Income

We derive the majority of our income from net interest income. The following table shows a breakdown of net interest income on a tax-equivalent basis for 2011 compared to 2010. The tax equivalent
adjustment was $72,000 and $100,000 for the years ended December 31, 2011 and 2010, respectively, based on a tax rate of 34%.



|                           |  |          |        |  |            |  |      |          |  |   |            |  |  |        |      |   |  |   |        |  
|-------------------------- |  | -------- | ------ |  | ---------- |  | ---- | -------- |  | - | ---------- |  |  | ------ | ---- | - |  | - | ------ | -
|(Dollars in thousands)     |  |          |        |  |            |  |      |          | 
|Years ended December 31,   |  | 2011     |        |  | 2010       |  |      |          | 
|                           |  | Interest |        |  | Yield/Rate |  |      | Interest |  |   | Yield/Rate |  |  | Change |     
|                           |  |          |        |  |           
|Interest and fees on loans |  | $        | 17,421 |  |            |  | 5.59 | %        |  | $ | 18,519     |  |  |        | 5.84 | % |  | $ | (1,066 | )
|Other interest income      |  |          | 1,445  |  |            |  | 2.30 |          |  |   | 1,566      |  |  |        | 2.85 |   |  |   | (153   | )
|                           |  |          |        |  |            |  |      |          |  |   |            |  |  |        |      |   |  |   |        |  
|Total interest income      |  |          | 18,866 |  |            |  | 5.04 |          |  |   | 20,085     |  |  |        | 5.40 |   |  |   | (1,219 | )
|                           |  |          |        |  |            |  |      |          |  |   |            |  |  |        |      |   |  |   |        |  
|Interest on deposits       |  |          | 3,225  |  |            |  | 1.05 |          |  |   | 4,185      |  |  |        | 1.40 |   |  |   | (960   | )
|Interest on borrowings     |  |          | 1,645  |  |            |  | 3.52 |          |  |   | 2,389      |  |  |        | 4.01 |   |  |   | (744   | )
|                           |  |          |        |  |            |  |      |          |  |   |            |  |  |        |      |   |  |   |        |  
|Total interest expense     |  |          | 4,870  |  |            |  | 1.37 |          |  |   | 6,574      |  |  |        | 1.83 |   |  |   | (1,704 | )
|                           |  |          |        |  |            |  |      |          |  |   |            |  |  |        |      |   |  |   |        |  
|Net interest income        |  | $        | 13,996 |  |            |  |      |          |  | $ | 13,511     |  |  |        |      |   |  | $ | 485    |  
|                           |  |          |        |  |            |  |      |          |  |   |            |  |  |        |      |   |  |   |        |  
|Net interest spread        |  |          |        |  |            |  | 3.67 | %        |  |   |            |  |  |        | 3.57 | % |  |   |        |  
|Net interest margin        |  |          |        |  |            |  | 3.74 | %        |  |   |            |  |  |        | 3.63 | % |  |   |        |  
|                           |  |          |        |  |            |  |      |          |  |   |            |  |  |        |      |   |  |   |        |  



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The 3.6% growth in net interest income on a tax-equivalent basis, as shown in the table
above, was accomplished with an increase of 0.6% in average interest-earning assets, as the Bank benefited from certain market conditions in 2011 that allowed it to decrease its cost of funds, primarily through the repricing of deposit accounts in a
relatively stable low interest rate environment. Our interest-bearing liabilities have shorter overall maturities and reprice more frequently to market conditions than our interest-earning assets. For a discussion on interest rate risk see
Interest Rate Risk.

The Companys net interest margin on a fully-tax equivalent basis increased 10
basis points to 3.73% for 2011 from 3.63% for 2010.

Tax-exempt interest for 2011 was $162,000 compared to $222,000 for 2010.
Tax-exempt interest is primarily from bank-qualified municipal securities and municipal loans. Total interest income on a tax-equivalent basis of $18.9 million for 2011 represented a decrease of $1.2 million compared to $20.1 million for 2010. This
reduction resulted primarily from a decrease in average interest-earning assets related to the Banks balance sheet restructuring strategies. Total interest expense for 2011 decreased $1.7 million compared to 2010, as the Bank took advantage of
market opportunities to reprice and sharply reduce its cost of interest-bearing deposits, and reduced total borrowings, also as part of its balance sheet restructuring strategy. For further information, see  Financial Condition 
Rate/Volume Analysis.

Provision for Loan Losses

The provision for loan losses represents the current period credit or cost associated with maintaining an appropriate allowance for loan
losses. Periodic fluctuations in the provision for loan losses result from managements assessment of the adequacy of the allowance for loan losses. The allowance for loan losses is dependent upon many factors, including loan growth, net
charge-offs, changes in the composition of the loan portfolio, delinquencies, assessment by management, third parties and banking regulators of the quality of the loan portfolio, the value of the underlying collateral on problem loans and the
general economic conditions in our market area. We believe the allowance for loan losses is adequate to cover losses inherent in the loan portfolio as calculated in accordance with generally accepted accounting principles.

We had a provision for loan losses of $1.4 million for 2011 compared to a provision of $1.9 million for 2010. The provisions for both
2011 and 2010 reflected elevated levels of nonperforming loans and charge-offs, and the continuing pressure of current economic conditions on credit quality. The allowance to total loans ratio was 1.30% at December 31, 2011, compared to 1.33%
at December 31, 2010.

Other Income

The $22,000 increase in total other income to $5.6 million in 2011 resulted primarily from the net of the following changes:



| |  |  | A $137,000, or 6.8%, increase in fees and service charges from deposit account relationships to $2.1 million, including a $119,000 increase in debit
card fees that was due primarily to a 7.0% increase in the number of checking accounts that resulted from the Banks continuing focus on growing core deposit relationships;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | A $158,000, or 11.5%, increase in commissions earned on insurance and brokerage sales to $1.5 million resulted primarily from increased brokerage sales
by the Banks subsidiary, Ameriana Financial Services, Inc.;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Net gains on sales of available-for-sale securities increased $616,000 from $303,000 for 2010 on $9.8 million in sales to $919,000 for 2011 on $48.7
million in sales, as the Bank benefited in both years from falling mortgage loan rates that resulted in higher market values of its mortgage-backed securities.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

| |  |  | A $698,000 decrease in gains on sales of loans and servicing rights to $225,000 for 2011 from $923,000 for 2010, related primarily to a $560,000 gain
in 2010 from a bulk sale of $10.9 million of seasoned performing residential mortgage loans;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | A $272,000 increase in rental income from OREO to $771,000 resulted primarily from gross operating revenue for an Indianapolis area golf course
acquired in mid-2011 and sold in December, the mid-2010 acquisition of an Indianapolis area strip commercial center held for all of 2011, the leasing of two high-end Indianapolis area single family homes, and partly offset by reduced income from a
multi-family apartment complex in Anderson, Indiana, that was held for all of 2010 and sold in mid-2011;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | A $668,000 increase in the net loss from sales and write-downs of other real estate owned to $1.0 million for 2011 from $359,000 for 2010, related
primarily to $845,000 in total write-downs of the strip commercial center and a $277,000 write-down of an uncompleted apartment complex located in Lafayette, Indiana. The write-downs reflected further deterioration in the market value of both
properties during 2011, but were partly offset by a $121,000 gain from the sale of the Indianapolis area golf course and a $72,000 gain from the sale of the Anderson, Indiana, apartment complex; and
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | A $134,000 decrease in the loss from a limited partnership investment in real estate qualifying for federal tax credits, from $142,000 for 2010 to
$8,000 for 2011;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------

Other Expense

The Company recorded a $187,000 increase in total other expense to $17.0 million for 2011, compared to $16.8 million for 2010, due primarily to the following major differences:



| |  |  | $9.4 million for salaries and employee benefits for 2011, which was $135,000, or 1.4%, higher than 2010, and due mostly to an increase in incentive
awards related primarily to the Banks retail deposit goals and sales goals for Ameriana Financial Services, Inc., and a $124,000 increase in funding costs for the frozen multi-employer defined benefit retirement plan, partly offset by an
$84,000 decrease in employee health insurance expense. In light of the impact of poor economic conditions on the earnings of the Company, management agreed to forego salary increases for 2011;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The $88,000, or 5.7%, increase in net occupancy expense to $1.6 million related primarily to real estate tax expense. The expense for 2011 included a
$28,000 increase in rent for a banking center that was related mostly to a real estate tax adjustment, whiled during 2010 the Bank benefited from a $35,000 refund of prior years real estate taxes as a result of successfully contesting the
assessment on one of the Banks offices;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Other real estate owned expense of $1.0 million for 2011 was $53,000 higher than the total for 2010. $727,000 of the total for 2011 represented
operating expenses on the Indianapolis area golf course and apartment complex in Anderson, Indiana, with both properties being sold in 2011, and the Indianapolis area strip commercial center. The three properties together provided $695,000 of rental
income in 2011; and
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The increases above were offset in part by:



| |  |  | A decrease of $77,000 in legal and professional fees that was due primarily to a lower expense recorded for legal fees related to problem loans, and a
$25,000 recruiting fee that was incurred in the first nine months of 2010, while no recruiting fees were incurred in 2011, offset in part by $14,000 in fees resulting from the required conversion to eXtensible Business Reporting Language
(XBRL) for SEC financial reporting in 2011; and
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | A $111,000 decrease in FDIC insurance premiums and assessments that resulted from the new assessment methodology that became effective in the beginning
of the second quarter of 2011.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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Income Tax Expense

We recorded income tax expense of $21,000 on pre-tax income of $1.2 million for 2011, compared to an income tax benefit of $242,000 on $311,000 of pre-tax income for 2010. Both years had a significant
amount of tax-exempt BOLI income, and tax-exempt income from municipal loans and municipal securities.



| |  |  | We have a deferred state tax asset of $1.9 million that is primarily the result of operating losses sustained since 2003 for state tax purposes. We
started recording a valuation allowance against our current period state income tax benefit in 2005 due to our concern that we may not be able to use more than the tax asset already recorded on the books without modifying the use of AIMI, our
investment subsidiary, which was liquidated effective December 31, 2009. Operating income from AIMI was not subject to state income taxes under state law, and is the primary reason for the tax asset. The valuation allowance was $1.1 million at
December 31, 2011.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The Company had a deferred federal tax asset of $4.6 million at December 31, 2011, that was composed of $1.6 million of tax benefit from a net
operating loss carryforward of $4.7 million, $1.6 million related to temporary differences between book and tax income, and $1.4 million in tax credits. The federal loss carryforward expires in 2026, and the tax credits begin to expire in 2023.
Included in the $1.4 million of tax credits available to offset future federal income tax are approximately $666,000 of alternative minimum tax credits which have no expiration date. Management believes that the Company will be able to utilize the
benefits recorded for loss carryforwards and credits within the allotted time periods.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | In addition to the liquidation of AIMI, the Bank has initiated several strategies designed to expedite the use of both the deferred state tax asset and
the deferred federal tax asset. Through sales of $34.5 million of municipal securities and only one purchase since December 31, 2006, that segment of the investment securities portfolio has been reduced to $2.4 million. The proceeds from these
sales have been reinvested in taxable financial instruments. The Bank periodically evaluates a sale/leaseback transaction that could result in a taxable gain on its office properties, and also allow the Bank to convert nonearning assets to earnings
assets that will produce taxable income. Additionally, the Bank is exploring options related to reducing its current investment in tax-exempt bank owned life insurance policies that involve the reinvestment of the proceeds in taxable financial
instruments with a similar or greater risk-adjusted after-tax yield. Sales of banking centers not important to long-term growth objectives that would result in taxable gains and reduced operating expenses could be considered by the Bank.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The effective tax rate was 1.8% in 2011, which resulted from $1.2 million in pre-tax income with income tax of $21,000, compared to an effective tax
rate of (77.8)% for 2010 that resulted from $311,000 in pre-tax income coupled with a $242,000 income tax benefit. The primary difference in the effective tax rate and the statutory tax rates in both 2011 and 2010 relates to the cash value of life
insurance, municipal loans and municipal securities income.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

See Note 9 to the Consolidated Financial Statements for more
information relating to income taxes

Liquidity and Capital Resources.

Liquidity is the ability to meet current and future obligations of a short-term nature. Historically, funds provided by operations, loan
repayments and new deposits have been our principal sources of liquid funds. In addition, we have the ability to obtain funds through the sale of new mortgage loans, through borrowings from the FHLB system, and through the brokered certificates
market. We regularly adjust the investments in liquid assets based upon our assessment of (1) expected loan demand, (2) expected deposit flows, (3) yields available on interest-earning deposits and securities and (4) the
objectives of our asset/liability program.

The Company is a separate entity and apart from the Bank and must provide for its
own liquidity. In addition to its operating expenses, the Company is responsible for the payment of dividends declared for its shareholders, and the payment of interest on its subordinated debentures. At times, the Company has repurchased its



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##### Table of Contents

stock. Substantially all of the Companys operating cash is obtained from subsidiary service fees and dividends. Payment of such dividends to the Company by the Bank is limited under Indiana
law. Additionally, as part of a resolution adopted by the Board of Directors of the Bank on July 26, 2010, the Bank cannot declare or pay any dividends without the prior written consent of the FDIC and the Indiana Department of Financial
Institutions. See -Regulatory Action. The Company believes that such restriction will not have an impact on the Companys ability to meet its ongoing cash obligations.

At December 31, 2011, we had $10.2 million in loan commitments outstanding and $45.3 million of additional commitments for line of
credit receivables.

Certificates of deposit due within one year of December 31, 2011 totaled $87.8 million, or 26.0% of
total deposits. If these maturing certificates of deposit do not remain with us, other sources of funds must be used, including other certificates of deposit, brokered CDs, and borrowings. Depending on market conditions, we may be required to pay
higher rates on such deposits or other borrowings than currently paid on the certificates of deposit due on or before December 31, 2012. However, based on past experiences we believe that a significant portion of the certificates of deposit
will remain. We have the ability to attract and retain deposits by adjusting the interest rates offered. We held no brokered CDs at December 31, 2011 and $10.4 million at December 31, 2010.

Our primary investing activities are the origination of loans and purchase of securities. In 2011, our loan originations totaled $58.0
million, and we purchased loans from other financial institutions totaling $3.8 million.

Financing activities consist
primarily of activity in deposit accounts, including brokered certificates of deposit, and FHLB advances. Deposit flows are affected by the overall level of interest rates, the interest rates and products we offer, and our local competitors and
other factors. Deposit account balances decreased by $728,000 in 2011. We had FHLB advances of $32.0 million and $34.0 million at December 31, 2011 and 2010, respectively.

The Bank is subject to various regulatory capital requirements set by the FDIC, including a risk-based capital measure. The Company is
also subject to similar capital requirements set by the Federal Reserve Bank. The risk-based capital guidelines include both a definition of capital and a framework for calculating risk-weighted assets by assigning balance sheet assets and
off-balance sheet items to broad risk categories. At December 31, 2011, both the Company and the Bank exceeded all of regulatory capital requirements and are considered well capitalized under regulatory guidelines.

Off-Balance-Sheet Arrangements

In the normal course of operations, we engage in a variety of financial transactions that, in accordance with generally accepted accounting principles, are not recorded on our financial statements. These
transactions involve, to varying degrees, elements of credit, interest rate and liquidity risk. Such transactions are used primarily to manage customers requests for funding and take the form of loan commitments and lines of credit. See Note 4
of the Notes to Consolidated Financial Statements.

We do not have any off-balance-sheet arrangements that have or are
reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

Impact of Inflation and Changing Prices

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

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



53



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##### Table of Contents

Item 7A. Quantitative and Qualitative Disclosures About Market
Risk

Not applicable as issuer is a smaller reporting company.



54



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##### Table of Contents

Item 8. Financial Statements and Supplementary Data

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS



|                                                                                                                 |  |      |    | 
|---------------------------------------------------------------------------------------------------------------- |  | ---- | -- | 
|                                                                                                                 |  | Page |   
|                                                                                                                 | 
|Managements Report on Internal Control Over Financial Reporting                                                 |  |      | 56 | 
|                                                                                                                 | 
|Report of Independent Registered Public Accounting Firm                                                          |  |      | 57 | 
|                                                                                                                 | 
|Consolidated Balance Sheets at December 31, 2011 and 2010                                                        |  |      | 58 | 
|                                                                                                                 | 
|Consolidated Statements of Income for Each of the Two Years in the Period Ended December 31, 2011                |  |      | 59 | 
|                                                                                                                 | 
|Consolidated Statements of Shareholders Equity for Each of the Two Years in the Period Ended December 31,
 2011 |  |      | 60 | 
|                                                                                                                 | 
|Consolidated Statements of Cash Flows for Each of the Two Years in the Period Ended December 31,
2011            |  |      | 61 | 
|                                                                                                                 | 
|Notes to Consolidated Financial Statements                                                                       |  |      | 63 | 



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##### Table of Contents

MANAGEMENTS REPORT OF INTERNAL CONTROL OVER FINANCIAL

PROCEDURES AND FINANCIAL STATEMENTS

The management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting. The internal control process has been designed under our supervision
to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Companys financial statements for external reporting purposes in accordance with accounting principles generally accepted in the United
States of America.

Management conducted an assessment of the effectiveness of the Companys internal control over
financial reporting as of December 31, 2011, utilizing the framework established in Internal Control  Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on this assessment,
management has determined that the Companys internal control over financial reporting as of December 31, 2011 is effective.

Our internal control over financial reporting includes policies and procedures that pertain to the maintenance of records that accurately and fairly reflect, in reasonable detail, transactions and
dispositions of assets; and provide reasonable assurances that: (1) transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States; (2)
receipts and expenditures are being made only in accordance with authorizations of management and the directors of the Company; and (3) unauthorized acquisition, use, or disposition of the Companys assets that could have a material effect on
the Companys financial statements are prevented or timely detected.

All internal control systems, no matter how well
designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.



56



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Report of Independent Registered Public Accounting Firm

Audit Committee, Board of Directors and Stockholders

Ameriana Bancorp

New Castle, Indiana

We have audited the accompanying consolidated balance sheets of Ameriana Bancorp as of December 31, 2011 and 2010, and the related consolidated statements of income, shareholders equity and
cash flows for the years then ended. The Companys management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing auditing procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Companys internal control over financial reporting. Accordingly, we express no such opinion. Our audits also included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by management and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Ameriana
Bancorp as of December 31, 2011 and 2010, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

/s/ BKD, LLP

Indianapolis, Indiana

March 29, 2012



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Ameriana Bancorp

Consolidated Balance Sheets

(in thousands, except share data)



|                                                             |  |              |         |   |      |   |         |  
|------------------------------------------------------------ |  | ------------ | ------- | - | ---- | - | ------- | -
|                                                             |  | December 31, |        
|                                                             |  | 2011         |         |   | 2010 |  
|Assets                                                       |  |              |         |   |      |   |         |  
|Cash on hand and in other institutions                       |  | $            | 6,204   |   |      | $ | 3,673   |  
|Interest-bearing demand deposits                             |  |              | 3,505   |   |      |   | 8,074   |  
|                                                             |  |              |         |   |      |   |         |  
|Cash and cash equivalents                                    |  |              | 9,709   |   |      |   | 11,747  |  
|Investment securities available for sale                     |  |              | 43,847  |   |      |   | 38,608  |  
|Loans held for sale                                          |  |              | 252     |   |      |   | 91      |  
|Loans, net of allowance for loan losses of $4,132 and $4,212 |  |              | 312,509 |   |      |   | 312,715 |  
|Premises and equipment                                       |  |              | 14,650  |   |      |   | 14,736  |  
|Stock in Federal Home Loan Bank                              |  |              | 4,472   |   |      |   | 5,101   |  
|Goodwill                                                     |  |              | 656     |   |      |   | 649     |  
|Cash value of life insurance                                 |  |              | 26,248  |   |      |   | 25,413  |  
|Other real estate owned                                      |  |              | 7,545   |   |      |   | 9,067   |  
|Other assets                                                 |  |              | 9,903   |   |      |   | 11,530  |  
|                                                             |  |              |         |   |      |   |         |  
|Total assets                                                 |  | $            | 429,791 |   |      | $ | 429,657 |  
|                                                             |  |              |         |   |      |   |         |  
|                                                             |  |             
|Liabilities and Shareholders Equity                         |  |              |         |   |      |   |         |  
|Liabilities                                                  |  |              |         |   |      |   |         |  
|Deposits                                                     |  |              |         |   |      |   |         |  
|Noninterest-bearing                                          |  | $            | 40,197  |   |      | $ | 34,769  |  
|Interest-bearing                                             |  |              | 297,053 |   |      |   | 303,209 |  
|                                                             |  |              |         |   |      |   |         |  
|Total deposits                                               |  |              | 337,250 |   |      |   | 337,978 |  
|Borrowings                                                   |  |              | 49,810  |   |      |   | 51,810  |  
|Drafts payable                                               |  |              | 2,532   |   |      |   | 1,594   |  
|Other liabilities                                            |  |              | 5,694   |   |      |   | 5,024   |  
|                                                             |  |              |         |   |      |   |         |  
|Total liabilities                                            |  |              | 395,286 |   |      |   | 396,406 |  
|                                                             |  |              |         |   |      |   |         |  
|Commitments and contingencies                                |  |              |         |   |      |   |         |  
|Shareholders equity                                         |  |              |         |   |      |   |         |  
|Preferred stock  5,000,000 shares authorized and unissued   |  |              |        |   |      |   |        |  
|Common stock, $1.00 par value                                |  |              |         |   |      |   |         |  
|Authorized 15,000,000 shares                                 |  |              |         |   |      |   |         |  
|Issued  3,213,952 and 3,213,952 shares                      |  |              | 3,214   |   |      |   | 3,214   |  
|Outstanding  2,988,952 and 2,988,952 shares                 |  |              |         |   |      |   |         |  
|Additional paid-in capital                                   |  |              | 1,051   |   |      |   | 1,048   |  
|Retained earnings                                            |  |              | 32,871  |   |      |   | 31,849  |  
|Accumulated other comprehensive income                       |  |              | 367     |   |      |   | 138     |  
|Treasury stock  225,000 and 225,000 shares                  |  |              | (2,998  | ) |      |   | (2,998  | )
|                                                             |  |              |         |   |      |   |         |  
|Total shareholders equity                                   |  |              | 34,505  |   |      |   | 33,251  |  
|                                                             |  |              |         |   |      |   |         |  
|Total liabilities and shareholders equity                   |  | $            | 429,791 |   |      | $ | 429,657 |  
|                                                             |  |              |         |   |      |   |         |  

See notes to consolidated financial statements



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Ameriana Bancorp

Consolidated Statements of Income

(in thousands, except share data)



|                                                                                           |  |                         |        |   |      |   |        |  
|------------------------------------------------------------------------------------------ |  | ----------------------- | ------ | - | ---- | - | ------ | -
|                                                                                           |  | Year Ended December 31, |       
|                                                                                           |  | 2011                    |        |   | 2010 |  
|Interest Income                                                                            |  |                         |        |   |      |   |        |  
|Interest and fees on loans                                                                 |  | $                       | 17,381 |   |      | $ | 18,465 |  
|Interest on mortgage-backed securities                                                     |  |                         | 1,096  |   |      |   | 1,210  |  
|Interest on investment securities                                                          |  |                         | 143    |   |      |   | 173    |  
|Other interest and dividend income                                                         |  |                         | 174    |   |      |   | 137    |  
|                                                                                           |  |                         |        |   |      |   |        |  
|Total interest income                                                                      |  |                         | 18,794 |   |      |   | 19,985 |  
|                                                                                           |  |                         |        |   |      |   |        |  
|Interest Expense                                                                           |  |                         |        |   |      |   |        |  
|Interest on deposits                                                                       |  |                         | 3,225  |   |      |   | 4,185  |  
|Interest on borrowings                                                                     |  |                         | 1,645  |   |      |   | 2,389  |  
|                                                                                           |  |                         |        |   |      |   |        |  
|Total interest expense                                                                     |  |                         | 4,870  |   |      |   | 6,574  |  
|                                                                                           |  |                         |        |   |      |   |        |  
|Net Interest Income                                                                        |  |                         | 13,924 |   |      |   | 13,411 |  
|Provision for loan losses                                                                  |  |                         | 1,385  |   |      |   | 1,933  |  
|                                                                                           |  |                         |        |   |      |   |        |  
|Net Interest Income After Provision for Loan Losses                                        |  |                         | 12,539 |   |      |   | 11,478 |  
|                                                                                           |  |                         |        |   |      |   |        |  
|Other Income                                                                               |  |                         |        |   |      |   |        |  
|Other fees and service charges                                                             |  |                         | 2,144  |   |      |   | 2,007  |  
|Brokerage and insurance commissions                                                        |  |                         | 1,530  |   |      |   | 1,372  |  
|Net realized and recognized gains on available-for-sale securities                         |  |                         | 919    |   |      |   | 303    |  
|Gains on sales of loans and servicing rights                                               |  |                         | 225    |   |      |   | 923    |  
|Net loss from sales and write-downs of other real estate owned                             |  |                         | (1,027 | ) |      |   | (359   | )
|Net gain (loss) on other repossessed assets                                                |  |                         | 5      |   |      |   | (1     | )
|Other real estate owned rental income                                                      |  |                         | 771    |   |      |   | 499    |  
|Increase in cash value of life insurance                                                   |  |                         | 836    |   |      |   | 875    |  
|Loss from limited partnership investment in real estate qualifying for federal tax credits |  |                         | (8     | ) |      |   | (142   | )
|Other                                                                                      |  |                         | 233    |   |      |   | 173    |  
|                                                                                           |  |                         |        |   |      |   |        |  
|Total other income                                                                         |  |                         | 5,628  |   |      |   | 5,650  |  
|                                                                                           |  |                         |        |   |      |   |        |  
|Other Expense                                                                              |  |                         |        |   |      |   |        |  
|Salaries and employee benefits                                                             |  |                         | 9,373  |   |      |   | 9,238  |  
|Net occupancy expense                                                                      |  |                         | 1,622  |   |      |   | 1,534  |  
|Furniture and equipment expense                                                            |  |                         | 853    |   |      |   | 856    |  
|Legal and professional fees                                                                |  |                         | 485    |   |      |   | 562    |  
|FDIC insurance premiums and assessments                                                    |  |                         | 643    |   |      |   | 754    |  
|Data processing expense                                                                    |  |                         | 799    |   |      |   | 758    |  
|Printing and office supplies                                                               |  |                         | 263    |   |      |   | 256    |  
|Marketing expense                                                                          |  |                         | 367    |   |      |   | 370    |  
|Other real estate owned expense                                                            |  |                         | 1,007  |   |      |   | 954    |  
|Other                                                                                      |  |                         | 1,592  |   |      |   | 1,535  |  
|                                                                                           |  |                         |        |   |      |   |        |  
|Total other expense                                                                        |  |                         | 17,004 |   |      |   | 16,817 |  
|                                                                                           |  |                         |        |   |      |   |        |  
|Income Before Income Taxes                                                                 |  |                         | 1,163  |   |      |   | 311    |  
|Income tax expense (benefit)                                                               |  |                         | 21     |   |      |   | (242   | )
|                                                                                           |  |                         |        |   |      |   |        |  
|Net Income                                                                                 |  | $                       | 1,142  |   |      | $ | 553    |  
|                                                                                           |  |                         |        |   |      |   |        |  
|Basic and Diluted Earnings Per Share                                                       |  | $                       | 0.38   |   |      | $ | 0.19   |  
|                                                                                           |  |                         |        |   |      |   |        |  

See notes to consolidated financial statements.



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Ameriana Bancorp

Consolidated Statements of Shareholders Equity

(in thousands, except share data)



|                                                                                                                   |  |             |       |  |                          |   |       |                  |  |   |                                           |   |  |               |      |   |       |   |        |   |  |   |        |  
|------------------------------------------------------------------------------------------------------------------ |  | ----------- | ----- |  | ------------------------ | - | ----- | ---------------- |  | - | ----------------------------------------- | - |  | ------------- | ---- | - | ----- | - | ------ | - |  | - | ------ | -
|                                                                                                                   |  | CommonStock |       |  | AdditionalPaid-inCapital |   |       | RetainedEarnings |  |   | AccumulatedOtherComprehensiveIncome(Loss) |   |  | TreasuryStock |      |   | Total |  
|Balance at December 31, 2009                                                                                       |  |             | 3,214 |  |                          |   | 1,045 |                  |  |   | 31,416                                    |   |  |               | (102 | ) |       |   | (2,998 | ) |  |   | 32,575 |  
|Net Income                                                                                                         |  |             |       |  |                          |   |       |                  |  |   | 553                                       |   |  |               |      |   |       |   |        |   |  |   | 553    |  
|Change of $379 from unrealized loss to unrealized gain on available-for-sale securities, net of income tax of
$139 |  |             |       |  |                          |   |       |                  |  |   |                                           |   |  |               | 240  |   |       |   |        |   |  |   | 240    |  
|                                                                                                                   |  |             |       |  |                          |   |       |                  |  |   |                                           |   |  |               |      |   |       |   |        |   |  |   |        |  
|Comprehensive income                                                                                               |  |             |       |  |                          |   |       |                  |  |   |                                           |   |  |               |      |   |       |   |        |   |  |   | 793    |  
|Share-based compensation                                                                                           |  |             |       |  |                          |   | 3     |                  |  |   |                                           |   |  |               |      |   |       |   |        |   |  |   | 3      |  
|Dividends declared ($0.04 per share)                                                                               |  |             |       |  |                          |   |       |                  |  |   | (120                                      | ) |  |               |      |   |       |   |        |   |  |   | (120   | )
|                                                                                                                   |  |             |       |  |                          |   |       |                  |  |   |                                           |   |  |               |      |   |       |   |        |   |  |   |        |  
|Balance at December 31, 2010                                                                                       |  | $           | 3,214 |  |                          | $ | 1,048 |                  |  | $ | 31,849                                    |   |  | $             | 138  |   |       | $ | (2,998 | ) |  | $ | 33,251 |  
|Net Income                                                                                                         |  |             |       |  |                          |   |       |                  |  |   | 1,142                                     |   |  |               |      |   |       |   |        |   |  |   | 1,142  |  
|Increase of $347 in unrealized gain on available-for-sale securities, net of income tax of $118                    |  |             |       |  |                          |   |       |                  |  |   |                                           |   |  |               | 229  |   |       |   |        |   |  |   | 229    |  
|                                                                                                                   |  |             |       |  |                          |   |       |                  |  |   |                                           |   |  |               |      |   |       |   |        |   |  |   |        |  
|Comprehensive income                                                                                               |  |             |       |  |                          |   |       |                  |  |   |                                           |   |  |               |      |   |       |   |        |   |  |   | 1,371  |  
|Share-based compensation                                                                                           |  |             |       |  |                          |   | 3     |                  |  |   |                                           |   |  |               |      |   |       |   |        |   |  |   | 3      |  
|Dividends declared ($0.04 per share)                                                                               |  |             |       |  |                          |   |       |                  |  |   | (120                                      | ) |  |               |      |   |       |   |        |   |  |   | (120   | )
|                                                                                                                   |  |             |       |  |                          |   |       |                  |  |   |                                           |   |  |               |      |   |       |   |        |   |  |   |        |  
|Balance at December 31, 2011                                                                                       |  | $           | 3,214 |  |                          | $ | 1,051 |                  |  | $ | 32,871                                    |   |  | $             | 367  |   |       | $ | (2,998 | ) |  | $ | 34,505 |  
|                                                                                                                   |  |             |       |  |                          |   |       |                  |  |   |                                           |   |  |               |      |   |       |   |        |   |  |   |        |  

See notes to consolidated financial statements.



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Ameriana Bancorp

Consolidated Statements of Cash Flows

(in thousands, except share data)



|                                                                   |  |                         |         |   |      |   |         |  
|------------------------------------------------------------------ |  | ----------------------- | ------- | - | ---- | - | ------- | -
|                                                                   |  | Year Ended December 31, |        
|                                                                   |  | 2011                    |         |   | 2010 |  
|Operating Activities                                               |  |                         |         |   |      |   |         |  
|Net income                                                         |  | $                       | 1,142   |   |      | $ | 553     |  
|Items not requiring (providing) cash                               |  |                         |         |   |      |   |         |  
|Provision for losses on loans                                      |  |                         | 1,385   |   |      |   | 1,933   |  
|Depreciation and amortization                                      |  |                         | 1,297   |   |      |   | 1,213   |  
|Increase in cash value of life insurance                           |  |                         | (836    | ) |      |   | (875    | )
|Gain on sale of investments                                        |  |                         | (919    | ) |      |   | (303    | )
|Deferred taxes                                                     |  |                         | (349    | ) |      |   | (271    | )
|Loss on sale or write-down of other real estate owned              |  |                         | 1,027   |   |      |   | 359     |  
|Mortgage loans originated for sale                                 |  |                         | (8,710  | ) |      |   | (16,504 | )
|Proceeds from sale of mortgage loans                               |  |                         | 8,676   |   |      |   | 17,125  |  
|Gains on sale of loans and servicing rights                        |  |                         | (225    | ) |      |   | (923    | )
|Decrease in accrued interest payable                               |  |                         | (35     | ) |      |   | (302    | )
|Other adjustments                                                  |  |                         | 2,637   |   |      |   | 733     |  
|                                                                   |  |                         |         |   |      |   |         |  
|Net cash provided by operating activities                          |  |                         | 5,090   |   |      |   | 2,738   |  
|                                                                   |  |                         |         |   |      |   |         |  
|Investing Activities                                               |  |                         |         |   |      |   |         |  
|Purchase of securities                                             |  |                         | (57,932 | ) |      |   | (18,953 | )
|Proceeds/principal from sale of securities                         |  |                         | 48,712  |   |      |   | 9,836   |  
|Principal collected on mortgage-backed securities                  |  |                         | 5,008   |   |      |   | 6,829   |  
|Net change in loans                                                |  |                         | (4,467  | ) |      |   | (9,586  | )
|Proceeds from sales of mortgage loans transferred to held for sale |  |                         |        |   |      |   | 11,436  |  
|Proceeds from sales of other real estate owned                     |  |                         | 3,798   |   |      |   | 1,724   |  
|Purchase of insurance business                                     |  |                         | (190    | ) |      |   |        |  
|Purchase of financial services business                            |  |                         | (46     | ) |      |   |        |  
|Net purchases and construction of premises and equipment           |  |                         | (891    | ) |      |   | (239    | )
|Proceeds from stock repurchased by Federal Home Loan Bank          |  |                         | 629     |   |      |   | 528     |  
|Other investing activities                                         |  |                         | 8       |   |      |   | 114     |  
|                                                                   |  |                         |         |   |      |   |         |  
|Net cash (used in) provided by investing activities                |  |                         | (5,371  | ) |      |   | 1,689   |  
|                                                                   |  |                         |         |   |      |   |         |  
|Financing Activities                                               |  |                         |         |   |      |   |         |  
|Net change in demand and savings deposits                          |  |                         | 21,788  |   |      |   | 9,680   |  
|Net changes in brokered certificates of deposit                    |  |                         | (10,363 | ) |      |   | 10,363  |  
|Net change in all other certificates of deposit                    |  |                         | (12,153 | ) |      |   | (20,446 | )
|Increase in drafts payable                                         |  |                         | 938     |   |      |   | 674     |  
|Proceeds from long-term borrowings                                 |  |                         | 4,000   |   |      |   | 3,000   |  
|Repayment of long-term borrowings                                  |  |                         | (6,000  | ) |      |   | (15,375 | )
|Net change in advances by borrowers for taxes and insurance        |  |                         | 153     |   |      |   | (44     | )
|Cash dividends paid                                                |  |                         | (120    | ) |      |   | (120    | )
|                                                                   |  |                         |         |   |      |   |         |  
|Net cash used in financing activities                              |  |                         | (1,757  | ) |      |   | (12,268 | )
|                                                                   |  |                         |         |   |      |   |         |  
|Change in Cash and Cash Equivalents                                |  |                         | (2,038  | ) |      |   | (7,841  | )
|Cash and Cash Equivalents at Beginning of Year                     |  |                         | 11,747  |   |      |   | 19,588  |  
|Cash and Cash Equivalents at End of Year                           |  | $                       | 9,709   |   |      | $ | 11,747  |  
|                                                                   |  |                         |         |   |      |   |         |  



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Ameriana Bancorp

Consolidated Statements of Cash Flows

(in thousands, except share data)



|                                               |  |                         |       |  |      |   |       | 
|---------------------------------------------- |  | ----------------------- | ----- |  | ---- | - | ----- | 
|                                               |  | Year Ended December 31, |      
|                                               |  | 2011                    |       |  | 2010 |  
|Supplemental information:                      |  |                         |       |  |      |   |       | 
|Interest paid on deposits                      |  | $                       | 3,212 |  |      | $ | 4,461 | 
|                                               |  |                         |       |  |      |   |       | 
|Interest paid on borrowings                    |  | $                       | 1,623 |  |      | $ | 2,414 | 
|                                               |  |                         |       |  |      |   |       | 
|Non-cash supplemental information:             |  |                         |       |  |      |   |       | 
|Transfer from loans to other real estate owned |  | $                       | 3,303 |  |      | $ | 5,601 | 
|                                               |  |                         |       |  |      |   |       | 

See notes to consolidated financial statements.



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Ameriana Bancorp

Notes to Consolidated Financial Statements

(table dollar amounts in thousands, except share data)



|1. | Nature of Operations and Summary of Significant Accounting Policies
|-- | -------------------------------------------------------------------

Principles of Consolidation: The consolidated financial statements include the accounts of Ameriana Bancorp (the
Company) and its wholly-owned subsidiary, Ameriana Bank (the Bank), and the Banks wholly-owned subsidiaries, Ameriana Financial Services, Inc., and Ameriana Insurance Agency, Inc. All significant intercompany accounts
and transactions have been eliminated.

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

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

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

Cash and Cash
Equivalents

The Company considers all liquid investments with original maturities of three months or less to be cash equivalents. At
December 31, 2011 and 2010, cash equivalents consisted primarily of interest-bearing deposits with the Federal Reserve Bank of Chicago.

The only commercial bank holding one of the Companys cash accounts is participating in the FDICs Transaction Account Guarantee Program. Under
the program, through December 31, 2012, all noninterest-bearing transaction accounts are fully guaranteed by the FDIC for the entire amount in the account.

The FDICs insurance limit increase to $250,000 was made permanent in 2010. At December 31, 2011, the Companys cash accounts exceeded federally insured limits by approximately $3.5
million, with $3.4 million held by the Federal Reserve Bank of Chicago and $91,000 held by the Federal Home Loan Bank of Indianapolis, and both banks not being insured.

Investment Securities

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

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

When the Company does not intend to sell a debt security, and it is more likely than not that the Company will not have to sell the security before
recovery of its cost basis, it recognizes the credit component of an other-than-temporary impairment of a debt security in earnings and the remaining portion in other comprehensive income. For held-to-maturity debt securities, the amount of an
other-than-temporary impairment recorded in other comprehensive income for the noncredit portion of a previous other-than-temporary impairment is amortized prospectively over the remaining life of the security on the basis of the timing of future
estimated cash flows of the security.



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Ameriana Bancorp

Notes to Consolidated Financial Statements

(table dollar amounts in thousands, except share data)



For equity securities, when the Company has decided to sell an impaired available-for-sale security and
the entity does not expect the fair value of the security to fully recover before the expected time of sale, the security is deemed other-than-temporarily impaired in the period in which the decision to sell is made. The Company recognizes an
impairment loss when the impairment is deemed other than temporary even if a decision to sell has not been made.

Valuation
Measurements:Valuation methodologies often involve a significant degree of judgment, particularly when there are no observable active markets for the items being valued. In determining fair values for investment securities and residential
mortgage loans held for sale, fair values as defined in ASC 820 Fair Value Measurements and Disclosures (ASC 820) require key judgments affecting how fair value for such assets and liabilities are determined. In addition, the
outcomes of valuations have a direct bearing on the carrying amounts for goodwill and intangible assets. To determine the values of these assets and liabilities, as well as the extent to which related assets may be impaired, management makes
assumptions and estimates related to discount rates, asset returns, prepayment rates and other factors. The use of different discount rates or other valuation assumptions could produce significantly different results, which could affect the
Companys results of operations.

Loans Held for Sale:Mortgage loans originated and intended for sale in the secondary
market are carried at the lower of cost or fair value in the aggregate. Net unrealized losses, if any, are recognized through a valuation allowance by charges to noninterest income. Gains and losses on loan sales are recorded in noninterest income,
and direct loan origination costs and fees are deferred at origination of the loan and are recognized in noninterest income upon sale of the loan.

Loansare carried at the principal amount outstanding. A loan is impaired when, based on current information or events, it is probable that the Company will be unable to collect all amounts
due (principal and interest) according to the contractual terms of the loan agreement. Payments with insignificant delays not exceeding 90 days outstanding are not considered impaired. Certain non-accrual and substantially delinquent loans may be
considered to be impaired. Generally, loans are placed on non-accrual status at 90 days past due and accrued interest is reversed against earnings, unless the loan is well-secured and in the process of collection. The Company considers its
investment in one-to four-family residential loans and consumer loans to be homogeneous and, therefore, they are generally excluded from separate identification of evaluation of impairment. Interest income is accrued on the principal balances of
loans. The accrual of interest on impaired and non-accrual loans is discontinued when, in managements opinion, the borrower may be unable to meet payments as they become due.

When interest accrual is discontinued, all unpaid accrued interest is reversed when considered uncollectible. Generally, interest income is subsequently recognized only to the extent cash payments are
received. Certain loan fees and direct costs are being deferred and amortized as an adjustment of yield on the loans over the contractual lives of the loans. When a loan is paid off or sold, any unamortized loan origination fee balance is credited
to income.

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

The determination of the adequacy of the allowance for loan losses is based on estimates that are particularly
susceptible to significant changes in the economic environment and market conditions. Management believes that as of December 31, 2011, the allowance for loan losses was adequate based on information then available. A worsening or protracted
economic decline in the areas within which the Company operates would increase the likelihood of additional losses due to credit and market risks and could create the need for additional loss reserves.

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



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Ameriana Bancorp

Notes to Consolidated Financial Statements

(table dollar amounts in thousands, except share data)



Stock in Federal Home Loan Bank is the amount of stock the Company is required to own as
determined by regulation. This stock is carried at cost and represents the amount at which it can be sold back to the Federal Home Loan Bank (the FHLB). The Company reviewed the FHLB stock and based on current performance of the Federal
Home Loan Bank of Indianapolis, the Company determined there was no impairment of this stock at December 31, 2011.

Goodwillis tested at least annually for impairment. If the implied fair value of goodwill is lower than its carrying amount, goodwill impairment is indicated and goodwill is written down to its implied fair value. Subsequent increases in goodwill
value are not recognized in the financial statements. There was no impairment of goodwill recognized in 2011 or 2010.

Other Real Estate
Owned:Assets acquired through, or in lieu of, loan foreclosure are held for sale and are initially recorded at fair value less cost to sell at the date of foreclosure, establishing a new cost basis. Subsequent to foreclosure, valuations are
periodically performed by management and the assets are carried at the lower of carrying amount or fair value less cost to sell. Revenue and expenses from operations and changes in the valuation allowance are included in net income or expense from
foreclosed assets.

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

Mortgage Servicing Rightson originated loans are capitalized
by estimating the fair value of the streams of net servicing revenues that will occur over the estimated life of the servicing arrangement. Capitalized servicing rights, which include purchased servicing rights, are amortized in proportion to and
over the period of estimated servicing revenues. At least annually, the Bank engages a third party consulting firm to perform a valuation analysis, that is reviewed by management, of the fair value of the mortgage servicing rights. Based on the most
recent valuation as of November 30, 2011, the valuation allowance was increased by $19,000 to $32,000 as of December 31, 2011, from $13,000 at December 31, 2010.

Stock Options: The Company has stock plans which are described more fully in Note 10.

Income Taxin the consolidated Statements of Income includes deferred income tax provisions or benefits for all significant temporary differences in recognizing income and expenses for
financial reporting and income tax purposes. The Company and its subsidiaries file consolidated tax returns. The parent company and subsidiaries are charged or given credit for income taxes as though separate returns were filed. The Company
recognizes interest and penalties on income taxes as a component of income tax expense.

The Company accounts for income taxes in accordance
with income tax accounting guidance (ASC 740, Income Taxes).The income tax accounting guidance results in two components of income tax expense, current and deferred. Current income tax expense reflects taxes to be paid or refunded for the
current period by applying the provisions of the enacted tax law to the taxable income or excess of deductions over revenues. The Company determines deferred income taxes using the liability (or balance sheet) method. Under this method, the net
deferred tax asset or liability is based on the tax effect of the differences between the book and tax basis of assets and liabilities, and enacted changes in tax rates and laws are recognized in the period in which they occur. Deferred income tax
expense results from changes in deferred tax assets and liabilities between periods. Deferred tax assets are reduced by a valuation allowance if, based on the weight of evidence available, it is more likely than not that some portion or all of a
deferred tax asset will not be realized.

Uncertain tax positions are recognized if it is more likely than not, based on the technical merits,
that the tax position will be realized or sustained upon examination. The term more likely than not means a likelihood of more than 50 percent; the terms examined and upon examination also included resolution of the related appeals or
litigation processes, if any. A tax position that meets the more likely than not recognition threshold is initially and subsequently measured as the largest amount of tax benefit that has a greater than 50 percent likelihood of being
realized upon settlement with a taxing authority that has full knowledge of all relevant information. The determination of whether or not a tax position has met the more likely than not recognition threshold considers the facts,
circumstances and information available at the reporting date, and is subject to managements judgment.



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Ameriana Bancorp

Notes to Consolidated Financial Statements

(table dollar amounts in thousands, except share data)



Under U.S. GAAP, a valuation allowance is required to be recognized if it is more likely than
not that a deferred tax asset will not be realized. The determination of the realizability of the deferred tax asset is highly subjective and dependent upon judgment concerning our evaluation of both positive and negative evidence, our
forecasts of future income, applicable tax planning strategies, and assessments of current and future economic and business conditions. Positive evidence includes the existence of taxes paid in available carry-back years as well as the probability
that taxable income will be generated in future periods, while negative evidence includes any cumulative losses in the current year and prior two years and general business and economic trends. At December 31, 2011 and December 31, 2010,
we determined that our existing valuation allowance was adequate, largely based on available tax planning strategies and our projections of future taxable income. Any reduction in estimated future taxable income may require us to increase the
valuation allowance against our deferred tax assets. Any required increase to the valuation allowance would result in additional income tax expense in the period and could have a significant impact on our future earnings.



|2. | Restriction on Cash and Due From Banks
|-- | --------------------------------------

The Bank is required to maintain reserve funds in cash and/or on deposit with the Federal Reserve Bank. The reserve required at
December 31, 2011 was $298,000.



|3. | Investment Securities
|-- | ---------------------

The amortized cost and approximate fair values of securities, together with unrealized gains and losses, are as follows:



|                                                           |  |               |        |  |                      |   |     |                       |  |   |           |  |  |   |        | 
|---------------------------------------------------------- |  | ------------- | ------ |  | -------------------- | - | --- | --------------------- |  | - | --------- |  |  | - | ------ | 
|                                                           |  | AmortizedCost |        |  | GrossUnrealizedGains |   |     | GrossUnrealizedLosses |  |   | FairValue | 
|Available for sale at December 31, 2011                    |  |               |        |  |                      |   |     |                       |  |   |           |  |  |   |        | 
|Ginnie Mae and GSE mortgage-backed pass-through securities |  | $             | 39,280 |  |                      | $ | 443 |                       |  | $ | 9         |  |  | $ | 39,714 | 
|Municipal securities                                       |  |               | 2,322  |  |                      |   | 29  |                       |  |   |          |  |  |   | 2,351  | 
|Mutual funds                                               |  |               | 1,689  |  |                      |   | 93  |                       |  |   |          |  |  |   | 1,782  | 
|                                                           |  |               |        |  |                      |   |     |                       |  |   |           |  |  |   |        | 
|                                                           |  | $             | 43,291 |  |                      | $ | 565 |                       |  | $ | 9         |  |  | $ | 43,847 | 
|                                                           |  |               |        |  |                      |   |     |                       |  |   |           |  |  |   |        | 



|                                                           |  |               | 39,280 |  |                      |   | 39,280 |                       |  |   | 39,280    |  |  |   | 39,280 | 
|---------------------------------------------------------- |  | ------------- | ------ |  | -------------------- | - | ------ | --------------------- |  | - | --------- |  |  | - | ------ | 
|                                                           |  | AmortizedCost |        |  | GrossUnrealizedGains |   |        | GrossUnrealizedLosses |  |   | FairValue | 
|Available for sale at December 31, 2010                    |  |               |        |  |                      |   |        |                       |  |   |           |  |  |   |        | 
|Ginnie Mae and GSE mortgage-backed pass-through securities |  | $             | 29,210 |  |                      | $ | 336    |                       |  | $ | 110       |  |  | $ | 29,436 | 
|Ginnie Mae collateralized mortgage obligations             |  |               | 5,335  |  |                      |   | 8      |                       |  |   | 2         |  |  |   | 5,341  | 
|Municipal securities                                       |  |               | 2,228  |  |                      |   | 12     |                       |  |   | 76        |  |  |   | 2,164  | 
|Mutual funds                                               |  |               | 1,626  |  |                      |   | 41     |                       |  |   |          |  |  |   | 1,667  | 
|                                                           |  |               |        |  |                      |   |        |                       |  |   |           |  |  |   |        | 
|                                                           |  | $             | 38,399 |  |                      | $ | 397    |                       |  | $ | 188       |  |  | $ | 38,608 | 
|                                                           |  |               |        |  |                      |   |        |                       |  |   |           |  |  |   |        | 



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Ameriana Bancorp

Notes to Consolidated Financial Statements

(table dollar amounts in thousands, except share data)



The amortized cost and fair value of securities available for sale at December 31, 2011, by
contractual maturity, are shown below. Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.



|                                                           |  |                    |        |  |           |   |        | 
|---------------------------------------------------------- |  | ------------------ | ------ |  | --------- | - | ------ | 
|                                                           |  | Available for Sale |       
|                                                           |  | AmortizedCost      |        |  | FairValue |  
|One to five years                                          |  | $                  | 104    |  |           | $ | 105    | 
|Five to ten years                                          |  |                    | 376    |  |           |   | 381    | 
|After ten years                                            |  |                    | 1,842  |  |           |   | 1,865  | 
|                                                           |  |                    |        |  |           |   |        | 
|                                                           |  |                    | 2,322  |  |           |   | 2,351  | 
|Ginnie Mae and GSE mortgage-backed pass-through securities |  |                    | 39,280 |  |           |   | 39,714 | 
|Mutual funds                                               |  |                    | 1,689  |  |           |   | 1,782  | 
|                                                           |  |                    |        |  |           |   |        | 
|                                                           |  | $                  | 43,291 |  |           | $ | 43,847 | 
|                                                           |  |                    |        |  |           |   |        | 

Certain investment securities are reported in the financial statements at an amount less than their historical cost.
Total fair value of these investments at December 31, 2011 and December 31, 2010 were $4,199,000 and $9,159,000, respectively, which is approximately 9.6% and 23.7% of the Companys investment portfolio, respectively.

Should the impairment of any of these securities become other than temporary, the cost basis of the investment will be reduced and the resulting loss
recognized in net income in the period the other-than-temporary impairment is identified.

The following table shows the Companys
investments gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at December 31, 2011 and December 31, 2010:



|                                                           |  |                     | 000000 |  |                     |   | 000000 |            |  |   | 000000           |  |  |            | 000000 |  |                  |   | 000000 |  |  |   | 000000 | 
|---------------------------------------------------------- |  | ------------------- | ------ |  | ------------------- | - | ------ | ---------- |  | - | ---------------- |  |  | ---------- | ------ |  | ---------------- | - | ------ |  |  | - | ------ | 
|At December 31, 2011                                       |  | Less Than 12 Months |        |  | 12 Months or Longer |   |        | Total      | 
|                                                           |  | Fair Value          |        |  | UnrealizedLosses    |   |        | Fair Value |  |   | UnrealizedLosses |  |  | Fair Value |        |  | UnrealizedLosses |  
|Ginnie Mae and GSE mortgage-backed pass-through securities |  | $                   | 4,180  |  |                     | $ | 8      |            |  | $ | 19               |  |  | $          | 1      |  |                  | $ | 4,199  |  |  | $ | 9      | 
|                                                           |  |                     |        |  |                     |   |        |            |  |   |                  |  |  |            |        |  |                  |   |        |  |  |   |        | 



|                                                           |  |                     | 0000001 |  |                     |   | 0000001 |            |  |   | 0000001          |  |  |            | 0000001 |  |                  |   | 0000001 |  |  |   | 0000001 | 
|---------------------------------------------------------- |  | ------------------- | ------- |  | ------------------- | - | ------- | ---------- |  | - | ---------------- |  |  | ---------- | ------- |  | ---------------- | - | ------- |  |  | - | ------- | 
|At December 31, 2010                                       |  | Less Than 12 Months |         |  | 12 Months or Longer |   |         | Total      | 
|                                                           |  | Fair Value          |         |  | UnrealizedLosses    |   |         | Fair Value |  |   | UnrealizedLosses |  |  | Fair Value |         |  | UnrealizedLosses |  
|Ginnie Mae and GSE mortgage-backed pass-through securities |  | $                   | 5,055   |  |                     | $ | 109     |            |  | $ | 51               |  |  | $          | 1       |  |                  | $ | 5,106   |  |  | $ | 110     | 
|Ginnie Mae collateralized mortgage obligations             |  |                     | 2,225   |  |                     |   | 2       |            |  |   |                 |  |  |            |        |  |                  |   | 2,225   |  |  |   | 2       | 
|Municipal securities                                       |  |                     | 1,828   |  |                     |   | 76      |            |  |   |                 |  |  |            |        |  |                  |   | 1,828   |  |  |   | 76      | 
|                                                           |  |                     |         |  |                     |   |         |            |  |   |                  |  |  |            |         |  |                  |   |         |  |  |   |         | 
|                                                           |  | $                   | 9,108   |  |                     | $ | 187     |            |  | $ | 51               |  |  | $          | 1       |  |                  | $ | 9,159   |  |  | $ | 188     | 
|                                                           |  |                     |         |  |                     |   |         |            |  |   |                  |  |  |            |         |  |                  |   |         |  |  |   |         | 

Mortgage-backed pass-through securities: The contractual cash flows of those investments are guaranteed by
either Ginnie Mae, a U.S. Government agency, or by U.S. Government-sponsored entities, Fannie Mae and Freddie Mac, institutions which the U.S. Government has affirmed its commitment to support. Accordingly, it is expected that the securities would
not be settled at a price less than the amortized cost of the Companys investment.

Together with mortgage loans, investment securities
with a total market value of $5,341,000 were pledged at December 31, 2010 to secure FHLB advances and three letters of credit. No investment securities were pledged at December 31, 2011 to secure FHLB advances and four letters of credit.



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##### Table of Contents

Ameriana Bancorp

Notes to Consolidated Financial Statements

(table dollar amounts in thousands, except share data)



Investment securities with a total market value of $9,369,000 and $9,047,000 were pledged at
December 31, 2011 and December 31, 2010, respectively, to secure a repurchase agreement.

A gross gain of $934,000 and a gross loss
of $15,000 resulting from sales of available for sale securities were realized during the year ended December 31, 2011, with a net tax expense of $312,000. A gross gain of $306,000 and a gross loss of $3,000 resulting from sales of available
for sale securities were realized during the year ended December 31, 2010, with a net tax expense of $103,000.



|4. | Loans
|-- | -----

Classes of loans include:



|                          |  |              |         |  |      |   |         | 
|------------------------- |  | ------------ | ------- |  | ---- | - | ------- | 
|                          |  | December 31, |        
|                          |  | 2011         |         |  | 2010 |  
|Real estate loans:        |  |              |         |  |      |   |         | 
|Commercial                |  | $            | 100,126 |  |      | $ | 94,595  | 
|Residential               |  |              | 164,420 |  |      |   | 169,274 | 
|Construction              |  |              | 17,980  |  |      |   | 24,705  | 
|Commercial loans          |  |              | 30,961  |  |      |   | 22,360  | 
|Municipal loans           |  |              | 740     |  |      |   | 2,718   | 
|Consumer loans            |  |              | 2,860   |  |      |   | 3,943   | 
|                          |  |              |         |  |      |   |         | 
|                          |  |              | 317,087 |  |      |   | 317,595 | 
|                          |  |              |         |  |      |   |         | 
|Deduct                    |  |              |         |  |      |   |         | 
|Undisbursed loan proceeds |  |              | 12      |  |      |   | 443     | 
|Deferred loan fees, net   |  |              | 434     |  |      |   | 225     | 
|Allowance for loan losses |  |              | 4,132   |  |      |   | 4,212   | 
|                          |  |              |         |  |      |   |         | 
|                          |  |              | 4,578   |  |      |   | 4,880   | 
|                          |  |              |         |  |      |   |         | 
|                          |  | $            | 312,509 |  |      | $ | 312,715 | 
|                          |  |              |         |  |      |   |         | 

Loans being serviced by the Company for investors, primarily Freddie Mac, totaled approximately $95,653,000 and
$115,855,000 as of December 31, 2011 and 2010, respectively. Such loans are not included in the preceding table.

The aggregate fair
value of capitalized mortgage servicing rights at December 31, 2011 and 2010 is based on comparable market values and expected cash flows, with impairment assessed based on portfolio characteristics including product type, investor type and
interest rates. At December 31, 2011 and December 31, 2010, the fair value of mortgage servicing rights was approximately $577,000 and $689,000, respectively.



|                                 |  |                         |      |   |      |   |      |  
|-------------------------------- |  | ----------------------- | ---- | - | ---- | - | ---- | -
|                                 |  | Year Ended December 31, |     
|                                 |  | 2011                    |      |   | 2010 |  
|Mortgage servicing rights        |  |                         |      |   |      |   |      |  
|Balance at beginning of year     |  | $                       | 689  |   |      | $ | 707  |  
|Servicing rights capitalized     |  |                         | 83   |   |      |   | 212  |  
|Amortization of servicing rights |  |                         | (182 | ) |      |   | (211 | )
|Addition to valuation allowance  |  |                         | (13  | ) |      |   | (19  | )
|                                 |  |                         |      |   |      |   |      |  
|Balance at end of year           |  | $                       | 577  |   |      | $ | 689  |  
|                                 |  |                         |      |   |      |   |      |  



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Ameriana Bancorp

Notes to Consolidated Financial Statements

(table dollar amounts in thousands, except share data)



At December 31, 2011 and 2010, the Company had outstanding commitments to originate loans of
approximately $10,215,000 and $6,110,000. The outstanding commitments for 2011 included $3,054,000 for one-to four-family mortgage loans, $2,064,000 for commercial real estate loans and $5,097,000 for commercial loans. The outstanding commitments
for 2010 included $3,630,000 for one-to four-family mortgage loans, $1,580,000 for commercial real estate loans and $900,000 for commercial loans. In addition, the Company had $45,274,000 and $49,485,000 of conditional commitments for lines of
credit at December 31, 2011 and 2010. Exposure to credit loss in the event of nonperformance by the other party to the financial instruments for commitments to extend credit is represented by the contractual or notional amount of those
instruments. The same credit policies are used in making such commitments as are used for instruments that are included in the consolidated balance sheets. Commitments to extend credit are agreements to lend to a customer as long as there is no
violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon,
the total commitment amounts do not necessarily represent future cash requirements. Each customers credit worthiness is evaluated on a case-by-case basis. The amount of collateral obtained, if deemed necessary upon extension of credit, is
based on managements credit evaluation. Collateral held varies but may include accounts receivable, inventory, real estate, equipment, and income-producing commercial properties. In addition, the Company had $8,817,000 and $10,832,000 of
letters of credit outstanding at December 31, 2011 and 2010. Letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. The credit risk involved in issuing letters of credit
is essentially the same as that involved in extending loans to customers.

Executive officers and directors of Ameriana Bancorp and
significant subsidiaries and their related interests are loan clients of Ameriana Bancorps affiliate bank in the normal course of business. An analysis of the 2011 and 2010 activity of these loans is as follows:



|                             |  |      |        |   |      |   |        |  
|---------------------------- |  | ---- | ------ | - | ---- | - | ------ | -
|                             |  | 2011 |        |   | 2010 |  
|Balance at beginning of year |  | $    | 11,106 |   |      | $ | 11,087 |  
|New loans                    |  |      | 191    |   |      |   | 245    |  
|Repayments                   |  |      | (4,343 | ) |      |   | (226   | )
|                             |  |      |        |   |      |   |        |  
|Balance at end of year       |  | $    | 6,954  |   |      | $ | 11,106 |  
|                             |  |      |        |   |      |   |        |  

At December 31, 2011, unfunded commitment amounts related to the outstanding loan balances shown above totaled
$205,000.



|5. | Allowance for Loan Losses
|-- | -------------------------

The risk characteristics of each loan portfolio segment are as follows:

Commercial Real Estate:These loans are viewed primarily as cash flow loans and secondarily as loans secured by real estate. Commercial real estate lending typically involves higher loan principal
amounts and the repayment of these loans is generally dependent on the successful operation of the property securing the loan or the business conducted on the property securing the loan. Commercial real estate loans may be more adversely affected by
conditions in the real estate markets or in the general economy. The properties securing the Banks commercial real estate portfolio are diverse in terms of type and geographic location. Management monitors and evaluates commercial real estate
loans based on collateral and risk grade criteria. As a general rule, the Bank avoids financing single purpose projects unless other underwriting factors are present to help mitigate risk. In addition, management tracks the level of owner-occupied
commercial real estate loans versus non-owner occupied loans.

Construction Real Estate:Construction loans are underwritten utilizing
feasibility studies, independent appraisal reviews, sensitivity analysis of absorption and lease rates and financial analysis of the developers and property owners. Construction loans are generally based on estimates of costs and value associated
with the complete project. These estimates may be inaccurate. Construction loans often involve the disbursement of substantial funds with repayment substantially dependent on the success of the ultimate project. Sources of repayment for these types
of loans may be pre-committed permanent loans from approved long-term lenders, sales of developed property or an interim loan commitment from the Bank until permanent financing is obtained. These loans are closely monitored by on-site



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Ameriana Bancorp

Notes to Consolidated Financial Statements

(table dollar amounts in thousands, except share data)



inspections and are considered to have higher risks than other real estate loans due to their ultimate repayment being sensitive to interest rate changes, timely completion and sale of the
property, governmental regulation of real property, general economic conditions and the availability of long-term financing.

Commercial
Loan and Leases:Commercial loans and leases are primarily based on the identified cash flows of the borrower and secondarily on the underlying collateral provided by the borrower. The cash flows of borrowers, however, may not be as expected and
the collateral securing these loans and leases may fluctuate in value. Most commercial loans are secured by the assets being financed or other business assets such as accounts receivable or inventory and may incorporate a personal guarantee;
however, some short-term loans may be made on an unsecured basis. In the case of loans secured by accounts receivable, the availability of funds for the repayment of these loans may be substantially dependent on the ability of the borrower to
collect amounts due from its customers.

Residential and Consumer: With respect to residential loans that are secured by one-to
four-family residences and are generally owner occupied, the Bank generally establishes a maximum loan-to-value ratio and requires private mortgage insurance if that ratio is exceeded. Home equity loans are typically secured by a subordinate
interest in one-to four-family residences, and consumer loans are secured by consumer assets such as automobiles or recreational vehicles. Some consumer loans are unsecured such as small installment loans and certain lines of credit. Repayment of
these loans is primarily dependent on the personal income of the borrowers, which can be impacted by economic conditions in their market areas such as unemployment levels. Repayment can also be impacted by changes in property values on residential
properties. Risk is mitigated by the fact that the loans are of smaller individual amounts and spread over a large number of borrowers.

Municipal:Municipal loans are primarily based on the identified cash flows of the borrower and secondarily on the underlying collateral provided
by the borrower. Most municipal loans are secured by the full faith and credit of the municipality. The availability of funds for the repayment of these loans may be substantially dependent on the ability of the municipality to collect taxes or
other revenue.

Allowance for Loan and Lease Losses Methodology:

Bank policy is designed to ensure that an adequate allowance for loan and lease losses (ALLL) will be maintained. Primary responsibility for ensuring that the Bank has in place processes to
consistently assess the adequacy of the ALLL rests with the Board. The Board has charged the Chief Credit Officer (CCO) with responsibility for establishing the methodology to be used and to assess the adequacy of the ALLL quarterly. The
methodology will be reviewed and affirmed by the Loan Review Officer. Quarterly the Board will review recommendations from the CCO to adjust the allowance as appropriate.

The methodology employed by the CCO for each portfolio segment will at a minimum contain the following:



| | 1) | Loans will be segmented by type of loan.
| | -- | ----------------------------------------



| | 2) | Loans will be further segmented by risk grades.
| | -- | -----------------------------------------------



| | 3) | The required ALLL for types of performing homogeneous loans which do not have a specific reserve will be determined by applying a factor based on historical losses
averaged over the 12 quarters prior to the most recent quarter. In those instances, where the Banks historical experience is not available, the CCO will develop factors based on industry experience and best practices.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 4) | All criticized and classified loans will be tested for impairment by applying one of three methodologies:
| | -- | ---------------------------------------------------------------------------------------------------------



| | a. | Present value of future cash flows;
| | -- | -----------------------------------



| | b. | Fair value of collateral less cost to sell; or
| | -- | ----------------------------------------------



| | c. | The loans observable market price
| | -- | ----------------------------------



| | 5) | Loans tested for impairment will be removed from other pools to prevent layering (double-counting).
| | -- | ---------------------------------------------------------------------------------------------------



| | 6) | The required ALLL for each group of loans will be added together to determine the total required ALLL for the Bank. The required ALLL will be compared to the current
ALLL to determine the required provision to increase the ALLL or credit to decrease the ALLL.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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Ameriana Bancorp

Notes to Consolidated Financial Statements

(table dollar amounts in thousands, except share data)



The historical loss experience is determined by portfolio segment and is based on the actual loss
history experienced by the Bank over the 12 quarters prior to the most recent quarter. Management believes the historical loss experience methodology is appropriate in the current economic environment, as it captures loss rates that are comparable
to the current period being analyzed.

We also factor in the following qualitative considerations:



| | 1) | Changes in policies and procedures;
| | -- | -----------------------------------



| | 2) | Changes in national, regional and local economic and business conditions;
| | -- | -------------------------------------------------------------------------



| | 3) | Changes in the composition and size of the portfolio and in the terms of loans;
| | -- | -------------------------------------------------------------------------------



| | 4) | Changes in the experience, ability and depth of lending management and other relevant staff;
| | -- | --------------------------------------------------------------------------------------------



| | 5) | Changes in the volume and severity of past due loans, the volume of non-accrual loans, and the volume and severity of adversely classified or graded loans;
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------



| | 6) | Changes in the quality of the Banks loan review system;
| | -- | --------------------------------------------------------



| | 7) | Changes in the value of underlying collateral for collateral-dependent loans;
| | -- | -----------------------------------------------------------------------------



| | 8) | The existence and effect of any concentration of credit, and changes in the level of such concentrations; and
| | -- | -------------------------------------------------------------------------------------------------------------



| | 9) | The effect of other external factors such as competition and legal and regulatory requirements on the level of estimated credit losses in the existing portfolio.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------

The following tables present the balance and activity in allowance for loan losses and the recorded investment in loans and
impairment methods as of December 31, 2011 (dollars in thousands):

Allowance for Loan Losses and Recorded Investment
In Loans

For Year Ended December 31, 2011



|                                      |  |                            |         |   |                             |   |         |                              |  |   |                           |   |  |                |        |   |               |   |     |       |  |   |       |   |  |   |         |  
|------------------------------------- |  | -------------------------- | ------- | - | --------------------------- | - | ------- | ---------------------------- |  | - | ------------------------- | - |  | -------------- | ------ | - | ------------- | - | --- | ----- |  | - | ----- | - |  | - | ------- | -
|                                      |  | CommercialReal EstateLoans |         |   | ResidentialReal EstateLoans |   |         | ConstructionReal EstateLoans |  |   | CommercialLoans andLeases |   |  | MunicipalLoans |        |   | ConsumerLoans |   |     | Total | 
|Balance at beginning of year          |  | $                          | 639     |   |                             | $ | 1,584   |                              |  | $ | 1,254                     |   |  | $              | 657    |   |               |   |    |       |  | $ | 78    |   |  | $ | 4,212   |  
|Provision (credit) for losses         |  |                            | (45     | ) |                             |   | 484     |                              |  |   | 431                       |   |  |                | 402    |   |               |   |    |       |  |   | 113   |   |  |   | 1,385   |  
|Charge-offs (1)                       |  |                            | (11     | ) |                             |   | (605    | )                            |  |   | (536                      | ) |  |                | (301   | ) |               |   |    |       |  |   | (107  | ) |  |   | (1,560  | )
|Recoveries                            |  |                            | 1       |   |                             |   | 76      |                              |  |   | 1                         |   |  |                | 2      |   |               |   |    |       |  |   | 15    |   |  |   | 95      |  
|                                      |  |                            |         |   |                             |   |         |                              |  |   |                           |   |  |                |        |   |               |   |     |       |  |   |       |   |  |   |         |  
|Balance at end of period              |  | $                          | 584     |   |                             | $ | 1,539   |                              |  | $ | 1,150                     |   |  | $              | 760    |   |               |   |    |       |  | $ | 99    |   |  | $ | 4,132   |  
|                                      |  |                            |         |   |                             |   |         |                              |  |   |                           |   |  |                |        |   |               |   |     |       |  |   |       |   |  |   |         |  
|                                      |  |                            |         |   |                             |   |        
|Ending allowance balance:             |  |                            |         |   |                             |   |         |                              |  |   |                           |   |  |                |        |   |               |   |     |       |  |   |       |   |  |   |         |  
|Individually evaluated for impairment |  | $                          | 445     |   |                             | $ | 707     |                              |  | $ | 435                       |   |  | $              | 142    |   |               | $ |    |       |  | $ | 8     |   |  | $ | 1,737   |  
|Collectively evaluated for impairment |  |                            | 139     |   |                             |   | 832     |                              |  |   | 715                       |   |  |                | 618    |   |               |   |    |       |  |   | 91    |   |  |   | 2,395   |  
|                                      |  |                            |         |   |                             |   |         |                              |  |   |                           |   |  |                |        |   |               |   |     |       |  |   |       |   |  |   |         |  
|Total                                 |  | $                          | 584     |   |                             | $ | 1,539   |                              |  | $ | 1,150                     |   |  | $              | 760    |   |               |   |    |       |  | $ | 99    |   |  | $ | 4,132   |  
|                                      |  |                            |         |   |                             |   |         |                              |  |   |                           |   |  |                |        |   |               |   |     |       |  |   |       |   |  |   |         |  
|Ending loan balance:                  |  |                            |         |   |                             |   |         |                              |  |   |                           |   |  |                |        |   |               |   |     |       |  |   |       |   |  |   |         |  
|Individually evaluated for impairment |  | $                          | 4,891   |   |                             | $ | 6,440   |                              |  | $ | 3,672                     |   |  | $              | 935    |   |               | $ |    |       |  | $ | 44    |   |  | $ | 15,982  |  
|Collectively evaluated for impairment |  |                            | 95,235  |   |                             |   | 157,980 |                              |  |   | 14,308                    |   |  |                | 30,026 |   |               |   | 740 |       |  |   | 2,816 |   |  |   | 301,105 |  
|                                      |  |                            |         |   |                             |   |         |                              |  |   |                           |   |  |                |        |   |               |   |     |       |  |   |       |   |  |   |         |  
|Total                                 |  | $                          | 100,126 |   |                             | $ | 164,420 |                              |  | $ | 17,980                    |   |  | $              | 30,961 |   |               | $ | 740 |       |  | $ | 2,860 |   |  | $ | 317,087 |  
|                                      |  |                            |         |   |                             |   |         |                              |  |   |                           |   |  |                |        |   |               |   |     |       |  |   |       |   |  |   |         |  



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Ameriana Bancorp

Notes to Consolidated Financial Statements

(table dollar amounts in thousands, except share data)



The following table presents the balance in allowance for loan losses and the recorded investment in
loans and impairment methods as of December 31, 2010 (dollars in thousands):

Allowance for Loan Losses and Recorded
Investment In Loans

For Year Ended December 31, 2010



|                                      |  |                            |        |   |                             |   |         |                              |  |   |                           |   |  |                |        |   |               |   |       |       |  |   |       |   |  |   |         |  
|------------------------------------- |  | -------------------------- | ------ | - | --------------------------- | - | ------- | ---------------------------- |  | - | ------------------------- | - |  | -------------- | ------ | - | ------------- | - | ----- | ----- |  | - | ----- | - |  | - | ------- | -
|                                      |  | CommercialReal EstateLoans |        |   | ResidentialReal EstateLoans |   |         | ConstructionReal EstateLoans |  |   | CommercialLoans andLeases |   |  | MunicipalLoans |        |   | ConsumerLoans |   |       | Total | 
|Balance at beginning of year          |  | $                          | 661    |   |                             | $ | 1,262   |                              |  | $ | 1,269                     |   |  | $              | 686    |   |               | $ |      |       |  | $ | 127   |   |  | $ | 4,005   |  
|Provision for losses                  |  |                            | 200    |   |                             |   | 1,059   |                              |  |   | 304                       |   |  |                | 365    |   |               |   |      |       |  |   | 5     |   |  |   | 1,933   |  
|Charge-offs (1)                       |  |                            | (238   | ) |                             |   | (737    | )                            |  |   | (525                      | ) |  |                | (398   | ) |               |   |      |       |  |   | (72   | ) |  |   | (1,970  | )
|Recoveries                            |  |                            | 16     |   |                             |   |        |                              |  |   | 206                       |   |  |                | 4      |   |               |   |      |       |  |   | 18    |   |  |   | 244     |  
|                                      |  |                            |        |   |                             |   |         |                              |  |   |                           |   |  |                |        |   |               |   |       |       |  |   |       |   |  |   |         |  
|Balance at end of year                |  | $                          | 639    |   |                             | $ | 1,584   |                              |  | $ | 1,254                     |   |  | $              | 657    |   |               | $ |      |       |  | $ | 78    |   |  | $ | 4,212   |  
|                                      |  |                            |        |   |                             |   |         |                              |  |   |                           |   |  |                |        |   |               |   |       |       |  |   |       |   |  |   |         |  
|                                      |  |                            |        |   |                             |   |        
|Ending allowance balance:             |  |                            |        |   |                             |   |         |                              |  |   |                           |   |  |                |        |   |               |   |       |       |  |   |       |   |  |   |         |  
|Individually evaluated for impairment |  | $                          | 406    |   |                             | $ | 876     |                              |  | $ | 797                       |   |  | $              | 97     |   |               | $ |      |       |  | $ | 8     |   |  | $ | 2,184   |  
|Collectively evaluated for impairment |  |                            | 233    |   |                             |   | 708     |                              |  |   | 457                       |   |  |                | 560    |   |               |   |      |       |  |   | 70    |   |  |   | 2,028   |  
|                                      |  |                            |        |   |                             |   |         |                              |  |   |                           |   |  |                |        |   |               |   |       |       |  |   |       |   |  |   |         |  
|Total                                 |  | $                          | 639    |   |                             | $ | 1,584   |                              |  | $ | 1,254                     |   |  | $              | 657    |   |               | $ |      |       |  | $ | 78    |   |  | $ | 4,212   |  
|                                      |  |                            |        |   |                             |   |         |                              |  |   |                           |   |  |                |        |   |               |   |       |       |  |   |       |   |  |   |         |  
|                                      |  |                            |        |   |                             |   |        
|Ending loan balance:                  |  |                            |        |   |                             |   |         |                              |  |   |                           |   |  |                |        |   |               |   |       |       |  |   |       |   |  |   |         |  
|Individually evaluated for impairment |  | $                          | 6,288  |   |                             | $ | 7,604   |                              |  | $ | 5,694                     |   |  | $              | 1,055  |   |               | $ |      |       |  | $ | 42    |   |  | $ | 20,683  |  
|Collectively evaluated for impairment |  |                            | 88,307 |   |                             |   | 161,670 |                              |  |   | 19,011                    |   |  |                | 21,305 |   |               |   | 2,718 |       |  |   | 3,901 |   |  |   | 296,912 |  
|                                      |  |                            |        |   |                             |   |         |                              |  |   |                           |   |  |                |        |   |               |   |       |       |  |   |       |   |  |   |         |  
|Total                                 |  | $                          | 94,595 |   |                             | $ | 169,274 |                              |  | $ | 24,705                    |   |  | $              | 22,360 |   |               | $ | 2,718 |       |  | $ | 3,943 |   |  | $ | 317,595 |  
|                                      |  |                            |        |   |                             |   |         |                              |  |   |                           |   |  |                |        |   |               |   |       |       |  |   |       |   |  |   |         |  



|(1) | Policy for Charging Off Loans:
|--- | ------------------------------

A loan
should be charged off at any point in time when it no longer can be considered a bankable asset, meaning collectable within the parameters of policy. The Bank shall not renew any loan, or put a loan on a demand basis, only to defer a problem, nor is
it appropriate to attempt long-term recoveries while reporting loans as assets. An unsecured loan generally should be charged off no later than when it is 120 days past due as to principal or interest. For loans in the legal process of foreclosure
against collateral of real and/or liquid value, the 120-day rule does not apply. Such charge-offs can be deferred until the foreclosure process progresses to the point where the Bank can adequately determine whether or not any ultimate loss will
result. In similar instances where other legal actions will cause extraordinary delays, such as the settlement of an estate, yet collateral of value is realizable, the 120-day period could be extended. When a loan is unsecured or not fully
collateralized, the loan should be charged off or written down to the documented collateral value rather than merely being placed on non-accrual status.

All charge-offs and forgiveness of debt greater than $50,000 must be approved by the Loan Committee upon recommendation by the CCO. The Loan Committee consists of the Banks Chief Executive Officer,
Chief Operating Officer, Chief Credit Officer, Chief Marketing Officer and Loan Review Officer. Charge-offs between $10,000 and $50,000 must be approved by the CCO. Decisions to defer the charge off of a loan must be approved by the CCO.



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Ameriana Bancorp

Notes to Consolidated Financial Statements

(table dollar amounts in thousands, except share data)



Narrative Description of Borrower Rating:

Grade 1  Highest Quality (Pass)

This loan represents a credit extension of the highest quality. The borrowers historic (at least five years) cash flows manifest extremely large and stable margins of coverage. Balance sheets are
conservative, well capitalized, and liquid. After considering debt service for proposed and existing debt, projected cash flows continue to be strong and provide ample coverage. The borrower typically reflects broad geographic and product
diversification and has broad access to alternative financial markets. Also included in this category may be loans secured by U.S. government securities, U.S. government agencies, highly rated municipal bonds, insured savings accounts, and insured
certificates of deposit drawn on high quality banks.

Grade 2  Excellent Quality (Pass)

This loan has a sound primary and secondary source of repayment. The borrower has proven access to alternative sources of financing. This loan carries a
low level of risk, with minimal loss exposure. The borrower has the ability to perform according to the terms of the credit facility. The margins of cash flow coverage are strong. Loans secured by high quality traded stocks and lower grade municipal
bonds (must still be investment grade).

Grade 3  Good Quality (Pass)

This loan has a sound primary source of repayment. The borrower may have access to alternative sources of financing, but sources are not as widely
available as they are to a higher graded borrower. This loan carries a normal level of risk, with minimal loss exposure. The borrower has the ability to perform according to the terms of the credit facility. The margins of cash flow coverage are
satisfactory but vulnerable to more rapid deterioration than the higher quality loans. Real estate loans in this category display advance rates below the suggested maximum, debt coverage well in excess of the suggested level, or are leased beyond
the loan term by a credit tenant.

Grade 4  Acceptable Quality (Pass)

The borrower is a reasonable credit risk and demonstrates the ability to repay the debt from normal business operations. Risk factors may include
reliability of margins and cash flows, liquidity, dependence on a single product or industry, cyclical trends, depth of management, or limited access to alternative financing sources. Historic financial information may indicate erratic performance,
but current trends are positive. Quality of financial information is adequate, but is not as detailed and sophisticated as information found on higher graded loans. If adverse circumstances arise, the impact on the borrower may be significant. All
small business loans extended based upon credit scoring should be classified in this category unless deterioration occurs, in which case they should bear one of the below mentioned grades.

Grade 5  Marginal Quality (Pass)

The borrower is an acceptable credit risk
and while it can demonstrate it has the ability to repay the debt from normal business operations, the coverage is not as strong as an Acceptable Quality loan. Weakness in one or more areas are defined. Risk factors would typically include a higher
leverage position than desirable, low liquidity, weak or sporadic cash flow, the lack of reasonably current and complete financial information, and/or overall financial trends are erratic.

Grade 6  Elevated Risk, Management Attention (Watch)

The borrower while at
origination is not considered a high risk potential, there are characteristics related to the financial condition, and/or a level of concern regarding either or both the primary and secondary source of repayment, that may preclude this from being a
pass credit. These credit facilities are considered pass credits but exhibit the potential of developing a more serious weakness in their operation going forward. Usually, a credit in this category will be upgraded or downgraded on
further analysis within a short period of time.

Grade 7  Special Mention

These credit facilities have developing weaknesses that deserve extra attention from the loan officer and other management personnel. If the developing
weakness is not corrected or mitigated, there may be deterioration in the ability of the borrower to repay the Banks debt in the future. This grade should not be assigned to loans which bear certain peculiar risks normally associated with the
type of financing involved, unless circumstances have caused the risk to



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Ameriana Bancorp

Notes to Consolidated Financial Statements

(table dollar amounts in thousands, except share data)



increase to a level higher than would have been acceptable when the credit was originally approved. Loans where actual, not potential, weaknesses or problems are clearly evident and significant
should generally be graded in one of the grade categories below.

Grade 8  Substandard

Loans and other credit extensions bearing this grade are considered to be inadequately protected by the current sound worth and debt service capacity of
the borrower or of any pledged collateral. These obligations, even if apparently protected by collateral value, have well-defined weaknesses related to adverse financial, managerial, economic, market, or political conditions which have clearly
jeopardized repayment of principal and interest as originally intended. Furthermore, there is the possibility that some future loss will be sustained by the Bank if such weaknesses are not corrected. Clear loss potential, however, does not have to
exist in any individual assets classified as substandard.

Grade 9  Doubtful

Loans and other credit extensions graded 9 have all the weaknesses inherent in those graded 8, with the added characteristic that
the severity of the weaknesses make collection or liquidation in full highly questionable or improbable based upon currently existing facts, conditions, and values. The probability of some loss is extremely high, but because of certain important and
reasonably specific factors, the amount of loss cannot be determined. Such pending factors could include merger or liquidation, additional capital injection, refinancing plans, or perfection of liens on additional collateral. Loans in this
classification should be placed in nonaccrual status, with collections applied to principal on the Banks books.

Grade 10 
Loss

Loans in this classification are considered uncollectible and cannot be justified as a viable asset of the Bank. This
classification does not mean the loan has absolutely no recovery value, but that it is neither practical nor desirable to defer writing off this loan even though partial recovery may be obtained in the future.

The following tables present the credit risk profile of the Companys loan portfolio based on rating category and payment activity as of
December 31, 2011 and December 31, 2010 (dollars in thousands):

Loan Portfolio Quality Indicators

At December 31, 2011



|                          |  |                            |         |  |                             |   |         |                              |  |   |                           |  |  |                |        |  |               |   |     |       |  |   |       |  |  |   |         | 
|------------------------- |  | -------------------------- | ------- |  | --------------------------- | - | ------- | ---------------------------- |  | - | ------------------------- |  |  | -------------- | ------ |  | ------------- | - | --- | ----- |  | - | ----- |  |  | - | ------- | 
|                          |  | CommercialReal EstateLoans |         |  | ResidentialReal EstateLoans |   |         | ConstructionReal EstateLoans |  |   | CommercialLoans andLeases |  |  | MunicipalLoans |        |  | ConsumerLoans |   |     | Total | 
|Rating:                   |  |                            |         |  |                             |   |         |                              |  |   |                           |  |  |                |        |  |               |   |     |       |  |   |       |  |  |   |         | 
|Pass (Grades 1-5)         |  | $                          | 82,701  |  |                             | $ | 156,783 |                              |  | $ | 12,204                    |  |  | $              | 28,513 |  |               | $ | 740 |       |  | $ | 2,860 |  |  | $ | 283,801 | 
|Watch (Grade 6)           |  |                            | 7,257   |  |                             |   | 1,100   |                              |  |   | 2,210                     |  |  |                | 1,200  |  |               |   |    |       |  |   |      |  |  |   | 11,767  | 
|Special Mention (Grade 7) |  |                            | 5,037   |  |                             |   | 90      |                              |  |   | 135                       |  |  |                | 318    |  |               |   |    |       |  |   |      |  |  |   | 5,580   | 
|Substandard (Grade 8)     |  |                            | 5,131   |  |                             |   | 1,940   |                              |  |   |                          |  |  |                | 286    |  |               |   |    |       |  |   |      |  |  |   | 7,357   | 
|Doubtful (Grade 9)        |  |                            |        |  |                             |   | 4,507   |                              |  |   | 3,431                     |  |  |                | 644    |  |               |   |    |       |  |   |      |  |  |   | 8,582   | 
|Loss (Grade 10)           |  |                            |        |  |                             |   |        |                              |  |   |                          |  |  |                |       |  |               |   |    |       |  |   |      |  |  |   |        | 
|                          |  |                            |         |  |                             |   |         |                              |  |   |                           |  |  |                |        |  |               |   |     |       |  |   |       |  |  |   |         | 
|Total                     |  | $                          | 100,126 |  |                             | $ | 164,420 |                              |  | $ | 17,980                    |  |  | $              | 30,961 |  |               | $ | 740 |       |  | $ | 2,860 |  |  | $ | 317,087 | 
|                          |  |                            |         |  |                             |   |         |                              |  |   |                           |  |  |                |        |  |               |   |     |       |  |   |       |  |  |   |         | 



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Ameriana Bancorp

Notes to Consolidated Financial Statements

(table dollar amounts in thousands, except share data)



Loan Portfolio Quality Indicators

At December 31, 2010



|                          |  |                            |        |  |                             |   |         |                              |  |   |                           |  |  |                |        |  |               |   |       |       |  |   |       |  |  |   |         | 
|------------------------- |  | -------------------------- | ------ |  | --------------------------- | - | ------- | ---------------------------- |  | - | ------------------------- |  |  | -------------- | ------ |  | ------------- | - | ----- | ----- |  | - | ----- |  |  | - | ------- | 
|                          |  | CommercialReal EstateLoans |        |  | ResidentialReal EstateLoans |   |         | ConstructionReal EstateLoans |  |   | CommercialLoans andLeases |  |  | MunicipalLoans |        |  | ConsumerLoans |   |       | Total | 
|Rating:                   |  |                            |        |  |                             |   |         |                              |  |   |                           |  |  |                |        |  |               |   |       |       |  |   |       |  |  |   |         | 
|Pass (Grades 1-5)         |  | $                          | 76,303 |  |                             | $ | 159,913 |                              |  | $ | 16,271                    |  |  | $              | 21,277 |  |               | $ | 2,718 |       |  | $ | 3,929 |  |  | $ | 280,411 | 
|Watch (Grade 6)           |  |                            | 6,501  |  |                             |   | 1,257   |                              |  |   | 2,685                     |  |  |                | 513    |  |               |   |      |       |  |   |      |  |  |   | 10,956  | 
|Special Mention (Grade 7) |  |                            | 5,420  |  |                             |   | 216     |                              |  |   | 55                        |  |  |                | 43     |  |               |   |      |       |  |   |      |  |  |   | 5,734   | 
|Substandard (Grade 8)     |  |                            | 6,168  |  |                             |   | 1,630   |                              |  |   | 1,510                     |  |  |                |       |  |               |   |      |       |  |   |      |  |  |   | 9,308   | 
|Doubtful (Grade 9)        |  |                            | 203    |  |                             |   | 6,258   |                              |  |   | 4,184                     |  |  |                | 527    |  |               |   |      |       |  |   | 14    |  |  |   | 11,186  | 
|Loss (Grade 10)           |  |                            |       |  |                             |   |        |                              |  |   |                          |  |  |                |       |  |               |   |      |       |  |   |      |  |  |   |        | 
|                          |  |                            |        |  |                             |   |         |                              |  |   |                           |  |  |                |        |  |               |   |       |       |  |   |       |  |  |   |         | 
|Total                     |  | $                          | 94,595 |  |                             | $ | 169,274 |                              |  | $ | 24,705                    |  |  | $              | 22,360 |  |               | $ | 2,718 |       |  | $ | 3,943 |  |  | $ | 317,595 | 
|                          |  |                            |        |  |                             |   |         |                              |  |   |                           |  |  |                |        |  |               |   |       |       |  |   |       |  |  |   |         | 

For all loan classes, the entire balance of a loan is considered delinquent if the minimum payment contractually required
to be made is not received by the specified due date.

The following tables present the Companys loan portfolio aging analysis as of
December 31, 2011 and December 31, 2010 (dollars in thousands):

Loan Portfolio Aging Analysis

At December 31, 2011



|                            |  |                        |       |  |                        |   |     |                     |  |   |               |  |  |         |        |  |                       |   |         |                                |  |   |         |  |  |   |     | 
|--------------------------- |  | ---------------------- | ----- |  | ---------------------- | - | --- | ------------------- |  | - | ------------- |  |  | ------- | ------ |  | --------------------- | - | ------- | ------------------------------ |  | - | ------- |  |  | - | --- | 
|                            |  | 30-59 DaysPast Due (A) |       |  | 60-89 DaysPast Due (B) |   |     | Greater than90 Days |  |   | Total PastDue |  |  | Current |        |  | Total LoansReceivable |   |         | Total Loans> 90 days &Accruing | 
|Real estate loans:          |  |                        |       |  |                        |   |     |                     |  |   |               |  |  |         |        |  |                       |   |         |                                |  |   |         |  |  |   |     | 
|                            |  |                        |       |  |                        |   |    
|Commercial                  |  | $                      |      |  |                        | $ |    |                     |  | $ |              |  |  | $       |       |  |                       | $ | 100,126 |                                |  | $ | 100,126 |  |  | $ |    | 
|Residential                 |  |                        | 1,204 |  |                        |   | 417 |                     |  |   | 4,398         |  |  |         | 6,019  |  |                       |   | 158,401 |                                |  |   | 164,420 |  |  |   | 243 | 
|Construction                |  |                        | 4,908 |  |                        |   |    |                     |  |   | 1,126         |  |  |         | 6,034  |  |                       |   | 11,946  |                                |  |   | 17,980  |  |  |   |    | 
|Commercial loans and leases |  |                        | 434   |  |                        |   | 554 |                     |  |   | 219           |  |  |         | 1,207  |  |                       |   | 29,754  |                                |  |   | 30,961  |  |  |   |    | 
|Municipal loans             |  |                        |      |  |                        |   |    |                     |  |   |              |  |  |         |       |  |                       |   | 740     |                                |  |   | 740     |  |  |   |    | 
|Consumer loans              |  |                        | 8     |  |                        |   | 2   |                     |  |   | 9             |  |  |         | 19     |  |                       |   | 2,841   |                                |  |   | 2,860   |  |  |   | 9   | 
|                            |  |                        |       |  |                        |   |     |                     |  |   |               |  |  |         |        |  |                       |   |         |                                |  |   |         |  |  |   |     | 
|Total                       |  | $                      | 6,554 |  |                        | $ | 973 |                     |  | $ | 5,752         |  |  | $       | 13,279 |  |                       | $ | 303,808 |                                |  | $ | 317,087 |  |  | $ | 252 | 
|                            |  |                        |       |  |                        |   |     |                     |  |   |               |  |  |         |        |  |                       |   |         |                                |  |   |         |  |  |   |     | 



|(A) | Includes $3,049,000 in loans classified as nonaccrual that are less than 30 days past due, of which $2,306,000 are construction loans, $425,000 are commercial loans,
and $318,000 are residential real estate loans.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(B) | Includes a $27,000 residential real estate loan 68 days delinquent that is classified as nonaccrual.
|--- | ----------------------------------------------------------------------------------------------------



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Ameriana Bancorp

Notes to Consolidated Financial Statements

(table dollar amounts in thousands, except share data)



Loan Portfolio Aging Analysis

At December 31, 2010



|                            |  |                        |       |  |                    |   |     |                     |  |   |               |  |  |         |        |  |                       |   |         |                                |  |   |         |  |  |   |    | 
|--------------------------- |  | ---------------------- | ----- |  | ------------------ | - | --- | ------------------- |  | - | ------------- |  |  | ------- | ------ |  | --------------------- | - | ------- | ------------------------------ |  | - | ------- |  |  | - | -- | 
|                            |  | 30-59 DaysPast Due (A) |       |  | 60-89 DaysPast Due |   |     | Greater than90 Days |  |   | Total PastDue |  |  | Current |        |  | Total LoansReceivable |   |         | Total Loans> 90 days &Accruing | 
|Real estate loans:          |  |                        |       |  |                    |   |     |                     |  |   |               |  |  |         |        |  |                       |   |         |                                |  |   |         |  |  |   |    | 
|Commercial                  |  | $                      |      |  |                    | $ |    |                     |  | $ |              |  |  | $       |       |  |                       | $ | 94,595  |                                |  | $ | 94,595  |  |  | $ |   | 
|Residential                 |  |                        | 2,069 |  |                    |   | 538 |                     |  |   | 5,221         |  |  |         | 7,828  |  |                       |   | 161,446 |                                |  |   | 169,274 |  |  |   | 60 | 
|Construction                |  |                        | 4,909 |  |                    |   |    |                     |  |   |              |  |  |         | 4,909  |  |                       |   | 19,796  |                                |  |   | 24,705  |  |  |   |   | 
|Commercial loans and leases |  |                        |      |  |                    |   | 203 |                     |  |   | 527           |  |  |         | 730    |  |                       |   | 21,630  |                                |  |   | 22,360  |  |  |   |   | 
|Municipal loans             |  |                        |      |  |                    |   |    |                     |  |   |              |  |  |         |       |  |                       |   | 2,718   |                                |  |   | 2,718   |  |  |   |   | 
|Consumer loans              |  |                        | 191   |  |                    |   | 11  |                     |  |   | 14            |  |  |         | 216    |  |                       |   | 3,727   |                                |  |   | 3,943   |  |  |   |   | 
|                            |  |                        |       |  |                    |   |     |                     |  |   |               |  |  |         |        |  |                       |   |         |                                |  |   |         |  |  |   |    | 
|Total                       |  | $                      | 7,169 |  |                    | $ | 752 |                     |  | $ | 5,762         |  |  | $       | 13,683 |  |                       | $ | 303,912 |                                |  | $ | 317,595 |  |  | $ | 60 | 
|                            |  |                        |       |  |                    |   |     |                     |  |   |               |  |  |         |        |  |                       |   |         |                                |  |   |         |  |  |   |    | 



|(A) | Includes $2,978,000 in loans classified as nonaccrual that are less than 30 days past due, of which $1,097,000 are residential real estate loans and $1,881,000 are
construction loans.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Impaired Loans:For all loan classes, a loan is designated as impaired when, based on current
information or events, it is probable that the Bank will be unable to collect all amounts due (principal and interest) according to the contractual terms of the loan agreement. Payments with insignificant delays not exceeding 90 days outstanding are
not considered impaired. Certain non-accrual and substantially delinquent loans may be considered to be impaired. Generally, loans are placed on non-accrual status at 90 days past due and accrued interest is reversed against earnings, unless the
loan is well-secured and in the process of collection. The accrual of interest on impaired and non-accrual loans is discontinued when, in managements opinion, the borrower may be unable to meet payments as they become due.

For all loan classes, when interest accrual is discontinued all unpaid accrued interest is reversed when considered uncollectible. When a loan is in a
non-accrual status, all cash payments of interest are applied to loan principal. Should the loan be reinstated to accrual status, all cash payments of interest received while in non-accrual status will be taken into income over the remaining life of
the loan using the level yield accounting method.



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##### Table of Contents

Ameriana Bancorp

Notes to Consolidated Financial Statements

(table dollar amounts in thousands, except share data)



The following table presents impaired loans as of December 31, 2011 (dollars in thousands):

Impaired Loans

At December 31, 2011



|                                              |  |                 |        |  |                        |   |        |                   |  |   |                                        |  |  |                              |        |  |  |   |     | 
|--------------------------------------------- |  | --------------- | ------ |  | ---------------------- | - | ------ | ----------------- |  | - | -------------------------------------- |  |  | ---------------------------- | ------ |  |  | - | --- | 
|                                              |  | RecordedBalance |        |  | UnpaidPrincipalBalance |   |        | SpecificAllowance |  |   | Average Investmentin Impaired Loans(1) |  |  | Interest IncomeRecognized(2) |       
|Loans without a specific valuation allowance: |  |                 |        |  |                        |   |        |                   |  |   |                                        |  |  |                              |        |  |  |   |     | 
|Real estate loans:                            |  |                 |        |  |                        |   |        |                   |  |   |                                        |  |  |                              |        |  |  |   |     | 
|Commercial                                    |  |                 |       |  |                        |   |       |                   |  |   | N/A                                    |  |  |                              |       |  |  |   |    | 
|Residential                                   |  |                 |       |  |                        |   |       |                   |  |   | N/A                                    |  |  |                              |       |  |  |   |    | 
|Construction                                  |  |                 |       |  |                        |   |       |                   |  |   | N/A                                    |  |  |                              |       |  |  |   |    | 
|Commercial loans and leases                   |  |                 |       |  |                        |   |       |                   |  |   | N/A                                    |  |  |                              |       |  |  |   |    | 
|Municipal loans                               |  |                 |       |  |                        |   |       |                   |  |   | N/A                                    |  |  |                              |       |  |  |   |    | 
|Consumer loans                                |  |                 |       |  |                        |   |       |                   |  |   | N/A                                    |  |  |                              |       |  |  |   |    | 
|                                              |  |                 |        |  |                        |   |        |                   |  |   |                                        |  |  |                              |        |  |  |   |     | 
|Total                                         |  |                 |       |  |                        |   |       |                   |  |   | N/A                                    |  |  |                              |       |  |  |   |    | 
|                                              |  |                 |        |  |                        |   |        |                   |  |   |                                        |  |  |                              |        |  |  |   |     | 
|                                              |  |                 |        |  |                       
|Loans with a specific valuation allowance:    |  |                 |        |  |                        |   |        |                   |  |   |                                        |  |  |                              |        |  |  |   |     | 
|Real estate loans:                            |  |                 |        |  |                        |   |        |                   |  |   |                                        |  |  |                              |        |  |  |   |     | 
|                                              |  |                 |        |  |                       
|Commercial                                    |  | $               | 4,891  |  |                        | $ | 4,891  |                   |  | $ | 445                                    |  |  | $                            | 5,318  |  |  | $ | 181 | 
|Residential                                   |  |                 | 6,440  |  |                        |   | 6,494  |                   |  |   | 707                                    |  |  |                              | 6,142  |  |  |   | 100 | 
|Construction                                  |  |                 | 3,672  |  |                        |   | 3,842  |                   |  |   | 435                                    |  |  |                              | 3,962  |  |  |   | 57  | 
|Commercial loans and leases                   |  |                 | 935    |  |                        |   | 955    |                   |  |   | 142                                    |  |  |                              | 952    |  |  |   | 16  | 
|Municipal loans                               |  |                 |       |  |                        |   |       |                   |  |   |                                       |  |  |                              |       |  |  |   |    | 
|Consumer loans                                |  |                 | 44     |  |                        |   | 44     |                   |  |   | 8                                      |  |  |                              | 50     |  |  |   |    | 
|                                              |  |                 |        |  |                        |   |        |                   |  |   |                                        |  |  |                              |        |  |  |   |     | 
|Total                                         |  | $               | 15,982 |  |                        | $ | 16,226 |                   |  | $ | 1,737                                  |  |  | $                            | 16,424 |  |  | $ | 354 | 
|                                              |  |                 |        |  |                        |   |        |                   |  |   |                                        |  |  |                              |        |  |  |   |     | 
|                                              |  |                 |        |  |                       
|All Impaired Loans                            |  | $               | 15,982 |  |                        | $ | 16,226 |                   |  | $ | 1,737                                  |  |  | $                            | 16,424 |  |  | $ | 354 | 
|                                              |  |                 |        |  |                        |   |        |                   |  |   |                                        |  |  |                              |        |  |  |   |     | 



|(1) | Includes all loans that were classified as impaired at any time during 2011 (not just impaired loans at December 31, 2011), and their average balance for only the
period during which they were classified as impaired.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Interest recorded in income during only the period the loans were classified as impaired, for all loans that were classified as impaired at any time during 2011.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------

For all loan classes, interest income on loans individually classified as impaired is recognized on a cash basis after all past
due and current principal payments have been made.



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Ameriana Bancorp

Notes to Consolidated Financial Statements

(table dollar amounts in thousands, except share data)



The following table presents impaired loans for the year ended December 31, 2010 (dollars in
thousands):

Impaired Loans

At December 31, 2010



|                                              |  |                 |        |  |                         |   |        |                   |  |   |                                        |  |  |                              |        |  |  |   |     | 
|--------------------------------------------- |  | --------------- | ------ |  | ----------------------- | - | ------ | ----------------- |  | - | -------------------------------------- |  |  | ---------------------------- | ------ |  |  | - | --- | 
|                                              |  | RecordedBalance |        |  | Unpaid PrincipalBalance |   |        | SpecificAllowance |  |   | Average Investmentin Impaired Loans(1) |  |  | Interest IncomeRecognized(2) |       
|Loans without a specific valuation allowance: |  |                 |        |  |                         |   |        |                   |  |   |                                        |  |  |                              |        |  |  |   |     | 
|Real estate loans:                            |  |                 |        |  |                         |   |        |                   |  |   |                                        |  |  |                              |        |  |  |   |     | 
|Commercial                                    |  |                 |       |  |                         |   |       |                   |  |   | N/A                                    |  |  |                              |       |  |  |   |    | 
|Residential                                   |  | $               | 60     |  |                         | $ | 60     |                   |  |   | N/A                                    |  |  | $                            | 78     |  |  |   |    | 
|Construction                                  |  |                 |       |  |                         |   |       |                   |  |   | N/A                                    |  |  |                              |       |  |  |   |    | 
|Commercial loans and leases                   |  |                 |       |  |                         |   |       |                   |  |   | N/A                                    |  |  |                              |       |  |  |   |    | 
|Municipal loans                               |  |                 |       |  |                         |   |       |                   |  |   | N/A                                    |  |  |                              |       |  |  |   |    | 
|Consumer loans                                |  |                 |       |  |                         |   |       |                   |  |   | N/A                                    |  |  |                              |       |  |  |   |    | 
|                                              |  |                 |        |  |                         |   |        |                   |  |   |                                        |  |  |                              |        |  |  |   |     | 
|Total                                         |  | $               | 60     |  |                         | $ | 60     |                   |  |   | N/A                                    |  |  | $                            | 78     |  |  |   |    | 
|                                              |  |                 |        |  |                         |   |        |                   |  |   |                                        |  |  |                              |        |  |  |   |     | 
|                                              |  |                 |        |  |                        
|Loans with a specific valuation allowance:    |  |                 |        |  |                         |   |        |                   |  |   |                                        |  |  |                              |        |  |  |   |     | 
|Real estate loans:                            |  |                 |        |  |                         |   |        |                   |  |   |                                        |  |  |                              |        |  |  |   |     | 
|Commercial                                    |  | $               | 6,288  |  |                         | $ | 6,288  |                   |  | $ | 406                                    |  |  | $                            | 4,835  |  |  | $ | 333 | 
|Residential                                   |  |                 | 7,544  |  |                         |   | 7,544  |                   |  |   | 876                                    |  |  |                              | 6,911  |  |  |   | 190 | 
|Construction                                  |  |                 | 5,694  |  |                         |   | 5,694  |                   |  |   | 797                                    |  |  |                              | 7,739  |  |  |   | 285 | 
|Commercial loans and leases                   |  |                 | 1,055  |  |                         |   | 1,055  |                   |  |   | 97                                     |  |  |                              | 783    |  |  |   | 30  | 
|Municipal loans                               |  |                 |       |  |                         |   |       |                   |  |   |                                       |  |  |                              |       |  |  |   |    | 
|Consumer loans                                |  |                 | 42     |  |                         |   | 42     |                   |  |   | 8                                      |  |  |                              | 49     |  |  |   |    | 
|                                              |  |                 |        |  |                         |   |        |                   |  |   |                                        |  |  |                              |        |  |  |   |     | 
|Total                                         |  | $               | 20,623 |  |                         | $ | 20,623 |                   |  | $ | 2,184                                  |  |  | $                            | 20,317 |  |  | $ | 838 | 
|                                              |  |                 |        |  |                         |   |        |                   |  |   |                                        |  |  |                              |        |  |  |   |     | 
|                                              |  |                 |        |  |                        
|All Impaired Loans                            |  | $               | 20,683 |  |                         | $ | 20,683 |                   |  | $ | 2,184                                  |  |  | $                            | 20,395 |  |  | $ | 838 | 
|                                              |  |                 |        |  |                         |   |        |                   |  |   |                                        |  |  |                              |        |  |  |   |     | 



|(1) | Includes all loans that were classified as impaired at any time during 2010 (not just impaired loans at December 31, 2010), and their average balance for only the
period during which they were classified as impaired.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Interest recorded in income during only the period the loans were classified as impaired, for all loans that were classified as impaired at any time during 2010.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------

For all loan classes, interest income on loans individually classified as impaired is recognized on a cash basis after all past
due and current principal payments have been made.



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Ameriana Bancorp

Notes to Consolidated Financial Statements

(table dollar amounts in thousands, except share data)



Non-Accrual Loans: Any loan which becomes 90 days delinquent, or has the full collection of
principal and interest in doubt, or a portion of principal has been charged off; will immediately be placed on non-accrual status. The loan does not have to be placed on non-accrual if the charge-off is part of a Chapter 13 reaffirmation. At the
time a loan is placed on non-accrual, all accrued but unpaid interest will be reversed from interest income. Placing the loan on non-accrual does not relieve the borrower of the obligation to repay interest.

For all loan classes, when a loan is in a non-accrual status all cash payments of interest are applied to loan principal.

A loan placed on non-accrual may be restored to accrual status when all delinquent principal and interest has been brought current, and the Bank expects
full payment of the remaining contractual principal and interest including any previous charge-offs. The Bank requires a period of satisfactory performance of not less than six months before returning a non-accrual loan to accrual status. Should the
loan be reinstated to accrual status, all cash payments of interest received while in non-accrual status will be taken into income over the remaining life of the loan using the level yield accounting method.

The following table presents the Companys non-accrual loans at December 31, 2011 and December 31, 2010 (dollars in thousands):

Loans Accounted for on a Non-Accrual Basis



|                            |  |                     |       |  |                     |   |        | 
|--------------------------- |  | ------------------- | ----- |  | ------------------- | - | ------ | 
|                            |  | At December 31,2011 |       |  | At December 31,2010 |  
|Real estate loans:          |  |                     |       |  |                     |   |        | 
|Commercial                  |  | $                   |      |  |                     | $ |       | 
|Residential                 |  |                     | 4,500 |  |                     |   | 6,258  | 
|Construction                |  |                     | 3,432 |  |                     |   | 4,184  | 
|Commercial loans and leases |  |                     | 644   |  |                     |   | 731    | 
|Municipal loans             |  |                     |      |  |                     |   |       | 
|Consumer loans              |  |                     |      |  |                     |   | 14     | 
|                            |  |                     |       |  |                     |   |        | 
|Total                       |  | $                   | 8,576 |  |                     | $ | 11,187 | 
|                            |  |                     |       |  |                     |   |        | 

Total non-accrual loans at December 31, 2011 and December 31, 2010 included $1,706,000 and $2,245,000 of
troubled debt restructurings, respectively.

Troubled Debt Restructurings (TDRs):Our loan and lease portfolio includes
certain loans where economic concessions have been granted to borrowers who have experienced financial difficulties. These concessions typically result from loss mitigation efforts and could include reductions in the interest rate, payment
extensions, forgiveness of principal, forbearance or other actions. Certain TDRs are classified as non-performing at the time of restructuring and typically are returned to performing status after considering the borrowers sustained repayment
performance for a period of at least six months.

When we modify loans and leases in a TDR, we evaluate any possible impairment similar to
other impaired loans based on the present value of expected future cash flows, discounted at the contractual interest rate of the original loan or lease agreement, or use the current fair value of the collateral, less selling costs for collateral
dependent loans. If we determine that the value of the modified loan is less than the recorded balance of the loan (net of previous charge-offs, deferred loan fees or costs and unamortized premium or discount), impairment is recognized through a
specific allowance or charge-off to the allowance. In periods subsequent to modification, we evaluate all TDRs, including those that have payment defaults, for possible impairment and recognize impairment through the allowance.



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Ameriana Bancorp

Notes to Consolidated Financial Statements

(table dollar amounts in thousands, except share data)



The following table presents the Companys troubled debt restructurings at December 31, 2011
and December 31, 2010 (dollars in thousands):

Troubled Debt Restructurings



|                            |  |                     |       |  |                     |   |       |                     |  |   |                     |  |  |   |       | 
|--------------------------- |  | ------------------- | ----- |  | ------------------- | - | ----- | ------------------- |  | - | ------------------- |  |  | - | ----- | 
|                            |  | Total               |       |  | Nonperforming       |  
|                            |  | At December 31,2011 |       |  | At December 31,2010 |   |       | At December 31,2011 |  |   | At December 31,2010 | 
|Real estate loans:          |  |                     |       |  |                     |   |       |                     |  |   |                     |  |  |   |       | 
|Commercial                  |  | $                   | 5,101 |  |                     | $ | 4,743 |                     |  | $ |                    |  |  | $ |      | 
|Residential                 |  |                     | 2,578 |  |                     |   | 1,165 |                     |  |   | 446                 |  |  |   |      | 
|Construction                |  |                     | 1,112 |  |                     |   | 2,485 |                     |  |   | 1,112               |  |  |   | 2,245 | 
|Commercial loans and leases |  |                     | 225   |  |                     |   |      |                     |  |   | 225                 |  |  |   |      | 
|Municipal loans             |  |                     |      |  |                     |   |      |                     |  |   |                    |  |  |   |      | 
|Consumer loans              |  |                     |      |  |                     |   |      |                     |  |   |                    |  |  |   |      | 
|                            |  |                     |       |  |                     |   |       |                     |  |   |                     |  |  |   |       | 
|Total                       |  | $                   | 9,016 |  |                     | $ | 8,393 |                     |  | $ | 1,783               |  |  | $ | 2,245 | 
|                            |  |                     |       |  |                     |   |       |                     |  |   |                     |  |  |   |       | 

Loans classified as a troubled debt restructuring during 2011, segregated by class, are shown in the table below (dollars
in thousands). These modifications consisted primarily of interest rate concessions.



|                            |  |               |    |  |                        |   |       |                       |  |   |       | 
|--------------------------- |  | ------------- | -- |  | ---------------------- | - | ----- | --------------------- |  | - | ----- | 
|                            |  | Modifications |   
|                            |  | Number        |    |  | RecordedBalance Before |   |       | RecordedBalance After | 
|Real estate loans:          |  |               |    |  |                        |   |       |                       |  |   |       | 
|Commercial                  |  |               | 4  |  |                        | $ | 4,719 |                       |  | $ | 4,669 | 
|Residential                 |  |               | 10 |  |                        |   | 1,323 |                       |  |   | 1,350 | 
|Construction                |  |               | 1  |  |                        |   | 1,174 |                       |  |   | 1,174 | 
|Commercial loans and leases |  |               | 1  |  |                        |   | 250   |                       |  |   | 250   | 
|Municipal loans             |  |               |   |  |                        |   |      |                       |  |   |      | 
|Consumer loans              |  |               |   |  |                        |   |      |                       |  |   |      | 
|                            |  |               |    |  |                        |   |       |                       |  |   |       | 
|Total                       |  |               | 16 |  |                        | $ | 7,466 |                       |  | $ | 7,443 | 
|                            |  |               |    |  |                        |   |       |                       |  |   |       | 



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Ameriana Bancorp

Notes to Consolidated Financial Statements

(table dollar amounts in thousands, except share data)



Troubled debt restructured loans which had payment defaults during 2011, segregated by class, are shown
in the table below (dollars in thousands). Default occurs when a loan or lease is 90 days or more past due or transferred to nonaccrual and is within 12 months of restructuring.



|                            |  |                    |   |  |                  |   |     | 
|--------------------------- |  | ------------------ | - |  | ---------------- | - | --- | 
|                            |  | Number of Defaults |   |  | Recorded Balance |  
|                            |  |                   
|Real estate loans:          |  |                    |   |  |                  |   |     | 
|Commercial                  |  |                    |  |  |                  |   |    | 
|Residential                 |  |                    | 5 |  |                  | $ | 321 | 
|Construction                |  |                    |  |  |                  |   |    | 
|Commercial loans and leases |  |                    |  |  |                  |   |    | 
|Municipal loans             |  |                    |  |  |                  |   |    | 
|Consumer loans              |  |                    |  |  |                  |   |    | 
|                            |  |                    |   |  |                  |   |     | 
|Total                       |  |                    | 5 |  |                  | $ | 321 | 
|                            |  |                    |   |  |                  |   |     | 



|6. | Premises and Equipment
|-- | ----------------------

Major classifications of premises and equipment, stated at cost, are as follows:



|                              |  |              |        |  |      |   |        | 
|----------------------------- |  | ------------ | ------ |  | ---- | - | ------ | 
|                              |  | December 31, |       
|                              |  | 2011         |        |  | 2010 |  
|Land                          |  | $            | 4,331  |  |      | $ | 4,254  | 
|Land improvements             |  |              | 1,220  |  |      |   | 1,220  | 
|Office buildings              |  |              | 12,368 |  |      |   | 12,107 | 
|Furniture and equipment       |  |              | 6,913  |  |      |   | 6,984  | 
|Automobiles                   |  |              | 142    |  |      |   | 145    | 
|                              |  |              |        |  |      |   |        | 
|                              |  |              | 24,974 |  |      |   | 24,710 | 
|Less accumulated depreciation |  |              | 10,324 |  |      |   | 9,974  | 
|                              |  |              |        |  |      |   |        | 
|                              |  | $            | 14,650 |  |      | $ | 14,736 | 
|                              |  |              |        |  |      |   |        | 



|7. | Deposits
|-- | --------

Deposits by type are as follows:



|                                 |  |              |         |  |      |   |         | 
|-------------------------------- |  | ------------ | ------- |  | ---- | - | ------- | 
|                                 |  | December 31, |        
|                                 |  | 2011         |         |  | 2010 |  
|Demand                           |  | $            | 157,913 |  |      | $ | 136,332 | 
|Savings                          |  |              | 29,043  |  |      |   | 28,836  | 
|Certificates of $100,000 or more |  |              | 42,610  |  |      |   | 44,481  | 
|Brokered certificates            |  |              |        |  |      |   | 10,363  | 
|Other certificates               |  |              | 107,684 |  |      |   | 117,966 | 
|                                 |  |              |         |  |      |   |         | 
|                                 |  | $            | 337,250 |  |      | $ | 337,978 | 
|                                 |  |              |         |  |      |   |         | 



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Ameriana Bancorp

Notes to Consolidated Financial Statements

(table dollar amounts in thousands, except share data)



Certificates maturing in years ending after December 31, 2011:



|           |  |   |         | 
|---------- |  | - | ------- | 
|2012       |  | $ | 87,756  | 
|2013       |  |   | 25,751  | 
|2014       |  |   | 18,025  | 
|2015       |  |   | 8,631   | 
|2016       |  |   | 4,646   | 
|Thereafter |  |   | 5,485   | 
|           |  |   |         | 
|           |  | $ | 150,294 | 
|           |  |   |         | 



|8. | Borrowings
|-- | ----------

Borrowings at December 31, 2011 and 2010 include Federal Home Loan Bank advances totaling $32,000,000 and $34,000,000 with a
weighted-average rate of 3.15% and 3.70%. The advances are secured by a combination of first mortgage loans and overnight deposits. At December 31, 2011 the pledged mortgage loans totaled $127,843,000.

Some advances are subject to restrictions or penalties in the event of prepayment.

Borrowings at December 31, 2011 and 2010 also include subordinated debentures in the amount of $10,310,000. For the five years prior to March 15, 2011 the rate was equal to the average of 6.71%
and the three-month London Interbank Offered Rate (LIBOR) plus 150 basis points. Effective March 15, 2011, the securities bear a rate equal to 150 basis points over the three-month LIBOR. At December 31, 2011, the interest rate
was 2.05%. These subordinated debentures mature on March 15, 2036.

Borrowings at December 31, 2011 also include a repurchase
agreement with Barclays Capital, Inc. in the amount of $7,500,000 with a rate of 4.42%. The repurchase agreement has embedded interest rate caps with a four-year term ending on September 22, 2012 that have a total notional value of $15,000,000.
The interest rate caps will provide a reduction of the interest rate during any quarter if three-month LIBOR exceeds 3.81% on the quarterly determination date. These embedded interest rate caps are considered to be clearly and closely related to the
host instrument. The repurchase agreement has a seven-year term with a final repurchase date of September 22, 2015, and provides Barclays Capital, Inc. with an early termination right on the four-year anniversary date of September 22,
2012. At December 31, 2011, pledged investment securities for this repurchase agreement had a market value of $9,369,000.

Aggregate
annual maturities of borrowings at December 31, 2011 are:



|                                        |  |              |        |  |                     |   |       |                        |  |   |        |  |  |   |        | 
|--------------------------------------- |  | ------------ | ------ |  | ------------------- | - | ----- | ---------------------- |  | - | ------ |  |  | - | ------ | 
|                                        |  | FHLBAdvances |        |  | RepurchaseAgreement |   |       | SubordinatedDebentures |  |   | Total  | 
|Maturities in years ending December 31, |  |              |        |  |                     |   |       |                        |  |   |        |  |  |   |        | 
|2012                                    |  | $            | 4,000  |  |                     |   |      |                        |  |   |       |  |  | $ | 4,000  | 
|2013                                    |  |              |       |  |                     |   |      |                        |  |   |       |  |  |   |       | 
|2014                                    |  |              |       |  |                     |   |      |                        |  |   |       |  |  |   |       | 
|2015                                    |  |              | 23,000 |  |                     | $ | 7,500 |                        |  |   |       |  |  |   | 30,500 | 
|2016                                    |  |              |       |  |                     |   |      |                        |  |   |       |  |  |   |       | 
|Thereafter                              |  |              | 5,000  |  |                     |   |      |                        |  | $ | 10,310 |  |  |   | 15,310 | 
|                                        |  |              |        |  |                     |   |       |                        |  |   |        |  |  |   |        | 
|                                        |  | $            | 32,000 |  |                     | $ | 7,500 |                        |  | $ | 10,310 |  |  | $ | 49,810 | 
|                                        |  |              |        |  |                     |   |       |                        |  |   |        |  |  |   |        | 



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Ameriana Bancorp

Notes to Consolidated Financial Statements

(table dollar amounts in thousands, except share data)



|9. | Income Taxes
|-- | ------------

The components of the net deferred tax asset at December 31, 2011 and 2010 are as follows:



|                                                                               |  |              |        |   |      |   |        |  
|------------------------------------------------------------------------------ |  | ------------ | ------ | - | ---- | - | ------ | -
|                                                                               |  | December 31, |       
|                                                                               |  | 2011         |        |   | 2010 |  
|Deferred tax assets:                                                           |  |              |        |   |      |   |        |  
|Deferred compensation                                                          |  | $            | 812    |   |      | $ | 777    |  
|General loan loss reserves                                                     |  |              | 2,012  |   |      |   | 1,998  |  
|State and federal net operating loss carryforward and tax credits carryforward |  |              | 4,555  |   |      |   | 4,526  |  
|Other real estate owned                                                        |  |              | 619    |   |      |   | 124    |  
|Other                                                                          |  |              | 52     |   |      |   | 62     |  
|                                                                               |  |              |        |   |      |   |        |  
|                                                                               |  |              | 8,050  |   |      |   | 7,487  |  
|                                                                               |  |              |        |   |      |   |        |  
|Deferred tax liabilities:                                                      |  |              |        |   |      |   |        |  
|Net unrealized gain on securities available for sale                           |  |              | (189   | ) |      |   | (71    | )
|FHLB stock dividends                                                           |  |              | (251   | ) |      |   | (284   | )
|Deferred loan fees                                                             |  |              | (233   | ) |      |   | (259   | )
|Mortgage servicing rights                                                      |  |              | (241   | ) |      |   | (286   | )
|Deferred state tax                                                             |  |              | (210   | ) |      |   | (199   | )
|Depreciation                                                                   |  |              | (230   | ) |      |   | (224   | )
|Prepaid expenses                                                               |  |              | (212   | ) |      |   | (187   | )
|Goodwill                                                                       |  |              | (173   | ) |      |   | (152   | )
|                                                                               |  |              |        |   |      |   |        |  
|                                                                               |  |              | (1,739 | ) |      |   | (1,662 | )
|                                                                               |  |              |        |   |      |   |        |  
|Net deferred tax asset before valuation allowance                              |  |              | 6,311  |   |      |   | 5,825  |  
|                                                                               |  |              |        |   |      |   |        |  
|Valuation allowance                                                            |  |              |        |   |      |   |        |  
|Beginning balance                                                              |  |              | (879   | ) |      |   | (836   | )
|Change during the period                                                       |  |              | (254   | ) |      |   | (43    | )
|                                                                               |  |              |        |   |      |   |        |  
|Ending balance                                                                 |  |              | (1,133 | ) |      |   | (879   | )
|                                                                               |  |              |        |   |      |   |        |  
|Net deferred tax asset                                                         |  | $            | 5,178  |   |      | $ | 4,946  |  
|                                                                               |  |              |        |   |      |   |        |  

As of December 31, 2011, the Company had approximately $18,404,000 of state tax loss carryforward available to
offset future franchise tax. As of December 31, 2011, the Company had approximately $4,676,000 of federal tax loss carryforward available to offset future federal tax. Also, at December 31, 2011, the Company had approximately $1,401,000 of
tax credits available to offset future federal income tax. The state loss carryforward begins to expire in 2023. The federal loss carryforward expires in 2026. The tax credits begin to expire in 2023. Included in the $1,401,000 of tax credits
available to offset future federal income tax are approximately $666,000 of alternative minimum tax credits which have no expiration date. Management believes that the Company will be able to utilize the benefits recorded for both state and federal
loss carryforwards and federal credits within the allotted time periods.

Retained earnings at December 31, 2011 includes an allocation
of income to bad debt deductions of approximately $11,883,000 for which no provision for federal income taxes has been made. If, in the future, this portion of retained earnings is used for any purpose other than to absorb bad debt losses, including
redemption of bank stock or excess dividends, or loss of bank status, federal income taxes may be imposed at the then applicable rates. The unrecorded deferred income tax liability on the above amount was approximately $4,000,000.



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Ameriana Bancorp

Notes to Consolidated Financial Statements

(table dollar amounts in thousands, except share data)



The effective income tax rate on income from continuing operations is reconciled to the statutory
corporate tax rate as follows:



|                                                               |  |                         |       |   |      |  |       |   
|-------------------------------------------------------------- |  | ----------------------- | ----- | - | ---- |  | ----- | --
|                                                               |  | Year Ended December 31, |      
|                                                               |  | 2011                    |       |   | 2010 | 
|Statutory federal tax rate                                     |  |                         | 34.0  | % |      |  | 34.0  | % 
|Tax credits                                                    |  |                         |      |   |      |  | (0.1  | ) 
|Cash value of life insurance                                   |  |                         | (28.6 | ) |      |  | (92.3 | ) 
|Tax exempt interest - municipal securities and municipal loans |  |                         | (4.6  | ) |      |  | (22.8 | ) 
|Other                                                          |  |                         | 1.0   |   |      |  | 3.6   |   
|                                                               |  |                         |       |   |      |  |       |   
|Effective tax rate                                             |  |                         | 1.8   | % |      |  | (77.6 | )%
|                                                               |  |                         |       |   |      |  |       |   

The expense (benefit) for income taxes consists of the following:



|                      |  |                         |      |   |      |   |      |  
|--------------------- |  | ----------------------- | ---- | - | ---- | - | ---- | -
|                      |  | Year Ended December 31, |     
|                      |  | 2011                    |      |   | 2010 |  
|Federal               |  |                         |      |   |      |   |      |  
|Current               |  | $                       | 370  |   |      | $ | 29   |  
|Deferred              |  |                         | (349 | ) |      |   | (271 | )
|                      |  |                         |      |   |      |   |      |  
|Tax expense (benefit) |  | $                       | 21   |   |      | $ | (242 | )
|                      |  |                         |      |   |      |   |      |  

The Company or one of its subsidiaries files income tax returns in the U.S. federal jurisdiction and various states and
foreign jurisdictions. With a few exceptions, the Company is no longer subject to U.S. federal, state and local or non-U.S. income tax examinations by tax authorities for years before 2007.



|10. | Employee Benefits
|--- | -----------------

Multi-Employer Defined Benefit Pension Plan.The Company is a participating employer in a multi-employer defined benefit
pension plan. Since the defined benefit pension plan is a multi-employer plan, no separate actuarial valuations are made with respect to each participating employer. The Company froze the defined benefit pension plan on June 30, 2004 to stop
accruing benefits to plan participants beyond what was already earned to that date and to prevent new participants from entering the plan. The change was made in an effort to control and reduce pension plan expense in the future. The Company will
continue to make contributions to meet required funding obligations.

The Company participates in the Pentegra Defined Benefit Plan for
Financial Institutions (the Pentegra Plan), a non-contributory pension plan covering all qualified employees. The trustees of the Financial Institutions Retirement Fund administer the Pentegra Plan, employer identification number
35-0377080 and plan number 6087. The Pentegra Plan operates as a multi-employer plan for accounting purposes and as a multiple-employer plan under the Employee Retirement Income Security Act of 1974 and the internal Revenue Code. There are no
collective bargaining agreements in place that require contributions to the Pentegra Plan.

The Pentegra Plan is a single plan under Internal
Revenue Code Section 413(c) and, as a result, all of the assets stand behind all of the liabilities. Accordingly, under the Pentegra Plan contributions made by a participating employer may be used to provide benefits to participants of other
participating employers. There is no separate valuation of the Pentegra Plan benefits or segregation of the Pentegra Plan assets specifically for the Company, because the Pentegra Plan is a multi-employer plan and separate actuarial valuations are
not made with respect to each employer. If the Company chooses to stop participating in the multi-employer plan, they may be required to pay an amount based on the underfunded status of the plan, referred to as a withdrawal liability. The funded
status of the Pentegra Plan, market value of plan assets divided by funding target, as of July 1, 2011 and 2010 was 78.19% and 79.25%, respectively.

The Company had expenses of $499,000 and $376,000 for the years ended December 2011 and 2010, respectively. Company cash contributions to the Pentegra Plan for these same periods were $545,000 and
$454,000, respectively.



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Ameriana Bancorp

Notes to Consolidated Financial Statements

(table dollar amounts in thousands, except share data)



Total contributions made to the Pentegra Plans were $203,020,000 and $155,164,000 for the plan years
ended June 30, 2011 and 2010, respectively. The Companys contributions to the Pentegra Plan were not more than 5% of the total contributions to the plan.

401(k) Plan. The Companys self-administered 401(k) plan became effective April 1, 2008. Prior to that date, the Company was a participating employer in a multi-employer
401(k) plan. The current plan covers substantially all full-time employees of the Company. The Company matches employees contributions to the 401(k) plan at the rate of 100% for the first 4% of base salary contributed by participants.
Effective April 1, 2011, the Company added an employee stock ownership plan component to its 401(k) plan. Matching contributions made to the 401(k) plan by the Company will be used to purchase shares of Ameriana Bancorp stock.

Pension expense for the two plans totaled $740,000 and $615,000 in 2011 and 2010, respectively.

Split-dollar Life Insurance Agreements.The Company adopted the accounting guidance for separate agreements which split dollar life insurance policy benefits between an employer and
employee. This guidance requires the employer to recognize a liability for future benefits payable to the employee under these agreements. At December 31, 2011 and 2010, the Company had a recorded a liability of $1,048,000 and
$1,216,000, respectively. During 2011 and 2010, the Company recognized net income of $168,000 and net expense totaling $4,000, respectively.

Supplemental Executive Retirement Plan. Effective January 1, 2008, the Company terminated the supplemental retirement plan (the
Plan) that provided retirement and death benefits to certain officers and directors. At that time, the officers and directors covered by that Plan voluntarily elected to forego their benefits under the Plan. Instead, the Company entered
into separate agreements with these officers and directors that provide retirement and death benefits. The Company is recording an expense equal to the projected present value of the payment due at the full eligibility date. The liability for the
plan at December 31, 2011 and 2010 was $1,949,000 and $1,879,00, respectively. The expense for the plan was $198,000 and $184,000 for 2011 and 2010, respectively.

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

Stock Options.Under the 1996 Stock Option and Incentive Plan
(1996 Plan) and the 2006 Long-Term Incentive Plan (2006 Plan), the Company has granted options to individuals to purchase common stock at a price equal to the fair market value at the date of grant, subject to the terms and
conditions of the plans. The 1996 Plan and the 2006 Plan require that options be granted at the fair market value of the stock on the date of the grant. Options vest and are fully exercisable when granted or over an extended period subject to
continuous employment or under other conditions set forth in the plans. The period for exercising options shall not exceed ten years from the date of grant. The plans also permit grants of stock appreciation rights. An amendment of the 1996 Plan
extended the plans term by five years and increased the number of shares reserved under the plan from 176,000 to 352,000 shares. The 2006 Plan permits the granting of up to 225,000 shares. The 1996 Plan and 2006 Plan were approved by the
stockholders of the Company.

The fair value of each option award is estimated on the date of grant using a Black-Scholes option pricing
model. There were no stock options granted or exercised in 2011 or in 2010.



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Ameriana Bancorp

Notes to Consolidated Financial Statements

(table dollar amounts in thousands, except share data)



A summary of option activity under the Plan as of December 31, 2011, and changes during the year
then ended, is presented below.



|                               |  |        |         |   |                                |   |       |                                          |  |  |                          |  |  |   |     | 
|------------------------------ |  | ------ | ------- | - | ------------------------------ | - | ----- | ---------------------------------------- |  |  | ------------------------ |  |  | - | --- | 
|                               |  | Shares |         |   | Weighted-AverageExercise Price |   |       | Weighted-AverageRemainingContractualTerm |  |  | AggregateIntrinsic Value | 
|Outstanding, beginning of year |  |        | 169,482 |   |                                | $ | 14.09 |                                          |  |  | 3.95                     |  |  | $ | -0- | 
|Forfeited                      |  |        | (1,500  | ) |                                |   | 13.22 |                                          |  |  |                          |  |  |   |     | 
|                               |  |        |         |   |                                |   |       |                                          |  |  |                          |  |  |   |     | 
|Outstanding, end of year       |  |        | 167,982 |   |                                | $ | 14.09 |                                          |  |  | 2.95                     |  |  | $ | -0- | 
|                               |  |        |         |   |                                |   |       |                                          |  |  |                          |  |  |   |     | 
|                               |  |        |         |  
|Exercisable, end of year       |  |        | 167,582 |   |                                | $ | 14.11 |                                          |  |  | 2.94                     |  |  | $ | -0- | 
|                               |  |        |         |   |                                |   |       |                                          |  |  |                          |  |  |   |     | 

As of December 31, 2011, there was $1,000 of total unrecognized compensation cost related to non-vested share-based
compensation arrangements granted under the Plan. That cost is expected to be recognized over a weighted-average period of 0.17 years.

During
2011, the Company recognized $3,000 of share-based compensation expense.



|11. | Dividend and Capital Restrictions
|--- | ---------------------------------

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

In addition, without prior approval, current regulations allow the
Bank to pay dividends to the Company not exceeding retained net income for the applicable calendar year to date, plus retained net income for the preceding two years. Application is required by the Bank to pay dividends in excess of this
restriction.

On July 26, 2010, following a joint examination by and discussions with the FDIC and the Indiana Department of Financial
Institutions (DFI), the Board of Directors of the Bank adopted a resolution agreeing to receive prior written consent from the FDIC and the DFI before declaring or paying any dividends. All requests from the Bank to declare and pay a
quarterly dividend to the Company have been approved by the FDIC and DFI prior to approval by the Banks Board of Directors and payment by the Bank.

On December 17, 2009, following an off-site review by the Federal Reserve Bank of Chicago, the Board of Directors of the Company adopted a resolution agreeing to seek and obtain the approval of the
Federal Reserve Bank at least thirty days before taking any of the following actions:



| |  |  | The payment of corporate dividends;
| | - |  | -----------------------------------



| |  |  | The payment of interest on trust preferred securities;
| | - |  | ------------------------------------------------------



| |  |  | Any increase in debt or issuance of trust preferred obligations; and
| | - |  | --------------------------------------------------------------------



| |  |  | The redemption of Company stock.
| | - |  | --------------------------------

All requests from the Company to pay quarterly dividends to shareholders and to make quarterly interest payments on the trust preferred securities have been approved by the Federal Reserve Bank of Chicago
prior to approval by the Companys Board of Directors and payment by the Company. There have been no requests from the Company for approval of an increase in debt or issuance of trust preferred obligations, or redemption of Company stock.



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Ameriana Bancorp

Notes to Consolidated Financial Statements

(table dollar amounts in thousands, except share data)



|12. | Earnings Per Share
|--- | ------------------



|                                                                |  |           |       |  |                        |  |           |                |  |   |           |  |  |                        |     |  |                |  |           |  |  |   |      | 
|--------------------------------------------------------------- |  | --------- | ----- |  | ---------------------- |  | --------- | -------------- |  | - | --------- |  |  | ---------------------- | --- |  | -------------- |  | --------- |  |  | - | ---- | 
|                                                                |  | 2011      |       |  | 2010                   | 
|                                                                |  | NetIncome |       |  | Weighted-AverageShares |  |           | PerShareAmount |  |   | NetIncome |  |  | Weighted-AverageShares |     |  | PerShareAmount | 
|Basic Earnings Per Share:                                       |  |           |       |  |                        |  |           |                |  |   |           |  |  |                        |     |  |                |  |           |  |  |   |      | 
|Income available to common shareholders                         |  | $         | 1,142 |  |                        |  | 2,988,952 |                |  | $ | 0.38      |  |  | $                      | 553 |  |                |  | 2,988,952 |  |  | $ | 0.19 | 
|                                                                |  |           |       |  |                        |  |           |                |  |   |           |  |  |                        |     |  |                |  |           |  |  |   |      | 
|Effect of Dilutive Stock Options                                |  |           |      |  |                        |  |           |                |  |   |           |  |  |                        |    |  |                |  |           |  |  |   |      | 
|                                                                |  |           |       |  |                        |  |           |                |  |   |           |  |  |                        |     |  |                |  |           |  |  |   |      | 
|Diluted Earnings Per Share:                                     |  |           |       |  |                        |  |           |                |  |   |           |  |  |                        |     |  |                |  |           |  |  |   |      | 
|Income available to common shareholders and assumed conversions |  | $         | 1,142 |  |                        |  | 2,988,952 |                |  | $ | 0.38      |  |  | $                      | 553 |  |                |  | 2,988,952 |  |  | $ | 0.19 | 
|                                                                |  |           |       |  |                        |  |           |                |  |   |           |  |  |                        |     |  |                |  |           |  |  |   |      | 

Options to purchase 167,982 and 169,482 shares of common stock at exercise prices of $9.25 to $15.56 per share were
outstanding at December 31, 2011 and 2010, respectively, but were not included in the computation of diluted earnings per share because the options were anti-dilutive.



|13. | Other Comprehensive Income
|--- | --------------------------

Other comprehensive income components and related taxes were as follows:



|                                                                           |  |      |       |  |      |   |     | 
|-------------------------------------------------------------------------- |  | ---- | ----- |  | ---- | - | --- | 
|                                                                           |  | 2011 |       |  | 2010 |  
|Unrealized gain on securities available for sale arising during the period |  | $    | 1,266 |  |      | $ | 682 | 
|Less: reclassification adjustment for gains realized in net income         |  |      | 919   |  |      |   | 303 | 
|                                                                           |  |      |       |  |      |   |     | 
|Other comprehensive income before tax effect                               |  |      | 347   |  |      |   | 379 | 
|Tax expense                                                                |  |      | 118   |  |      |   | 139 | 
|                                                                           |  |      |       |  |      |   |     | 
|Other comprehensive income                                                 |  | $    | 229   |  |      | $ | 240 | 
|                                                                           |  |      |       |  |      |   |     | 



|14. | Accumulated other comprehensive income
|--- | --------------------------------------

The components of accumulated other comprehensive income, included in shareholders equity, are as follows:



|                                                                                                                                            |  |      |     |  |      |   |     | 
|------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | --- |  | ---- | - | --- | 
|                                                                                                                                            |  | 2011 |     |  | 2010 |  
|Net unrealized gain on available-for-sale securities, net of income tax expense of $189 and $71 at December 31, 2011 and
2010, respectively |  | $    | 367 |  |      | $ | 138 | 
|                                                                                                                                            |  |      |     |  |      |   |     | 



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Ameriana Bancorp

Notes to Consolidated Financial Statements

(table dollar amounts in thousands, except share data)



|15. | Regulatory Matters
|--- | ------------------

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

There are five capital categories defined in the regulations, ranging from well capitalized to critically undercapitalized. Classification in any of the
undercapitalized categories can result in actions by regulators that could have a material effect on a banks operations. At December 31, 2011 and 2010, the Bank was categorized as well capitalized and met all subject capital adequacy
requirements. There are no conditions or events since December 31, 2011, that management believes have changed this classification.

On
July 26, 2010, following a joint examination by and discussions with the FDIC and the Indiana Department of Financial Institutions, the Board of Directors of the Bank adopted a resolution agreeing to, among other things, adopt a capital plan to
increase its Tier 1 Leverage Ratio to 8.50% by June 30, 2010 and to maintain a Total Risk-Based Capital Ratio of 12.00%.

Actual and
required capital amounts and ratios for the Bank are as follows:



|                                |  |                              |       |   |                              |   |        |                |  |  |        |   |  |       |        |  |        |  |       |   |  |   |        | 
|------------------------------- |  | ---------------------------- | ----- | - | ---------------------------- | - | ------ | -------------- |  |  | ------ | - |  | ----- | ------ |  | ------ |  | ----- | - |  | - | ------ | 
|                                |  | December 31, 2011            |      
|                                |  | Required forWell Capitalized |       |   | Required ForAdequate Capital |   |        | Actual Capital | 
|                                |  | Ratio                        |       |   | Amount                       |   |        | Ratio          |  |  | Amount |   |  | Ratio |        |  | Amount | 
|Total risk-based capital ratio  |  |                              | 10.00 | % |                              | $ | 31,573 |                |  |  | 8.00   | % |  | $     | 25,258 |  |        |  | 13.58 | % |  | $ | 42,874 | 
|Tier 1 risk-based capital ratio |  |                              | 6.00  |   |                              |   | 18,944 |                |  |  | 4.00   |   |  |       | 12,629 |  |        |  | 12.32 |   |  |   | 38,883 | 
|Tier 1 leverage ratio           |  |                              | 5.00  |   |                              |   | 21,055 |                |  |  | 3.00   |   |  |       | 12,633 |  |        |  | 9.23  |   |  |   | 38,883 | 



|                                |  |                              | 25,258 |   |                              |   | 25,258 |                |  |  | 25,258 |   |  |       | 25,258 |  |        |  | 25,258 |   |  |   | 25,258 | 
|------------------------------- |  | ---------------------------- | ------ | - | ---------------------------- | - | ------ | -------------- |  |  | ------ | - |  | ----- | ------ |  | ------ |  | ------ | - |  | - | ------ | 
|                                |  | December 31, 2010            |       
|                                |  | Required forWell Capitalized |        |   | Required ForAdequate Capital |   |        | Actual Capital | 
|                                |  | Ratio                        |        |   | Amount                       |   |        | Ratio          |  |  | Amount |   |  | Ratio |        |  | Amount | 
|Total risk-based capital ratio  |  |                              | 10.00  | % |                              | $ | 31,626 |                |  |  | 8.00   | % |  | $     | 25,300 |  |        |  | 13.11  | % |  | $ | 41,468 | 
|Tier 1 risk-based capital ratio |  |                              | 6.00   |   |                              |   | 18,975 |                |  |  | 4.00   |   |  |       | 12,650 |  |        |  | 11.86  |   |  |   | 37,493 | 
|Tier 1 leverage ratio           |  |                              | 5.00   |   |                              |   | 21,003 |                |  |  | 3.00   |   |  |       | 12,602 |  |        |  | 8.93   |   |  |   | 37,493 | 



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|16. | Fair Value of Financial Instruments
|--- | -----------------------------------

DISCLOSURES ABOUT FAIR VALUE OF ASSETS AND LIABILITIES

ASC Topic 820, Fair Value Measurements, defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the
measurement date. A fair value hierarchy has been established that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that
may be used to measure fair value:

Level 1        Quoted prices in active
markets for identical assets or liabilities.

Level 2        Observable inputs
other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in active markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full
term of the assets or liabilities.

Level 3        Unobservable inputs that are
supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

Following
is a description of the valuation methodologies used for instruments measured at fair value on a recurring basis and recognized in the accompanying balance sheet, as well as the general classification of such instruments pursuant to the valuation
hierarchy.

Available-for-Sale Securities

Where quoted market prices are available in an active market, securities are classified within Level 1 of the valuation hierarchy.
The securities valued in Level 1 are mutual funds.

Level 2 securities include U.S. agency and U.S. government
sponsored enterprise mortgage-backed securities and municipal securities. Level 2 securities are valued by a third party pricing service commonly used in the banking industry utilizing observable inputs, and the values are reviewed by the
Banks management. The pricing provider utilizes evaluated pricing models that vary based on asset class. These models incorporate available market information including quoted prices of securities with similar characteristics and, because many
fixed-income securities do not trade on a daily basis, apply available information through processes such as benchmark curves, benchmarking of like securities, sector grouping and matrix pricing. In addition, model processes, such as an option
adjusted spread model is used to develop prepayment and interest rate scenarios for securities with prepayment features.

Level 3 securities consist of municipal securities and are valued by a third party who uses a discounted cash flow model to determine
the price. The key inputs to the discounted cash flow model are the coupon, yield, and expected maturity date. Appropriate market yields are determined based on credit, structure, and related Wall Street trades, quotes, and issuances.



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The following table presents the fair value measurements of assets recognized in the accompanying balance
sheet measured at fair value on a recurring basis and the level within the ASC 820 fair value hierarchy in which the fair value measurements fall at December 31, 2011 and December 31, 2010:



|                                                           |  |            |        |  |                                                            |   |       |                                            |  |   |                                         |  |  |   |       | 
|---------------------------------------------------------- |  | ---------- | ------ |  | ---------------------------------------------------------- | - | ----- | ------------------------------------------ |  | - | --------------------------------------- |  |  | - | ----- | 
|                                                           |  |            |        |  | Fair Value Measurements Using                              |  
|Available-for-sale securities:                             |  | Fair Value |        |  | Quoted Prices inActive Marketsfor IdenticalAssets(Level 1) |   |       | Significant OtherObservableInputs(Level 2) |  |   | SignificantUnobservableInputs(Level
 3) | 
|                                                           |  |            |        | 
|At December 31, 2011:                                      |  |            |        |  |                                                            |   |       |                                            |  |   |                                         |  |  |   |       | 
|Ginnie Mae and GSE mortgage-backed pass-through securities |  | $          | 39,714 |  |                                                            | $ |      |                                            |  | $ | 39,714                                  |  |  | $ |      | 
|Municipal securities                                       |  |            | 2,351  |  |                                                            |   |      |                                            |  |   |                                        |  |  |   | 2,351 | 
|Mutual funds                                               |  |            | 1,782  |  |                                                            |   | 1,782 |                                            |  |   |                                        |  |  |   |      | 
|                                                           |  |            |        |  |                                                            |   |       |                                            |  |   |                                         |  |  |   |       | 
|                                                           |  | $          | 43,847 |  |                                                            | $ | 1,782 |                                            |  | $ | 39,714                                  |  |  | $ | 2,351 | 
|                                                           |  |            |        | 
|At December 31, 2010:                                      |  |            |        |  |                                                            |   |       |                                            |  |   |                                         |  |  |   |       | 
|Ginnie Mae and GSE mortgage-backed pass-through securities |  | $          | 29,436 |  |                                                            | $ |      |                                            |  | $ | 29,436                                  |  |  | $ |      | 
|Ginnie Mae collateralized mortgage obligations             |  |            | 5,341  |  |                                                            |   |      |                                            |  |   | 5,341                                   |  |  |   |      | 
|Municipal securities                                       |  |            | 2,164  |  |                                                            |   |      |                                            |  |   | 2,164                                   |  |  |   |      | 
|Mutual funds                                               |  |            | 1,667  |  |                                                            |   | 1,667 |                                            |  |   |                                        |  |  |   |      | 
|                                                           |  |            |        |  |                                                            |   |       |                                            |  |   |                                         |  |  |   |       | 
|                                                           |  | $          | 38,608 |  |                                                            | $ | 1,667 |                                            |  | $ | 36,941                                  |  |  | $ |      | 

The following is a reconciliation of the beginning and ending balance for the year ended
December 31, 2011 of fair value measurements recognized in the accompanying balance sheet using significant unobservable (Level 3) inputs (dollars in thousands):



|                                               |  |                   |       | 
|---------------------------------------------- |  | ----------------- | ----- | 
|                                               |  | Year Ended        |      
|                                               |  | December 31, 2011 |      
|Beginning balance                              |  | $                 |      | 
|Total realized and unrealized gains and losses |  |                   |       | 
|Included in net income                         |  |                   | 1     | 
|Included in other comprehensive income         |  |                   | 29    | 
|Purchases, issuances and settlements           |  |                   | 2,321 | 
|Transfers in or out of Level 3                 |  |                   |      | 
|                                               |  |                   |       | 
|Ending balance                                 |  | $                 | 2,351 | 
|                                               |  |                   |       | 



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Following is a description of valuation methodologies used for instruments measured at fair value on a
non-recurring basis and recognized in the accompanying balance sheet, as well as the general classification of such instruments pursuant to the valuation hierarchy.

Impaired Loans (Collateral Dependent)

Loans for which it is probable that the
Company will not collect all principal and interest due according to contractual terms are measured for impairment. Allowable methods for determining the amount of impairment include estimating fair value using the fair value of the collateral for
collateral-dependent loans.

If the impaired loan is identified as collateral dependent, then the fair value method of measuring the amount of
impairment is utilized. This method requires obtaining a current independent appraisal of the collateral and applying a discount factor to the value.

Impaired loans that are collateral dependent are classified within Level 3 of the fair value hierarchy when impairment is determined using the fair value method.

Other Real Estate Owned

The fair value of the Companys other real estate owned is determined using Level 3 inputs, which include current and prior appraisals and estimated costs to sell. The change in fair value of other
real estate owned on December 31, 2011 that was recognized during the year ended December 31, 2011 was $1,185,000, which was recorded as a direct charge to current earnings.

The following table presents the fair value measurements of assets recognized in the accompanying balance sheet measured at fair value on a nonrecurring basis and the level within the ASC 820 fair value
hierarchy in which the fair value measurements fall at December 31, 2011 and December 31, 2010:



|                        |  |            |        |  |                                                             |   |   |                                            |  |   |                                         |  |  |   |        | 
|----------------------- |  | ---------- | ------ |  | ----------------------------------------------------------- | - | - | ------------------------------------------ |  | - | --------------------------------------- |  |  | - | ------ | 
|                        |  |            |        |  | Fair Value Measurements Using                               |  
|                        |  | Fair Value |        |  | Quoted Prices inActive Markets forIdentical Assets(Level 1) |   |   | Significant OtherObservableInputs(Level 2) |  |   | SignificantUnobservableInputs(Level
 3) | 
|At December 31, 2011:   |  |            |        |  |                                                             |   |   |                                            |  |   |                                         |  |  |   |        | 
|Impaired loans          |  | $          | 10,442 |  |                                                             | $ |  |                                            |  | $ |                                        |  |  | $ | 10,442 | 
|Other real estate owned |  |            | 2,486  |  |                                                             |   |  |                                            |  |   |                                        |  |  |   | 2,486  | 
|                        |  |            |        | 
|At December 31, 2010:   |  |            |        |  |                                                             |   |   |                                            |  |   |                                         |  |  |   |        | 
|Impaired loans          |  | $          | 17,388 |  |                                                             | $ |  |                                            |  | $ |                                        |  |  | $ | 17,388 | 
|Other real estate owned |  |            | 4,028  |  |                                                             |   |  |                                            |  |   |                                        |  |  |   | 4,028  | 



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Fair Value of Financial Instruments

Fair values are based on estimates using present value and other valuation techniques in instances where quoted market prices are not available. These techniques are significantly affected by the
assumptions used, including discount rates and estimates of future cash flows. Accordingly, the aggregate fair value amounts presented do not represent, and should not be construed to represent, the underlying value of the Company.

The following table presents the estimates of fair value of financial instruments:



|                                         |  |                   |         |  |                   |   |         |               |  |   |           |  |  |   |         | 
|---------------------------------------- |  | ----------------- | ------- |  | ----------------- | - | ------- | ------------- |  | - | --------- |  |  | - | ------- | 
|                                         |  | December 31, 2011 |         |  | December 31, 2010 |  
|                                         |  | CarryingValue     |         |  | FairValue         |   |         | CarryingValue |  |   | FairValue | 
|Assets                                   |  |                   |         |  |                   |   |         |               |  |   |           |  |  |   |         | 
|Cash and cash equivalents                |  | $                 | 9,709   |  |                   | $ | 9,709   |               |  | $ | 11,747    |  |  | $ | 11,747  | 
|Investment securities available for sale |  |                   | 43,847  |  |                   |   | 43,847  |               |  |   | 38,608    |  |  |   | 38,608  | 
|Loans held for sale                      |  |                   | 252     |  |                   |   | 252     |               |  |   | 91        |  |  |   | 91      | 
|Loans                                    |  |                   | 312,509 |  |                   |   | 322,066 |               |  |   | 312,715   |  |  |   | 318,753 | 
|Stock in FHLB                            |  |                   | 4,472   |  |                   |   | 4,472   |               |  |   | 5,101     |  |  |   | 5,101   | 
|Mortgage servicing rights                |  |                   | 577     |  |                   |   | 577     |               |  |   | 689       |  |  |   | 689     | 
|Interest and dividends receivable        |  |                   | 1,089   |  |                   |   | 1,089   |               |  |   | 1,065     |  |  |   | 1,065   | 
|                                         |  |                   |         | 
|Liabilities                              |  |                   |         |  |                   |   |         |               |  |   |           |  |  |   |         | 
|Deposits                                 |  |                   | 337,250 |  |                   |   | 339,930 |               |  |   | 337,978   |  |  |   | 340,430 | 
|Borrowings                               |  |                   | 49,810  |  |                   |   | 46,780  |               |  |   | 51,810    |  |  |   | 50,061  | 
|Drafts payable                           |  |                   | 2,532   |  |                   |   | 2,532   |               |  |   | 1,594     |  |  |   | 1,594   | 
|Interest payable                         |  |                   | 77      |  |                   |   | 77      |               |  |   | 113       |  |  |   | 113     | 

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

Cash and Cash Equivalents and Stock in FHLB: The carrying amounts reported in the consolidated balance sheets approximate those
assets fair values.

Loans Held for Sale: The carrying amounts reported in the consolidated balance sheets approximate
those assets fair values.

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

Mortgage
Servicing Rights:The fair value is determined by a valuation performed by an independent third party that is reviewed by the Banks management. The valuation is based on the discounted cash flow method, utilizing Bloombergs
Median Forecasted Prepayment Speeds for mortgage-backed securities assumed to possess enough similarities to the Banks servicing portfolio to facilitate a comparison.

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

Deposits: The fair values of non-maturity demand, savings, and money market accounts are equal to the amount payable on demand at the balance sheet date. Fair values for certificates of
deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered on deposits to a schedule of aggregated expected monthly maturities on deposits.

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

Drafts Payable: The fair value approximates carrying value.



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|17. | Parent Company Financial Information
|--- | ------------------------------------

The following are condensed financial statements for the parent company, Ameriana Bancorp, only:



|                                     |  |              | 000000 |  |      |   | 000000 | 
|------------------------------------ |  | ------------ | ------ |  | ---- | - | ------ | 
|                                     |  | December 31, |       
|Balance Sheets                       |  | 2011         |        |  | 2010 |  
|Assets                               |  |              |        |  |      |   |        | 
|Cash                                 |  | $            | 399    |  |      | $ | 339    | 
|Investment in Bank                   |  |              | 41,519 |  |      |   | 40,630 | 
|Investments in affiliates            |  |              | 312    |  |      |   | 320    | 
|Other assets                         |  |              | 2,640  |  |      |   | 2,336  | 
|                                     |  |              |        |  |      |   |        | 
|                                     |  | $            | 44,870 |  |      | $ | 43,625 | 
|                                     |  |              |        |  |      |   |        | 
|Liabilities and shareholders equity |  |              |        |  |      |   |        | 
|Notes payable, other                 |  | $            | 10,310 |  |      | $ | 10,310 | 
|Other liabilities                    |  |              | 55     |  |      |   | 64     | 
|Shareholders equity                 |  |              | 34,505 |  |      |   | 33,251 | 
|                                     |  |              |        |  |      |   |        | 
|                                     |  | $            | 44,870 |  |      | $ | 43,625 | 
|                                     |  |              |        |  |      |   |        | 



|                                                                                                    |  |                         | 000000 |  |      |   | 000000 |  
|--------------------------------------------------------------------------------------------------- |  | ----------------------- | ------ |  | ---- | - | ------ | -
|                                                                                                    |  | Year Ended December 31, |       
|Statements of Income                                                                                |  | 2011                    |        |  | 2010 |  
|Dividends from Bank                                                                                 |  | $                       | 1,075  |  |      | $ | 1,325  |  
|Interest income                                                                                     |  |                         | 7      |  |      |   | 14     |  
|                                                                                                    |  |                         |        |  |      |   |        |  
|                                                                                                    |  |                         | 1,082  |  |      |   | 1,339  |  
|Operating expense                                                                                   |  |                         | 902    |  |      |   | 1,161  |  
|                                                                                                    |  |                         |        |  |      |   |        |  
|Income before income tax benefit and equity in undistributed income of Bank                         |  |                         | 180    |  |      |   | 178    |  
|Income tax benefit                                                                                  |  |                         | 304    |  |      |   | 390    |  
|                                                                                                    |  |                         |        |  |      |   |        |  
|                                                                                                    |  |                         | 484    |  |      |   | 568    |  
|Equity in undistributed income of Bank and affiliates (distributions in excess of equity in income) |  |                         | 658    |  |      |   | (15    | )
|                                                                                                    |  |                         |        |  |      |   |        |  
|Net Income                                                                                          |  | $                       | 1,142  |  |      | $ | 553    |  
|                                                                                                    |  |                         |        |  |      |   |        |  



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|                                                                                             |  |                         |       |   |      |   |      |  
|-------------------------------------------------------------------------------------------- |  | ----------------------- | ----- | - | ---- | - | ---- | -
|                                                                                             |  | Year Ended December 31, |      
|Statements of Cash Flows                                                                     |  | 2011                    |       |   | 2010 |  
|Operating Activities                                                                         |  |                         |       |   |      |   |      |  
|Net income                                                                                   |  | $                       | 1,142 |   |      | $ | 553  |  
|Items not requiring (providing) cash:                                                        |  |                         |       |   |      |   |      |  
|(Undistributed income) or distributions of Bank and affiliates in excess of equity in income |  |                         | (658  | ) |      |   | 15   |  
|Other adjustments                                                                            |  |                         | (304  | ) |      |   | (273 | )
|                                                                                             |  |                         |       |   |      |   |      |  
|Net cash provided by operating activities                                                    |  |                         | 180   |   |      |   | 295  |  
|                                                                                             |  |                         |       |   |      |   |      |  
|Financing Activities                                                                         |  |                         |       |   |      |   |      |  
|Cash dividends paid                                                                          |  |                         | (120  | ) |      |   | (120 | )
|                                                                                             |  |                         |       |   |      |   |      |  
|Net cash used in financing activities                                                        |  |                         | (120  | ) |      |   | (120 | )
|                                                                                             |  |                         |       |   |      |   |      |  
|Change in cash                                                                               |  |                         | 60    |   |      |   | 175  |  
|Cash at beginning of year                                                                    |  |                         | 339   |   |      |   | 164  |  
|                                                                                             |  |                         |       |   |      |   |      |  
|Cash at end of year                                                                          |  | $                       | 399   |   |      | $ | 339  |  
|                                                                                             |  |                         |       |   |      |   |      |  



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|18. | Current and Future Accounting Matters
|--- | -------------------------------------

Financial Accounting Standards Board (FASB)



| |  | ASU No. 2011-02; In April 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2011-02
Receivables (Topic 310)  A Creditors Determination of Whether a Restructuring is a Troubled Debt Restructuring. ASU 2011-02 clarifies whether loan modifications constitute troubled debt restructuring. In evaluating
whether a restructuring constitutes a troubled debt restructuring, a creditor must separately conclude that both of the following exist: (a) the restructuring constitutes a concession; and (b) the debtor is experiencing financial
difficulties. ASU 2011-02 is effective for the first interim and annual period beginning on or after June 15, 2011, and should be applied retrospectively to the beginning of the annual period of adoption. The Company adopted the
applicable required additional disclosures effective July 1, 2011. Adoption of these additional disclosures did not have a material effect on the Companys financial position or results of operations.
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | ASU No. 2011-03; Reconsideration of Effective Control for Repurchase Agreements. In April, 2011, FASB issued ASU No. 2011-03. The amendments
in this ASU remove from the assessment of effective control the criterion relating to the transferors ability to repurchase or redeem financial assets on substantially the agreed terms, even in the event of default by the transferee. The
amendments in this ASU also eliminate the requirement to demonstrate that the transferor possesses adequate collateral to fund substantially all the cost of purchasing replacement financial assets. The guidance in this ASU is effective for the first
interim or annual period beginning on or after December 15, 2011. The guidance should be applied prospectively to transactions or modifications of existing transactions that occur on or after the effective date. Early adoption is not permitted.
The Company will adopt the methodologies prescribed by this ASU by the date required, and does not anticipate that the ASU will have a material effect on its financial position or results of operations.
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | ASU No. 2011-04; Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs. In May, 2011, FASB issued
ASU No. 2011-04. The amendments in this ASU generally represent clarifications of Topic 820, but also include some instances where a particular principle or requirement for measuring fair value or disclosing information about fair value
measurements has changed. This ASU results in common principles and requirements for measuring fair value and for disclosing information about fair value measurements in accordance with U.S. GAAP and IFRSs. The amendments in this ASU are to be
applied prospectively. For public entities, the amendments are effective during interim and annual periods beginning after December 15, 2011. Early application by public entities is not permitted. The Company will adopt the methodologies
prescribed by this ASU by the date required, and does not anticipate that the ASU will have a material effect on its financial position or results of operations.
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | ASU No. 2011-05; Amendments to Topic 220, Comprehensive Income. In June, 2011, FASB issued ASU No. 2011-05. Under the amendments in this ASU,
an entity has the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive
statements. In both choices, an entity is required to present each component of net income along with total net income, each component of other comprehensive income along with a total for other comprehensive income, and a total amount for
comprehensive income. This ASU eliminates the option to present the components of other comprehensive income as part of the statement of changes in stockholders equity. The amendments in this ASU do not change the items that must be reported
in other comprehensive income or when an item of other comprehensive income must be reclassified to net income. The amendments in this ASU should be applied retrospectively. For public entities, the amendments are effective for fiscal years, and
interim periods within those years, beginning after December 15, 2011. Early adoption is permitted, because compliance with the amendments is already permitted. The amendments do not require any transition disclosures. Due to the recency of
this pronouncement, the Company is evaluating its timing of adoption of ASU 2011-05, but will adopt the ASU retrospectively by the due date.
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | ASU No. 2011-08; Testing Goodwill for Impairment. In September 2011, the FASB issued ASU No. 2011-08, Intangibles-Goodwill and Other (Topic
350): Testing Goodwill for Impairment. The amendments in this ASU will allow an entity to first assess qualitative factors to determine whether it is necessary to perform the
two-
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| | step quantitative goodwill impairment test. Under these amendments, an entity would not be required to calculate the fair value of a reporting unit unless the entity determines, based on a
qualitative assessment, that it is more likely than not that its fair value is less than its carrying amount. The amendments include a number of events and circumstances for an entity to consider in conducting the qualitative
assessment. ASU 2011-08 is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. Early adoption is permitted, including for annual and interim goodwill impairment
tests performed as of a date before September 15, 2011, if an entitys financial statements for the most recent annual or interim period have not yet been issued. The Company will adopt this ASU by the date required and does not
anticipate that it will have a material effect on our consolidated financial statements.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | ASU No. 2011-09; Compensation  Retirement Benefits  Multi-Employer Plans. In September 2011, the Financial Accounting Standards Board
(FASB) issued ASU No. 2011-09. This ASU requires companies who participate in multiemployer benefit plans to provide additional separate quantitative and qualitative disclosures for multiemployer pension plans and multiemployer other
postretirement benefit plans. For companies that participate in multiemployer pension plans, the ASU requires detailed information including the plan names and identifying number, level of an employers participation including the amount
of an employers contributions, the financial health of a multiemployer plan including an indication of the funded status, pending changes in funding plans, and surcharges on the contributions to the plan, and the nature of the employer
commitments to the plan. In addition, if public information is not available outside of the employers financial statements about the plan, the employer is required to make additional disclosures including a description of the nature of
the plan benefits, a qualitative description of the extent to which the employer could be responsible for the obligations of the plan, and other quantitative information, if available, about the plan such as total assets, actuarial present value of
accumulated plan benefits, and total contributions received by the plan. The ASU is effective for public companies for annual periods for fiscal years ending after December 15, 2011. The Company participates in a multiemployer pension
plan and will be required to include additional disclosures related to the ASU. The Company has included the required disclosure in Note 10 to the Consolidated Financial Statements in this Annual Report on Form 10-K for the year ended
December 31, 2011.
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|19. | Significant Estimates, Concentrations and Contingencies
|--- | -------------------------------------------------------

Accounting principles generally accepted in the United States of America require disclosure of certain significant estimates and
current vulnerabilities due to certain concentrations. Estimates related to the allowance for loan losses are reflected in the footnote regarding loans. Current vulnerabilities due to certain concentrations of credit risk are discussed in the
footnote on commitments and credit risk.

Litigation

Neither the Company nor the Bank is involved in any pending legal proceedings other than routing legal proceedings occurring in the
ordinary course of business. Such routine legal proceedings, in the aggregate, are believed by management to be immaterial to the financial condition and results of operations of the Company.

Bank-Owned Life Insurance

Approximately 47% of the Companys investment in bank-owned life insurance was held by two carriers at December 31, 2011 and 2010, respectively.



|20. | Current Economic Conditions
|--- | ---------------------------

The current protracted economic decline continues to present financial institutions with circumstances and challenges, which in some
cases have resulted in large and unanticipated declines in the fair values of investments and other assets, constraints on liquidity and capital and significant credit quality problems, including severe volatility in the valuation of real estate and
other collateral supporting loans.

At December 31, 2011, the Company held $100,126,000 in commercial real estate loans and $15,811,000
in loans collateralized by commercial and development real estate. Due to national, state and local economic conditions, values for commercial and development real estate have declined significantly, and the market for these properties is depressed.



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The accompanying financial statements have been prepared using values and information currently available to
the Company.

Given the volatility of current economic conditions, the values of assets and liabilities recorded in the financial statements
could change rapidly, resulting in material future adjustments in asset values, the allowance for loan losses and capital that could negatively impact the Companys ability to meet regulatory capital requirements and maintain sufficient
liquidity.



|21. | Risks and Uncertainties
|--- | -----------------------

The Companys allowance for loan losses contains certain assumptions on the value of collateral dependent loans as well as certain
economic and industry conditions which may be subject to change within the next year. These changes could have an adverse impact on the allowance for loan loss in the near term.



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Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure

Not applicable.

Item 9A. Controls and Procedures



| | (a) | Disclosure Controls and Procedures
| | --- | ----------------------------------

The Companys management, including the Companys principal executive officer and principal financial officer, have evaluated the effectiveness of the Companys disclosure controls
and procedures, as such term is defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended, (the Exchange Act). Based upon their evaluation, the principal executive officer and principal financial
officer concluded that, as of the end of the period covered by this report, the Companys disclosure controls and procedures were effective for the purpose of ensuring that the information required to be disclosed in the reports that the
Company files or submits under the Exchange Act with the Securities and Exchange Commission (the SEC) (1) is recorded, processed, summarized and reported within the time periods specified in the SECs rules and forms, and
(2) is accumulated and communicated to the Companys management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.



| | (b) | Internal Controls Over Financial Reporting
| | --- | ------------------------------------------

Managements annual report on internal control over financial reporting is incorporated herein by reference to the Companys audited Consolidated Financial Statements in this Annual Report on
Form 10-K.



| | (c) | Changes to Internal Control Over Financial Reporting
| | --- | ----------------------------------------------------

Except as indicated herein, there were no changes in the Companys internal control over financial reporting during the three months ended December 31, 2011 that have materially affected, or are
reasonable likely to materially affect, the Companys internal control over financial reporting.

Item 9B. Other Information

Not applicable.



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PART III

Item 10. Directors, Executive Officers and Corporate Governance

Information concerning the directors of the Company is incorporated herein by reference to the section captioned Items to be Voted on by Shareholders  Item 1  Election of
Directors in the Proxy Statement for the 2012 Annual Meeting of Shareholders (the Proxy Statement).

Information concerning the executive officers of the Company is incorporated herein by reference to Item 1. Business 
Executive Officers in Part I of this Annual Report on Form 10-K.

Information concerning compliance with
Section 16(a) of the Exchange Act required by this item is incorporated herein by reference to the cover page of this Form 10-K and the section titled Other Information Relating to Directors and Executive Officers 
Section 16(a) Beneficial Ownership Reporting Compliance in the Proxy Statement.

The Company has adopted a Code
of Ethics that applies to the Companys principal executive officer, principal accounting and financial officer and senior executive officers. For information concerning the Code of Ethics, see the section titled Corporate Governance
and Board Matters  Code of Ethics in the Proxy Statement. The Code of Ethics is posted on the Companys Internet Web site at www.ameriana.com. The Company intends to satisfy the disclosure requirement under Item 5.05
of Form 8-K regarding an amendment to or waiver from a provision of the Companys Code of Ethics by posting such information on its Internet site at www.ameriana.com.

Information concerning the Audit Committee and its composition and the audit committee financial expert and other corporate governance
matters is incorporated by reference to the section titled Corporate Governance and Board Matters in the Proxy Statement.

Item 11. Executive Compensation

The information required by this item is incorporated herein by reference to the sections captioned Corporate Governance and
Board MattersDirector Compensation and Executive Compensation in the Proxy Statement.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Information required by this item is incorporated herein by reference to the section captioned Stock Ownership in the
Proxy Statement.



| | (a) | Security Ownership of Certain Beneficial Owners
| | --- | -----------------------------------------------

Information required by this item is incorporated herein by reference to the section captioned Stock Ownership in the Proxy Statement.



| | (b) | Security Ownership of Management
| | --- | --------------------------------

Information required by this item is incorporated herein by reference to the section captioned Stock Ownership in the Proxy Statement.



| | (c) | Changes in Control
| | --- | ------------------

Management of Ameriana Bancorp knows of no arrangements, including any pledge by any person or securities of Ameriana Bancorp, the
operation of which may at a subsequent date result in a change in control of the registrant.



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| | (d) | Equity Compensation Plan Information
| | --- | ------------------------------------

The following table sets forth information about Company common stock that may be issued under the Companys equity compensation plans as of December 31, 2011. The Company does not maintain any
equity compensation plans that have not been approved by shareholders.



|                                                           |  |                                                                                             |         |  |                                                                           |   |       |                                                                                                                                            |  |  |         | 
|---------------------------------------------------------- |  | ------------------------------------------------------------------------------------------- | ------- |  | ------------------------------------------------------------------------- | - | ----- | ------------------------------------------------------------------------------------------------------------------------------------------ |  |  | ------- | 
|Plan Category                                              |  | Number of securitiesto be
issued uponthe exercise ofoutstanding options,warrants and rights |         |  | Weighted-averageexercise 
price ofoutstanding options,warrants and rights |   |       | Number of securitiesremaining
availablefor future issuanceunder equitycompensation plans(excluding securitiesreflected in the firstcolumn) | 
|                                                           |  |                                                                                             |        
|Equity compensation plans approved by security holders     |  |                                                                                             | 167,982 |  |                                                                           | $ | 14.09 |                                                                                                                                            |  |  | 222,000 | 
|                                                           |  |                                                                                             |        
|Equity compensation plans not approved by security holders |  |                                                                                             |        |  |                                                                           |   |      |                                                                                                                                            |  |  |        | 
|                                                           |  |                                                                                             |         |  |                                                                           |   |       |                                                                                                                                            |  |  |         | 
|                                                           |  |                                                                                             |        
|Total                                                      |  |                                                                                             | 167,982 |  |                                                                           | $ | 14.09 |                                                                                                                                            |  |  | 222,000 | 

Item 13. Certain Relationships and Related Transactions, and Director
Independence

The information concerning certain relationships and related transactions is incorporated herein by
reference to the section captioned Other Information Relating to Directors and Executive OfficersTransactions with Related Persons in the Proxy Statement.

Information concerning director independence is incorporated by reference to the section titled Items to be Voted on by
Shareholders  Item 1  Election of Directors in the Proxy Statement.

Item 14.
Principal Accountant Fees and Services

The information required by this item is incorporated herein by reference to
the section captioned Items to be Voted on by Shareholders  Item 2  Ratification of the Independent Registered Public Accounting Firm in the Proxy Statement.

PART IV

Item 15.Exhibits and Financial Statement Schedules

List of Documents Filed as Part
of This Report

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



|                                                                                                                                                                                                                                                                
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Report of Independent Registered Public Accounting Firm                                                                                                                                                                                                         
|Consolidated Balance Sheets at December 31, 2011 and 2010                                                                                                                                                                                                       
|Consolidated Statements of Operations for Each of the Two Years in the Period Ended December 31, 2011                                                                                                                                                           
|Consolidated Statements of Stockholders Equity for Each of the Two Years in the Period
Ended December 31, 2011 Consolidated Statements of Cash Flows for Each of the Two Years in the
Period Ended December 31, 2011 Notes to Consolidated Financial Statements



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

(3)Exhibits. The following is a list of exhibits as part of this Annual Report on Form 10-K and is also the Exhibit Index.



|      |  |                                                                                                                                                                                                                                                                                                    
|----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|No.   |  | Description                                                                                                                                                                                                                                                                                        
|      | 
|3.1   |  | Ameriana Bancorp Amended and Restated Articles of Incorporation (incorporated herein by reference to the Companys Registration Statement on Form S-4 filed with the SEC on
September 18, 1989)                                                                                                    
|      | 
|3.2   |  | Amended and Restated Bylaws (incorporated herein by reference to the Companys Current Report on Form 8-K filed with the SEC on October 2, 2007)                                                                                                                                                   
|      | 
|4.1   |  | No long-term debt instrument issued by the Registrant exceeds 10% of consolidated assets or is registered. In accordance with paragraph 4 (iii) of Item 601 (b) of Regulation S-K,
the Registrant will furnish the SEC copies of long-term debt instruments and related agreements upon request    
|      | 
|10.1* |  | Employment Agreement, dated January 1, 2011, between Ameriana Bank and Jerome J. Gassen (incorporated herein by reference to the Companys Annual Report on Form 10-K for
the year ended December 31, 2010, filed with the SEC on March 31, 2011)                                                  
|      | 
|10.2* |  | Employment Agreement, dated January 1, 2011, between Ameriana Bank and Timothy G. Clark (incorporated herein by reference to the Companys Annual Report on Form 10-K for
the year ended December 31, 2010, filed with the SEC on March 31, 2011)                                                  
|      | 
|10.3* |  | Ameriana Bancorp Amended and Restated 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 9, 2003)                                                                                                
|      | 
|10.4* |  | Change in Control Severance Agreement, dated September 20, 2005, by and between Ameriana Bank and Trust, SB and James A. Freeman (incorporated herein by reference to the
Companys Quarterly Report on Form 10-Q for the quarter ended September 30, 2005 filed with the SEC on November 14, 2005)
|      | 
|10.5* |  | Employment Agreement, effective January 1, 2011, between Ameriana Bank, SB and John J. Letter (incorporated herein by reference to the Companys Annual Report on
Form 10-K for the year ended December 31, 2010, filed with the SEC on March 31, 2011)                                            
|      | 
|10.6* |  | Supplemental Life Insurance Agreement, effective December 20, 2007, by and between Ameriana Bank, SB and Jerome J. Gassen (incorporated herein by reference to the
Companys Annual Report on Form 10-K for the year ended December 31, 2007, filed with the SEC on March 31, 2008)                
|      | 
|10.7* |  | Supplemental Life Insurance Agreement, effective December 20, 2007, by and between Ameriana Bank, SB and Richard E. Hennessey (incorporated herein by reference to the
Companys Annual Report on Form 10-K for the year ended December 31, 2007, filed with the SEC on March 31, 2008)            
|      | 
|10.8* |  | Ameriana Bank, SB Salary Continuation Agreement dated December 15, 2008 between Ameriana Bank, SB and Jerome J. Gassen (incorporated herein by reference to the Companys
Annual Report on Form 10-K for the year ended December 31, 2008, filed with the SEC on March 30, 2009)                   
|      | 
|10.9* |  | Ameriana Bank, SB Salary Continuation Agreement dated December 18, 2008 between Ameriana Bank, SB and Timothy G. Clark (incorporated herein by reference to the Companys
Annual Report on Form 10-K for the year ended December 31, 2008, filed with the SEC on March 30, 2009)                   



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|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|------ |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       | 
|10.10* |  | Ameriana Bank, SB Supplemental Retirement Plan, dated December 10, 2008 between Ameriana Bank, SB and Michael E. Kent (incorporated herein by reference to the Companys Annual
Report on Form 10-K for the year ended December 31, 2008, filed with the SEC on March 30, 2009)                                                                                                                                                                                                                                                                                                                                     
|       | 
|10.11* |  | Mr. Dracketts Supplemental Retirement Plan is the same as the Supplemental Retirement Plan in Exhibit 10.11, which is incorporated herein by reference except as to: (i) the
name of the Executive, which is Charles M. Drackett, Jr.; (ii) the date of execution, which is December 30, 2008; and (iii) the annual benefit amount in Section 2.1.1, which is $21,000.                                                                                                                                                                                                                                             
|       | 
|10.12* |  | Mr. Danielsons Supplemental Retirement Plan is the same as the Supplemental Retirement Plan in Exhibit 10.11, which is incorporated herein by reference except as to: (i) the
name of the Executive, which is Donald C. Danielson; (ii) the date of execution, which is November 17, 2008; (iii) the normal retirement age under Section 1.10, which is age 87; and (iv) the annual benefit amount in Section 2.1.1, which is
$20,000.                                                                                                                                                                             
|       | 
|10.13* |  | Ameriana Bank, SB Supplemental Retirement Plan dated November 15, 2008 between Ameriana Bank, SB and Ronald R. Pritzke (incorporated herein by reference to the Companys Annual
Report on Form 10-K for the year ended December 31, 2008, filed with the SEC on March 30, 2009)                                                                                                                                                                                                                                                                                                                                    
|       | 
|10.14* |  | Mr. Hayess Supplemental Retirement Plan is the same as the Supplemental Retirement Plan in Exhibit 10.11, which is incorporated herein by reference except as to: (i) the name
of the Executive, which is R. Scott Hayes; (ii) the date of execution, which is November 16, 2008; and (iii) the annual benefit amount in Section 2.1.1, which is $15,000.                                                                                                                                                                                                                                                          
|       | 
|10.15* |  | Ameriana Bank, SB Supplemental Retirement Plan dated December 30, 2008 between Ameriana Bank, SB and Richard E. Hennessey (incorporated herein by reference to the Companys
Annual Report on Form 10-K for the year ended December 31, 2008, filed with the SEC on March 30, 2009)                                                                                                                                                                                                                                                                                                                                 
|       | 
|10.16* |  | Life Insurance Endorsement Method Split Dollar Plan Agreement, dated May 6, 1999, as amended, between Ameriana Bank, SB and Timothy G. Clark (incorporated herein by reference to the
Companys Annual Report on Form 10-K for the year ended December 31, 2008, filed with the SEC on March 30, 2009)                                                                                                                                                                                                                                                                                                              
|       | 
|10.17* |  | Ameriana Bancorp 2006 Long-Term Incentive Plan (incorporated herein by reference to Appendix A to the Proxy Statement for the 2006 Annual Meeting of Shareholders, filed with the SEC
on April 14, 2006)                                                                                                                                                                                                                                                                                                                                                                                                            
|       | 
|21     |  | Subsidiaries (incorporated herein by reference to the Companys Annual Report on Form 10-K for the year ended December 31, 2011, filed with the SEC on March 29,
2012)                                                                                                                                                                                                                                                                                                                                                                                                                                              
|       | 
|23     |  | Consent of BKD, LLP (incorporated herein by reference to the Companys Annual Report on Form 10-K for the year ended December 31, 2011, filed with the SEC on March 29,
2012)                                                                                                                                                                                                                                                                                                                                                                                                                                       
|       | 
|31.1   |  | Rule 13(a)-14(a) Certification of Chief Executive Officer                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|       | 
|31.2   |  | Rule 13(a)-14(a) Certification of Chief Financial Officer                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|       | 
|32     |  | Certifications Pursuant to 18 U.S.C. Section 1350                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|       | 
|101 ** |  | The following materials from Ameriana Bancorps Annual Report of Form 10-K for the year ended December 31, 2011 formatted in Extensible Business Reporting Language
(XBRL): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Income, (iii) the Consolidated Statements of Shareholders Equity, (iv) the Consolidated Statements of Cash Flows and (v) Notes to the Consolidated
Financial Statements, tagged as blocks of text. (incorporated herein by reference to the Companys Annual Report on Form 10-K for the year ended December 31, 2011, filed with the SEC on March 29, 2012)



|* | Management contract or compensation plan or arrangement.
|- | --------------------------------------------------------

|** | Furnished, not filed.
|-- | ---------------------



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SIGNATURES

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



|                  |  |  |  |                  |  |                                                                                        
|----------------- |  |  |  | ---------------- |  | ---------------------------------------------------------------------------------------
|                  |  |  |  | AMERIANA BANCORP
|                  |  |  | 
|Date: May 3, 2012 |  |  |  | By:              |  | /s/ Jerome J. Gassen                                                                   
|                  |  |  |  |                  |  | Jerome J. Gassen President
and Chief Executive Officer (Duly Authorized Representative)