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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549


                                    FORM 10-K

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

/X/  ANNUAL REPORT  PURSUANT TO SECTION 13 OR 15(d) OF THE  SECURITIES  EXCHANGE
     ACT OF 1934

For the fiscal year ended December 31, 2003
                                       OR

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

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

                         Commission File Number: 0-18392

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

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

2118 Bundy Avenue, New Castle, Indiana                      47362-1048
--------------------------------------                 --------------------
(Address of Principal Executive Offices)                    (Zip Code)

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

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

           Securities registered pursuant to Section 12(g) of the Act:
                     Common Stock, par value $1.00 per share
                     ---------------------------------------

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

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

Indicate  by check mark  whether  the  registrant  is an  accelerated  filer (as
defined in Exchange Act Rule 12b-2). Yes    No X
                                         --    --

At June 30, 2003, the registrant had 3,148,288 shares of its Common Stock, $1.00
per share,  outstanding.  The  aggregate  market  value of voting  stock held by
non-affiliates  of the registrant at June 30, 2003 was approximately $39 million
based on the closing  sale price of the  registrant's  Common Stock as listed on
the Nasdaq National Market as of the last business day of the registrant's  most
recently  completed  second fiscal  quarter.  For purposes of this  calculation,
directors and executive officers are not treated as "non-affiliates".

                      DOCUMENTS INCORPORATED BY REFERENCE

1.   Portions of Proxy  Statement  for the 2004 Annual  Meeting of  Shareholders
     ("Proxy Statement") (Part III).


<PAGE>
                                     PART I

Item 1.  Business
-----------------

FORWARD-LOOKING STATEMENTS

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

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

GENERAL

     THE COMPANY.  Ameriana  Bancorp (the  "Company") is a bank holding  company
subject to regulation  and  supervision by the Board of Governors of the Federal
Reserve System (the "Federal  Reserve Board") under the Bank Holding Company Act
of 1956 ("BHCA").  The Company became the holding  company for the Bank in 1990.
The Company's  principal  subsidiary is Ameriana Bank and Trust,  SB, an Indiana
chartered savings bank  headquartered in New Castle,  Indiana (the "Bank").  The
Company  also holds a minority  interest in a limited  partnership  organized to
acquire  and manage  real  estate  investments,  which  qualify  for federal tax
credits.

     THE BANK. The Bank began  operations in 1890. Since 1935, the Bank has been
a member of the Federal Home Loan Bank ("FHLB") System. Its deposits are insured
to  applicable  limits  by the  Savings  Association  Insurance  Fund  ("SAIF"),
administered  by the FDIC.  Effective  June 29, 2002,  the Bank  converted to an
Indiana  savings bank and adopted its present  name,  "Ameriana  Bank and Trust,
SB." As a result of the conversion, the Bank become subject to regulation by the
Indiana Department of Financial Institutions (the "DFI") and the Federal

                                       1
<PAGE>

Deposit  Insurance  Corporation  ("FDIC")  rather  than by the  Office of Thrift
Supervision  and the  Company  became a bank  holding  company.  The Bank's main
office is located at 2118  Bundy  Avenue,  New  Castle,  Indiana.  The Bank also
conducts  business  through ten Indiana  branch  offices  located in New Castle,
Middletown,  Knightstown,  Morristown,  Greenfield, Anderson, Avon, McCordsville
and New Palestine, Indiana. The Bank has three direct wholly-owned subsidiaries,
Ameriana Insurance Agency ("AIA"), Ameriana Financial Services, Inc. ("AFS") and
Ameriana Investment Management, Inc. ("AIMI"). AIA provides insurance sales from
offices in New  Castle,  Greenfield  and Avon,  Indiana.  AFS  offers  insurance
products through its ownership of an interest in Family Financial Life Insurance
Company,  New Orleans,  Louisiana,  which offers a full line of credit,  related
insurance products.  AIMI manages the Company's investment  portfolio.  In 2002,
AFS acquired a 20.9% ownership interest in Indiana Title Insurance Company,  LLC
through which it offers title insurance.  AFS also operates a brokerage facility
in  conjunction  with  Linsco/Private  Ledger.  The Bank  maintains a website at
www.ameriana.com.
-----------------

     The business of the Bank consists primarily of attracting deposits from the
general  public and  originating  mortgage  loans on  single-family  residences,
multi-family  housing  and  commercial  real  estate.  The Bank also  makes home
improvement  loans and consumer loans and,  through its  subsidiary,  engages in
insurance and brokerage  activities.  The Bank has a Business  Services Division
which  provides  specialized  lending and other  banking  services  for business
customers. As a result of the Business Services Division, commercial real estate
loan activity has increased significantly during 2003, 2002 and 2001.

     The Bank operates a Trust Department,  which provides trust, investment and
estate planning services.  The principal sources of funds for the Bank's lending
activities  include  deposits  received from the general public,  funds borrowed
from the FHLB,  principal  amortization  and  prepayment  of loans.  The  Bank's
primary  sources  of  income  are  interest  and fees on loans and  interest  on
investments.   The  Bank  has  from  time  to  time  purchased  loans  and  loan
participations in the secondary market. The Bank also invests in various federal
and government agency obligations and other investment  securities  permitted by
applicable laws and regulations, including mortgage-backed, municipal and equity
securities.  The Bank's principal expenses are interest paid on deposit accounts
and borrowed funds and operating expenses incurred in the operation of the Bank.

     RECENT DEVELOPMENTS.  On September 30, 2003, the Bank completed the sale of
its two  Cincinnati-area  branches  located  in Deer Park and  Landen,  Ohio and
recorded an  after-tax  gain of  approximately  $2,930,000  or $0.93 per diluted
share in the third  quarter  2003.  The  transaction  included  the Bank's  real
property  related to the Deer Park branch and its  leasehold on the premises for
the Landen  branch.  Additionally,  the Bank  conveyed  most of

                                       2
<PAGE>
the consumer and commercial  loans at those branches as part of the transaction,
as well as the  branches'  saving  deposits,  but retained and will  continue to
service  certain  single  family  residential   mortgages  originated  in  those
locations.

     On September 30, 2003, the Company  charged-off  the remaining  balances of
two troubled  equipment lease pools originated by Commercial Money Center, a now
bankrupt  company,  and recorded an after-tax  loss of  $3,534,000  or $1.12 per
diluted  share  for the year  ended  December  31,  2003  (see  Item 3 -- "Legal
Proceedings").


     REGULATORY  ACTIONS.  During the second  quarter of 2002,  the Bank entered
into a memorandum  of  understanding  ("MOU")  with the FDIC and the DFI.  Among
other  things,  the MOU  required  the Bank to adopt  written  action plans with
respect to certain  classified  assets,  revise its  lending  policies,  require
greater  financial  information from borrowers,  establish a loan review program
and certain other internal controls. For a more detailed discussion of the terms
and  conditions of the MOU, see  "Regulation  and  Supervision - Regulation  and
Supervision of the Bank - Capital Requirements" below.

LENDING AND INVESTMENT ACTIVITIES

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

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


                                       3
<PAGE>

     The following table sets forth information  concerning the Bank's aggregate
loans by type of loan at the dates indicated.
<TABLE>
<CAPTION>

                                                                                  At December 31,
                                             2003                 2002                 2001               2000            1999
                                     -------------------   -----------------    -------------------  --------------   -------------
                                     Amount          %     Amount        %       Amount        %     Amount     %     Amount   %
                                     ------        -----   ------      -----     ------      -----   ------    ---    ------  ---
<S>                                    <C>         <C>      <C>          <C>      <C>          <C>   <C>       <C>     <C>    <C>
                                                                            (Dollars in thousands)

Real estate mortgage loans:
  Commercial........................ $  79,621    37.19%   $  88,558  27.54%   $  61,678  16.91%   $ 35,615   8.57% $ 22,411   6.51%
  Residential loans.................   100,865    47.12      157,622  49.00      211,601  58.00     295,949  71.18   250,392  72.77
  Construction loans................    18,035     8.43       42,714  13.28       42,045  11.52      43,287  10.41    42,971  12.49
Commercial loans....................     7,672     3.58       19,192   5.97       18,536   5.08       8,764   2.11     1,209   0.35
Consumer loans:
  Mobile home and auto loans........     5,191     2.42       10,092   3.14       15,941   4.37      20,767   5.00    16,373   4.77
  Loans secured by deposits.........       811     0.38        1,130   0.35        1,348   0.37       1,598   0.38     1,392   0.40
  Home improvement loans............       206     0.10          248   0.08          403   0.11         321   0.08     1,577   0.46
  Other.............................     1,661     0.78        2,043   0.64       13,294   3.64       9,431   2.27     7,762   2.26
                                     ---------   ------    --------- ------    --------- ------    -------- ------  -------- ------
     Total..........................   214,062   100.00%     321,599 100.00%     364,846 100.00%    415,732 100.00%  344,087 100.00%
                                     ---------   =======   --------- ======    --------- ======    -------- ======  -------- ======

Less:
  Loans in process..................     5,859                 7,985              12,725             16,724           16,723
  Deferred loan fees................       318                   362                   8               (143)            (129)
  Loan loss reserve.................     3,744                 8,666               1,730              1,489            1,534
                                     ---------             ---------           ---------           --------         --------
   Subtotal.........................     9,921                17,013              14,463             18,070           18,128
                                     ---------             ---------           ---------           --------         --------
     Total.......................... $ 204,141             $ 304,586           $ 350,383           $397,662         $325,959
                                     =========             =========           =========           ========         ========
</TABLE>

                                        4
<PAGE>


     The following table shows, at December 31, 2003, the Bank's aggregate loans
based on their contractual terms to maturity (mortgage-backed securities are not
included).  Demand loans,  loans having no stated  schedule of repayments and no
stated  maturity  and  overdrafts  are  reported  as due in one  year  or  less.
Contractual  principal repayments of loans do not necessarily reflect the actual
term of the loan portfolio.  The average life of mortgage loans is substantially
less than their  contractual  terms because of loan  prepayments  and because of
enforcement of due-on-sale  clauses,  which give the Bank the right to declare a
loan  immediately  due and payable in the event,  among other  things,  that the
borrower  sells the real  property  subject to the  mortgage and the loan is not
repaid.  The average  life of mortgage  loans tends to increase,  however,  when
current  mortgage  loan rates  substantially  exceed rates on existing  mortgage
loans.
<TABLE>
<CAPTION>
                                                           Amounts of Loans Which Mature in
                                  --------------------------------------------------------------------------------
                                                                                 2009 and
                                    2004              2005 - 2008               Thereafter               Total
                                  --------            -----------              ------------            ----------
                                                                   (In thousands)
<S>                                 <C>                   <C>                    <C>                      <C>
Type of Loan:
   Real estate mortgage.......  $   28,620             $   18,417               $ 151,484            $  198,521
   Other......................       6,011                  7,930                   1,600                15,541
                                ----------             ----------               ---------            ----------
      Total...................  $   34,631             $   26,347               $ 153,084            $  214,062
                                ==========             ==========               =========            ==========
</TABLE>


         The following table sets forth the dollar amount of the Company's
aggregate loans due after one year from December 31, 2003 which have
predetermined interest rates and which have floating or adjustable interest
rates (mortgage-backed securities are not included).
<TABLE>
<CAPTION>

                                                      Fixed              Adjustable
                                                       Rate                  Rate                 Total
                                                   -----------           -----------              -----
                  <S>                                 <C>                   <C>                   <C>
                                                                       (In thousands)

          Real estate mortgage loans.............  $   39,821             $ 130,080            $ 169,901
          Other loans............................       8,245                 1,285                9,530
                                                   ----------             ---------            ---------
            Total................................  $   48,066             $ 131,365            $ 179,431
                                                   ==========             =========            =========
</TABLE>

     RESIDENTIAL REAL ESTATE LENDING.  The Bank's primary lending activities are
the origination of loans on one-to-four family  residential  dwelling units. The
Bank  currently  offers  fixed-rate,   first  and  second  mortgage  loans.  The
fixed-rate  mortgage  loans provide for a maturity of ten to thirty years,  with
the thirty-year  loan bearing a slightly  higher rate of interest.  The terms of
the first mortgage loans generally conform to the guidelines  established by the
Federal Home Loan Mortgage Corporation ("FHLMC") and are, therefore, saleable in
the secondary  mortgage  market.  The Bank's  fixed-rate  second  mortgage loans
provide  for a maturity of up to 15 years and bear  interest at a rate  slightly
higher than that borne by the first mortgage loans. At the time the Bank makes a
fixed-rate  mortgage  loan,  it  determines  whether  the  loan  will be held in
portfolio  or sold.  Normally  the  Bank  sells  fixed-rate  loans  and

                                       5
<PAGE>

retains  adjustable-rate  loans.  Once placed in portfolio,  loans are not sold.
Loans originated for sale are promptly sold in the secondary market.  Fixed-rate
mortgage loans in the amount of $150.3  million were  originated for sale during
2003 and $154.5 million were sold at a gain of $1.9 million. Mortgage loans held
for sale are  those  loans  that have been  committed  to be sold,  but have not
closed as of the end of the year and were $730,000 at December 31, 2003.

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

     The Bank  limits the  maximum  loan-to-value  ratio on  one-to-four  family
residential  first  mortgages to 97% of the appraised value with the requirement
that private mortgage insurance normally be obtained for loan-to-value ratios in
excess  of 80%.  The Bank  limits  the  loan-to-value  ratio to 89.9% on  second
mortgages on one-to-four family dwellings.

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

     CONSTRUCTION AND COMMERCIAL REAL ESTATE LENDING.  The Bank originates loans
secured by existing commercial  properties and construction loans on residential
real estate. Churches, nursing homes, hotels/motels,  and other income-producing
properties  secure the Bank's  commercial real estate loans. The Bank's Business
Services  Division  operation  makes  direct  commercial  real estate  loans and
purchases  loan   participations  from  other  financial   institutions.   These
participations  in commercial  real estate loans are reviewed and approved based
upon the same credit  standards  as direct  commercial  real estate loans at the
Bank.  Loans secured by commercial real estate  properties are generally  larger
and involve a greater degree of credit risk than one-to-four  family residential
mortgage  loans.  Because  payments on loans secured by  commercial  real estate
properties are often dependent on the successful  operation or management of the
properties,  repayment of such loans may be subject to adverse conditions in the
real estate market or by general economic conditions.  If the cash flow from the
project is reduced (for  example,  if leases are not  obtained or renewed),  the
borrower's  ability to repay the loan may be  impaired.  To  minimize  the risks
involved in originating such loans, the Bank considers,  among other things, the
credit  worthiness

                                       6
<PAGE>

of the  borrower,  the location of the real estate,  the condition and occupancy
levels  of the  security  and  the  quality  of the  organization  managing  the
property.

     The Bank originates  and/or purchases  construction  loans on single-family
residential  properties in its primary  market  areas.  The loans are secured by
real estate,  and most of the homes to be constructed  are already  subject to a
sales  contract  at  the  time  the  construction   loan  is  made.  The  Bank's
construction  loans generally range in size between  $100,000 and $500,000,  and
the Bank's  commercial  real  estate  loans range from  $100,000 to  $4,000,000.
Substantially  all  of  the  commercial  real  estate  and  construction   loans
originated  and/or purchased by the Bank have either  adjustable  interest rates
with  maturities of 30 years or less or are loans with fixed  interest rates and
maturities of ten years or less.

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

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

     CONSUMER LOANS.  The consumer loans granted by the Bank have included loans
on automobiles and other consumer goods,  loans secured by savings  accounts and
secured and unsecured lines of credit.

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

     COMMERCIAL BUSINESS LENDING. Under applicable law, the Bank is permitted to
make  secured  and  unsecured  loans for  commercial,  corporate,  business  and
agricultural purposes, including issuing letters of credit and

                                       7
<PAGE>

engaging in inventory financing and commercial leasing activities. The Bank does
not, as a common practice, make unsecured commercial loans. The total lease and
commercial portfolio at December 31, 2003 was $7.7 million.

     ORIGINATIONS,  PURCHASES  AND SALES.  Historically,  most  residential  and
commercial real estate loans have been  originated  directly by the Bank through
salaried loan officers.  Residential loan originations have been attributable to
referrals  from  real  estate  brokers  and  builders,  depositors  and  walk-in
customers,  and  commissioned  loan agents.  The Bank also obtains  consumer and
commercial loans from paid brokers. The Bank obtained $1.5 million of loans from
brokers and other financial  institutions  through loan  participations in 2003.
Commercial  real  estate  and  construction  loan  originations  have  also been
obtained by direct solicitation.  Consumer loan originations are attributable to
walk-in customers who have been made aware of the Bank's programs by advertising
as well as direct solicitation.

     The Bank has previously  sold whole loans to other  financial  institutions
and  institutional  investors.  Sales of loans generate  income (or loss) at the
time of sale,  produce future  servicing income and provide funds for additional
lending and other  purposes.  When the Bank  retains the  servicing  of loans it
sells,  the Bank  retains  responsibility  for  collecting  and  remitting  loan
payments,  inspecting the properties,  making certain insurance and tax payments
on behalf of borrowers and otherwise  servicing those loans.  The Bank typically
receives  a fee of between  0.25% and  0.375% per annum of the loan's  principal
amount for  performing  this  service.  The right to service a loan has economic
value and the Bank carries  capitalized  servicing  rights on its books based on
comparable market values and expected cash flows. At December 31, 2003, the Bank
was servicing  $193.0  million of loans for others.  The aggregate book value of
capitalized servicing rights at December 31, 2003 was $1.3 million.

     Management  believes that  purchases of loans and loan  participations  are
generally desirable, primarily when area mortgage demand is less than the supply
of funds  available  for  local  mortgage  origination  or when  loan  terms are
available  in  areas  outside  the  Bank's  local  lending  areas  that are more
favorable to its investment requirements.  Additionally,  purchases of loans may
be made in order to  diversify  the Bank's  lending  portfolio.  The Bank's loan
purchasing activities fluctuate significantly. The seller generally performs the
servicing of purchased  loans.  In order 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 --
Results of Operations" included in Item 7 of this Annual Report.

                                       8
<PAGE>

     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 salaried loan officer.  As part of the loan application  process,
the  Bank  obtains  information  concerning  the  income,  financial  condition,
employment,  and  credit  history  of  the  applicant.  In  addition,  qualified
appraisers inspect and appraise the property that is offered to secure the loan.

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

     LOAN  COMMITMENTS.  Conventional loan commitments by the Bank are generally
granted for periods of up to 60 days.  The total amount of the Bank's  aggregate
outstanding commitments to originate real estate loans at December 31, 2003, was
approximately $1.2 million of residential mortgage commitments and approximately
$1.7 million of commercial  commitments.  It has been the Bank's experience that
few commitments expire unfunded.

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

     When possible,  the Bank charges loan  origination fees 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
from none to 1.00 point  (one  point  being  equivalent  to 1% of the  principal
amount of the loan).  In  accordance  with  Statement  of  Financial  Accounting
Standard No. 91, loan  origination  and commitment  fees and certain direct loan
origination  costs are deferred and the net amount amortized as an adjustment of
yield over the contractual life of the related loans.

                                        9
<PAGE>

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

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

     NON-PERFORMING  ASSETS AND ASSET  CLASSIFICATION.  Loans are  reviewed on a
regular  basis and are placed on a  non-accrual  status when,  in the opinion of
management,  the  collection  of  additional  interest is doubtful.  Residential
mortgage  loans are  placed on  non-accrual  status  when  either  principal  or
interest is 90 days or more past due unless 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 becomes over 120 days  delinquent.
Commercial  business and real estate loans are placed on non-accrual status when
the loan is 90 days or more past due.  Interest accrued and unpaid at the time a
loan is placed  on  non-accrual  status  is  charged  against  interest  income.
Subsequent payments are 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 the lower of the unpaid
principal  balance  of the  related  loan  or its  fair  value.  Any  subsequent
deterioration  of the property is charged off  directly to income,  reducing the
value of the asset.

                                       10
<PAGE>

         The following table sets forth information with respect to the
Company's aggregate non-performing assets at the dates indicated.
<TABLE>
<CAPTION>

                                                                           At December 31,
                                                     -----------------------------------------------------------
                                                        2003        2002        2001       2000         1999
                                                        -----      ------      ------     ------       ------
       <S>                                              <C>         <C>         <C>        <C>          <C>
                                                                       (Dollars in thousands)
Loans accounted for on a non-accrual basis:
  Real Estate:
     Residential....................................  $  1,691    $  3,281    $    818    $    720    $    703
     Commercial.....................................     3,390       2,269       1,348          36         226
     Construction...................................     3,217          --          --          --          --
  Commercial........................................        85      12,500          --           8          11
  Consumer..........................................        --         257          12          37         231
                                                      --------    --------    --------    --------    --------
    Total...........................................     8,383      18,307       2,178         801       1,171
                                                      --------    --------    --------    --------    --------

Accruing loans contractually past due 90
  days or more:
  Real Estate:
     Residential....................................        74         103         268         576          16
     Commercial.....................................        --          28          --          --          --
     Construction...................................        --          --          --         158          --
  Commercial........................................        --          --          --          --          --
  Consumer..........................................        --           4         127          13           9
                                                      --------    --------    --------    --------    --------
    Total...........................................        74         135         395         747          25
                                                      --------    --------    --------    --------    --------
    Total of non-accrual and
       90 days past due loans.......................  $  8,457    $ 18,442    $  2,573    $  1,548    $  1,196
                                                      ========    ========    ========    ========    ========

Percentage of total loans (excluding
    mortgage-backed securities).....................      4.07%       5.89%       0.74%       0.39%       0.37%
                                                      ========    ========    ========    ========    ========
Other non-performing assets (1).....................  $    623    $    525    $    606    $    125    $     --
                                                      ========    ========    ========    ========    ========
</TABLE>

--------------------
(1)  Other   non-performing   assets   represents   property   acquired  through
     foreclosure or  repossession.  This property is carried at the lower of its
     fair market value or the principal balance of the related loan.

     The decrease of $9.9 million in non-accrual  loans during 2003 is primarily
due to the  charge-off  of the two  troubled  equipment  lease  pools  for $10.9
million (see Item 3 -- "Legal Proceedings").

     The  Bank  has  real  estate   development/lot   loans  and  single  family
residential loans on existing properties with a builder/developer group, and its
related parties,  totaling $3.5 million at December 31, 2003, that are currently
in  default  and  bankruptcy.  There  appears  to be a  considerable  number  of
fraudulent  transactions involved and there are multiple lien issues on a number
of the properties. The Bank is working closely with the workout specialist hired
by the  bankruptcy  trustee on  liquidation  of the  properties  involved in the
bankruptcy and we are negotiating  with the borrower and its related parties and
their counsel for resolution of the remaining properties.

                                       11
<PAGE>

     During 2003, the Bank would have recorded gross interest income of $596,000
on the loans set forth above as accounted  for on a non-accrual  basis,  if such
loans had been  current  in  accordance  with  their  terms.  Instead,  the Bank
recorded interest income of $71,000 on those loans for the year.

     For  additional  information  regarding the Bank's  problem assets and loss
provisions recorded thereon, see "Management's  Discussion and Analysis" in Item
7 of this Annual Report.

RESERVES FOR LOSSES ON LOANS AND REAL ESTATE

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

     It is  management's  policy to maintain  reserves for  estimated  losses on
loans. The Bank's  personnel  provide general loan loss reserves based on, among
other things,  estimates of the historical loan loss  experience,  evaluation of
economic  conditions  in general and in various  sectors of the Bank's  customer
base, and periodic  reviews of loan  portfolio  quality.  Specific  reserves are
provided  for  individual  loans where the  ultimate  collection  is  considered
questionable by management after reviewing the current status of loans which are
contractually  past due and considering the net realizable value of the security
of the loan or guarantees, if applicable. It is management's policy to establish
specific  reserves for estimated  losses on delinquent  loans when it determines
that losses are  anticipated  to be incurred on the  underlying  properties.  At
December  31,  2003,  the Bank's  allowance  for loan  losses  amounted  to $3.7
million.

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

                                       12
<PAGE>

         The following table sets forth an analysis of the Bank's aggregate
allowance for loan losses for the periods indicated.
<TABLE>
<CAPTION>

                                                                           Year Ended December 31,
                                                      ----------------------------------------------------------
                                                        2003        2002        2001       2000         1999
                                                       ------      ------      ------     ------       ------
<S>                                                     <C>         <C>          <C>       <C>          <C>
                                                                             (Dollars in thousands)

Balance at Beginning of Period.....................  $   8,666    $  1,730    $  1,489    $  1,534    $  1,284
                                                     ---------    --------    --------    --------    --------

Charge-Offs:
  Real Estate:
    Residential....................................        182         202          29          30          --
    Commercial.....................................         68          --          --         206          --
    Construction...................................         --          24          --          --          --
  Commercial business..............................     10,902          --          --         252          --
  Consumer.........................................        242         162         117          --          98
                                                     ---------    --------    --------    --------    --------
                                                        11,394         388         146         488          98
                                                      --------    --------    --------    --------    --------

Recoveries:
  Real Estate:
    Residential....................................          1          --          12          --          --
    Commercial.....................................         --          --          --          --          --
    Construction...................................         --          --          --          --          --
  Commercial business..............................         --          --          --           3           4
  Consumer.........................................         31          24          15          23          16
                                                     ---------    --------    --------    --------    --------
                                                            32          24          27          26          20
                                                      --------    --------    --------    --------    --------

Net Charge-Offs....................................    (11,362)       (364)       (119)       (462)        (78)
Increase from Acquisition..........................         --          --          --          --          --
Provision for Loan Losses..........................      6,440       7,300         360         417         328
                                                     ---------    --------    --------    --------    --------


Balance at End of Period............................  $  3,744    $  8,666    $  1,730    $  1,489    $  1,534
                                                      ========    ========    ========    ========    ========

Ratio of Net Charge-Offs to Average
  Loans Outstanding During the Period..............       4.25%       0.11%       0.03%       0.12%       0.03%
                                                      ========    ========    ========    ========    ========

Ratio of Ending Allowance for
  Loan Losses to Ending Loans......................       1.80%       2.77%       0.49%       0.37%       0.47%
                                                      ========    ========    ========    ========    ========
</TABLE>


         The provision for loan losses in 2003 decreased to $6.4 million from
$7.3 million from the prior year. The provision expense for both 2003 and 2002
was significantly higher than 1999 through 2001. The increases in 2002 and 2003
were primarily due to the non-accrual loans in the table under the heading
"Non-Performing Assets and Asset Classification" earlier in this section. The
two lease pools had 50% reserves at year-end 2002 due to an expected lengthy
litigation process, and the remaining 50% was charged off in 2003 due to
continuing uncertainty surrounding the prospects for eventual recovery from the
sureties (see Item 3 -- "Legal Proceedings"). The loans to the builder/developer
group, and its related parties had 25% reserves for $895,000 and $831,000 at
year-end 2002 and 2003 respectively. The remaining reserves were necessary to
reflect management's view on the risk in the loan

                                       13
<PAGE>

portfolio due to the change in the portfolio mix. See also "Item 7. Management's
Discussion  and Analysis of Financial  Condition  and Results of  Operations  --
Loans -- Credit Quality".

     Net  charge-offs  for the year ended  December  31,  2003  increased  $11.0
million  from  2002.  The  lease  write-off  in  2003  was  $10.9  million.  Net
charge-offs  for the year ended December 31, 2002 increased  $245,000 from 2001.

     The  following  table sets forth a  breakdown  of the  Company's  aggregate
allowance  for loan losses by loan category at the dates  indicated.  Management
believes that the allowance can be allocated by category only on an  approximate
basis.  The  allocation  of the  allowance to each  category is not  necessarily
indicative  of future  losses and does not restrict the use of the  allowance to
absorb losses in any category.
<TABLE>
<CAPTION>
                                                                        At December 31,
                                            -------------------------------------------------------------------------------
                                                          2003                   2002                      2001
                                            -------------------------- ------------------------  --------------------------

                                                         Percent of                Percent of                 Percent of
                                                        Loans in Each             Loans in Each              Loans in Each
                                                         Category to               Category to                Category to
                                            Amount       Total Loans    Amount     Total Loans   Amount       Total Loans
                                            ------      -------------   ------    -------------  ------      -------------
             <S>                             <C>           <C>          <C>        <C>           <C>          <C>
                                                                         (Dollars in thousands)
Loans:
  Real Estate Mortgage:
    Commercial............................  $   1,686         37%      $   1,414      28%        $     617       17%
    Residential...........................        620         47             772      49               417       58
    Construction..........................      1,095          9             539      13                90       12
  Commercial..............................        192          4           5,618       6               185        5
  Consumer................................        151          3             323       4               421        8
                                            ---------        ---       ---------     ---         ---------      ---
    Total Allowance for Loan Losses.......  $   3,744        100%      $   8,666     100%        $   1,730      100%
                                            =========        ===       =========     ===         =========      ===
<CAPTION>

                                                                         At December 31,
                                            -----------------------------------------------------------------------
                                                          2000                                   1999
                                            -------------------------------         -------------------------------
                                                                Percent of                            Percent of
                                                               Loans in Each                         Loans in Each
                                                                Category to                           Category to
                                              Amount            Total Loans          Amount           Total Loans
                                              ------           -------------         ------          --------------
      <S>                                      <C>                 <C>                <C>                   <C>
                                                                      (Dollars in thousands)
Loans:
  Real Estate Mortgage:
    Commercial..........................    $    76                 9%              $   58                 7%
    Residential.........................        635                71                  649                73
    Construction........................         93                10                  112                12
  Commercial............................          8                 2                   11                --
  Consumer..............................        677                 8                  704                 8
                                              -----               ---              -------               ---
    Total Allowance for Loan Losses.....    $ 1,489               100%             $ 1,534               100%
                                              =====               ===                =====               ===
</TABLE>

                                       14
<PAGE>

INVESTMENT ACTIVITIES

     Interest  and   dividends   on   investment   securities,   mortgage-backed
securities,   collateralized   mortgage   obligations,   FHLB  stock  and  other
investments  provide  the second  largest  source of income for the Bank  (after
interest on loans),  constituting 16.7% of the Bank's total interest income (and
dividends)  for fiscal  2003.  The Bank  maintains  its liquid  assets at levels
believed  adequate  to  meet  requirements  of  normal  banking  activities  and
potential savings outflows.

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

     The Bank's investment portfolio consists primarily of obligations issued by
federal  agencies  such as  FNMA,  FHLB  and the  FFCB  System,  mortgage-backed
securities  issued  by GNMA,  FNMA and  FHLMC.  The  Bank has also  invested  in
trust-preferred  securities,  municipal  securities,  mutual funds and maintains
interest-bearing deposits in other financial institutions (primarily the FHLBs).
As a member of the FHLB System,  the Bank is also  required to hold stock in the
FHLBs of  Indianapolis  and  Cincinnati.  At December 31, 2003, the Bank had two
investments  which exceeded 10% of equity:  securities  issued by Shay Financial
Services,  Inc.  with book values of $5.1  million  and $4.6  million and market
values of $5.0 million and $4.5 million as of that date.

                                       15
<PAGE>

     During  2001,   the  Bank   substantially   increased   its   portfolio  of
mortgage-backed  securities and  collateralized  mortgage  obligations to offset
declines in the loan portfolio due to refinancings and calls of federal agencies
securities  attributable in both cases to the radically  declining interest rate
environment.  As interest  rates  stabilized  at the end of 2001,  the estimated
lives  of  these  securities  increased  significantly,  exposing  the  Bank  to
unacceptable  levels of interest rate risk.  The Bank  accordingly  reclassified
these  securities,   effective  December  31,  2001,  from  held-to-maturity  to
available-for-sale and marked them to fair value, recording an accumulated other
comprehensive  loss of  $696,000.  The Bank  disposed  of these  mortgage-backed
securities  and  collateralized  mortgage  obligation  portfolios  in the  first
quarter of 2002 at an estimated after-tax loss of $1.9 million. All investments,
as of December 31, 2003, was classified as available-for-sale.

     The following table sets forth the carrying value of the Banks  investments
in federal  agency  obligations  and  mortgage-backed  securities,  collaterized
mortgage obligations and other investments at the dates indicated.
<TABLE>
<CAPTION>

                                                                  At December 31,
                                                     -----------------------------------------
                                                      2003              2002             2001
                                                     ------            ------           ------
                  <S>                                 <C>               <C>               <C>
                                                                   (In thousands)

         Federal agencies..........................  $  78,423         $   8,227        $  28,696
         Mortgage-backed securities and
            collateral mortgage obligations........     36,501            27,824          110,393
         Interest-bearing deposits (1).............      5,044            38,215            4,283
         FHLB stock................................      6,948             6,759            7,365
         Mutual fund...............................     11,796                --               --
         Municipal securities......................      9,424            20,538               --
         Other investments.........................      1,644             1,566            1,540
                                                     ---------         ---------        ---------
             Total investments.....................  $ 149,780         $ 103,129        $ 152,277
                                                     =========         =========        =========
</TABLE>
----------------------
(1)  Consist of overnight deposits and short-term non-negotiable certificates of
     deposit.



                                       16
<PAGE>
         The following table sets forth information regarding maturity
distribution and average yields for the Bank's investment securities portfolio
at December 31, 2003. The Bank's federal agencies investment portfolio consists
of obligations issued by FHLMC, FHLB, and the FFCB System.
<TABLE>
<CAPTION>

                              Within 1 Year        1-5 Years       5-10 Years       Over 10 Years        Total
                              -------------      ------------     ------------      -------------    ------------
                              Amount  Yield      Amount Yield     Amount Yield      Amount Yield     Amount Yield
                              ------  -----      ------ -----     ------ -----      ------ -----     ------ -----
<S>                             <C>   <C>        <C>    <C>       <C>    <C>        <C>    <C>       <C>     <C>
                                                                 (Dollars in thousands)

Federal agencies.........     $ 4,061  3.70%     $74,362 2.98%      --     --         --     --      $78,423  3.02%
Municipal Securities.....          --    --           --   --   $3,205   3.46     $6,219   3.66%     $ 9,424  3.59%
Mutual fund(1)...........     $11,796  2.69%          --   --       --     --         --     --      $11,796  2.69%
Trust preferred securities         --    --           --   --       --     --     $1,644   8.09%     $ 1,644  8.09%
</TABLE>
(1) Note that these securities have no maturity date.

     The   Bank's   mortgage-backed    securities   include   both   fixed   and
adjustable-rate  securities.  At December 31, 2003,  the Bank's  mortgage-backed
securities consisted of the following:

<TABLE>
<CAPTION>

                                                                       Carrying Average
                                                                       Amount      Rate
                                                                      --------    ------
                 <S>                                                    <C>         <C>
                                                                    (Dollars in thousands)

        Variable-rate:
           Repricing in one year or less...........................  $     2,923    3.45%
        Fixed-rate:
           Maturing in five years or less..........................  $    17,822    2.84%
           Maturing in five to ten years...........................  $     6,146    4.18%
           Maturing in more than ten years.........................  $     9,610    5.65%
                                                                     -----------    ----
                Total..............................................  $    36,501    3.86%
                                                                     ===========    ====
</TABLE>

SOURCES OF FUNDS

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

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

                                       17
<PAGE>

with  various  maturities.   The  Bank  also  offers   tax-deferred   individual
retirement, Keogh retirement, and simplified employer plan retirement accounts.

     As of December 31, 2003,  approximately  45.8%, or $158.5  million,  of the
Bank's  aggregate  deposits  consisted  of various  savings  and demand  deposit
accounts  from which  customers  are  permitted  to  withdraw  funds at any time
without penalty.

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

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

                                       18
<PAGE>



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

<TABLE>
<CAPTION>
                                                             Increase                           Increase
                                             Balance at     (Decrease)       Balance at        (Decrease)      Balance at
                                           December 31,     From Prior      December 31,        From Prior     December 31,
                                               2003            Year            2002                Year            2001
                                       ------------------   ----------  -----------------     ------------ ------------------
       <S>                                      <C>           <C>             <C>                  <C>          <C>
                                                                              (Dollars in thousands)

Savings deposits....................   $   30,558   8.84%   $ (3,432)   $ 33,990     8.45%    $   1,343    $  32,647    7.92%
NOW accounts........................       43,162  12.48       3,818      39,344     9.78        (1,297)      40,641    9.85
Super NOW accounts..................       36,545  10.57      36,545          --       --            --           --      --
Money market deposit accounts.......       48,238  13.95     (12,889)     61,127    15.20        13,441       47,686   11.56
Certificate accounts:
  Certificates $100,000 and more....       27,212   7.87     (18,298)     45,510    11.32       (14,853)      60,363   14.64
  Fixed-rate certificates:
     12 months or less..............       49,837  14.42     (16,493)     66,330    16.49         4,792       61,538   14.92
     13-24 months...................       42,705  12.35     (16,107)     58,812    14.62       (38,221)      97,033   23.53
     25-36 months...................       14,228   4.12       7,036       7,192     1.79          (593)       7,785    1.89
     37 months or greater...........       51,140  14.79     (36,465)     87,605    21.78        25,423       62,182   15.08
  Variable-rate certificates:
     18 months......................        2,119   0.61        (158)      2,277     0.57          (261)       2,538    0.61
                                       ---------- ------   ---------    --------   ------     ---------    ---------  ------
                                       $  345,744 100.00%  $ (56,443)   $402,187   100.00%    $ (10,226)   $ 412,413  100.00%
                                       ========== ======   =========    ========   ======     =========    =========  ======

</TABLE>



                                       19

<PAGE>

     The variety of deposit  accounts offered by the Bank has permitted it to be
competitive  in obtaining  funds and has allowed it to respond with  flexibility
to, but without eliminating the threat of,  disintermediation (the flow of funds
away from  depository  institutions  such as savings  institutions  into  direct
investment vehicles such as government and corporate  securities).  In addition,
the Bank has become  much more  subject  to  short-term  fluctuation  in deposit
flows, as customers have become more interest rate conscious. The ability of the
Bank to attract and maintain deposits and its costs of funds have been, and will
continue to be,  significantly  affected by money  market  conditions.  The Bank
currently offers a variety of deposit products as options to the customer.  They
include noninterest-bearing and interest-bearing NOW accounts,  interest-bearing
Super NOW accounts, savings accounts, Money Market Deposit Accounts ("MMDA") and
Certificates  of Deposit  ranging in terms from three months to seven years.  In
September of 2003,  the Bank sold its  Cincinnati  branch  locations.  This sale
included  $38.3  million  in  Certificates  of  Deposits  and $17.3  million  in
checking, savings and money market deposit accounts. The Bank introduced a Super
NOW account in 2003 which had a portfolio  balance of $36.5  million at December
31, 2003.

     The following  table sets forth the Bank's average  aggregate  balances and
interest  rates.  Average  balances in 2003 and 2002 are calculated  from actual
daily  balances.  Average  balances  for 2001 are derived  from  balances  which
management does not believe are materially different from daily balances (actual
daily balances could not be obtained without undue effort and expense).

<TABLE>
<CAPTION>

                                                      For the Year Ended December 31,
                                          2003                     2002                    2001
                                  ---------------------    ----------------------    ----------------------
                                              Average                   Average                   Average
                                  Average       Rate        Average       Rate        Average       Rate
                                  Balance       Paid        Balance       Paid        Balance       Paid
                                  -------     -------       -------     -------       -------     -------
<S>                                 <C>        <C>           <C>           <C>          <C>          <C>
                                                            (Dollars in thousands)
Interest-bearing demand
   deposits....................  $  103,179       1.47%     $   78,490    2.01%      $   60,791    2.93%
Savings deposits...............      33,951        .69          34,003    1.16           33,321    1.68
Time deposits..................     236,887       3.34         284,259    4.48          276,924    5.89
                                 ----------      -----      ----------   -----       ----------    ----
     Total interest bearing
        deposits...............     374,017       2.58%        396,752    3.71%         371,036    5.03%
                                                 =====                   =====                     ====
Non-interest-bearing demand
   and savings deposits........      22,439                     19,448                   16,494
                                 ----------                 ----------               ----------
     Total deposits............  $  396,456                 $  416,200               $  387,530
                                 ==========                 ==========               ==========
</TABLE>


                                       20
<PAGE>
     The  following  table sets forth the  aggregate  time  deposits in the Bank
classified by rates as of the dates indicated.

<TABLE>
<CAPTION>
                                                                  At December 31,
                                                     --------------------------------------------
                                                        2003              2002             2001
                                                       ------            ------           ------
<S>                                                     <C>              <C>               <C>
                                                                   (In thousands)

         Less than 2%..............................  $  77,121         $ 24,693         $  12,984
         2% -  3.99%...............................     75,293           129,697           54,762
         4% -  5.99%...............................     33,448            52,644          105,139
         6% -  7.99%...............................      1,379            60,692          118,554
                                                     ---------         ---------        ---------
                                                     $ 187,241         $ 267,726        $ 291,439
                                                     =========         =========        =========
</TABLE>

     The following table sets forth the amount and maturities of the Bank's time
deposits at December 31, 2003.
<TABLE>
<CAPTION>

                                                                    Amount Due
                                 ----------------------------------------------------------------------------
                                 Less Than                                         More Than
      Rate                        One Year        1-2 Years      2-3 Years          3 Years        Total
      ----                        --------        ---------      ---------         ---------       -----
<S>                                  <C>            <C>            <C>               <C>            <C>
                                                                      (In thousands)

Less than 2%....................  $  68,151       $    8,914     $       56      $       --       $   77,121
2% - 3.99%......................     32,802            5,645         12,600          24,246           75,293
4% - 5.99%......................      5,360           12,491          8,533           7,064           33,448
6% - 7.99%......................        436              849             47              47            1,379
                                  ---------       ----------     ----------      ----------       ----------
                                  $ 106,749       $   27,899     $   21,236      $   31,357       $  187,241
                                  =========       ==========     ==========      ==========       ==========
</TABLE>
         The following table indicates the amount of the Bank's certificates of
deposit and other deposits of $100,000 or more by time remaining until maturity
at December 31, 2003.

<TABLE>
<CAPTION>
                                                                                      Savings, NOW
                                                            Certificates                and MMDA
                      Maturity Period                        of Deposit                  Deposits
                      ---------------                       ------------              ------------
                           <S>                                  <C>                          <C>
                                                                        (In thousands)

             Three months or less.........................   $   4,682                 $   66,156
             Over three through six months................       5,529                         --
             Over six through twelve months...............       4,941                         --
             Over twelve months...........................      12,060                         --
                                                             ---------                 ----------
                    Total.................................   $  27,212                 $   66,156
                                                             =========                 ==========
</TABLE>


                                       21

<PAGE>

     BORROWINGS.  Deposits  are the  primary  sources  of funds  for the  Bank's
lending and investment  activities and for its general  business  purposes.  The
Bank also uses advances (borrowings) from the Federal Home Loan Bank ("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,  2003,  the Bank had $9.6
million of FHLB advances outstanding.

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

     The Company had a note payable to a third party financial  institution with
a current  balance of  $600,000  and bearing  interest at 3.50% at December  31,
2003, the proceeds of which were used to finance stock repurchases during 1999.

         The following table sets forth certain information regarding borrowings
from the FHLBs at the dates and for the periods indicated.
<TABLE>
<CAPTION>
                                                                                 At or for the Year
                                                                                Year Ended December 31,
                                                                   --------------------------------------------
                                                                    2003              2002               2001
                                                                   ------            ------            --------
                <S>                                                 <C>               <C>                  <C>
                                                                                  (Dollars in thousands)
      Amounts outstanding at end of period:
           FHLB advances........................................  $    9,630        $    5,592       $   87,653

      Weighted average rate paid on:
           FHLB advances........................................        5.38%            6.83%             5.51%

      Maximum amount of borrowings outstanding at any month end:
           FHLB advances........................................  $    9,698        $   75,105       $  128,497

      Approximate average amounts outstanding:
           FHLB advances........................................  $    5,829        $   43,813       $   84,080

      Approximate weighted average rate paid on:
           FHLB advances........................................        6.57%            6.39%             6.50%
</TABLE>

                                       22
<PAGE>

AVERAGE BALANCE SHEET

     The  following  table  sets  forth  certain  information  relating  to  the
Company's  aggregate average yield on assets and average cost of liabilities for
the periods  indicated.  Such yields and costs are derived by dividing income or
expenses by the average balance of assets or liabilities,  respectively, for the
periods presented. Average balances for 2003 and 2002 are calculated from actual
daily  balances.  Average  balances  for 2001 are derived  from  balances  which
management does not believe are materially different from daily balances (actual
daily balances could not be obtained without undue effort and expense).

<TABLE>
<CAPTION>
                                                                      For the Year Ended December 31,
                                    ----------------------------------------------------------------------------------------------
                                                 2003                            2002                           2001
                                    ----------------------------- -------------------------------   ------------------------------
                                                         Average                         Average                          Average
                                    Average    Interest/  Yield/    Average    Interest/  Yield/    Average    Interest/   Yield/
                                    Balance    Dividends   Cost     Balance    Dividends   Cost     Balance    Dividends   Cost
                                    -------    --------- -------    -------    --------- -------    -------    ---------  -------
<S>                                   <C>        <C>       <C>        <C>        <C>      <C>        <C>        <C>         <C>
                                                                        (Dollars in thousands)
Interest-earning assets:
 Loan portfolio..................   $267,119   $19,241     7.20%    $ 342,240  $24,473    7.15%     $376,157   $  30,005    7.98%
 Mortgage-backed securities......     34,187     1,109     3.24        56,644    3,196    5.64        31,768       2,225    7.00
 Short-term investments and other
  interest-earning assets (1)....    101,941     2,746     2.69        74,610    2,304    3.09        74,186       4,940    6.66
                                    --------   -------    -----     ---------  -------   -----      --------   ---------   -----
    Total interest-earning assets    403,247    23,096     5.73       473,494   29,973    6.33       482,111      37,170    7.71
Noninterest-earning assets.......     49,247                           40,566                         42,722
                                    --------                        ---------                       --------
    Total assets.................   $452,494                        $ 514,060                      $ 524,833
                                    ========                        =========                      =========


Interest-bearing liabilities:
  Deposits.......................   $374,017   $ 9,656     2.58     $ 396,752  $14,712    3.71      $371,036      18,663    5.03%
  FHLB advances..................      5,829       383     6.57        43,813    2,798    6.39        84,080       5,466    6.50
  Notes payable..................        683        27     3.95           841       31    3.69         1,562         114    7.30
                                    --------   -------    -----     ---------  -------   -----      --------   ---------   -----
    Total interest-bearing
     liabilities                     380,529    10,066     2.65       441,406   17,541    3.97       456,678      24,243    5.31
                                               -------    -----                -------   -----                 ---------   -----
Noninterest-bearing liabilities..     32,967                           30,621                         25,549
                                    --------                        ---------                       --------
    Total liabilities............    413,496                          472,027                        482,227
Shareholders' equity.............     38,998                           42,033                         42,606
                                    --------                        ---------                       --------
    Total liabilities and
      shareholders' equity.......   $452,494                        $ 514,060                       $524,833
                                    ========                        =========                       ========
Net interest income..............              $13,030                         $12,432                          $ 12,927
                                               =======                         =======                         =========
Interest rate spread.............                          3.08%                          2.36%                             2.40%
                                                          =====                          =====                             =====
Net yield on interest-earning assets                       3.23%                          2.63%                             2.68%
                                                          =====                          =====                             =====
Ratio of average interest-earning
  assets to average interest-bearing
  liabilities....................                        105.97%                        107.27%                           105.57%
                                                         ======                         ======                            ======
</TABLE>

--------------------
(1) Includes interest-bearing deposits in other financial institutions,
investment securities and FHLB stock.



                                       23
<PAGE>
TRUST ACTIVITIES

     During 1999, the Bank began offering trust,  investment and estate planning
services through its Ameriana Trust and Investment Management Services division.
Trust  services  consist of personal  trusts,  testamentary  trusts,  investment
agency  accounts  (discretionary  and directed),  guardianships,  rollover IRA's
(discretionary  and  directed)  and  estates  (personal  representative).  These
accounts are offered to customers  within the Bank's  service  areas in Indiana.
Trust  account  balances  of $75,000 and more can  profitably  be managed by the
Bank.  At December  31, 2003,  the Bank had $15.6  million in trust assets under
management.

SUBSIDIARY ACTIVITIES

     The Bank has three direct wholly-owned subsidiaries;  AFS, AIS and AIMI.

     At December 31,  2003,  the Bank's  investments  in its  subsidiaries  were
approximately $137.8 million, consisting of direct equity investments.

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

                                       24
<PAGE>

COMPETITION

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

     The primary  factors in  competing  for loans are  interest  rates and loan
origination  fees and the range of  services  offered by the  various  financial
institutions.  Competition  for  origination of real estate loans normally comes
from other thrift  institutions,  commercial banks,  mortgage bankers,  mortgage
brokers and insurance  companies.  The Bank has been able to compete effectively
in its market area.

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

                           REGULATION AND SUPERVISION

REGULATION AND SUPERVISION OF THE COMPANY

     GENERAL. The Company is a public company registered with the Securities and
Exchange  Commission (the "SEC"),  whose common stock trades on the Nasdaq Stock
Market,  Inc.  (the  "Nasdaq")  and  it is a bank  holding  company  subject  to
regulation  by the  Federal  Reserve  Board  under  the BHCA.  As a result,  the
activities of the Company are subject to certain  requirements  and limitations,
which are  described  below.  As a public  reporting  company,  the  Company  is
required to file  annual,  quarterly  and current  reports with the SEC and as a
bank  holding  company,  the Company is  required  to file annual and  quarterly
reports  with  the  Federal   Reserve  Board  and  to  furnish  such  additional
information as the Federal  Reserve Board may require  pursuant to the BHCA. The
Company is also subject to regular examination by the Federal Reserve Board.

     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

                                       25
<PAGE>

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

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

     SARBANES-OXLEY ACT OF 2002 AND RELATED  REGULATIONS.  On July 30, 2002, the
Sarbanes-Oxley Act of 2002 ("SOX") was signed into law. SOX contains  provisions
addressing  corporate  and  accounting  fraud which both amended the  Securities
Exchange Act of 1934,  as amended (the "Act") and directed the SEC to promulgate
rules.  SOX provided for the  establishment  of a new Public Company  Accounting
Oversight Board ("PCAOB"), to enforce auditing, quality control and independence
standards for firms that audit public reporting  companies and will be funded by
fees from all public reporting companies.  It is unlawful for any person that is
not a registered  public  accounting  firm ("RPAF") to audit a public  reporting
company.  Under  the  Act,  a RPAF is  prohibited  from  performing  statutorily
mandated audit services for a company if such company's chief executive officer,
chief financial  officer,  comptroller,  chief accounting  officer or any person
serving in equivalent  positions has been employed by such firm and participated
in the audit of such company  during the  one-year  period  preceding  the audit
initiation date. The SEC has prescribed rules requiring inclusion of an internal
control   report  and   assessment   by  management  in  the  annual  report  to
shareholders.  SOX  requires  the RPAF that issues the audit report to attest to
and report on management's  assessment of the Company's  internal  controls.  In
addition,  SOX requires that each  financial  report  required to be prepared in
accordance with (or reconciled to) generally accepted accounting  principles and
filed  with  the SEC  reflect  all  material  correcting  adjustments  that  are
identified by a RPAF in accordance with generally accepted accounting principles
and the rules and regulations of the SEC. SOX requires chief executive  officers
and chief financial officers, or their equivalent, to certify to the accuracy of
periodic reports

                                       26
<PAGE>

filed with the SEC, subject to civil and criminal penalties if they knowingly or
willfully violate this certification requirement.

     SOX also  increases  the  oversight  and  authority of audit  committees of
publicly traded companies. SOX imposed higher standards for auditor independence
and restricts  provisions of consulting  services by auditing firms to companies
they audit. Any non-audit  services (subject to a 5% de minimis exception) being
provided  to an  audit  client  require  pre-approval  by  the  Company's  audit
committee  members.  Audit committee  members must be independent and are barred
from accepting consulting,  advisory or other compensatory fees from the issuer.
In addition,  all public reporting  companies must disclose whether at least one
member of the committee is an audit committee  "financial expert" (as such terms
is defined by the SEC rules) and if not, why not. Audit  committees of Company's
listed on the Nasdaq must be composed of three directors who meet the definition
of "independent"  set forth both in NASD Rule 4200(a)(15) and Section 10A(m) and
Rule  10A-3  of the  Act,  and  whose  audit  committee  has a  written  charter
containing  specific  elements  set  forth in these  same NASD and SEC rules and
sections.  A  Company  with  stock  quoted  on the  Nasdaq  that  fails to be in
compliance with these audit committee requirements, as well as additional Nasdaq
requirements, will be delisted.

     Due to SOX, longer prison terms will be applied to corporate executives who
violate federal  securities laws, the period during which certain types of suits
can be brought against a company or its officers has been extended,  and bonuses
issued  to  top  executives  prior  to  restatement  of  a  company's  financial
statements  are now  subject  to  disgorgement  if such  restatement  was due to
corporate  misconduct.  Executives  are  also  prohibited  from  trading  during
retirement  plan  "blackout"  periods,  and  loans  to  company  executives  are
restricted.  In addition, a provision directs that civil penalties levied by the
SEC as a result  of any  judicial  or  administrative  action  under  the Act be
deposited in a fund for the benefit of harmed investors.

     Although  the  Company  anticipates  it will  incur  additional  expense in
complying with the provisions of the Act and the related rules,  management does
not expect that such  compliance  will have a material  impact on the  Company's
financial condition or results of operations.

     ACQUISITIONS.  With certain  exceptions,  the BHCA prohibits a bank holding
company from acquiring  direct or indirect  ownership or control of more than 5%
of the voting shares of a company that is not a bank or a bank holding  company,
or from  engaging  directly  or  indirectly  in  activities  other than those of
banking,   managing  or  controlling   banks,  or  providing  services  for  its
subsidiaries.  The principal  exceptions to these  prohibitions  involve certain
non-bank activities, which, by statute or by Federal Reserve Board regulation or
order,  have been  identified

                                       27
<PAGE>

as activities closely related to the business of banking.  The activities of the
Company are subject to these legal and regulatory limitations under the BHCA and
the related  Federal  Reserve  Board  regulations.  Notwithstanding  the Federal
Reserve Board's prior approval of specific non-banking  activities,  the Federal
Reserve Board has the power to order a holding  company or its  subsidiaries  to
terminate  any  activity,  or to  terminate  its  ownership  or  control  of any
subsidiary,  when it has reasonable  cause to believe that the  continuation  of
such  activity or such  ownership or control  constitutes  a serious risk to the
financial safety,  soundness or stability of any bank subsidiary of that holding
company.

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

     FINANCIAL MODERNIZATION LEGISLATION.  On November 12, 1999, legislation was
enacted  which  could  have a  far-reaching  impact  on the  financial  services
industry.  The  Gramm-Leach-Bliley  Act ("GLB") authorizes  affiliations between
banking,  securities and insurance firms and authorizes  bank holding  companies
and national banks to engage in a variety of new financial activities. Among the
new activities  that will be permitted to bank holding  companies are securities
and insurance brokerage,  securities  underwriting,  insurance  underwriting and
merchant banking.  The Federal Reserve Board, in consultation with the Secretary
of the Treasury, may approve additional financial activities.  The GLB, however,
prohibits  future  acquisitions  of existing  unitary  savings and loan  holding
companies  by firms which are engaged in  commercial  activities  and limits the
permissible activities of unitary holding companies formed after May 4, 1999.

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

REGULATION AND SUPERVISION OF THE BANK

     GENERAL.  The  Bank is  subject  to  extensive  regulation  by the  Indiana
Department  of  Financial   Institutions  ("DFI")  and  the  FDIC.  The  lending
activities and other investments of the Bank must comply with various regulatory
requirements. The DFI and FDIC periodically examine the Bank for compliance with
various regulatory

                                       28
<PAGE>

requirements.  The Bank must file reports  with the DFI and the FDIC  describing
its  activities  and  financial  condition.  The Bank is also subject to certain
reserve requirements  promulgated by the Federal Reserve Board. This supervision
and regulation is intended  primarily for the protection of depositors.  Certain
of these  regulatory  requirements  are  referred  to below or appear  elsewhere
herein.

     CAPITAL  REQUIREMENTS.  Under FDIC regulations,  state-chartered banks that
are not members of the Federal Reserve System are required to maintain a minimum
leverage  capital  requirement  consisting of a ratio of Tier 1 capital to total
assets of 3% if the FDIC determines that the institution is not  anticipating or
experiencing  significant  growth and has  well-diversified  risk,  including no
undue interest rate risk exposure, excellent asset quality, high liquidity, good
earnings and in general a strong banking  organization,  rated composite 1 under
the Uniform  Financial  Institutions  Rating System (the CAMELS  rating  system)
established by the Federal Financial  Institutions  Examination Council. For all
but the most highly rated  institutions  meeting the conditions set forth above,
the minimum leverage capital ratio is 3% plus an additional  "cushion" amount of
at least 100 to 200 basis points with a minimum leverage capital  requirement of
not less than 4%.  Tier 1 capital  is the sum of  common  stockholders'  equity,
noncumulative  perpetual  preferred  stock  (including any related  surplus) and
minority  interests in consolidated  subsidiaries,  minus all intangible  assets
(other  than  certain   mortgage   servicing   assets,   purchased  credit  card
relationships,  credit-enhancing  interest-only  strips and certain deferred tax
assets) minus identified losses,  investments in certain financial  subsidiaries
and nonfinancial equity investments.

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

                                       29
<PAGE>

is  multiplied  by risk  weight  assigned  to that  category.  The sum of  these
weighted values equals the bank's risk-weighted assets.

     At December  31,  2003,  the Bank's ratio of Tier 1 capital to total assets
was 9.38%,  its ratio of Tier 1 capital to  risk-weighted  assets was 15.17% and
its ratio of total risk-based capital to risk-weighted assets was 16.42%.

     During the second  quarter of 2002,  the Bank entered into a memorandum  of
understanding  ("MOU") with the FDIC and the DFI.  Among other  things,  the MOU
required  the Bank to  adopt  written  action  plans  with  respect  to  certain
classified  assets,  revise its lending  policies in  accordance  with  examiner
recommendations, require greater financial information from borrowers, establish
a loan review  program,  document  Board  review of the adequacy of loan losses,
formulate a plan for improving the Bank's  profitability,  review staffing needs
with particular  emphasis on loan  administration,  strengthen  certain internal
controls  and audit  coverage and address  other  regulatory  compliance  issues
raised in the most recent  examination report by the FDIC and DFI. While the MOU
is in effect, the Bank must maintain Tier 1 capital at or above 7% of assets.

     The Company's  Board of Directors have adopted  resolutions  providing that
the Company will not cause the Bank to pay dividends if its Tier 1 capital would
be less than 7%  thereafter,  that the Company  will not incur  additional  debt
without prior Federal Reserve  approval,  and that the Company will not purchase
any treasury stock. The resolutions remain in effect until the MOU is lifted.

     The Company  believes  that the Company and the Bank have taken all actions
specified in the MOU and Board resolutions within the timeframes specified.  The
Company does not believe the MOU or Board resolutions will materially affect the
operations  of the Company or the Bank.  A failure to comply with either the MOU
or resolutions could lead to the initiation of formal  enforcement action by the
FDIC, DFI and the Federal Reserve.

     DIVIDEND  LIMITATIONS.  The Bank may not pay dividends on its capital stock
if its  regulatory  capital  would  thereby  be reduced  below the  amount  then
required  for the  liquidation  account  established  for the benefit of certain
depositors of the Bank at the time of its conversion to stock form. 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 DFI. The Company's Board of Directors have
also resolved not to cause the Bank to pay dividends if its Tier 1 capital would
be less than 7% thereafter.  At December 31, 2003, the  shareholder's  equity of
the Bank was $38.3 million and approval is required by the Indiana Department of
Financial Institutions to pay dividends to the Company.

                                       30
<PAGE>

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

     Under FDIC  regulations,  the Bank is  prohibited  from  making any capital
distributions if after making the distribution, the Bank would have: (i) a total
risk-based  capital  ratio of less than 8.0%;  (ii) a Tier 1 risk-based  capital
ratio of less  than  4.0%;  or (iii) a  leverage  ratio of less than  4.0%.  For
additional   information   about  dividend   limitations  see  Note  12  in  the
Consolidated Financial Statements.

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

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

     The FDIC has adopted an  assessment  schedule  for SAIF  deposit  insurance
pursuant to which the assessment rate for well-capitalized institutions with the
highest  supervisory  ratings have been reduced to zero and  institutions in the
worst risk  assessment  classification  will be assessed at the rate of 0.27% of
insured deposits. At

                                       31
<PAGE>

December  31,  2003,  the Bank is  considered  well  capitalized.  In  addition,
FDIC-insured  institutions  are required to pay  assessments to the FDIC to help
fund  interest  payments on certain  bonds issued by the  Financing  Corporation
("FICO"),  an agency of the federal government  established to finance takeovers
of insolvent thrifts.

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

                                       32
<PAGE>

established by the appropriate  federal banking regulator,  the institution will
be subject to conservatorship or receivership within specified time periods.

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

                                                     Adequately                                   Significantly
                           Well Capitalized          Capitalized         Undercapitalized        Undercapitalized
                           ----------------          -----------         ----------------        ----------------
<S>                             <C>                    <C>                        <C>                       <C>
Total risk-based
    capital ratio           10.0% or more            8.0% or more        Less than 8.0%          Less than 6.0%
Tier 1 risk-based
    capital ratio            6.0% or more            4.0% or more        Less than 4.0%          Less than 3.0%
Leverage ratio               5.0% or more            4.0% or more *      Less than 4.0% *        Less than 3.0%
</TABLE>

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

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

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

                                       33
<PAGE>

that a depository institution is not in compliance with the safety
and soundness guidelines, it may require the institution to submit an acceptable
plan to achieve compliance with the guidelines. A depository institution must
submit an acceptable compliance plan to its primary federal regulator within 30
days of receipt of a request for such a plan. Failure to submit or implement a
compliance plan may subject the institution to regulatory sanctions. Management
believes that the Bank meets all the standards adopted in the interagency
guidelines.

     RESERVE  REQUIREMENTS.  Under Federal Reserve Board  regulations,  the Bank
currently must maintain  average daily  reserves equal to 3% of net  transaction
accounts over $6.0 million up to $42.1 million, plus 10% on the remainder.  This
percentage  is subject to  adjustment  by the  Federal  Reserve  Board.  Because
required  reserves  must  be  maintained  in the  form  of  vault  cash  or in a
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, 2003,  the Bank met  applicable  Federal  Reserve Board
reserve requirements.

     FEDERAL  HOME LOAN BANK  SYSTEM.  The Bank is a member of the Federal  Home
Loan Bank System, which consists of 12 regional Federal Home Loan Banks governed
and regulated by the Federal Housing Finance Board  ("FHFB").  As a member,  the
Bank is required to purchase  and hold stock in the FHLB of  Indianapolis  in an
amount equal to the greater of 1% of its aggregate  unpaid home loan balances at
the beginning of the year or an amount equal to 5% of FHLB advances outstanding,
whichever is greater.  As of December 31, 2003,  the Bank held stock in the FHLB
of  Indianapolis  in the amount $6.0  million was in  compliance  with the above
requirement.

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

     The  Bank is also a  member  of the  FHLB of  Cincinnati  due to  remaining
borrowings  after the merger of  Ameriana-Ohio  and the Bank. As of December 31,
2003,  the Bank  held  stock in the FHLB of  Cincinnati  in the  amount  of $1.0
million and was in compliance with requirements of membership.

     LOANS TO EXECUTIVE OFFICERS, DIRECTORS AND PRINCIPAL STOCKHOLDERS. Loans to
directors,  executive officers and principal  stockholders of a state non-member
bank  like  the  Bank  must be made on  substantially  the  same  terms as those
prevailing  for  comparable  transactions  with  persons  who are not  executive
officers, directors,  principal stockholders or employees of the Bank unless the
loan is made pursuant to a compensation or benefit plan that is widely available
to  employees  and does not  favor  insiders.  Loans to any  executive  officer,
director and

                                       34
<PAGE>

principal  stockholder  together with all other outstanding loans to such person
and affiliated  interests  generally may not exceed 15% of the bank's unimpaired
capital  and  surplus  and  all  loans  to  such  persons  may  not  exceed  the
institution's  unimpaired  capital and unimpaired  surplus.  Loans to directors,
executive officers and principal stockholders,  and their respective affiliates,
in  excess of the  greater  of  $25,000  or 5% of  capital  and  surplus  (up to
$500,000) must be approved in advance by a majority of the board of directors of
the bank with any "interested"  director not participating in the voting.  State
non-member  banks are  prohibited  from  paying the  overdrafts  of any of their
executive  officers or directors  unless  payment is made pursuant to a written,
pre-authorized interest-bearing extension of credit plan that specifies a method
of  repayment or transfer of funds from  another  account at the bank.  Loans to
executive  officers may not be made on terms more  favorable than those afforded
other  borrowers and are restricted as to type,  amount and terms of credit.  In
addition,  Section 106 of the BHCA  prohibits  extensions of credit to executive
officers,   directors,  and  greater  than  10%  stockholders  of  a  depository
institution  by  any  other  institution  which  has  a  correspondent   banking
relationship  with the  institution,  unless  such  extension  of  credit  is on
substantially  the same  terms as those  prevailing  at the time for  comparable
transactions  with other  persons and does not involve more than the normal risk
of repayment or present other unfavorable features.

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

                                       35
<PAGE>

     PATRIOT  ACT.  The  Patriot  Act  is  intended  to   strengthen   U.S.  law
enforcement's and the intelligence  communities' abilities to work cohesively to
combat terrorism on a variety of fronts. The potential impact of the Patriot Act
on financial  institutions  of all kinds is  significant  and wide ranging.  The
Patriot Act contains sweeping anti-money  laundering and financial  transparency
laws and imposes various  regulations  including  standards for verifying client
identification  at  account  opening,  and rules to  promote  cooperation  among
financial  institutions,  regulators and law enforcement entities in identifying
parties that may be involved in terrorism or money laundering.

                                       36
<PAGE>

INDIANA BANKING LAW

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

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

     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 AND STATE TAXATION

     FEDERAL  TAXATION.  The Company and its  subsidiaries  file a  consolidated
federal  income tax return on a calendar  year end.  Saving 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 recent
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 in recent
years.

     EMPLOYEES

     As of December 31, 2003, the Company and subsidiaries had approximately 164
full-time and 7 part-time  employees.  The employees  are not  represented  by a
collective  bargaining  agreement.  Management  believes  the  Company  and  its
subsidiaries enjoy good relations with their personnel.

                                       37
<PAGE>
<TABLE>
<CAPTION>
EXECUTIVE OFFICERS
                                   Age at
Name                          December 31, 2003      Principal Position
----                          -----------------      ------------------
<S>                                   <C>                 <C>

Harry J. Bailey                      61              President and Chief Executive Officer of the Bank and the
                                                     Company

Timothy G. Clark                     53              Executive Vice President and Chief Operating Officer of
                                                     the Bank and the Company

Bradley L. Smith                     43              Senior Vice President - Treasurer and Chief Financial Officer
                                                     of the Bank and the Company

Nancy A. Rogers                      61              Senior Vice President - Marketing Services of
                                                     the Bank and Secretary of the Bank and the Company

Ted R. Girton                        42              Senior Vice President - Credit Administration

Grover F. Archer                     63              Senior Vice President - Retail Banking of the Bank

Deborah A. Bell                      51              Senior Vice President - Information Technology of the Bank

Ronald M. Holloway                   54              Senior Vice President - Lending Services of the Bank

Jan F. Wright                        60              Senior Vice President - Business Services of the Bank
</TABLE>


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

     HARRY J.  BAILEY has been  President  of the Company and the Bank since May
1990, and was appointed Chief Executive Officer in December 1990. Mr. Bailey had
been the Executive  Vice  President and Chief  Operating  Officer of the Company
since its formation in 1989 and of the Bank since  February  1984. He has been a
Director  of the Bank  since  1987  and a  Director  of the  Company  since  its
formation.  From June 1983 to January 1984, Mr. Bailey, an attorney,  acted as a
consultant  to financial  institutions  and for 15 years  before,  served in the
legal  department  and as  operations  officer  for thrift  institutions  in the
Chicago area. He is a Trustee of the Henry County Memorial Hospital, Director of
the New Castle/Henry County Economic Development  Corporation,  is a past member
of the Board of Directors of the Federal  Home Loan Bank of  Indianapolis,  past
Chairman and Director of the Indiana Bankers  Association,  and past Director of
the Henry County Community Foundation.

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

     BRADLEY L.  SMITH,  a  certified  public  accountant,  joined the Bank as a
Senior  Vice  President-Treasurer  and Chief  Financial  Officer of the Bank and
Company on April 10, 2002.  Prior to joining the Bank, he was the Executive Vice
President of Finance Center Federal  Credit Union in  Indianapolis  where he had
been employed since 1992.

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

                                       38
<PAGE>

     TED R. GIRTON was elected as Senior Vice President - Credit  Administration
of the Bank in June 2002.  Prior to joining the Bank, he was Vice  President and
Head of Credit  Administration  for the Commercial Lending Unit at Union Federal
Bank in Indianapolis.

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

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

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

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

                                       39
<PAGE>
     ITEM 2. PROPERTIES
     ------------------

     The  following  table  sets  forth the  location  of the  Company's  office
facilities at December 31, 2003 and certain other information  relating to these
properties at that date.

<TABLE>
<CAPTION>

                                    Year           Total              Net          Owned/            Square
                                  Acquired      Investment        Book Value       Leased              Feet
                                  --------      ----------        ----------       ------            -------
   <S>                              <C>            <C>               <C>             <C>               <C>
                                                  (Dollar amounts in thousands)
  MAIN OFFICE:
  2118 Bundy Avenue
  New Castle, Indiana..........     1958         $   1,658       $      427         Owned             20,500

  BRANCH OFFICES:
  1311 Broad Street
  New Castle, Indiana..........     1890             1,128              320         Owned             18,000

  956 North Beechwood Street
  Middletown, Indiana..........     1971               322               64         Owned              5,500

  22 North Jefferson
  Knightstown, Indiana.........     1979               400              166         Owned              3,400

  1810 North State Street
  Greenfield, Indiana..........     1995             1,207              980         Owned              5,800

  99 Dan Jones Road
  Avon, Indiana................     1995             1,558            1,317         Owned             12,600

  1754 East 53rd Street
  Anderson, Indiana............     1993               734              655         Owned              4,900

  488 W. Main Street
  Morristown, Indiana..........     1998               353              305         Owned              2,600

  7435 W. U.S. 52
  New Palestine, Indiana.......     1999               944              832         Owned              3,300

  6653 West Broadway
  McCordsville, Indiana........     2004               890              890         Owned              3,366

  AMERIANA INSURANCE
  AGENCY, INC. AND TRUST
  DEPARTMENT OF THE BANK
  1908 Bundy Avenue
  New Castle, Indiana..........     1999               384              352         Owned              5,000
                                                 ---------       ----------

        Total..................                  $   9,578       $    6,308
                                                 =========       ==========
</TABLE>


     The Bank purchased  land in 2003 for future bank use. The total  investment
for the land was  $236,000.  The value of the land is not  included in the table
above. The Bank uses on-line processing  terminals.  Most of the data processing
is done by an in-house data processing  center.  At December 31, 2003, the total
net book value of the  Company's  offices  and  equipment  (including  leasehold
improvements) was $ 7.9 million.

                                       40
<PAGE>

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

     The Bank is involved in a variety of  litigation in regard to its interests
in two pools of equipment leases originated by the Commercial Money Center, Inc.
("CMC"),   a  California  based  equipment  leasing  company  which  is  now  in
bankruptcy.

     In June and September  2001, the Bank purchased the income streams from two
separate pools of leases  totaling  $12,003,000.  Each lease within each pool is
supported by a surety bond issued by one of two insurance companies,  which were
rated at least "A" by Moody's at the time that the surety bonds were issued. The
bonds  guarantee  payment  of all  amounts  due under the leases in the event of
default by the lessee.  Each pool was sold by the terms of a Sales and Servicing
Agreement which provides that the insurers will service the leases. In each case
the insurers  have  assigned  their  servicing  rights and  responsibilities  to
Commercial Service Center, a company which has also filed bankruptcy.

     When the  lease  payments  went  into  default,  notice  was  given to each
insurer.  One then made payments for a few months under a reservation of rights;
the other paid nothing.  Both insurers  claim they were  defrauded by Commercial
Money Center (CMC), the company which sold the lease pools. Both are now denying
responsibility for payment.

     Many other financial  institutions have purchased lease pools from CMC. All
of the lease pools are in default and in litigation.  The Panel on Multidistrict
Litigation  has taken  control of the many actions and assigned them to the U.S.
District Court for the Northern District of Ohio, Eastern Division.  The actions
have been consolidated for the purpose of discovery.

     The Bank has also been named as a  defendant  in a suit filed by a group of
lessees in California  state court.  The California suit alleges that the leases
are usurious and  uncollectable  under California law. None of the plaintiffs in
the  California  suit is a lessee in either of the lease pools  purchased by the
Bank.

     The Company believes the surety bonds are enforceable against the insurers.
The current unpaid balance for the pools of $10,900,000 was fully charged-off in
September of 2003.

                                       41
<PAGE>

     The Bank has also been named in a suit filed by the  Trustee in the CMC and
CSC bankruptcies. The suit alleges that the Bank received preferential treatment
when it received  payments  from one of the lease pools and seeks  repayment  of
approximately  $86,000  received  by the Bank.  Additionally,  the suit  seeks a
determination that the transaction represents a loan in which the Bank failed to
properly  perfect its  interest  such that the Trustee is entitled to all future
payments.  The  Bank  believes  the  transaction  is a true  sale  in  which  no
perfection is required. The Bank is vigorously defending its position.

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

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

                                     PART II

ITEM 5. MARKET FOR THE REGISTRANT'S  COMMON EQUITY,  RELATED STOCKHOLDER MATTERS
        AND ISSUER PURCHASERS OF EQUITY SECURITIES
--------------------------------------------------------------------------------

     The Company's common stock, par value $1.00 per share (the "Common Stock"),
is traded on the Nasdaq  National  MarketSM under the symbol "ASBI." As of March
12, 2004, the Company had 3,148,788  shares of Common Stock  outstanding and had
601 stockholders of record and  approximately  1,373  beneficial  owners holding
shares in nominee or "street" name. The Company began paying quarterly dividends
during the fourth  quarter of fiscal  year 1987.  The  Company's  ability to pay
dividends is dependent on dividends  received from the Bank.  See Note 12 to the
"Consolidated  Financial Statements" included under Item 8 of this Annual Report
for a discussion  of the  restrictions  on the payment of cash  dividends by the
Company.

     The following  table sets forth the high,  low and closing sales prices for
the Common  Stock as  reported  on the  Nasdaq  National  MarketSM  and the cash
dividends declared on the Common Stock for each full quarterly period during the
last two fiscal years.
<TABLE>
<CAPTION>
                                          2003                                        2002
                            -----------------------------------       -------------------------------------
                                                      Dividends                                   Dividends
Quarter Ended:               High     Low     Close    Declared       High     Low      Close      Declared
-------------                ----     ---     -----   ---------       ----     ---      -----      --------
<S>                          <C>      <C>      <C>      <C>           <C>      <C>       <C>          <C>
March 31                    $12.99   $11.36  $12.56     $0.16         $16.00  $13.15   $14.94       $0.16
June 30                      14.56    11.96   14.03      0.16          15.10   13.85    14.54        0.16
September 30                 15.56    13.13   15.25      0.16          14.20   12.10    13.25        0.16
December 31                  16.00    14.50   14.50      0.16          13.25   10.71    11.48        0.16
</TABLE>


                                       42
<PAGE>



ITEM 6.  SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>

------------------------------------------------------------------------------------------------------------------------------------
                                                            (Dollars in thousands, except per share data)
                                                                            at December 31,
------------------------------------------------------------------------------------------------------------------------------------
Summary of Financial Condition                      2003        2002         2001         2000          1999
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                 <C>         <C>          <C>            <C>         <C>
   Cash                                         $    9,505  $   7,481    $     7,518  $    14,609  $    14,637
   Investment securities                           137,788     58,155        140,629       99,707      102,705
   Loans net of allowances for loan losses         204,141    304,586        350,383      397,662      325,959
   Interest-bearing deposits, and stock
      in Federal Home Loan Bank                     11,992     44,974         11,648       11,687       11,136
   Other assets                                     39,027     41,611         41,896       33,623       31,912
------------------------------------------------------------------------------------------------------------------------------------
   Total assets                                 $  402,453  $ 456,807    $   552,074  $   557,288  $   486,349
------------------------------------------------------------------------------------------------------------------------------------

   Deposits noninterest-bearing                 $   19,039  $  19,124    $    24,257  $    12,927  $    16,308
   Deposits interest-bearing                       326,705    383,063        388,156      354,668      339,451
   Borrowings                                       10,230      6,432         88,583      141,172       82,872
   Other liabilities                                 7,605      9,148          8,183        6,810        7,689
------------------------------------------------------------------------------------------------------------------------------------
   Total liabilities                               363,579    417,767        509,179      515,577      446,320
------------------------------------------------------------------------------------------------------------------------------------
   Shareholders' equity                             38,874     39,040         42,895       41,711       40,029
------------------------------------------------------------------------------------------------------------------------------------
   Total liabilities and shareholders' equity   $  402,453  $ 456,807    $   552,074   $  557,288   $  486,349
------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>

                                                                           Year Ended December 31,
------------------------------------------------------------------------------------------------------------------------------------
Summary of Earnings                                 2003        2002         2001            2000        1999
------------------------------------------------------------------------------------------------------------------------------------
              <S>                                    <C>          <C>          <C>           <C>         <C>
   Interest income                              $   23,096  $  29,973    $    37,170    $  37,323    $  29,083
   Interest expense                                 10,066     17,541         24,243       24,728       16,749
   Net interest income                              13,030     12,432         12,927       12,595       12,334
   Provision for loan losses                         6,440      7,300            360          417          328
   Other income                                     10,540      2,949          4,046        3,533        3,428
   Other expense                                    13,602     13,675         11,348       10,985       10,635
------------------------------------------------------------------------------------------------------------------------------------
   Income (loss) before taxes                        3,528     (5,594)         5,265        4,726        4,799
   Income taxes                                      1,110     (2,519)         1,465        1,164        1,467
------------------------------------------------------------------------------------------------------------------------------------
   Net income(loss)                             $    2,418  $  (3,075)   $     3,800    $   3,562    $   3,332
------------------------------------------------------------------------------------------------------------------------------------
   Basic earnings (loss)per share               $    0.77   $   (0.98)   $      1.21    $    1.13    $    0.98
   Diluted earnings (loss)per share             $    0.77   $   (0.98)   $      1.21    $    1.13    $    0.98
------------------------------------------------------------------------------------------------------------------------------------
   Dividends declared per share                 $    0.64   $    0.64    $      0.61    $    0.60    $    0.60
------------------------------------------------------------------------------------------------------------------------------------
   Book value per share                         $   12.35   $   12.40    $     13.63    $   13.26    $   12.72
------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>

                                                                           Year Ended December 31,
------------------------------------------------------------------------------------------------------------------------------------
Other Selected Data                                 2003        2002         2001         2000        1999
------------------------------------------------------------------------------------------------------------------------------------
              <S>                                  <C>          <C>           <C>           <C>           <C>
   Return on average assets                          0.53%      (0.60)%         0.72%        0.68%        0.77%
   Return on average equity                          6.20       (7.32)          8.92         8.68         7.60
   Ratio of average equity to average assets         8.62        8.18           8.12         7.84        10.17
   Dividend payout ratio (1)                        83.12%        NM(2)        50.41%       53.00%       61.22%
   Number of full-service bank offices                   9         11             11           11           12
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

(1) Based on total dividends per share declared and net income per share for the
    year.
(2) NM - Not meaningful.




                                       43
<PAGE>

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

EXECUTIVE SUMMARY
-----------------

     The Company was incorporated  under Indiana law for the purpose of becoming
the  holding  company  for the  Bank.  The Bank has  three  direct  wholly-owned
subsidiaries,  Ameriana Insurance Agency ("AIA"),  Ameriana Financial  Services,
Inc. ("AFS") and Ameriana Investment  Management,  Inc. ("AIMI"). AIA operates a
general insurance agency in three locations.  AFS has a brokerage  operation and
owns a  partial  interest  in a life  insurance  company  and a title  insurance
company. AIMI manages the Company's investment portfolio.  On June 29, 2001, the
Bank converted from a federal savings bank to an Indiana chartered state savings
bank and changed its name to  "Ameriana  Bank and Trust,  SB".  The Company also
owns a minority  interest  in a limited  partnership  organized  to acquire  and
manage real estate investments, which qualify for federal tax credits.

     The Company returned to profitability in 2003 with net income of $2,418,000
or $0.77 per diluted  share  compared with a net loss of $3,075,000 or $0.98 per
diluted share in 2002.  The Company's net income for the full year 2003 included
charges totaling $5,890,000, or $3,534,000 after tax or $1.12 per diluted share,
taken in the second and third quarters primarily to write off the troubled lease
portfolio.  These charges were offset to some extent by a gain of $5,511,000, or
$2,930,000  after tax or $0.93 per diluted  share,  on the third quarter sale of
two  branches  in Ohio.  The  Company's  net loss  for 2002  reflected  both the
additional  reserves set aside in the fourth quarter of 2002 as well as a charge
of $3,212,000,  or $1,900,000  after tax or $0.61 per diluted share,  associated
with the  restructuring  of the  Company's  investment  portfolio  in the  first
quarter of 2002. Despite the unfavorable  charges mentioned above, the Company's
capital ratios remain strong.  The Company's risk based capital to risk-weighted
assets improved to 16.42% at December 31, 2003 from 13.89% at December 31, 2002,
and continues to be classified as "well capitalized" by regulatory standards.

     As  with  most  banks,   the  Company's   largest  source  of  revenue  has
historically  been the net  interest  margin,  which is derived  from the spread
earned  between its interest  income and  interest  expense.  The  interest-rate
environment  continued at a 40-year low point in 2003, and actually improved the
Company's net interest margin. The net interest margin improved to 3.23% in 2003
from 2.63% in 2002,  primarily due to the cost of interest bearing  liabilities,
which  declined  greater  than the yield  earned  on  interest  earning  assets.
Management expects the net interest margin to contract in the coming year should
interest rates remain low.

     The low interest rate environment in 2003 and 2002 also kept the demand for
mortgage loan  refinancing  at a high level.  The Company  continued to sell new
fixed rate mortgage  production to minimize  potential  long-term

                                       44
<PAGE>

interest rate risk  associated  with such  long-term,  low-interest  loans. As a
result,  gain on sale of loans and servicing rights was $1.9 million in 2003 and
$1.4  million  in 2002.  Due to the rate  structure  in early 2004 and the large
volume of loans refinanced during 2003 and 2002, current estimates indicate that
the gain on sale of loans  during 2004 will be  significantly  less than 2003 or
2002.

     Employee  pension and legal  expenses  increased  in 2003.  Like many other
organizations,  the Company's  defined-benefit  pension cost  continues to rise.
Unfavorable  market  conditions  since 2000 reduced earnings in the pension fund
and accordingly  caused a significant  increase in the contribution  required by
the Company.  The  Company's  pension  expense was $768,000 in 2003  compared to
$215,000  in 2002 and  $5,000 in 2001.  Management  expects  pension  expense to
continue to increase in 2004. Litigation that started in 2002 continues with the
troubled lease portfolio.  Legal and professional  fees increased to $731,000 in
2003 from $386,000 in 2002.

     The  Company's  profitability  is also affected by outside  sources  beyond
management's control.  These outside sources include the economy, the regulatory
environment,  and government  monetary and fiscal policies.  Management  started
initiatives  in 2004 to improve  profits in the areas the Company  can  control,
such as limiting expense growth, expanding fee income, and enhancing operational
efficiency.

     The  statements  contained  within  this  report  contains  forward-looking
statements within the meaning of the federal securities laws. Statements in this
release that are not strictly  historical are forward-looking and are based upon
current  expectations  that may differ  materially  from actual  results.  These
forward-looking  statements,  identified by words such as "view" and  "believe,"
involve  risks and  uncertainties  that  could  cause  actual  results to differ
materially from those anticipated by the statements made herein. These risks and
uncertainties  involve  general  economic  trends and changes in interest rates,
increased  competition,  changes in consumer demand for financial services,  the
possibility  of  unforeseen  events  affecting  the  industry   generally,   the
uncertainties associated with newly developed or acquired operations, the amount
of losses incurred from the liquidation of certain of the Company's investments,
the eventual  outcome of litigation to enforce  certain surety  agreements,  and
market  disruptions  and other  effects of  terrorist  activities.  The  Company
undertakes  no  obligation  to  release   revisions  to  these   forward-looking
statements  publicly to reflect events or circumstances after the date hereof or
to reflect  the  occurrence  of  unforeseen  events,  except as  required  to be
reported  under  the  rules  and  regulations  of the  Securities  and  Exchange
Commission.


                                       45
<PAGE>

CRITICAL ACCOUNTING POLICIES
----------------------------
     The accounting and reporting policies of the Company are 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  for the year ended  December 31, 2003.  The
preparation  of financial  statements  in  conformity  with  generally  accepted
accounting principles requires management to make estimates and assumptions. The
financial  position and results of operations can be affected by these estimates
and  assumptions  and 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 CREDIT  LOSSES.  The  allowance  for credit  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  homogeneous  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 homogeneous 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
judgmental nature of individual loan evaluations, collateral

                                       46
<PAGE>

assessments and the interpretation of economic trends. Volatility of economic or
customer-specific  conditions  affecting the  identification  and  estimation of
losses for larger,  non-homogeneous  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  imprecision  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  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.

     GOODWILL  AND  OTHER  INTANGIBLES.  The  Company  records  all  assets  and
liabilities  acquired in purchase  acquisitions,  including  goodwill  and other
intangibles,  at fair value as required by  Statement  of  Financial  Accounting
Standards ("SFAS") No. 141. Goodwill is subject,  at a minimum,  to annual tests
for  impairment.  Other  intangible  assets are amortized  over their  estimated
useful lives using  straight-line  and accelerated  methods,  and are subject to
impairment if events or circumstances  indicate a possible  inability to realize
the carrying amount.  The initial goodwill and other intangibles  recorded,  and
subsequent impairment analysis, requires management to make subjective judgments
concerning  estimates  of how the  acquired  asset will  perform in the  future.
Events and factors that may significantly  affect the estimates  include,  among
others, customer attrition,  changes in revenue growth trends, specific industry
conditions and changes in competition.

                                       47
<PAGE>

SALE OF TWO CINCINNATI BRANCHES IN 2003
---------------------------------------

     On April 7, 2003, the Company  announced that it had agreed to sell its two
Cincinnati-area   branches  to  Peoples  Community  Bancorp,   Inc.  (NASDAQ/NM:
PCBI)("PCBI")  of West Chester,  Ohio. The two branches are located in Deer Park
and Landen, Ohio. On September 30, 2003, the Company announced the completion of
the sale of the two branches to PCBI. In connection  with the sale,  the Company
recorded an  after-tax  gain of  approximately  $2,930,000  or $0.93 per diluted
share in the third quarter 2003.

     The  transaction  included the Company's real property  related to the Deer
Park  branch  and  its  leasehold  on  the  premises  for  the  Landen   branch.
Additionally,  the Company  conveyed most consumer and commercial loans at those
branches as part of the  transaction,  as well as the branches' saving deposits,
but retained and will  continue to service  certain  single  family  residential
mortgages originated in those locations.

INVESTMENTS SOLD IN 2002
------------------------

     The interest  rate risk  position of the Bank for the prior  period  ending
December 31, 2001,  was reviewed by  management.  Management  determined  that a
significant  deterioration  had occurred in the Company's CMO  portfolio,  which
resulted in a large  increase in the Company's  exposure to future  increases in
interest rate risk. Upon further review, management determined that the increase
in the exposure  was  significant  enough to call into  question the prudence of
continuing to hold the  securities  to maturity.  In order to take the necessary
action to reduce this exposure, management decided to move the entire securities
portfolio  from  the  "Held  to  Maturity"  accounting   classification  to  the
"Available for Sale" classification as of December 31, 2001.

     In 2002, the Company  determined that most of its investments no longer fit
its risk profile,  given the  unsettled,  uncertain  and volatile  nature of the
market and the possibility that interest rates could move against the portfolio.
The  decelerating  speed of  prepayments on these  instruments  during the first
quarter of 2002 was remarkable,  significantly  extending the practical maturity
of the  portfolio  to a level that  exceeded  the Bank's  risk  parameters.  The
alternatives  to taking  immediate  action to  mitigate  the  potential  losses,
including   long-term  funding   strategies,   hedging  strategies  and  partial
liquidations,  were felt to be  inadequate  in the  circumstances.  The  Company
decided to liquidate the majority of the  investment  portfolio.  In March 2002,
the Bank  disposed  of $137.0  million in  securities  at a pretax  loss of $3.2
million, or approximately $1.9 million after tax.

     The proceeds from the liquidation of the Company's  investments  were first
applied towards repayment of short-term borrowings from the FHLB. This increased
the  Company's  flexibility  to  retain  more of its  self-originated

                                       48
<PAGE>

loans in portfolio  and to purchase  loan  participations  in the region as they
became available.  The balance of the proceeds were used to purchase  short-term
liquid investments,  including limited maturity MBS, which present less interest
rate risk than the liquidated  investments,  and an ARM mutual fund. The Company
also used some proceeds to invest in intermediate-term  MBS to provide a balance
to its portfolio  between interest rate risk reduction and maintenance of higher
net interest income levels.

     In September  2002,  the Bank  determined it could improve its net interest
margin by paying down the majority of FHLB  advances  with the sale of a similar
amount of investment securities. The Company sold an additional $44.6 million of
investments in the third quarter 2002 and realized a gain of approximately  $1.2
million on the sale,  which  offset to some  extent the loss on  disposition  of
investments  realized  earlier  in the  year.  The  proceeds  from  this  latest
investment sale were used to pay off higher-rate FHLB advances, which included a
prepayment penalty of approximately  $1.1 million.  Aside from the de-leveraging
effect,  these  transactions  are expected to improve the Company's net interest
margin through the reduction of higher-rate  debt with proceeds from the sale of
lower-earning investments.

TROUBLED LEASE PORTFOLIO WRITE-OFF
----------------------------------

     On September 30, 2003, the Company wrote-off the remaining  balances of two
troubled  equipment  lease pools  originated by Commercial  Money Center,  a now
bankrupt  company and  recorded an  after-tax  loss of  $3,534,000  or $1.12 per
diluted share for the year ended  December 31, 2003. The Bank entered into these
leases pools, which at the time had receivables totaling $12,003,000, consisting
primarily of equipment  leases, in June and September of 2001. Each lease within
each pool is supported by a surety bond issued by insurance companies which were
rated at least  "A" by  Moodys at the time the  Company  entered  into the lease
pools.  When the  issuer of the lease  pools  filed for  bankruptcy  in 2002 the
outstanding  balance on these pools was  $10,900,000.  The insurers of the lease
pools have denied  responsibility  for payment of the default on the lease pools
alleging fraud on the part of Commercial Money Center. At December 31, 2002, the
Company  established  reserves against the two lease pools of $5,450,000,  which
was equal to approximately 50% of the outstanding amount in default.  At the end
of the second quarter of 2003,  the Company set aside an additional  $900,000 in
specific reserves for one of the two lease pools. Subsequently, due to continued
uncertainty  surrounding the prospects for eventual  recovery from the sureties,
the fact that one of the insurance  companies had its credit rating  down-graded
to "D" by A.M. Best, and that the litigation  with respect to the enforcement of
the surety bonds was proving more  protracted and  challenging

                                       49
<PAGE>

than originally anticipated,  in keeping with the Company's policy for reserving
against its assets,  the Company determined to charge-off the remaining balances
of the lease pools.

FINANCIAL CONDITION
-------------------

     Total assets decreased $54.3 million or 11.9% to $402.5 million at December
31, 2003,  from $456.8  million at December 31, 2002. The decrease was primarily
due to the sale of the Ohio branches to Peoples  Community  Bancorp,  Inc. which
reduced assets approximately $55.6 million (See "Sale of Two Cincinnati Branches
in 2003").

CASH AND CASH EQUIVALENTS

     Cash and cash  equivalents  decreased  $31.2  million  to $14.5  million at
December 31, 2003, from $45.7 million at December 31, 2002. The decrease was the
result of investing cash and cash equivalents in investment securities.

SECURITIES
----------

     Investment  securities  increased  approximately  $79.6  million  to $137.8
million at December 31, 2003,  from $58.2 million at December 31, 2002. This was
mainly due to a decline in the loan  portfolio  during 2003 which  resulted from
refinanced  mortgage  loans.  Due to the  rate  environment  in  2003,  the Bank
continued to sell the majority of its fixed-rate originations.

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

<TABLE>
<CAPTION>
                                                        (Dollars in thousands)
        -------------------------------------------- ------------- ---------------- ---------------- ----------------
                                                         2003           2002           $ Change         % Change
        -------------------------------------------- ------------- ---------------- ---------------- ----------------
          <S>                                           <C>            <C>                 <C>              <C>
        Available for sale at December 31:
        Mortgage-backed and
              collateralized mortgage obligations        $ 36,501          $27,824          $8,677            31.2%
        Federal agencies                                   78,423            8,227          70,196           853.2
        Municipal securities                                9,424               --           9,424             NM(1)
        Mutual fund                                        11,796           20,538          (8,742)          (42.6)
        Trust preferred                                     1,644            1,566              78             5.0
        -------------------------------------------- ------------- ---------------- ---------------- ----------------
           Totals                                        $137,788          $58,155        $ 79,633           136.9%
        -------------------------------------------- ------------- ---------------- ---------------- ----------------
</TABLE>
(1) NM - Not meaningful.

     The following table identifies the percentage composition of the investment
securities:
<TABLE>
<CAPTION>

        --------------------------------------------------- ------------- -------------
                                                                2003          2002
        --------------------------------------------------- ------------- -------------
                <S>                                             <C>           <C>
        Available for sale at December 31:
        Mortgage-backed and
              collateralized mortgage obligations                26.5%         47.8%
        Federal agencies                                         56.9          14.2
        Municipal securities                                      6.8            --
        Mutual fund                                               8.6          35.3
        Trust preferred                                           1.2           2.7
        --------------------------------------------------- ------------- -------------
           Totals                                               100.0%        100.0%
        --------------------------------------------------- ------------- -------------
</TABLE>

                                       50
<PAGE>

     The following table  identifies  changes in net unrealized gains and losses
in investment securities:
<TABLE>
<CAPTION>

                                                        (Dollars in thousands)
        --------------------------------------------------- ------------- -------------- -------------
                                                                2003          2002         $ Change
        --------------------------------------------------- ------------- -------------- -------------
           <S>                                                    <C>         <C>             <C>
        Available for sale at December 31:
        Mortgage-backed and
              collateralized mortgage obligations                  $ 40            $573       $ (533)
        Federal agencies                                           (157)            175         (332)
        Municipal securities                                         56              --           56
        Mutual fund                                                (144)             61         (205)
        Trust preferred                                             144              66           78
        --------------------------------------------------- ------------- -------------- -------------
           Totals                                                 $ (61)           $875       $ (936)
        --------------------------------------------------- ------------- -------------- -------------
</TABLE>

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

LOANS
-----

The following table shows the percentage change of the loan portfolio by
category calculated as of December 31 (loans in process and deferred fees are
not included in this table):
<TABLE>
<CAPTION>
                             (Dollars in thousands)
        --------------------------------------------------- ------------- -------------
                                                                2003          2002
                                                                 vs            vs
                                                                2002          2001
        --------------------------------------------------- ------------- -------------
        <S>                                                     <C>              <C>
        At year-end December 31:
        Real estate mortgage loans:
          Commercial loans                                     (10.1)%          43.6%
          Residential loans                                    (36.0)          (25.5)
          Construction loans                                   (57.8)            1.6
        Commercial loans and leases                            (60.0)            3.5
        Consumer loans:
          Mobile home and auto loans                           (48.6)          (36.7)
          Loans secured by deposits                            (28.2)          (16.2)
          Home improvement loans                               (16.9)          (38.5)
          Other                                                (18.7)          (84.6)
        --------------------------------------------------- ------------- -------------
</TABLE>

     The loan  portfolio  declined  $107.5 million to $214.1 million at year end
2003  from  $321.6  million  at year end  2002.  The  sale of the Ohio  branches
accounted for $28.8 million of the loan  portfolio  decline,  with mortgage loan
refinancing accounting for most of the remainder.

     The sale of the Ohio branches  included $649,000 in residential real estate
mortgage loans, $25.0 million in commercial mortgage real estate loans, and $3.2
million in consumer  loans.  The portfolio shift to commercial real estate loans
continued in 2003 and 2002 with commercial loans comprising 37.2% of the overall
portfolio  at  year-end  2003  compared to 27.5% at  year-end  2002.  Fixed-rate
residential  mortgage loan production were sold in the secondary  market in 2003
and 2002, which is the main cause for the decline in residential mortgage loans.
Proceeds from loans sold in the secondary  markets were $154.5  million in 2003,
and $113.0 million in 2002. Fixed mortgage

                                       51
<PAGE>

loan rates have been at historic  lows during this  two-year  period,  which has
increased the volume of refinances. The fixed-rate residential loans are sold to
minimize the Bank's  exposure to interest rate risk. Due to the consumer  demand
for fixed-rate  loans, the Bank's  residential loan portfolio has declined.  The
Bank generally  retains loan servicing on loans  originated and sold in Indiana,
and sold loans and loan  servicing  rights for loans  previously  originated and
sold in Ohio.  Loans serviced by the Bank for  investors,  primarily the Federal
Home Loan Mortgage Corporation ("FHLMC"),  Federal National Mortgage Association
("FNMA") and the Federal Home Loan Bank ("FHLB"),  totaled  approximately $193.0
million in 2003 and $177.4 million in 2002. Loans sold and subsequently serviced
by the Bank generate a steady source of fee income,  with servicing fees ranging
from 0.25% to 0.375%.

     In 2001,  the  Bank  purchased  two  separate  pools of lease  receivables,
totaling  $12.0  million,  which is the reason for the  substantial  increase in
commercial  loans and leases in 2001.  In 2002 these two pools went into default
and were charged-off in 2003 (see "Troubled Lease Portfolio Charged-Off").

     Consumer loans made up 3.68% and 4.21% of the total loan portfolio for 2003
and 2002, respectively. Consumer loans declined $5.6 million, to $7.9 million at
December 31,  2003,  from $13.5  million at December  31, 2002.  The decline was
primarily  due to reduced  loan  volume as market  competitive  rates were below
minimums  established  by the Company and the sale of loans included in the Ohio
branch sale which included $3.2 million in consumer loans.

     Total loan production was strong for 2003 and 2002. New loan production was
$229.9 million and $217.0 million in 2003 and 2002, respectively. Since the Bank
sells most of its fixed-rate  mortgage loans in the secondary  market,  the loan
volume is not fully reflected in the balance sheet.

CREDIT QUALITY
--------------

     Non-performing  assets,  totaling  $8.4  million,  declined  in 2003.  This
represents a decrease of $10.0 million from the 2002 non-performing assets total
of $18.4  million.  The main  cause for the  decrease  was the two  lease  pools
totaling  $10.9  million  that were  charged-off  in 2003 (see  "Troubled  Lease
Portfolio Charged-Off").

     The  Bank  also has a  number  of real  estate  development/lot  loans  and
single-family  residential loans on existing properties with a builder/developer
group,  and its related  parties,  that are currently in default and bankruptcy.
The Bank is working closely with the workout  specialist hired by the bankruptcy
trustee on  liquidation of the properties  involved in the  bankruptcy,  and the
Bank is  negotiating  with the  borrower and its counsel for  resolution  of the
remaining properties. The total outstanding balance of the various loans totaled
$3.5 million as of December 31, 2003.

                                       52
<PAGE>

         The following table compares delinquent loans as a percentage of total
loans:
<TABLE>
<CAPTION>
        -------------------------- --------------------------------------- -- ---------------------------------------
        December 31,                                2003                                       2002
        -------------------------- --------------------------------------- -- ---------------------------------------
                                              90                                           90
                                              days        Non-                            days      Non-
                                    30-89     and       accrual                30-89      and     accrual
                                     days     over(1)    loans     Totals       days     over(1)   loans      Totals
        -------------------------- --------- --------- ---------- -------- -- --------- -------- ---------- ---------
           <S>                          <C>    <C>       <C>        <C>          <C>       <C>       <C>       <C>
        Real Estate:
          Residential                 0.79%     0.04%      0.81%    1.64%         0.59%    0.03%      1.05%     1.83%
          Commercial                  0.05        --       1.63     1.68          0.22     0.01       0.72      0.79
          Construction                  --        --       1.55     1.55          0.32       --         --      0.32
        Commercial loans              0.01        --       0.04     0.05          0.14       --       0.51      0.65
        Consumer loans                0.14        --         --     0.14          0.17       --       0.08      0.25
        Leases                          --        --         --       --            --       --       3.48      3.48
        -------------------------- --------- --------- ---------- -------- -- --------- -------- ---------- ---------
        Totals                        0.99%     0.04%      4.03%    5.06%        1.44%    0.04%      5.85%     7.32%
        -------------------------- --------- --------- ---------- -------- -- --------- -------- ---------- ---------
</TABLE>

        (1)   Still accruing

     The  Bank's  charged-off  loans,  less  recoveries,  were  $11,362,000  and
$364,000 in 2003 and 2002,  respectively.  The percentage of net  charge-offs to
average assets were 2.51% and .07% in 2003 and 2002, respectively.

DEPOSITS
--------

     Interest  rates paid on Bank  deposits  stayed at historic  lows in 2003 as
market  interest rates  continued to fall. The fed funds interest rate, the rate
banks  charge  other banks on  overnight  loans,  was at a 42-year low. Fed fund
rates generally  affect the prime lending rate,  which was at a 45-year historic
low.  The Federal  Reserve has cut the fed funds rate 12 times since 2001,  with
the last rate cut of .50% in November 2002.  Short-term  deposits (deposits with
maturities  of one  year or  less,  including  certificate  accounts,  checking,
savings and money market accounts) comprised 77% of the Bank's deposit portfolio
as of year-end 2003,  compared with 80% for the same period in 2002. With such a
high percentage of deposit accounts staying short-term,  an increase in rates in
the near future may squeeze  the Bank's net  interest  margin in the short term,
since loans are slower to re-price at new market rates.

     Deposits declined $56.5 million, or 14.0%, in 2003 for a year-end portfolio
balance of $345.7  million.  The deposit  portfolio at year-end  2002 was $402.2
million.  The main  reason for the  decline  was the sale of the two  Cincinnati
branches which included the transfer of $55.6 million in deposits.

                                       53
<PAGE>

         The following table shows deposit changes by category:

                             (Dollars in thousands)
<TABLE>
<CAPTION>
        -------------------------------------------------------------------------------------------------------------
                                                         2003           2002           $ Change         % Change
        -------------------------------------------------------------------------------------------------------------
         <S>                                            <C>           <C>                <C>                <C>
        December 31,
          Savings deposits                                $30,558          $33,990         $(3,432)       (10.10)%
          NOW and Super NOW accounts                       79,707           39,344          40,363        102.59
          Money market accounts                            48,238           61,127         (12,889)       (21.09)
          Certificates $100,000 and more                   27,212           45,510         (18,298)       (40.21)
          Other certificates                              160,029          222,216         (62,187)       (27.98)
        -------------------------------------------------------------------------------------------------------------
           Totals                                         345,744         $402,187        $(56,443)       (14.03)%
        -------------------------------------------------------------------------------------------------------------
</TABLE>

BORROWINGS
----------

     Borrowings  increased in 2003. FHLB advances increased $4.0 million to $9.6
million at year-end  2003 from $5.6 million at year-end  2002.  The increase was
mainly due to a $5.0  million  putable  FHLB  advance  taken in  November  2003.
Putable  advances  offer  a low  fixed  rate of  interest  in  exchange  for the
borrower's selling the FHLB the option to convert the advance before maturity on
any given conversion date to an adjustable rate advance based on a predetermined
index for the remaining  term to maturity,  at the FHLB's sole  discretion.  The
putable  advance  has a 10 year maturity with a rate of 3.90% guaranteed for two
years and could  convert to an adjustable  advance  should the three month LIBOR
index reach 8.0%.

     Notes  payable by the  Company  declined  $240,000  to $600,000 at year-end
2003,  from  $840,000 at year-end  2002.  The notes  payable  consists of a note
payable to a third-party  financial  institution  with a balance of $600,000 and
$750,000  bearing  interest at 3.50% and 4.25% at December 31, 2003 and December
31,  2002  respectively,  the  proceeds  of which  were  used to  finance  stock
repurchases during 1999. Notes payable with a balance of $90,000 at December 31,
2002 and paid off in 2003 were 6.0%  notes  payable  to former  stockholders  of
Cardinal State Bank.

INTEREST RATE RISK
------------------

     The  Bank  is  subject  to  interest  rate  risk  to the  degree  that  its
interest-bearing  liabilities,  primarily deposits and borrowings from the FHLB,
mature or reprice at different rates than its interest-earning  assets. Although
having liabilities that mature or reprice more frequently on average than assets
may not be beneficial in times of rising interest rates, such an asset/liability
structure could result in higher net income during periods of declining interest
rates, unless offset by other factors.

     The Asset-Liability  Management Committee and the Board of Directors review
the Bank's  exposure  to  interest  rate  changes and market risk on a quarterly
basis.  This review is accomplished  by the use of a cash flow simulation  model
using detailed securities,  loan, deposit,  borrowings and market information to
estimate fair values

                                       54
<PAGE>

of assets and liabilities  using discounted cash flows.  The difference  between
the  Bank's  estimated  fair  value of assets  and the  estimated  fair value of
liabilities,  is the fair value of equity, also referred to as net present value
of equity  ("NPV").  The change in the NPV is calculated  at different  interest
rate  intervals.  This tests the interest rate risk  exposure from  movements in
interest  rates to determine  the change in the Bank's NPV. The model also tests
the impact various  interest rate scenarios have on net interest  income and net
income over a stated period of time (one year, for example).

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

     The Bank's  information  below provides an assessment of the risk of NPV in
the event of sudden and sustained 200-basis-point increases and decreases in the
prevailing interest rates as of December 31, 2003.
<TABLE>
<CAPTION>

--------------------------------------------------------------------------------------------------------------------------
                                                                                            NPV as Percent of
                                               Net Portfolio Value                       Present Value of Assets
--------------------------------------------------------------------------------------------------------------------------
 Change                       Dollar                Dollar                Percent
in Rates                      Amount                Change                Change        NPV Ratio          Change
--------------------------------------------------------------------------------------------------------------------------
<S>                            <C>                   <C>                    <C>          <C>                  <C>
                                                    (Dollars in thousands)

 +200  bp *                  $41,094               $ (2,751)               (6.27)%          10.37%        (38) bp
Base or 0%                    43,845                                                        10.75%
-200   bp                     43,495                   (350)               (0.80)%          10.42%        (33) bp
* basis points
</TABLE>

     The Bank information below provides an assessment of the risk of NPV in the
event of sudden and  sustained  200 basis point  increases  and decreases in the
prevailing interest rates as of December 31, 2002.
<TABLE>
<CAPTION>

----------------------------------------------------------------------------------------------------------------------------
                                                                                            NPV as Percent of
                                               Net Portfolio Value                       Present Value of Assets
----------------------------------------------------------------------------------------------------------------------------
 Change                       Dollar                Dollar                Percent
in Rates                      Amount                Change                Change        NPV Ratio          Change
----------------------------------------------------------------------------------------------------------------------------
<S>                             <C>                 <C>                    <C>           <C>                 <C>
                                                    (Dollars in thousands)

 +200  bp *                  $36,812               $ (5,999)              (14.01) %          8.61%       (147) bp
Base or 0%                    42,811                                                        10.08%
-200   bp                     39,952                 (2,859)               (6.68)            9.65         (43) bp
* basis points
</TABLE>

                                       55
<PAGE>



     The interest  rate risk  position of the Bank for the prior  period  ending
December  31,  2003,  was within the Bank's  risk  parameters  specified  in its
interest rate risk policy.

YIELDS EARNED AND RATES PAID
----------------------------

     The following  tables set forth the weighted  average  yields earned on the
Company's  interest-earning  assets and the weighted average interest rates paid
on the Company's  interest-bearing  liabilities,  together with the net yield on
interest-earning assets.
<TABLE>
<CAPTION>
                                                                                   Year Ended December 31,
                                                                               --------------------------------------
Weighted Average Yield:                                                          2003       2002         2001
---------------------------------------------------------------------------------------------------------------------
<S>                                                                                <C>       <C>         <C>
     Loans                                                                        7.20%     7.15%        7.98%
     Mortgage-backed and collateralized mortgage obligations                      3.24      5.64         7.00
     Other interest-earning assets                                                2.69      3.09         6.66
     All interest-earning assets                                                  5.73      6.33         7.71
Weighted Average Cost:
---------------------------------------------------------------------------------------------------------------------
     Deposits                                                                     2.58      3.71         5.03
     Federal Home Loan Bank advances                                              6.57      6.39         6.50
     Notes payable                                                                3.95      3.69         7.30
     All interest-bearing liabilities                                             2.65      3.97         5.31
---------------------------------------------------------------------------------------------------------------------
Interest Rate Spread (spread between weighted average yield on all
     interest-earning assets and all interest-bearing liabilities)                3.08      2.36         2.40
---------------------------------------------------------------------------------------------------------------------
Net Yield (net interest income as a percentage of average
     interest-earning assets)                                                     3.23      2.63         2.68

                                                                                           At December 31,
                                                                           ------------------------------------------
Weighted Average Interest Rates:                                              2003          2002         2001
---------------------------------------------------------------------------------------------------------------------
     Loans                                                                     6.82%        6.88%        7.74%
     Mortgage-backed and collateralized mortgage obligations                   4.79         6.66         6.35
     Other earning assets                                                      3.18         2.39         7.18
     Total interest-earning assets                                             5.46         6.07         7.39
     Deposits                                                                  1.92         3.04         4.40
     Federal Home Loan Bank advances                                           5.38         6.83         5.58
     Notes payable                                                             3.50         4.44         6.20
     Total interest-bearing liabilities                                        2.03         3.09         4.62
     Interest rate spread                                                      3.43         2.98         2.77
---------------------------------------------------------------------------------------------------------------------
</TABLE>

                                       56
<PAGE>

RATE/VOLUME ANALYSIS

     The following  table sets forth certain  information  regarding  changes in
interest income, interest expense and net interest income of the Company for the
periods   indicated.   For  each  category  of  interest   earning   assets  and
interest-bearing  liabilities,  information is provided on changes  attributable
to: (1)  changes in volume  (changes in volume  multiplied  by old rate) and (2)
changes in rate (changes in rate multiplied by new volume).  No material amounts
of loan fees or out-of-period interest are included in the table. Dollars are in
thousands.
<TABLE>
<CAPTION>
                                                                  Year Ended December 31
                                               2003        vs.       2002       2002       vs        2001
-------------------------------------------------------------------------------------------------------------------
                                                       Increase (Decrease)             Increase (Decrease)
                                                       Due to Changes in               Due to Changes in
-------------------------------------------------------------------------------------------------------------------
                                                                    Net                             Net
                                               Volume        Rate   Change      Volume        Rate  Change
-------------------------------------------------------------------------------------------------------------------
<S>                                             <C>        <C>      <C>         <C>           <C>        <C>
Interest income:
   Loans                                       $(5,372)  $   140   $(5,232)      $(2,705)  $(2,827) $ (5,532)
   Other interest-earning assets                   204    (1,849)   (1,645)        1,770    (3,435)   (1,665)
-------------------------------------------------------------------------------------------------------------------
   Total interest-earning assets                (5,168)   (1,709)   (6,877)         (935)   (6,262)   (7,197)
-------------------------------------------------------------------------------------------------------------------
Interest Expense:
   Deposits                                       (843)   (4,213)   (5,056)        2,272    (6,223)   (3,951)
   FHLB advances and notes payable              (2,416)       (3)   (2,419)       (2,671)      (80)   (2,751)
-------------------------------------------------------------------------------------------------------------------
   Total interest-bearing liabilities           (3,259)   (4,216)   (7,475)         (399)   (6,303)   (6,702)
-------------------------------------------------------------------------------------------------------------------
   Change in net interest income               $(1,909)  $ 2,507   $   598       $  (536)  $    41  $   (495)
-------------------------------------------------------------------------------------------------------------------
</TABLE>

RESULTS OF OPERATIONS

PART 1   2003 COMPARED TO 2002
------------------------------

Net  Income (Loss)
------------------

     The Company had a net profit of $2.4 million or $0.77 per diluted share for
the year-end 2003. The Company  incurred a provision  expense of $6.4 million in
2003 which was offset by a net gain on the sale of branches of $5.5  million for
the same period. The provision expense decreased  approximately $900,000 in 2003
compared to 2002. The provision expense was $7.3 million in 2002.

     The provision  expense included  specific  reserves of approximately  $5.45
million  taken in both 2003 and 2002 was largely  due to two pools of  equipment
lease receivables. (see "Troubled Lease Portfolio Charged-Off").

                                       57
<PAGE>

     For a quarterly  breakdown  of earnings,  see Note 18 to the  "Consolidated
Financial Statements."

     The table below shows selected performance data:
<TABLE>
<CAPTION>

----------------------------------------------- -------------- ------------- -------------- ------------- --------------
                                                    2003           2002          2001           2000          1999
----------------------------------------------- -------------- ------------- -------------- ------------- --------------
<S>                                                     <C>         <C>            <C>           <C>          <C>
Net income (loss) (in thousands)                       $2,418      $(3,075)         $3,800        $3,562         $3,332
Basic earnings (loss) per share                        $ 0.77      $ (0.98)         $ 1.21        $ 1.13         $ 0.98
Diluted earning (loss) per share                       $ 0.77      $ (0.98)         $ 1.21        $ 1.13         $ 0.98
Dividends declared per share                           $ 0.64       $ 0.64          $ 0.61        $ 0.60         $ 0.60
Book value per share                                   $12.35      $ 12.40          $13.63        $13.26         $12.72
Return on average assets                                0.53%       (0.60)%          0.72%         0.68%          0.77%
Return on average equity                                6.20%       (7.32)%          8.92%         8.68%          7.60%
Ratio of average equity to average assets               8.62%        8.18%           8.12%         7.84%         10.17%
Dividend Payout Ratio(1)                               83.33%         NM            50.41%        53.00%         61.22%
Number of full-service bank offices                      9            11             11            11             12
----------------------------------------------- -------------- ------------- -------------- ------------- --------------
</TABLE>
 (1)     Based on total dividends per share declared and net income per share
for the year. NM - not meaningful.

NET INTEREST INCOME
-------------------

     The Company  derives the majority of its income from net  interest  income.
The following  table shows a breakdown of net interest  income for 2003 compared
to 2002.
<TABLE>
<CAPTION>
                             (Dollars in thousands)
---------------------------------------------------------------------------------------------------
Years ended December 31,                             2003                           2002
---------------------------------------------------------------------------------------------------
                                             Interest       Yield          Interest       Yield         Change
------------------------------------------------------------------------------------------------------------------
<S>                                             <C>           <C>               <C>        <C>            <C>
Interest and fees on loans                      $19,241       7.20%           $24,473       7.15%      $ (5,232)
Other interest income                             3,855       2.83              5,500       4.19         (1,645)
------------------------------------------------------------------------------------------------------------------
   Total interest income                         23,096       5.73             29,973       6.33         (6,877)
------------------------------------------------------------------------------------------------------------------
Interest on deposits                              9,656       2.58             14,712       3.71         (5,056)
Interest on borrowings                              410       6.30              2,829       6.33         (2,419)
------------------------------------------------------------------------------------------------------------------
   Total interest expense                        10,066       2.65             17,541       3.97         (7,475)
------------------------------------------------------------------------------------------------------------------
Net interest income                             $13,030         --            $12,432         --            598
------------------------------------------------------------------------------------------------------------------
Net interest spread                                  --       3.08%               --        2.36%            --
Net interest margin                                  --       3.23%               --        2.63%            --
------------------------------------------------------------------------------------------------------------------
</TABLE>

     Net  interest  income  increased  4.8% or  $598,000  in  2003.  Most of the
increase was rate-related.  See "Rate/Volume Analysis" for more information. The
net interest spread,  which is the mathematical  difference between the yield on
average  interest-earning assets and cost of interest-bearing  liabilities,  was
3.08% in 2003 and 2.36% in 2002.  The net  interest  margin on  interest-earning
assets,  which is interest income as a percentage of average earning assets, was
3.23% in 2003 and 2.63% in 2002.  The  improvements  in the interest  spread and
margin are the results of high cost  certificates that repriced at maturity to a
lower rate, and an overall shift from  certificates to short-term  money market,
Super Now accounts, and lower borrowing cost. The lower borrowing costs were the
result  of  paying  off  higher   costing  FHLB  advances  with  lower  yielding
investments in September 2002.

                                       58
<PAGE>

PROVISION FOR LOAN LOSSES
-------------------------

     The Company's provision for loan losses was $6.4 million for 2003, compared
with 7.3  million in 2002.  The  provision  is the  amount  that is added to the
allowance for loan losses to absorb inherent  losses in the loan portfolio.  The
provision  expense for both 2003 and 2002 consisted of specific reserves for the
troubled lease pools (see "Troubled Lease Portfolio Charged-Off").

     Specific    reserves   of   $895,000   were   established   in   2002   for
business/development  loans and its related  parties.  The  business/development
loans had a principal  balance of $3.5  million and 3.6 million at December  31,
2003 and December 31, 2002  respectively.  The reserves are approximately 25% of
the principal balance at December 31 2003 and December 31, 2002.

     Net loan charge-offs were $11.4 million and $364,000 for the years 2003 and
2002,  respectively.  The  allowance  for loan  losses as a percent of loans was
1.80% at December  31,  2003,  and 2.77% at December  31,  2002.  Non-performing
loans, which consists of non-accrual loans and loans delinquent over 90 days and
still  accruing,  decreased by $10.0 million during 2003.  Non-performing  loans
were $8.4 million at December 31, 2003,  and $18.4 million at December 31, 2002.
The decrease in  non-performing  loans was mainly due to the  charge-off  of the
troubled lease portfolio (see "Troubled Lease Portfolio Charged-Off").
<TABLE>
<CAPTION>

         The following table breaks out non-performing loans by category.

                                                        (Dollars in thousands)
        -------------------------------------------- ------------- ---------------- ---------------- ----------------
                                                         2003           2002           $ Change         % Change
        -------------------------------------------------------------------------------------------------------------
                <S>                                     <C>                <C>                <C>           <C>
        December 31,
        Non-accrual loans                                  $8,383          $18,307         $(9,924)         (54.21)%
        Over 90 days delinquent still accruing                 74              135             (61)         (45.19)%
        -------------------------------------------------------------------------------------------------------------
        Totals                                             $8,457          $18,442         $(9,985)         (54.14)%
        -------------------------------------------------------------------------------------------------------------
</TABLE>

     The Company  believes it has  established  an adequate  allowance  for loan
losses  in  accordance  with  generally  accepted  accounting  principles.   The
variation in the amount of provision  charged against income is directly related
to  changes  in loan  charge-offs,  non-performing  loans,  loan  delinquencies,
economic  conditions in the Company's lending area and loan portfolio mix during
each year.

NON-INTEREST INCOME
-------------------

         Non-interest income was $10.5 million in 2003 and $2.9 million in 2002,
for an overall increase of $7.6 million or 257.4%. The main cause of the change
was due to the net gain on sale of branches of $5.5 million in 2003 (See "Sale
of Two Cincinnati Branches in 2003") and net losses on securities sold in 2002
of $2.0 million (See

                                       59
<PAGE>

"Investments  Sold in 2002").  Excluding  the net gain on sale of  branches  and
security losses,  non-interest  income would have improved 1.11%. Gains on sales
of loans  and  servicing  rights  improved  to $1.9  million  for 2003 from $1.4
million for 2002, an increase of 31.97%.  Interest rates have steadily  declined
since 2001,  which has created a higher  demand from  consumers  for  fixed-rate
mortgage  loans.  Proceeds from loans sold in the  secondary  market were $154.5
million in 2003 and $113.0  million in 2002.  The  increase in gains on sales of
loans was the result of a  continued  increase in  refinancing  during the first
nine  months  of 2003.  Due to the rate  structure  in early  2004 and the large
amount of loans that refinanced during 2003 and 2002, current estimates indicate
that the gain on sale of loans during 2004 will be significantly  less than 2003
or 2002.  Other fees and service  charges  improved  6.31%,  while brokerage and
insurance  commissions  were down 4.48%.  The Bank invested in life insurance on
employees and directors, with a balance or cash surrender value of $19.7 million
and $18.9 million,  respectively, at December 31, 2003 and 2002. The majority of
these policies were purchased in 1999. The nontaxable increase in cash surrender
value of life insurance  declined to $773,000 in 2003 from $897,000 in 2002. The
decline was due to declining  interest rates.  Operating losses  associated with
the  limited  partnership  amounted  to a loss of  $81,000 in 2003 and a gain of
$92,000 in 2002 and are  included  in other  income.  The  Company  incurred  an
allocated  gain of  $191,000  and tax credit  recapture  of  $33,000  due to the
termination  of ownership  in one of the  properties  in 2002.  The Company also
reflected federal income tax credits of $174,000 and $159,000 for the year ended
December 31, 2003, and December 31, 2002.

NON-INTEREST EXPENSE
--------------------

     Non-interest  expense was $13.6  million in 2003 and $13.7 million in 2002,
for an  overall  decrease  of  $73,000  or 0.53%.  Non-interest  expense in 2002
included  penalties  charged for early  payoff of FHLB  advances of $1.1 million
(See "Investments Sold in 2002").  Excluding the advance early payoff penalties,
non-interest  expense would have  increased  $1.1 million or 7.96%.  The largest
component  of  non-interest  expense is salaries and  employee  benefits,  which
made-up 59.42% of total non-interest expenses in 2003.

     Salaries and employee benefits  increased $483,000 to $8.1 million in 2003,
compared with $7.6 million in 2002. The Bank's employee  retirement plan expense
increased  to  $768,000 in 2003 from  $215,000 in 2002.  Prior to 2002 the stock
market  generally  provided enough  earnings to cover increases  required in the
employee  retirement  fund.  With the  decline of the stock  market,  the Bank's
retirement  expense  in rose  substantially  in 2002 and 2003.  Other  insurance
benefits,  comprised mainly of medical  insurance,  increased to $1.2 million in
2003 from $1.0 million in 2002,  for an overall  increase in insurance  benefits
expense  of  $200,000.  Please  see  Note  11  to  the

                                       60
<PAGE>

"Consolidated Financial Statements" for more information regarding benefits.

     Net occupancy and furniture and equipment expense was $1.6 million in 2003,
compared with $1.7 million 2002, for an overall expense decrease of $104,000, or
6.30%. The decrease was mainly due to real estate taxes which declined  $142,000
due  to  a  reduction  in  Indiana  real  estate  tax  assessments.   Legal  and
professional  expenses were $345,000  higher in 2003 from 2002 mainly due to the
CMC  leases  litigation  and the sale of the  Ohio  branches.  Data  processing,
printing and supplies,  and all other expenses increased $279,000,  or 9.42%, in
2003  from  2002  mainly  due to  higher  federal  deposit  insurance  and  loan
processing  expense.  Federal  deposit  insurance was $119,000  higher due to an
increase in the Bank's  insurance  premium rate in mid 2002 and loan  processing
expense was $87,000 higher due to a greater volume of loans  originated and sold
in 2003 from 2002.

INCOME TAX EXPENSE
------------------

     The Company  incurred income tax expense of $1.1 million in 2003,  compared
to an income tax benefit of $2.5  million in 2002.  The  effective  tax rate was
31.5% in 2003 and  (45.0)% in 2002.  The 2003  income  taxes were  composed of a
$847,000 credit for current taxes and a $2.0 million expense for deferred taxes.
The 2002 income taxes were composed of a $796,000  expense for current taxes and
a $3.3 million credit for deferred  taxes.  The deferred tax expense in 2003 was
mainly due to net charge-offs in 2003 exceeding the loan provision expense.  The
deferred tax credit in 2002 was mainly due to the loan provision expense in 2002
which exceeded net charge-offs. The primary difference between the effective tax
rates and the statutory tax rates in 2003 relates to tax credits,  cash value of
life insurance and the  disposition  of goodwill  resulting from the sale of the
Ohio branches.  The primary  difference  between the effective tax rates and the
statutory  tax  rates in 2002  relate  to tax  credits  and  cash  value of life
insurance.  See  Note 10 to the  "Consolidated  Financial  Statements"  for more
information.

PART 2   2002 COMPARED TO 2001
------------------------------

NET INCOME (LOSS)
-----------------

     The  Company  had a net loss of $3.1  million for the  year-end  2002,  due
primarily to security losses and large loan provision expenses.

     The total provision for loan and lease losses  increased  substantially  in
2002.  Provision expense increased $6.9 million for a total provision expense of
$7.3 million in 2002. This increase was necessary to establish specific reserves
for the additional  non-accrual loans, which increased by $16.1 million in 2002,
for a year-end  total of $18.3  million.  In 2002,  the Bank set aside  specific
reserves  in the amount of $5.5  million  for two lease  pools with a  principal
balance of $10.9 million at December 31, 2002, in addition to specific  reserves
of  $795,000  for

                                       61
<PAGE>

business/development  loans and its related parties with a principal  balance of
$3.6 million at December  31, 2002.  These  specific  reserves  account for $6.2
million of the $6.9 million increase in the provision for loan and lease losses.
The Bank also  increased  its general  reserves  due to the weak  economy and to
reflect the Bank's  current risk in the loan  portfolio due to the change in the
portfolio mix.

         For a quarterly breakdown of earnings, see Note 18 to the "Consolidated
Financial Statements."

NET INTEREST INCOME
-------------------

         The Company derives the majority of its income from net interest
income. The following table shows a breakdown of net interest income for 2002
compared with 2001.
<TABLE>
<CAPTION>
                             (Dollars in thousands)
--------------------------------------------------------------------------------------------------------------------
Years ended December 31,                             2002                           2001
------------------------------------------------------------------------------------------------------
                                             Interest       Yield          Interest       Yield           Change
--------------------------------------------------------------------------------------------------------------------
<S>                                             <C>         <C>              <C>              <C>          <C>
Interest and fees on loans                      $24,473       7.15%           $30,005       7.98%        $  (5,532)
Other interest income                             5,500       4.19              7,165       6.76            (1,665)
--------------------------------------------------------------------------------------------------------------------
   Total interest income                         29,973       6.33             37,170       7.71            (7,197)
--------------------------------------------------------------------------------------------------------------------
Interest on deposits                             14,712       3.71             18,663       5.03            (3,951)
Interest on borrowings                            2,829       6.33              5,580       6.52            (2,751)
--------------------------------------------------------------------------------------------------------------------
   Total interest expense                        17,541       3.97             24,243       5.31            (6,702)
--------------------------------------------------------------------------------------------------------------------
Net interest income                             $12,432         --            $12,927         --             $(495)
--------------------------------------------------------------------------------------------------------------------
Net interest spread                                  --       2.36%                --       2.40%               --
Net interest margin                                  --       2.63%                --       2.68%               --
--------------------------------------------------------------------------------------------------------------------
</TABLE>

     Net interest income declined 3.8% or $495,000 in 2002. Most of the decrease
was volume related.  See "Rate/Volume  Analysis" for more  information.  The net
interest  spread,  which is the  mathematical  difference  between  the yield on
average  interest-earning assets and cost of interest-bearing  liabilities,  was
2.36% in 2002 and 2.40% in 2001.  The net  interest  margin on  interest-earning
assets,  which is interest income as a percentage of average earning assets, was
2.63% in 2002 and 2.68% in 2001.

PROVISION FOR LOAN LOSSES
-------------------------

     The Company  significantly  increased  the  provision for loan losses for a
total  provision  expense of $7.3 million for 2002,  compared  with  $360,000 in
2001. The provision is the amount that is added to the allowance for loan losses
to absorb  inherent  losses in the loan  portfolio.  Net loan  charge-offs  were
$364,000 and $119,000 for the years 2002 and 2001,  respectively.  The allowance
for loan losses as a percent of loans was 2.77% at December 31,  2002,  and .49%
at December 31, 2001, and represents  management's best estimate of the inherent
losses in the loan  portfolio.  The provision  increase in 2002 was necessary to
increase  the  allowance  for loan and  lease  losses to a  sufficient  level of
specific  and  general  reserves.   Non-performing   loans,  which  consists  of
non-accrual  loans  and  loans  delinquent  over 90  days  and  still  accruing,
substantially increased by $15.8 million during 2002.  Non-performing loans were
$18.4 million at December 31, 2002,  and $2.6 million at December 31, 2001.  The
increase in

                                       62
<PAGE>

non-performing  loans was mainly due to a few large  loans.  Please see  "Credit
Quality" for more information.

The following table breaks out non-performing loans by category.
<TABLE>
<CAPTION>
                                                        (Dollars in thousands)
        -------------------------------------------------------------------------------------------------------------
                                                         2002           2001           $ Change         % Change
        -------------------------------------------------------------------------------------------------------------
          <S>                                              <C>           <C>               <C>              <C>
        December 31,
        Non-accrual loans                                 $18,307           $2,178         $16,129            740.5%
        Over 90 days delinquent still accruing                135              395            (260)           (65.8)
        -------------------------------------------------------------------------------------------------------------
        Totals                                            $18,442           $2,573         $15,869            616.8%
        -------------------------------------------------------------------------------------------------------------
</TABLE>

     The Company  believes it has  established  an adequate  allowance  for loan
losses  in  accordance  with  generally  accepted  accounting  principles.   The
variation in the amount of provision  charged against income is directly related
to  changes  in loan  charge-offs,  non-performing  loans,  loan  delinquencies,
economic  conditions in the Company's lending area and loan portfolio mix during
each year.

NON-INTEREST INCOME
-------------------

     Non-interest  income was $2.9 million in 2002 and $4.0 million in 2001, for
an overall decrease of 27.50%.  The main cause of the decline was due to the net
losses on  securities  sold in 2002 of $2.0  million (See  "Investments  Sold in
2002").  Excluding the security losses,  non-interest income would have improved
22.94%.  Gains on sales of loans and servicing  rights  improved to $1.4 million
for 2002 from  $804,000  for 2001,  an increase of 77.00%.  Interest  rates have
steadily  declined since 2001,  which has created a higher demand from consumers
for fixed-rate mortgage loans.  Proceeds from loans sold in the secondary market
were $113.0  million in 2002 and $86.8  million in 2001.  Other fees and service
charges improved 5.25%, while brokerage and insurance commissions were up 1.01%.
The Bank invested in life insurance on employees and  directors,  with a balance
or cash  surrender  value of $18.9 million and $18.0 million,  respectively,  at
December 31, 2002 and 2001.  The majority of these  policies  were  purchased in
1999.  The  nontaxable  increase in cash  surrender  value of life insurance was
$897,000 in 2002 and  $945,000 in 2001.  Overall,  the increase in cash value of
life  insurance  declined  5.08% in 2002  compared with 2001.  Operating  losses
associated  with the limited  partnership  amounted to a gain of $92,000 in 2002
and a loss of $172,000 in 2001 and are  included  in other  income.  The Company
incurred an allocated  gain of $191,000 and tax credit  recapture of $33,000 due
to the  termination  of ownership in one of the  properties in 2002. The Company
also  reflected  federal  income  tax  credits  of  $159,000  (after-tax  credit
recapture)  and $210,000 for the year ended  December 31, 2002, and December 31,
2001.


                                       63
<PAGE>

NON-INTEREST EXPENSE
--------------------

     Non-interest  expense was $13.7  million in 2002 and $11.3 million in 2001,
for an overall  increase  of  20.51%.  The main  cause of the  increase  was the
penalties charged for early payoff of FHLB advances in 2002 of $1.1 million (See
"Investments  Sold in 2002").  Excluding  the advance  early  payoff  penalties,
non-interest  expense  would have  increased  11.02%.  The largest  component of
non-interest expense is salaries and employee benefits,  which make up 55.57% of
total non-interest expenses.

     Salaries and employee benefits  increased $879,000 to $7.6 million in 2002,
compared  with $6.7 million in 2001. In 2002,  the Bank paid a former  executive
officer  severance  pay for a  non-recurring  expense  of  $289,000.  The Bank's
employee  retirement  plan expense  increased to $215,000 in 2002 from $5,000 in
2001. The  retirement  expense  incurred in 2001 was for general  administrative
expenses of the retirement  fund. In 2001, the stock market  generally  provided
enough earnings to cover  increases  required in the employee  retirement  fund.
With the decline of the stock market, the Bank's retirement expense in 2002 rose
substantially.  Other insurance benefits, comprised mainly of medical insurance,
increased to $1.0 million in 2002 from $748,000 in 2001, for an overall increase
in insurance  benefits  expense of $280,000.  There were 11 new positions  added
during  2002 in several  areas  Bank.  Please  see Note 11 to the  "Consolidated
Financial Statements" for more information regarding benefits.

     Net occupancy and furniture and equipment expense was $1.7 million in 2002,
compared with $1.4 million 2001, for an overall expense increase of $271,000, or
19.62%, in 2001. The increase was mainly due to building  equipment  maintenance
expense,  utilities,  equipment rental and  depreciation  expense that increased
$74,000,  $17,000,  $22,000,  $14,000,  respectively,  in 2002 from  2001.  Data
processing, printing and supplies, and all expenses increased $32,000, or 1.10%,
in 2002 from 2001.

INCOME TAX EXPENSE
------------------

     The Company  incurred a $2.5  million  income tax benefit in 2002  compared
income tax expense of $1.5 million in 2001.  The  effective tax rate was (45.0)%
in 2002 and 27.8% in 2001.  2002 income taxes were composed of $796,000  expense
for current  taxes and a $3.3 million  credit for deferred The 2001 income taxes
were composed of $1.7 million  expense for current taxes and $229,000 credit for
taxes.  The deferred  tax credits in 2002 were mainly due to the loan  provision
expense in 2002.  For both 2002 and 2001 , the  primary  difference  between the
effective  tax rates and the  statutory tax rates relate to tax credits and cash
value of life insurance.  See Note 10 to the "Consolidated Financial Statements"
for more information.

                                       64
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES
-------------------------------

     Historically,  funds provided by operations,  loan principal repayments and
new deposits  have been the  Company's  principal  sources of liquid  funds.  In
addition,  the Company has the ability to obtain  funds  through the sale of new
mortgage  loans and through  borrowings  from the FHLB  system.  At December 31,
2003, the Company's  commitments  for loans in process  totaled $5.9 million and
conditional  commitments for lines of credit receivable totaled $21.4 million.
Management believes that the Company's liquidity and other sources of funds will
be  sufficient  to fund all  outstanding  commitments  and other cash  needs.  A
portion of these  commitments is for fixed-rate  mortgage  loans,  which will be
sold immediately into the secondary market.

     An amendment of the 1996 Stock Option Plan, which provides for the granting
of incentive and non-qualified  stock options,  was approved by the shareholders
in April 1998 and extended the plan's term to ten years and increased the number
of shares  reserved under the plan from 176,000 to 352,000  shares.  Options for
825  shares  in 2003  were  exercised.  Options  for  9,713  shares in 2002 were
exercised. See Notes 1 and 11 to the "Consolidated Financial Statements" for the
pro  forma  effect  on  net  income  and  option  activity.

OFF-BALANCE SHEET ARRANGEMENTS
------------------------------

     The Company does not have any off-balance  sheet  arrangements that have or
are  reasonably  likely to have a  current  or  future  effect of the  Company's
financial  condition,  changes in  financial  condition,  revenues or  expenses,
results of operations, liquidity, capital expenditures or capital resources that
is material to investors.

CONTRACTUAL OBLIGATIONS
-----------------------

         Either the Company or the Bank has the following known contractual
obligations as of December 31, 2003:
<TABLE>
<CAPTION>
----------------------------------- ----------------------------------------------------------------------------------
                                                                  Payment due by period

     Contractual Obligations
----------------------------------- ----------------------------------------------------------------------------------
                                                       Less than           1-3              3-5          More than
                                         Total           1 year           years            years          5 years
----------------------------------- ---------------- --------------- ---------------- ---------------- ---------------
<S>                                        <C>           <C>              <C>              <C>             <C>
                                                                 (Dollars in thousands)
----------------------------------- ----------------------------------------------------------------------------------
Long-Term Debt Obligations                  $ 9,630          $  915          $ 3,517           $  198         $ 5,000
----------------------------------- ---------------- --------------- ---------------- ---------------- ---------------
Capital Lease Obligations                        --              --               --               --              --
----------------------------------- ---------------- --------------- ---------------- ---------------- ---------------
Operating Lease Obligations                     327             114              150               63              --
----------------------------------- ---------------- --------------- ---------------- ---------------- ---------------
Purchase Obligations                             --              --               --               --              --
----------------------------------- ---------------- --------------- ---------------- ---------------- ---------------
Other    Long-Term     Liabilities               --              --               --               --              --
Reflected    on   the    Company's
Balance Sheet under GAAP
----------------------------------- ---------------- --------------- ---------------- ---------------- ---------------
         Total                              $ 9,957         $ 1,029          $ 3,667           $  260         $ 5,000
----------------------------------- ---------------- --------------- ---------------- ---------------- ---------------
</TABLE>


                                       65
<PAGE>

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.

CURRENT ACCOUNTING ISSUES
-------------------------

     In May 2003,  the Financial  Accounting  Standards  Board  ("FASB")  issued
Statement of Financial  Accounting  Standards  ("SFAS") No. 150,  Accounting for
Certain  Financial  Instruments  with  Characteristics  of both  Liabilities and
Equity. SFAS 150 establishes standards for classification and measurement in the
statement  of  financial   position  of  certain   financial   instruments  with
characteristics  of both  liabilities  and equity.  It  requires  that an issuer
classify a financial  instrument  that is within its scope as a  liability.  The
FASB's Staff Position 150-3 deferred  indefinitely  the guidance in SFAS No. 150
on certain  mandatorily  redeemable  noncontrolling  interests.  At December 31,
2003,  the Company has no financial  instruments  with  characteristics  of both
liabilities and equity.

     In January of 2003, the FASB issued Interpretation No. 46, Consolidation of
Variable Interest  Entities,  an Interpretation of Accounting  Research Bulletin
No.  51, and in  December  2003 the FASB  deferred  certain  effective  dates of
Interpretation  No. 46. For all variable  interest  entities  other than special
purpose  entities,  the revised  Interpretation  is effective for periods ending
after March 15, 2004. For variable  interest  entities meeting the definition of
special purpose  entities under earlier  accounting  rules,  the  Interpretation
remains effective for periods ending after December 31, 2003. The Interpretation
requires the consolidation of entities in which an enterprise absorbs a majority
of the entity's  expected losses,  receives a majority of the entity's  expected
residual  returns,  or both,  as a result  of  ownership,  contractual  or other
financial   interests  in  the  entity.   Currently,   entities  are   generally
consolidated  by an  enterprise  when  it  has a  controlling  interest  through
ownership  of a  majority  voting  interest  in  the  entity.  The  Company  has
determined that it has no such interests.


                                       66
<PAGE>

     In December 2002, the FASB issued SFAS No. 148,  Accounting for Stock-based
Compensation - Transition and Disclosure, which provides guidance for transition
from the intrinsic value method of accounting for stock-based compensation under
Accounting  Principles Board ("APB") Opinion No. 25 to SFAS No. 123's fair value
method of accounting,  if a company so elects.  The Company  applies APB Opinion
No. 25 and related  Interpretations  in  accounting  for the stock  option plan.
Accordingly,  no compensation costs have been recognized, as all options granted
had an exercise price equal to the market value of the  underlying  common stock
on the date of grant. Had compensation  cost for the Company's stock option plan
been  recorded  based on the fair value at the grant dates for awards  under the
plan consistent  with the method  prescribed by SFAS No. 123, net income and net
income per share would have been adjusted to the proforma  amounts  indicated in
Note 1.

     In  November  2002,  FASB  Interpretation  No. 45 ("FIN  45"),  Guarantor's
Accounting  and  Disclosure  Requirements  for  Guarantees,  Including  Indirect
Guarantees of Indebtedness of Others was issued. FIN 45 requires the disclosures
to be made by a guarantor  in its  financial  statements  about its  obligations
under certain  guarantees that it has issued. It also clarifies that a guarantor
is required to recognize,  at the inception of a guarantee,  a liability for the
fair value of the  obligation  undertaken  in issuing  the  guarantee.  The most
significant FIN45 instruments of the Company are standby letters of credit.  The
Company has determined that its standby letters of credit  obligations under FIN
45 are not material for disclosure.

                                       67
<PAGE>

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

     Reference is made to the discussion  captioned "Interest Rate Risk" in Item
7 of this Annual Report.

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

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
                                                                                                            Page
<S>                                                                                                           <C>

Report of Independent Auditors                                                                              F - 1

Consolidated Balance Sheets at December 31, 2003 and 2002                                                   F - 2

Consolidated Statements of Operations for Each of the Three Years in the Period Ended
     December 31, 2003                                                                                      F - 3

Consolidated Statements of Shareholders' Equity for Each of the Three Years in the
     Period Ended December 31, 2003                                                                         F - 4

Consolidated Statements of Cash Flows for Each of the Three Years in the Period
     Ended December 31, 2003                                                                                F - 5

Notes to Consolidated Financial Statements                                                                  F - 6

</TABLE>

                                       68
<PAGE>
                         Independent Accountants' Report


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


     We have audited the  accompanying  consolidated  balance sheets of Ameriana
     Bancorp as of  December  31, 2003 and 2002,  and the  related  consolidated
     statements of operations,  shareholders'  equity and cash flows for each of
     the three years in the period ended December 31, 2003.  These  consolidated
     financial  statements are the  responsibility of the Company's  management.
     Our responsibility is to express an opinion on these consolidated financial
     statements based on our audits.

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

     In our opinion,  the  consolidated  financial  statements  described  above
     present  fairly,  in all  material  respects,  the  consolidated  financial
     position of  Ameriana  Bancorp as of  December  31, 2003 and 2002,  and the
     results of its operations and its cash flows for each of the three years in
     the  period  ended  December  31,  2003,  in  conformity   with  accounting
     principles generally accepted in the United States of America.

     As more  fully  discussed  in Note 7, the  Company  changed  its  method of
     accounting for goodwill in 2002.


/s/ BKD, LLP

Indianapolis, Indiana
February 6, 2004


                                     F-(1)
<PAGE>
                                Ameriana Bancorp
                           Consolidated Balance Sheets
                        (in thousands, except share data)
<TABLE>
<CAPTION>

-----------------------------------------------------------------------------------------------------------------------------
                                                                                                 December 31
-----------------------------------------------------------------------------------------------------------------------------
                                                                                             2003                 2002
-----------------------------------------------------------------------------------------------------------------------------
<S>                                                                                       <C>                    <C>
ASSETS
Cash on hand and in other institutions                                                 $     9,505            $   7,481
Interest-bearing demand deposits                                                             5,044               38,215
-----------------------------------------------------------------------------------------------------------------------------
         Cash and cash equivalents                                                          14,549               45,696
Investment securities available for sale                                                   137,788               58,155
Loans, net of allowance for loan losses of $3,744 and $8,666                               204,141              304,586
Premises and equipment                                                                       7,887                7,901
Stock in Federal Home Loan Bank                                                              6,948                6,759
Goodwill                                                                                       564                1,291
Cash value of life insurance                                                                19,705               18,932
Other assets                                                                                10,871               13,487
-----------------------------------------------------------------------------------------------------------------------------
         Total assets                                                                     $402,453             $456,807
=============================================================================================================================

LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
     Deposits
       Noninterest-bearing                                                               $  19,039            $  19,124
       Interest-bearing                                                                    326,705              383,063
-----------------------------------------------------------------------------------------------------------------------------
         Total deposits                                                                    345,744              402,187
     Borrowings                                                                             10,230                6,432
     Drafts payable                                                                          3,477                5,099
     Other liabilities                                                                       4,128                4,049
-----------------------------------------------------------------------------------------------------------------------------
         Total liabilities                                                                 363,579              417,767
-----------------------------------------------------------------------------------------------------------------------------
Commitments and contingencies
Shareholders' equity
     Preferred stock  - 5,000,000 shares authorized and unissued
     Common stock, $1.00 par value
         Authorized 15,000,000 shares
         Issued and outstanding - 3,148,288 and 3,147,463 shares                             3,148                3,147
     Additional paid-in capital                                                                506                  499
     Retained earnings                                                                      35,259               34,856
     Accumulated other comprehensive income (loss)                                             (39)                 538
-----------------------------------------------------------------------------------------------------------------------------
         Total shareholders' equity                                                         38,874               39,040
-----------------------------------------------------------------------------------------------------------------------------
         Total liabilities and shareholders' equity                                       $402,453             $456,807
=============================================================================================================================
</TABLE>


See notes to consolidated financial statements.

                                      F-(2)

<PAGE>
                                Ameriana Bancorp
                      Consolidated Statements of Operations
                        (in thousands, except share data)
<TABLE>
<CAPTION>

----------------------------------------------------------------------------------------------------------------------------
                                                                                   Year Ended December 31
----------------------------------------------------------------------------------------------------------------------------
                                                                         2003               2002               2001
----------------------------------------------------------------------------------------------------------------------------
<S>                                                                     <C>                 <C>                <C>
INTEREST INCOME
Interest and fees on loans                                               $19,241             $24,473            $30,005
Interest on mortgage-backed securities                                     1,109               3,196              2,225
Interest on investment securities                                          1,983               1,320              4,067
Other interest and dividend income                                           763                 984                873
----------------------------------------------------------------------------------------------------------------------------
         Total interest income                                            23,096              29,973             37,170
----------------------------------------------------------------------------------------------------------------------------
INTEREST EXPENSE
Interest on deposits                                                       9,656              14,712             18,663
Interest on borrowings                                                       410               2,829              5,580
----------------------------------------------------------------------------------------------------------------------------
         Total interest expense                                           10,066              17,541             24,243
----------------------------------------------------------------------------------------------------------------------------
NET INTEREST INCOME                                                       13,030              12,432             12,927
Provision for loan losses                                                  6,440               7,300                360
----------------------------------------------------------------------------------------------------------------------------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES                        6,590               5,132             12,567
----------------------------------------------------------------------------------------------------------------------------
OTHER INCOME
Other fees and service charges                                             1,365               1,284              1,220
Brokerage and insurance commissions                                          960               1,005                995
Net realized losses on sales of available-for-sale securities                 41              (2,025)                --
Gains on sales of loans and servicing rights                               1,878               1,423                804
Net gain on sale of branches                                               5,511                  --                 --
Increase in cash value of life insurance                                     773                 897                945
Other                                                                         12                 365                 82
----------------------------------------------------------------------------------------------------------------------------
         Total other income                                               10,540               2,949              4,046
----------------------------------------------------------------------------------------------------------------------------
OTHER EXPENSE
Salaries and employee benefits                                             8,082               7,599              6,720
Net occupancy expense                                                        783                 963                802
Furniture and equipment expense                                              765                 689                579
Legal and professional fees                                                  731                 386                317
Data processing expense                                                      554                 541                453
Printing and office supplies                                                 253                 309                330
Penalty on early payoff of FHLB advances                                      --               1,076                 --
Other                                                                      2,434               2,112              2,147
----------------------------------------------------------------------------------------------------------------------------
         Total other expense                                              13,602              13,675             11,348
----------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) BEFORE INCOME TAXES                                          3,528              (5,594)             5,265
Income taxes                                                               1,110              (2,519)             1,465
----------------------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS)                                                       $  2,418            $ (3,075)          $  3,800
============================================================================================================================
BASIC AND DILUTED EARNINGS (LOSS) PER SHARE                                $ .77               $(.98)             $1.21
============================================================================================================================
</TABLE>


See notes to consolidated financial statements.


                                      F-(3)
<PAGE>
                                Ameriana Bancorp
                 Consolidated Statements of Shareholders' Equity
                      (in thousands, except per share data)
<TABLE>
<CAPTION>

---------------------------------------------------------------------------------------------------------------------------
                                                                                           Accumulated
                                                                                              Other
                                                           Additional                     Comprehensive
                                             Common         Paid-in         Retained         Income
                                             Stock          Capital         Earnings         (Loss)            Total
----------------------------------------------------------------------------------------------------------------------------
<S>                                             <C>            <C>             <C>               <C>             <C>
Balance at January 1, 2001                      $3,147            $499         $38,065                          $41,711
Net income                                          --              --           3,800                            3,800
Unrealized depreciation on
   available-for-sale securities, net
   of income tax benefit of $464                    --              --              --           $(696)            (696)
                                                                                                         ------------------
    Comprehensive income                                                                                          3,104
Dividends declared ($.61 per share)                 --              --          (1,920)             --           (1,920)
---------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 2001                     3,147             499          39,945            (696)          42,895
Net loss                                            --              --          (3,075)             --           (3,075)
Change in unrealized depreciation on
   available-for-sale securities, net
   of income tax expense of $801                    --              --              --           1,234            1,234
                                                                                                         ------------------
    Comprehensive loss                                                                                           (1,841)
Exercise of stock options                            9             128              --              --              137
Purchase of common stock                            (9)           (128)             --              --             (137)
Dividends declared ($.64 per share)                 --              --          (2,014)             --           (2,014)
---------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 2002                     3,147             499          34,856             538           39,040
Net income                                          --              --           2,418              --            2,418
Change in unrealized depreciation on
   available-for-sale securities, net
   of income tax benefit of $359                    --              --              --            (577)            (577)
                                                                                                         ------------------
    Comprehensive income                                                                                          1,841
Exercise of stock options                            1               7              --              --                8
Dividends declared ($.64 per share)                 --              --          (2,015)             --           (2,015)
---------------------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 2003                    $3,148            $506         $35,259          $  (39)         $38,874
===========================================================================================================================
</TABLE>


See notes to consolidated financial statements.


                                      F-(4)
<PAGE>

                                Ameriana Bancorp
                      Consolidated Statements of Cash Flows
                                 (in thousands)
<TABLE>
<CAPTION>

------------------------------------------------------------------------------------------------------------------------------
                                                                                         Year Ended December 31
------------------------------------------------------------------------------------------------------------------------------
                                                                                2003             2002             2001
------------------------------------------------------------------------------------------------------------------------------
<S>                                                                             <C>             <C>               <C>
OPERATING ACTIVITIES
------------------------------------------------------------------------------------------------------------------------------
Net income                                                                   $    2,418      $  (3,075)          $ 3,800
Items not requiring (providing) cash
     Provision for losses on loans                                                6,440          7,300               360
     Depreciation and amortization                                                1,503            967               804
     Increase in cash surrender value                                              (773)          (897)             (945)
     Mortgage loans originated for sale                                        (150,283)      (110,756)          (91,515)
     Proceeds from sale of mortgage loans                                       154,529        113,047            86,814
     Gains on sale of loans and servicing rights                                 (1,878)        (1,423)             (804)
     Loss on sale of investments                                                    (41)         2,025                --
     Gain on sale of branches                                                    (5,511)            --                --
     Increase (decrease) in drafts payable                                       (1,622)        (1,053)            3,053
     Other adjustments                                                           (1,032)         2,898            (2,297)
------------------------------------------------------------------------------------------------------------------------------
         Net cash provided by (used in)  operating activities                     3,750          9,033              (730)
------------------------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
------------------------------------------------------------------------------------------------------------------------------
Purchase of investment securities held to maturity                                   --             --          (131,430)
Proceeds from maturities/calls of securities held to maturity                        --             --            77,805
Principal collected on mortgage-backed securities held to maturity                   --             --            11,445
Purchase of investment securities available for sale                           (139,037)      (131,339)               --
Proceeds from sale of investment securities available for sale                   20,705        179,218                --
Proceeds from maturities/calls of securities available for sale                  18,764          6,207                --
Principal collected on mortgage-backed securities available for sale             19,696         28,038                --
Net change in loans                                                              64,512         37,856            45,711
Net purchases of premises and equipment                                          (1,233)        (1,589)             (425)
Purchase of Federal Home Loan Bank stock                                             --            (69)             (100)
Proceeds from sale of Federal Home Loan Bank stock                                   --            675                --
Net cash paid on sale of branches                                               (19,751)            --                --
Other investing activities                                                          488            256               153
----------------------------------------------------------------------------------------------------------------------------
         Net cash provided by (used in) investing activities                    (35,856)       119,253             3,159
----------------------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
------------------------------------------------------------------------------------------------------------------------------
Net change in demand and passbook deposits                                       41,347         13,487            10,309
Net change in certificates of deposit                                           (42,179)       (23,713)           34,509
Proceeds from borrowings                                                          5,000         55,500            93,500
Repayment of borrowings                                                          (1,202)      (137,651)         (146,089)
Purchase of common stock                                                             --           (137)               --
Exercise of stock options                                                             8            137                --
Cash dividends paid                                                              (2,015)        (2,014)           (1,888)
------------------------------------------------------------------------------------------------------------------------------
         Net cash provided by (used in) financing activities                        959        (94,391)           (9,659)
------------------------------------------------------------------------------------------------------------------------------
CHANGE IN CASH AND CASH EQUIVALENTS                                             (31,147)        33,895            (7,230)
Cash and Cash Equivalents at Beginning of Year                                   45,696         11,801            19,031
----------------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF YEAR                                        $14,549        $45,696           $11,801
==============================================================================================================================
</TABLE>


See notes to consolidated financial statements.

                                      F-(5)
<PAGE>

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


1.   NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION:  The consolidated  financial statements include the
accounts of Ameriana  Bancorp (the "Company") and its  wholly-owned  subsidiary,
Ameriana  Bank  and  Trust,  SB  ("the  Bank"),  and  the  Bank's   wholly-owned
subsidiaries,  Ameriana Investment Management, Inc. ("AIMI"), 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 Company 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  and the
Federal  Deposit  Insurance  Corporation.   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.  AIMI  manages  the  Company's  investment
portfolio.

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

CASH AND CASH EQUIVALENTS  consist of cash on hand and in other institutions and
interest-bearing demand deposits.

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

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

STOCK IN  FEDERAL  HOME LOAN BANK  ("FHLB")  is stated at cost and the amount of
stock the Company is required to own is determined by regulation.

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

                                      F-(6)
<PAGE>
Ameriana Bancorp
Notes to Consolidated Financial Statements
(table dollar amounts in thousands, except share data)


ALLOWANCE  FOR  LOAN  LOSSES  is  maintained  at a level  believed  adequate  by
management  to  absorb  inherent  losses  in the  loan  portfolio.  Management's
determination  of the adequacy of the allowance is based on an evaluation of the
portfolio including consideration of past loan loss experience, current economic
conditions,   volume,  growth  and  composition  of  the  loan  portfolio,   the
probability of collecting all amounts due, and other relevant factors.  Impaired
loans are measured by the present  value of expected  future cash flows,  or the
fair value of the collateral of the loan, if collateral dependent. The allowance
is increased by provisions for loan losses charged against  income.  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,  2003,  the  allowance  for  loan  losses  is  adequate  based  on
information  currently available.  A worsening or protracted economic decline in
the areas within which the Company  operates  would  increase the  likelihood of
additional  losses due to credit and market  risks and could create the need for
additional loss reserves.

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

GOODWILL  is  annually  tested  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.

EARNINGS  PER SHARE is computed by dividing  net income by the  weighted-average
number of common and potential common shares outstanding during each year.

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

STOCK OPTIONS - The Company has a stock-based employee  compensation plan, which
is described more fully in Note 11. The Company accounts for this plan under the
recognition and measurement  principles of Accounting  Principles  Board ("APB")
Opinion  No.  25,  Accounting  for  Stock  Issued  to  Employees,   and  related
interpretations.  No stock-based employee  compensation cost is reflected in net
income, as all options granted under the plan had an exercise price equal to the
market value of the  underlying  common stock on the grant date.  The  following
table illustrates the effect on net income and earnings per share if the Company
had applied the fair value  provisions  of  Statement  of  Financial  Accounting
Standards  (SFAS)  No.  123,   Accounting  for  Stock-Based   Compensation,   to
stock-based employee compensation.
<TABLE>
<CAPTION>

-----------------------------------------------------------------------------------------------------------------------------
                                                                                2003             2002            2001
-----------------------------------------------------------------------------------------------------------------------------
<S>                                                                             <C>             <C>             <C>
Net income (loss), as reported                                               $2,418           $(3,075)          $3,800
Less:  Total stock-based employee compensation cost determined under the
   fair value based method, net of income taxes                                  (7)              (25)              --
-----------------------------------------------------------------------------------------------------------------------------

Pro forma net income (loss)                                                  $2,411           $(3,100)          $3,800
=============================================================================================================================

Basic and diluted earnings (loss) per share, as reported                       $.77             $(.98)           $1.21

Basic and diluted earnings (loss) per share, pro forma                          .77              (.98)            1.21
</TABLE>


                                      F-(7)
<PAGE>



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


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

RECLASSIFICATIONS of certain amounts in the 2002 and 2001 consolidated financial
statements have been made to conform to the 2003 presentation.


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, 2003 was
$2,934,000.


3.   INVESTMENT SECURITIES

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------------
                                                                      Gross             Gross
                                                 Amortized         Unrealized         Unrealized            Fair
                                                   Cost               Gains             Losses             Value
-------------------------------------------------------------------------------------------------------------------------
<S>                                                  <C>               <C>                 <C>                 <C>
Available for sale at December 31, 2003
    Mortgage-backed securities                     $ 36,461               $365               $325          $ 36,501
    Federal agencies                                 78,580                108                265            78,423
    Municipal securities                              9,368                 67                 11             9,424
    Equity securities                                13,440                144                144            13,440
-------------------------------------------------------------------------------------------------------------------------
                                                   $137,849               $684               $745          $137,788
=========================================================================================================================
Available for sale at December 31, 2002
    Mortgage-backed securities and
      collateralized mortgage obligations           $27,251               $584                $11           $27,824
    Federal agencies                                  8,052                175                 --             8,227
    Equity securities                                21,977                127                 --            22,104
-------------------------------------------------------------------------------------------------------------------------
                                                    $57,280               $886                $11           $58,155
=========================================================================================================================
</TABLE>



                                      F-(8)
<PAGE>

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, 2003, 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.
<TABLE>
<CAPTION>

-------------------------------------------------------------------------------------------------------------------------
                                                                                            Available for Sale
-------------------------------------------------------------------------------------------------------------------------
                                                                                       Amortized            Fair
                                                                                          Cost              Value
-------------------------------------------------------------------------------------------------------------------------
<S>                                                                                     <C>                  <C>
Within one year                                                                           $  3,999          $  4,061
One to five years                                                                           74,581            74,362
Five to ten years                                                                            3,168             3,205
After ten years                                                                              6,200             6,219
-------------------------------------------------------------------------------------------------------------------------
                                                                                            87,948            87,847
Mortgage-backed securities                                                                  36,461            36,501
Equity securities                                                                           13,440            13,440
-------------------------------------------------------------------------------------------------------------------------
                                                                                          $137,849          $137,788
=========================================================================================================================
</TABLE>

Certain  investments in debt and equity securities are reported in the financial
statements  at an  amount  less  than  their  historical  cost.  These  declines
primarily resulted from recent increases in market interest rates and failure of
certain  investments  to  maintain  consistent  credit  quality  ratings or meet
projected earnings targets.

Based on evaluation of available  evidence,  including  recent changes in market
interest rates and credit rating  information,  management believes the declines
in fair value for these securities are temporary.

The Company's  temporarily  impaired investment  securities at December 31, 2003
are shown below.
<TABLE>
<CAPTION>

At December 31, 2003                      Less Than 12 Months         12 Months or Longer                Total
---------------------------------------------------------------------------------------------------------------------------
                                                      Unrealized                  Unrealized                  Unrealized
                                        Fair Value      Losses      Fair Value      Losses     Fair Value       Losses
---------------------------------------------------------------------------------------------------------------------------
<S>                                         <C>          <C>             <C>         <C>          <C>            <C>
Mortgage-backed securities                $22,724       $318             $392         $7          $23,116        $325
Federal agencies                           42,403        265               --         --           42,403         265
Municipal securities                        2,141         11               --         --            2,141          11
Equity securities                          11,796        144               --         --           11,796         144
---------------------------------------------------------------------------------------------------------------------------
                                          $79,064       $738              392         $7          $79,456        $745
===========================================================================================================================
</TABLE>

No  investment   securities  were  pledged  at  December  31,  2003.  Investment
securities  with a total carrying  value of $1,811,000  were pledged at December
31, 2002 to secure FHLB advances.

Gross  gains of $41,000 and  $1,247,000  and gross  losses of $0 and  $3,272,000
resulting from sales of available-for-sale securities were realized for 2003 and
2002.

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


                                      F-(9)
<PAGE>
Ameriana Bancorp
Notes to Consolidated Financial Statements
(table dollar amounts in thousands, except share data)


4.   LOANS
<TABLE>
<CAPTION>

----------------------------------------------------------------------------------------------------------------------------
                                                                                                 December 31
----------------------------------------------------------------------------------------------------------------------------
                                                                                           2003                2002
----------------------------------------------------------------------------------------------------------------------------
<S>                                                                                         <C>                 <C>
Residential mortgage loans                                                                $108,172             $195,055
Commercial mortgage loans                                                                   90,349               91,856
Installment loans                                                                            7,058               12,386
Commercial loans                                                                             7,672               21,172
Loans secured by deposits                                                                      811                1,130
----------------------------------------------------------------------------------------------------------------------------
                                                                                           214,062              321,599
----------------------------------------------------------------------------------------------------------------------------
Deduct
----------------------------------------------------------------------------------------------------------------------------
Undisbursed loan proceeds                                                                    5,859                7,985
Deferred loan costs, net                                                                       318                  362
Allowance for loan losses                                                                    3,744                8,666
----------------------------------------------------------------------------------------------------------------------------
                                                                                             9,921               17,013
----------------------------------------------------------------------------------------------------------------------------
                                                                                          $204,141             $304,586
============================================================================================================================
</TABLE>

Loans being  serviced by the Company for  investors,  primarily the Federal Home
Loan Mortgage  Corporation and Federal National  Mortgage  Association,  totaled
approximately  $193,016,000,  $177,392,000  and  $162,017,000 as of December 31,
2003, 2002 and 2001. Such loans are not included in the preceding table.

The aggregate fair value of capitalized  mortgage  servicing  rights at December
31, 2003 and 2002 is based on comparable  market values and expected cash flows,
with impairment  assessed based on portfolio  characteristics  including product
type,  investor type and interest rates. No valuation allowance was necessary at
December 31, 2003 and 2002.
<TABLE>
<CAPTION>

----------------------------------------------------------------------------------------------------------------------------
                                                                                      Year Ended December 31
----------------------------------------------------------------------------------------------------------------------------
                                                                              2003             2002             2001
----------------------------------------------------------------------------------------------------------------------------
<S>                                                                             <C>             <C>             <C>
Mortgage servicing rights
Balance at beginning of year                                                  $1,197            $1,012          $   847
Servicing rights capitalized                                                     727               597              416
Amortization of servicing rights                                                (611)             (412)            (251)
----------------------------------------------------------------------------------------------------------------------------
   Balance at end of year                                                    $ 1,313            $1,197           $1,012
============================================================================================================================
</TABLE>



                                     F-(10)
<PAGE>



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


At December  31,  2003 and 2002,  the Company  had  outstanding  commitments  to
originate loans of approximately $2,845,000 and $8,379,000, which were primarily
for  adjustable-rate  mortgages  with  rates that are  determined  just prior to
closing or  fixed-rate  mortgage  loans with rates locked in at the time of loan
commitment.  In  addition,  the  Company  had  $21,409,000  and  $22,231,000  of
conditional commitments for lines of credit receivables at December 31, 2003 and
2002.  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 $3,584,000
of letters of credit  outstanding  at  December  31,  2003 and 2002.  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.


5.   ALLOWANCE FOR LOAN LOSSES

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------
                                                                                       Year Ended December 31
----------------------------------------------------------------------------------------------------------------------------
                                                                                2003               2002            2001
----------------------------------------------------------------------------------------------------------------------------
<S>                                                                             <C>               <C>               <C>
Balance at beginning of year                                                   $8,666             $1,730            $1,489
Provision for losses                                                            6,440              7,300               360
Charge-offs                                                                   (11,394)              (388)             (156)
Recoveries                                                                         32                 24                37
----------------------------------------------------------------------------------------------------------------------------
Net charge-offs                                                               (11,362)              (364)             (119)
----------------------------------------------------------------------------------------------------------------------------
Balance at end of year                                                         $3,744             $8,666            $1,730
============================================================================================================================
</TABLE>

At December 31, 2003 and 2002, impaired loans totaled $6,952,000 and $16,669,000
with  an  allocation  of  the  allowance  for  loan  losses  of  $1,304,000  and
$6,646,000.

Interest of $154,000 and $119,000 was  recognized on average  impaired  loans of
$14,471,000  and  $11,076,000  for 2003 and 2002.  All  interest  recognized  on
impaired loans during 2003 and 2002 was on a cash basis.

Impaired loans were immaterial at and during the year ended December 31, 2001.

At December 31, 2003 and 2002, accruing loans delinquent 90 days or more totaled
$74,000 and  $135,000.  Non-accruing  loans at  December  31, 2003 and 2002 were
$8,383,000 and $18,307,000.

                                     F-(11)

<PAGE>

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


6.   PREMISES AND EQUIPMENT
<TABLE>
<CAPTION>

----------------------------------------------------------------------------------------------------------------------------
                                                                                                   December 31
----------------------------------------------------------------------------------------------------------------------------
                                                                                              2003              2002
----------------------------------------------------------------------------------------------------------------------------
<S>                                                                                            <C>              <C>
Land                                                                                          $1,814             $1,777
Land improvements                                                                                502                580
Office buildings                                                                               7,498              7,682
Furniture and equipment                                                                        4,048              4,891
Automobiles                                                                                       98                 70
----------------------------------------------------------------------------------------------------------------------------
                                                                                              13,960             15,000
Less accumulated depreciation                                                                  6,073              7,099
----------------------------------------------------------------------------------------------------------------------------
                                                                                              $7,887             $7,901
============================================================================================================================
</TABLE>


7.   GOODWILL

During  2002,  the  Company  changed  its  method of  accounting  and  financial
reporting for goodwill and other intangible assets by adopting the provisions of
SFAS No. 142.  Had the new method been  applied  retroactively,  the  previously
reported 2001 net income would have increased by $120,000.

During 2003,  $727,000 of goodwill was eliminated in connection with the sale of
two Ohio branches.  On September 29, 2003, the branches located in Deer Park and
Landen, Ohio were sold to Peoples Community Bancorp, Inc. of West Chester, Ohio.
The  transaction  included the Company's real property  related to the Deer Park
branch and its  leasehold on the premises for the Landen  branch.  Additionally,
the Company  conveyed most consumer and  commercial  loans at those  branches as
part of the transaction,  as well as the branches' saving deposits.  The Company
retained  and  will  continue  to  service  certain  single  family  residential
mortgages originated in those locations.


8.   DEPOSITS

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------
                                                                                                 December 31
----------------------------------------------------------------------------------------------------------------------------
                                                                                           2003                2002
----------------------------------------------------------------------------------------------------------------------------
<S>                                                                                         <C>                 <C>
Demand                                                                                    $127,945            $ 100,471
Savings                                                                                     30,558               33,990
Certificates of $100,000 or more                                                            27,212               45,510
Other certificates                                                                         160,029              222,216
----------------------------------------------------------------------------------------------------------------------------
                                                                                          $345,744             $402,187
============================================================================================================================
</TABLE>


                                     F-(12)
<PAGE>



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


Certificates maturing in years ending after December 31, 2003:
<TABLE>
<CAPTION>

--------------------------------------------------------------------------------------------------------
<S>                                                                                        <C>
2004                                                                                     $ 106,749
2005                                                                                        27,899
2006                                                                                        21,236
2007                                                                                        16,145
2008                                                                                        12,397
Thereafter                                                                                   2,815
--------------------------------------------------------------------------------------------------------
                                                                                         $ 187,241
========================================================================================================
</TABLE>

Interest paid on deposits approximated interest expense in 2003, 2002 and 2001.


9.   BORROWINGS

Borrowings at December 31, 2003 and 2002 include Federal Home Loan Bank advances
totaling  $9,630,000 and $5,592,000  with a  weighted-average  rate of 5.38% and
6.83%.  The  advances  are secured by a  combination  of  first-mortgage  loans,
investment  securities  and  overnight  deposits.  Some  advances are subject to
restrictions or penalties in the event of prepayment.

Borrowings  at  December  31,  2003 and 2002  also  include a note  payable  for
$600,000 and $750,000 to another financial  institution with a rate of 3.50% and
4.25%. The note is secured by the outstanding common stock of the Bank. The note
outstanding  at  December  31,  2002 was due at July 24, 2003 and was renewed at
that date to January 24, 2004.

A promissory  note of $90,000 was included in  borrowings  at December 31, 2002.
The interest rate on the note was 6.0%.

Interest paid on borrowings was $414,000,  $3,092,000,  and $5,881,000 for 2003,
2002 and 2001.
<TABLE>
<CAPTION>

----------------------------------------------------------------------------------------------------------------------------
<S>                                                                                                          <C>
Maturities in years ending December 31
2004                                                                                                   $    1,515
2005                                                                                                        3,301
2006                                                                                                          216
2007                                                                                                          170
2008                                                                                                           28
Thereafter                                                                                                  5,000
----------------------------------------------------------------------------------------------------------------------------
                                                                                                          $10,230
============================================================================================================================
</TABLE>


                                     F-(13)
<PAGE>



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


10.  INCOME TAXES
<TABLE>
<CAPTION>

----------------------------------------------------------------------------------------------------------------------------
                                                                                                       December 31
----------------------------------------------------------------------------------------------------------------------------
                                                                                                   2003            2002
----------------------------------------------------------------------------------------------------------------------------
<S>                                                                                             <C>               <C>
Deferred tax assets
Deferred compensation                                                                            $   404           $   294
General loan loss reserves                                                                         1,526             3,428
Net unrealized loss on securities available for sale                                                  22                --
Reserve for uncollected interest                                                                     335               534
Other                                                                                                 --                48
----------------------------------------------------------------------------------------------------------------------------
                                                                                                   2,287             4,304
----------------------------------------------------------------------------------------------------------------------------
Deferred tax liabilities
FHLB stock dividends                                                                                (608)             (515)
Tax bad debt reserves                                                                                (23)              (88)
Purchase accounting adjustments                                                                       --               (95)
Deferred loan fees                                                                                   (35)              (91)
Mortgage servicing rights                                                                           (525)             (454)
Net unrealized gains on securities available for sale                                                 --              (337)
Other                                                                                                (75)             (105)
----------------------------------------------------------------------------------------------------------------------------
                                                                                                  (1,266)           (1,685)
----------------------------------------------------------------------------------------------------------------------------
         Net deferred tax asset                                                                  $ 1,021            $2,619
============================================================================================================================
</TABLE>

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

----------------------------------------------------------------------------------------------------------------------------
                                                                                      Year Ended December 31
----------------------------------------------------------------------------------------------------------------------------
                                                                              2003             2002             2001
----------------------------------------------------------------------------------------------------------------------------
<S>                                                                             <C>             <C>             <C>
Statutory federal tax rate                                                    34.0%            (34.0)%           34.0%
State income taxes, net of federal tax benefit                                 0.9              (4.5)             2.8
Tax credits                                                                   (4.9)             (2.9)            (4.0)
Cash value of life insurance                                                  (7.5)             (5.5)            (6.1)
Disposition/amortization of Goodwill                                           8.8                .6              1.9
Other                                                                          0.2               1.3              (.8)
----------------------------------------------------------------------------------------------------------------------------
Effective tax rate                                                            31.5%            (45.0)%           27.8%
============================================================================================================================
</TABLE>


                                     F-(14)
<PAGE>

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


The provision (credit) for income taxes consists of the following:
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------
                                                                                      Year Ended December 31
----------------------------------------------------------------------------------------------------------------------------
                                                                              2003             2002             2001
----------------------------------------------------------------------------------------------------------------------------
<S>                                                                             <C>             <C>            <C>
Federal
Current                                                                       $  (903)        $    702           $1,448
Deferred                                                                        1,963           (2,840)            (205)
----------------------------------------------------------------------------------------------------------------------------
                                                                                1,060           (2,138)           1,243
----------------------------------------------------------------------------------------------------------------------------
State
Current                                                                            56               94              246
Deferred                                                                           (6)            (475)             (24)
----------------------------------------------------------------------------------------------------------------------------
                                                                                   50             (381)             222
----------------------------------------------------------------------------------------------------------------------------
                                                                               $1,110          $(2,519)          $1,465
============================================================================================================================
</TABLE>

As of December 31, 2003, the Company had  approximately  $4,700,000 of state tax
loss  carryforward  available to offset future  franchise tax. Also, at December
31,  2003,  the Company had  approximately  $72,000 of tax credits  available to
offset future federal income tax. Both the state loss  carryforward  and the tax
credits expire in 2023.

The Company paid  $1,503,000,  $290,000 and $969,000 of state and federal income
taxes in 2003, 2002 and 2001.


11.  EMPLOYEE BENEFITS

The  Company is a  participating  employer in a  multi-employer  defined-benefit
pension  plan and a 401(k) plan.  The plans cover  substantially  all  full-time
employees  of  the  Company.  Since  the  defined-benefit   pension  plan  is  a
multi-employer  plan, no separate actuarial  valuations are made with respect to
each  participating  employer.  Pension expense for the plans totaled  $768,000,
$215,000, and $5,000 in 2003, 2002 and 2001, respectively.

The Company has  arrangements  that  provide  retirement  and death  benefits to
certain  officers  and  directors.  The  accrual of benefits  totaled  $991,000,
$744,000 and  $420,000 for 2003,  2002 and 2001.  In  connection  with these and
other  benefits,  life  insurance has been  purchased with the proceeds from the
policies to be utilized for the payment of benefits.

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



                                     F-(15)
<PAGE>

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


Under the 1987 Stock  Option Plan and the 1996 Stock Option and  Incentive  Plan
("1996 Plan"),  which are accounted for under the  recognition  and  measurement
principles of APB No. 25, Accounting for Stock Issued to Employees,  and related
interpretations,  the  Company has granted  options to  individuals  to purchase
common  stock at a price  equal to the fair  market  value at the date of grant,
subject to the terms and  conditions  of the plans.  Plan terms  permit  certain
nonincentive  stock  options  to be granted  at less than  market  value at plan
committee  discretion.  Options vest and are fully  exercisable  when granted or
over an  extended  period  subject  to  continuous  employment  or  under  other
conditions set forth in the plans.  The period for exercising  options shall not
exceed ten years from the date of grant.  The plans also permit  grants of stock
appreciation  rights.  An amendment of the 1996 Plan extended the plan's term by
five  years and  increased  the  number of shares  reserved  under the plan from
176,000 to 352,000 shares.

The following is a summary of the status of the Company's stock option plans and
changes in those plans as of and for the years ended December 31, 2003, 2002 and
2001.
<TABLE>
<CAPTION>

----------------------------------------------------------------------------------------------------------------------------
                                                                     Year Ended December 31
----------------------------------------------------------------------------------------------------------------------------
                                                  2003                        2002                         2001
----------------------------------------------------------------------------------------------------------------------------
                                                     Weighted-                     Weighted-                   Weighted-
                                                      Average                       Average                     Average
                 Options                 Shares    Exercise Price     Shares    Exercise Price    Shares    Exercise Price
----------------------------------------------------------------------------------------------------------------------------
<S>                                       <C>           <C>             <C>          <C>           <C>          <C>
Outstanding at beginning of year          199,022      $14.27         203,510        $14.37        226,786        $14.31
Granted                                        --          --          22,000         14.25             --            --
Exercised                                    (825)       9.43          (9,713)        14.15             --            --
Forfeited/expired                          (3,145)      14.30         (16,775)        17.81        (23,276)        13.81
                                      -----------                 -----------                  -----------

Outstanding at end of year                195,052       14.29         199,022         14.27        203,510         14.37
                                      ===========                 ===========                  ===========
Options exercisable at year end           187,052       14.29         187,022         14.27        201,750         14.35
Weighted-average fair value of
   options granted during the year                         --                         $1.58                           --
</TABLE>

As of December 31, 2003, selected other information in exercise price ranges for
options outstanding and exercisable is as follows:
<TABLE>
<CAPTION>

                                      Outstanding                                                    Exercisable
----------------------------------------------------------------------------------------  ----------------------------------
                                             Weighted-           Weighted-Average                             Weighted-
    Exercise Price       Number              Average         Remaining Contractual            Number          Average
         Range         of Shares          Exercise Price               Life                  of Shares     Exercise Price
----------------------------------------------------------------------------------------  ----------------------------------
<S>                           <C>              <C>                   <C>                        <C>             <C>
$9.43 - 12.53          63,352                $ 12.50                 2.1 years                   63,352        $ 12.50
13.05 - 18.30          131,700                 15.15                 3.9 years                  123,700          15.21
</TABLE>

There were 178,442  shares under the 1996 Plan  available  for grant at December
31, 2003.

Although the Company has elected to follow APB No. 25, SFAS No. 123 requires pro
forma  disclosures  of net income and  earnings  per share as if the Company had
accounted for its employee stock options under that Statement. The fair value of
each option grant was estimated on the grant date using an option-pricing  model
with the following assumptions:
<TABLE>
<CAPTION>
                                                                                                                2002
                                                                                                          ------------------
<S>                                                                                                             <C>
Risk-free interest rates                                                                                        3.3%
Dividend yields                                                                                                 4.7%
Expected volatility factors of market price of common stock                                                    18.4%
Weighted-average expected life of the options                                                                 10 years
</TABLE>

The proforma effect on net income is disclosed in Note 1.

                                     F-(16)
<PAGE>



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


12.  SHAREHOLDERS' EQUITY

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 the net worth of this entity to be reduced below regulatory  capital
requirements or the amount required for its liquidation accounts.

In addition,  without prior approval,  current regulations allow 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  and the Company's Board of Directors have resolved not to cause the
Bank to pay dividends if its Tier 1 capital would be less than 7% thereafter. At
December 31, 2003,  the  shareholder's  equity of the Bank was  $38,325,000  and
approval is required by the Indiana Department of Financial  Institutions to pay
dividends to the Company.


13.  EARNINGS (LOSS) PER SHARE
<TABLE>
<CAPTION>
                                                                     Year Ended December 31
------------------------------------------------------------------------------------------------------------------------------
                                               2003                          2002                           2001
------------------------------------------------------------------------------------------------------------------------------
                                            Weighted-                      Weighted-                      Weighted-
                                             Average  Per Share             Average  Per Share             Average  Per Share
                                    Income   Shares     Amount     Loss     Shares     Amount    Income    Shares    Amount
------------------------------------------------------------------------------------------------------------------------------
<S>                                   <C>     <C>       <C>        <C>       <C>        <C>       <C>       <C>       <C>
Basic Earnings Per Share
Income (loss) available to common
   shareholders                     $2,418 3,148,164     $ .77  $(3,075)  3,147,301     $(.98)  $3,800   3,146,616     $1.21
                                                         =====                          =====                          =====
Effect Of Dilutive Stock Options        --     3,412                 --          --                 --       1,352
                                   -----------------            -------------------            -------------------
Diluted Earnings Per Share
Income available to common
   shareholders and assumed
   conversions                      $2,418 3,151,576     $ .77  $(3,075)  3,147,301     $(.98)  $3,800   3,147,968     $1.21
                                   ===========================================================================================
</TABLE>

Options to  purchase  131,700,  199,022 and  138,420  shares of common  stock at
exercise  prices of $14.25 to  $18.30,  $9.43 to $18.30 and $14.32 to $18.30 per
share were outstanding at December 31, 2003, 2002 and 2001 but were not included
in the  computation  of diluted  earnings  per share  because the  options  were
anti-dilutive.


14.  OTHER COMPREHENSIVE INCOME (LOSS)

Other comprehensive income (loss) components and related taxes were as follows:
<TABLE>
<CAPTION>

                                                                                   2003             2002            2001
------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                 <C>             <C>             <C>
Unrealized gains (losses) on securities available for sale                         $(895)       $       10          $1,160
Reclassification for realized amount included in income                               41            (2,025)             --
------------------------------------------------------------------------------------------------------------------------------
         Other comprehensive income (loss), before tax effect                       (936)            2,035           1,160
Tax expense (benefit)                                                               (359)              801            (464)
------------------------------------------------------------------------------------------------------------------------------
         Other comprehensive income (loss)                                         $(577)           $1,234         $  (696)
==============================================================================================================================
</TABLE>



                                     F-(17)
<PAGE>



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, 2003 and 2002,  the
Bank is categorized as well  capitalized  and met all subject  capital  adequacy
requirements.  There are no conditions or events since  December 31, 2003,  that
management believes have changed this classification.

Actual and required capital amounts and ratios for the Bank are as follows:
<TABLE>
<CAPTION>

------------------------------------------------------------------------------------------------------------------------------
                                                                                         December 31, 2003
------------------------------------------------------------------------------------------------------------------------------
                                                                              Required For
                                                                           Adequate Capital(1)          Actual Capital
------------------------------------------------------------------------------------------------------------------------------
                                                                          Ratio        Amount       Ratio         Amount
------------------------------------------------------------------------------------------------------------------------------
<S>                                                                        <C>          <C>          <C>           <C>
Total risk-based capital(1)(to risk-weighted assets)                        8.0%       $19,882       16.42%      $40,819
Tier 1 capital (to risk-weighted assets)                                    4.0          9,941       15.17        37,705
Core capital(1)(to adjusted total assets)                                   3.0         12,057        9.38        37,705
Core capital(1)(to adjusted tangible assets)                                2.0          8,038        9.38        37,705
Tangible capital (to adjusted total assets)                                 1.5          6,028        9.38        37,705
</TABLE>

(1) As defined by regulatory agencies
<TABLE>
<CAPTION>

------------------------------------------------------------------------------------------------------------------------------
                                                                                         December 31, 2002
------------------------------------------------------------------------------------------------------------------------------
                                                                              Required For
                                                                           Adequate Capital(1)          Actual Capital
------------------------------------------------------------------------------------------------------------------------------
                                                                          Ratio        Amount       Ratio         Amount
------------------------------------------------------------------------------------------------------------------------------
<S>                                                                        <C>          <C>          <C>           <C>
Total risk-based capital(1)(to risk-weighted assets)                        8.0%       $23,754       13.89%      $41,255
Tier 1 capital (to risk-weighted assets)                                    4.0         11,877       12.61        37,455
Core capital(1)(to adjusted total assets)                                   3.0         14,109        7.96        37,455
Core capital(1)(to adjusted tangible assets)                                2.0          9,406        7.96        37,455
Tangible capital (to adjusted total assets)                                 1.5          7,054        7.96        37,455
</TABLE>

(1) As defined by regulatory agencies

During the  second  quarter  of 2002,  the Bank  entered  into a  memorandum  of
understanding  (the "MOU") with the Federal Deposit  Insurance  Corporation (the
"FDIC") and the Indiana Department of Financial  Institutions (the "DFI"). Among
other  things,  the MOU  required  the Bank to adopt  written  action plans with
respect to certain classified assets,  revise its lending policies in accordance
with  examiner  recommendations,  require  greater  financial  information  from
borrowers,  establish  a loan  review  program,  document  Board  review  of the
adequacy  of  loan   losses,   formulate  a  plan  for   improving   the  Bank's
profitability,   review  staffing  needs  with   particular   emphasis  on  loan
administration,  strengthen  certain  internal  controls and audit  coverage and
address other regulatory compliance issues raised in the most recent examination
report by the FDIC and DFI.  While the MOU is in effect,  the Bank must maintain
Tier 1 capital at or above 7% of assets.

                                     F-(18)
<PAGE>
Ameriana Bancorp
Notes to Consolidated Financial Statements
(table dollar amounts in thousands, except share data)


The Company's  Board of Directors  have adopted  resolutions  providing that the
Company will not cause the Bank to pay  dividends if its Tier 1 capital would be
less than 7% thereafter, that the Company will not incur additional debt without
prior  Federal  Reserve  approval,  and that the Company  will not  purchase any
treasury stock. The resolutions remain in effect until the MOU is lifted.

The  Company  believes  that it has taken all actions  specified  in the MOU and
Board resolutions within the timeframes specified.  The Company does not believe
the MOU or Board  resolutions  will  materially  affect  the  operations  of the
Company or the Bank.  A failure  to comply  with  either the MOU or  resolutions
could lead to the initiation of formal  enforcement  action by the FDIC, DFI and
the Federal Reserve.

Retained earnings at December 31, 2003,  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.


16.  FAIR VALUE OF FINANCIAL INSTRUMENTS

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

The  following   table  presents  the  estimates  of  fair  value  of  financial
instruments:
<TABLE>
<CAPTION>

----------------------------------------------------------------------------------------------------------------------------
                                                                                       December 31
----------------------------------------------------------------------------------------------------------------------------
                                                                            2003                          2002
------------------------------------------------------------------------------------------------------------------------------
                                                                  Carrying         Fair         Carrying         Fair
                                                                    Value          Value          Value          Value
----------------------------------------------------------------------------------------------------------------------------
<S>                                                                   <C>          <C>           <C>             <C>
Assets
Cash and cash equivalents                                          $  14,549     $  14,549       $  45,696     $  45,696
Investment securities                                                137,788       137,788          58,155        58,155
Loans                                                                204,141       206,589         304,586       309,792
Interest receivable                                                    2,037         2,037           1,958         1,958
Stock in FHLB                                                          6,948         6,948           6,759         6,759
Cash value of life insurance                                          19,705        19,705          18,932        18,932

Liabilities
Deposits                                                             345,744       346,897         402,187       403,745
Borrowings                                                            10,230        10,591           6,432         6,897
Interest payable                                                         210           210             411           411
Drafts payable                                                         3,477         3,477           5,099         5,099

</TABLE>


                                     F-(19)
<PAGE>
Ameriana Bancorp
Notes to Consolidated Financial Statements
(table dollar amounts in thousands, except share data)


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

CASH AND CASH EQUIVALENTS,  STOCK IN FHLB AND CASH VALUE OF LIFE INSURANCE:  The
carrying amounts reported in the consolidated  balance sheets  approximate those
assets' fair values.

INVESTMENT SECURITIES: Fair values are based on quoted market prices.

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

INTEREST    RECEIVABLE/PAYABLE:    The   fair   value   of   accrued    interest
receivable/payable approximates carrying values.

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

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.


17.  PARENT COMPANY FINANCIAL INFORMATION

The  following  are  condensed  financial  statements  for the  parent  company,
Ameriana Bancorp, only:
<TABLE>
<CAPTION>

----------------------------------------------------------------------------------------------------------------------------
                                                                                                  December 31
----------------------------------------------------------------------------------------------------------------------------
BALANCE SHEETS                                                                              2003               2002
----------------------------------------------------------------------------------------------------------------------------
<S>                                                                                          <C>                  <C>
Assets
Cash                                                                                      $       22         $       --
Advances to subsidiaries                                                                       1,746                 --
Investment in the Bank                                                                        38,325             39,590
Investments in affiliates                                                                        382                464
Other assets                                                                                      11                360
----------------------------------------------------------------------------------------------------------------------------
                                                                                             $40,486            $40,414
============================================================================================================================
Liabilities and shareholders' equity
Notes payable, other                                                                       $     600          $     840
Other liabilities                                                                              1,012                534
Shareholders' equity                                                                          38,874             39,040
----------------------------------------------------------------------------------------------------------------------------
                                                                                             $40,486            $40,414
============================================================================================================================
</TABLE>


                                     F-(20)
<PAGE>

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

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------
                                                                                     Year Ended December 31
----------------------------------------------------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS                                                    2003              2002              2001
----------------------------------------------------------------------------------------------------------------------------
<S>                                                                           <C>             <C>                <C>
Dividends from subsidiary                                                    $3,300            $1,500            $3,000
Interest income                                                                   8                 6                47
-----------------------------------------------------------------------------------------------------------------------------
                                                                              3,308             1,506             3,047
Operating expense                                                               525               489               594
----------------------------------------------------------------------------------------------------------------------------
   Income before income tax benefit and equity in undistributed
     income of subsidiary                                                     2,783             1,017             2,453
Income tax benefit                                                              404               356               511
---------------------------------------------------------------------- -------------------------------------------------------
                                                                              3,187             1,373             2,964
Equity in undistributed income of subsidiary and affiliates
   (distributions in excess of equity in income)                               (769)           (4,448)              836
----------------------------------------------------------------------------------------------------------------------------
Net Income (Loss)                                                            $2,418           $(3,075)           $3,800
============================================================================================================================
</TABLE>

<TABLE>
<CAPTION>

----------------------------------------------------------------------------------------------------------------------------
                                                                                      Year Ended December 31
----------------------------------------------------------------------------------------------------------------------------
STATEMENTS OF CASH FLOWS                                                     2003              2002             2001
----------------------------------------------------------------------------------------------------------------------------
<S>                                                                          <C>              <C>               <C>
Operating Activities
Net income (loss)                                                             $2,418          $(3,075)           $3,800
Items not requiring (providing) cash
     Equity in undistributed income of subsidiaries and affiliates               769            4,448              (866)
     Other adjustments                                                           828             (368)              210
----------------------------------------------------------------------------------------------------------------------------
         Net cash provided by operating activities                             4,015            1,005             3,144
----------------------------------------------------------------------------------------------------------------------------
Investing Activity - changes in advances to subsidiaries                      (1,746)           1,341               484
----------------------------------------------------------------------------------------------------------------------------
Financing Activities
Repayment of notes payable to subsidiaries                                        --             (243)             (250)
Repayment of other borrowings                                                   (240)             (90)           (1,491)
Cash dividends paid                                                           (2,015)          (2,014)           (1,888)
Purchase of common stock                                                          --             (137)               --
Proceeds from exercise of stock options                                            8              137                --
----------------------------------------------------------------------------------------------------------------------------
         Net cash used in financing activities                                (2,247)          (2,347)           (3,629)
----------------------------------------------------------------------------------------------------------------------------
Change in cash                                                                    22               (1)               (1)
Cash at beginning of year                                                         --                1                 2
----------------------------------------------------------------------------------------------------------------------------
Cash at end of year                                                        $      22         $     --         $       1
============================================================================================================================
</TABLE>


                                     F-(21)
<PAGE>
Ameriana Bancorp
Notes to Consolidated Financial Statements
(table dollar amounts in thousands, except share data)


18.  QUARTERLY DATA (UNAUDITED)

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------
                                                              First            Second            Third            Fourth
                                                             Quarter           Quarter          Quarter           Quarter
----------------------------------------------------------------------------------------------------------------------------
<S>                                                           <C>             <C>              <C>               <C>
2003
Total interest income                                        $6,188          $ 6,412          $ 5,636           $ 4,860
Total interest expense                                        3,060            2,817            2,392             1,797
   Net interest income                                        3,128            3,595            3,244             3,063
   Provision for loan losses                                    150            1,400            4,790               100
Net income                                                      755               96              952               615
----------------------------------------------------------------------------------------------------------------------------
Basic earnings per share                                        .24              .03              .30               .20
----------------------------------------------------------------------------------------------------------------------------
   Diluted earnings per share                                   .24              .03              .30               .19
----------------------------------------------------------------------------------------------------------------------------
   Dividends declared per share                                 .16              .16              .16               .16
----------------------------------------------------------------------------------------------------------------------------
   Stock price range
     High                                                     12.99            14.56           15.56              16.00
     Low                                                      11.36            11.96           13.13              14.50
----------------------------------------------------------------------------------------------------------------------------
2002
Total interest income                                        $8,592           $7,476           $7,268            $6,637
Total interest expense                                        5,244            4,775            4,192             3,330
   Net interest income                                        3,348            2,701            3,076             3,307
   Provision for loan losses                                  1,250              150              150             5,750
Net income                                                   (2,050)             600              786            (2,411)
----------------------------------------------------------------------------------------------------------------------------
Basic and diluted earnings per share                           (.65)             .19              .25              (.77)
----------------------------------------------------------------------------------------------------------------------------
   Dividends declared per share                                 .16              .16              .16               .16
----------------------------------------------------------------------------------------------------------------------------
   Stock price range
     High                                                     16.00            15.10            14.20              13.25
     Low                                                      13.15            13.85            12.10              12.70
----------------------------------------------------------------------------------------------------------------------------
</TABLE>


                                     F-(22)


<PAGE>



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

         Not applicable.

ITEM 9A.  CONTROLS AND PROCEDURES
--------------------------------------------------------------------------------

     As of the end of the  period  covered  by this  report,  management  of the
Company  carried  out  an  evaluation,   under  the  supervision  and  with  the
participation  of  the  Company's  principal  executive  officer  and  principal
financial officer, of the effectiveness of the Company's disclosure controls and
procedures.  Based on this evaluation, the Company's principal executive officer
and principal financial officer concluded that the Company's disclosure controls
and  procedures  are  effective  in  ensuring  that  information  required to be
disclosed  by the  Company  in  reports  that it  files  or  submits  under  the
Securities Exchange Act of 1934, as amended, is recorded, processed,  summarized
and reported,  within the time periods  specified in the Securities and Exchange
Commission's  rules  and  forms.  It  should  be noted  that the  design  of the
Company's  disclosure  controls  and  procedures  is based in part upon  certain
reasonable  assumptions about the likelihood of future events,  and there can be
no reasonable  assurance  that any design of disclosure  controls and procedures
will  succeed  in  achieving  its  stated  goals  under  all  potential   future
conditions,  regardless of how remote, but the Company's principal executive and
financial  officers have  concluded that the Company's  disclosure  controls and
procedures are, in fact, effective at a reasonable assurance level.

     There have been no changes in the Company's internal control over financial
reporting  (to the extent  that  elements  of internal  control  over  financial
reporting are subsumed within disclosure controls and procedures)  identified in
connection  with the evaluation  described in the above  paragraph that occurred
during the Company's last fiscal quarter,  that has materially  affected,  or is
reasonably  likely to materially  affect,  the Company's  internal  control over
financial reporting.

                                    PART III

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

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

                                       69
<PAGE>

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

     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.  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 10 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 Web site at  www.ameriana.com.

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

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

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

         (a)      SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

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

         (b)      SECURITY OWNERSHIP OF MANAGEMENT

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

         (c)      CHANGES IN CONTROL

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


                                       70
<PAGE>

          (d)     SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION
                  PLANS

               The following table sets forth certain  information  with respect
          to the Company's equity compensation plans as of December 31, 2003.
<TABLE>
<CAPTION>

                                                (a)                         (b)                            (c)
                                                                                                Number of securities remaining
                                     Number of securities to be                                 available for future issuance
                                      issued upon exercise of       Weighted-average exercise     under equity compensation
                                        outstanding options,          price of outstanding       plans (excluding securities
Plan category                           warrants and rights       options, warrants and rights     reflected in column (a))
-------------                           -------------------       ----------------------------     ------------------------
<S>                                             <C>                           <C>                          <C>
Equity compensation plans
  approved by security holders
                                              195,052                      $ 14.29                         178,442
Equity compensation plans not
  approved by security holders                     --                           --                              --
                                            ---------                      --------                     ----------

     Total                                    195,052                      $ 14.29                         178,442
                                            =========                      =======                      ==========
</TABLE>


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

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

ITEM 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES
------------------------------------------------

     The information  required by this item is incorporated  herein by reference
to the section captioned "Audit Fees" in the Proxy Statement.


                                       71
<PAGE>

                                     PART IV

ITEM 15.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
--------------------------------------------------------------------------

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

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

                           Report of Independent Auditors
                           Consolidated Balance Sheets at December 31, 2003 and
                            2002
                           Consolidated Statements of Operations for Each of the
                            Three Years in the Period Ended December 31, 2003
                           Consolidated Statements of Shareholders' Equity for
                            Each of the Three Years in the Period Ended December
                            31, 2003
                           Consolidated Statements of Cash Flows for Each of the
                            Three Years in the Period Ended December
                             31, 2003
                           Notes to Consolidated Financial Statements

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

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

<TABLE>
<CAPTION>

           No.    Description
           ---    -----------
          <S>       <C>
          3(i)    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(ii)   Amended and Restated Bylaws

          10.1*   Ameriana  Bancorp 1987 Stock Option Plan--incorporated  herein by
                  reference  to the  Company's  Registration  Statement on Form S-8
                  filed with the SEC on March 30, 1990 and May 17, 1996

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

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

                                       72
<PAGE>
<TABLE>
<CAPTION>

           No.   Description
           ---   -----------
          <S>       <C>
          10.4   Employment  Agreement,  dated January 1, 2004,  between  Ameriana
                 Bank & Trust and Bradley L. Smith
          10.5*  Ameriana   Bank  of   Indiana,   F.S.B.   Director   Supplemental
                 Retirement Program Director  Agreement -- incorporated  herein by
                 reference to the Company's  Annual Report on Form 10-K filed with
                 the SEC on March 30, 2000
          10.6*  Ameriana   Bank  of   Indiana,   F.S.B.   Director   Supplemental
                 Retirement  Program  Director  Agreement,  dated  June  4,  1999,
                 between  Ameriana  Bank of Indiana,  F.S.B.  and Paul W. Prior --
                 incorporated  herein by reference to the Company's  Annual Report
                 on Form 10-K filed with the SEC on March 30, 2000
          10.7*  Executive  Supplemental  Retirement Plan Agreement,  dated May 6,
                 1999,  between  Ameriana  Bank of  Indiana,  F.S.B.  and Harry J.
                 Bailey --  incorporated  herein  by  reference  to the  Company's
                 Annual Report on Form 10-K filed with the SEC on March 30, 2000
          10.8*  Executive  Supplemental  Retirement Plan Agreement,  dated May 6,
                 1999,  between  Ameriana Bank of Indiana,  F.S.B.  and Timothy G.
                 Clark -- incorporated herein by reference to the Company's Annual
                 Report on Form 10-K filed with the SEC on March 29, 2001
          10.9   Executive Supplemental Retirement Plan Agreement Amendment, dated
                 December 5, 2003,  between  Ameriana Bank of Indiana,  F.S.B. and
                 Harry J. Bailey
          10.10  Executive  Supplemental   Retirement  Plan  Agreement  Amendment,
                 dated December 5, 2003, between Ameriana Bank of Indiana,  F.S.B.
                 and Timothy G. Clark
          23     Consent of BKD, LLP
          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     Certification Pursuant to 18 U.S.C. Section 1350
</TABLE>

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

                                       73
<PAGE>




          (b) REPORTS ON FORM 8-K. During the fourth quarter of the fiscal year
              --------------------
covered by this Annual Report, the Company filed the following Current Report on
Form 8-K:
                                                                   Financial
     Date of Report                Item(s) Reported             Statements Filed
     --------------                ----------------             ----------------
     October 30, 2003                    7, 12                         N/A

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

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

                                       74
<PAGE>
                                   SIGNATURES

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

                                        AMERIANA BANCORP


Date:    March 26, 2004                 By:/s/ Harry J. Bailey
                                           ------------------------------------
                                           Harry J. Bailey
                                           President and Chief Executive Officer
                                           (Duly Authorized Representative)

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


By:  /s/ Harry J. Bailey                                          March 26, 2004
    -------------------------------------------------
     Harry J. Bailey
     President, Chief Executive Officer
     and Director
     (Principal Executive Officer)


By:  /s/ Bradley L. Smith                                         March 26, 2004
    -------------------------------------------------
     Bradley L. Smith
     Senior Vice President - Treasurer
     (Principal Financial and Accounting Officer)


By:
    -------------------------------------------------
     Paul W. Prior
     Chairman of the Board and Director


By:
    -------------------------------------------------
     Donald C. Danielson
     Director


By: /s/ Charles M. Drackett, Jr.                                  March 26, 2004
    -------------------------------------------------
     Charles M. Drackett, Jr.
     Director


By:
   --------------------------------------------------
    R. Scott Hayes
    Director


By: /s/ Michael E. Kent                                           March 26, 2004
    -------------------------------------------------
     Michael E. Kent
     Director


By: /s/ Ronald R. Pritzke                                         March 26, 2004
   --------------------------------------------------
    Ronald R. Pritzke
    Director