UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
DC  20549







FORM
10-Q




(Mark
One)


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




For the
quarterly period ended June 30, 2010


OR




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




For the
transition period from 
to




Commission
File Number: 0-18392




AMERIANA
BANCORP







Indiana
              
              35-1782688(State
      or Other Jurisdiction of
              
              (I.R.S.
      EmployerIncorporation
      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




Not Applicable







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




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





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company.  See definitions of “large accelerated filer,” “ accelerated
filer” and “smaller reporting company” in Rule 12b-2 of the Exchange
Act.




Large
      accelerated filer       ̈
                Accelerated
      filer                     
       ̈Non-accelerated
      filer         ̈
                Smaller
      reporting company    x





(Do not
check if a smaller reporting company)




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




At August
12, 2010, the registrant had 2,988,952 shares of its common stock
outstanding.





AMERIANA
BANCORP





Table
of Contents





Page
      No.Part
      I.  Financial Information
                          3Item
      1.
                          Financial
      Statements (Unaudited)
                          3Consolidated
      Condensed Balance Sheets at June 30, 2010 andDecember
      31, 2009
                          3Consolidated
      Condensed Statements of Operations for the Three and SixMonths
      Ended June 30, 2010 and 2009
                          4Consolidated
      Condensed Statements of Shareholders’ Equity for theSix
      Months Ended June 30, 2010
                          5Consolidated
      Condensed Statements of Cash Flows for the Six MonthsEnded
      June 30, 2010 and 2009
                          6Notes
      to Consolidated Condensed Financial Statements
                          7Item
      2.
                          Management’s
      Discussion and Analysis of Financial Conditionand
      Results of Operations
                          13Item
      3.
                          Quantitative
      and Qualitative Disclosure about Market Risk
                          26Item
      4T.
                          Controls
      and Procedures
                          26Part
      II.  Other InformationItem
      1.
                          Legal
      Proceedings
                          27Item 1A.
                          Risk
      Factors
                          27Item
      2.
                          Unregistered
      Sales of Equity Securities and Use of Proceeds
                          27Item
      3.
                          Defaults
      upon Senior Securities
                          27Item
      4.
                          (Removed
      and Reserved)
                          27Item
      5.
                          Other
      Information
                          27Item
      6.
                          Exhibits
                          27Signatures


(2)





PART
I - FINANCIAL INFORMATION





ITEM
I - FINANCIAL STATEMENTS


Ameriana
Bancorp


Consolidated
Condensed Balance Sheets


(In
thousands, except share data)





June
      30,
                  
                  
                  December
      31,2010
                  
                  
                  2009(Unaudited)AssetsCash
      on hand and in other institutions
                  
                  $
                  5,156
                  
                  
                  $
                  6,283Interest-bearing
      demand deposits
                  
                  
                  15,619
                  
                  
                  
                  13,305Cash
      and cash equivalents
                  
                  
                  20,775
                  
                  
                  
                  19,588Investment
      securities available for sale
                  
                  
                  39,767
                  
                  
                  
                  35,841Loans
      held for sale
                  
                  
                  251
                  
                  
                  
                  537Loans,
      net of allowance for loan losses of $4,033 and $4,005
                  
                  
                  302,480
                  
                  
                  
                  321,544Premises
      and equipment
                  
                  
                  15,053
                  
                  
                  
                  15,508Stock
      in Federal Home Loan Bank
                  
                  
                  5,629
                  
                  
                  
                  5,629Goodwill
                  
                  
                  649
                  
                  
                  
                  649Cash
      value of life insurance
                  
                  
                  24,974
                  
                  
                  
                  24,538Other
      real estate owned
                  
                  
                  9,821
                  
                  
                  
                  5,517Other
      assets
                  
                  
                  11,342
                  
                  
                  
                  12,212Total
      assets
                  
                  $
                  430,741
                  
                  
                  $
                  441,563Liabilities
      and Shareholders’ EquityLiabilitiesDepositsNoninterest-bearing
                  
                  $
                  31,374
                  
                  
                  $
                  29,531Interest-bearing
                  
                  
                  300,411
                  
                  
                  
                  308,850Total
      deposits
                  
                  
                  331,785
                  
                  
                  
                  338,381Borrowings
                  
                  
                  58,810
                  
                  
                  
                  64,185Drafts
      payable
                  
                  
                  1,864
                  
                  
                  
                  920Other
      liabilities
                  
                  
                  4,901
                  
                  
                  
                  5,502Total
      liabilities
                  
                  
                  397,360
                  
                  
                  
                  408,988Commitments
      and contingenciesShareholders’
      equityPreferred
      stock - 5,000,000 shares authorized and unissued
                  
                  
                  —
                  
                  
                  
                  —Common
      stock, $1.00 par value Authorized 15,000,000 shares
      Issued  –  3,213,952 shares Outstanding – 2,988,952
      shares
                  
                  
                  3,214
                  
                  
                  
                  3,214Additional
      paid-in capital
                  
                  
                  1,048
                  
                  
                  
                  1,045Retained
      earnings
                  
                  
                  31,665
                  
                  
                  
                  31,416Accumulated
      other comprehensive income (loss)
                  
                  
                  452
                  
                  
                  
                  (102
                  )Treasury
      stock at cost – 225,000 shares
                  
                  
                  (2,998
                  )
                  
                  
                  (2,998
                  )Total
      shareholders’ equity
                  
                  
                  33,381
                  
                  
                  
                  32,575Total
      liabilities and shareholders’ equity
                  
                  $
                  430,741
                  
                  
                  $
                  441,563





See notes to consolidated condensed
financial statements.





(3)





Ameriana
Bancorp


Consolidated
Condensed Statements of Operations


(In
thousands, except per share data)


(Unaudited)





Three Months Ended
                  June 30,
                
                
                Six Months Ended
                  June 30,2010
                
                
                2009
                
                
                2010
                
                
                2009Interest
      IncomeInterest
      and fees on loans
                
                $
                4,722
                
                
                $
                4,823
                
                
                $
                9,398
                
                
                $
                9,707Interest
      on mortgage-backed securities
                
                
                314
                
                
                
                603
                
                
                
                632
                
                
                
                1,274Interest
      on investment securities
                
                
                43
                
                
                
                130
                
                
                
                95
                
                
                
                313Other
      interest and dividend income
                
                
                38
                
                
                
                24
                
                
                
                75
                
                
                
                109Total
      interest income
                
                
                5,117
                
                
                
                5,580
                
                
                
                10,200
                
                
                
                11,403Interest
      ExpenseInterest
      on deposits
                
                
                1,107
                
                
                
                1,710
                
                
                
                2,276
                
                
                
                3,483Interest
      on borrowings
                
                
                638
                
                
                
                820
                
                
                
                1,269
                
                
                
                1,829Total
      interest expense
                
                
                1,745
                
                
                
                2,530
                
                
                
                3,545
                
                
                
                5,312Net
      Interest Income
                
                
                3,372
                
                
                
                3,050
                
                
                
                6,655
                
                
                
                6,091Provision
      for loan losses
                
                
                658
                
                
                
                615
                
                
                
                1,018
                
                
                
                953Net
      Interest Income After Provision for Loan Losses
                
                
                2,714
                
                
                
                2,435
                
                
                
                5,637
                
                
                
                5,138Other
      IncomeOther
      fees and service charges
                
                
                531
                
                
                
                461
                
                
                
                1,000
                
                
                
                878Brokerage
      and insurance commissions
                
                
                322
                
                
                
                246
                
                
                
                686
                
                
                
                583Net
      realized and recognized gains (losses) on available-for-sale investment
      securities
                
                
                1
                
                
                
                (5
                )
                
                
                105
                
                
                
                102Gains
      on sales of loans and servicing rights
                
                
                639
                
                
                
                173
                
                
                
                705
                
                
                
                187Net
      loss on other real estate owned
                
                
                (145
                )
                
                
                (379
                )
                
                
                (180
                )
                
                
                (700
                )Other
      real estate owned income
                
                
                110
                
                
                
                105
                
                
                
                210
                
                
                
                105Increase
      in cash value of life insurance
                
                
                219
                
                
                
                213
                
                
                
                437
                
                
                
                426Gain
      on liquidation of minority interest in unconsolidated
      investment
                
                
                —
                
                
                
                192
                
                
                
                —
                
                
                
                192Other
                
                
                42
                
                
                
                14
                
                
                
                108
                
                
                
                25Total
      other income
                
                
                1,719
                
                
                
                1,020
                
                
                
                3,071
                
                
                
                1,798Other
      ExpenseSalaries
      and employee benefits
                
                
                2,351
                
                
                
                2,218
                
                
                
                4,625
                
                
                
                4,366Net
      occupancy expense
                
                
                367
                
                
                
                364
                
                
                
                775
                
                
                
                738Furniture
      and equipment expense
                
                
                216
                
                
                
                224
                
                
                
                431
                
                
                
                441Legal
      and professional fees
                
                
                176
                
                
                
                235
                
                
                
                397
                
                
                
                415FDIC
      insurance premiums and assessments
                
                
                195
                
                
                
                239
                
                
                
                391
                
                
                
                254Data
      processing expense
                
                
                190
                
                
                
                205
                
                
                
                366
                
                
                
                382Printing
      and office supplies
                
                
                59
                
                
                
                59
                
                
                
                113
                
                
                
                148Marketing
      expense
                
                
                78
                
                
                
                157
                
                
                
                179
                
                
                
                328Other
      real estate owned expense
                
                
                326
                
                
                
                241
                
                
                
                534
                
                
                
                304Other
                
                
                262
                
                
                
                401
                
                
                
                695
                
                
                
                822Total
      other expense
                
                
                4,220
                
                
                
                4,343
                
                
                
                8,506
                
                
                
                8,198Income
      (Loss) Before Income Taxes
                
                
                213
                
                
                
                (888
                )
                
                
                202
                
                
                
                (1,262
                )Income
      tax benefit
                
                
                16
                
                
                
                422
                
                
                
                107
                
                
                
                683Net
      Income (Loss)
                
                $
                229
                
                
                $
                (466
                )
                
                $
                309
                
                
                $
                (579
                )Basic
      Earnings (Loss) Per Share
                
                $
                0.08
                
                
                $
                (0.16
                )
                
                $
                0.10
                
                
                $
                (0.19
                )Diluted
      Earnings (Loss) Per Share
                
                $
                0.08
                
                
                $
                (0.16
                )
                
                $
                0.10
                
                
                $
                (0.19
                )Dividends
      Declared Per Share
                
                $
                0.01
                
                
                $
                0.04
                
                
                $
                0.02
                
                
                $
                0.08





See
notes to consolidated condensed financial statements


(4)





Ameriana
Bancorp


Consolidated
Condensed Statements of Shareholders’ Equity


For
the Six Months Ended June 30, 2010


(In
thousands, except per share data)


(Unaudited)





Common
                    Stock
                  
                  
                  Additional
                    Paid-in
                    Capital
                  
                  
                  Retained
                    Earnings
                  
                  
                  Accumulated
                    Other
                    Comprehensive
                    Income (Loss)
                  
                  
                  Treasury
                    Stock
                  
                  
                  TotalBalance
      at December 31, 2009
                  
                  $
                  3,214
                  
                  
                  $
                  1,045
                  
                  
                  $
                  31,416
                  
                  
                  $
                  (102
                  )
                  
                  $
                  (2,998
                  )
                  
                  $
                  32,575Net
      Income
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  309
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  309Change
      of $855 from unrealized loss to unrealized gain on available-for-sale
      securities, net of income tax of $301
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  554
                  
                  
                  
                  —
                  
                  
                  
                  554Comprehensive
      income
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  863Share-based
      compensation
                  
                  
                  —
                  
                  
                  
                  3
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  3Dividends
      declared ($0.02 per share)
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  (60
                  )
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  (60
                  )Balance
      at June 30, 2010
                  
                  $
                  3,214
                  
                  
                  $
                  1,048
                  
                  
                  $
                  31,665
                  
                  
                  $
                  452
                  
                  
                  $
                  (2,998
                  )
                  
                  $
                  33,381





See
notes to consolidated condensed financial statements.


(5)


Ameriana
Bancorp


Consolidated
Condensed Statements of Cash Flows


(In
thousands)


(Unaudited)





Six Months Ended June 30,2010
                                  
                                  
                                  2009Operating
      ActivitiesNet
      income (loss)
                                  
                                  $
                                  309
                                  
                                  
                                  $
                                  (579
                                  )Items
      not requiring (providing) cashProvision
      for losses on loans
                                  
                                  
                                  1,018
                                  
                                  
                                  
                                  953Depreciation
      and amortization
                                  
                                  
                                  569
                                  
                                  
                                  
                                  507Increase
      in cash value of life insurance
                                  
                                  
                                  (437
                                  )
                                  
                                  
                                  (426
                                  )Gain
      from sale of available-for-sale securities
                                  
                                  
                                  (105
                                  )
                                  
                                  
                                  (102
                                  )Loss
      on sale or write-down of other real estate owned
                                  
                                  
                                  180
                                  
                                  
                                  
                                  700Gain
      on liquidation of minority interest in unconsolidated
      investment
                                  
                                  
                                  —
                                  
                                  
                                  
                                  (192
                                  )Mortgage
      loans originated for sale
                                  
                                  
                                  (7,050
                                  )
                                  
                                  
                                  (9,803
                                  )Proceeds
      from sales of mortgage loans originated for sale
                                  
                                  
                                  7,398
                                  
                                  
                                  
                                  9,572Gains
      on sales of mortgage loans and servicing rights
                                  
                                  
                                  (705
                                  )
                                  
                                  
                                  (187
                                  )Decrease
      in accrued interest payable
                                  
                                  
                                  (278
                                  )
                                  
                                  
                                  (131
                                  )Other
      adjustments
                                  
                                  
                                  957
                                  
                                  
                                  
                                  29Net
      cash provided by (used in) operating activities
                                  
                                  
                                  1,856
                                  
                                  
                                  
                                  (526
                                  )Investing
      ActivitiesPurchase
      of securities
                                  
                                  
                                  (10,417
                                  )
                                  
                                  
                                  (5,380
                                  )Proceeds/principal
      from the sale of securities
                                  
                                  
                                  4,444
                                  
                                  
                                  
                                  7,916Principal
      collected on mortgage-backed securities
                                  
                                  
                                  2,445
                                  
                                  
                                  
                                  8,263Net
      change in loans
                                  
                                  
                                  1,708
                                  
                                  
                                  
                                  (17,278
                                  )Proceeds
      from sales of mortgage loans transferred to held for sale
                                  
                                  
                                  11,436
                                  
                                  
                                  
                                  —Proceeds
      from sales of other real estate owned
                                  
                                  
                                  993
                                  
                                  
                                  
                                  554Purchase
      of insurance business
                                  
                                  
                                  —
                                  
                                  
                                  
                                  (724
                                  )Proceeds
      from liquidation of minority interest in unconsolidated
      investment
                                  
                                  
                                  —
                                  
                                  
                                  
                                  645Purchases
      and construction of premises and equipment
                                  
                                  
                                  (55
                                  )
                                  
                                  
                                  (1,136
                                  )Other
      investing activities
                                  
                                  
                                  (15
                                  )
                                  
                                  
                                  22Net
      cash used in investing activities
                                  
                                  
                                  10,539
                                  
                                  
                                  
                                  (7,118
                                  )Financing
      ActivitiesNet
      change in demand and savings deposits
                                  
                                  
                                  3,669
                                  
                                  
                                  
                                  40,318Net
      change in certificates of deposit
                                  
                                  
                                  (10,265
                                  )
                                  
                                  
                                  9,055Increase
      in drafts payable
                                  
                                  
                                  944
                                  
                                  
                                  
                                  458Proceeds
      from long-term borrowings
                                  
                                  
                                  3,000
                                  
                                  
                                  
                                  —-Repayment
      of long-term borrowings
                                  
                                  
                                  (8,375
                                  )
                                  
                                  
                                  (23,500
                                  )Net
      change in advances by borrowers for taxes and insurance
                                  
                                  
                                  (121
                                  )
                                  
                                  
                                  259Cash
      dividends paid
                                  
                                  
                                  (60
                                  )
                                  
                                  
                                  (239
                                  )Net
      cash (used in) provided by financing activities
                                  
                                  
                                  (11,208
                                  )
                                  
                                  
                                  26,351Change
      in Cash and Cash Equivalents
                                  
                                  
                                  1,187
                                  
                                  
                                  
                                  18,707Cash
      and Cash Equivalents at Beginning of Year
                                  
                                  
                                  19,588
                                  
                                  
                                  
                                  8,449Cash
      and Cash Equivalents at End of Quarter
                                  
                                  $
                                  20,775
                                  
                                  
                                  $
                                  27,156Supplemental
      information:Interest
      paid on deposits
                                  
                                  $
                                  2,538
                                  
                                  
                                  $
                                  3,554Interest
      paid on borrowings
                                  
                                  $
                                  1,285
                                  
                                  
                                  $
                                  1,895Non-cash
      supplemental information:Transfers
      from loans to other real estate owned
                                  
                                  $
                                  5,445
                                  
                                  
                                  $
                                  3,037





See
notes to consolidated condensed financial statements.


(6)


AMERIANA
BANCORP AND SUBSIDIARIES





NOTES
TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (unaudited)





NOTE
A — BASIS OF PRESENTATION





The
consolidated condensed financial statements include the accounts of Ameriana
Bancorp (the “Company”) and its wholly-owned subsidiary, Ameriana Bank (the
“Bank”).  The Bank has two wholly-owned subsidiaries, Ameriana
Insurance Agency and Ameriana Financial Services, Inc.





The
unaudited interim consolidated condensed financial statements have been prepared
in accordance with the instructions to Form 10-Q and, therefore, do not include
all information and disclosures required by generally accepted accounting
principles (“GAAP”) for complete financial statements.  In the opinion
of management, the financial statements reflect all adjustments (comprised only
of normal recurring adjustments and accruals) necessary to present fairly the
Company’s financial position and results of operations and cash
flows.  The consolidated condensed balance sheet of the Company as of
December 31, 2009 has been derived from the audited consolidated balance sheet
of the Company as of that date.  The results of operations for the
period are not necessarily indicative of the results to be expected in the full
year or for any other period.  These statements should be read in
conjunction with the consolidated financial statements and related notes which
are included in the Company's Annual Report on Form 10-K for the year ended
December 31, 2009.





NOTE
B — SHAREHOLDERS’ EQUITY





On June
28, 2010, the Board of Directors declared a quarterly cash dividend of $0.01 per
share.  This dividend, totaling approximately $30,000, was accrued for
payment to shareholders of record on July 9, 2010, and was paid on July 30,
2010.





No
stock options were exercised during the second quarter of 2010.





NOTE
C — EARNINGS (LOSS) PER SHARE





Earnings
(loss) per share were computed as follows:





(In thousands, except share data)Three Months Ended June 30,2010
                
                
                2009Net
                  Income
                
                
                Weighted
                  Average
                  Shares
                
                
                PerShare
                  Amount
                
                
                NetLoss
                
                
                Weighted
                  Average
                  Shares
                
                
                PerShare
                  AmountBasic
      Earnings (Loss) Per Share: Income (loss) availabletocommon  shareholders
                
                $
                229
                
                
                
                2,988,952
                
                
                $
                0.08
                
                
                $
                (466
                )
                
                
                2,988,952
                
                
                $
                (0.16
                )Effect
      of dilutive stock options
                
                
                -
                
                
                
                -
                
                
                
                
                
                
                
                -
                
                
                
                -Diluted
      Earnings (Loss) Per Share: Income (loss) available to common shareholders
      and assumed conversions
                
                $
                229
                
                
                
                2,988,952
                
                
                $
                0.08
                
                
                $
                (466
                )
                
                
                2,988,952
                
                
                $
                (0.16
                )





(In thousands, except share data)Six Months Ended June 30,2010
                
                
                2009Net
                  Income
                
                
                Weighted
                  Average
                  Shares
                
                
                PerShare
                  Amount
                
                
                NetLoss
                
                
                Weighted
                  Average
                  Shares
                
                
                PerShare
                  AmountBasic
      Earnings (Loss) Per Share: Income (loss) availabletocommon  shareholders
                
                $
                309
                
                
                
                2,988,952
                
                
                $
                0.10
                
                
                $
                (579
                )
                
                
                2,988,952
                
                
                $
                (0.19
                )Effect
      of dilutive stock options
                
                
                -
                
                
                
                -
                
                
                
                
                
                
                
                -
                
                
                
                -Diluted
      Earnings (Loss) Per Share: Income (loss) available to common shareholders
      and assumed conversions
                
                $
                309
                
                
                
                2,988,952
                
                
                $
                0.10
                
                
                $
                (579
                )
                
                
                2,988,952
                
                
                $
                (0.19
                )


(7)


Options
to purchase 169,982 and 199,482 shares of common stock at exercise prices of
$9.25 to $15.56 and $9.25 to $15.56 per share were outstanding at June 30, 2010
and 2009, respectively, but were not included in the computation of diluted
earnings per share because the options were anti-dilutive.





NOTE
D — INVESTMENT SECURITIES





The
following tables provide the composition of investment securities at June 30,
2010, and December 31, 2009 (dollars in thousands):





Amortized
                  Cost
                
                
                Gross
                  Unrealized
                  Gains
                
                
                Gross
                  Unrealized
                  Losses
                
                
                Fair
                  ValueAvailable
      for sale at June 30, 2010Ginnie
      Mae and GSE mortgage-backed pass-through securities
                
                $
                29,497
                
                
                $
                656
                
                
                $
                1
                
                
                $
                30,152Ginnie
      Mae collateralized mortgage obligations
                
                
                5,758
                
                
                
                3
                
                
                
                8
                
                
                
                5,753Municipal
      securities
                
                
                2,228
                
                
                
                17
                
                
                
                49
                
                
                
                2,196Mutual
      fund
                
                
                1,599
                
                
                
                67
                
                
                
                —
                
                
                
                1,666$
                39,082
                
                
                $
                743
                
                
                $
                58
                
                
                $
                39,767





Amortized
                  Cost
                
                
                Gross
                  Unrealized
                  Gains
                
                
                Gross
                  Unrealized
                  Losses
                
                
                Fair
                  ValueAvailable
      for sale at December 31, 2009Ginnie
      Mae and GSE mortgage-backed pass-through securities
                
                $
                24,953
                
                
                $
                214
                
                
                $
                175
                
                
                $
                24,992Ginnie
      Mae collateralized mortgage obligations
                
                
                6,024
                
                
                
                —
                
                
                
                204
                
                
                
                5,820Municipal
      securities
                
                
                3,461
                
                
                
                30
                
                
                
                60
                
                
                
                3,431Mutual
      fund
                
                
                1,573
                
                
                
                25
                
                
                
                —
                
                
                
                1,598$
                36,011
                
                
                $
                269
                
                
                $
                439
                
                
                $
                35,841





The
amortized cost and fair value of securities available for sale at June 30, 2010,
by contractual maturity, are shown below.  Expected maturities will
differ from contractual maturities because issuers may have the right to
call


or prepay
obligations with or without call or prepayment penalties.





Available for SaleAmortized
                        Cost
                      
                      
                      Fair
                        ValueWithin
      one year
                      
                      $
                      —
                      
                      
                      $
                      —One
      to five years
                      
                      
                      325
                      
                      
                      
                      342Five
      to ten years
                      
                      
                      —
                      
                      
                      
                      —After ten years
                      
                      
                      1,903
                      
                      
                      
                      1,8542,228
                      
                      
                      
                      2,196Ginnie
      Mae and GSE mortgage-backed pass-through securities
                      
                      
                      29,497
                      
                      
                      
                      30,152Ginnie
      Mae collateralized mortgage obligations
                      
                      
                      5,758
                      
                      
                      
                      5,753Mutual fund
                      
                      
                      1,599
                      
                      
                      
                      1,666$
                      39,082
                      
                      
                      $
                      39,767





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


(8)


Collateralized
mortgage obligations: The unrealized loss on the Company’s investment in
collateralized mortgage obligations was caused by interest rate
changes.  The contractual cash flows of these investments are
guaranteed by  Ginnie Mae, a U. S. Government
Agency.  Accordingly, it is expected that the securities would not be
settled at a price less than the amortized cost of the Company’s
investment.  Because the decline in market value was attributable to
changes in interest rates and not credit quality, and because the Company has
the ability and intent to hold those investments until a recovery of fair value,
which may be maturity, the Company does not consider those investments to be
other-than-temporarily impaired at June 30, 2010.





Municipal
securities:  All of the municipal securities in the Company’s
investment portfolio at June 30, 2010 that were rated received an investment
grade credit quality rating.  Two securities were not
rated.  The contractual terms of those investments do not permit the
issuer to settle the securities at a price less than the amortized cost of the
investment.





Mutual
funds:The mutual fund balance at June 30, 2010 consisted of
an investment in the CRA Qualified Investment mutual fund, whose portfolio
composition is primarily in debt securities with an average credit quality
rating of AAA.





Certain
investment securities are reported in the financial statements at an amount less
than their historical cost.  Total fair value of these investments at
June 30, 2010 and December 31, 2009 were $4,450,000 and $18,289,000,
respectively, which is approximately 11.2% and 51.0%, respectively, of the
Company’s investment portfolio.





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





The
following table shows the Company’s investments’ gross unrealized losses and
fair value, aggregated by investment category and length of time that individual
securities have been in a continuous unrealized loss position at June 30, 2010
and December 31, 2009 (dollars in thousands):





At June 30, 2010
                
                Less Than 12 Months
                
                
                12 Months or Longer
                
                
                TotalFair Value
                
                
                Unrealized
                  Losses
                
                
                Fair Value
                
                
                Unrealized
                  Losses
                
                
                Fair Value
                
                
                Unrealized
                  LossesGinnie
      Mae and GSE mortgage-backed pass-through securities
                
                $
                —
                
                
                $
                —
                
                
                $
                199
                
                
                $
                1
                
                
                $
                199
                
                
                $
                1Ginnie
      Mae collateralized mortgage obligations
                
                
                —
                
                
                
                —
                
                
                
                2,397
                
                
                
                8
                
                
                
                2,397
                
                
                
                8Municipal
      securities
                
                
                1,854
                
                
                
                49
                
                
                
                —
                
                
                
                —
                
                
                
                1,854
                
                
                
                49$
                1,854
                
                
                $
                49
                
                
                $
                2,596
                
                
                $
                9
                
                
                $
                4,450
                
                
                $
                58





At December 31, 2009
                
                Less Than 12 Months
                
                
                12 Months or Longer
                
                
                TotalFair Value
                
                
                Unrealized
                  Losses
                
                
                Fair Value
                
                
                Unrealized
                  Losses
                
                
                Fair Value
                
                
                Unrealized
                  LossesGinnie
      Mae and GSE mortgage-backed pass-through securities
                
                $
                10,394
                
                
                $
                172
                
                
                $
                231
                
                
                $
                3
                
                
                $
                10,625
                
                
                $
                175Ginnie
      Mae collateralized mortgage obligations
                
                
                5,820
                
                
                
                204
                
                
                
                —
                
                
                
                —
                
                
                
                5,820
                
                
                
                204Municipal
      securities
                
                
                1,844
                
                
                
                60
                
                
                
                —
                
                
                
                —
                
                
                
                1,844
                
                
                
                60$
                18,058
                
                
                $
                436
                
                
                $
                231
                
                
                $
                3
                
                
                $
                18,289
                
                
                $
                439





Investment
securities with a total market value of $5,753,000 and $5,820,000 were pledged
at June 30, 2010 and December 31, 2009, respectively, to secure FHLB
advances and three letters of credit.





Investment
securities with a total market value of $9,461,000 and $9,030,000 were pledged
at June 30, 2010 and December 31, 2009, respectively, to secure a repurchase
agreement.





A gross
gain of $4,000 and a gross loss of $3,000 resulting from sales of
available-for-sale securities were realized during the three month period ended
June 30, 2010, compared to a $5,000 gross loss for the three month period ended
June 30, 2009, with a net tax benefit of $2,000.  A gross gain of
$108,000 and a gross loss of $3,000 resulting from sales of available-for-sale
securities were realized during the first six months of 2010, with a net tax
expense of $36,000, compared to a $131,000 gross gain and a $29,000 gross loss
for the first six months of 2009, with a net tax expense of
$35,000.


(9)


NOTE
E — CURRENT AND FUTURE ACCOUNTING MATTERS





In June
2009, the FASB issued guidance on accounting for transfers of financial assets
to improve the reporting for the transfer of financial assets resulting from (1)
practices that have developed since the issuance of the prior standard  
that are not consistent with the original intent and key requirements of the
prior standard, and (2) concerns of financial statement users that many of the
financial assets (and related obligations) that have been derecognized should
continue to be reported in the financial statements of
transferors.  This guidance is included in the Codification as ASC
860.    The Company adopted this guidance effective January 1,
2010.  The adoption did not have a material impact on the Company’s
financial position or statement of operations.





In June
2009, the FASB issued guidance on the consolidation of variable interest
entities to improve financial reporting by enterprises involved with variable
interest entities and to provide more relevant and reliable information to users
of financial statements.  This guidance is included in the
Codification as part of ASC 810.  The Company adopted this guidance
effective January 1, 2010.  The adoption did not have a material
impact on the Company’s financial position or statement of
operations.





In
January 2010, the FASB issued guidance for improving disclosures about fair
value measurements.  The guidance requires additional disclosure in
two areas:  (1) a description of, as well as the disclosure of, the
dollar amount of transfers in or out of Level 1 or Level 2, and (2) in the
reconciliation of fair value measurements using significant unobservable inputs
(Level 3), a reporting entity should present separately information about
purchases, sales, issuances, and settlements.  Increased disclosures
regarding the transfers in/out of Level 1 and 2 are required for interim and
annual periods beginning after December 15, 2009.  Increased
disclosures for the Level 3 fair value reconciliation are required for fiscal
years beginning after December 15, 2010.  The adoption of both parts
of this guidance did not have a material impact on the Company’s consolidated
financial position or statement of operations.





In July
2010, the FASB issued guidance for improving disclosures about an entity’s
allowance for loan losses and the credit quality of its loans.  The
guidance requires additional disclosure to facilitate financial statement users’
evaluation of the following: (1) the nature of credit risk inherent in the
entity’s loan portfolio, (2) how that risk is analyzed and assessed in arriving
at the allowance for loan losses, and (3) the changes and reasons for those
changes in the allowance for loan losses.  For public companies,
increased disclosures as of the end of a reporting period are effective for
periods ending on or after December 15, 2010.  Increased disclosures
about activity that occurs during a reporting period are effective for interim
and annual reporting periods beginning on or after December 31,
2010.  The Company is currently evaluating the requirements of this
guidance, but does not expect it to have a material impact on the Company’s
consolidated financial position or statement of operations.





NOTE
F -– RETIREMENT PLAN





The
Company entered into separate agreements with certain officers and directors
that provide retirement and death benefits.  The Company is recording
an expense equal to the projected present value of the payment due at the full
eligibility date.  The liability for the plan at June 30, 2010 and
December 31, 2009 was $1,851,000 and $1,823,000, respectively.  The
expense for the plan was $46,000 and $55,000 for the three-month periods ended
June 30, 2010 and June 30, 2009, respectively.   The expense for
the plan was $92,000 and $109,000 for the six-month periods ended June 30, 2010
and June 30, 2009, respectively.





NOTE
G – DISCLOSURES ABOUT FAIR VALUE OF ASSETS AND LIABILITIES





The
Company adopted accounting guidance that defines fair value, establishes a
framework for measuring fair value and expands disclosures about fair value
measurements.  This guidance has been applied prospectively as of the
beginning of the year/period.




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




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




(10)




Level
      2
                  Observable
      inputs other than Level 1 prices, such as quoted prices for similar assets
      or liabilities; quoted prices in active markets that are not active; or
      other inputs that are observable or can be corroborated by observable
      market data for substantially the full term of the assets or
      liabilitiesLevel
      3
                  Unobservable
      inputs that are supported by little or no market activity and that are
      significant to the fair value of the assets or
  liabilities




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




Available-for-sale
Securities




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




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




The
Company currently holds no securities valued in Level 3.




The
following table presents the fair value measurements of assets and liabilities
recognized in the accompanying balance sheet measured at fair value on a
recurring basis and the level within the ASC 820 fair value hierarchy in which
the fair value measurements fall at June 30, 2010 and December 31, 2009 (dollars
in thousands):




Fair Value Measurements UsingAvailable-for-sale securities:
                      
                      Fair Value
                      
                      
                      Quoted Prices in
                        Active Markets for
                        Identical Assets
                        (Level 1)
                      
                      
                      Significant Other
                        Observable Inputs
                        (Level 2)
                      
                      
                      Significant
                        Unobservable
                        Inputs
                        (Level 3)At
      June 30, 2010:Ginnie
      Mae and GSE mortgage-backed pass-through securities
                      
                      $
                      30,152
                      
                      
                      $
                      —
                      
                      
                      $
                      30,152
                      
                      
                      $
                      —Ginnie
      Mae collateralized mortgage obligations
                      
                      
                      5,753
                      
                      
                      
                      —
                      
                      
                      
                      5,753
                      
                      
                      
                      —Municipal
      securities
                      
                      
                      2,196
                      
                      
                      
                      —
                      
                      
                      
                      2,196
                      
                      
                      
                      —Mutual
      funds
                      
                      
                      1,666
                      
                      
                      
                      1,666
                      
                      
                      
                      —
                      
                      
                      
                      —$
                      39,767
                      
                      
                      $
                      1,666
                      
                      
                      $
                      38,101
                      
                      
                      $
                      —At
      December 31, 2009:Ginnie
      Mae and GSE mortgage-backed pass-through securities
                      
                      $
                      24,992
                      
                      
                      $
                      —
                      
                      
                      $
                      24,992
                      
                      
                      $
                      —Ginnie
      Mae collateralized mortgage obligations
                      
                      
                      5,820
                      
                      
                      
                      —
                      
                      
                      
                      5,820Municipal
      securities
                      
                      
                      3,431
                      
                      
                      
                      —
                      
                      
                      
                      3,431
                      
                      
                      
                      —Mutual
      funds
                      
                      
                      1,598
                      
                      
                      
                      1,598
                      
                      
                      
                      —
                      
                      
                      
                      —$
                      35,841
                      
                      
                      $
                      1,598
                      
                      
                      $
                      34,243
                      
                      
                      $
                      —





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


(11)


Impaired
Loans (Collateral Dependent)




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




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




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




Other
Real Estate Owned




The
fair value of the Company’s other real estate owned is determined using Level 3
inputs, which include current and prior appraisals and estimated costs to
sell.




The
following table presents the fair value measurements of assets and liabilities
recognized in the accompanying balance sheet measured at fair value on a
nonrecurring basis and the level within the ASC 820 fair value hierarchy in
which the fair value measurements fall at June 30, 2010 and December 31,
2009.  The totals represent only those impaired loans and other real
estate owned as of that date that experienced a change in fair value since the
beginning of the year (dollars in thousands):




Fair Value Measurements UsingFair Value
                  
                  
                  Quoted Prices in
                    Active Markets for
                    Identical Assets
                    (Level 1)
                  
                  
                  Significant Other
                    Observable Inputs
                    (Level 2)
                  
                  
                  Significant
                    Unobservable
                    Inputs
                    (Level 3)At
      June 30, 2010:Impaired
      loans
                  
                  $
                  13,007
                  
                  
                  $
                  —
                  
                  
                  $
                  —
                  
                  
                  $
                  13,007Other
      real estate owned
                  
                  
                  2,762
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  2,762At
      December  31, 2009:Impaired
      loans
                  
                  $
                  11,401
                  
                  
                  $
                  —
                  
                  
                  $
                  —
                  
                  
                  $
                  11,401Other
      real estate owned
                  
                  
                  3,286
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  3,286





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 may not be realized upon 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
(dollars in thousands):





June 30, 2010
                    
                    
                    December 31, 2009Carrying
                      Value
                    
                    
                    Fair
                      Value
                    
                    
                    Carrying
                      Value
                    
                    
                    Fair
                      ValueAssetsCash
      and cash equivalents
                    
                    $
                    20,775
                    
                    
                    $
                    20,775
                    
                    
                    $
                    19,588
                    
                    
                    $
                    19,588Investment
      securities available for sale
                    
                    
                    39,767
                    
                    
                    
                    39,767
                    
                    
                    
                    35,841
                    
                    
                    
                    35,841Loans
      held for sale
                    
                    
                    251
                    
                    
                    
                    251
                    
                    
                    
                    537
                    
                    
                    
                    537Loans
                    
                    
                    302,480
                    
                    
                    
                    309,205
                    
                    
                    
                    321,544
                    
                    
                    
                    323,890Stock
      in FHLB
                    
                    
                    5,629
                    
                    
                    
                    5,629
                    
                    
                    
                    5,629
                    
                    
                    
                    5,629Interest
      receivable
                    
                    
                    1,315
                    
                    
                    
                    1,315
                    
                    
                    
                    1,419
                    
                    
                    
                    1,419LiabilitiesDeposits
                    
                    
                    331,785
                    
                    
                    
                    328,405
                    
                    
                    
                    338,381
                    
                    
                    
                    340,940Borrowings
                    
                    
                    58,810
                    
                    
                    
                    56,913
                    
                    
                    
                    64,185
                    
                    
                    
                    60,034Drafts
      payable
                    
                    
                    1,864
                    
                    
                    
                    1,864
                    
                    
                    
                    920
                    
                    
                    
                    920Interest
      payable
                    
                    
                    137
                    
                    
                    
                    137
                    
                    
                    
                    414
                    
                    
                    
                    414


(12)


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





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





Loans Held for
Sale:The fair value
approximates carrying value.





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 value of
interest-bearing demand and savings accounts are estimated by adding a servicing
cost factor to the applicable interest rate, and the use of a discounted cash
flow calculation based on an average remaining life of five years and a discount
factor equal to the interest rate being offered on a FHLB five year borrowing at
that time.  The 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.





ITEM
2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS





Management’s Discussion and Analysis of
Financial Condition and Results of Operations (the “MD&A”) is designed to
provide a narrative on our financial condition, results of operations,
liquidity, critical accounting policies, off-balance sheet arrangements and the
future impact of accounting standards.  It is useful to read our
MD&A in conjunction with the consolidated financial statements contained in
Part I in this Quarterly Report on Form 10-Q (this "Form 10-Q"), our Annual
Report on Form 10-K for the fiscal year ended December 31, 2009, and our other
reports on Forms 10-Q and 8-K and other publicly available
information.





FORWARD-LOOKING
STATEMENTS





This Form 10-Q may contain certain
“forward-looking statements” within the meaning of the federal securities laws.
These statements are not historical facts, rather statements based on Ameriana
Bancorp’s (the “Company”) current expectations regarding its business
strategies, intended results and future performance.  Forward-looking
statements are generally preceded by terms such as “expects,” “believes,”
“anticipates,” “intends” and similar expressions.  Such statements are
subject to certain risks and uncertainties including changes in economic
conditions in the Company’s market area, changes in policies by regulatory
agencies, the outcome of litigation, fluctuations in interest rates, demand for
loans and deposits in the Company’s market area, changes in the quality or
composition of our loan portfolio, changes in accounting principles, laws and
regulations, and competition that could cause actual results to differ
materially from historical earnings and those presently anticipated or
projected.  Additional factors that may affect our results are
discussed in the Form 10-K under Part I, Item 1A- “Risk Factors,” in this Form
10-Q under Part II, Item 1A -“Risk Factors,” and in other reports filed with the
Securities and Exchange Commission.  The Company cautions readers not
to place undue reliance on any such forward-looking statements, which speak only
as of the date made.  The Company advises readers that the factors
listed above could affect the Company’s financial performance and could cause
the Company’s actual results for future periods to differ materially from any
opinions or statements expressed with respect to future periods in any current
statements.





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





Who We
Are





Ameriana Bancorp is an Indiana
chartered bank holding company subject to regulation and supervision by the
Board of Governors of the Federal Reserve System (the “Federal Reserve Board”)
under the Bank Holding Company Act of 1956, as amended.  The Company
became the holding company for Ameriana Bank, an Indiana chartered commercial
bank headquartered in New Castle, Indiana (the “Bank”), in 1990.  The
Company also holds a minority interest in a limited partnership organized to
acquire and manage real estate investments, which qualify for federal tax
credits.


(13)


The Bank
began operations in 1890.  Since 1935, the Bank has been a member of
the Federal Home Loan Bank (the “FHLB”) System.  Its deposits are
insured to applicable limits by the Deposit Insurance Fund, administered by the
Federal Deposit Insurance Corporation (the “FDIC”).  On June 29, 2002,
the Bank converted to an Indiana savings bank and adopted the name “Ameriana
Bank and Trust, SB.”  As a result of the conversion in 2002, the Bank
became subject to regulation by the Indiana Department of Financial Institutions
and the FDIC.  On July 31, 2006, the Bank closed its Trust Department
and adopted the name Ameriana Bank, SB, on September 12, 2006.  On
June 10, 2009, the Bank converted to an Indiana chartered commercial bank and
adopted the name Ameriana Bank.  The Bank conducts business through
its main office at 2118 Bundy Avenue, New Castle, Indiana and through twelve
branch offices located in New Castle, Middletown, Knightstown, Morristown,
Greenfield, Anderson, Avon, McCordsville, Carmel, Fishers, Westfield and New
Palestine, Indiana and a loan production office in Carmel, Indiana.




The Bank
has two wholly-owned subsidiaries, Ameriana Insurance Agency (“AIA”) and
Ameriana Financial Services, Inc. (“AFS”).  AIA provides insurance
sales from offices in New Castle, Greenfield and Avon, Indiana.  On
July 1, 2009, AIA purchased the book of business of Chapin-Hayworth Insurance
Agency, Inc., a multi-line property and casualty insurance agency located in New
Castle, Indiana.  AFS operates a brokerage facility in conjunction
with LPL Financial that provides non-bank investment product alternatives to its
customers and the general public.  A third wholly-owned subsidiary,
Ameriana Investment Management, Inc. (“AIMI”), had been responsible for managing
investment securities for the Bank.  AIMI was liquidated by the Bank
effective December 31, 2009, and the investment securities were transferred to
the Bank.




What We
Do





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





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





Executive Overview of the
Second Quarter of 2010





The
Company recorded net income of $229,000, or $0.08 per share for the three-month
period ended June 30, 2010.  The second quarter earnings benefited
from an increase in net interest income that reflected a continued improvement
in net interest margin and from a gain on a bulk sale of seasoned performing
residential mortgage loans, but earnings were negatively impacted by continuing
elevated credit costs resulting from a weak economic climate.





·
            Consistent
      with its capital contingency plan, the Company paid only a de minimis
      quarterly dividend of $0.01 per
share.





·
            All
      three of the Bank’s capital ratios at June 30, 2010 were considerably
      above the levels required under regulatory guidelines to be considered
      “well capitalized,” and exceeded the higher standards as established in
      the Board resolution addressed
below.


(14)


·
            Net
      interest income for the second quarter of 2010 was $322,000, or 10.6%,
      higher than the same quarter in 2009.  This improvement was
      achieved despite a lower volume of average interest-earning assets that
      resulted from balance sheet restructuring in the last half of 2009 that
      was designed to increase the Bank’s regulatory capital
    ratios.





·
            Net
      interest margin of 3.61% on a fully tax-equivalent basis for the second
      quarter of 2010 was 75 basis points higher than the same period of 2009,
      and 10 basis points more than the first quarter of 2010.  The
      improvement resulted primarily from a significant reduction in the Bank’s
      average cost of deposits.





·
            Due
      to a continuing elevated level of charge-offs and non-performing loans,
      the Bank recorded a $658,000 provision for loan losses in the second
      quarter of 2010, slightly higher than the $615,000 provision in the year
      earlier quarter.





·
            Other
      income of $1.7 million for the second quarter of 2010 was $699,000, or
      68.5%, higher than the total for the same quarter of 2009.  The
      increase was due primarily to a $560,000 gain on a bulk sale of seasoned
      performing residential mortgage loans and a $234,000 reduction in OREO
      losses, reduced by a $192,000 gain in the same period a year earlier from
      the liquidation of a minority interest in an unconsolidated
      investment.





·
            Other
      expense for the second quarter of 2010 of $4.2 million was $123,000, or
      2.8% lower than the same quarter in 2009, due primarily to a $292,000
      expense reversal related to the elimination of a directors’
      post-retirement benefit plan.





·
            The
      Company had income before income taxes of $213,000 for the second quarter
      of 2010, but recorded an income tax benefit of $16,000 that resulted
      primarily from the significant amount of tax-exempt income from bank-owned
      life insurance.





For the
second quarter of 2010, total assets decreased by $9.7 million, or 2.2%, to
$430.7 million from $440.4 million at March 31, 2010:





·
            An
      $8.9 million increase in the investment portfolio during the second
      quarter of 2010 to $39.8 million resulted primarily from total purchases
      of $10.4 million of Ginnie Mae mortgage-backed securities, reduced by
      $807,000 in sales of municipal securities, and principal payments on
      mortgage-backed securities.  The Bank continues to sell
      municipal securities as part of its overall income tax strategy, and that
      segment of the investment portfolio has been reduced to $2.2
      million.





·
            Net
      loans receivable of $302.5 million at June 30, 2010 represented a decrease
      of $17.0 million, or 5.3%, for the second quarter, as commercial loan
      demand remained weak, the Bank executed the bulk sale of $10.9 million of
      mortgage loans and continued its mortgage banking strategy of selling new
      production fixed-rate residential products in the secondary
      market.





·
            Total
      non-performing loans of $5.9 million, or 1.9% of total net loans, at June
      30, 2010, represented a decrease of $3.5 million from March 31, 2010,
      primarily the result of  the migration of a $3.5 million credit
      to OREO in June 2010.





·
            The
      allowance for loan losses of $4.0 million at June 30, 2010, was equal to
      1.32% of total loans and 68.7% of non-performing loans, compared to ratios
      of 1.23% and 42.2%, respectively, at March 31,
  2010.





·
            As
      of June 30, 2010, the Company did not own Fannie Mae or Freddie Mac
      preferred stock or private-label mortgage-backed
      securities.  The Company has no direct exposure to sub-prime
      loans in its loan portfolio.





·
            During
      the second quarter of 2010, total deposits decreased by $4.9 million, or
      1.5%, to $331.8 million, as the Bank focused on core deposit
      relationships, allowing more rate-sensitive accounts to run off, including
      a net reduction of $7.1 million in certificate accounts.  No
      brokered certificates of deposit were held at June 30,
    2010.





·
            Also,
      during the second quarter of 2010, a $5.0 million note payable to the FHLB
      was repaid, reducing total borrowings to $58.8
  million.


(15)


Regulatory
Action





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





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


·
            Adopt
      a written plan to lower classified
assets;


·
            Formulate
      and implement a written profit
plan;


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


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


·
            Furnish
      quarterly progress reports regarding the Bank’s compliance with all
      provisions of the resolution.





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





Strategic
Issues





As part of the Bank’s efforts to expand
its commercial lending capabilities in the second quarter of 2007, the Bank
opened a commercial lending center in the fast growing suburban area of Carmel,
Indiana. This office, our current emphasis on commercial lending and our strong
focus on retail banking activities, are expected to allow us to produce earnings
growth for the Company.





A major remodeling of our Greenfield
Banking Center, our second largest office, was completed in the third quarter of
2008. The renovations provide our customers the opportunity to interact with our
banking associates in a new and dynamic environment that includes interactive
terminals, an internet café, and multi-media in-store marketing.





The
Company opened three new full-service banking centers in Hamilton County, which
lies just north of Marion County and Indianapolis, in Fishers and Carmel in
November 2008 and December 2008, respectively, and in Westfield in late May
2009.  These new banking centers enhance Ameriana’s presence in one of
the fastest growing areas of Indiana, considerably increase the footprint in the
Indianapolis area, and boost the Company’s overall visibility in this
market.





Achievement
of the Company’s financial objectives will require obtaining new loans and
deposits in our traditional markets, generating significant loan and deposit
growth from our new offices in Hamilton County and continuing the expansion of
our commercial lending strategy in the greater Indianapolis metropolitan
area.




We
believe the long-term success of the Company is dependent on its ability to
provide its customers with financial advice and solutions that assist them in
achieving their goals.  We will accomplish this mission
by:





·
            being
      our customers’ first choice for financial advice and
      solutions;




·
            informing
      and educating customers on the basics of money management;
    and




·
            understanding
      and meeting customers’ financial needs throughout their life
      cycle.




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





CRITICAL
ACCOUNTING POLICIES





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


(16)


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





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





Regardless
of the extent of the Company’s analysis of customer performance, portfolio
trends or risk management processes, certain inherent but undetected losses are
probable within the loan portfolio. This is due to several factors, including
inherent delays in obtaining information regarding a customer’s financial
condition or changes in their unique business conditions, the nature of
individual loan evaluations, collateral assessments and the interpretation of
economic trends. Volatility of economic or customer-specific conditions
affecting the identification and estimation of losses for larger,
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 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 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.





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





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


(17)


Under
U.S. GAAP, a valuation allowance is required to be recognized if it is “more
likely than not” that a deferred tax asset will not be realized.  The
determination of the realizability of the deferred tax assets is highly
subjective and dependent upon judgment concerning our evaluation of both
positive and negative evidence, our forecasts of future income, applicable tax
planning strategies, and assessments of current and future economic and business
conditions.  Positive evidence includes the existence of taxes paid in
available carry-back years as well as the probability that taxable income will
be generated in future periods, while negative evidence includes any cumulative
losses in the current year and prior two years and general business and economic
trends.  At June 30, 2010 and December 31, 2009, we determined that
valuation allowances were not necessary, largely based on available tax planning
strategies and our projections of future taxable income.  Any
reduction in estimated future taxable income may require us to record a
valuation allowance against our deferred tax assets.  Any required
valuation allowance would result in additional income tax expense in the period
and could have a significant impact on our future earnings.





Positions
taken in our tax returns may be subject to challenge by the taxing authorities
upon examination.  The benefit of an uncertain tax position is
initially recognized in the financial statements only when it is more likely
than not the position will be sustained upon examination by the tax
authorities.  Such tax positions are both initially and subsequently
measured as the largest amount of tax benefit that is greater than 50% likely of
being realized upon settlement with the tax authority, assuming full knowledge
of the position and all relevant facts.  Differences between our
position and the position of tax authorities could result in a reduction of a
tax benefit or an increase to a tax liability, which could adversely affect our
future income tax expense.





We
believe our tax policies and practices are critical accounting policies because
the determination of our tax provision and current and deferred tax assets and
liabilities have a material impact our net income and the carrying value of our
assets.  We believe our tax liabilities and assets are adequate and
are properly recorded in the consolidated financial statements at June 30,
2010.





FINANCIAL
CONDITION





Total
assets of $430.7 million at June 30, 2010 represented a reduction of$10.9
million, or 2.5%, from the December 31, 2009 total of $441.6 million, and were
also considerably lower than total assets of $489.4 million at June 30,
2009.  During the last half of 2009, the Company initiated a major
balance sheet restructuring strategy to strengthen its capital position to be in
a better position to sustain the possible consequences of a continuing weak
economy.  The strategy focused primarily on eliminating non-core
deposits and reducing the level of borrowed money using excess cash accumulated
earlier in the year, and also with the proceeds from sales of investment
securities that resulted in significant gains for the Bank in the last six
months of 2009.





Cash and
cash equivalents of $20.8 million at June 30, 2010 were up slightly from the
December 31, 2009 total of $19.6 million, and included $15.6 million in
interest-bearing deposits at the Federal Reserve Bank of
Chicago.  Cash and cash equivalents represent an immediate source of
liquidity to fund loans or meet deposit outflows.





Investment
securities available-for-sale increased 10.9% to $39.8 million at June 30, 2010
from $35.9 million at December 31, 2009.  This $3.9 million increase
resulted primarily from $10.4 million in purchases of Ginnie Mae mortgage-backed
securities, partially offset by sales of Fannie Mae mortgage-backed securities
totaling $3.2 million, sales of three municipal securities totaling $1.2
million, and $2.4 million of principal repayments on mortgage-backed
securities.  The municipal security sales represent a continuation of
a Bank income tax strategy that has resulted in the municipal securities
portfolio being reduced to $2.2 million at June 30, 2010.  All
mortgage-backed securities in the portfolio at June 30, 2010, which totaled
$35.9 million, are insured by either the U. S. Government agency Ginnie Mae, or
by a U. S. Government sponsored enterprise (“GSE”), Fannie Mae or Freddie
Mac.





Net loans
receivable decreased by $19.0 million, or 5.9%, to $302.5 million from $321.5
million at December 31, 2009, primarily due to a sale of $10.9 million of
seasoned performing residential mortgage loans.  Due mostly to the
bulk sale and total sales of $7.3 million of new originations from mortgage
banking operations, the owner-occupied residential real estate first mortgage
loan portfolio declined $16.1 million during the six months ended June 30, 2010.
The residential mortgage loan strategy is reviewed regularly to ensure that it
remains consistent with the Bank’s overall balance sheet management
objectives.  For the six months ended June 30, 2010, the Bank’s
commercial and investment residential real estate, and commercial business loans
decreased $2.5 million, which reflected the impact of relatively poor economic
conditions.  Outstanding consumer loan balances, including home equity
lines of credit, dropped $426,000 during the first six months of
2010.





Premises
and equipment of $15.1 million at June 30, 2010 represented a $455,000 decrease
from the total of $15.5 million at December 31, 2009.  The net
decrease was a result of $510,000 of depreciation for the six months ended June
30, 2010 exceeding capital expenditures of $55,000 for the period.





Total
goodwill of $649,000 at June 30, 2010 was unchanged from December 31,
2009.  $457,000 of the goodwill relates to deposits associated with a
banking center acquired on February 27, 1998, and $192,000 is the result of two
separate acquisitions of insurance businesses.  The Bank’s impairment
tests reflected that there was no impairment as of June 30,
2010.


(18)


Other
real estate owned of $9.8 million at June 30, 2010, represented an increase of
$4.3 million from December 31, 2009, with fifteen properties added and fifteen
sales during the six month period.  The increase was due primarily to
the June migration of a $3.5 million commercial real estate credit from the
non-performing loan classification.





Other
assets were $11.3 million at June 30, 2010, compared to $12.2 million at
December 31, 2009.  The decrease of $870,000 included a $373,000
reduction in prepaid FDIC insurance premiums and a $194,000 decline in net
deferred tax assets.





Total
deposits of $331.8 million at June 30, 2010 represented a decrease of $6.6
million, or 2.0%, from $338.4 million at December 31, 2009, as the Bank focused
on core deposit relationships, allowing the more rate-sensitive accounts to run
off.  During the first six months of 2010, the Bank grew the total for
checking, money market and savings balances by $3.7 million, while certificate
of deposit balances decreased $10.3 million. The Bank has concentrated on
strategies designed to grow total balances in multi-product deposit
relationships.  Our markets remain very competitive for deposit
products and the Bank continues to utilize pricing strategies designed to
produce growth with an acceptable marginal cost for both existing and new
deposits.





Borrowings
declined by $5.4 million during the first six months of 2010 to $58.8 million,
as the Bank repaid  three Federal Home Loan Bank borrowings totaling
$8.4 million that had matured, and added a $3.0 million five year Federal Home
Loan Bank advance with a fixed interest rate of 2.70%.  Wholesale
funding options and strategies are continuously analyzed to ensure that we
retain sufficient sources of credit to fund all of the Company’s needs, and to
control funding costs by using this alternative to organic deposit account
funding when appropriate.





Drafts
payable of $1.9 million at June 30, 2010 were up $944,000 from $920,000 at
December 31, 2009.  This difference will vary and is a function of the
dollar amount of checks issued near period end and the time required for those
checks to clear.





Total
shareholders’ equity of $33.4 million at June 30, 2010 was $806,000 higher than
the total at December 31, 2009. The increase resulted primarily from $309,000 in
net income and an unrealized gain net of income taxes of $554,000 from the
Bank’s available-for-sale investment securities portfolio, reduced by $60,000 in
dividends declared during the six-month period. The Company and the Bank’s three
regulatory capital ratios were all considerably above the levels required under
regulatory guidelines to be considered “well capitalized,” and exceeded the
higher standards as established in the September 28, 2009 Board
resolution.





RESULTS
OF OPERATIONS





Second Quarter of 2010
compared to the Second Quarter of 2009





The
Company recorded net income of $229,000, or $0.08 per diluted share, for the
second quarter of 2010, compared to a net loss of $466,000, or $0.16 per diluted
share, for the second quarter of 2009.





Credit
costs related to the weak economic environment had a significant negative impact
on earnings for both the second quarter of 2010 and the second quarter of
2009.  Compared to the three-month period ended June 30, 2009, the
second quarter of 2010 benefited primarily from an improvement in net interest
income, a gain from a bulk sale of seasoned performing residential mortgage
loans, and a major expense reversal related to the elimination of a directors’
retirement benefit plan, while the same period in 2009 benefited from a gain on
liquidation of a minority interest in an unconsolidated investment.





Net Interest
Income





Net
interest income on a fully tax-equivalent basis increased $276,000, or 8.8%, to
$3.4 million for the second quarter of 2010 compared to $3.1 million for the
same period of 2009.  The growth resulted primarily from a significant
increase in interest rate spread, as average interest-earning assets of $377.2
million for the quarter ended June 30, 2010 were down $60.4 million, or 13.8%
from the total for the same quarter a year earlier.  The reduction in
average interest-earning assets resulted primarily from balance sheet
restructuring strategies that were implemented during the second half of
2009.  As a result of the Company’s interest rate spread improvement,
that was due primarily to a decrease in the Bank’s cost of funds, net interest
margin on a fully tax-equivalent basis increased 75 basis points to 3.61% for
the second quarter of 2010 from 2.86% for the second quarter of
2009.


(19)


Tax-exempt
interest was $55,000 for the second quarter of 2010 compared to $141,000 for the
same period of 2009, as a result of levels in each period of bank-qualified
municipal securities and municipal loans.  Tax-equivalent adjustments
were $25,000 and $71,000 for the second quarter of 2010 and 2009,
respectively.  The decrease in tax-exempt interest for the second
quarter compared to the same period of 2009 was due primarily to the Bank’s
sales of municipal securities.





“Net
interest income on a fully tax-equivalent basis” is calculated by increasing net
interest income by an amount that represents the additional taxable interest
income that would be needed to produce the same amount of after-tax income as
the tax-exempt interest income included in net interest income for the
period.





“Net
interest margin on fully tax-equivalent basis” is calculated by dividing
annualized “net interest income on a fully tax-equivalent basis” by average
interest-earning assets for the period.





Provision for Loan
Losses





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





(Dollars
      in thousands)Three
      Months Ended June 30,2010
                  
                  
                  2009Balance
      at beginning of quarter
                  
                  $
                  3,963
                  
                  
                  $
                  3,225Provision
      for loan losses
                  
                  
                  658
                  
                  
                  
                  615Charge-offs
                  
                  
                  (607
                  )
                  
                  
                  (201
                  )Recoveries
                  
                  
                  19
                  
                  
                  
                  4Net
      charge-offs
                  
                  
                  (588
                  )
                  
                  
                  (197
                  )Balance
      at end of period
                  
                  $
                  4,033
                  
                  
                  $
                  3,643Allowance
      to total loans
                  
                  
                  1.32
                  %
                  
                  
                  1.07
                  %Allowance
      to non-performing loans
                  
                  
                  68.68
                  %
                  
                  
                  82.66
                  %





We recorded a provision for loan losses
of $658,000 in the second quarter of 2010, compared to $615,000 for the same
period in 2009.  The provision for loan losses for the second quarter
of 2010 reflected the continuing pressure of current economic conditions on
credit quality, including an increase in net charge-offs and non-performing
assets.





The
following table summarizes the Company’s non-performing loans:





(Dollars
      in thousands)June
      30,2010
                  
                  
                  2009Loans
      accounted for on a non-accrual basis
                  
                  $
                  5,753
                  
                  
                  $
                  4,344Accruing
      loans contractually past due 90 days or more
                  
                  
                  119
                  
                  
                  
                  63Total
      of non-accrual and 90 days past due loans
                  
                  $
                  5,872
                  
                  
                  $
                  4,407Percentage
      of total net loans
                  
                  
                  1.94
                  %
                  
                  
                  1.31
                  %Other
      non-performing assets (1)
                  
                  $
                  9,825
                  
                  
                  $
                  5,946


___________


(1)   Other
non-performing assets represent property acquired through foreclosure or
repossession.  This property is carried at the lower of its fair
market value or its carrying value.





Although
the allowance for loan losses of $4.0 million at June 30, 2010 was $390,000, or
10.7%, higher than a year earlier, the allowance for loan losses to
non-performing loans ratio of 68.68% at June 30, 2010 reflected a decrease from
the ratio of 82.66% at June 30, 2009 due to the higher total of non-performing
loans.  Non-performing loans of $5.9 million at June 30, 2010
represented a $1.5 million increase over the total of $4.4 million at June 30,
2009, but reflects a decrease of $3.5 million from total non-performing loans of
$9.4 million at March 31, 2010, due primarily to the June migration of a $3.5
million credit to OREO.  It is management’s opinion that the allowance
for loan losses at June 30, 2010 is adequate based on measurements of the credit
risk in the entire portfolio as of that date.


(20)


Other
real estate owned of $9.8 million at June 30, 2010, represented an increase of
$3.2 million from March 31, 2010, with six new properties and eight sales during
the three month period.





Other
Income





The
Company recorded other income of $1.7 million for the second quarter of 2010, an
increase of $699,000 over the total of $1.0 million for the same period a year
earlier that resulted primarily from:





·
            A
      $70,000 increase in fees and service charges from deposit account
      relationships compared to the same quarter a year earlier that reflected
      the Bank’s success in growing retail checking
  accounts;





·
            A
      $76,000 increase in commissions earned on insurance and brokerage sales
      that resulted primarily from the July 1, 2009 purchase of an insurance
      business;





·
            A
      $466,000 increase in gains on sales of loans and servicing rights over the
      same quarter a year earlier.  Due to the extremely weak housing
      market, gains related to new originations were down $94,000 from the same
      quarter a year earlier, but the second quarter of 2010 benefited from a
      $560,000 gain from a bulk sale of $10.9 million of seasoned performing
      residential mortgage loans;





·
            The
      Bank experienced a $234,000 reduction in net losses from OREO to a net
      loss of $145,000 for the second quarter of 2010, compared to a net loss
      $379,000 in the same period a year earlier;
and





·
            Other
      income for the second quarter of 2009 included a $192,000 gain from the
      liquidation of a minority interest in Family Financial, an unconsolidated
      investment that focused on credit-related insurance
    products.





Other
Expense





Total
other expense of $4.2 million for the second quarter of 2010 was $123,000, or
2.8% lower than the second quarter of 2009, with the following major
differences:





·
            An
      increase of $133,000 in salaries and employee benefits that was due mostly
      to a $131,000 increase in employee health insurance costs resulting
      primarily from an increase in claims, and a $47,000 increase in funding
      costs for the frozen multi-employer defined benefit retirement
      plan;





·
            A
      decrease of $59,000 in legal and professional
  fees;





·
            A
      $44,000 decrease in the total for FDIC insurance premiums and
      assessments.  FDIC insurance premiums for the second quarter of
      2010 represented an increase of $181,000 that resulted from industry-wide
      increases and the exhaustion of the one-time credit, but the total expense
      of $239,000 for same period of 2009 was higher because of a one-time
      $225,000 industry-wide special
assessment;





·
            The
      $326,000 for other real estate owned expense exceeded the total for the
      same quarter a year earlier by $85,000, and for both periods the total
      related primarily to real estate taxes and additionally to operating
      expenses for an apartment complex that provided $110,000 of rental income
      during the second quarter of 2010, and $105,000 for the same period a year
      earlier;





·
            Marketing
      expense of $78,000 for the second quarter of 2010 was $79,000 lower than
      the same quarter a year earlier, and reflects an expense reduction
      initiative implemented by Bank management in the second half of 2009;
      and





·
            Other
      expense was $139,000 lower primarily as a result of a $292,000 expense
      reversal in the second quarter of 2010 related to the elimination of a
      directors’ post-retirement benefit plan, which was offset in part by
      $86,000 in loan expense resulting from the write-off of receivables from
      loan customers that represented advances for taxes and various other
      items.


(21)


Income Tax
Expense





The
Company had income before income taxes of $213,000, but recorded an income tax
benefit of $16,000 for the second quarter of 2010 due to a significant amount of
tax-exempt income, primarily from bank owned life insurance.  For the
same quarter of 2009, the Company had a loss before income taxes of $888,000 and
recorded a tax benefit of $422,000 that was increased by a similar amount of
tax-exempt BOLI income coupled with the interest from a larger investment in
municipal securities.  The municipal securities portfolio had been
reduced from an average balance of $11.4 million for the second quarter of 2009
to an average balance of $2.5 million for the second quarter of
2010.





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





The
Company also has a deferred federal tax asset that is composed of tax benefit
from a net operating loss carryforward and purchased tax credits.  The
federal loss carryforward expires in 2026, and the tax credits begin to expire
in 2023.  Management believes that the Company will be able to utilize
the benefits recorded for loss carryforwards and credits within the allotted
time periods.





In
addition to the liquidation of AIMI, the Bank has initiated several strategies
designed to expedite the use of both the deferred state tax asset and the
deferred federal tax asset.  Through sales of tax-exempt municipal
securities, that segment of the investment portfolio has been reduced by $32.3
million, or 93.6%, from $34.5 million at December 31, 2006 to $2.2 million at
June 30, 2010.  The proceeds from these sales have been reinvested in
taxable financial instruments.  The Bank is considering a
sale/leaseback transaction that could result in a taxable gain on its office
properties, and also allow the Bank to convert nonearning assets to earnings
assets that will produce taxable income.  Additionally, the Bank is
exploring options related to reducing its current investment in tax-exempt bank
owned life insurance policies that involve the reinvestment of the proceeds in
taxable financial instruments with a similar or greater risk-adjusted after-tax
yield.  Sales of banking centers not important to long-term growth
objectives that would result in taxable gains and reduced operating expenses
could be considered by the Bank.





Six Months Ended June 30,
2010 compared to the Six Months Ended June 30, 2009





The
Company recorded net income of $309,000, or $0.10 per diluted share, for the
first six months of 2010, an increase of $888,000 from a net loss of $579,000,
or $(0.19) per diluted share, for the first six months of 2009.





One of
the major factors in the earnings improvement was net interest income growth of
$564,000, or 9.3%, compared to the first half of 2009 that resulted primarily
from the Bank’s success with continuing efforts related to enhancing net
interest margin.  Additionally, the Company had an increase of $1.3
million in other income for the six months of 2010 compared to the same period
in 2009, due primarily to a $560,000 gain from the bulk sale of seasoned
performing residential mortgage loans, and a $520,000 reduction in net losses on
other real estate owned.





Net Interest
Income





Net
interest income on a fully tax-equivalent basis increased $451,000, or 7.2%, to
$6.7 million for the first six months of 2010 compared to $6.3 million for the
same period of 2009, primarily as a result of a 53 basis point reduction in the
Bank’s average cost of deposits from 1.80% at June 30, 2009 to 1.27% at June 30,
2010.  The Company’s net interest margin on a fully tax-equivalent
basis increased 64 basis points to 3.56% for the first six months of 2010 from
2.92% for the first six months of 2009.





Tax-exempt
interest was $120,000 for the first six months of 2010 compared to $331,000 for
the same period of 2009. Our tax-exempt interest results from holdings of
bank-qualified municipal securities and municipal loans.  The
tax-equivalent adjustments were $54,000 and $167,000 for the first six months of
2010 and 2009, respectively.  The decrease in tax-exempt interest for
the first six months of 2010 compared to the same period of 2009 was due
primarily to the significant amount of municipal securities
sales.


(22)


Provision for Loan
Losses





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





(Dollars
      in thousands)Six
      Months Ended June 30,2010
                  
                  
                  2009Balance
      at beginning of year
                  
                  $
                  4,005
                  
                  
                  $
                  2,991Provision
      for loan losses
                  
                  
                  1,018
                  
                  
                  
                  953Charge-offs
                  
                  
                  (1,147
                  )
                  
                  
                  (319
                  )Recoveries
                  
                  
                  157
                  
                  
                  
                  18Net
      charge-offs
                  
                  
                  (990
                  )
                  
                  
                  (301
                  )Balance
      at end of period
                  
                  $
                  4,033
                  
                  
                  $
                  3,643





We had a provision for loan losses of
$1.0 million for the first six months of 2010, compared to $953,000 for the same
period in 2009.  The increase in the provision reflected the
continuing pressure of current economic conditions on credit quality, which
resulted in a higher level of non-performing loans and
charge-offs.  The allowance to total loans ratio was 1.32% at June 30,
2010 compared to 1.07% at June  30, 2009 and 1.23% at December 31,
2009.





Other
Income





The $1.3
million increase in other income to $3.1 million for the six months of 2010,
compared to $1.8 million for the same period of 2009, resulted primarily from
the following:





·
            A
      $122,000 increase in fees and service charges from deposit account
      relationships compared to the same six month period a year earlier,
      including a $57,000 increase in debit card fees, that reflected the Bank’s
      success in growing retail checking
accounts;





·
            A
      $103,000 increase in commissions earned on insurance and brokerage sales
      that resulted primarily from the July 1, 2009 purchase of an insurance
      business;





·
            A
      $518,000 increase in gains on sales of loans and servicing rights over the
      first half of 2009, due primarily to the $560,000 gain from the $10.9
      million bulk sale of seasoned performing residential mortgage
      loans;





·
            A
      $520,000 decrease in net losses on OREO from a net loss of $700,000 for
      the six months ended June 30, 2009 to a net loss of $180,000 for the six
      months ended June 30, 2010;





·
            A
      $105,000 increase in OREO income related primarily to additional rental
      income received on a foreclosed  apartment complex;
      and





·
            An
      $83,000 increase in other, of which $59,000 related to loan servicing
      fees; reduced by





·
            A
      $192,000 gain from the liquidation of a minority interest in Family
      Financial, an unconsolidated investment that focused on credit-related
      insurance products that occurred in the first six months of
      2009.





Other
Expense





The
Company recorded a $308,000, or 3.8% increase in total other expense to $8.5
million for the first six months of 2010, compared to $8.2 million for the first
six months of 2009, due primarily to the following differences:





·
            An
      increase of $259,000 in salaries and employee benefits that was due mostly
      to a $228,000 increase in employee health insurance costs resulting
      primarily from an increase in claims, and a $94,000 increase in funding
      costs for the frozen multi-employer defined benefit retirement
      plan.  Salary costs were $65,000 lower, as the benefit from the
      elimination of positions through attrition exceeded additional salary
      costs associated with a new banking center and normal annual salary
      increases for employees.  In light of the impact of poor
      economic conditions on the earnings of the Company, management agreed to
      forego salary increases for
2010;


(23)


·
            The
      Bank experienced a $137,000 increase in FDIC insurance premiums and
      assessments that was related primarily to higher net premiums due to
      industry-wide increases and the exhaustion of the one-time credit;
      and





·
            Other
      real estate owned expense of $534,000 was related primarily to real estate
      taxes, and represented a $230,000 increase over the first six months of
      2009.





The
increases above were offset in part by:





·
            A
      $149,000 reduction in marketing expense that reflected an expense
      reduction initiative implemented by Bank management in the second half of
      2009; and





·
            A
      $127,000 reduction in other that resulted primarily from the $292,000
      expense reversal related to the elimination of a directors’
      post-retirement benefit plan, reduced by $86,000 in loan expense resulting
      from the write-off of receivables from loan customers that represented
      advances for taxes and various other
items.





Income Tax
Expense





The
Company had income before income taxes of $202,000 for the first six months of
2010, but recorded an income tax benefit of $107,000 as a result of tax-exempt
income.  The Company had a loss before income taxes of $1.3 million
for the same period of 2009, and recorded a $683,000 income tax benefit that was
also elevated by tax-exempt income.  For both six month periods, the
Bank had a significant amount of tax-exempt income from BOLI, in addition to
tax-exempt income from municipal loans and municipal securities.





OFF-BALANCE
SHEET ARRANGEMENTS





In the
normal course of operations, we engage in a variety of financial transactions
that, in accordance with GAAP, are not recorded in our financial
statements.  These transactions involve, to varying degrees, elements
of credit, interest rate and liquidity risk.  Such transactions are
used primarily to manage customers’ requests for funding and take the form of
loan commitments and lines of credit.





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




LIQUIDITY
AND CAPITAL RESOURCES





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




The
Company is a separate entity and apart from the Bank and must provide for its
own liquidity.  In addition to its operating expenses, the Company is
responsible for the payment of dividends declared for its shareholders and the
payment of interest on its subordinated debentures.  At times, the
Company has repurchased its stock.  Substantially all of the Company’s
operating cash is obtained from subsidiary dividends.  Payment of such
dividends to the Company by the Bank is limited under Indiana
law.  Additionally, as part of a resolution adopted by the Board of
Directors of the Bank on July 26, 2010, the Bank cannot declare or pay any
dividends without the prior written consent of the FDIC and the Indiana
Department of Financial Institutions.  See “Regulatory
Action.”  The Company believes that such restriction will not have an
impact on the Company’s ability to meet its ongoing cash
obligations.





At June
30, 2010, we had $5.4 million in loan commitments outstanding and $38.0 million
of additional commitments for line of credit
receivables.  Certificates of deposit due within one year of June 30,
2010 totaled $103.8 million, or 31.3% of total deposits.  If these
maturing certificates of deposit do not remain with us, other sources of funds
must be used, including other certificates of deposit, brokered CDs, and
borrowings.  Depending on market conditions, we may be required to pay
higher rates on such deposits or other borrowings than currently paid on the
certificates of deposit due on or before June 30, 2011.  However,
based on past experiences we believe that a significant portion of the
certificates of deposit will remain.  We have the ability to attract
and retain deposits by adjusting the interest rates offered.


(24)


Our
primary investing activity, the origination and purchase of loans, is offset by
the sale of loans and principal repayments.  In the first six months
of 2010, net loans receivable decreased by $19.1 million, or 5.9%.  In
the first six months of 2009, we experienced an increase of $13.3 million in net
loans receivable.





Financing
activities consist primarily of activity in retail deposit accounts and FHLB
advances. Deposit flows are affected by the overall level of interest rates, the
interest rates and products we offer, and our local competitors and other
factors.  Total deposits decreased by $6.6 million and total FHLB
advances were reduced by $5.4 million during the six months of 2010. There were
no brokered certificates at either June 30, 2010 or December 31,
2009.





The
Bank is subject to various regulatory capital requirements set by the FDIC
including a risk-based capital measure. The Company is also subject to similar
capital requirements set by the Federal Reserve Board.  The risk-based
capital guidelines include both a definition of capital and a framework for
calculating risk-weighted assets by assigning balance sheet assets and
off-balance sheet items to broad risk categories.  In addition, as
part of a resolution adopted by the Board of Directors of the Bank on July 26,
2010, the Bank adopted a capital plan to increase its Tier 1 Leverage Ratio to
8.50% by June 30, 2010 and maintain a Total Risk-Based Capital Ratio of
12.00%.  See “Regulatory Action.”





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 June 30, 2010 and
December 31, 2009, the Bank was categorized as “well capitalized” and met
all subject capital adequacy requirements.  There are no conditions or
events since June 30, 2010, that management believes have changed this
classification.





Actual,
required, and well capitalized amounts and ratios for the Bank are as
follows:





June 30, 2010Actual Capital
                  
                  
                  Required For
                    Adequate Capital
                  
                  
                  To Be
                    Well CapitalizedAmount
                  
                  
                  Ratio
                  
                  
                  Amount
                  
                  
                  Ratio
                  
                  
                  Amount
                  
                  
                  RatioTotal
      risk-based capital ratio
                    (risk
      based capital to risk-weighted assets)
                  
                  $
                  41,570
                  
                  
                  
                  13.38
                  %
                  
                  $
                  24,857
                  
                  
                  
                  8.00
                  %
                  
                  $
                  31,072
                  
                  
                  
                  10.00
                  %Tier
      1 risk-based capital ratio
                    (tier
      1 capital to risk-weighted assets)
                  
                  $
                  37,654
                  
                  
                  
                  12.12
                  %
                  
                  $
                  12,429
                  
                  
                  
                  4.00
                  %
                  
                  $
                  18,643
                  
                  
                  
                  6.00
                  %Tier
      1 leverage ratio
                    (tier
      1 capital  to adjusted average total assets)
                  
                  $
                  37,654
                  
                  
                  
                  8.70
                  %
                  
                  $
                  12,983
                  
                  
                  
                  3.00
                  %
                  
                  $
                  21,638
                  
                  
                  
                  5.00
                  %





December 31, 2009Actual Capital
                  
                  
                  Required For
                    Adequate Capital
                  
                  
                  To Be
                    Well CapitalizedAmount
                  
                  
                  Ratio
                  
                  
                  Amount
                  
                  
                  Ratio
                  
                  
                  Amount
                  
                  
                  RatioTotal
      risk-based capital ratio
                    (risk
      based capital to risk-weighted assets)
                  
                  $
                  40,811
                  
                  
                  
                  12.51
                  %
                  
                  $
                  26,107
                  
                  
                  
                  8.00
                  %
                  
                  $
                  32,634
                  
                  
                  
                  10.00
                  %Tier
      1 risk-based capital ratio
                    (tier
      1 capital to risk-weighted assets)
                  
                  $
                  36,720
                  
                  
                  
                  11.25
                  %
                  
                  $
                  13,053
                  
                  
                  
                  4.00
                  %
                  
                  $
                  19,580
                  
                  
                  
                  6.00
                  %Tier
      1 leverage ratio
                    (tier
      1 capital  to adjusted average total assets)
                  
                  $
                  36,720
                  
                  
                  
                  8.27
                  %
                  
                  $
                  13,314
                  
                  
                  
                  3.00
                  %
                  
                  $
                  22,189
                  
                  
                  
                  5.00
                  %


(25)


Actual,
required, and well capitalized amounts and ratios for the Company are as
follows:





June 30, 2010Actual Capital
                  
                  
                  Required For
                    Adequate Capital
                  
                  
                  To Be
                    Well CapitalizedAmount
                  
                  
                  Ratio
                  
                  
                  Amount
                  
                  
                  Ratio
                  
                  
                  Amount
                  
                  
                  RatioTotal
      risk-based capital ratio
                    (risk
      based capital to risk-weighted assets)
                  
                  $
                  41,794
                  
                  
                  
                  13.34
                  %
                  
                  $
                  25,066
                  
                  
                  
                  8.00
                  %
                  
                  $
                  31,333
                  
                  
                  
                  10.00
                  %Tier
      1 risk-based capital ratio
                    (tier
      1 capital to risk-weighted assets)
                  
                  $
                  37,878
                  
                  
                  
                  12.09
                  %
                  
                  $
                  12,533
                  
                  
                  
                  4.00
                  %
                  
                  $
                  18,800
                  
                  
                  
                  6.00
                  %Tier
      1 leverage ratio
                    (tier
      1 capital  to adjusted average total assets)
                  
                  $
                  37,878
                  
                  
                  
                  8.74
                  %
                  
                  $
                  12,995
                  
                  
                  
                  3.00
                  %
                  
                  $
                  21,659
                  
                  
                  
                  5.00
                  %





December 31, 2009Actual Capital
                  
                  
                  Required For
                    Adequate Capital
                  
                  
                  To Be
                    Well CapitalizedAmount
                  
                  
                  Ratio
                  
                  
                  Amount
                  
                  
                  Ratio
                  
                  
                  Amount
                  
                  
                  RatioTotal
      risk-based capital ratio
                    (risk
      based capital to risk-weighted assets)
                  
                  $
                  41,047
                  
                  
                  
                  12.49
                  %
                  
                  $
                  26,300
                  
                  
                  
                  8.00
                  %
                  
                  $
                  32,874
                  
                  
                  
                  10.00
                  %Tier
      1 risk-based capital ratio
                    (tier
      1 capital to risk-weighted assets)
                  
                  $
                  36,956
                  
                  
                  
                  11.24
                  %
                  
                  $
                  13,150
                  
                  
                  
                  4.00
                  %
                  
                  $
                  19,725
                  
                  
                  
                  6.00
                  %Tier
      1 leverage ratio
                    (tier
      1 capital  to adjusted average total assets)
                  
                  $
                  36,956
                  
                  
                  
                  8.32
                  %
                  
                  $
                  13,333
                  
                  
                  
                  3.00
                  %
                  
                  $
                  22,222
                  
                  
                  
                  5.00
                  %





AVAILABLE
INFORMATION





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





ITEM
3 – QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK





Not
applicable as issuer is a smaller reporting company.





ITEM
4T – CONTROLS AND PROCEDURES





As
of the end of the period covered by this report, we carried out an evaluation,
under the supervision and with the participation of our principal executive
officer and principal financial officer, of the effectiveness of our disclosure
controls and procedures. Based on this evaluation, our principal executive
officer and principal financial officer concluded that our disclosure controls
and procedures are effective in ensuring that information required to be
disclosed by us in reports that we file or submit under the Securities Exchange
Act of 1934, as amended, (1) is recorded, processed, summarized and reported,
within the time periods specified in the SEC’s rules and forms and (2) is
accumulated and communicated to our management, including our principal
executive and principal financial officers as appropriate to allow timely
discussions regarding required disclosures.  It should be noted that
the design of our 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 our principal executive and financial
officers have concluded that our disclosure controls and procedures are, in
fact, effective at a reasonable assurance level.





There
were no changes in the Company’s internal control over financial reporting
during the three months ended June 30, 2010 that have materially affected, or
are reasonably likely to materially affect, the Company’s internal control over
financial reporting.


(26)


PART
II - OTHER INFORMATION





ITEM 1 – LEGAL PROCEEDINGS





The Abstract & Title Guaranty
Company, Inc. (“AGT”) sued the Bank in 2003 to recover for checks issued by AGT
and delivered to one of its title insurance customers for delivery to various
payees. Generally, the checks were issued in conjunction with real estate
transactions and were issued to pay mortgage liens in full. Forty-one such
checks were forged and deposited into an account at the Bank. The
litigation was initiated in Hendricks County Superior Court in May of 2003 and
the plaintiff is seeking damages of approximately $740,000 plus interest and
attorney fees.  The Bank has adequate insurance to protect it from any
judgment rendered based upon the complaint. However, the insurance does not
provide indemnification for the costs of defending the litigation. 
Discovery is now being conducted by both parties.  The parties have
agreed to participate in mediation on August 16, 2010.  Provided that
no settlement can be reached in mediation, the parties anticipate that the
matter will go to trial in late 2010 to early 2011.




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





ITEM
1A – RISK FACTORS





Recently enacted regulatory reform
may have a material impact on our operations.





On July 21, 2010, the President signed
into law The Dodd-Frank Wall Street Reform and Consumer Protection Act (the
“Dodd-Frank Act”).  The Dodd-Frank Act restructures the regulation of
depository institutions.  The Dodd-Frank Act contains various
provisions designed to enhance the regulation of depository institutions and
prevent the recurrence of a financial crisis such as occurred in
2008-2009.  Also included is the creation of a new federal agency to
administer and enforce consumer and fair lending laws, a function that is now
performed by the depository institution regulators.  The federal
preemption of state laws currently accorded federally chartered depository
institutions will be reduced as well.  The full impact of the
Dodd-Frank Act on our business and operations will not be known for years until
regulations implementing the statute are written and adopted.  The
Dodd-Frank Act may have a material impact on our operations, particularly
through increased compliance costs resulting from possible future consumer and
fair lending regulations.





In
addition to the other information set forth in this report, you should carefully
consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual
Report on Form 10-K for the year ended December 31, 2009, which could materially
affect our business, financial condition or future results. The risks described
in our Annual Report on Form 10-K are not the only risks that we face.
Additional risks and uncertainties not currently known to us or that we
currently deem to be immaterial also may materially adversely affect our
business, financial condition and/or operating results.





ITEM
2 - UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS





The
Company did not repurchase any of its common stock during the quarter ended June
30, 2010, and at June 30, 2010 had no approved repurchase plans or
programs.





ITEM 3 – DEFAULTS UPON SENIOR
SECURITIES





Not Applicable





ITEM 4 – (Removed and
Reserved)





ITEM 5 – OTHER
INFORMATION





Not Applicable





ITEM 6 - EXHIBITS





No.
              
              Description31
              
              Rule
      13a-14(a)/15d-14(a) Certifications32
              
              Section
      1350 Certifications


(27)


SIGNATURES





Pursuant
to the requirements 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
      BANCORPDATE:  August 12,
      2010
                  /s/ Jerome J. GassenJerome
      J. GassenPresident
      and Chief Executive Officer(Duly
      Authorized Representative)DATE:  August
      12, 2010
                  /s/ John J. LetterJohn
      J. LetterSenior
      Vice President-Treasurer andChief
      Financial Officer(Principal
      Financial Officerand
      Accounting
Officer)