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 March 31, 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





(Exact
name of registrant as specified in its charter)




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





(Former
name, former address and former fiscal year, if changed since last
report)




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.  YesxNo ̈




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 ̈Nox




At May  14,
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 March 31, 2010 and December 31,
      2009
                3Consolidated
      Condensed Statements of Operations for the Three Months Ended March 31,
      2010 and 2009
                4Consolidated
      Condensed Statements of Shareholders’ Equity for the Three Months Ended
      March 31, 2010
                5Consolidated
      Condensed Statements of Cash Flows for the Three Months Ended March 31,
      2010 and 2009
                6Notes
      to Consolidated Condensed Financial Statements
                7Item
      2.
                Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
                14Item
      3.
                Quantitative
      and Qualitative Disclosure about Market Risk
                25Item
      4T.
                Controls
      and Procedures
                25Part
      II.  Other Information
                25Item
      1.
                Legal
      Proceedings
                25Item
      1A.
                Risk
      Factors
                26Item
      2.
                Unregistered
      Sales of Equity Securities and Use of Proceeds
                26Item
      3.
                Defaults
      upon Senior Securities
                26Item
      4.
                (Removed
      and Reserved)
                26Item
      5.
                Other
      Information
                26Item
      6.
                Exhibits
                26Signatures


(2)


PART
I - FINANCIAL INFORMATION




ITEM
I - FINANCIAL STATEMENTS




Ameriana
Bancorp


Consolidated
Condensed Balance Sheets


(In
thousands, except share data)





March 31,
                  
                  
                  December 31,2010
                  
                  
                  2009(Unaudited)AssetsCash
      on hand and in other institutions
                  
                  $
                  3,975
                  
                  
                  $
                  6,283Interest-bearing
      demand deposits
                  
                  
                  16,173
                  
                  
                  
                  13,305Cash
      and cash equivalents
                  
                  
                  20,148
                  
                  
                  
                  19,588Investment
      securities available for sale
                  
                  
                  30,869
                  
                  
                  
                  35,841Loans
      held for sale
                  
                  
                  925
                  
                  
                  
                  537Loans,
      net of allowance for loan losses of $3,963 and $4,005
                  
                  
                  319,520
                  
                  
                  
                  321,544Premises
      and equipment
                  
                  
                  15,281
                  
                  
                  
                  15,508Stock
      in Federal Home Loan Bank
                  
                  
                  5,629
                  
                  
                  
                  5,629Goodwill
                  
                  
                  649
                  
                  
                  
                  649Cash
      value of life insurance
                  
                  
                  24,756
                  
                  
                  
                  24,538Other
      real estate owned
                  
                  
                  6,595
                  
                  
                  
                  5,517Other
      assets
                  
                  
                  16,042
                  
                  
                  
                  12,212Total
      assets
                  
                  $
                  440,414
                  
                  
                  $
                  441,563Liabilities
      and Shareholders’ EquityLiabilitiesDepositsNoninterest-bearing
                  
                  $
                  32,159
                  
                  
                  $
                  29,531Interest-bearing
                  
                  
                  304,537
                  
                  
                  
                  308,850Total
      deposits
                  
                  
                  336,696
                  
                  
                  
                  338,381Borrowings
                  
                  
                  63,810
                  
                  
                  
                  64,185Drafts
      payable
                  
                  
                  948
                  
                  
                  
                  920Other
      liabilities
                  
                  
                  6,227
                  
                  
                  
                  5,502Total
      liabilities
                  
                  
                  407,681
                  
                  
                  
                  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
                  
                  
                  3,214
                  
                  
                  
                  3,214Outstanding
      – 2,988,952 sharesAdditional
      paid-in capital
                  
                  
                  1,048
                  
                  
                  
                  1,045Retained
      earnings
                  
                  
                  31,466
                  
                  
                  
                  31,416Accumulated
      other comprehensive income (loss)
                  
                  
                  3
                  
                  
                  
                  (102
                  )Treasury
      stock at cost – 225,000 shares
                  
                  
                  (2,998
                  )
                  
                  
                  (2,998
                  )Total
      shareholders’ equity
                  
                  
                  32,733
                  
                  
                  
                  32,575Total
      liabilities and shareholders’ equity
                  
                  $
                  440,414
                  
                  
                  $
                  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
                  March 31,2010
                
                
                2009Interest
      IncomeInterest
      and fees on loans
                
                $
                4,676
                
                
                $
                4,884Interest
      on mortgage-backed securities
                
                
                318
                
                
                
                671Interest
      on investment securities
                
                
                52
                
                
                
                183Other
      interest and dividend income
                
                
                37
                
                
                
                85Total
      interest income
                
                
                5,083
                
                
                
                5,823Interest
      ExpenseInterest
      on deposits
                
                
                1,169
                
                
                
                1,773Interest
      on borrowings
                
                
                631
                
                
                
                1,009Total
      interest expense
                
                
                1,800
                
                
                
                2,782Net
      Interest Income
                
                
                3,283
                
                
                
                3,041Provision
      for loan losses
                
                
                360
                
                
                
                338Net
      Interest Income After Provision for Loan Losses
                
                
                2,923
                
                
                
                2,703Other
      IncomeOther
      fees and service charges
                
                
                469
                
                
                
                417Brokerage
      and insurance commissions
                
                
                364
                
                
                
                337Net
      realized and recognized gains on available-for-sale investment
      securities
                
                
                104
                
                
                
                107Gains
      on sales of loans and servicing rights
                
                
                66
                
                
                
                14Net
      loss on other real estate owned
                
                
                (35
                )
                
                
                (321
                )Other
      real estate owned income
                
                
                100
                
                
                
                —Increase
      in cash value of life insurance
                
                
                218
                
                
                
                213Other
                
                
                66
                
                
                
                11Total
      other income
                
                
                1,352
                
                
                
                778Other
      ExpenseSalaries
      and employee benefits
                
                
                2,274
                
                
                
                2,148Net
      occupancy expense
                
                
                408
                
                
                
                374Furniture
      and equipment expense
                
                
                215
                
                
                
                217Legal
      and professional fees
                
                
                221
                
                
                
                180FDIC
      insurance premiums and assessments
                
                
                196
                
                
                
                15Data
      processing expense
                
                
                176
                
                
                
                177Printing
      and office supplies
                
                
                54
                
                
                
                89Marketing
      expense
                
                
                101
                
                
                
                171Other
      real estate owned expense
                
                
                208
                
                
                
                63Other
                
                
                433
                
                
                
                421Total
      other expense
                
                
                4,286
                
                
                
                3,855Loss
      Before Income Taxes
                
                
                (11
                )
                
                
                (374
                )Income
      tax benefit
                
                
                (91
                )
                
                
                (261
                )Net
      Income (Loss)
                
                $
                80
                
                
                $
                (113
                )Basic
      Earnings (Loss) Per Share
                
                $
                0.03
                
                
                $
                (0.04
                )Diluted
      Earnings (Loss) Per Share
                
                $
                0.03
                
                
                $
                (0.04
                )Dividends
      Declared Per Share
                
                $
                0.01
                
                
                $
                0.04


See
notes to consolidated condensed financial statements


(4)


Ameriana
Bancorp


Consolidated
Condensed Statements of Shareholders’ Equity


For
the Three Months Ended March 31, 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
              
              
              —
              
              
              
              —
              
              
              
              80
              
              
              
              —
              
              
              
              —
              
              
              
              80Change
      of $175 from unrealized loss to unrealized gain on available-for-sale
      securities, net of income tax of $70
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              105
              
              
              
              —
              
              
              
              105Comprehensive
      income
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              185Share-based
      compensation
              
              
              —
              
              
              
              3
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              3Dividends
      declared ($0.01 per share)
              
              
              —
              
              
              
              —
              
              
              
              (30
              )
              
              
              —
              
              
              
              —
              
              
              
              (30
              )Balance
      at March 31, 2010
              
              $
              3,214
              
              
              $
              1,048
              
              
              $
              31,466
              
              
              $
              3
              
              
              $
              (2,998
              )
              
              $
              32,733




See
notes to consolidated condensed financial statements.


(5)


Ameriana
Bancorp


Consolidated
Condensed Statements of Cash Flows


(In
thousands)


(Unaudited)





Three Months Ended March 31,2010
                
                
                2009Operating
      ActivitiesNet
      income (loss)
                
                $
                80
                
                
                $
                (113
                )Items
      not requiring (providing) cashProvision
      for losses on loans
                
                
                360
                
                
                
                338Depreciation
      and amortization
                
                
                285
                
                
                
                237Increase
      in cash value of life insurance
                
                
                (218
                )
                
                
                (213
                )Gain
      from sale of available-for-sale securities
                
                
                (104
                )
                
                
                (107
                )Loss
      on sale or write-down of other real estate owned
                
                
                35
                
                
                
                321Mortgage
      loans originated for sale
                
                
                (3,489
                )
                
                
                (1,198
                )Proceeds
      from sale of mortgage loans
                
                
                3,131
                
                
                
                727Gains
      on sale of loans and servicing rights
                
                
                (66
                )
                
                
                (14
                )Increase
      in accrued interest payable
                
                
                621
                
                
                
                778Other
      adjustments
                
                
                (354
                )
                
                
                29Net
      cash provided by operating activities
                
                
                281
                
                
                
                785Investing
      ActivitiesPurchase
      of securities
                
                
                (10
                )
                
                
                —-Proceeds/principal
      from the sale of securities
                
                
                553
                
                
                
                7,225Principal
      collected on mortgage-backed securities
                
                
                1,094
                
                
                
                2,765Net
      change in loans
                
                
                194
                
                
                
                (16,543
                )Proceeds
      from sales of other real estate owned
                
                
                389
                
                
                
                172Net
      purchases and construction of premises and equipment
                
                
                (30
                )
                
                
                (508
                )Construction
      cost for other real estate owned
                
                
                (32
                )
                
                
                —-Other
      investing activities
                
                
                8
                
                
                
                11Net
      cash provided by (used in) investing activities
                
                
                2,166
                
                
                
                (6,878
                )Financing
      ActivitiesNet
      change in demand and savings deposits
                
                
                1,490
                
                
                
                33,554Net
      change in certificates of deposit
                
                
                (3,175
                )
                
                
                623Increase
      in drafts payable
                
                
                28
                
                
                
                733Proceeds
      from long-term borrowings
                
                
                3,000
                
                
                
                —-Repayment
      of long-term borrowings
                
                
                (3,375
                )
                
                
                (3,500
                )Net
      change in advances by borrowers for taxes and insurance
                
                
                175
                
                
                
                227Cash
      dividends paid
                
                
                (30
                )
                
                
                (119
                )Net
      cash (used in) provided by financing activities
                
                
                (1,887
                )
                
                
                31,518Change
      in Cash and Cash Equivalents
                
                
                560
                
                
                
                25,425Cash
      and Cash Equivalents at Beginning of Year
                
                
                19,588
                
                
                
                8,449Cash
      and Cash Equivalents at End of Quarter
                
                $
                20,148
                
                
                $
                33,874Supplemental
      information:Interest
      paid on deposits
                
                $
                544
                
                
                $
                990Interest
      paid on borrowings
                
                $
                635
                
                
                $
                1,015Non-cash
      supplemental information:Transfers
      from loans to other real estate owned
                
                $
                1,470
                
                
                $
                2,965





See
notes to consolidated condensed financial statements.


(6)


AMERIANA
BANCORP AND SUBSIDIARIES





NOTES
TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS





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 March
29, 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 April 9, 2010, and was paid on April 30,
2010.





No stock
options were exercised during the first 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 March 31,2010
                  
                  
                  2009Net
                    Income
                  
                  
                  Weighted
                    Average
                    Shares
                  
                  
                  Per Share
                    Amount
                  
                  
                  Net Loss
                  
                  
                  Weighted
                    Average
                    Shares
                  
                  
                  Per Share
                    AmountBasic
      Earnings (Loss) Per Share: Income (loss) available to
      common  shareholders
                  
                  $
                  80
                  
                  
                  
                  2,988,952
                  
                  
                  $
                  0.03
                  
                  
                  $
                  (113
                  )
                  
                  
                  2,988,952
                  
                  
                  $
                  (0.04
                  )Effect
      of dilutive stock options
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  
                  
                  
                  
                  —
                  
                  
                  
                  —Diluted
      Earnings (Loss) Per Share: Income (loss) available to common shareholders
      and assumed conversions
                  
                  $
                  80
                  
                  
                  
                  2,988,952
                  
                  
                  $
                  0.03
                  
                  
                  $
                  (113
                  )
                  
                  
                  2,988,952
                  
                  
                  $
                  (0.04
                  )





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 March 31, 2010
and 2009, respectively, but were not included in the computation of diluted
earnings per share because the options were anti-dilutive.


(7)





NOTE
D — INVESTMENT SECURITIES





The
following tables provide the composition of investment securities at March 31,
2010, and December 31, 2009:





Amortized
                  Cost
                
                
                Gross
                  Unrealized
                  Gains
                
                
                Gross
                  Unrealized
                  Losses
                
                
                Fair
                  ValueAvailable
      for sale at March 31, 2010Ginnie
      Mae and GSE mortgage-backed pass-through securities
                
                $
                20,336
                
                
                $
                151
                
                
                $
                70
                
                
                $
                20,417Ginnie
      Mae collateralized mortgage obligations
                
                
                5,909
                
                
                
                —
                
                
                
                78
                
                
                
                5,831Municipal
      securities
                
                
                3,036
                
                
                
                20
                
                
                
                57
                
                
                
                2,999Mutual
      fund
                
                
                1,584
                
                
                
                38
                
                
                
                —
                
                
                
                1,622$
                30,865
                
                
                $
                209
                
                
                $
                205
                
                
                $
                30,869





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 March 31,
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
                  
                  
                  352
                  
                  
                  
                  353After
      ten years
                  
                  
                  2,359
                  
                  
                  
                  2,3043,036
                  
                  
                  
                  2,999Ginnie
      Mae and GSE mortgage-backed pass-through securities
                  
                  
                  20,336
                  
                  
                  
                  20,417Ginnie
      Mae collateralized mortgage obligations
                  
                  
                  5,909
                  
                  
                  
                  5,831Mutual
      fund
                  
                  
                  1,584
                  
                  
                  
                  1,622$
                  30,865
                  
                  
                  $
                  30,869





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.





Collateralized
mortgage obligations: The unrealized losses on the Company’s investment
in collateralized mortgage obligations were caused by interest rate
changes.  The contractual cash flows of those 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 March 31, 2010.


(8)





Municipal
securities:  All of the municipal securities in the Company’s
investment portfolio at March 31, 2010 that were rated by Moody’s Investors
Service received an investment grade credit quality rating.  Two
securities were not rated by Moody’s.  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 March 31, 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 by Standard & Poor’s.





Certain
investment securities are reported in the financial statements at an amount less
than their historical cost.  Total fair value of these investments at
March 31, 2010 and December 31, 2009 were $18,185,000 and $18,289,000, which is
approximately 58.9% and 51.0% 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 March 31, 2010
and December 31, 2009:





At March 31, 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
                  
                  $
                  10,286
                  
                  
                  $
                  67
                  
                  
                  $
                  221
                  
                  
                  $
                  3
                  
                  
                  $
                  10,507
                  
                  
                  $
                  70Ginne
      Mae collateralized mortgage obligations
                  
                  
                  5,831
                  
                  
                  
                  78
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  5,831
                  
                  
                  
                  78Municipal
      securities
                  
                  
                  1,847
                  
                  
                  
                  57
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  1,847
                  
                  
                  
                  57$
                  17,964
                  
                  
                  $
                  202
                  
                  
                  $
                  221
                  
                  
                  $
                  3
                  
                  
                  $
                  18,185
                  
                  
                  $
                  205





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
                  
                  
                  $
                  175Ginne
      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 $5,831,000 and $5,820,000 were pledged
at March 31, 2010 and December 31, 2009, respectively, to secure FHLB
advances and three letters of credit.





Investment
securities with a total market value of $9,129,000 and $9,030,000 were pledged
at March 31, 2010 and December 31, 2009, respectively, to secure a repurchase
agreement.





A gross
gain of $104,000 and no gross loss resulting from sales of available for sale
securities were realized during the first quarter of 2010, with a net tax
expense of $35,000, compared to a $131,000 gross gain and a $24,000 gross loss
for the first quarter of 2009, with a net tax expense of
$36,000.


(9)





NOTE
E — CURRENT AND FUTURE ACCOUNTING MATTERS





o
            Financial Accounting Standards
      Board (FASB)




§
            ASU
      No. 2010-06,Fair
      Value Measurements and Disclosures (Topic 820) – Improving Disclosures
      about Fair Value
  Measurements.




The FASB
has issued ASU No. 2010-06, Fair Value Measurements and
Disclosures (Topic 820): ImprovingDisclosures about Fair Value
Measurements. This ASU requires some new disclosures and clarifies some
existing disclosure requirements about fair value measurement as set forth in
Codification Subtopic 820-10. The FASB’s objective is to improve these
disclosures and, thus, increase the transparency in financial reporting.
Specifically, ASU 2010-06 amends Codification Subtopic 820-10 to now
require:




·
            A
      reporting entity should disclose separately the amounts of significant
      transfers in and out of Level 1 and Level 2 fair value measurements and
      describe the reasons for the transfers;
and


·
            In
      the reconciliation for fair value measurements using significant
      unobservable inputs, a reporting entity should present separately
      information about purchases, sales, issuances, and
      settlements.




In
addition, ASU 2010-06 clarifies the requirements of the following existing
disclosures:




·
            For
      purposes of reporting fair value measurement for each class of assets and
      liabilities, a reporting entity needs to use judgment in determining the
      appropriate classes of assets and liabilities;
  and


·
            A
      reporting entity should provide disclosures about the valuation techniques
      and inputs used to measure fair value for both recurring and nonrecurring
      fair value measurements.




This
Company adopted this standard effective January 1, 2010, and its provisions did
not have a material impact on our financial condition, results of operations or
disclosures.




§
            ASU
      2010-01,Equity
      (Topic 505), Accounting for Distribution to Shareholders with Components
      of Stock and Cash




The FASB
has issued Accounting Standard Update (ASU) No. 2010-01, Equity (Topic 505): Accounting for
Distributions to Shareholders with Components of Stock and
Cash.  The amendments to the Codification in this ASU clarify
that the stock portion of a distribution to shareholders that allows them to
elect to receive cash or stock with a potential limitation on the total amount
of cash that all shareholders can elect to receive in the aggregate is
considered a share issuance that is reflected in earnings per share
prospectively and is not a stock dividend.  This ASU codifies the
consensus reached in EITF Issue No. 09-E, "Accounting for Stock Dividends,
Including Distributions to Shareholders with Components of Stock and
Cash."





The
provisions of this ASU did not have a material impact on our financial
condition, results of operations or disclosures.




§
            ASC
      810 (formerly SFAS No. 167),Amendments to FASB
      Interpretation No. 46(R))




In June
2009, the FASB issued consolidation guidance applicable to variable interest
entities.  The amendments to the consolidation guidance affect all
entities currently within the scope of the previous standard, as well as
qualifying special-purpose entities (QSPEs) that are currently excluded from the
scope of the previous standard.  This Company adopted this standard
effective January 1, 2010, and its provisions did not have a material impact on
our financial condition, results of operations or disclosures.




§
            ASC
      860 (formerly SFAS No. 166), Accounting for Transfers of
      Financial Assets Accounting for Transfers of Financial Assets, an
      amendment of FASB Statement No.
  140)




This
standard amends the derecognition accounting and disclosure guidance relating to
transfers of financial assets.  This standard eliminates the exemption
from consolidation for QSPEs, and also requires a transferor to evaluate all
existing QSPEs to determine whether it must be consolidated.  ASC 860
was effective for the Company as of January 1, 2010, and its provisions did not
have a material impact on our financial condition, results of operations or
disclosures.


(10)





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 March 31, 2010 and
December 31, 2009 was $1,837,000 and $1,823,000, respectively.  The
expense for the plan was $46,000 and $54,000 for the three month periods ended
March 31, 2010 and March 31, 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




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




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


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




Available-for-sale
Securities




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




Level 2
securities include U.S. agency and U.S. government sponsored enterprise
mortgage-backed securities, municipal securities, and one U.S. Small Business
Administration asset-backed security. 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.




There
currently are no securities valued in Level 3.




(11)




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 March 31, 2010 and December 31,
2009:




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
      March 31, 2010:Ginnie
      Mae and GSE mortgage-backed pass-through securities
                          
                          $
                          20,417
                          
                          
                          $
                          —
                          
                          
                          $
                          20,417
                          
                          
                          $
                          —Ginnie
      Mae collateralized mortgage obligations
                          
                          
                          5,831
                          
                          
                          
                          —
                          
                          
                          
                          5,831
                          
                          
                          
                          —Municipal
      securities
                          
                          
                          2,999
                          
                          
                          
                          —
                          
                          
                          
                          2,999
                          
                          
                          
                          —Mutual
      funds
                          
                          
                          1,622
                          
                          
                          
                          1,622
                          
                          
                          
                          —
                          
                          
                          
                          —$
                          30,869
                          
                          
                          $
                          1,622
                          
                          
                          $
                          29,247
                          
                          
                          $
                          —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.





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.


(12)




Other
Real Estate Owned




The
fair value of the Company’s other real estate owned is determined using Level 3
inputs, which include current and prior appraisals and estimated costs to sell.
The change in fair value of other real estate owned on March 31, 2010 that was
recognized during the three months ended March 31, 2010 was $38,000, which was
recorded as a direct charge to current earnings.




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 March 31, 2010 and December 31,
2009:




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
      March 31, 2010:Impaired
      loans
                  
                  $
                  12,307
                  
                  
                  $
                  —
                  
                  
                  $
                  —
                  
                  
                  $
                  12,307Other
      real estate owned
                  
                  
                  34
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  34At
      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 cannot be compared to independent markets and,
further, 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:





March 31, 2010
                        
                        
                        December 31, 2009Carrying
                          Value
                        
                        
                        Fair
                          Value
                        
                        
                        Carrying
                          Value
                        
                        
                        Fair
                          ValueAssetsCash
      and cash equivalents
                        
                        $
                        20,148
                        
                        
                        $
                        20,148
                        
                        
                        $
                        19,588
                        
                        
                        $
                        19,588Investment
      securities available for sale
                        
                        
                        30,869
                        
                        
                        
                        30,869
                        
                        
                        
                        35,841
                        
                        
                        
                        35,841Loans
      held for sale
                        
                        
                        925
                        
                        
                        
                        925
                        
                        
                        
                        537
                        
                        
                        
                        537Loans
                        
                        
                        319,520
                        
                        
                        
                        323,177
                        
                        
                        
                        321,544
                        
                        
                        
                        323,890Interest
      receivable
                        
                        
                        1,363
                        
                        
                        
                        1,363
                        
                        
                        
                        1,419
                        
                        
                        
                        1,419Stock
      in FHLB
                        
                        
                        5,629
                        
                        
                        
                        5,629
                        
                        
                        
                        5,629
                        
                        
                        
                        5,629LiabilitiesDeposits
                        
                        
                        336,696
                        
                        
                        
                        328,737
                        
                        
                        
                        338,381
                        
                        
                        
                        340,940Borrowings
                        
                        
                        63,810
                        
                        
                        
                        61,209
                        
                        
                        
                        64,185
                        
                        
                        
                        60,034Interest
      payable
                        
                        
                        1,036
                        
                        
                        
                        1,036
                        
                        
                        
                        414
                        
                        
                        
                        414Drafts
      payable
                        
                        
                        948
                        
                        
                        
                        948
                        
                        
                        
                        920
                        
                        
                        
                        920


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.




(13)




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





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





Drafts
Payable: The
fair value approximates carrying value.





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.





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.




(14)




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
First Quarter of 2010





The
Company recorded net income of $80,000, or $0.03 per share for the three-month
period ended March 31, 2010.  The
first quarter earnings benefited from an improvement in net interest margin and
from gains on sales of investment
securities, but earnings were negatively impacted by continuing elevated credit
costs resulting primarily 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 March 31, 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.





·
            Net
      interest income for the first quarter of 2010 was $242,000, or 8.0%,
      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 3.50% on a fully tax-equivalent basis for the first
      quarter of 2010 was 51 basis points higher than the same period of 2009,
      and 16 basis points more than the fourth quarter of 2009.  The
      improvement resulted primarily from a significant reduction in the Bank’s
      average cost of deposits.


(15)




·
            Due
      to a continuing elevated level of charge-offs and non-performing loans,
      the Bank recorded a $360,000 provision for loan losses in the first
      quarter of 2010, slightly higher than the $338,000 provision in the year
      earlier quarter.





·
            Other
      income of $1.4 million for the first quarter of 2010 was $574,000, or
      73.8%, greater than the total for the same quarter of 2009, and resulted
      primarily from a $286,000 reduction in OREO losses and $100,000 in rental
      income on an OREO property.





·
            Other
      income also included $104,000 in gains from sales of investment
      securities, compared to gains of $107,000 in the year earlier
      quarter.





·
            Other
      expense for the first quarter of 2010 was $431,000, or 11.2%, higher than
      the same quarter in 2009, due primarily to increases in employee
      retirement and health insurance costs, higher FDIC insurance premiums, and
      higher OREO expense.





·
            The
      income tax benefit of $91,000 for the first quarter of 2010 was related
      primarily to the significant amount of tax-exempt income from bank-owned
      life insurance.





For the
first quarter of 2010, total assets dropped by $1.2 million, or 0.3%, to $440.4
million from $441.6 million at December 31, 2009:





·
            A
      $5.0 million reduction in the investment portfolio during the quarter
      resulted primarily from $4.0 million of sales, including a $425,000
      municipal security, 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 $3.0
million.





·
            Net
      loans receivable of $319.5 million at March 31, 2010 represented a
      decrease of $2.0 million, or 0.6%, for the quarter, as commercial loan
      demand remained weak and the Bank continued the strategic change adopted
      in the prior year of selling fixed-rate residential products in the
      secondary market.





·
            Reflective
      of the continuing weak economy, total non-performing loans of $9.4
      million, or 2.9% of total net loans, at March 31, 2010, represented an
      increase of $335,000 from December 31,
2009.





·
            The
      allowance for loan losses of $4.0 million at March 31, 2010, was equal to
      1.2% of total loans and 42.2% of non-performing loans, with similar ratios
      of 1.2% and 44.2%, respectively, at December 31,
  2009.





·
            As
      of March 31, 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 first quarter of 2010, total deposits decreased by $1.7 million, or
      0.5%, to $336.7 million, as the Bank focused on core deposit growth,
      allowing the more rate-sensitive certificate accounts to run off. 
      Retail and business checking and savings account balances were up $4.1
      million for the quarter.  No brokered certificates of deposit were
      held at March 31, 2010.





·
            Also,
      during the first quarter of 2010, $3.4 million in notes payable to the
      FHLB matured, and the Bank added a $3.0 million five-year Federal Home
      Loan Bank advance with a fixed interest rate of
  2.70%.





Regulatory
Action





On September 28, 2009, 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 7.75% by December
      31, 2009 and to 8.00% at March 31, 2010 and to increase its Total
      Risk-Based Capital Ratio to 12.00% by December 31,
  2009;


·
            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


(16)


·
            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 of
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:





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.


(17)


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.





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 March 31, 2010 and December 31, 2009, we determined that our
existing valuation allowance was adequate, largely based on available tax
planning strategies and our projections of future taxable income.  Any
reduction in estimated future taxable income may require us to increase the
valuation allowance against our deferred tax assets.  Any required increase
to the valuation allowance would result in additional income tax expense in
the period and could have a significant impact on our future
earnings.





Positions
taken in our tax returns may be subject to challenge by the taxing authorities
upon examination.  The benefit of an uncertain tax position is initially
recognized in the financial statements only when it is more likely than not the
position will be sustained upon examination by the tax authorities.  Such
tax positions are both initially and subsequently measured as the largest amount
of tax benefit that is 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.


(18)


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 March 31,
2010.





FINANCIAL
CONDITION





Total
assets of $440.4 million at March 31, 2010 represented a reduction of$1.2
million, or 0.3%, from the December 31, 2009 total of $441.6 million, but were
considerably lower than total assets of $496.3 million at March 31, 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 $20.1 million at March 31, 2010 were up slightly from the
December 31, 2009 total of $19.6 million, and included $16.1 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 decreased 13.9% to $30.9 million at March 31, 2010
from $35.9 million at December 31, 2009.  This $5.0 million decrease
resulted from sales of three mortgage-backed securities totaling $3.6 million, a
sale of a $425,000 municipal security, and principal repayments on
mortgage-backed securities totaling $1.1 million.  The municipal security
sale represents a continuation of a Bank income tax strategy that has resulted
in the municipal securities portfolio being reduced to $3.0 million at March 31,
2010.  All mortgage-backed securities in the portfolio at March 31, 2010,
which totaled $26.2 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 $2.0 million, or 0.6%, to $319.5 million from $321.5
million at December 31, 2009.  For the three months ended March 31, 2010,
the Bank’s commercial and investment residential real estate, and commercial
business loans increased only $627,000, which reflected the impact of relatively
poor economic conditions. The owner-occupied residential real estate first
mortgage loan portfolio declined $2.5 million during the first quarter of 2010,
due mostly to the Bank’s decision to sell $3.1 million of new originations. The
residential mortgage loan strategy is reviewed regularly to ensure that it
remains consistent with the Bank’s overall balance sheet management
objectives.  Outstanding consumer loan balances, including home equity
lines of credit, dropped $203,000 during the first quarter of 2010.





Premises
and equipment of $15.3 million at March 31, 2010 represented a $227,000 decrease
from the total of $15.5 million at December 31, 2009.  The net decrease was
a result of $256,000 of depreciation for the three months ended March 31, 2010
exceeding capital expenditures of $30,000 for the period.





Total
goodwill of $649,000 at March 31, 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 results of the Bank’s
impairment tests have reflected that there is no impairment as of March 31,
2010.





The total
for other assets was $16.0 million at March 31, 2010, compared to $12.2 million
at December 31, 2009.  This increase of $3.8 million was due mostly to sale
proceeds receivable from securities dealers totaling $3.6 million that resulted
from three investment securities transactions on March 30, 2010, that had April
settlement dates.  The gains from these three sales are reflected in the
financial statements for the quarter ended March 31, 2010.





Total
deposits of $336.7 million at March 31, 2010 represented a decrease of $1.7
million, or 0.5%, from the total of $338.4 million at December 31, 2009, as the
Bank focused on growing core deposits, allowing the more rate-sensitive of its
certificates of deposit to run off.  During the first quarter of 2010, the
Bank grew retail and business checking account balances by $2.2 million, or
2.9%, to $78.1 million, and savings accounts were up $1.9 million, or 7.5%, to
$26.4 million.  Public funds checking balances decreased $2.8 million to
$25.7 million, and certificates of deposit decreased $3.2 million to $179.7
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.


(19)


Borrowings
declined by $375,000 during the first three months of 2010 to $63.8 million, as
the Bank repaid  two Federal Home Loan Bank borrowings totaling $3.4
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 being 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 $948,000 at March 31, 2010 were up slightly 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 $32.7 million at March 31, 2010 was $158,000 higher than
the total at December 31, 2009. The increase resulted primarily from $80,000 in
net income and an unrealized gain net of income taxes of $105,000 from the
Bank’s available for sale investments securities portfolio, reduced by $30,000
in dividends declared during the three-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





First Quarter of 2010 
compared to the First Quarter of 2009





The
Company recorded net income of $80,000, or $0.03 per diluted share, for the
first quarter of 2010, compared to a net loss of $113,000, or $(0.04) per
diluted share, for the first quarter of 2009.





Credit
costs related to the weak economic environment had a significant negative impact
on earnings for both the first quarter of 2010 and the first quarter of
2009.  Compared to the three-month period ended March 31, 2009, the first
quarter of 2010 benefited from an improvement in net interest income and reduced
net OREO costs, but sustained higher costs for employee benefits and FDIC
insurance premiums.





Net Interest
Income





Net
interest income on a fully tax-equivalent basis increased $175,000, or 5.6%, to
$3.3 million for the first 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 $383.9 million
for the quarter ended March 31, 2010 were down $42.2 million, or 9.9% 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, net interest margin on
a fully tax-equivalent basis increased 51 basis points to 3.50% for the first
quarter of 2010 from 2.99% for the first quarter of 2009.





Tax-exempt
interest was $64,000 for the first quarter of 2010 compared to $190,000 for the
same period of 2009, and resulted from bank-qualified municipal securities and
municipal loans.  Tax-equivalent adjustments were $29,000 and $96,000 for
the first quarter of 2010 and 2009, respectively.  The decrease in
tax-exempt interest for the first quarter compared to the same period of 2009
was due primarily to the Bank’s sales of  municipal
securities.


(20)


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 March 31,2010
                  
                  
                  2009Balance
      at beginning of quarter
                  
                  $
                  4,005
                  
                  
                  $
                  2,991Provision
      for loan losses
                  
                  
                  360
                  
                  
                  
                  338Charge-offs
                  
                  
                  (540
                  )
                  
                  
                  (118
                  )Recoveries
                  
                  
                  138
                  
                  
                  
                  14Net
      charge-offs
                  
                  
                  (402
                  )
                  
                  
                  (104
                  )Balance
      at end of period
                  
                  $
                  3,963
                  
                  
                  $
                  3,225Allowance
      to total loans
                  
                  
                  1.23
                  %
                  
                  
                  0.95
                  %Allowance
      to non-performing loans
                  
                  
                  42.22
                  %
                  
                  
                  97.96
                  %





We
recorded a provision for loan losses of $360,000 in the first quarter of 2009,
compared to $338,000 for the same period in 2009.  The provision for loan
losses for the first quarter of 2010 reflected the continuing pressure of
current economic conditions on credit quality, including an increase in
non-performing loans and charge-offs.  Based on the results of the
Company’s continuing review process, it is management’s opinion that the
allowance for loan losses is adequate as of March 31, 2010.





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





(Dollars in thousands)March 31,2010
                  
                  
                  2009Loans
      accounted for on a non-accrual basis
                  
                  $
                  8,935
                  
                  
                  $
                  3,282Accruing
      loans contractually past due 90 days or more
                  
                  
                  451
                  
                  
                  
                  10Total
      of non-accrual and 90 days past due loans
                  
                  $
                  9,386
                  
                  
                  $
                  3,292Percentage
      of total net loans
                  
                  
                  2.94
                  %
                  
                  
                  0.98
                  %Other
      non-performing assets (1)
                  
                  $
                  6,622
                  
                  
                  $
                  6,640





(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 March 31, 2010 was $738,000, or
22.9%, higher than a year earlier, the allowance for loan losses to
non-performing loans ratio of 42.22% at March 31, 2010 reflected a significant
change from the ratio of 97.96% at March 31, 2009 as the result of the higher
total of non-performing loans.  Non-performing loans of $9.4 million at
March 31, 2010 represented a $335,000 increase over the total of $9.1 million at
December 31, 2009.  Non-performing loans at March 31, 2010 include a $2.9
million commercial real estate loan with sufficient collateral coverage to
support a limited reserve amount.  Although the allowance for loan losses
as a percentage of non-performing loans is lower than a year earlier, it is
management’s opinion that the allowance for loan losses at March 31, 2010 is
adequate based on measurements of the credit risk in the entire portfolio as of
that date.





Other
real estate owned of $6.6 million at March 31, 2010, represented an increase of
$1.1 million from December 31, 2009, with nine new properties and seven sales,
and one write down that totaled $38,000.





Other
Income





The
Company recorded other income of $1.4 million for the first quarter of 2010, an
increase of $574,000 over the total of $778,000 for the same period a year
earlier that was due primarily to:


(21)


·
            A
      $52,000 increase in fees and service charges from deposit account
      relationships compared to the same quarter a year earlier that included a
      $27,000 improvement in debit card fees, and reflected the Bank’s success
      in growing retail checking
accounts;





·
            A
      $52,000 increase is gains on sales of loans and servicing rights over the
      same quarter a year earlier, when the mortgage-banking strategy involved
      retaining most of the new originations in the Bank’s loan
      portfolio;





·
            A
      $286,000 reduction in net losses from OREO to $35,000 for the first
      quarter of 2010, compared to $321,000 in the same period a year
      earlier;





·
            $100,000
      in rental income from OREO for the first quarter of 2010, $98,000 from an
      apartment complex, compared to no OREO rental income for the same period
      in 2009; and





·
            A
      $39,000 reduction in the write-off of mortgage loan servicing rights
      resulting from payoffs to $27,000 for the first quarter of 2010, compared
      to $66,000 for the same period a year earlier that experienced higher
      mortgage loan prepayment activity due mostly to heavy refinancing
      volume.





Other
Expense





The
$431,000 or 11.2% increase in total other expense for the first quarter of 2010,
compared to the first quarter of 2009, resulted primarily from increases in
employee retirement and health insurance costs, higher FDIC insurance premiums,
and higher OREO expense:





·
            The
      $2.3 million total cost for salaries and employee benefits for the first
      quarter of 2010 was $126,000 higher than the year earlier quarter, due to
      a $97,000 increase in
      employee health insurance costs, and a $47,000 increase in funding costs
      for the frozen multi-employer defined benefit retirement plan. Salary
      costs were $24,000 lower than the same quarter of 2009, 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.





·
            The
      $181,000 increase in FDIC insurance premiums and assessments resulted from
      a higher industry-wide insurance assessment rate than a year earlier, and
      the balance of the one-time assessment credit being used up in the first
      half of 2009.





·
            The
      $208,000 of other real estate owned expense exceeded the total for the
      same quarter a year earlier by $145,000 and related primarily to real
      estate taxes and to operating expenses for the OREO apartment complex that
      provided $98,000 of rental income during the
  quarter.





·
            Marketing
      expense of $101,000 for the first quarter of 2010 was $70,000 lower than
      the same quarter a year earlier, and reflective of an expense reduction
      initiative implemented by Bank management in the second half of
      2009.





Income Tax
Expense





The
Company had a loss before income taxes of $11,000, but recorded an income tax
benefit of $91,000 for the first 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 $374,000 and
recorded a tax benefit of $261,000 that was due primarily to a similar amount of
BOLI income coupled with the interest from a larger average investment in
municipal securities.  The municipal securities portfolio had been reduced
from an average balance of $17.2 million for the first quarter of 2009 to an
average balance of $3.5 million for the first 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.


(22)


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, our investment subsidiary, 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 $31.1 million, or 90.1%, from $34.5 million at December 31, 2006
to $3.0 million at March 31, 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.





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 new mortgage loans,
through borrowings from the FHLB system, and through the brokered certificates
market.  We regularly adjust the investments in liquid assets based upon
our assessment of (1) expected loan demand, (2) expected deposit flows, (3)
yields available on interest-earning deposits and securities and (4) the
objectives of our asset/liability program.




The
Company is a separate entity and apart from the Bank and must provide for its
own liquidity.  In addition to its operating expenses, the Company is
responsible for the payment of dividends declared for its shareholders and the
payment of interest on its subordinated debentures.  At times, the Company
has repurchased its stock.  Substantially all of the Company’s operating
cash is obtained from subsidiary service fees and dividends.  Payment of
such dividends to the Company by the Bank is limited under Indiana law. 
Additionally, as part of a resolution adopted by the Board of Directors of the
Bank on September 28, 2009, 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 March
31, 2010, we had $8.5 million in loan commitments outstanding and $36.7 million
of additional commitments for line of credit receivables.  Certificates of
deposit due within one year of March 31, 2010 totaled $114.1 million, or 33.9%
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 March 31,
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.




Our
primary investing activity, the origination and purchase of loans, is offset by
the sale of loans and principal repayments.  In the first quarter of 2010,
net loans receivable decreased by $2.0 million, or 0.6%.  In the first
three months of 2009, we experienced an increase of $13.2 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 $1.7 million and total FHLB advances
were reduced by $375,000 during the three months of 2010. There were no brokered
certificates at either March 31, 2010 or December 31, 2009.


(23)


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 September 28, 2009, the Bank
agreed to adopt a capital plan to increase its Tier 1 Leverage Ratio to 7.75% by
December 31, 2009 and to 8.00% at March 31, 2010 and to increase its Total
Risk-Based Capital Ratio to 12.00% by December 31, 2009.  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 March 31, 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 March 31, 2010, that management believes have changed this
classification.





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




March
31, 2010





Actual 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)
                  
                  $
                  41,280
                  
                  
                  
                  12.83
                  %
                  
                  $
                  25,741
                  
                  
                  
                  8.00
                  %
                  
                  $
                  32,176
                  
                  
                  
                  10.00
                  %Tier
      1 risk-based capital ratio
                    (tier
      1 capital to risk-weighted assets)
                  
                  $
                  37,258
                  
                  
                  
                  11.58
                  %
                  
                  $
                  12,870
                  
                  
                  
                  4.00
                  %
                  
                  $
                  19,306
                  
                  
                  
                  6.00
                  %Tier
      1 leverage ratio
                    (tier
      1 capital  to adjusted average total assets)
                  
                  $
                  37,258
                  
                  
                  
                  8.54
                  %
                  
                  $
                  13,092
                  
                  
                  
                  3.00
                  %
                  
                  $
                  21,821
                  
                  
                  
                  5.00
                  %




December
31, 2009





Actual 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
              %





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




March
31, 2010





Actual 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)
                            
                            $
                            41,460
                            
                            
                            
                            12.79
                            %
                            
                            $
                            25,942
                            
                            
                            
                            8.00
                            %
                            
                            $
                            32,427
                            
                            
                            
                            10.00
                            %Tier
      1 risk-based capital ratio
                              (tier
      1 capital to risk-weighted assets)
                            
                            $
                            37,438
                            
                            
                            
                            11.55
                            %
                            
                            $
                            12,971
                            
                            
                            
                            4.00
                            %
                            
                            $
                            19,456
                            
                            
                            
                            6.00
                            %Tier
      1 leverage ratio
                              (tier
      1 capital  to adjusted average total assets)
                            
                            $
                            37,438
                            
                            
                            
                            8.57
                            %
                            
                            $
                            13,105
                            
                            
                            
                            3.00
                            %
                            
                            $
                            21,842
                            
                            
                            
                            5.00
                            %


(24)




December
31, 2009





Actual 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 March 31, 2010 that have materially affected, or
are reasonably likely to materially affect, the Company’s internal control over
financial reporting.





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
anticipate that the matter will go to trial in late 2010 to early
2011.




(25)




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





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
March 31, 2010, and at March 31, 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





(26)


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:  May
      14, 2010
                      /s/
      Jerome J. GassenJerome
      J. GassenPresident
      and Chief Executive Officer(Duly
      Authorized Representative)DATE:  May 14, 2010
                      /s/
      John J. LetterJohn
      J. LetterSenior
      Vice President-Treasurer andChief
      Financial Officer(Principal
      Financial Officerand
      Accounting
Officer)