Ameriana Bancorp's net interest income for the first quarter of 2010 remained level with the fourth quarter of 2009, but increased 8% compared with the first quarter of 2009. This improvement in net interest income over the year-earlier quarter was achieved with a lower volume of interest-earning assets that resulted from balance sheet restructuring in the last half of 2009, which was designed to increase the Bank's regulatory capital ratios. For the first quarter of 2010, Ameriana's net interest margin on a fully tax-equivalent basis increased to 3.50% or 16 basis points more than the fourth quarter of 2009 and 51 basis points higher than the first quarter of 2009, continuing a positive trend that began in the third quarter of 2009. This improvement, especially compared with the prior-year period, primarily reflected the positive impact of a proportionate increase in the loan portfolio of higher-yielding commercial loans and Ameriana's increased focus on core deposits, allowing non-core deposits, less stable public funds deposits and promotional certificates of deposit to run off.
The weak economy, underscored by high unemployment and declining home prices, has exerted greater pressure on borrowers, which continues to result in high credit costs for Ameriana. The Bank's non-performing assets, which includes non-performing loans, OREO and repossessed assets, increased $1.4 million in the first quarter to $16.0 million at March 31, 2010, from $14.6 million at December 31, 2009, and $9.9 million as of March 31, 2009. However, there are indications that credit problems may have peaked as the amount of loans delinquent 31-89 days declined 36% in the first quarter of 2010 versus the fourth quarter of 2009 and are now 20% below the year-earlier quarter, while net charge-offs for the first quarter of 2010 declined 48% from the fourth quarter of 2009. The Company remains diligent in its collection activities by working with borrowers where possible for reasonable solutions, but the ongoing decline in asset values often makes a favorable resolution of problem loans difficult.