<PAGE>

================================================================================

                                 UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549

                               -----------------

                                   FORM 10-K

(Mark One)

   [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
               ACT OF 1934 For the fiscal year ended December 31, 2001

                                      OR

     [_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                 EXCHANGE ACT OF 1934 For the Transition period from
                                               to

                          Commission File No. 0-14354
[LOGO] FIRST INDIANA
CORPORATION
            (Exact name of registrant as specified in its charter)

                       Indiana                 35-1692825
              (State of Incorporation)        (IRS Employer
                                           Identification No.)

               135 N. Pennsylvania St.
                Indianapolis, Indiana             46204
                (Address of principal
                 executive offices)            (Zip Code)

              Registrant's telephone number, including area code:
                                (317) 269-1200

          Securities Registered Pursuant to Section 12(b) of the Act:
                                     NONE

          Securities Registered Pursuant to Section 12(g) of the Act:

                              Title of Each Class
                              -------------------
                            Common Stock, $.01 par
                                     value
                           Preferred Share Purchase
                                    Rights

   Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.  Yes _X_  No ____

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

   State the aggregate market value of the common stock held by non-affiliates
of the registrant: $191,273,000 as of February 18, 2002.

   On February 18, 2002, the registrant had 12,375,997 shares of common stock
outstanding, $0.01 par value.

   Documents Incorporated by Reference: Portions of the definitive proxy
statement for the 2002 Annual Meeting of Shareholders (Part III).

================================================================================

<PAGE>

                           FIRST INDIANA CORPORATION

                                   Form 10-K

                               Table of Contents

<TABLE>
<CAPTION>
                                                                                               Page
                                                                                               ----
<C>      <S>                                                                                   <C>
Part I
         Financial Review.....................................................................   3
         Five-Year Summary of Selected Financial Data.........................................   3
         Description of Business..............................................................   4
         Critical Accounting Policies.........................................................   4
         Statement of Earnings Analysis.......................................................   5
         Financial Condition..................................................................  10
         Asset Quality........................................................................  15
         Liquidity and Market Risk Management.................................................  19
         Capital..............................................................................  21
         Impact of Inflation and Changing Prices..............................................  22
         Impact of Accounting Standards Not Yet Adopted.......................................  22
         Fourth Quarter Summary...............................................................  23
         Consolidated Financial Statements....................................................  24
         Notes to Consolidated Financial Statements...........................................  28
         Independent Auditors' Report.........................................................  51
         Statement of Management Responsibility...............................................  52
Item 1.  Business.............................................................................  53
         Description of Business..............................................................   4
         Business Segments....................................................................  49
         Competition..........................................................................  28
         Supervision and Regulation...........................................................  53
         Employees............................................................................  53
         Liquidity and Market Risk Management.................................................  19
         Financial Review.....................................................................   3
Item 2.  Properties...........................................................................  54
Item 3.  Legal Proceedings....................................................................  54
Item 4.  Submission of Matters to a Vote of Security Holders..................................  54

Part II
Item 5.  Market for Registrant's Common Equity and Related Shareholder Matters................  54
Item 6.  Selected Financial Data..............................................................  54
Item 7.  Management's Discussion and Analysis of Financial Condition and Results of Operations  54
Item 7A. Quantitative and Qualitative Disclosures About Market Risk...........................  54
Item 8.  Financial Statements and Supplementary Data..........................................  55
Item 9.  Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.  55

Part III
Item 10. Directors and Executive Officers of the Registrant...................................  55
Item 11. Executive Compensation...............................................................  56
Item 12. Security Ownership of Certain Beneficial Owners and Management.......................  56
Item 13. Certain Relationships and Related Transactions.......................................  56

Part IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.....................  57
Signatures....................................................................................  59
</TABLE>

                                      2

<PAGE>

                               FINANCIAL REVIEW

   Statements contained in this Annual Report on Form 10-K that are not
historical facts may constitute forward-looking statements (within the meaning
of Section 21E of the Securities Exchange Act of 1934, as amended) which
involve significant risks and uncertainties. First Indiana intends such
forward-looking statements to be covered by the safe-harbor provisions in the
Private Securities Litigation Reform Act of 1995, and is including this
statement for purposes of invoking these safe-harbor provisions. First
Indiana's ability to predict results or the actual effect of future plans or
strategies is inherently uncertain, and involves a number of risks and
uncertainties. In particular, among the factors that could cause actual results
to differ materially are changes in interest rates, loss of deposits and loan
demand to other financial institutions, substantial changes in financial
markets in general or the loan market in particular, changes in the real estate
market, statutory or regulatory changes, or unanticipated results in pending
legal proceedings. The fact that there are various risks and uncertainties
should be considered in evaluating forward-looking statements, and undue
reliance should not be placed on such statements.

                 FIVE-YEAR SUMMARY OF SELECTED FINANCIAL DATA


<TABLE>
<CAPTION>
                                                 2001         2000         1999         1998         1997
(Dollars in Thousands, Except Per Share Data) -----------  -----------  -----------  -----------  -----------
<S>                                           <C>          <C>          <C>          <C>          <C>
   Year-End Balance Sheet Data
   Total Assets.............................. $ 2,046,657  $ 2,085,997  $ 1,979,774  $ 1,795,990  $ 1,613,405
   Investment Securities.....................     170,354      180,375      178,246      159,583      162,886
   Loans.....................................   1,756,486    1,784,475    1,702,181    1,544,243    1,370,943
      Business...............................     512,738      312,757      235,941      178,933      124,467
      Residential............................     292,503      466,125      481,034      536,125      503,213
      Other..................................     951,245    1,005,593      985,206      829,185      743,263
   Deposits..................................   1,379,478    1,399,983    1,312,115    1,227,918    1,107,555
      Non-Interest-Bearing Demand............     165,023      123,836      113,780      129,043       90,612
      Interest-Bearing Demand................     140,175      115,651      117,674      102,305      101,384
      Savings................................     447,832      375,331      361,179      376,728      314,337
      Certificates of Deposit................     626,448      785,165      719,482      619,842      601,222
   Short-Term Borrowings.....................     121,082      117,725       98,754       54,219       75,751
   Federal Home Loan Bank Advances...........     296,647      336,754      366,854      327,247      257,458
   Shareholders' Equity......................     209,031      198,812      177,103      165,970      153,036
   Selected Operations Data
   Net Interest Income....................... $    74,049  $    77,768  $    70,851  $    63,851  $    64,034
   Provision for Losses on Loans.............      15,228        9,756        9,410        9,780       10,700
   Non-Interest Income.......................      43,963       25,638       26,958       22,676       16,950
   Non-Interest Expense......................      70,501       53,728       52,346       45,756       41,104
   Net Earnings..............................      20,009       24,817       22,733       19,147       17,744
   Basic Earnings Per Common Share...........        1.29         1.58         1.45         1.20         1.12
   Diluted Earnings Per Common Share.........        1.25         1.55         1.42         1.15         1.09
   Dividends Declared Per Common Share.......       0.512        0.448        0.416        0.384        0.320
   Selected Ratios
   Net Interest Margin.......................        3.69%        3.90%        3.92%        3.88%        4.39%
   Return on Average Total Assets............        0.95         1.20         1.20         1.12         1.17
   Return on Average Shareholders' Equity....        9.60        13.28        13.37        11.96        12.16
   Average Shareholders' Equity to
     Average Total Assets....................        9.89         9.04         9.00         9.33         9.66
   Dividend Payout Ratio.....................       39.69        28.35        28.69        32.00        28.57
   Average Common Shares Outstanding
   Basic.....................................  15,569,956   15,716,234   15,722,681   15,919,463   15,804,519
   Diluted...................................  15,998,976   15,997,179   16,049,598   16,571,215   16,313,433
</TABLE>

  All share and per share data has been restated to reflect the five-for-four
stock split declared on January 16, 2002.

                                      3

<PAGE>

                            DESCRIPTION OF BUSINESS

   First Indiana Corporation ("First Indiana" or the "Corporation") is an
Indiana corporation formed in 1986. The Corporation is the holding company for
First Indiana Bank, N.A. (the "Bank"), the largest bank headquartered in
Indianapolis; and Somerset Financial Services, LLC ("Somerset"), an accounting
and consulting firm. Somerset Financial Services was acquired by the
Corporation in a merger completed on September 29, 2000.

   In the third quarter of 2001, the Federal Reserve Board approved the
Corporation's bank holding company application, and the Comptroller of the
Currency approved the conversion of First Indiana Bank from a federal savings
bank to a national bank. Effective August 1, 2001, First Indiana Bank became a
national bank and the thrift charter was surrendered. Effective September 25,
2001, the Federal Reserve Board approved the Corporation's election to become a
financial holding company. As a financial holding company, the Corporation may
engage in activities that are financial in nature or incidental to a financial
activity.

   The Bank is engaged primarily in the business of attracting deposits from
the general public and originating commercial loans and consumer loans. The
Bank offers a full range of banking services through 26 offices in central
Indiana. The Bank also originates home equity loans in 46 states through a
national independent agent network. The Bank has construction and consumer loan
service offices in Indiana, Arizona, Florida, Illinois, North Carolina, Oregon,
and Ohio. One Investment Partners, a subsidiary of the Bank, purchases and
sells loan participations originated outside of Indiana by the Bank and others
in the secondary market.

   Through Somerset Financial Services and FirstTrust Indiana, a division of
First Indiana Bank, First Indiana offers a full array of financial services,
including tax planning and preparation, accounting services, retirement and
estate planning, and investment advisory and trust services. Somerset also has
an extensive consulting practice spanning construction services, health care,
entrepreneurial activities, real estate, information technology, and risk
management.

                         CRITICAL ACCOUNTING POLICIES

   The accounting and reporting policies of the Corporation and its
subsidiaries conform to accounting principles generally accepted in the United
States of America. In preparing the Consolidated Financial Statements,
management is required to make estimates and assumptions that affect the
reported amounts of assets and liabilities as of the date of the balance sheet
and revenues and expenses for the period. Actual results could differ
significantly from those estimates. Material estimates that are particularly
susceptible to significant change in the near term relate to the determination
of the allowance for loan losses, assumptions used to value the loan servicing
rights, and the determination of the valuation allowance for deferred taxes.

Allowance for Loan Losses

   An allowance has been established for loan losses. The provision for loan
losses charged to operations is based on management's judgment of current
economic conditions and the credit risk of the loan portfolio. Management
believes that this allowance is adequate for the losses inherent in the loan
portfolio. While management uses available information to recognize losses on
loans, future additions to the allowance may be necessary based on changes in
economic conditions. In addition, various regulatory agencies, as an integral
part of their examination process, periodically review this allowance and may
require the Corporation to recognize additions to the allowance based on their
judgment about information available to them at the time of their examination.

Loan Servicing Rights

   The Corporation accounts for loan servicing rights under the provisions of
Financial Accounting Standards Board ("FASB") Statement No. 140, "Accounting
for Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities (a replacement of FASB Statement No. 125)." Loan servicing rights
are periodically evaluated for impairment by stratifying them based on
predominant risk characteristics of the

                                      4

<PAGE>

underlying serviced loans. These risk characteristics include loan type (fixed
or adjustable rate), investor type (FHLMC, GNMA, private), term, note rate,
lien position, and year of origination. Impairment represents the excess of
carrying value of an individual loan servicing rights stratum over its
estimated fair value and is recognized through a valuation allowance. Fair
values for individual strata are based on the present value of estimated future
cash flows using a discount rate commensurate with the risks involved.
Estimates of fair value include assumptions about prepayment, default and
interest rates, and other factors, which are subject to change over time.
Changes in these underlying assumptions could cause the fair value of loan
servicing rights, and the related valuation allowance, to change significantly
in the future.

Valuation Allowance for Deferred Taxes

   Deferred income tax assets and liabilities result from temporary differences
in the recognition of income and expense for income tax and financial reporting
purposes. In assessing the realizability of deferred tax assets, management
considers whether it is more likely than not that some portion or all of the
deferred tax assets will not be realized. The ultimate realization of deferred
tax assets is dependent upon the generation of future taxable income during the
periods in which those temporary differences become deductible. Management
considers the scheduled reversal of deferred tax liabilities, projected future
taxable income, and tax planning strategies in making this assessment. Based
upon the level of historical taxable income and projections for future taxable
income over the periods which the deferred tax assets are deductible,
management believes it is more likely than not the Corporation will realize the
benefits of these deductible differences. The amount of the deferred tax asset
considered realizable, however, could be reduced in the near term if estimates
of future taxable income are reduced.

                        STATEMENT OF EARNINGS ANALYSIS

Earnings Summary

   First Indiana reported net income of $20,009,000, or $1.25 per diluted
share, in 2001, compared to $24,817,000, or $1.55 per diluted share, in 2000.
Earnings in 2001 were unfavorably affected by an increase of $5,472,000 in the
provision for loan losses over 2000 and the charge-off of $4,066,000 of
overdrafts by a commercial banking client. Net income in 1999 was $22,733,000,
or $1.42 per diluted share. Earnings for 1999 include the effect of the sale of
deposits of First Indiana's five Evansville-area branches and its de-emphasis
of the mortgage banking business. These two events added $995,000, or $0.06 per
diluted share, to 1999 earnings.

   Returns on average common equity and average assets for 2001 were 9.60
percent and 0.95 percent, compared to 13.28 percent and 1.20 percent, in 2000
and 13.37 percent and 1.20 percent, in 1999.

   On January 16, 2002, the Board of Directors approved a five-for-four stock
split to be effected on February 27, 2002, to shareholders of record as of
February 13, 2002. All share and per share information has been restated to
reflect the stock split.

Net Interest Income

   Net interest income is the principal source of First Indiana's earnings. Net
interest income is interest income on earning assets less interest expense on
interest-bearing liabilities. Net interest income is affected by several
factors, including the volume, pricing, mix and maturity of earning assets and
interest-bearing liabilities, interest rate fluctuations, and asset quality.

   Net interest income was $74,049,000 in 2001, compared with $77,768,000 in
2000 and $70,851,000 in 1999. Earning assets averaged $2,006,008,000 in 2001
and remained relatively flat compared to $1,994,909,000 in 2000. Earning assets
averaged $1,805,921,000 in 1999. Net interest margin is calculated as the
percentage of net interest income to average earning assets. Net interest
margin was 3.69 percent in 2001, compared to 3.90 percent in 2000 and 3.92
percent in 1999. The Federal Reserve Board reduced interest rates 11 times in
2001, and rapidly falling interest rates, combined with a net asset-sensitive
position within a one-year time period, put

                                      5

<PAGE>

downward pressure on net interest income and net interest margin in 2001. An 11
percent increase in lower-cost demand and savings deposits on average in 2001
helped to partially offset the impact of the rate reductions on the net
interest margin.

   The 9.8 percent increase in net interest income in 2000 over 1999 is
primarily due to growth in earning assets, driven by business and home equity
loan growth partially offset by a decline in residential loans. The net
interest margin was maintained in 2000, despite upward pressure on deposit
costs and the effect of partially funding the Somerset Group merger with cash.

   Net interest margin consists of two components: interest rate spread and the
contribution of interest-free funds (primarily shareholders' equity and other
non-interest-bearing liabilities). Interest rate spread is the difference
between the yield on total earning assets and the cost of total
interest-bearing liabilities. The interest rate spread for 2001 was 3.02
percent, compared with 3.18 percent in 2000 and 3.28 percent in 1999. Interest
rate spread declined in 2001 as earning assets repriced downward faster than
interest-bearing liabilities.

   The contribution of interest-free funds to net interest margin varies
depending on the level of interest-free funds and the level of interest rates.
Average interest-free funds provided 67 basis points to the margin in 2001,
compared with 72 basis points in 2000 and 64 basis points in 1999. Although
interest-free funds increased on average in 2001, their impact declined
compared to 2000 due to the lower interest rate environment.

Net Interest Margin

<TABLE>
<CAPTION>
                                                 2001                       2000                       1999
                                      -------------------------  -------------------------  -------------------------
                                      Avererage           Yield/  Average            Yield/  Average            Yield/
                                       Balance   Interest  Rate   Balance   Interest  Rate   Balance   Interest  Rate
(Dollars in Thousands)                ---------- -------- ------ ---------- -------- ------ ---------- -------- ------
<S>                                   <C>        <C>      <C>    <C>        <C>      <C>    <C>        <C>      <C>
Assets
   Federal Funds Sold................ $   13,463 $    478  3.55% $   12,432 $    786  6.32% $    8,572 $    411  4.79%
   Securities Available for Sale.....    155,767    9,880  6.34     153,678   10,401  6.77     153,706    9,502  6.18
   Federal Home Loan Bank and
    Federal Reserve Bank Stock.......     21,968    1,627  7.41      21,591    1,746  8.09      17,977    1,476  8.21
   Loans (1)
    Business.........................    417,517   32,003  7.67     273,513   26,657  9.75     205,877   17,652  8.57
    Consumer.........................    719,516   63,972  8.89     734,128   69,013  9.40     629,720   57,442  9.12
    Residential Mortgage.............    394,583   27,629  7.00     516,897   38,161  7.38     487,499   35,708  7.32
    Single-Family Construction.......    231,125   17,341  7.50     240,745   22,216  9.23     269,406   21,328  7.92
    Commercial Real Estate...........     52,069    4,198  8.06      41,925    3,830  9.14      33,164    2,907  8.77
                                      ---------- --------        ---------- --------        ---------- --------
   Total Loans.......................  1,814,810  145,143  8.00   1,807,208  159,877  8.85   1,625,666  135,037  8.31
                                      ---------- --------        ---------- --------        ---------- --------
  Total Earning Assets...............  2,006,008  157,128  7.83   1,994,909  172,810  8.66   1,805,921  146,426  8.11
  Other Assets.......................    101,446                     72,604                     82,917
                                      ----------                 ----------                 ----------
Total Assets......................... $2,107,454                 $2,067,513                 $1,888,838
                                      ==========                 ==========                 ==========
Liabilities and Shareholders' Equity
   Interest-Bearing Deposits
    Demand Deposits.................. $  124,139 $  1,620  1.30% $  118,641 $  1,830  1.54% $  123,118 $  2,338  1.90%
    Savings Deposits.................    413,397   13,526  3.27     363,643   16,466  4.53     375,684   15,418  4.10
    Certificates of Deposit..........    745,522   44,851  6.02     771,363   46,957  6.09     681,930   36,717  5.38
                                      ---------- --------        ---------- --------        ---------- --------
   Total Interest-Bearing Deposits...  1,283,058   59,997  4.68   1,253,647   65,253  5.21   1,180,732   54,473  4.61
   Short-Term Borrowings.............    112,991    4,301  3.81     107,849    6,384  5.92      56,348    2,793  4.96
   Federal Home Loan Bank
    Advances.........................    329,858   18,781  5.69     370,763   23,405  6.31     328,470   18,309  5.57
                                      ---------- --------        ---------- --------        ---------- --------
  Total Interest-Bearing Liabilities.  1,725,907   83,079  4.81   1,732,259   95,042  5.48   1,565,550   75,575  4.83
  Non-Interest-Bearing Demand
   Deposits..........................    126,910                    109,051                    115,422
  Other Liabilities..................     46,307                     39,265                     37,827
  Shareholders' Equity...............    208,330                    186,938                    170,039
                                      ----------                 ----------                 ----------
Total Liabilities and Shareholders'
 Equity.............................. $2,107,454                 $2,067,513                 $1,888,838
                                      ========== --------        ========== --------        ========== --------
Net Interest Income/Spread...........            $ 74,049  3.02%            $ 77,768  3.18%            $ 70,851  3.28%
                                                 ========  ====             ========  ====             ========  ====
Net Interest Margin..................                      3.69%                      3.90%                      3.92%
                                                           ====                       ====                       ====
</TABLE>
--------
(1) Included in loans are loans held for sale totaling $34.9 million, $49.2
    million, and $32.6 million in 2001, 2000, and 1999, and non-accrual loans.

                                      6

<PAGE>

   The following table shows the impact on net interest income of changes in
interest rates and volume of the Corporation's assets and liabilities. The
change in interest not due solely to rate or volume has been allocated in
proportion to the absolute dollar amounts of the change in each.

<TABLE>
<CAPTION>
                                       2001 Compared with 2000      2000 Compared with 1999
                                    ----------------------------  ---------------------------
                                    Increase (Decrease)           Increase (Decrease)
                                     Due to Change in              Due to Change In
                                    ------------------            ------------------
                                                          Net                         Net
                                      Rate     Volume    Change     Rate     Volume  Change
(Dollars in Thousands)              --------   -------  --------   ------   -------  -------
<S>                                 <C>        <C>      <C>       <C>       <C>      <C>
Interest Income
   Federal Funds Sold.............. $   (345)  $    37  $   (308) $  131    $   244  $   375
   Securities Available for Sale...     (654)      133      (521)    901         (2)     899
   FHLB and FRB Stock..............     (147)       28      (119)    (22)       292      270
   Loans...........................  (15,342)      608   (14,734)  8,780     16,060   24,840
                                    --------   -------  --------   ------   -------  -------
                                     (16,488)      806   (15,682)  9,790     16,594   26,384
                                    --------   -------  --------   ------   -------  -------
Interest Expense
   Interest-Bearing Deposits
       Demand Deposits.............     (282)       72      (210)   (439)       (69)    (508)
       Savings Deposits............   (4,568)    1,628    (2,940)  1,593       (545)   1,048
       Certificates of Deposit.....     (551)   (1,555)   (2,106)  4,378      5,862   10,240
   Short-Term Borrowings...........   (2,295)   (2,329)   (4,624)    542      3,049    3,591
   FHLB Advances...................   (2,279)      196    (2,083)  2,426      2,670    5,096
                                    --------   -------  --------   ------   -------  -------
                                      (9,975)   (1,988)  (11,963)  8,500     10,967   19,467
                                    --------   -------  --------   ------   -------  -------
Net Interest Income................ $ (6,513)  $ 2,794  $ (3,719) $1,290    $ 5,627  $ 6,917
                                    ========   =======  ========   ======   =======  =======
</TABLE>

Non-Interest Income

   The following table shows First Indiana's non-interest income for the past
three years.

<TABLE>
<CAPTION>
                                                   Years Ended December 31
                              ----------------------------------------------------------------
                                         Increase (Decrease)          Increase (Decrease)
                                         ------------------           -----------------
                               2001       Amount     Percent  2000     Amount    Percent   1999
(Dollars in Thousands)        -------     -------    ------- -------  -------    -------  -------
<S>                           <C>        <C>         <C>     <C>      <C>        <C>      <C>
Loan and Deposit Charges..... $12,643    $ 5,361       73.6% $ 7,282  $ 1,221      20.1%  $ 6,061
Loan Servicing Income........     962       (297)     (23.6)   1,259       39       3.2     1,220
Loan Fees....................   3,736        369       11.0    3,367     (259)     (7.1)    3,626
Trust Fees...................   2,284        557       32.3    1,727      647      59.9     1,080
Other Financial Services Fees   9,561      7,509      365.9    2,052    2,052     100.0        --
Insurance Commissions........   1,945      1,394      253.0      551      443     410.2       108
Sale of Loans................   9,240      4,190       83.0    5,050   (2,367)    (31.9)    7,417
Sale of Loan Servicing.......      --     (1,251)    (100.0)   1,251      346      38.2       905
Sale of Investment Securities     543        711      423.2     (168)   2,847      94.4    (3,015)
Sale of Deposits.............      --         --         --       --   (7,590)   (100.0)    7,590
Other........................   3,049       (218)      (6.7)   3,267    1,301      66.2     1,966
                              -------     -------            -------  -------             -------
                              $43,963    $18,325       71.5% $25,638  $(1,320)     (4.9)% $26,958
                              =======     =======            =======  =======             =======
</TABLE>

   Non-interest income totaled $43,963,000 in 2001, compared with $25,638,000
in 2000 and $26,958,000 in 1999. The increase in non-interest income in 2001
was broad-based and was fueled by First Indiana's strategy of expanding client
relationships, the merger with The Somerset Group, Inc. in September 2000, and
asset sales.

                                      7

<PAGE>

   Loan and deposit charges increased 73.6 percent to $12,643,000 in 2001
following a 20.1 percent increase in 2000 to $7,282,000. The growth in 2001
resulted from the introduction of a new deposit product and an expanded core
checking and savings account base. Growth in core deposits is attributable to
the Corporation's successful execution of its strategy to build long-term
relationships and the uncertain economic environment, which led consumers to
increase their liquid funds. The increased account base led to volume-related
growth in fees. The growth in loan and deposit charges in 2000 reflected a
significant increase in consumer and business checking accounts in 2000 due to
marketing efforts and the fallout of mergers between other banks in the market.

   Loan servicing income was $962,000 in 2001 compared to $1,259,000 in 2000.
The decrease in loan servicing income is due to a reduction in loans serviced
for others. The Corporation's residential loans serviced for others decreased
to $446,268,000 at December 31, 2001 from $611,227,000 at December 31, 2000.
This decrease in residential loan servicing is consistent with the Bank's
strategy to de-emphasize the residential mortgage banking business. Another
factor in the decrease is loan prepayments due to the current low interest rate
environment. Consumer loans serviced for others totaled $387,068,000 at
year-end 2001, compared to $368,783,000 at year-end 2000.

   FirstTrust Indiana, the Bank's investment advisory and trust division,
completed its third full year of operations in 2001. Assets under management by
FirstTrust were $673,668,000, $593,563,000, and $447,477,000 at year-end 2001,
2000, and 1999, respectively.

   Other financial services fees and insurance commissions include the fee
income of Somerset Financial Services and First Indiana Investor Services,
Inc., both of which have been included in the Corporation's results since its
merger with The Somerset Group on September 29, 2000.

   Gain on the sale of loans totaled $9,240,000 in 2001, compared to $5,050,000
in 2000 and $7,417,000 in 1999. Although the volume of loans sold in 2001
declined from 2000, the gain on sale of loans increased, primarily due to
improved sales prices resulting from declining interest rates. The decrease in
gain on sale of loans in 2000 compared to 1999 resulted from a decrease in the
volume of loans sold. The gain on the sale of loans in 2001 consists primarily
of gains on the sale of fixed-rate home equity loans. Consumer loans sold were
$257,698,000 in 2001, compared with $270,191,000 in 2000 and $297,052,000 in
1999. Residential loans sold were $2,395,000 in 2001, compared with $88,053,000
in 2000 and $410,900,000 in 1999. The decrease in residential loan sales is
consistent with the Bank's strategy to de-emphasize the residential mortgage
banking business, which resulted in fewer residential loan originations.

   During 2000, the Bank sold $216,227,000 in out-of-market loan servicing at a
gain of $1,251,000. In 1999, the Bank sold $148,000,000 in out-of-market loan
servicing at a gain of $905,000. The Corporation recorded a gain on the sale of
investment securities of $543,000 in 2001, compared to a loss of $168,000 in
2000 and a loss of $3,015,000 in 1999. Non-interest income in 1999 includes a
gain of $7,590,000 from the sale of the Evansville branches and deposits.

   Other non-interest income totaled $3,049,000 in 2001, compared to $3,267,000
in 2000 and $1,966,000 in 1999. Other non-interest income included a gain on
the sale of a former branch building totaling $561,000 in 2001 and a loss on
the sale of fixed assets totaling $770,000 relating to the sale of Evansville
deposits in 1999. Amortization of negative goodwill was $1,895,000 for each of
the years 2000 and 1999. Negative goodwill was fully amortized by year-end
2000. Customer fee revenue included in other non-interest income increased over
the three-year period as a result of increased fees, an expanded customer base,
and new products.

                                      8

<PAGE>

Non-Interest Expense

   The following table shows First Indiana's non-interest expense for the past
three years.

<TABLE>
<CAPTION>
                                                            Years Ended December 31
                                       -----------------------------------------------------------------
                                                    Increase (Decrease)          Increase (Decrease)
                                                    ------------------           ------------------
                                        2001         Amount     Percent  2000     Amount     Percent  1999
(Dollars in Thousands)                 -------       -------    ------- -------  ------      ------- -------
<S>                                    <C>          <C>         <C>     <C>      <C>         <C>     <C>
Salaries.............................. $30,630      $ 6,724       28.1% $23,906  $  415         1.8% $23,491
Benefits..............................   6,090        1,545       34.0    4,545    (116)       (2.5)   4,661
Net Occupancy.........................   3,724          820       28.2    2,904     (38)       (1.3)   2,942
Equipment.............................   7,056          951       15.6    6,105     280         4.8    5,825
Professional Services.................   4,122          868       26.7    3,254      97         3.1    3,157
Marketing.............................   2,424         (486)     (16.7)   2,910     492        20.3    2,418
Telephone, Supplies, and Postage......   3,515          572       19.4    2,943    (528)      (15.2)   3,471
Goodwill Amortization.................     920          641      229.7      279     208       293.0       71
Other Real Estate Owned Operations--
  Net.................................     401           (3)      (0.7)     404     484       605.0      (80)
Deposit Insurance.....................     267           (4)      (1.5)     271    (441)      (61.9)     712
Miscellaneous.........................  11,352        5,145       82.9    6,207     529         9.3    5,678
                                       -------       -------            -------   ------             -------
                                       $70,501      $16,773       31.2% $53,728  $1,382         2.6% $52,346
                                       =======       =======            =======   ======             =======
Full Time Equivalent Staff at Year-End     693                              648                          561
Efficiency Ratio--First Indiana
  Corporation.........................   59.74%                           51.96%                       53.52%
Efficiency Ratio--First Indiana Bank..   53.61                            48.03                        50.93
</TABLE>

   Non-interest expense in 2001 was $70,501,000, compared to $53,728,000 in
2000. The inclusion of The Somerset Group following the merger on September 29,
2000 increased non-interest expense in 2001 by $10,647,000. The increase in
salaries and benefits, net occupancy, equipment, and goodwill amortization
expense in 2001 over 2000 is primarily due to the addition of The Somerset
Group's operations. Professional services expense increased in 2001, primarily
due to expenses associated with legal fees incurred for new loans and problem
loans and expenses incurred to change the Bank's charter from a thrift to a
national bank and for acquisition initiatives. Marketing expense was $2,424,000
in 2001, compared to $2,910,000 in 2000. Miscellaneous non-interest expense
totaled $11,352,000 in 2001 compared to $6,207,000 in the prior year. The
write-off of $4,066,000 in overdrafts by a commercial banking client is
included in miscellaneous non-interest expense in 2001. Other factors
influencing the increase in miscellaneous non-interest expense include expenses
associated with a new retail product offering, new selective insurance coverage
relating to high loan-to-value loans, and price increases in general insurance.

   Non-interest expense in 2000 was $53,728,000, an increase of 2.6 percent
over $52,346,000 in 1999. In the fourth quarter of 2000, approximately
$2,644,000 of non-interest expense was added as a result of the addition of The
Somerset Group operations. The year-to-year comparison is also affected by the
recognition of $1,581,000 in expenses due to the Bank's de-emphasis of the
mortgage banking business and the sale of the Evansville branches and deposits
in the third quarter of 1999. As a result of these actions, the Bank had a
lower non-interest expense base beginning in the fourth quarter of 1999.

   The Corporation's efficiency ratio for the year 2001 was 59.74 percent,
compared to 51.96 percent in 2000 and 53.52 percent in 1999. Excluding the
impact of the write-offs of the overdrafts from a commercial banking client,
the efficiency ratio would have been 56.30 percent for 2001. In 2001, the
efficiency ratio increased from its historical levels due to the merger of The
Somerset Group, which by the nature of its business has a higher level of
non-interest expense as a percentage of revenue. Additionally, the decrease in
net interest income in 2001 compared to 2000 had a negative impact on the
efficiency ratio. The Bank's efficiency ratio for the year 2001 was 53.61
percent, compared to 48.03 percent in 2000 and 50.93 percent in 1999. The
overdraft write-off of $4,066,000 had the effect of increasing the Bank's
efficiency ratio 375 basis points in 2001.

                                      9

<PAGE>

Income Tax Expense

   The following table shows the Corporation's income before income taxes, as
well as applicable income taxes and effective tax rates for each of the past
three years.

<TABLE>
<CAPTION>
                                         2001     2000     1999
             (Dollars in Thousands)     -------  -------  -------
             <S>                        <C>      <C>      <C>
             Income Before Income Taxes $32,283  $39,922  $36,053
             Income Taxes..............  12,274   15,105   13,320
             Effective Tax Rate........    38.0%    37.8%    36.9%
</TABLE>

   The Corporation's effective tax rate has remained relatively stable over the
past three years. Additional data on income taxes can be found in Note 10 of
the Notes to Consolidated Financial Statements.

                              FINANCIAL CONDITION

   First Indiana's total assets at December 31, 2001 were $2,046,657,000,
compared to $2,085,997,000 at December 31, 2000.

Loans

   General.  Loans outstanding totaled $1,756,486,000 at year-end 2001, a
slight decrease from $1,784,475,000 one year earlier. Growth occurred in the
targeted portfolio of business loans, while consumer and residential mortgage
loans outstanding decreased as a result of prepayments due to the lower
interest rate environment. Residential mortgages also decreased as a result of
the Corporation's strategic decision in 1999 to de-emphasize the mortgage
banking business.

   Loan Portfolio Composition. The following table sets forth information
concerning the composition of the Bank's loan portfolio in dollar amounts and
in percentages by type of loan.

<TABLE>
<CAPTION>
                                                                   At December 31
                           ---------------------------------------------------------------------------------------------
                                  2001               2000               1999               1998               1997
                           -----------------  -----------------  -----------------  -----------------  -----------------
                             Amount   Percent   Amount   Percent   Amount   Percent   Amount   Percent   Amount   Percent
(Dollars in Thousands)     ---------- ------- ---------- ------- ---------- ------- ---------- ------- ---------- -------
<S>                        <C>        <C>     <C>        <C>     <C>        <C>     <C>        <C>     <C>        <C>
Business Loans............ $  512,738   29.2% $  312,757   17.5% $  235,941   13.9% $  178,933   11.6% $  124,467    9.1%
Consumer Loans............
   Home Equity Loans......    664,692   37.8     737,370   41.4     665,177   39.1     565,932   36.7     528,185   38.5
   Other Consumer Loans...     10,419    0.6      10,920    0.6      10,584    0.5      14,593    0.9      19,831    1.4
Residential Mortgage Loans    292,503   16.7     466,125   26.1     481,034   28.3     536,125   34.7     503,213   36.7
Single-Family Construction
 Loans....................    224,926   12.8     207,569   11.6     274,010   16.1     216,059   14.0     155,680   11.4
Commercial Real Estate
 Loans....................     51,208    2.9      49,734    2.8      35,435    2.1      32,601    2.1      39,567    2.9
                           ----------  -----  ----------  -----  ----------  -----  ----------  -----  ----------  -----
      Total Loans......... $1,756,486  100.0% $1,784,475  100.0% $1,702,181  100.0% $1,544,243  100.0% $1,370,943  100.0%
                           ==========  =====  ==========  =====  ==========  =====  ==========  =====  ==========  =====
</TABLE>

   Commercial Loans. The Bank offers a variety of commercial loans, including
business loans, single-family construction loans, and commercial real estate
loans. The commercial segment of the loan portfolio is diversified by industry
and by relative size of loan relationships. The Bank had no more than seven
percent of commercial loans outstanding to any one industry subgroup at
December 31, 2001. Of the 112 business loan relationships over $1,000,000, only
14 were over $10,000,000, including four over $15,000,000. The average of these
business relationships was $4,586,000.

   Business loans include loans to small and middle market companies in central
Indiana, as well as land development loans to borrowers in Indianapolis,
Indiana; Charlotte and Raleigh, North Carolina; Portland, Oregon; Phoenix,
Arizona; and Orlando, Florida. Over the past four years, First Indiana has
expanded its efforts in business lending and treasury management services.
Rather than concentrating exclusively on lending

                                      10

<PAGE>

transactions, First Indiana's sales force takes a holistic approach to its
customers, with the goal of learning about all of their business and personal
needs and recommending a comprehensive solution, including treasury management
services, benefits consulting, and tax planning. First Indiana's merger with
The Somerset Group was designed to facilitate this holistic approach.

   As reflected in the table above, First Indiana's strategies have resulted in
significant growth in business loans in each of the last four years. Business
loans increased 63.9 percent to $512,738,000 at December 31, 2001, compared
with $312,757,000 one year earlier. Strategies for 2002 and beyond call for
continued growth in this market segment.

   The majority of First Indiana's business loans have variable rates, which
provide immediate adjustments when interest rate changes occur. This portfolio
of loans is widely diversified with loans to companies in a variety of
industries, including distribution, manufacturing, transportation, finance, and
various services. This diversification minimizes industry concentration risks
and allows for management of risks due to changing economic conditions.

   Included in business loans at December 31, 2001, are $69,277,000 in land
development loans, which are exclusively for the acquisition and development of
land into individual single-family building lots. The interest rate on land
development loans is generally in excess of the Bank's prime rate and the term
of these loans is generally 36 months or less.

   Single-family construction loans are made both to builders and to
individuals. The Bank originates construction loans through its lending offices
in Indianapolis, Indiana; Charlotte and Raleigh, North Carolina; Portland,
Oregon; Phoenix, Arizona; and Orlando, Florida. These loans have terms ranging
from six months to one year. At December 31, 2001 and 2000, the Bank's
construction loans outstanding equaled $224,926,000 and $207,569,000,
respectively.

   Commercial real estate loans were $51,208,000 at December 31, 2001, compared
to $49,734,000 one year earlier. The Bank's portfolio of real estate loans
includes office buildings, strip centers, and multi-family units in
Indianapolis, Indiana; Charlotte and Raleigh, North Carolina; Portland, Oregon;
Phoenix, Arizona; and Orlando, Florida. The Bank's construction lending offices
in these cities are a source of business referrals. The usual term of these
loans is three to five years.

   The following table presents the remaining maturities and rate sensitivity
of business and single-family construction loans.

<TABLE>
<CAPTION>
                                     Remaining Maturities
                               --------------------------------
                               One Year Over One Year Over Five
                               or Less  to Five Years   Years    Total   Percent
(Dollars in Thousands)         -------- ------------- --------- -------- -------
<S>                            <C>      <C>           <C>       <C>      <C>
Type of Loan:
   Business................... $453,558    $55,168     $4,012   $512,738  69.51%
   Single-Family Construction.  213,680     11,246         --    224,926  30.49
                               --------    -------     ------   -------- ------
       Total.................. $667,238    $66,414     $4,012   $737,664 100.00%
                               ========    =======     ======   ======== ======
Rate Sensitivity:
   Fixed-Rate................. $ 27,377    $55,168     $4,012   $ 86,557  11.73%
   Adjustable-Rate............  639,861     11,246         --    651,107  88.27
                               --------    -------     ------   -------- ------
       Total.................. $667,238    $66,414     $4,012   $737,664 100.00%
                               ========    =======     ======   ======== ======
</TABLE>

   Consumer Loans. At December 31, 2001, consumer loans totaled $675,111,000,
of which $34,756,000 were held for sale, compared with $748,290,000 and
$675,761,000, of which $48,882,000 and $26,571,000 were held for sale, at
December 31, 2000 and 1999, respectively. Consumer loans include primarily home
equity loans and home equity lines of credit. The Bank experienced a decrease
in consumer loans outstanding in 2001 as a

                                      11

<PAGE>

result of prepayments. Additionally, the balance of consumer loans held for
sale was lower at year-end 2001 compared to 2000. Consumer loans generally have
shorter terms and higher interest rates than residential loans but involve
higher credit risk. Of the $675,111,000 consumer loans outstanding at December
31, 2001, 98.5 percent were secured by first or second mortgages on real
property.

   The Bank originates a full range of fixed-rate consumer loans with varying
levels of credit risk. These range from "A" credits to the Bank's retail
customers, which may be kept in the portfolio, to sub-prime credits, which are
originated for sale. These loans carry a loan-to-value ratio of up to 115
percent. The Bank typically retains the lower loan-to-value loans in its
portfolio and sells the higher loan-to-value loans. The Bank has a group of
investors which regularly purchases these loans. During 2001, the Bank sold
$257,698,000 in loans, compared to $270,191,000 in 2000 and $297,052,000 in
1999. The Bank offers revolving lines of credit secured by a lien on the equity
in the borrower's home in amounts up to 100 percent of the appraised value of
the real estate. The Bank retains all line of credit loans in its portfolio.
The Bank makes loans secured by deposits and overdraft loans in connection with
its checking accounts. In addition, the Bank also offers auto loans;
fixed-rate, fixed-term secured and unsecured loans; and Visa credit cards
through an agent.

   Residential Mortgage Loans. Residential mortgage loans outstanding totaled
$292,503,000 at December 31, 2001, compared to $466,125,000 and $481,034,000 at
year-end 2000 and 1999, respectively. The decrease in residential mortgage
loans is the result of prepayments due to the lower interest rate environment
in 2001, as well as the Bank's decision in the third quarter of 1999 to
de-emphasize the traditional mortgage banking business. Mortgage lending has
become a commodity business where the only differentiating factor for most
customers is a low rate; consequently, First Indiana shifted its emphasis into
products and services where the Bank could add value by building long-term
relationships. The initial result of this strategy change was a decrease in
residential loan originations. Residential mortgage loan originations amounted
to $771,000 in 2001, compared with $42,821,000 in 2000 and $479,178,000 in
1999. Another result was a reduction in the sales of residential mortgage loans
into the secondary market as part of the Bank's normal mortgage banking
activity. During 2001, the Bank sold $2,395,000 in residential mortgage loans,
compared to $88,053,000 in 2000 and $410,900,000 in 1999. Sales in 2000
included $76,121,000 of low-yielding residential loans, which were sold in
order to free up liquidity to originate more profitable business and consumer
loans. Residential loan sales in 2001 produced gains of $63,000 compared with
losses of $1,234,000 during 2000 and gains of $1,252,000 in 1999.

   The original contractual loan payment period for residential mortgage loans
originated by the Bank normally ranges from 10 to 30 years. Because borrowers
may refinance or prepay their loans, they normally remain outstanding for a
substantially shorter period.

   Origination of Loans. Loan originations come from a number of sources.
Business loans are originated through Bank loan officers and banking center
managers. Construction loan originations are obtained primarily by direct
solicitation of builders and repeat business from builders. Multi-family and
commercial real estate loan originations are obtained from previous borrowers
and direct contacts with the Bank. Consumer loans come from retail customers
and loan brokers through the Bank's loan originators. The Bank originates home
equity loans through a national network of loan originators, which has expanded
to include 46 states. Residential loan originations are offered as an
accommodation to retail and private banking customers and brokered into the
secondary market or retained in the Bank's portfolio.

   The Bank obtains title insurance on many secured properties and requires
borrowers to obtain hazard insurance and, if applicable, flood insurance. First
Indiana's appraisers note any obvious environmental problems, and the title
companies used to close loans give the Bank an endorsement insuring over any
existing environmental liens.

   Interest rates charged by the Bank on its loans are affected primarily by
the demand for such loans and the supply of money available for lending
purposes. These factors are in turn affected by general economic conditions and
such other factors as monetary policies of the federal government, including
the Federal Reserve Board; the general supply of money in the economy;
legislative tax policies; and governmental budgetary matters.

                                      12

<PAGE>

   Servicing Activity. At December 31, 2001, First Indiana serviced
approximately $387,068,000 in consumer loans and $446,268,000 in residential
loans that had been sold to other investors. As of December 31, 2001,
approximately $2,866,000 in loans, or about 0.2 percent of First Indiana's
loans receivable, were serviced by others. The total cost of home equity and
residential mortgage loans originated with the intent to sell is allocated
between the loan servicing right and the loan without servicing based on their
relative fair values at the date of sale. The capitalized cost of loan
servicing rights is amortized in proportion to, and over the period of,
estimated net servicing revenue. For this purpose, estimated servicing revenues
include late charges and other ancillary income. Estimated servicing costs
include direct costs associated with performing the servicing function and
allocations of other costs.

   Loan servicing rights are periodically evaluated for impairment by
stratifying them based on predominant risk characteristics of the underlying
serviced loans. These risk characteristics include loan type (fixed or
adjustable rate), investor type (FHLMC, GNMA, private), term, note rate, lien
position, and year of origination. Impairment represents the excess of carrying
value of an individual loan servicing rights stratum over its estimated fair
value and is recognized through a valuation allowance. Fair values for
individual strata are based on the present value of estimated future cash flows
using a discount rate commensurate with the risks involved. Estimates of fair
value include assumptions about prepayment, default and interest rates, and
other factors, which are subject to change over time. Changes in these
underlying assumptions could cause the fair value of loan servicing rights, and
the related valuation allowance, to change significantly in the future. At
December 31, 2001 and 2000, the balance of capitalized loan servicing rights
included in other assets was $9,819,000 and $8,249,000, with an estimated fair
value of $11,491,000 and $13,795,000. The amounts capitalized in 2001, 2000,
and 1999 were $4,164,000, $3,280,000, and $6,040,000, and the amounts amortized
to loan servicing income were $2,594,000, $2,147,000, and $1,919,000. During
2000, the Bank sold $216,227,000 in out-of-market loan servicing at a gain of
$1,251,000. During 1999, the Bank sold $148,000,000 in out-of-market loan
servicing at a gain of $905,000.

Investments

   The relative mix of investment securities and loans in the Bank's portfolio
is dependent upon management's evaluation of the yields available on loans
compared to investment securities. The Board of Directors has established an
investment policy, and the Investment Committee of the Board meets quarterly
with management to establish more specific investment guidelines about types of
investments, relative amounts, and maturities. Credit risk is controlled by
limiting the number, size, and type of investments and by approving the brokers
and agents through which investments are made. The Bank's current investment
guidelines limit purchases of corporate bonds to an investment rating of "A" or
better.

   At December 31, 2001, First Indiana's investments totaled $170,354,000, or
8.3 percent of total assets, and consisted primarily of U.S. government agency
securities, corporate debt securities, asset-backed securities, mortgage-backed
securities, Federal Reserve Bank ("FRB") stock, and Federal Home Loan Bank of
Indianapolis ("FHLB") stock. The Bank is required by the Federal Reserve Board
to own shares of FRB stock. FRB stock, which is a restricted investment
security, is carried at its cost of $50 par value per share. The balance at
December 31, 2001, was $900,000. In addition, as a member of the Federal Home
Loan Bank System, the Bank is required to own shares of capital stock in the
FHLB. FHLB stock is carried at its cost of $100 par value per share since it is
a restricted investment security. First Indiana's investment in FHLB stock was
$21,591,000 at December 31, 2001 and December 31, 2000. For additional
information concerning investments held by the Corporation, see the
Corporation's Consolidated Financial Statements, including Note 3.

                                      13

<PAGE>

   The distribution of securities available for sale is detailed below.

<TABLE>
<CAPTION>
                                                 December 31
                                          --------------------------
                                            2001     2000     1999
            (Dollars in Thousands)        -------- -------- --------
            <S>                           <C>      <C>      <C>
            U.S. Government Agencies..... $110,555 $106,489 $ 67,949
            Mortgage-Backed Securities...   34,569   49,181   54,734
            Other Asset-Backed Securities      210      445   15,719
            Corporate Debt Securities....    2,529    2,594   19,354
            Other Debt Securities........       --       75      147
                                          -------- -------- --------
                   Total................. $147,863 $158,784 $157,903
                                          ======== ======== ========
</TABLE>

   At December 31, 2001, securities available for sale had the following
maturity and yield characteristics.


<TABLE>
<CAPTION>
                                 Due in
                                   one        Due after one
                                 year or    year through five Due after five years   Due after
                                  less            years        through ten years     ten years       Total
                              ------------  ----------------  -------------------  ------------  -------------
                               Book           Book               Book               Book          Book
                               Value  Yield   Value     Yield    Value      Yield   Value  Yield  Value   Yield
(Dollars in Thousands)        ------- -----  --------   -----   -------    -----   ------- ----- -------- -----
<S>                           <C>     <C>   <C>         <C>   <C>          <C>     <C>     <C>   <C>      <C>
U.S. Government Agencies..... $10,347 6.29% $100,208    6.06% $    --       -- %   $    --  -- % $110,555 6.09%
Mortgage-Backed Securities...      --   --     9,526    7.15   10,386      6.87     14,657 6.94    34,569 6.94
Other Asset-Backed Securities      --   --       210    6.37       --        --         --   --       210 6.37
Corporate Debt Securities....   2,529 9.47        --      --       --        --         --   --     2,529 9.47
                              -------        --------           -------            -------       --------
       Total................. $12,876 6.91% $109,944    6.16% $10,386      6.87%   $14,657 6.94% $147,863 6.35%
                              =======        ========           =======            =======       ========
</TABLE>

Sources of Funds

   General.  Deposits are an important source of the Bank's funds for use in
lending and for other general business purposes. In addition to deposits, the
Bank derives funds from repayments of loans and mortgage-backed securities,
Federal Home Loan Bank advances, repurchase agreements, short-term borrowings,
and sales of loans. Repayments of loans and mortgage-backed securities are a
relatively stable source of funds, while deposit inflows and outflows are
significantly influenced by general interest rates and money market conditions.
Borrowings may be used to compensate for reductions in normal sources of funds,
such as deposit inflows at less than projected levels, or to support expanded
activities. Historically, the Bank's borrowings have been primarily from the
FHLB and through repurchase agreements.

   Deposits.  The Bank has a wide variety of deposit programs designed to
attract both short-term and long-term deposits from the general public. These
deposit accounts include non-interest-bearing retail and business demand
accounts, money market checking accounts, passbook savings accounts, money
market savings accounts, and fixed-rate certificates of deposit. In 2002, the
Bank plans to continue to increase checking and savings accounts in an effort
to reduce funding costs and strengthen core deposits, which further the Bank's
strategy by forming the basis of long-term relationships.

                                      14

<PAGE>

   The following table reflects the increase (decrease) in various types of
deposits offered by the Bank for each of the periods indicated.

<TABLE>
<CAPTION>
                                         2001       2000      1999
           (Dollars in Thousands)      ---------  --------  --------
           <S>                         <C>        <C>       <C>
           Non-Interest-Bearing Demand $  41,187  $ 10,056  $(14,892)
           Interest-Bearing Demand....    24,524    (2,023)    3,911
           Savings....................    72,501    14,152    (4,462)
           CDs Under $100,000.........   (48,955)  (10,897)  (37,252)
           CDs $100,000 and Greater...  (109,762)   76,580   136,892
                                       ---------  --------  --------
           Net Increase (Decrease).... $ (20,505) $ 87,868  $ 84,197
                                       =========  ========  ========
</TABLE>

   The Bank issues certificates of deposit in denominations of $100,000 and
greater through brokers as well as directly to public entities such as
municipalities and to retail customers through the branches, the Internet, and
the Call Center. At December 31, 2001, these certificates of deposit included
$149,570,000 in brokered funds, $41,753,000 in public funds, and $82,359,000 in
retail funds. The Bank's certificates of deposit of $100,000 or more at
December 31, 2001, the maturities of such deposits, and the percentage of total
deposits represented by these certificates are set forth in the table below.

<TABLE>
<CAPTION>
                                                      Over      Over Six
                                     Three Months Three Months  Months to   Over            Percent of
                                       or Less    to Six Months One Year  One Year  Total    Deposits
(Dollars in Thousands)               ------------ ------------- --------- -------- -------- ----------
<S>                                  <C>          <C>           <C>       <C>      <C>      <C>
Certificates of $100,000 and Greater   $70,831       $36,827     $65,609  $100,415 $273,682    19.8%
                                       =======       =======     =======  ======== ========    ====
</TABLE>

   Borrowings.  The FHLB of Indianapolis functions as a central reserve bank
providing credit for depository institutions in Indiana and Michigan. As a
member of the FHLB, the Bank is required to own capital stock in the FHLB and
is authorized to apply for advances on the security of such stock and certain
of the Bank's residential mortgage loans and other assets, subject to credit
standards. The FHLB advances are made pursuant to several different credit
programs, each with its own interest rate and range of maturities. At December
31, 2001, the Bank had $296,647,000 in FHLB advances, 14.5 percent of total
assets, with a weighted average interest rate of 5.28 percent. Of these
advances, $60,000,000 carried variable interest rates and $110,000,000 were
putable on certain dates at the discretion of the FHLB.

   The Bank enters into repurchase agreements with registered government
securities dealers as a short-term source of borrowing. Additionally, First
Indiana has repurchase agreements with several of its depositors, under which
clients' funds are invested daily into a non-FDIC insured interest-bearing
account. At December 31, 2001, the Bank had repurchase agreements totaling
$100,082,000, 4.9 percent of total assets, with a weighted average interest
rate of 1.69 percent. First Indiana's repurchase agreements are collateralized
by qualifying investment securities.

                                 ASSET QUALITY

   General.   The Bank's asset quality is directly affected by the credit risk
of the assets on its balance sheet. Most of the Bank's credit risk is
concentrated in its loan portfolios and, to a lesser extent, its other real
estate owned ("OREO") portfolio. There are varying degrees of credit risk
within each of the individual loan portfolios. The credit risk is managed
through asset selection focusing on portfolio diversification by loan types and
geography, by defining and limiting exposures to a single client or industry,
by requiring collateral, and by integrating consistent lending policies and
underwriting criteria throughout the credit process. The accurate and timely
identification of credit risk is verified independently from the relationship
management and loan operation areas of the Bank through the loan review process
implemented by the Bank and reporting to the Bank's Chief Credit Officer, who
reports directly to the Corporation's Chairman and Vice Chairman.

                                      15

<PAGE>

   Additional information relating to non-performing assets, loan charge-offs
and impaired loans may be found in Note 1 and Note 4 of the Notes to
Consolidated Financial Statements.

   Non-Performing Assets.  Non-performing assets consist of non-accrual loans,
loans 90 days or more past due and still accruing interest, and OREO. In
addition, at December 31, 2000, non-performing loans included one impaired loan
in the amount of $7,118,000 that was current as to interest and principal. In
2001, this loan was partially repaid, partially charged-off, and the remaining
balance of $1,458,000 became a non-accrual loan. The charge-off related to this
loan was $2,428,000, for which $1,711,000 had previously been specifically
reserved. At December 31, 2001, non-performing assets increased to $46,803,000
from $35,141,000 one year earlier. A commercial client's loans with an
aggregate balance of $6,526,000 were classified as impaired during the fourth
quarter 2001 and are carried at the net realizable value of the collateral
pledged to secure the loans. The remainder of the increase is principally due
to increased defaults in loans secured by residential real estate. These loans
are typically charged down to the net realizable value of the underlying
collateral during the period in which they reach 120 days past due.

   If these loans had been current, the amount of interest on non-performing
loans that would have been recorded in 2001 totaled $3,739,000. Of this amount,
$1,937,000 was actually recorded in 2001.

Non-Performing Assets

<TABLE>
<CAPTION>
                                                                           December 31
                                                           -------------------------------------------
                                                            2001     2000     1999     1998     1997
(Dollars in Thousands)                                     -------  -------  -------  -------  -------
<S>                                                        <C>      <C>      <C>      <C>      <C>
Non-Performing Loans
   Non-Accrual Loans......................................
       Business........................................... $ 7,998  $ 2,634  $ 2,525  $ 1,019  $   254
       Consumer...........................................  13,532    9,008    4,282    3,804    3,907
       Residential Mortgage...............................   6,447    5,127    3,564    4,268    3,718
       Single-Family Construction.........................   8,165    3,987    4,090    4,714    6,059
       Commercial Real Estate.............................     357      954       --       --       99
                                                           -------  -------  -------  -------  -------
   Total Non-Accrual Loans................................  36,499   21,710   14,461   13,805   14,037
                                                           -------  -------  -------  -------  -------
   Accruing Loans.........................................
       Business--Current as to Interest and Principal.....      --    7,118       --       --       --
       Business--Past Due 90 Days or More.................     307       --       --       --       --
       Consumer--Past Due 90 Days or More.................   3,005    3,720    3,211    3,371    4,395
                                                           -------  -------  -------  -------  -------
   Total Accruing Loans...................................   3,312   10,838    3,211    3,371    4,395
                                                           -------  -------  -------  -------  -------
   Total Non-Performing Loans.............................  39,811   32,548   17,672   17,176   18,432
   Other Real Estate Owned, Net...........................   6,992    2,593    1,227    2,204    3,907
                                                           -------  -------  -------  -------  -------
       Total Non-Performing Assets........................ $46,803  $35,141  $18,899  $19,380  $22,339
                                                           =======  =======  =======  =======  =======

Non-Performing Loans to Loans at End of Year..............    2.27%    1.82%    1.04%    1.11%    1.34%
Non-Performing Assets to Loans and OREO at End of Year....    2.65     1.97     1.11     1.25     1.62
</TABLE>

   Potential Problem Assets.  The Bank had $6,422,000 in potential problem
loans at December 31, 2001. Of this amount, $6,025,000 represented loans to
business borrowers, $347,000 represented loans to land development borrowers,
and $50,000 consisted of loans to residential builders. These loans are
currently performing according to their loan agreements, but the borrowers'
financial operations and financial condition caused the Bank's management to
question their ability to comply with present repayment terms in the future.
The business loans are collateralized with non-residential real estate and
other assets. The land development loans are collateralized with developed lots
or land developments in progress and raw land. The collateral for the builder
loans is single-family dwellings and fully developed lots.

   Allowance for Loan Losses.  The Bank maintains an allowance for loan losses
in an amount adequate to absorb the probable losses inherent in the loan
portfolio. An analysis of the adequacy of the allowance is completed each
quarter and reviewed and approved by the Investment Committee of the Board of
Directors.

                                      16

<PAGE>

   An assessment of the credit risk of individual loans greater than $500,000
is completed for each loan in the commercial portfolios, including business,
construction, and commercial real estate loans, which results in a risk rating
(risk grade). The Bank utilizes a ten grade risk rating system with six pass
grades and, in addition, four criticized grades which correlate to the banking
regulators' grades of special mention, substandard, doubtful, and loss. For
homogeneous loan portfolios and smaller balance commercial loans, loans that
are current or less than 90 days past due are considered pass loans and loans
90 days or more past due are assigned a risk rating of substandard.

   A target reserve is established for each loan portfolio based on the
analysis of the current risk characteristics of each portfolio and sub-segments
of the portfolio. This includes an analysis of empirical data of each
portfolio's credit performance and portfolio growth and trends, which results
in estimated levels of future net charge-offs and delinquencies. These
estimates are then adjusted based on management's judgment regarding specific
economic trends and events, other risk factors and general economic conditions
affecting individual loans, and portfolio performance. The target reserve
determined in this analysis for each loan portfolio is applied to the pass
loans. A separate target reserve is established for each portfolio segment of
loans that has a risk rating in any of the criticized risk grades. Loans and
groups of loans in these risk rating categories pose higher levels of risk to
the Bank and are assigned higher target reserves. The allowance is allocated to
each portfolio based on the sum of the target reserves established for the pass
and criticized risk rating for each loan portfolio.

   In addition to the allowance established for each loan portfolio, the Bank
maintains an unallocated allowance due to the residual losses embedded in the
loan portfolios. As discussed above, the target reserve for pass loans and
criticized loans is based on the inherent losses in the loan portfolio and on
the existing facts and circumstances and management's judgment thereof. A
residual loss is the loss embedded within the loan portfolio and not
specifically identified.

   Management believes that the Bank's allowance is adequate based on
information currently available. However, there can be no assurances that an
addition to the allowance will not be required or that the amount of any such
addition will not be significant. In addition, various regulatory agencies, as
an integral part of their examinations, periodically review the allowance and
may require the Bank to recognize an increase to the allowance based on their
judgment about information available at the time of the examination.

Allocation of Allowance for Loan Losses

   The following table presents an allocation of the Bank's allowance for loan
losses at the dates indicated.

<TABLE>
<CAPTION>
                                                                 December 31
                     --------------------------------------------------------------------------------------------------
                            2001                2000                1999                1998                1997
                     ------------------  ------------------  ------------------  ------------------  ------------------
                             Percent of          Percent of          Percent of          Percent of          Percent of
                              Loan Type           Loan Type           Loan Type           Loan Type           Loan Type
                                 to                  to                  to                  to                  to
(Dollars in          Amount  Total Loans Amount  Total Loans Amount  Total Loans Amount  Total Loans Amount  Total Loans
Thousands)           ------- ----------- ------- ----------- ------- ----------- ------- ----------- ------- -----------
<S>                  <C>     <C>         <C>     <C>         <C>     <C>         <C>     <C>         <C>     <C>
Balance at End of
 Period Applicable
 to:
Business Loans...... $10,814     29.2%   $ 7,447     17.5%   $ 4,350     14.1%   $ 2,727     11.6%   $ 2,008      9.1%
Consumer Loans......  19,170     38.4     16,212     42.0     10,665     40.4      9,508     37.7      9,706     39.9
Residential Mortgage
 Loans..............   1,067     16.7        924     26.1        673     27.0        609     34.6        588     36.7
Single-Family
 Construction
 Loans..............   2,516     12.8      2,923     11.6      5,464     16.4      4,613     14.0      3,663     11.4
Commercial Real
 Estate Loans.......     974      2.9        592      2.8        323      2.1        298      2.1        330      2.9
Unallocated.........   2,594       --      5,480       --      7,284       --      7,945       --      6,119       --
                     -------    -----    -------    -----    -------    -----    -------    -----    -------    -----
                     $37,135    100.0%   $33,578    100.0%   $28,759    100.0%   $25,700    100.0%   $22,414    100.0%
                     =======    =====    =======    =====    =======    =====    =======    =====    =======    =====
</TABLE>

                                      17

<PAGE>

   Summary of Allowance for Loan Loss Activity. Net charge-offs for 2001
totaled $11,671,000, compared to $4,937,000 for 2000 and $6,351,000 for 1999.
The increased level of charge-offs in 2001 primarily resulted from several
commercial loan relationships. The largest charge-off was $2,428,000, which was
on a loan previously classified as impaired with a specific reserve of
$1,711,000 established. The balance of the charge-offs covered several loan
relationships; the largest balance charged-off was $784,000.

   The provision for loan losses was $15,228,000 for 2001, compared to
$9,756,000 for 2000 and $9,410,000 for 1999. The increase in the provision in
2001 reflects the higher level of non-performing loans and charge-offs
resulting from the current economic environment. The slight increase in the
provision in 2000 compared to 1999 reflects improved charge-off experience
offset by an increase in delinquencies in the home equity loan portfolio.

   The allowance for loan losses was $37,135,000 at December 31, 2001, or 93.28
percent of non-performing loans.

   While the allowance for loan losses to loans ratio at December 31, 2001
improved to 2.11 percent (compared to 1.88 percent and 1.69 percent at December
31, 2000 and 1999), charge-offs to average loans and allowance for loan losses
to non-performing loans deteriorated when compared to prior years. Business
loan charge-offs in 2001 increased significantly from comparable charge-offs in
2000 and 1999 and were the principal reason for the increase in the charge-off
ratio. Non-performing loans were $39,811,000 at December 31, 2001 compared to
$32,548,000 at December 31, 2000 and $17,672,000 at December 31, 1999. The
increase in non-performing loans led to a corresponding decrease in the
allowance for loan losses to non-performing loan ratio.

Summary of Loan Loss Experience

<TABLE>
<CAPTION>
                                                                    Years Ended December 31
                                                          -------------------------------------------
                                                           2001     2000     1999     1998     1997
(Dollars in Thousands)                                    -------  -------  -------  -------  -------
<S>                                                       <C>      <C>      <C>      <C>      <C>
Balance of Allowance for Loan Losses at Beginning of Year $33,578  $28,759  $25,700  $22,414  $18,768
   Charge-Offs
       Business..........................................   4,464      380    2,015       15      528
       Consumer..........................................   6,528    5,019    5,114    6,934    7,210
       Residential Mortgage..............................     160       68       30       91       83
       Single-Family Construction........................     764      477      412      658    1,190
       Commercial Real Estate............................     855       --       --       93       75
                                                          -------  -------  -------  -------  -------
   Total Charge-Offs.....................................  12,771    5,944    7,571    7,791    9,086
   Recoveries
       Business..........................................     181      213       22       39        4
       Consumer..........................................     729      662      963      986    1,261
       Residential Mortgage..............................       1        6       --        2       --
       Single-Family Construction........................     188      126      235      270       40
       Commercial Real Estate............................       1       --       --       --      727
                                                          -------  -------  -------  -------  -------
   Total Recoveries......................................   1,100    1,007    1,220    1,297    2,032
                                                          -------  -------  -------  -------  -------
   Net Charge-Offs.......................................  11,671    4,937    6,351    6,494    7,054
   Provision for Loan Losses.............................  15,228    9,756    9,410    9,780   10,700
                                                          -------  -------  -------  -------  -------
Balance of Allowance for Loan Losses at End of Year...... $37,135  $33,578  $28,759  $25,700  $22,414
                                                          =======  =======  =======  =======  =======
Net Charge-Offs to Average Loans.........................    0.64%    0.27%    0.39%    0.44%    0.55%
Allowance for Loan Losses to Loans at End of Year........    2.11     1.88     1.69     1.66     1.63
Allowance for Loan Losses to Non-Performing Loans........   93.28   103.16   162.73   149.63   121.60
</TABLE>

                                      18

<PAGE>

                     LIQUIDITY AND MARKET RISK MANAGEMENT

Liquidity Management

   First Indiana Corporation conducts its business through subsidiaries. The
main source of funds for the Corporation is dividends from the Bank. The
Corporation has no significant assets other than its investments in the Bank
and Somerset.

   The Bank's primary source of funds is deposits, which were $1,379,478,000 at
December 31, 2001 and $1,399,983,000 at December 31, 2000. The Bank also relies
on Federal Home Loan Bank advances, repurchase agreements, loan payments, loan
payoffs, and sale of loans as sources of funds. Although the Bank continues to
rely on core retail deposits as its chief source of funds, the use of borrowed
funds, including Federal Home Loan Bank advances, continues to be an important
component of the Bank's liquidity. Scheduled loan payments are a relatively
stable source of funds, but loan payoffs, the sale of loans, and deposit
inflows and outflows fluctuate, depending on interest rates and economic
conditions. However, management does not expect any of these fluctuations to
occur in amounts that would affect the Corporation's ability to meet consumer
demand for liquidity or regulatory liquidity requirements.

Asset/Liability Management

   First Indiana engages in rigorous, formal asset/liability management, with
objectives to manage interest rate risk, ensure adequate liquidity, and
coordinate sources and uses of funds. The management of interest rate risk
entails the control, within acceptable limits, of the impact on earnings caused
by fluctuating interest rates and changing rate relationships. In this process,
management uses an internal earnings simulation model to identify and measure
interest rate sensitivity. The Asset/Liability Committee ("ALCO") reviews the
earnings impact of various changes in interest rates each month and manages the
risk to maintain an acceptable level of change in net interest income. The
Board of Directors also reviews this information every quarter.

   The Corporation's success is largely dependent upon its ability to manage
interest rate risk, which is defined as the exposure of the Corporation's net
interest income and net earnings to changes in interest rates. ALCO is
responsible for managing interest rate risk, and the Corporation has
established acceptable limits for interest rate exposure, which are reviewed
monthly. The Corporation uses a model that measures interest rate sensitivity
to determine the impact on net interest income of immediate and sustained
upward and downward movements in interest rates. Incorporated into the model
are assumptions regarding the current and anticipated interest rate
environment, estimated prepayment rates of certain assets and liabilities,
forecasted loan and deposit originations, contractual maturities and renewal
rates on certificates of deposits, estimated borrowing needs, anticipated loan
loss provision, projected secondary marketing gains and losses, expected
repricing spreads on variable-rate products, and contractual maturities and
repayments on lending and investment products. The model incorporates interest
rate sensitive instruments that are held to maturity or available for sale. The
Corporation has no trading assets. Based on the information and assumptions in
effect at December 31, 2001, the model forecasts that a 100 basis point
increase in interest rates over a 12-month period would result in a 3.1 percent
increase in net interest income while a 100 basis point decrease in interest
rates would result in a 4.6 percent decrease in net interest income. Because of
the numerous assumptions used in the computation of interest rate sensitivity,
and the fact that the model does not assume any actions ALCO could take in
response to the change in interest rates, the results may not be indicative of
actual results.

   The Corporation also monitors interest rate sensitivity using gap analysis.
This method recognizes the dynamics of the balance sheet and the effect of
changing interest rates on First Indiana's net earnings. The cumulative
rate-sensitivity gap reflects First Indiana's sensitivity to interest rate
changes over time. It is a static indicator and does not attempt to predict the
net interest income of a dynamic business in a rapidly changing environment.
Significant adjustments are made when the rate outlook changes.

   The Federal Open Market Committee lowered the federal funds target rate on
11 occasions in 2001. The federal funds target rate on January 1, 2001 was 6.50
percent. At December 31, 2001, the target rate was 1.75

                                      19

<PAGE>

percent, reflecting a 475 basis point decrease. Rapidly falling interest rates,
combined with a net asset-sensitive position within a one-year time period, put
downward pressure on net interest income and net interest margin in 2001.

   At December 31, 2001, First Indiana's six-month and one-year cumulative gap
stood at a positive 5.43 percent and a positive 3.30 percent of total
interest-earning assets. This compares with a positive 2.72 percent and a
positive 0.97 percent at December 31, 2000. This means that 5.43 and 3.30
percent of First Indiana's assets will reprice within six months and one year
without a corresponding repricing of funding liabilities. The increase in
percentage of assets repricing within 180 days is a result of market
conditions. In 2001, as rates fell, prepayments on assets increased. In
addition, savings and demand deposits grew in the fourth quarter. Management
intends to maintain a relatively neutral gap position to manage the volatility
of earnings.

Interest Rate Sensitivity

   The following table shows First Indiana's interest rate sensitivity at
December 31, 2001 and 2000.

<TABLE>
<CAPTION>
                                                          Rate Sensitivity by Period of Maturity or Rate Change at
                                                                              December 31, 2001
                                                        ------------------------------------------------------------
                                                                                        Over      Over
                                                                                         180       One
                                               Weighted            Percent             Days to   Year to     Over
                                               Average               of      Within      One      Five       Five
                                                 Rate    Balance    Total   180 Days    Year      Years      Years
(Dollars in Thousands)                         -------- ---------- ------- ----------  --------  --------  ---------
<S>                                            <C>      <C>        <C>     <C>         <C>       <C>       <C>
Interest-Earning Assets.......................
   Federal Funds Sold.........................    -- %  $       --    -- % $       --  $     --  $     --  $      --
   Securities Available for Sale..............   6.05      147,863   7.67      16,433    21,691   102,986      6,753
   FHLB and FRB Stock.........................   6.75       22,491   1.17          --        --        --     22,491
   Loans (1)
      Residential Mortgage Loans..............   6.65      292,503  15.18      70,735    57,568   138,992     25,208
      Commercial Real Estate Loans............   7.42       51,208   2.66      27,821     9,098     8,510      5,779
      Business Loans..........................   5.89      512,738  26.61     436,714    16,844    55,167      4,013
      Consumer Loans..........................   8.19      675,111  35.04     288,398    48,021   247,269     91,423
      Single-Family Construction Loans........   5.35      224,926  11.67     202,433    11,246    11,247         --
                                                        ---------- ------  ----------  --------  --------  ---------
                                                 6.81   $1,926,840 100.00%  1,042,534   164,468   564,171    155,667
                                                        ========== ======  ----------  --------  --------  ---------
Interest-Bearing Liabilities
   Deposits
      Demand Deposits (2).....................   0.81   $  140,175   8.59%     19,595        --        --    120,580
      Savings Deposits (2)....................   1.90      447,832  27.44     409,627       988     7,902     29,315
      Certificates of Deposit Under
       $100,000...............................   5.09      432,559  26.50     167,492   140,696   124,371         --
      Certificates of Deposit $100,000 or
       Greater................................   5.90      193,889  11.88      80,163    38,735    74,991         --
                                                        ---------- ------  ----------  --------  --------  ---------
                                                 3.55    1,214,455  74.41     676,877   180,419   207,264    149,895
Borrowings
   Short-Term Borrowings......................   1.77      121,082   7.42     121,082        --        --         --
   FHLB Advances..............................   5.28      296,647  18.17     140,000    25,000    90,855     40,792
                                                        ---------- ------  ----------  --------  --------  ---------
                                                 3.73    1,632,184 100.00%    937,959   205,419   298,119    190,687
                                                                   ======
Net--Other (3)................................             294,656                                           294,656
                                                        ----------         ----------  --------  --------  ---------
      Total...................................          $1,926,840            937,959   205,419   298,119    485,343
                                                        ==========         ----------  --------  --------  ---------
Rate-Sensitivity Gap..........................                             $  104,575  $(40,951) $266,052  $(329,676)
                                                                           ==========  ========  ========  =========
December 31, 2001 Cumulative Rate-Sensitivity
 Gap..........................................                             $  104,575  $ 63,624  $329,676
                                                                           ==========  ========  ========
Percent of Total Interest-Earning Assets......                                   5.43%     3.30%    17.11%
                                                                           ==========  ========  ========
December 31, 2000 Cumulative Rate-Sensitivity
 Gap..........................................                             $   54,045  $ 19,199  $133,743
                                                                           ==========  ========  ========
Percent of Total Interest-Earning Assets......                                   2.72%     0.97%     6.73%
                                                                           ==========  ========  ========
</TABLE>

                                      20

<PAGE>

--------
(1) The distribution of fixed-rate loans is based upon contractual maturity and
    scheduled contractual repayments adjusted for estimated prepayments. The
    distribution of adjustable-rate loans is based upon the earliest repricing
    date for each loan. Included in residential mortgage loans are $108,000 of
    loans held for sale. Included in consumer loans are $34.8 million of home
    equity loans held for sale.
(2) A portion of these deposits has been included in the Over Five Years
    category to reflect management's assumption that these accounts are not
    rate-sensitive. This assumption is based upon the historic trends on these
    types of deposits experienced through periods of significant increases and
    decreases in interest rates without changes in rates paid on these
    deposits. The rates represent a blended rate on all deposit types in the
    category.
(3) Net--Other is the excess of non-interest-bearing liabilities and capital
    over non-interest-bearing assets.

                                    CAPITAL

   At December 31, 2001, First Indiana's shareholders' equity was $209,031,000,
or 10.21 percent of total assets, compared with $198,812,000, or 9.53 percent
of total assets, at December 31, 2000.

   First Indiana paid a quarterly dividend of $0.128 per common share in 2001.
This reflects an increase from a quarterly dividend of $0.112 per share in
2000. On January 16, 2002, the Board of Directors approved a five-for-four
stock split and a quarterly cash dividend of $0.16 per share. The dividend will
be paid on shares outstanding after the split, resulting in a 25 percent
increase in cash paid to shareholders. The stock split will be effected on
February 27, 2002, to shareholders of record as of February 13, 2002. All share
and per share information herein has been restated to reflect the stock split.
The cash dividend is payable March 15, 2002, to shareholders of record as of
March 5, 2002. This is the 60th consecutive quarter First Indiana has paid a
cash dividend.

   See Note 11 of the Notes to Consolidated Financial Statements for additional
information on the Corporation's repurchases of its common stock and its
shareholder rights agreement.

Regulatory Capital Requirements

   First Indiana Corporation is subject to capital requirements and guidelines
imposed on holding companies by the Federal Reserve Board. First Indiana Bank
is subject to capital requirements and guidelines imposed on national banks by
the Office of the Comptroller of the Currency. The Corporation and the Bank are
required by their respective regulators to maintain minimum capital ratios. The
Federal Deposit Insurance Corporation Improvement Act of 1999 ("FDICIA")
established ratios and guidelines for banks to be considered
"well-capitalized." These capital requirements establish higher capital
standards for banks and bank holding companies that assume greater risks. For
this purpose, assets and certain specified off-balance sheet commitments are
assigned to four risk categories, each weighted differently based on the level
of credit risk ascribed to such assets or commitments.

                                      21

<PAGE>

   The following table shows the Corporation's and the Bank's strong capital
levels and compliance with all capital requirements at December 31, 2001.
Additionally, the Bank exceeds the capital levels set by FDICIA for a bank to
be considered well-capitalized.

<TABLE>
<CAPTION>
                                                              December 31, 2001
                                              ------------------------------------------------
                                                                  Minimum           To be
                                                  Actual      Capital Adequacy Well-Capitalized
                                              --------------  ---------------  ---------------
                                               Amount  Ratio   Amount    Ratio  Amount   Ratio
(Dollars in Thousands)                        -------- -----  --------   ----- --------  -----
<S>                                           <C>      <C>    <C>        <C>   <C>       <C>
Leverage (Tier One Capital to Average Assets)
   First Indiana Corporation................. $191,903  9.18% $ 83,645   4.00%      N/A    N/A
   First Indiana Bank........................  177,371  8.51    83,324   4.00  $104,155   5.00%
Tier One Capital to Risk-Weighted Assets
   First Indiana Corporation................. $191,903 10.61% $ 72,332   4.00%      N/A    N/A
   First Indiana Bank........................  177,371  9.84    72,138   4.00  $108,206   6.00%
Total Capital to Risk-Weighted Assets
   First Indiana Corporation................. $214,672 11.87% $144,664   8.00%      N/A    N/A
   First Indiana Bank........................  200,094 11.10   144,275   8.00  $180,344  10.00%
</TABLE>

                    IMPACT OF INFLATION AND CHANGING PRICES

   The consolidated financial statements and related data presented herein have
been prepared to conform to generally accepted accounting principles in the
United States, which generally require the measurement of financial position
and operating results in terms of historical dollars without considering
changes in the relative purchasing power of money over time due to inflation.

   Almost all of the assets and liabilities of a bank are monetary, which
limits the usefulness of data derived by adjusting a bank's financial
statements for the effects of changing prices.

                IMPACT OF ACCOUNTING STANDARDS NOT YET ADOPTED

   As discussed in Note 1 (R) of the Notes to Consolidated Financial
Statements, First Indiana will be required to adopt FASB Statements No. 141 and
No. 142 in 2002.

   In August 2001, FASB issued FASB Statement No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets," which addresses financial
accounting and reporting for the impairment or disposal of long-lived assets.
Statement No. 144 excludes goodwill and other intangible assets that are not
amortized which are covered by Statement No. 142. While Statement No. 144
supersedes Statement No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of," it retains many of the
fundamental provisions of that Statement.

   Statement No. 144 also supersedes the accounting and reporting provisions of
Accounting Principles Board Opinion No. 30, "Reporting the Results of
Operations--Reporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions," for
the disposal of a segment of a business. However, it retains the requirement in
Opinion No. 30 to report separately discontinued operations and extends that
reporting to a component of an entity that either has been disposed of (by
sale, abandonment, or in a distribution to owners) or is classified as held for
sale.

   The Corporation is required to adopt Statement No. 144 no later than the
year beginning after December 15, 2001, and plans to adopt its provisions for
the quarter ending March 31, 2002. Since Statement No. 144 maintains many of
the fundamental provisions of current accounting pronouncements, the adoption
of this standard is not expected to have a material impact on the financial
condition or results of operations of the Corporation.

                                      22

<PAGE>

                            FOURTH QUARTER SUMMARY

   First Indiana posted a net loss of $372,000, or $0.02 per diluted share, in
the fourth quarter of 2001, compared to net earnings of $6,651,000, or $0.43
per diluted share, for the same period of 2000. An increased provision for loan
losses and the charge-off of overdrafts by a commercial banking customer led to
the net loss for the quarter.

Net Interest Income

   Net interest income for the fourth quarter of 2001 was $17,203,000, with a
net interest margin of 3.46 percent. For the comparable period in 2000, net
interest income was $19,385,000, with a net interest margin of 3.88 percent.
The rapid decline in interest rates in 2001 put downward pressure on the net
interest margin. The decrease in net interest income in 2001 reflects the lower
net interest margin and relatively flat earning assets outstanding. Earning
assets averaged $1,992,465,000 in the fourth quarter of 2001, compared to
$1,997,443,000 in the fourth quarter of 2000.
Provision for Loan Losses

   The provision for loan losses was $7,875,000 for the fourth quarter of 2001,
compared to $2,439,000 for the same quarter of 2000, reflecting higher
non-performing loans and charge-offs and the current economic environment. Net
charge-offs for the fourth quarter of 2001 were $7,182,000, compared to
$1,529,000 in the fourth quarter of 2000. The increased level of charge-offs
primarily resulted from several business relationships, the largest of which
had previously been classified as impaired with a specific reserve established.

Non-Interest Income

   Non-interest income for the fourth quarter of 2001 was $9,847,000, compared
to $9,578,000 for the same period in 2000. The increase in non-interest income
is primarily the result of deposit product fees, partially offset by reductions
in loan fees, loan servicing income, and other financial services fees.
Additionally, gain on the sale of loans was lower due to a decrease in the
amount of loans sold.

Non-Interest Expense

   Non-interest expense for the fourth quarter of 2001 was $19,764,000,
compared to $16,264,000 for the fourth quarter of 2000. Included in
non-interest expense in the fourth quarter of 2001 is $4,066,000 for the
write-off of overdrafts by a commercial banking client. The client has provided
collateral to support repayment of the overdrafts; however, a write-off was
taken due to uncertainty regarding some of the collateral. The Bank added
$6,526,000 to non-performing loans in the fourth quarter 2001 relating to the
overdrafts and this client's existing loans. Marketing expense was $373,000 in
the fourth quarter 2001, compared to $1,123,000 for the same quarter in 2000.

                                      23

<PAGE>

                       CONSOLIDATED FINANCIAL STATEMENTS

                  FIRST INDIANA CORPORATION AND SUBSIDIARIES

                          CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                December 31
                                                                          ----------------------
                                                                             2001        2000
(Dollars in Thousands, Except Per Share Data)                             ----------  ----------
Assets
------
<S>                                                                       <C>         <C>
Cash..................................................................... $   62,147  $   43,114
Federal Funds Sold.......................................................         --      22,000
                                                                          ----------  ----------
   Total Cash and Cash Equivalents.......................................     62,147      65,114
Securities Available for Sale............................................    147,863     158,784
Federal Home Loan Bank and Federal Reserve Bank Stock....................     22,491      21,591
Loans....................................................................  1,756,486   1,784,475
   Allowance for Loan Losses.............................................    (37,135)    (33,578)
                                                                          ----------  ----------
Net Loans................................................................  1,719,351   1,750,897
Premises and Equipment...................................................     20,587      19,212
Accrued Interest Receivable..............................................     15,246      18,327
Goodwill.................................................................     13,045      13,904
Other Assets.............................................................     45,927      38,168
                                                                          ----------  ----------
       Total Assets...................................................... $2,046,657  $2,085,997
                                                                          ==========  ==========
Liabilities
-----------
Non-Interest-Bearing Deposits............................................ $  165,023  $  123,836
Interest-Bearing Deposits................................................  1,214,455   1,276,147
                                                                          ----------  ----------
Total Deposits...........................................................  1,379,478   1,399,983
Short-Term Borrowings....................................................    121,082     117,725
Federal Home Loan Bank Advances..........................................    296,647     336,754
Accrued Interest Payable.................................................      3,804       6,752
Advances by Borrowers for Taxes and Insurance............................     12,251       6,188
Other Liabilities........................................................     24,364      19,783
                                                                          ----------  ----------
       Total Liabilities.................................................  1,837,626   1,887,185
                                                                          ----------  ----------
Shareholders' Equity
--------------------
Preferred Stock, $.01 Par Value: 2,000,000 Shares Authorized; None Issued         --          --
Common Stock, $.01 Par Value: 33,000,000 Shares Authorized; Issued:
  2001--17,127,770 Shares; 2000--16,951,356 Shares.......................        171         170
Capital Surplus..........................................................     41,837      39,888
Retained Earnings........................................................    183,196     170,954
Accumulated Other Comprehensive Income...................................      4,084       2,046
Treasury Stock at Cost: 2001--1,684,476 Shares; 2000--1,377,088 Shares...    (20,257)    (14,246)
                                                                          ----------  ----------
       Total Shareholders' Equity........................................    209,031     198,812
                                                                          ----------  ----------
       Total Liabilities and Shareholders' Equity........................ $2,046,657  $2,085,997
                                                                          ==========  ==========
</TABLE>

                See Notes to Consolidated Financial Statements

                                      24

<PAGE>

                  FIRST INDIANA CORPORATION AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF EARNINGS

<TABLE>
<CAPTION>
                                                      Years Ended December 31
                                                    ---------------------------
                                                      2001     2000      1999
(Dollars in Thousands, Except Per Share Data)       -------- --------  --------
<S>                                                 <C>      <C>       <C>
Interest Income
   Loans........................................... $145,143 $159,877  $135,037
   Securities Available for Sale...................    9,880   10,401     9,502
   Dividends on FRB and FHLB Stock.................    1,627    1,746     1,476
   Federal Funds Sold..............................      478      786       411
                                                    -------- --------  --------
       Total Interest Income.......................  157,128  172,810   146,426
                                                    -------- --------  --------
Interest Expense
   Deposits........................................   59,997   65,253    54,473
   Short-Term Borrowings...........................    4,301    6,384     2,793
   Federal Home Loan Bank Advances.................   18,781   23,405    18,309
                                                    -------- --------  --------
       Total Interest Expense......................   83,079   95,042    75,575
                                                    -------- --------  --------
Net Interest Income................................   74,049   77,768    70,851
   Provision for Loan Losses.......................   15,228    9,756     9,410
                                                    -------- --------  --------
Net Interest Income After Provision for Loan Losses   58,821   68,012    61,441
Non-Interest Income
   Loan and Deposit Charges........................   12,643    7,282     6,061
   Loan Servicing Income...........................      962    1,259     1,220
   Loan Fees.......................................    3,736    3,367     3,626
   Trust Fees......................................    2,284    1,727     1,080
   Other Financial Services Fees...................    9,561    2,052        --
   Insurance Commissions...........................    1,945      551       108
   Sale of Loans...................................    9,240    5,050     7,417
   Sale of Loan Servicing..........................       --    1,251       905
   Sale of Investment Securities...................      543     (168)   (3,015)
   Sale of Deposits................................       --       --     7,590
   Other...........................................    3,049    3,267     1,966
                                                    -------- --------  --------
       Total Non-Interest Income...................   43,963   25,638    26,958
Non-Interest Expense
   Salaries and Benefits...........................   36,720   28,451    28,152
   Net Occupancy...................................    3,724    2,904     2,942
   Equipment.......................................    7,056    6,105     5,825
   Professional Services...........................    4,122    3,254     3,157
   Marketing.......................................    2,424    2,910     2,418
   Telephone, Supplies, and Postage................    3,515    2,943     3,471
   Goodwill Amortization...........................      920      279        71
   Other...........................................   12,020    6,882     6,310
                                                    -------- --------  --------
       Total Non-Interest Expense..................   70,501   53,728    52,346
                                                    -------- --------  --------
Earnings Before Income Taxes.......................   32,283   39,922    36,053
Income Taxes.......................................   12,274   15,105    13,320
                                                    -------- --------  --------
Net Earnings....................................... $ 20,009 $ 24,817  $ 22,733
                                                    ======== ========  ========
Basic Earnings Per Share........................... $   1.29 $   1.58  $   1.45
                                                    ======== ========  ========
Diluted Earnings Per Share......................... $   1.25 $   1.55  $   1.42
                                                    ======== ========  ========
Dividends Per Common Share......................... $   0.51 $   0.45  $   0.42
                                                    ======== ========  ========
</TABLE>

                See Notes to Consolidated Financial Statements

                                      25

<PAGE>

                  FIRST INDIANA CORPORATION AND SUBSIDIARIES

                CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                                                         Accumulated
                                                    Common Stock                            Other                   Total
                                                 -----------------  Capital   Retained  Comprehensive Treasury  Shareholders'
                                                   Shares    Amount Surplus   Earnings  Income (Loss)  Stock       Equity
(Dollars in Thousands, Except Per Share Data)    ----------  ------ --------  --------  ------------- --------  -------------
<S>                                              <C>         <C>    <C>       <C>       <C>           <C>       <C>
Balance at December 31, 1998.................... 15,879,118   $170  $ 36,994  $137,063     $   425    $ (8,682)   $165,970
Comprehensive Income:
   Net Earnings.................................         --     --        --    22,733          --          --      22,733
   Unrealized Loss on Securities Available for
    Sale of $861, Net of Income Taxes and
    Reclassification Adjustment of ($527),
    Net of Income Taxes.........................         --     --        --        --      (1,149)         --      (1,149)
                                                                                                                  --------
Total Comprehensive Income......................                                                                    21,584
Dividends on Common Stock--$0.42 per share......         --     --        --    (6,532)         --          --      (6,532)
Exercise of Stock Options.......................    127,683      1       682                    --          --         683
Common Stock Issued under Restricted Stock
 Plans--Net of Amortization.....................         --     --      (160)      446          --          --         286
Purchase of Treasury Stock......................   (349,006)    --        --        --          --      (5,299)     (5,299)
Redemption of Common Stock......................     (3,855)    --       (57)                   --          --         (57)
Tax Benefit of Option Compensation..............         --     --       468                    --          --         468
                                                 ----------   ----  --------  --------     -------    --------    --------
Balance at December 31, 1999.................... 15,653,940    171    37,927   153,710        (724)    (13,981)    177,103
                                                 ----------   ----  --------  --------     -------    --------    --------
Comprehensive Income:
   Net Earnings.................................         --     --        --    24,817          --          --      24,817
   Unrealized Gain on Securities Available for
    Sale of $4,388, Net of Income Taxes and
    Reclassification Adjustment of ($105),
    Net of Income Taxes.........................         --     --        --        --       2,770          --       2,770
                                                                                                                  --------
Total Comprehensive Income......................                                                                    27,587
Dividends on Common Stock--$0.45 per share......         --     --        --    (7,045)         --          --      (7,045)
Exercise of Stock Options.......................    118,259      1       779                    --          --         780
Common Stock Issued under Restricted Stock
 Plans--Net of Amortization.....................     45,000     --       792      (528)         --          --         264
Redemption of Common Stock Related to
 Somerset Merger................................ (3,448,084)   (34)  (48,929)       --          --          --     (48,963)
Issuance of Common Stock Related to Somerset
 Merger.........................................  3,224,539     32    45,757        --          --          --      45,789
Purchase of Treasury Stock......................    (18,750)    --        --        --          --        (283)       (283)
Reissuance of Treasury Stock....................      2,678     --        28        --          --          18          46
Option Consideration Related to Somerset
 Merger.........................................         --     --     3,327        --          --          --       3,327
Redemption of Common Stock......................     (3,314)    --       (56)       --          --          --         (56)
Tax Benefit of Option Compensation..............         --     --       263        --          --          --         263
                                                 ----------   ----  --------  --------     -------    --------    --------
Balance at December 31, 2000.................... 15,574,268    170    39,888   170,954       2,046     (14,246)    198,812
                                                 ----------   ----  --------  --------     -------    --------    --------
Comprehensive Income:
   Net Earnings.................................         --     --        --    20,009          --          --      20,009
   Unrealized Gain on Securities Available for
    Sale of $3,571, Net of Income Taxes and
    Reclassification Adjustment of $309, Net
    of Income Taxes.............................         --     --        --        --       2,038          --       2,038
                                                                                                                  --------
Total Comprehensive Income......................                                                                    22,047
Dividends on Common Stock--$0.51 per share......         --     --        --    (7,977)         --          --      (7,977)
Exercise of Stock Options.......................    197,043      1     1,685        --          --          --       1,686
Common Stock Issued under Restricted Stock
 Plans--Net of Amortization.....................      1,009     --       129       210          --          --         339
Purchase of Treasury Stock......................   (307,388)    --        --        --          --      (6,011)     (6,011)
Option Consideration Related to Somerset
 Merger.........................................         --     --      (113)       --          --          --        (113)
Redemption of Common Stock......................    (21,638)    --      (404)       --          --          --        (404)
Tax Benefit of Option Compensation..............         --     --       652        --          --          --         652
                                                 ----------   ----  --------  --------     -------    --------    --------
Balance at December 31, 2001.................... 15,443,294   $171  $ 41,837  $183,196     $ 4,084    $(20,257)   $209,031
                                                 ==========   ====  ========  ========     =======    ========    ========
</TABLE>

                See Notes to Consolidated Financial Statements

                                      26

<PAGE>

                  FIRST INDIANA CORPORATION AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                      Years Ended December 31
                                                                  -------------------------------
                                                                    2001       2000       1999
(Dollars in Thousands)                                            ---------  ---------  ---------
<S>                                                               <C>        <C>        <C>
Cash Flows from Operating Activities
   Net Earnings.................................................. $  20,009  $  24,817  $  22,733
Adjustments to Reconcile Net Earnings to Net Cash Provided by
  Operating Activities
   Gain on Sale of Assets and Deposits, Net......................    (9,783)    (4,878)   (11,992)
   Amortization of Premium, Discount, and Intangibles, Net.......     2,819        233      2,104
   Depreciation and Amortization of Premises and Equipment.......     3,094      2,923      2,524
   Amortization of Net Deferred Loan Fees........................     1,385        906       (240)
   Provision for Loan Losses.....................................    15,228      9,756      9,410
   Origination of Loans Held For Sale Net of Principal Collected.  (245,744)  (326,215)  (558,535)
   Proceeds from Sale of Loans Held for Sale.....................   269,333    315,606    647,113
   Tax Benefit of Option Compensation............................       652        263        468
   Change In:
       Accrued Interest Receivable...............................     3,081     (4,773)    (1,874)
       Other Assets..............................................   (26,303)   (10,268)   (14,058)
       Accrued Interest Payable..................................    (2,948)     1,147      2,959
       Other Liabilities.........................................     4,142        887      1,934
                                                                  ---------  ---------  ---------
Net Cash Provided by Operating Activities........................    34,965     10,404    102,546
                                                                  ---------  ---------  ---------
Cash Flows from Investing Activities
   Proceeds from Sale of Securities Available for Sale...........    20,000     57,255    203,238
   Proceeds from Maturities of Securities Available for Sale.....    16,005      6,645      9,486
   Purchase of Securities Available for Sale.....................   (20,000)   (60,000)  (234,502)
   Purchase of FHLB and FRB Stock................................      (900)    (1,248)    (3,731)
   Originations of Loans Net of Principal Collected..............    15,034   (111,341)  (306,488)
   Proceeds from Sale of Loans...................................        --     47,684     70,915
   Purchase of Premises and Equipment............................    (4,901)    (4,375)    (2,965)
   Acquisition of Somerset, Net of Cash Acquired.................      (279)   (16,384)        --
   Proceeds from Sale of Premises and Equipment..................     1,007         41      1,146
                                                                  ---------  ---------  ---------
Net Cash Provided (Used) by Investing Activities.................    25,966    (81,723)  (262,901)
                                                                  ---------  ---------  ---------
Cash Flows from Financing Activities
   Net Change in Deposits........................................   (20,505)    87,868    204,137
   Sale of Deposits..............................................        --         --   (112,350)
   Repayment of Federal Home Loan Bank Advances..................  (275,107)  (535,100)  (662,087)
   Borrowings of Federal Home Loan Bank Advances.................   235,000    505,000    701,694
   Net Change in Short-Term Borrowings...........................     3,357     18,971     44,535
   Net Change in Advances by Borrowers for Taxes and Insurance...     6,063      4,811       (581)
   Stock Option Proceeds.........................................     1,282        724        626
   Purchase of Treasury Stock....................................    (6,011)      (283)    (5,299)
   Reissuance of Treasury Stock..................................        --         46         --
   Dividends Paid................................................    (7,977)    (7,045)    (6,532)
                                                                  ---------  ---------  ---------
Net Cash Provided (Used) by Financing Activities.................   (63,898)    74,992    164,143
                                                                  ---------  ---------  ---------
Net Change in Cash and Cash Equivalents..........................    (2,967)     3,673      3,788
   Cash and Cash Equivalents at Beginning of Year................    65,114     61,441     57,653
                                                                  ---------  ---------  ---------
   Cash and Cash Equivalents at End of Year...................... $  62,147  $  65,114  $  61,441
                                                                  =========  =========  =========
</TABLE>

                See Notes to Consolidated Financial Statements

                                      27

<PAGE>

                  FIRST INDIANA CORPORATION AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) Nature of Operations and Summary of Significant Accounting Policies

   First Indiana Corporation ("First Indiana" or the "Corporation") is a bank
holding company, which has elected to become a financial holding company. First
Indiana Bank and its subsidiaries (collectively the "Bank"), the principal
asset of the Corporation, is a federally chartered national bank insured by the
Federal Deposit Insurance Corporation. First Indiana is the largest bank or
bank holding company based in Indianapolis.

   Somerset Financial Services, LLC ("Somerset"), also a subsidiary of the
Corporation, was acquired in September 2000 when The Somerset Group, Inc.
merged with the Corporation. Somerset is a comprehensive financial services
company offering businesses and their owners a wide variety of financial
services, including tax planning and preparation, accounting services,
retirement and estate planning, and investment management services. Somerset
also has an extensive consulting practice spanning construction services,
health care, entrepreneurial activities, real estate, information technology,
and risk management.

   The Bank is engaged primarily in the business of attracting deposits from
the general public and originating commercial and consumer loans. The Bank
offers a full range of banking services from 26 banking centers located
throughout Metropolitan Indianapolis, Franklin, Mooresville, Pendleton,
Rushville, and Westfield, Indiana. In addition, the Bank has construction and
consumer loan offices in Indiana, Arizona, Florida, Illinois, North Carolina,
Ohio, and Oregon. In the third quarter of 1999, the Bank sold the deposits and
branch facilities of its Evansville banking centers.

   The Bank experiences substantial competition in attracting and retaining
deposits and in lending funds. The primary factors in competing for deposits
are the ability to offer attractive rates and the availability of convenient
access. Direct competition for deposits comes from other depository
institutions, money market mutual funds, corporate and government securities,
and other non-insured investments. The primary factors in competing for loans
are interest rates, loan origination fees, and loan product variety.
Competition for origination of loans normally comes from other depository
institutions, lending brokers, and insurance companies.

   The majority of the Bank's assets and liabilities consists of financial
instruments (investments, loans, deposits, and borrowings). Each of these
financial instruments earns or pays interest for a given term at a negotiated
rate of interest. The Bank's Asset/Liability Committee manages these financial
instruments for the dual objectives of maximizing net interest income (the
difference between interest income and interest expense) while limiting
interest rate risk. The Bank manages interest rate risk by closely matching
both the maturities and interest rate repricing dates of its assets and
liabilities. Should this matching objective not be achieved, significant,
rapid, and sustained changes in market interest rates will significantly
increase or decrease net interest income. Because of this risk, the Committee
continuously monitors its financial instruments to ensure that these dual
objectives are achieved.

   The accounting and reporting policies of the Corporation and its
subsidiaries conform to accounting principles generally accepted in the United
States of America. The more significant policies are summarized below.

   (A) Basis of Financial Statement Presentation--The Consolidated Financial
Statements include the accounts of the Corporation, the Bank, and Somerset. All
significant intercompany balances and transactions have been eliminated in
consolidation. In preparing the Consolidated Financial Statements, management
is required to make estimates and assumptions that affect the reported amounts
of assets and liabilities as of the date of the balance sheet and revenues and
expenses for the period. Actual results could differ significantly from those
estimates. Material estimates that are particularly susceptible to significant
change in the near term relate to the determination of the allowance for loan
losses, assumptions used to value the loan servicing assets, and the
determination of the valuation allowance for deferred taxes.

                                      28

<PAGE>

                  FIRST INDIANA CORPORATION AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --(Continued)


   All share and per share data has been restated to reflect the five-for-four
stock split declared on January 16, 2002.

   (B) Investment Securities--The Bank classifies investments in debt and
equity securities (investment securities) as trading, held to maturity, or
available for sale. Investment securities classified as held to maturity are
stated at cost, as adjusted for amortization of premiums and accretion of
discounts using the level yield method. The Bank has the ability and positive
intent to hold these securities to maturity.

   Securities classified as available for sale are stated at fair value, based
on quoted market prices, with unrealized holding gains and losses excluded from
earnings and reported net of related income taxes as a separate component of
shareholders' equity until realized. A decline in the fair value of any
available-for-sale or held-to-maturity security below cost that is deemed other
than temporary is charged to earnings, resulting in the establishment of a new
cost basis for the security. The Corporation has no assets classified as
trading.

   Dividend and interest income is recognized when earned. Realized gains and
losses for securities classified as available for sale are included in earnings
and are derived using the specific identification method for determining the
cost of securities sold.

   (C) Federal Home Loan Bank and Federal Reserve Bank Stock--As members of the
Federal Home Loan Bank System and the Federal Reserve Bank System ("FRB"), the
Bank is required to own shares of capital stock in the Federal Home Loan Bank
of Indianapolis ("FHLB") and the FRB. FHLB and FRB stock are carried at their
cost of $100 and $50 par values per share since they are restricted investment
securities. Investment in FHLB stock was $21,591,000 at December 31, 2001 and
2000. The Bank's investment in FRB stock was $900,000 at December 31, 2001. The
Bank purchased this stock upon approval of its charter conversion in 2001.

   (D) Loans--Loans originated for portfolio are recorded at cost, with any
discount or premium amortized to maturity using the level-yield method. Loans
are placed on non-accrual status when payments of principal or interest become
91 days or more past due or earlier when an analysis of a borrower's
creditworthiness indicates that payments could become past due, unless the loan
is in process of collection and secured. Interest income on such loans is
recognized only to the extent that cash is received and where future collection
of principal is probable. Interest accruals are resumed on such loans only when
they are brought current with respect to interest and principal and when, in
the opinion of management, the loans are estimated to be fully collectible.

   (E) Home Equity and Mortgage Loan Origination Activities--In general, the
Bank originates selected fixed-rate home equity loans and fixed-rate
residential mortgage loans for sale in the secondary market. Adjustable-rate
residential mortgage and other home equity loans are originated primarily for
investment purposes, with the intention of holding them to maturity. In certain
instances, adjustable-rate mortgage loans originated are identified as held for
sale. This action is taken primarily to effectively manage the total interest
rate risk levels of the Bank's asset/liability structure.

   Loans held for sale are carried at the lower of cost or estimated market
value in the aggregate. The Bank continuously monitors its loan pipeline and
manages it through limits on market exposure. The total cost of home equity
loans and residential mortgages originated with the intent to sell is allocated
between the loan servicing right and the loan without servicing based on their
relative fair values at the date of sale. The capitalized cost of loan
servicing rights is amortized in proportion to, and over the period of,
estimated net servicing revenue. For this purpose, estimated servicing revenues
include late charges and other ancillary income. Estimated servicing costs
include direct costs associated with performing the servicing function and
allocations of other costs.


                                      29

<PAGE>

                  FIRST INDIANA CORPORATION AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --(Continued)

   Loan servicing rights are periodically evaluated for impairment by
stratifying them based on predominant risk characteristics of the underlying
serviced loans. These risk characteristics include loan type (fixed or
adjustable rate), investor type (FHLMC, GNMA, private), term, note rate, lien
position, and year of origination. Impairment represents the excess of cost of
an individual loan servicing rights stratum over its estimated fair value and
is recognized through a valuation allowance.

   Fair values for individual strata are based on the present value of
estimated future cash flows using a discount rate commensurate with the risks
involved. Estimates of fair value include assumptions about prepayment, default
and interest rates, and other factors that are subject to change over time.
Changes in these underlying assumptions could cause the fair value of loan
servicing rights, and the related valuation allowance, to change significantly
in the future.

   (F) Loan Fees--Non-refundable loan fees and certain direct costs are
deferred and the net amount amortized over the contractual life of the related
loan as an adjustment of the yield.

   (G) Discounts, Premiums, and Prepaid Fees--Discounts and premiums on the
purchase of loans and prepaid fees are amortized to interest income on a
level-yield basis.

   (H) Other Real Estate Owned--Other real estate owned ("OREO") is generally
acquired by deed in lieu of foreclosure and is initially recorded at the lower
of cost or fair market value at the date of foreclosure, establishing a new
cost basis. Subsequent to foreclosure, OREO is carried at the lower of cost or
fair value, less costs to sell. A review of OREO properties occurs in
conjunction with the review of the loan portfolios. As of December 31, 2001 and
2000, the balance of OREO included in other assets was $6,992,000 and
$2,593,000.

   (I) Allowance for Loan Losses--An allowance has been established for loan
losses. The provision for loan losses charged to operations is based on
management's judgment of current economic conditions and the credit risk of the
loan portfolio. Management believes that this allowance is adequate for the
losses inherent in the loan portfolio. While management uses available
information to recognize losses on loans, future additions to the allowance may
be necessary based on changes in economic conditions. In addition, various
regulatory agencies, as an integral part of their examination process,
periodically review this allowance and may require the Corporation to recognize
additions to the allowance based on their judgment about information available
to them at the time of their examination.

   (J) Income Taxes--The Corporation uses the asset and liability method to
account for income taxes. 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 on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date. First
Indiana files a consolidated income tax return.

   (K) Earnings Per Share--Basic earnings per share for 2001, 2000, and 1999
were computed by dividing net earnings by the weighted average shares of common
stock outstanding (15,569,956, 15,716,234, and 15,722,681). Diluted earnings
per share for 2001, 2000, and 1999 were computed by dividing net earnings by
the weighted average shares of common stock and common stock that would have
been outstanding assuming the issuance of all dilutive potential common shares
outstanding (15,998,976, 15,997,179, and 16,049,598). Dilution of the per-share
calculation relates to stock options.

   (L) Premises and Equipment--Premises and equipment are carried at cost, less
accumulated depreciation and amortization. Depreciation and amortization are
provided on a straight-line basis over the estimated useful lives of the
various classes of assets.

                                      30

<PAGE>

                  FIRST INDIANA CORPORATION AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --(Continued)


   (M) Cash and Cash Equivalents--For purposes of reporting cash flows, cash
and cash equivalents include cash on hand, amounts due from banks,
interest-bearing deposits with banks, and federal funds sold. Generally,
federal funds are sold for one-day periods. All cash and cash equivalents
mature within 90 days.

   (N) Reclassification--Certain amounts in the 2000 and 1999 Consolidated
Financial Statements have been reclassified to conform to the current year
presentation.

   (O) Comprehensive Income--Comprehensive income is the total of net income
and all non-owner changes in shareholders' equity.

   (P) Derivatives--Effective January 1, 2001, the Corporation adopted the
provisions of the Financial Accounting Standards Board ("FASB") Statement No.
133, "Accounting for Derivative Instruments and Hedging Activities." Since the
Corporation does not hold any derivative instruments that are subject to the
requirements of FASB Statement No. 133, the adoption had no impact on the
financial condition or results of operations of the Corporation.

   (Q) Transfers and Servicing of Financial Assets--Effective April 1, 2001,
the Corporation adopted the provisions of FASB Statement No. 140, "Accounting
for Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities (a replacement of FASB Statement No. 125)." The statement revises
the standards for accounting for securitizations and other transfers of
financial assets and collateral and requires certain disclosures, but it
carries over most of the provisions of Statement No. 125 without
reconsideration. The adoption of the standard had no impact on the financial
condition or results of operations of the Corporation.

   (R) Recent Accounting Pronouncements--In July 2001, the Financial Accounting
Standards Board issued FASB Statement No. 141, "Business Combinations," and
FASB Statement No. 142, "Goodwill and Other Intangible Assets." Statement No.
141 requires that the purchase method of accounting be used for all business
combinations initiated after June 30, 2001 as well as all purchase method
business combinations completed after June 30, 2001. Statement No. 141 also
specifies criteria that intangible assets acquired in a purchase method
business combination must meet to be recognized and reported apart from
goodwill, noting that any purchase price allocable to an assembled workforce
may not be accounted for separately. Statement No. 142 requires that goodwill
and intangible assets with indefinite useful lives no longer be amortized, but
instead tested for impairment at least annually in accordance with the
provisions of Statement No. 142. Statement No. 142 also requires that
intangible assets with estimated useful lives be amortized over their
respective estimated useful lives to their estimated residual values, and
reviewed for impairment in accordance with FASB Statement No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed of."

   The provisions of Statement No. 141 were required to be adopted immediately,
and Statement No. 142 was effective January 1, 2002. Furthermore, any goodwill
and intangible assets determined to have an indefinite useful life that are
acquired in a purchase business combination completed after June 30, 2001, but
before Statement No. 142 is adopted in full, will not be amortized, but will
continue to be evaluated for impairment in accordance with the appropriate
pre-Statement No. 142 accounting literature. Goodwill and intangible assets
acquired in business combinations completed before July 1, 2001 continue to be
amortized and tested for impairment in accordance with the appropriate
pre-Statement No. 142 accounting literature prior to the adoption of Statement
No. 142.

   Statement No. 141 requires upon adoption of Statement No. 142 that the
Corporation evaluate its existing intangible assets and goodwill that were
acquired in a prior purchase business combination, and make any necessary
reclassifications in order to conform with the new criteria in Statement No.
141 for recognition apart from goodwill. Upon adoption of Statement No. 142,
the Corporation will be required to reassess the useful lives

                                      31

<PAGE>

                  FIRST INDIANA CORPORATION AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --(Continued)

and residual values of all intangible assets acquired, and make any necessary
amortization period adjustments by the end of the first interim period after
adoption. In addition, to the extent an intangible asset is identified as
having an indefinite useful life, the Corporation will be required to test the
intangible asset for impairment in accordance with the provisions of Statement
No. 142 within the first interim period. Any impairment loss will be measured
as of the date of adoption and recognized as the cumulative effect of a change
in accounting principle in the first interim period.

   In connection with the Statement's transitional goodwill impairment
evaluation, Statement No. 142 requires the Corporation to perform an assessment
whether there is an indication that goodwill is impaired as of the date of
adoption. To accomplish this, the Corporation must identify its reporting units
and determine the carrying value of each reporting unit by assigning the assets
and liabilities, including the existing goodwill and intangible assets, to
those reporting units as of the date of adoption. The Corporation will have up
to six months from the date of adoption to determine the fair value of each
reporting unit and compare it to the carrying amount of the reporting unit. To
the extent the carrying amount of the reporting unit exceeds fair value, an
indication exists that the reporting unit goodwill may be impaired and the
Corporation must perform the second step of the transitional impairment test.
In the second step, the Corporation must compare the implied fair value of the
reporting unit to the reporting unit goodwill, both of which would be measured
as of the date of adoption. The implied fair value of goodwill is determined by
allocating the fair value of the reporting unit to all of the assets
(recognized and unrecognized) and liabilities of the reporting unit in a manner
similar to a purchase price allocation, in accordance with Statement No. 141.
This second step is required to be completed as soon as possible, but no later
than the end of the year of adoption. Any transitional impairment loss will be
recognized as the cumulative effect of a change in accounting principle in the
Corporation's statement of earnings.

   As of the date of adoption of Statement No. 142, the Corporation has
unamortized goodwill in the amount of $13,045,000, which will be subject to the
transition provisions of Statement No. 141 and Statement No. 142. Amortization
expense related to goodwill was $920,000 and $279,000 for the years ended
December 31, 2001 and 2000, respectively. Although the Corporation has not
completed its assessment of the impact of adopting Statement No. 141 and
Statement No. 142, it is not expected that the adoption of these statements
will have a material impact on the Corporation's financial statements.

(2) Business Combination

   On September 29, 2000, First Indiana acquired The Somerset Group, Inc.
("Somerset Group") by merger. Somerset Group, based in Indianapolis, Indiana,
was a comprehensive financial services company offering a full array of tax
planning, consulting, accounting, wealth management, investment advisory
services, and investment and insurance products to the general public. Somerset
Group owned 22 percent of the outstanding common stock of First Indiana prior
to the acquisition. The acquisition has been accounted for by the purchase
method of accounting, and accordingly, the financial results of Somerset have
been included in First Indiana's consolidated financial statements from the
September 29, 2000 acquisition date. The purchase price of $67,213,000 included
the cancellation of 3,448,084 of First Indiana's common shares held by Somerset
Group with a value of $48,963,000. Somerset Group's common shares were
exchanged for a combination of 3,224,539 First Indiana common shares and
$17,228,000 in cash. The excess of purchase price over the fair value of the
net identifiable assets acquired of $12,358,000 has been recorded as goodwill
and is being amortized on a straight-line basis over 15 years.


                                      32

<PAGE>

                  FIRST INDIANA CORPORATION AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --(Continued)

(3) Securities Available for Sale

   The amortized cost and estimated fair value of securities available for sale
and the related unrealized gains and losses were as follows:

<TABLE>
<CAPTION>
                                               December 31, 2001
                                    ---------------------------------------
                                               Gross Unrealized
                                    Amortized  ----------------  Fair Value
                                      Cost      Gains    Losses (Book Value)
     (Dollars in Thousands)         ---------   ------   ------ ------------
     <S>                            <C>        <C>       <C>    <C>
     U.S. Government Agencies...... $105,002   $5,553     $ --    $110,555
     Mortgage-Backed Securities
        FHLMC......................   21,443      722       --      22,165
        FNMA.......................   11,945      454       --      12,399
        Participation Certificates.        5       --       --           5
     Other Asset-Backed Securities.      210       --       --         210
     Corporate Debt Securities.....    2,507       22       --       2,529
                                    --------    ------    ----    --------
            Total.................. $141,112   $6,751     $ --    $147,863
                                    ========    ======    ====    ========
</TABLE>

<TABLE>
<CAPTION>
                                               December 31, 2000
                                    ---------------------------------------
                                               Gross Unrealized
                                    Amortized  ----------------  Fair Value
                                      Cost      Gains    Losses (Book Value)
     (Dollars in Thousands)         ---------   ------   ------ ------------
     <S>                            <C>        <C>       <C>    <C>
     U.S. Government Agencies...... $104,019   $2,470     $ --    $106,489
     Mortgage-Backed Securities
        FHLMC......................   31,917      395       --      32,312
        FNMA.......................   16,601      262       --      16,863
        Participation Certificates.        5        1       --           6
     Other Asset-Backed Securities.      445       --       --         445
     Corporate Debt Securities.....    2,550       44       --       2,594
     Other Debt Securities.........       75       --       --          75
                                    --------    ------    ----    --------
            Total.................. $155,612   $3,172     $ --    $158,784
                                    ========    ======    ====    ========
</TABLE>

   The maturity distribution of debt securities is shown below. The
distribution of mortgage-backed securities and collateralized mortgage
obligations is based on average expected maturities. Actual maturities might
differ because issuers may have the right to call or prepay obligations.

<TABLE>
<CAPTION>
                                                   December 31, 2001
                                               -------------------------
                                               Amortized Cost Fair Value
        (Dollars in Thousands)                 -------------- ----------
        <S>                                    <C>            <C>
        Due in one year or less...............    $ 12,447     $ 12,876
        Due after one year through five years.     104,499      109,944
        Due after five years through ten years       9,983       10,386
        Due after ten years...................      14,183       14,657
                                                  --------     --------
               Total..........................    $141,112     $147,863
                                                  ========     ========
</TABLE>

                                      33

<PAGE>

                  FIRST INDIANA CORPORATION AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --(Continued)


   Realized gains and losses related to securities available for sale for each
of the three years ended December 31 were as follows:

<TABLE>
<CAPTION>
                                         2001 2000    1999
                  (Dollars in Thousands) ---- -----  -------
                  <S>                    <C>  <C>    <C>
                    Realized Gains...... $543 $  84  $   218
                    Realized Losses.....   --  (252)  (3,233)
                                         ---- -----  -------
                    Net Gains (Losses).. $543 $(168) $(3,015)
                                         ==== =====  =======
</TABLE>

   Securities totaling $108,389,000 served as collateral for repurchase
agreements on December 31, 2001.

(4) Loans

   The composition of loans is summarized as follows:

<TABLE>
<CAPTION>
                                                   December 31
                                              ---------------------
                                                 2001       2000
             (Dollars in Thousands)           ---------- ----------
             <S>                              <C>        <C>
             Business Loans.................. $  512,738 $  312,757
             Consumer Loans
                Home Equity Loans............    664,692    737,370
                Other Consumer Loans.........     10,419     10,920
             Residential Mortgage Loans......    292,503    466,125
             Single-Family Construction Loans    224,926    207,569
             Commercial Real Estate Loans....     51,208     49,734
                                              ---------- ----------
                                              $1,756,486 $1,784,475
                                              ========== ==========
</TABLE>

   Loans are net of deferred costs and net unearned discounts of $9,013,000 and
$10,726,000 at December 31, 2001 and 2000.

   The weighted average yield on loans was 6.88 percent and 8.97 percent at
December 31, 2001 and 2000. Consumer loans serviced for others amounted to
$387,068,000 and $368,783,000 at December 31, 2001 and 2000. Residential loans
serviced for others amounted to $446,268,000 and $611,227,000 at December 31,
2001 and 2000. The decrease in residential loan servicing is consistent with
the Bank's strategy to de-emphasize the residential mortgage business. Another
factor in the decrease is the increase in loan prepayments due to the current
interest rate environment. During 2000, the Bank sold $216,227,000 in
out-of-market loan servicing at a gain of $1,251,000. During 1999, the Bank
sold $148,000,000 in out-of-market loan servicing at a gain of $905,000.

   In connection with the Bank's efforts to establish a secondary market for
its home equity loan originations, $275,698,000, $270,191,000, and $297,052,000
in fixed-rate loans were sold in 2001, 2000, and 1999. In addition, at December
31, 2001 and 2000, the Bank had classified $34,756,000 and $48,882,000 of home
equity loans as held for sale and $108,000 and $331,000 of residential mortgage
loans as held for sale.

   As of December 31, 2001 and 2000, the balance of capitalized loan servicing
rights included in other assets was $9,819,000 and $8,249,000, with an
estimated fair value of $11,491,000 and $13,795,000. The amounts capitalized in
2001, 2000, and 1999 were $4,164,000, $3,280,000, and $6,040,000, and the
amounts amortized to loan servicing income were $2,594,000, $2,147,000, and
$1,919,000.

                                      34

<PAGE>

                  FIRST INDIANA CORPORATION AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --(Continued)


   During 2001, 2000, and 1999, the Bank transferred $14,450,000, $8,776,000,
and $9,542,000 from loans to other real estate owned.

   The geographic distribution of loans at December 31, 2001, is presented
below:


<TABLE>
<CAPTION>
                           Location          Percent
                           --------          -------
                           <S>               <C>
                           Indiana..........    51%
                           Contiguous States     8
                           North Carolina...    10
                           Florida..........     9
                           Arizona..........     6
                           Oregon...........     3
                           Other............    13
                                               ---
                                  Total.....   100%
                                               ===
</TABLE>

   Loans exceeding $1,000,000 are considered impaired when it is probable that
all principal and interest amounts due will not be collected in accordance with
the loan's contractual terms. Impairment is recognized to the extent that the
recorded investment of an impaired loan exceeds its value. A loan's value is
based on the loan's underlying collateral value or the calculated present value
of projected cash flows discounted at the contractual interest rate. For
collateral dependent loans, the loan's value is based on the current value of
the underlying collateral securing the loan less estimated disposition costs,
and the amount of impairment is charged off. All other loans are grouped by
loan type and collectively evaluated for impairment.

   The recorded investment in impaired loans is periodically adjusted to
reflect cash payments, revised estimates of future cash flows, and increases in
the present value of expected cash flows due to the passage of time. Cash
payments representing interest income are reported as such. Other cash payments
are reported as reductions in recorded investment. Increases or decreases due
to changes in estimates of future payments and the passage of time are
considered in relation to the overall adequacy of the allowance for loan losses.

   Information relating to the Bank's impaired loans is outlined in the tables
below:

<TABLE>
<CAPTION>
                                                           December 31
                                                          -------------
                                                           2001   2000
        (Dollars in Thousands)                            ------ ------
        <S>                                               <C>    <C>
        Impaired Loans with Related Specific Allowance... $   -- $5,637
        Impaired Loans with No Related Specific Allowance  9,029  1,481
                                                          ------ ------
           Total Impaired Loans.......................... $9,029 $7,118
                                                          ====== ======

        Specific Allowance on Impaired Loans............. $   -- $1,704

                                                           Years Ended
                                                           December 31
                                                          -------------
                                                           2001   2000
                                                          ------ ------
        Average Balance of Impaired Loans................ $6,035 $1,646
        Interest Income Recognized on Impaired Loans.....    640    688
</TABLE>

   Non-accrual loans totaled $36,499,000 on December 31, 2001 and $21,710,000
on December 31, 2000.


                                      35

<PAGE>

                  FIRST INDIANA CORPORATION AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --(Continued)

(5) Allowance for Loan Losses

   A summary of activity in the allowance for loan losses for the three years
ended December 31, 2001 follows:

<TABLE>
<CAPTION>
                                           2001     2000     1999
            (Dollars in Thousands)       --------  -------  -------
            <S>                          <C>       <C>      <C>
            Balance at Beginning of Year $ 33,578  $28,759  $25,700
            Charge-Offs.................  (12,771)  (5,944)  (7,571)
            Recoveries..................    1,100    1,007    1,220
                                         --------  -------  -------
            Net Charge-Offs.............  (11,671)  (4,937)  (6,351)
            Provision for Loan Losses...   15,228    9,756    9,410
                                         --------  -------  -------
            Balance at End of Year...... $ 37,135  $33,578  $28,759
                                         ========  =======  =======
</TABLE>

(6) Premises and Equipment

<TABLE>
<CAPTION>
                                               December 31
                                           ------------------
                                             2001      2000
                  (Dollars in Thousands)   --------  --------
                  <S>                      <C>       <C>
                  Land.................... $  4,728  $  4,858
                  Building................    9,306     6,427
                  Leasehold Improvements..    1,617     1,571
                  Furniture and Equipment.   26,300    25,067
                  Accumulated Depreciation  (21,364)  (18,711)
                                           --------  --------
                                           $ 20,587  $ 19,212
                                           ========  ========
</TABLE>

(7) Interest-Bearing Deposits

<TABLE>
<CAPTION>
                                                        December 31
                                                   ---------------------
                                                      2001       2000
       (Dollars in Thousands)                      ---------- ----------
       <S>                                         <C>        <C>
       Interest-Bearing Demand.................... $  140,175 $  115,651
       Savings....................................    447,832    375,331
       Certificates of Deposit Under $100,000.....    352,766    401,721
       Certificates of Deposit $100,000 or Greater    273,682    383,444
                                                   ---------- ----------
                                                   $1,214,455 $1,276,147
                                                   ========== ==========
</TABLE>

   Following is a table of maturities for certificates of deposit outstanding
at December 31, 2001.

<TABLE>
<CAPTION>
                                                Amount
                        (Dollars in Thousands) --------
                        <S>                    <C>
                                 2002......... $419,394
                                 2003.........  121,981
                                 2004.........   61,569
                                 2005.........   18,095
                                 2006.........    5,409
                                               --------
                                               $626,448
                                               ========
</TABLE>

   Cash paid during the year for interest on deposits, advances, and other
borrowed money was $86,027,000, $93,895,000, and $72,616,000 for 2001, 2000,
and 1999, respectively.

                                      36

<PAGE>

                  FIRST INDIANA CORPORATION AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --(Continued)

(8) Short-Term Borrowings

   Federal funds purchased and securities sold under agreements to repurchase
are classified as short-term borrowings. Repurchase agreements represent an
indebtedness of the Bank secured by securities available for sale issued by (or
fully guaranteed as to principal and interest by) the United States or an
agency of the United States. All agreements represent obligations to repurchase
the same securities at maturity. These securities are under the Bank's control.

   Following is a summary of short-term borrowings for each of the three years
ended December 31:

<TABLE>
<CAPTION>
                                               2001      2000     1999
       (Dollars in Thousands)                --------  --------  -------
       <S>                                   <C>       <C>       <C>
       Balance at Year-End.................. $121,082  $117,725  $98,754
       Average During the Year..............  112,991   107,849   56,348
       Maximum Month-End Balance............  132,740   120,816   98,754
       Weighted Average Rate During the Year     3.81%     5.92%    4.96%
       Weighted Average Rate at Year-End....     1.77      6.09     5.35
</TABLE>

   At December 31, 2001, the Bank had $59,000,000 in unused lines of credit
available from local financial institutions for borrowing federal funds. There
are no fees associated with these lines. In addition, at December 31, 2001, the
Corporation had a $10,000,000 unused revolving line of credit on which it paid
$13,000 in fees in 2001.

(9) Federal Home Loan Bank Advances

   Each Federal Home Loan Bank is authorized to make advances to its member
institutions, subject to their regulations and limitations. Scheduled principal
repayments of FHLB advances outstanding at December 31, 2001, were:

<TABLE>
<CAPTION>
                                                Amount
                        (Dollars in Thousands) --------
                        <S>                    <C>
                              2002............ $105,000
                              2003............   75,000
                              2004............   25,000
                              2005............   50,650
                              2006............      211
                              Thereafter......   40,786
                                               --------
                                               $296,647
                                               ========
</TABLE>

   FHLB advances outstanding at December 31, 2001 mature from February 2002
through May 2019. Of the $296,647,000 in advances, the FHLB has the option to
require the Bank to repay $110,000,000 at certain designated dates. The
advances bear fixed or floating rates ranging from 1.99 percent to 8.57
percent. The weighted average interest rate at December 31, 2001 and 2000, was
5.28 percent and 6.32 percent. The FHLB advances are collateralized with FHLB
stock and other qualifying assets. As of December 31, 2001 and 2000, the Bank's
FHLB advances were backed by sufficient collateral. Additionally, the Bank
maintains an unused $10,000,000 line of credit with the FHLB.


                                      37

<PAGE>

                  FIRST INDIANA CORPORATION AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --(Continued)

(10) Income Taxes

   Income tax expense attributable to earnings before income taxes consists of:

<TABLE>
<CAPTION>
                                          Current Deferred  Total
             (Dollars in Thousands)       ------- -------- -------
             <S>                          <C>     <C>      <C>
             Year Ended December 31, 2001
             Federal..................... $12,839 $(1,582) $11,257
             State and Local.............   1,606    (589)   1,017
                                          ------- -------  -------
                                          $14,445 $(2,171) $12,274
                                          ======= =======  =======
             Year Ended December 31, 2000
             Federal..................... $15,381 $(2,795) $12,586
             State and Local.............   2,499      20    2,519
                                          ------- -------  -------
                                          $17,880 $(2,775) $15,105
                                          ======= =======  =======
             Year Ended December 31, 1999
             Federal..................... $10,371 $   353  $10,724
             State and Local.............   2,160     436    2,596
                                          ------- -------  -------
                                          $12,531 $   789  $13,320
                                          ======= =======  =======
</TABLE>

   The effective income tax rate differs from the statutory federal corporate
tax rate as follows:

<TABLE>
<CAPTION>
                                              Years Ended December 31
                                              ----------------------
                                               2001      2000   1999
                                              ----      ----   ----
              <S>                             <C>       <C>    <C>
              Statutory Rate................. 35.0%     35.0%  35.0%
                 State Income Taxes..........  2.2       4.1    4.2
                 Goodwill....................  0.9       0.2     --
                 Negative Goodwill...........   --      (1.6)  (1.8)
                 Non-Taxable Interest Income.   --      (0.1)  (0.1)
                 Other....................... (0.1)      0.2   (0.4)
                                               ----      ----   ----
              Effective Rate................. 38.0%     37.8%  36.9%
                                               ====      ====   ====
</TABLE>

                                      38

<PAGE>

                  FIRST INDIANA CORPORATION AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --(Continued)

   Deferred income tax assets and liabilities result from temporary differences
in the recognition of income and expense for income tax and financial reporting
purposes. The tax effects of temporary differences that give rise to
significant portions of net deferred tax assets included in other assets are
presented below:

<TABLE>
<CAPTION>
                                                   2001    2000
              (Dollars in Thousands)              ------- -------
              <S>                                 <C>     <C>
              Deferred Tax Assets
                 Allowance for Loan Losses....... $14,485 $12,922
                 Pension and Retirement Benefits.   3,699   3,354
                 Interest Credited...............     997     579
                 Premises and Equipment..........     697     565
                 Accrued Compensation............     529     337
                 Other...........................   1,346   1,462
                                                  ------- -------
                                                   21,753  19,219
                                                  ------- -------
              Deferred Tax Liabilities
                 Loan Servicing Rights...........   3,827   3,079
                 FHLB Stock Dividends............     548     540
                 Net Deferred Loan Fees..........   4,705   4,950
                 Unrealized Gain on Investments..   2,667   1,126
                 Other...........................      35     182
                                                  ------- -------
                                                   11,782   9,877
                                                  ------- -------
              Net Deferred Tax Assets............ $ 9,971 $ 9,342
                                                  ======= =======
</TABLE>

   In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred tax
assets will not be realized. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during the periods in
which those temporary differences become deductible. Management considers the
scheduled reversal of deferred tax liabilities, projected future taxable
income, and tax planning strategies in making this assessment. Based upon the
level of historical taxable income and projections for future taxable income
over the periods which the deferred tax assets are deductible, management
believes it is more likely than not the Corporation will realize the benefits
of these deductible differences. The amount of the deferred tax asset
considered realizable, however, could be reduced in the near term if estimates
of future taxable income are reduced.

   In accordance with Statement of Financial Accounting Standard No. 109,
"Accounting for Income Taxes," a deferred liability has not been established
for the Bank's tax bad debt base year reserves of $16,586,000. The base year
reserves are generally the balance of reserves as of December 31, 1987, reduced
proportionally for reductions in the Bank's loan portfolio since that date. The
base year reserves will continue to be subject to recapture and the Bank could
be required to recognize a tax liability if (1) the Bank fails to qualify as a
"bank" for federal income tax purposes, (2) certain distributions are made with
respect to the stock of the Bank, (3) the bad debt reserves are used for any
purpose other than to absorb bad debt losses, or (4) there is a change in tax
law.

   Cash paid during the year for income taxes was $13,725,000, $15,619,000, and
$14,869,000 for 2001, 2000, and 1999, respectively.

(11) Shareholders' Equity, Regulatory Capital, and Dividend Restrictions

   In April 1999, the Corporation's Board of Directors authorized the
repurchase from time to time of up to $10,000,000 of the Corporation's
outstanding common stock. At December 31, 2001, $9,956,000 of outstanding
common stock had been repurchased under this authorization. In November 2001,
the Corporation's Board of

                                      39

<PAGE>

                  FIRST INDIANA CORPORATION AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --(Continued)

Directors authorized the repurchase of an additional $5,000,000 in the
Corporation's outstanding common stock. No repurchases have been made under
this authorization.

   The Corporation has a shareholder rights agreement, whereby each common
shareholder is entitled to one preferred stock right for each share of common
stock owned. The rights "flip in" upon the acquisition of 20 percent of the
Corporation's outstanding common stock in a takeover attempt, and offer current
shareholders a measure of protection for their investment in First Indiana.

   On January 16, 2002, the Corporation declared a five-for-four stock split.
All share and per-share amounts have been adjusted to reflect this stock split.

   First Indiana Corporation is subject to capital requirements and guidelines
imposed on holding companies by the Federal Reserve Board. First Indiana Bank
is subject to capital requirements and guidelines imposed on national banks by
the Office of the Comptroller of the Currency ("OCC"). The Corporation and the
Bank are required by their respective regulators to maintain minimum capital
ratios. Failure to meet minimum capital requirements can initiate certain
mandatory and possibly additional discretionary actions by regulators which, if
undertaken, could have a direct material effect on the Corporation's or the
Bank's financial statements.

   Under capital adequacy guidelines and the regulatory framework for prompt
corrective action, First Indiana and the Bank must meet specific capital
guidelines that involve quantitative measures of their assets, liabilities, and
certain off-balance-sheet items as calculated under regulatory accounting
practices. First Indiana's and the Bank's capital amounts and classifications
are also subject to qualitative judgments by the regulators about components,
risk weightings, and other factors. Quantitative measures established by
regulation to ensure capital adequacy require First Indiana and the Bank to
maintain minimum amounts and ratios (set forth in the table) of total and Tier
1 capital (as defined in the regulations) to risk-weighted assets (as defined),
and Tier 1 capital (as defined) to average assets (as defined).

   The Federal Deposit Insurance Corporation Improvement Act of 1999 ("FDICIA")
established ratios and guidelines for banks to be considered
"well-capitalized." The Bank exceeds the capital levels set by FDICIA to be
considered well-capitalized. However, the OCC has not notified management of
its categorization of the Bank's regulatory capital under this regulation. The
following table shows the Corporation's and the Bank's compliance with all
capital requirements at December 31, 2001.

<TABLE>
<CAPTION>
                                                              December 31, 2001
                                              ------------------------------------------------
                                                                  Minimum           To be
                                                  Actual      Capital Adequacy Well-Capitalized
                                              --------------  ---------------  ---------------
                                               Amount  Ratio   Amount    Ratio  Amount   Ratio
(Dollars in Thousands)                        -------- -----  --------   ----- --------  -----
<S>                                           <C>      <C>    <C>        <C>   <C>       <C>
Leverage (Tier One Capital to Average Assets)
   First Indiana Corporation................. $191,903  9.18% $ 83,645   4.00%      N/A    N/A
   First Indiana Bank........................  177,371  8.51    83,324   4.00  $104,155   5.00%
Tier One Capital to Risk-Weighted Assets
   First Indiana Corporation................. $191,903 10.61% $ 72,332   4.00%      N/A    N/A
   First Indiana Bank........................  177,371  9.84    72,138   4.00  $108,206   6.00%
Total Capital to Risk-Weighted Assets
   First Indiana Corporation................. $214,672 11.87% $144,664   8.00%      N/A    N/A
   First Indiana Bank........................  200,094 11.10   144,275   8.00  $180,344  10.00%
</TABLE>

   Prior to its conversion to a national bank on August 1, 2001, the Bank was
subject to capital requirements and guidelines imposed on thrifts by the Office
of Thrift Supervision ("OTS"). The following table shows the Bank's capital
levels and compliance with all regulatory requirements at December 31, 2000.
The Bank was

                                      40

<PAGE>

                  FIRST INDIANA CORPORATION AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --(Continued)

classified as "well-capitalized" under the OTS regulatory framework for prompt
corrective action, its highest classification. Data is presented only for the
Bank as of December 31, 2000 because the Corporation was not subject to
regulatory capital requirements prior to its conversion to a bank holding
company in 2001.

<TABLE>
<CAPTION>
                                              December 31, 2000
                              ------------------------------------------------
                                                  Minimum           To be
                                  Actual      Capital Adequacy Well-Capitalized
                              --------------  ---------------  ---------------
                               Amount  Ratio   Amount    Ratio  Amount   Ratio
  (Dollars in Thousands)      -------- -----  --------   ----- --------  -----
  <S>                         <C>      <C>    <C>        <C>   <C>       <C>
  Tangible Capital........... $173,075  8.38% $ 30,992   1.50%      N/A    N/A
  Core (Tier One) Capital....  173,075  8.38    82,646   4.00  $103,308   5.00%
  Tier One Risk-Based Capital  173,075 10.08       N/A    N/A   103,024   6.00
  Total Risk-Based Capital...  193,079 11.24   137,365   8.00   171,706  10.00
</TABLE>

   The Corporation is not subject to any regulatory restrictions on the payment
of dividends to its shareholders. However applicable laws and regulations limit
the amount of dividends the Bank may pay. Prior regulatory approval is required
if dividends to be declared in any year would exceed net earnings of the
current year (as defined under the National Bank Act) plus retained net profits
for the preceding two years. At January 1, 2002, the Bank could have paid
dividends to the Corporation of approximately $20,849,000 without prior
regulatory approval. Future dividends will be dependent on the level of
earnings and capital and liquidity considerations of the Bank.

(12) Commitments and Contingencies

   At December 31, 2001 and 2000, the Bank had the following outstanding
commitments to fund loans:

<TABLE>
<CAPTION>
                                                     December 31
                                                  -----------------
                                                    2001     2000
             (Dollars in Thousands)               -------- --------
             <S>                                  <C>      <C>
             Commitments to Fund:
                Business Loans................... $237,955 $ 46,800
                Consumer Loans
                    Home Equity Loans............  171,709  158,740
                    Other........................    4,450       --
                Residential Mortgage Loans.......      754    3,482
                Single-Family Construction Loans.  147,539  149,964
                Commercial Real Estate Loans.....   10,127    3,550
                                                  -------- --------
                                                  $572,534 $362,536
                                                  ======== ========
</TABLE>

   Of the commitments to fund loans at December 31, 2001, nearly all are
commitments to fund variable-rate products.

   At December 31, 2001, the Bank had approximately $38,471,000 in commitments
to repurchase convertible adjustable-rate mortgage loans from third-party
investors. If the borrower under any of these loans elects to convert the loan
to a fixed-rate loan, the investor has the option to require the Bank to
repurchase the loan. If the investor exercises this option, the Bank sets a
purchase price for the loan which equals its market value, and immediately
sells the loan in the secondary market. Thus, the Bank incurs minimal interest
rate risk upon repurchase because of the immediate resale.


                                      41

<PAGE>

                  FIRST INDIANA CORPORATION AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --(Continued)

   The Bank issues standby letters of credit on behalf of its commercial loan
customers in exchange for a fee. At December 31, 2001, outstanding letters of
credit totaled $36,818,000. Letters of credit issued to enhance the bond rating
of economic development bonds totaled $5,249,000. Should these letters be
submitted for payment, the Bank's collateral policy requires the assignment of
the underlying commercial real estate. To ensure the completion of
infrastructure improvements (sewers, streets, sidewalks, underground utilities,
etc.), the Bank had outstanding $1,560,000 of completion letters of credit.
These letters were issued to municipal authorities and utility companies on
behalf of the Bank's commercial real estate borrowers. The standby and
completion letters of credit are collateralized by all assets of the borrower.
Evaluation of the credit risk associated with these letters of credit is part
of the Bank's commercial loan review procedures.

   Rental Obligations--Obligations under non-cancelable operating leases for
office space at December 31, 2001, require minimum future payments of
$2,649,000 in 2002, $2,298,000 in 2003, $2,118,000 in 2004, $2,054,000 in 2005,
$1,995,000 in 2006, and $9,462,000 thereafter. Minimum future payments have not
been reduced by minimum sublease rental income of $182,000 receivable in the
future non-cancelable subleases. Rental expense on office buildings was
$2,384,000, $1,770,000, and $1,736,000 for 2001, 2000, and 1999.

   Other Contingencies--Other lawsuits and claims are pending in the ordinary
course of business on behalf of and against First Indiana. In the opinion of
management, adequate provision has been made for these items in the
Consolidated Financial Statements.

(13) Employee Benefit Plans

   Retirement Plans--First Indiana is a participant in the Financial
Institutions Retirement Fund ("FIRF"). This is a multi-employer defined benefit
pension plan; separate actuarial valuations are not made with respect to each
participating employer. Employees of Somerset are excluded from participation
in this plan. According to FIRF administrators, the market value of the fund's
assets exceeded the value of vested benefits in the aggregate as of June 30,
2001, the date of the latest actuarial valuation. First Indiana's pension
expense under this plan was $15,000, $16,000, and $16,000 for 2001, 2000, and
1999.

   First Indiana has voluntary savings plans for eligible employees which
qualify under Section 401(k) of the Internal Revenue Code. The Corporation has
one such plan for its employees and the employees of its subsidiaries other
than Somerset. Somerset has one such plan for its employees. Employees can
participate by designating a portion of their compensation to be contributed to
the plan. Their employers in turn match the first six percent of the employee
contribution at rates ranging from $0.25 to $0.50 for every $1.00 in employee
contributions. The Corporation's expenses under both plans for matching
contributions in 2001, 2000, and 1999 were $463,000, $248,000, and $233,000. In
addition, Somerset made discretionary contributions to its plan for the
calendar years 2001 and 2000 of $185,000 and $203,000 (equal to three percent
of each participant's compensation up to $170,000).

   Additionally, the Bank maintains non-qualified retirement plans for the
advisory directors of its Mooresville and Rushville divisions. The Corporation
and the Bank maintain supplemental pension benefit plans covering certain of
their senior officers and certain senior officers of the Bank's Mooresville and
Rushville divisions. These supplemental benefit plans provide benefits for
their participants that normally would be paid under FIRF but are precluded
from being so paid by limitations under the Internal Revenue Code. In the case
of some participants, benefits are provided in excess of those that normally
would be paid under FIRF. Net periodic pension expenses for the foregoing
non-qualified retirement plans and supplemental benefit plans were $863,000,
$756,000, and $809,000 in 2001, 2000, and 1999. In determining these expenses,
the unrecognized net transition obligation in respect of acquired institutions
is being amortized over 15 years. The projected benefit obligations

                                      42

<PAGE>

                  FIRST INDIANA CORPORATION AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --(Continued)

were determined using an assumed discount rate of 7.00 percent and 7.50 percent
at December 31, 2001 and 2000. The assumed long-term salary increases were 5.00
percent at December 31, 2001 and 2000, compounded annually. The funded status
of these non-qualified retirement plans and supplemental benefit plans and the
amounts relating thereto reflected in the accompanying consolidated balance
sheets are as follows:

<TABLE>
<CAPTION>
                                                        December 31
                                                      ---------------
                                                       2001     2000
          (Dollars in Thousands)                      -------  ------
          <S>                                         <C>      <C>
          Projected Benefit Obligation............... $ 9,434  $8,494
          Fair Value of Plan Assets..................      --      --
                                                      -------  ------
          Excess of Projected Benefit Obligation Over
           Fair Value of Plan Assets.................   9,434   8,494
          Unrecognized Net Transition Obligation.....    (134)   (146)
          Unrecognized Loss..........................  (1,052)   (763)
                                                      -------  ------
          Accrued Pension Cost....................... $ 8,248  $7,585
                                                      =======  ======
</TABLE>

   Post-Retirement Benefits Other Than Pension--The projected benefit
obligation for post-retirement medical, dental, and life insurance programs for
Board members and certain officers of acquired institutions was $842,000 and
$697,000, and the accrued liability under such programs was $1,175,000 and
$1,149,000 at December 31, 2001 and 2000. Expenses under the programs were
$26,000, $29,000, and $29,000 in 2001, 2000, and 1999, respectively. The
accumulated post-retirement benefit obligation was determined using an assumed
discount rate of 7.00 percent and 7.50 percent at December 31, 2001 and 2000.
The assumed long-term salary increase was 5.00 percent for 2001 and 2000. The
assumed health care cost trend rates used were 5.50 percent for 2000 and later
years.

   Assumed health care cost trend rates affect amounts reported for the health
care plans. A one percentage point change in assumed health care cost trend
rates would have the following effects:

<TABLE>
<CAPTION>
                                                           One Percentage Point
                                                           -------------------
                                                           Increase    Decrease
   (Dollars in Thousands)                                  --------    --------
   <S>                                                     <C>         <C>
   Effect on total of service and interest cost components   $ 5         $ (5)
   Effect on post-retirement benefit obligation...........    59          (54)
</TABLE>

   Stock-Based Compensation--First Indiana has seven stock-based compensation
plans, which are described below. First Indiana applies Accounting Principals
Board Opinion No. 25, "Accounting for Stock Issued to Employees" and related
Interpretations in accounting for these plans. Accordingly, no compensation
cost has been recognized in respect of stock option grants under the plans,
except for deferred compensation expense in connection with certain Somerset
options that is being amortized over the life of the respective options. The
compensation cost charged against income for performance-based restricted stock
grants under the plans was $615,000, $480,000, and $523,000, in 2001, 2000, and
1999. The compensation cost charged against income for the Employees' Stock
Purchase Plans was $261,000, $252,000, and $377,000 in 2001, 2000, and 1999.

                                      43

<PAGE>

                  FIRST INDIANA CORPORATION AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --(Continued)

   If compensation cost in respect of options had been determined based on the
fair value of the option at the grant date consistent with the method of
Statement of Financial Accounting Standard No. 123, First Indiana's net
earnings and earnings per share would have been reduced to the pro forma
amounts indicated below. The effects of applying FASB Statement No. 123 in this
pro forma disclosure are not indicative of future amounts.

<TABLE>
<CAPTION>
                                                    2001    2000    1999
     (Dollars in Thousands, Except Per Share Data) ------- ------- -------
     <S>                                           <C>     <C>     <C>
              Net Earnings
                 As Reported...................... $20,009 $24,817 $22,733
                 Pro Forma........................  19,187  24,595  22,578
              Basic Earnings Per Share
                 As Reported...................... $  1.29 $  1.58 $  1.45
                 Pro Forma........................    1.23    1.57    1.44
              Diluted Earnings Per Share
                 As Reported...................... $  1.25 $  1.55 $  1.42
                 Pro Forma........................    1.20    1.54    1.41
</TABLE>

   The fair value of each option at the date of grant is estimated using the
Black-Scholes option pricing model with the following weighted-average
assumptions used for grants in 2001, 2000, and 1999: dividend yield of 3.0
percent for all years; expected volatility of 41 percent for 2001, 35 percent
for 2000, and 32 percent for 1999; weighted average risk-free interest rates of
5.11 percent, 6.73 percent, and 5.22 percent, respectively; and expected lives
of seven years for all years.

   Fixed Stock Option Plans--First Indiana has four stock option plans
classified in whole or in part as fixed. These include: the 1991 Stock Option
and Incentive Plan, the 1992 Directors' Stock Option Plan, and the 1998 Stock
Incentive Plan. Under the 1991 Plan, First Indiana is authorized to grant
options to its employees for up to 703,125 shares of common stock. Under the
1998 Plan, First Indiana is authorized to grant options to its employees,
directors, and consultants for up to 787,500 shares of common stock. Under the
1992 Plan, First Indiana is authorized to grant options to its outside
directors (i.e., directors who are not employees of the Corporation or any
subsidiary) up to 328,121 shares of common stock. In the case of all options
heretofore granted under the Plans, the exercise price of each option has been
the market price of the Corporation's stock on the date of grant or higher, the
option's maximum term has been five years or ten years, and each option has
vested fully at the end of a period ranging from one to five years from the
date of grant. The 1998 Plan authorized the issuance of stock options for an
exercise price which is less than the market value of the option stock on the
date of grant. The fourth such stock option plan, the 1992 Stock Option Plan,
was adopted upon completion of the mergers resulting in the Rushville and
Mooresville divisions. This plan allows grants for up to 214,886 shares of
common stock. Under all four stock option plans, optionees may elect to fund
their option exercises with stock they currently own. In that event, the
Corporation either cancels the stock certificates received from the optionee in
the stock swap transaction or issues a new certificate for the net number of
additional shares. In addition to the options outstanding at December 31, 2001,
326,288 shares of common stock were available for future grants or awards under
the plans.

   As part of the merger with Somerset Group, First Indiana assumed three
additional stock option plans. Only the options outstanding under these plans
were converted to options to acquire First Indiana Corporation common stock. No
additional options may be issued under these plans.

   Somerset Group's 1991 and 1998 Stock Incentive Plans provided for granting
of qualified and non-qualified stock options to officers and other key
employees at the quoted market value of First Indiana's common stock on the
date of the grant. The two plans are essentially identical. Qualified options
are exercisable during either a period of two to five years or a period of
three to five years after the date of the grant, and expire five years from the
date of the grant. Non-qualified options are exercisable during a period of six
months to ten years after the date of the grant and expire ten years from the
date of the grant.

                                      44

<PAGE>

                  FIRST INDIANA CORPORATION AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


   Somerset Group's 1991 Director Stock Option Plan provided for the granting
of stock options to non-employee directors of Somerset Group. Grants issued
were non-qualified stock options, which do not afford favorable tax treatment
to recipients and which normally result in tax deductions to First Indiana. On
the merger date, Somerset Group's Board of Directors was dissolved. This plan
expired on March 29, 2001 with no options outstanding.

   The following table summarizes information about stock options outstanding
at December 31, 2001:

<TABLE>
<CAPTION>
                                     Options Outstanding                    Options Exercisable
                         -------------------------------------------- -------------------------------
                                          Weighted
                         Outstanding at  Remaining       Weighted     Exercisable at     Weighted
                          December 31,  Contractual  Average Exercise  December 31,  Average Exercise
Range of Exercise Prices      2001      Life (Years)      Price            2001           Price
------------------------ -------------- ------------ ---------------- -------------- ----------------
<S>                      <C>            <C>          <C>              <C>            <C>
      $0.00-$5.00              4,683        0.16          $ 4.70           4,683          $ 4.70
      5.01-10.00             210,363        1.57            6.38         210,363            6.38
     10.01-15.00             459,777        4.18           13.21         267,998           12.70
     15.01-20.00             568,114        7.76           17.90         217,544           17.56
     20.01-22.30              34,538        6.53           21.27          32,163           21.33
                           ---------                                     -------
      0.00-22.30           1,277,475        5.39           14.36         732,751           12.66
                           =========                                     =======
</TABLE>

   A summary of the status of First Indiana's fixed stock option plans as of
December 31, 2001, 2000, and 1999, and changes during the years then ended is
presented below.

<TABLE>
<CAPTION>
                                          2001                 2000                1999
                                  -------------------- -------------------- -------------------
                                              Weighted             Weighted            Weighted
                                              Average              Average             Average
                                              Exercise             Exercise            Exercise
                                    Shares     Price     Shares     Price    Shares     Price
                                  ----------  -------- ----------  -------- ---------  --------
<S>                               <C>         <C>      <C>         <C>      <C>        <C>
Outstanding at Beginning of Year.  1,234,751   $12.48     822,609   $10.74    827,373   $ 9.25
Granted..........................    289,283    18.71     181,782    15.83    126,845    15.18
Somerset Replacement Options.....         --       --     378,875    13.14         --       --
Exercised........................   (197,043)    8.56    (118,259)    6.61   (127,684)    5.34
Surrendered......................    (49,516)   15.91     (30,256)   16.70     (3,925)   16.35
                                  ----------           ----------           ---------
Outstanding at End of Year.......  1,277,475    14.36   1,234,751    12.48    822,609    10.74
                                  ==========           ==========           =========
Options Exercisable at Year-End..    732,751              798,189             692,096
                                  ==========           ==========           =========
Weighted Average Fair Value of
  Options Granted During the Year $     6.83           $     7.72           $    4.54
                                  ==========           ==========           =========
</TABLE>

   Performance-Based Stock Plans--Under the 1991 and 1998 Stock Option and
Incentive Plans, First Indiana may award restricted stock to executive
officers. In addition, the 1998 Plan provides for unrestricted awards and
awards to other employees, directors, and consultants. On January 23,1997,
First Indiana awarded 54,375 shares of restricted stock among three executive
officers. On April 15, 1998, First Indiana awarded 7,500 shares of restricted
stock to an executive officer. The restrictions on these awarded shares ended
in January 2000 upon the achievement of specified performance objectives. On
January 20, 2000, First Indiana awarded 45,000 shares of restricted stock among
three executive officers. On April 1, 2001, First Indiana awarded 1,009 shares
of restricted stock to an officer. All of these shares are subject to
forfeiture in the event certain specified performance objectives are not met by
December 31, 2002 and March 31, 2006, respectively. First Indiana expensed
$615,000, $480,000, and $523,000 in 2001, 2000, and 1999, respectively, in
connection with these awards.

                                      45

<PAGE>

                  FIRST INDIANA CORPORATION AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


   Employees' Stock Purchase Plans--Under the Corporation's Employees' Stock
Purchase Plans, all full-time employees and directors are eligible to
participate after six months' employment. Approximately 46 percent of eligible
employees participated in the plan in 2001. Under the terms of the Plans,
employees and directors can choose to have up to 10 percent of their annual
base earnings or director's fees withheld to purchase the Corporation's common
stock. The Corporation matches the employee contribution at rates ranging from
25 percent to 50 percent according to the criteria specified within the plan.
The contributions are then paid to a trustee, who purchases the Corporation's
stock each month at the then prevailing market price. First Indiana's matching
contributions were $261,000, $252,000, and $377,000 for the years ended 2001,
2000, and 1999, respectively.

(14) Parent Company Only Statements


<TABLE>
<CAPTION>
                                                                 December 31
                                                              -----------------
Condensed Balance Sheets                                        2001     2000
(Dollars in Thousands)                                        -------- --------
<S>                                                           <C>      <C>
Assets
   Certificate of Deposit and Checking Account with the Bank. $    501 $    501
   Due from (to) Bank........................................    5,711     (152)
   Investment in the Bank....................................  183,615  177,389
   Investment in Somerset Financial Services.................   11,159   10,797
   Goodwill..................................................    4,795    5,133
   Other Assets..............................................    3,609    5,574
                                                              -------- --------
       Total Assets.......................................... $209,390 $199,242
                                                              ======== ========
Liabilities.................................................. $    359 $    430
Shareholders' Equity.........................................  209,031  198,812
                                                              -------- --------
       Total Liabilities and Shareholders' Equity............ $209,390 $199,242
                                                              ======== ========
</TABLE>

<TABLE>
<CAPTION>
                                                                            Years Ended December 31
                                                                           -------------------------
Condensed Statements of Earnings                                            2001     2000     1999
(Dollars in Thousands)                                                     -------  -------  -------
<S>                                                                        <C>      <C>      <C>
Cash Dividends from the Bank.............................................. $17,948  $10,045  $ 6,532
Interest Income on Certificate of Deposit.................................      22       32       25
Expenses..................................................................  (3,651)  (2,936)  (2,557)
Income Tax Benefit........................................................   1,163    1,107    1,000
                                                                           -------  -------  -------
Earnings Before Equity in Undistributed Net Earnings of Subsidiaries......  15,482    8,248    5,000
Equity in Undistributed Net Earnings of the Bank..........................   4,174   16,676   17,733
Equity in Undistributed Net Earnings (Loss) of Somerset Financial Services     353     (107)      --
                                                                           -------  -------  -------
       Net Earnings....................................................... $20,009  $24,817  $22,733
                                                                           =======  =======  =======
</TABLE>

                                      46

<PAGE>

                  FIRST INDIANA CORPORATION AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


<TABLE>
<CAPTION>
                                                                     Years Ended December 31
                                                                  ----------------------------
Condensed Statements of Cash Flows                                  2001      2000      1999
(Dollars in Thousands)                                            --------  --------  --------
<S>                                                               <C>       <C>       <C>
Cash Flows from Operating Activities
   Net Earnings.................................................. $ 20,009  $ 24,817  $ 22,733
   Adjustments to Reconcile Net Earnings to Net Cash Provided by
     Operating Activities
       Equity in Undistributed Earnings..........................   (4,527)  (16,569)  (17,733)
       Amortization of Restricted Stock Plan.....................      339       264       286
       Tax Benefit of Option Compensation........................      652       263       468
       Change in Other Liabilities...............................      (71)      430        --
       Change in Due from the Bank and Other Assets..............   (3,417)   15,298     6,302
                                                                  --------  --------  --------
Net Cash Provided by Operating Activities........................   12,985    24,503    12,056
                                                                  --------  --------  --------
Cash Flows from Investing Activities
   Investment in Equity Security.................................       --        --      (851)
   Acquisition of Somerset.......................................     (279)  (17,945)       --
                                                                  --------  --------  --------
Net Cash Used by Investing Activities............................     (279)  (17,945)     (851)
                                                                  --------  --------  --------
Cash Flows from Financing Activities
   Stock Option Proceeds.........................................    1,282       724       626
   Purchase of Treasury Stock....................................   (6,011)     (237)   (5,299)
   Dividends Paid................................................   (7,977)   (7,045)   (6,532)
                                                                  --------  --------  --------
Net Cash Used by Financing Activities............................  (12,706)   (6,558)  (11,205)
                                                                  --------  --------  --------
Net Change in Cash and Cash Equivalents..........................       --        --        --
Cash and Cash Equivalents at the Beginning of the Year...........      501       501       501
                                                                  --------  --------  --------
Cash and Cash Equivalents at the End of the Year................. $    501  $    501  $    501
                                                                  ========  ========  ========
</TABLE>

(15) Interim Quarterly Results (Unaudited)

<TABLE>
<CAPTION>
                                                First  Second   Third  Fourth
                                               Quarter Quarter Quarter Quarter
 (Dollars in Thousands, Except Per Share Data) ------- ------- ------- -------
 <S>                                           <C>     <C>     <C>     <C>
    2001
       Total Interest Income.................. $42,603 $40,877 $39,192 $34,456
       Net Interest Income....................  19,126  18,880  18,840  17,203
       Provision for Loan Losses..............   2,439   2,439   2,475   7,875
      Earnings (Loss) Before Income Taxes.....  10,815  11,151  10,906    (589)
       Net Earnings (Loss)....................   6,690   6,843   6,848    (372)
       Basic Earnings (Loss) Per Share........    0.43    0.44    0.44   (0.02)
       Diluted Earnings (Loss) Per Share......    0.42    0.42    0.43   (0.02)
    2000
       Total Interest Income.................. $40,256 $43,184 $45,042 $44,328
       Net Interest Income....................  18,961  19,561  19,861  19,385
       Provision for Loan Losses..............   2,439   2,439   2,439   2,439
       Earnings Before Income Taxes...........   8,912  10,158  10,592  10,260
       Net Earnings...........................   5,517   6,179   6,470   6,651
       Basic Earnings Per Share...............    0.35    0.39    0.41    0.43
       Diluted Earnings Per Share.............    0.34    0.38    0.40    0.43
</TABLE>

                                      47

<PAGE>

                  FIRST INDIANA CORPORATION AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


(16) Estimated Fair Value of Financial Instruments

   The following table discloses the estimated fair value of financial
instruments and is made in accordance with the requirements of Statement of
Financial Accounting Standard No. 107, "Disclosures about Fair Value of
Financial Instruments." The estimated fair value amounts have been determined
by the Corporation using available market information and appropriate valuation
methodologies. However, considerable judgment is required to interpret market
data to develop the estimates of fair value. Accordingly, the estimates herein
are not necessarily indicative of the amounts the Corporation could realize in
a current market exchange. The use of different market assumptions and/or
estimation methods may have a material effect on the estimated fair value
amount.

   Cash and Cash Equivalents--For cash and equivalents, the carrying amount is
a reasonable estimate of fair value.

   Securities Available for Sale--For securities, fair values are based on
quoted market prices or dealer quotes.

   Federal Home Loan Bank Stock and Federal Reserve Bank Stock--Federal Home
Loan Bank stock is valued at its cost because it is a restricted investment
security that can only be sold to other FHLB member institutions or redeemed by
the FHLB. Federal Reserve Bank stock is also valued at its cost because it is a
restricted investment security that can only be sold to other FRB member
institutions or redeemed by the FRB.

   Loans Receivable--For certain homogeneous categories of loans, such as some
residential mortgages, fair value is estimated using the quoted market prices
for securities backed by similar loans, adjusted for differences in loan
characteristics. The fair value of other types of loans is estimated by
discounting the future cash flows using the current rates at which similar
loans would be made to borrowers with similar credit ratings and for the same
remaining maturities. Interest rates on such loans approximate current lending
rates.

   Deposits--The fair value of demand deposits, savings accounts, and certain
money market deposits is the amount payable on demand at the reporting date.
The fair value of fixed-maturity certificates of deposit is estimated using the
rates currently offered for deposits of similar remaining maturities, but not
less than the carrying amount.

   Borrowings--Rates currently available to the Corporation for debt with
similar terms and remaining maturities are used to estimate fair value of
existing debt.

   Commitments to Extend Credit and Letters of Credit--The fair value of
commitments is estimated using the fees currently charged to enter into similar
agreements, taking into account the remaining terms of the agreements and the
present creditworthiness of the counterparties. For fixed-rate loan
commitments, fair value also includes the difference between current levels of
interest rates and the committed rates. The fair value of guaranties and
letters of credit is based on fees currently charged for similar agreements or
on the estimated cost to terminate them or otherwise settle the obligations
with the counterparties at the reporting date.

                                      48

<PAGE>

                  FIRST INDIANA CORPORATION AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

   Accrued Interest Receivable and Accrued Interest Payable--The estimated fair
value of these financial instruments approximates their carrying value.

Estimated Fair Value of Financial Instruments

<TABLE>
<CAPTION>
                                                           December 31, 2001   December 31, 2000
                                                          ------------------  ------------------
                                                          Carrying Estimated  Carrying Estimated
                                                           Amount  Fair Value  Amount  Fair Value
(Dollars in Thousands)                                    -------- ---------- -------- ----------
<S>                                                       <C>      <C>        <C>      <C>

Assets
   Cash and Cash Equivalents............................. $ 62,147  $ 62,147  $ 65,114  $ 65,114
   Securities Available for Sale.........................  147,863   147,863   158,784   158,784
   Federal Home Loan Bank and Federal Reserve Bank Stock.   22,491    22,491    21,591    21,591
   Loans
       Business..........................................  501,924   502,791   305,310   308,515
       Consumer..........................................  655,941   648,478   732,077   716,949
       Residential Mortgage..............................  291,436   285,582   465,153   465,067
       Single-Family Construction........................  222,410   222,410   204,646   204,763
       Commercial Real Estate............................   50,234    51,729    49,142    46,602
   Accrued Interest Receivable...........................   15,246    15,246    18,327    18,327
Liabilities
   Deposits
       Non-Interest-Bearing Demand Deposits..............  165,023   165,023   123,836   123,836
       Interest-Bearing Demand Deposits..................  140,175   140,175   115,651   115,651
       Savings...........................................  447,832   447,832   375,331   375,331
       Certificates of Deposit Under $100,000............  352,766   360,068   401,721   405,111
       Certificates of Deposit $100,000 or Greater.......  273,682   279,067   383,444   387,744
   Borrowings
       Short-Term Borrowings.............................  121,082   121,144   117,725   117,835
       FHLB Advances.....................................  296,647   307,142   336,754   340,549
   Accrued Interest Payable..............................    3,804     3,804     6,752     6,752
Off-Balance-Sheet Instruments
   Commitments to Extend Credit..........................       --    (1,287)       --       (63)
</TABLE>

(17) Segment Reporting

   The Corporation's business units are primarily organized to operate in the
financial services industry and are determined by the products and services
offered. The consumer segment includes the origination, sale, and portfolio
activities of both home equity and installment loans, and the residential
segment encompasses the portfolio of residential first mortgage loans. The
commercial segment originates business, single-family construction, and
commercial real estate loans, encompasses the portfolio of Community
Reinvestment Act loans, and provides traditional cash management services to
business customers. Investment portfolio management is included in the treasury
segment. FirstTrust Indiana includes the services, fees, and costs of the trust
segment. The retail segment includes the Bank's 26-branch network and
investment and insurance division. The Somerset segment includes all activities
of the Corporation's Somerset Financial Services subsidiary. Revenues in the
Corporation's segments are generated from loans, deposits, investments,
servicing fees, loan sales, and fee income. There are no foreign operations.

   The following segment financial information is based on the internal
management reporting used by the Corporation to monitor and manage financial
performance. The Corporation evaluates segment performance

                                      49

<PAGE>

                  FIRST INDIANA CORPORATION AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

based on average assets and profit or loss before income taxes and indirect
expenses. Indirect expenses include the Corporation's overhead and support
expenses. The Corporation attempts to match fund each business unit by
reviewing the earning assets and costing liabilities held by each unit and
assigning an appropriate expense or income offset based on the Treasury yield
curve. The Corporation accounts for intersegment revenues, expenses, and
transfers based on estimates of the actual costs to perform the intersegment
services.

Segment Reporting

<TABLE>
<CAPTION>
                                                                                                        Somerset
                                                                                  Retail                Financial
                                 Commercial    Consumer  Residential   Treasury   Banking  FirstTrust   Services
(Dollars in Thousands)           -----------   --------- ------------  ---------  -------- -----------  ----------
<S>                              <C>           <C>       <C>           <C>        <C>      <C>          <C>
Average Segment Assets.......... $   654,300   $ 751,891 $    427,961  $ 232,850  $ 28,434 $     2,812  $   13,409
Net Interest Income.............      28,390      26,905        3,402        413    12,367          --          77
Non-Interest Income.............       5,242      11,651          856        596    11,150       2,284       9,561
Intersegment Income (Expense)...          --         110         (432)        --        --          --          --
Significant Noncash Items:
   Provision for Loan Losses....       8,395       6,718          115         --        --          --          --
   Goodwill Amortization .......          --          --           --         --       121          --         450
Earning before Income Tax.......      13,440      23,689        1,525        155     7,329         451         850

                                                                                                         Somerset
                                                                                   Retail                Financial
                                  Commercial   Consumer   Residential   Treasury  Banking   FirstTrust   Services
                                 -----------   --------- ------------  ---------  -------- -----------  ----------
Average Segment Assets.......... $   563,265   $ 744,710 $    516,697  $ 219,185  $ 22,347 $     1,219  $    2,707
Net Interest Income.............      21,793      24,478        7,236      2,951    18,061          --          24
Non-Interest Income.............       4,171       7,240          699       (158)    6,169       1,727       2,052
Intersegment Income (Expense)...          --       3,379         (266)        --        --          --          --
Significant Noncash Items:
   Provision for Loan Losses....       3,991       5,639          126         --        --          --          --
   Goodwill Amortization........          --          --           --         --        83          --         110
Earning (Loss) before Income Tax      14,128      23,700        5,648      1,868    10,283         280        (105)


                                                                                  Retail
                                 Commercial    Consumer  Residential   Treasury   Banking  FirstTrust
                                 -----------   --------- ------------  ---------  -------- -----------
Average Segment Assets.......... $   482,519   $ 638,870 $    514,278  $ 182,729  $ 53,037 $       851
Net Interest Income.............      17,330      22,460        7,173      1,049    15,817          --
Non-Interest Income.............       4,228       7,538          889      4,538     4,791       1,080
Intersegment Income (Expense)...      (1,945)      4,821        5,381         --       957          --
Significant Noncash Items:
   Provision for Loan Losses....       3,149       6,174           87         --        --          --
   Goodwill Amortization........          --          --           --         --        71          --
Earning (Loss) before Income Tax      11,298      24,895        6,455      4,611     5,685        (452)
</TABLE>
<TABLE>
<CAPTION>
                                                         2001
                                 Intersegment        Consolidated
                                 Eliminations           Totals
(Dollars in Thousands)           ------------        -------------
<S>                              <C>                 <C>
Average Segment Assets..........      $(4,203) (1)   $   2,107,454
Net Interest Income.............         2,495  (2)         74,049
Non-Interest Income.............         2,623  (3)         43,963
Intersegment Income (Expense)...           322  (4)             --
Significant Noncash Items:
   Provision for Loan Losses....             --             15,228
   Goodwill Amortization .......           349  (3)            920
Earning before Income Tax.......      (15,156) (3)          32,283

                                                         2000
                                      Intersegment   Consolidated
                                      Eliminations      Totals
                                     ----            -------------
Average Segment Assets..........      $(2,617) (1)   $   2,067,513
Net Interest Income.............         3,225  (2)         77,768
Non-Interest Income.............         3,738  (3)         25,638
Intersegment Income (Expense)...         (3,113) (4)            --
Significant Noncash Items:
   Provision for Loan Losses....              --             9,756
   Goodwill Amortization........           86  (3)             279
Earning (Loss) before Income Tax        (15,880) (3)        39,922

                                                         1999
                                 Intersegment        Consolidated
                                 Eliminations           Totals
                                 ------------        -------------
Average Segment Assets..........       $16,554  (1)  $   1,888,838
Net Interest Income.............          7,022  (2)        70,851
Non-Interest Income.............         3,894  (3)         26,958
Intersegment Income (Expense)...         (9,214) (4)            --
Significant Noncash Items:
   Provision for Loan Losses....              --             9,410
   Goodwill Amortization........           --  (3)              71
Earning (Loss) before Income Tax      (16,439) (3)          36,053
</TABLE>
--------
(1) Segment assets differ from consolidated assets due to reclassification
    adjustments (primarily related to income tax assets) that are not reflected
    in the management reporting system.
(2) The net interest income amounts in the segment results reflect not only the
    actual interest income and expense from segment activities, but also
    amounts for transfer income and expense to match fund each segment.
    Transfer income and expense is assigned to each asset and liability based
    on the treasury yield curve. These match-funding entries are not made to
    the Corporation's actual results.
(3) Represents income and expense items, which are allocated to Corporate
    overhead departments. These amounts are included in the Corporation's
    overall results, but are not part of the management reporting system.
(4) Intersegment revenues are received by one segment for performing a service
    for another segment. In the case of residential and consumer portfolios, an
    amount is paid to the origination office, which is capitalized in the
    portfolio and amortized over a four-year period. These charges are similar
    to premiums paid for the purchase of loans, and are treated as such for
    management reporting. These entries are not made to the Corporation's
    actual results.

                                      50

<PAGE>

                         INDEPENDENT AUDITORS' REPORT

The Board of Directors and Shareholders
of First Indiana Corporation:

   We have audited the accompanying Consolidated Balance Sheets of First
Indiana Corporation and Subsidiaries as of December 31, 2001 and 2000 and the
related Consolidated Statements of Earnings, Shareholders' Equity, and Cash
Flows for each of the years in the three-year period ended December 31, 2001.
These consolidated financial statements are the responsibility of the
Corporation's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.

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

   In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of First
Indiana Corporation and subsidiaries as of December 31, 2001 and 2000 and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 2001 in conformity with accounting
principles generally accepted in the United States of America.


            [LOGO] KPMG LLP

Indianapolis, Indiana
January 16, 2002

                                      51

<PAGE>

                    STATEMENT OF MANAGEMENT RESPONSIBILITY

   Management of First Indiana Corporation has prepared and is responsible for
the financial statements and for the integrity and consistency of other related
information contained in the Annual Report. In the opinion of management, the
financial statements, which necessarily include amounts based on management's
estimates and judgments, have been prepared in conformity with accounting
principles generally accepted in the United States of America.

   The Corporation maintains a system of internal accounting controls designed
to provide reasonable assurance that assets are safeguarded, that transactions
are executed in accordance with the Corporation's authorizations and policies,
and that transactions are properly recorded so as to permit preparation of
financial statements that fairly present the financial position and results of
operations in conformity with accounting principles generally accepted in the
United States of America. Internal accounting controls are augmented by written
policies covering standards of personal and business conduct and an
organizational structure providing for division of responsibility and authority.

   The effectiveness of and compliance with established control systems is
monitored through a continuous program of internal audit and credit
examinations. In recognition of cost-benefit relationships and inherent control
limitations, some features of the control systems are designed to detect rather
than prevent errors, irregularities, and departures from approved policies and
practices. Management takes action to correct potential deficiencies in
internal controls as they are identified.

   The Corporation engaged the firm of KPMG LLP, independent certified public
accountants, to render an opinion on the financial statements. The accountants
have advised management that they were provided with access to all information
and records necessary to render their opinion.

   The Board of Directors exercises its responsibility for the financial
statements and related information through the Audit Committee, which is
composed entirely of outside directors. The Audit Committee meets regularly
with management, the auditor of the Corporation, and KPMG LLP to assess the
scope of the annual audit plan, to review the status and results of audits, to
review the Annual Report on Form 10-K, including major changes in accounting
policies and reporting practices, to review earnings reports and the
preparation of Form 10Q prior to their release to the general public, and to
approve non-audit services rendered by the independent auditors.

   KPMG LLP, the Audit Committee, and the Corporation's internal auditors have
direct and confidential access to each other at all times to discuss the
adequacy of compliance with established corporate policies and procedures and
the quality of financial reporting.

        /s/ Marni McKinney

-----------------------------
         Marni McKinney
    Vice Chairman and Chief
       Executive Officer

/s/ Owen B. Melton, Jr.                /s/ William J. Brunner

-----------------------------    -----------------------------
      Owen B. Melton, Jr.               William J. Brunner
      President and Chief               Vice President and
       Operating Officer                    Treasurer

January 16, 2002

                                      52

<PAGE>

                                    PART I

Item 1. Business

Supervision and Regulation

   First Indiana Corporation is a financial holding company and, as such, is
subject to regulation under the Bank Holding Company Act of 1956, as amended
("BHC Act"). The BHC Act requires the prior approval of the Federal Reserve
Board for a financial holding company to acquire or hold more than five percent
voting interest in any bank and restricts interstate banking activities. The
BHC Act allows interstate bank acquisitions anywhere in the country and
interstate branching by acquisition and consolidation in those states that had
not opted out by January 1, 1997.

   On November 12, 1999, President Clinton signed into law the
Gramm-Leach-Bliley Act ("GLB Act"). The general effect of the law is to
establish a comprehensive framework to permit affiliations among commercial
banks, insurance companies, securities firms, and other financial service
providers by repealing certain provisions of the Glass-Steagall Act and
revising and expanding the Bank Holding Company Act framework to permit a
holding company system to engage in a full range of financial activities
through a new entity known as a "Financial Holding Company." "Financial
activities" is broadly defined to include not only banking, insurance, and
securities activities, but also merchant banking and additional activities
approved by order or regulation of the Federal Reserve Board. The GLB Act also
permits national banks to engage in certain expanded activities through the
formation of financial subsidiaries and restricts financial institutions from
sharing customer nonpublic personal information with non-affiliated parties
unless the customer has had an opportunity to opt out of the disclosure.

   The Federal Reserve Board requires that a bank holding company act as a
source of financial and managerial strength to each of its subsidiary banks and
to maintain resources adequate to support each subsidiary bank. In addition,
the National Bank Act permits the Office of the Comptroller of the Currency
("OCC") to order the pro rata assessment of shareholders of a national bank
whose capital has become impaired. If a shareholder fails to pay such an
assessment, the OCC can order the sale of the shareholder's stock to cover the
deficiency. In the event of a bank holding company's bankruptcy, any commitment
by the bank holding company to a federal bank regulatory agency to maintain the
capital of a subsidiary bank would be assumed by the bankruptcy trustee and
entitled to priority of payment.

   The Bank is subject to the provisions of the National Bank Act, is under the
supervision of, and is subject to periodic examination by, the OCC, and is
subject to the rules and regulations of the OCC, Board of Governors of the
Federal Reserve System, and the Federal Deposit Insurance Corporation.

   Federal law provides that deposits and certain claims for administrative
expenses and employee compensation against an insured depository institution
are afforded a priority over other general unsecured claims against such
institution, including federal funds and letters of credit, in the liquidation
or other resolution of the institution by any receiver.

Employees

   At December 31, 2001, the Corporation and its subsidiaries employed 738
persons, including part-time employees. Management considers its relations with
its employees to be excellent. None of these employees is represented by any
collective bargaining group.

Other Required Information

   References for additional information required by this item are provided on
page 2.

                                      53

<PAGE>

Item 2. Properties

   At December 31, 2001, the Corporation operated through 26 full-service
banking centers and 10 loan origination offices in addition to its headquarters
and operations locations. The Corporation leases its headquarters location in
downtown Indianapolis and owns its operations facilities in Greenwood, Indiana.
The Corporation's subsidiary, Somerset Financial Services, and FirstTrust
Indiana, the Bank's investment advisory and trust division, lease their
facility on the north side of Indianapolis. The Corporation leases 11 of the
branches and ten of the origination offices and owns the remaining locations.
The aggregate carrying value at December 31, 2001 of the properties owned or
leased, including headquarters properties and leasehold improvements at the
leased offices, was $20,587,000. See Notes 6 and 12 of the Notes to
Consolidated Financial Statements.

Item 3. Legal Proceedings

   There are no pending legal proceedings to which the Corporation or any
subsidiary was a party or to which any of their property is subject other than
ordinary routine litigation incidental to its business which, in the opinion of
management, is not material to the Corporation's business, operations, or
financial condition.

Item 4. Submission of Matters to a Vote of Security Holders

   No matters were submitted to a vote of the Corporation's security holders
during the three months ended December 31, 2001.

                                    PART II

Item 5. Market for the Registrant's Common Equity and Related Shareholder
Matters

   The Corporation's stock is traded on the NASDAQ National Market under the
ticker symbol FINB. The ticker symbol was FISB until January 2, 2002. As of
February 18, 2002, there were approximately 1,814 holders of record of the
Corporation's common stock. The following table contains high and low bid
information as reported by NASDAQ.

<TABLE>
<CAPTION>
                                 2001                     2000
                       ------------------------ ------------------------
                        High   Low   Book Value  High   Low   Book Value
                       ------ ------ ---------- ------ ------ ----------
        <S>            <C>    <C>    <C>        <C>    <C>    <C>
        First Quarter. $21.45 $17.25   $13.15   $18.55 $13.30   $11.46
        Second Quarter  21.55  17.80    13.41    16.20  13.50    11.74
        Third Quarter.  21.52  15.74    13.76    20.05  15.20    12.31
        Fourth Quarter  20.00  16.28    13.54    20.20  16.05    12.77
</TABLE>

   For restrictions on the Corporation's present or future ability to pay
dividends, see Note 11 of the Notes to Consolidated Financial Statements.

   The Corporation paid a cash dividend of $0.128 per share outstanding in each
quarter of 2001 and $0.112 per share outstanding in each quarter of 2000. All
share and per share data has been restated to reflect the five-for-four stock
split declared on January 16, 2002.

Item 6. Selected Financial Data

   The information required by this item is shown under the heading "Five-Year
Summary of Selected Financial Data."

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

   The information required by this item is shown under the heading "Financial
Review."

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

   The information required by this item is shown under the heading "Liquidity
and Market Risk Management."


                                      54

<PAGE>

Item 8. Financial Statements and Supplementary Data

   Information required by this item is shown under the headings "Consolidated
Financial Statements" and "Notes to Consolidated Financial Statements." The
Corporation's unaudited quarterly financial data for each of the years in the
two-year period ended December 31, 2001 is shown in Note 15 of "Notes to
Consolidated Financial Statements".

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

   None.

                                   PART III

Item 10. Directors and Executive Officers of the Registrant

   The information required by this item with respect to the directors is
incorporated by reference to the Corporation's Proxy Statement under the
heading "Election of Directors" and the information relating to compliance by
officers and directors within Section 16(a) is incorporated by reference to the
Corporation's Proxy Statement under the heading "Section 16(a) Beneficial
Ownership Reporting Compliance."

   The following table sets forth information about the executive officers of
the Corporation, the Bank, and Somerset who are not directors of the
Corporation or the Bank. All executive officers are appointed by the Board of
Directors and serve at the discretion of the Board of Directors.

<TABLE>
<CAPTION>
                                                                                   Year First
Name                                      Position                           Age Elected Officer
----                                      --------                           --- ---------------
<S>                <C>                                                       <C> <C>
William J. Brunner   Vice President and Treasurer of the Corporation;        42       2000
                     Chief Financial Officer and Senior Vice President,
                     Financial Management Division of the Bank
Patrick J. Early     President, Somerset Financial Services                  44       2000
David A. Lindsey     Senior Vice President, Consumer Finance Division        51       1983
                     of the Bank
Merrill E. Matlock   Senior Vice President, Commercial Banking Division of   52       1984
                     the Bank
Ralph G. Nowak       President, FirstTrust Division of the Bank              50       1998
Timothy J. O'Neill   Senior Vice President, Correspondent Banking Services   54       1972
                     and Secondary Marketing Division of the Bank
Edward E. Pollack    Senior Vice President, Technology and Operations        53       1998
                     Division of the Bank
Kenneth L. Turchi    Senior Vice President, Retail Banking, Marketing, and   43       1987
                     Strategic Planning Division of the Bank
</TABLE>

   William J. Brunner has been with the Bank since May 2000, and currently
serves as the Corporation's vice president and treasurer, and the Bank's chief
financial officer and senior vice president, Financial Management Division. He
also serves as the chairman of the Bank's Asset/Liability Committee. Prior to
joining First Indiana, Mr. Brunner served in a number of financial positions at
commercial banks, including as senior vice president and director of capital
and asset/liability management, and director of corporate planning from March
1999 to May 2000 at Citizens Financial Group; vice president of treasury
management from November 1996 to March 1999 at Bank One Corporation; and chief
financial officer from May 1995 to November 1996 at Bank One, Cincinnati, N.A.

                                      55

<PAGE>

   Patrick J. Early has served as president of Somerset Financial Services
since the time of the merger with First Indiana Corporation in September 2000.
He joined Whipple & Company, the predecessor firm to Somerset Financial
Services, in 1979 and served as president from 1989 until the merger with The
Somerset Group, Inc. in 1998. From 1998 until September 2000, he was president
of Somerset Financial Services, a division of The Somerset Group, Inc. He also
served as president of The Somerset Group, Inc. from January 2000 until the
merger in September 2000.

   David A. Lindsey has been with the Bank since 1983, serving as the Bank's
senior vice president, Consumer Finance Division. He oversees the Bank's
national consumer sales force.

   Merrill E. Matlock is senior vice president of the Bank's Commercial Banking
Division. He is responsible for the Bank's construction, business, and
commercial real estate lending. Mr. Matlock has worked for First Indiana since
1984 and was most recently first vice president of the construction lending
department.

   Ralph G. Nowak has been with the bank since November 1998 serving as
president of the FirstTrust Indiana division of First Indiana Bank. Prior to
joining First Indiana, Mr. Nowak served in a number of commercial bank trust
investment positions since 1973, including that of Chief Investment Officer at
NBD Bank for the state of Indiana from 1992 to 1998.
   Timothy J. O'Neill has been with the Bank since 1970 and currently serves as
the Bank's senior vice president, Correspondent Banking and Secondary Marketing
Division. He is responsible for the servicing of the Bank's residential and
consumer loans, developing relationships with other financial institutions, and
selling the Bank's loans into the secondary market.

   Edward E. Pollack has been with the Bank since 1998, and currently serves as
the Bank's senior vice president, Technology and Operations Division. He leads
the Information Technology, Deposit Services, and Administrative Support
departments. Prior to joining First Indiana, he served from 1988 to 1998 as
Executive Vice President, USA Group, Inc. and from 1993 to 1997 as President
and Chief Executive Officer of USA Funds and USA Group Guarantee Services.

   Kenneth L. Turchi joined First Indiana in September 1985 and currently
serves as senior vice president, Retail Banking, Marketing, and Strategic
Planning Division. His duties include strategic planning, marketing,
advertising, market research, investor and public relations, mortgage lending,
the Bank's call center, retail banking center sales, and First Indiana Investor
Services, the Bank's investment and insurance division.

Item 11. Executive Compensation

   The information required by this item with respect to executive compensation
is incorporated by reference to the material under the heading "Executive
Compensation" in the Corporation's Proxy Statement.

Item 12. Security Ownership of Certain Beneficial Owners and Management

   The information required by this item is incorporated by reference to the
material under the heading "Proxy Statement" and "Proposal No 1: Election of
Directors" in the Corporation's Proxy Statement.

Item 13. Certain Relationships and Related Transactions

   The information required by this item is incorporated by reference to the
material under the heading "Certain Transactions" in the Corporation's Proxy
Statement.

                                      56

<PAGE>

                                    PART IV

Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K

<TABLE>
<CAPTION>
                                                                                                   Pages
                                                                                                   -----
<S>                                                                                                <C>
(a) (1) Financial Statements
       Consolidated Balance Sheets as of December 31, 2001 and 2000...............................    24
       Consolidated Statements of Earnings for the Three Years Ended December 31, 2001............    25
       Consolidated Statements of Shareholders' Equity for the Three Years Ended December 31,
         2001.....................................................................................    26
       Consolidated Statements of Cash Flows for the Three Years Ended December 31, 2001..........    27
       Notes to the Consolidated Financial Statements............................................. 28-50
       Independent Auditors' Report...............................................................    51
</TABLE>

  (2) Financial Statement Schedules Required by Regulation S-X

      None

  (3) Exhibits

<TABLE>
<C>      <S>
  3(a)   Articles of Incorporation of First Indiana Corporation, incorporated by reference to the Registrant's
         Form 10-K filed on March 12, 2001.
  3(b)   Amended and Restated Bylaws of First Indiana Corporation, incorporated by reference to the
         Registrant's Form 10-K filed on March 12, 2001.
  4(a)   Form of Certificate of Common Stock of Registrant, incorporated by reference to Exhibit 4(c) of the
         Registrant's registration statement on Form S-1, filed as No. 33-46547 on March 20, 1992.
  4(b)   Shareholder Rights Agreement between First Indiana Corporation and Harris Trust and Savings Bank
         dated November 14, 1997, incorporated by reference to the Registrant's Form 8-A filed on
         December 2, 1997.
 10(a)   First Indiana Bank 1997 Long-Term Management Performance Incentive Plan, incorporated by
         reference to Exhibit 10(a) of the Registrant's Annual Report on Form 10-K for the year ended
         December 31, 1997. *B
 10(b)   First Indiana Corporation 1991 Stock Option and Incentive Plan, incorporated by reference to
         Exhibit A of the Registrant's March 20, 1991 Proxy Statement, Pages A-1 to A-8. *B
 10(c)   First Indiana Corporation 1998 Stock Incentive Plan, incorporated by reference to Exhibit
         10(c) of the Registrant's Annual Report on Form 10-K for the year ended December 31, 1997. *B
 10(d)   First Indiana Corporation 1992 Director Stock Option Plan, incorporated by reference to Exhibit A of
         the Registrant's March 13, 1992 Proxy Statement, Pages A-1 to A-3. *B
 10(e)   First Indiana Corporation 1992 Stock Option Plan, incorporated by reference to Exhibit A of the
         Registrant's March 12, 1993 Proxy Statement, pages 15 to 19. *B
 10(f)   First Indiana Corporation Supplemental Benefit Plan effective May 1, 1997, incorporated by Reference
         to Exhibit 10(f) of the Registrant's Annual Report on Form 10-K for the year ended December 31,
         1997. *B
 10(g)   First Indiana Corporation Supplemental Benefit Plan Agreement effective May 1, 1997 between
         Registrant and Robert H. McKinney, incorporated by reference to Exhibit 10(g) of the Registrant's
         Annual Report on Form 10-K for the year ended December 31, 1997. *B
 10(h)   First Indiana Corporation Supplemental Benefit Plan Agreement effective May 1, 1997 between
         Registrant and each of Owen B. Melton, Jr. and Marni McKinney, incorporated by reference to Exhibit
         10(h) of the Registrant's Annual Report on Form 10-K for the year ended December 31, 1997. *B
</TABLE>

                                      57

<PAGE>

<TABLE>
<C>    <S>
 10(i) Supplemental Benefit Plan Agreement effective May 1, 1997 between Registrant and each of David
       A. Lindsey, Merrill E. Matlock, Timothy J. O'Neill, and Kenneth L. Turchi, and effective January 4,
       1999 between First Indiana and Edward E. Pollack, and effective May 6, 2000 between First Indiana
       and William J. Brunner, incorporated by reference to Exhibit 10(i) of the Registrant's Annual Report
       on Form 10-K for the year ended December 31, 1997. *B
 10(j) Form of Employment Agreement between Registrant and each of Robert H. McKinney, Owen B.
       Melton, Jr., and Marni McKinney, incorporated by reference to Exhibit 10(j) of the Registrant's
       Annual Report on Form 10-K for the year ended December 31, 1997. *B
 10(k) Form of Employment Agreement between Registrant and each of David A. Lindsey, Merrill E.
       Matlock, Timothy J. O'Neill, Kenneth L. Turchi, Edward E. Pollack, and William J. Brunner,
       incorporated by reference to Exhibit 10(k) of the Registrant's Annual Report on Form 10-K for the
       year ended December 31, 1997. *B
 10(l) Agreement and Plan of Reorganization dated April 19, 2000 between The Somerset Group, Inc. and
       First Indiana Corporation, incorporated by reference to Annex A to the joint proxy statement and
       prospectus contained in Registrant's registration statement on Form S-4, effective August 18, 2000,
       File No. 333-39926.
 10(m) The Somerset Group, Inc. 1991 Stock Incentive Plan, incorporated by reference to the Registrant's
       Form 10-K filed on March 12, 2001. *B
 10(n) The Somerset Group, Inc. 1998 Stock Incentive Plan, incorporated by reference to the Registrant's
       Form 10-K filed on March 12, 2001. *B
 10(o) The Somerset Group, Inc. 1991 Directors Stock Option Plan, incorporated by reference to the
       Registrant's Form 10-K filed on March 12, 2001. *B
 10(p) The Somerset Group, Inc. Employee Stock Purchase Plan, incorporated by reference to the
       Registrant's Form 10-K filed on March 12, 2001. *B
 21    Subsidiaries of First Indiana Corporation and First Indiana Bank. *A
 23    Consent of KPMG LLP.*A
</TABLE>
--------
*A These have been filed as an exhibit to this Form 10-K.
*B Management contract or compensation plan or arrangement required to be filed
   as an exhibit to this Form 10-K.

(b) The Corporation filed the following Current Reports on Form 8-K between
    October 1, 2001 and February 18, 2002:

<TABLE>
<CAPTION>
      Date                                          Item Reported
      ----                                          -------------
<C>               <S>
October 16, 2001. On October 16, 2001, a Form 8-K was filed related to the October 15, 2001 third
                  quarter 2001 earnings release.
December 19, 2001 On December 19, 2001, a Form 8-K was filed related to the December 19, 2001
                  release of financial information to the investing public.
January 16, 2002. On January 16, 2002, a Form 8-K was filed related to the January 15, 2002 fourth
                  quarter 2001 earnings release.
January 17, 2002. On January 17, 2002, a form 8-K was filed related to the January 16, 2002
                  announcement of a five-for-four stock split and declaration of the quarterly cash
                  dividend.
</TABLE>

                                      58

<PAGE>

                                  SIGNATURES

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

                                     FIRST INDIANA CORPORATION


                                     By:       /s/ Owen B. Melton, Jr.
                                        ---------------------------------------
                                                   Owen B. Melton, Jr.
                                          President and Chief Operating Officer
                                                  Date: March 11, 2002

   Pursuant to the requirements of the Securities Exchange Act of 1934, this
annual report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated on March 11, 2002.

                                   Officers


By:   /s/ Marni McKinney                 By:      /s/ William J. Brunner
  ---------------------------------           ----------------------------------
           Marni McKinney                              William J. Brunner
         Vice Chairman and                        Vice President and Treasurer
       Chief Executive Officer                 (Principal Financial Officer and
    (Principal Executive Officer)                 Principal Accounting Officer)

                                   Directors


By:   /s/ Gerald L. Bepko                By:      /s/ Owen B. Melton, Jr.
  ---------------------------------          -----------------------------------
          Gerald L. Bepko                             Owen B. Melton, Jr.



By:   /s/ Andrew Jacobs, Jr.              By:     /s/ Phyllis W. Minott
  ---------------------------------          -----------------------------------
          Andrew Jacobs, Jr.                          Phyllis W. Minott




By:   /s/ Marni McKinney                 By:      /s/ Michael L. Smith
  ---------------------------------           ----------------------------------
          Marni McKinney                              Michael L. Smith




By:   /s/ Robert H. McKinney              By:     /s/ John W. Wynne
  ---------------------------------          -----------------------------------
          Robert H. McKinney                          John W. Wynne

                                      59