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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, 2003



OR



 ̈TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934



For the Transition period from  to



Commission File No. 0-14354

LOGO

(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



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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



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



State the aggregate market value of the common stock held by non-affiliates of the registrant: $215.7 million as of June 30, 2003.



On February 12, 2004, the registrant had 15,605,180 shares of common stock outstanding, $0.01 par value.



Documents Incorporated by Reference: Portions of the definitive proxy
statement for the 2004 Annual Meeting of Shareholders (Part III).



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FIRST INDIANA CORPORATION



Form 10-K



Table of Contents



|           |  |                                                                                                |  |     
|---------- |  | ---------------------------------------------------------------------------------------------- |  | ----
|           |  |                                                                                                |  | Page
|Part I     |  |                                                                                               
|           |  | Financial Review                                                                               |  | 1   
|           |  | Five-Year Summary of Selected Financial Data                                                   |  | 1   
|           |  | Overview                                                                                       |  | 2   
|           |  | Critical Accounting Policies                                                                   |  | 3   
|           |  | Statement of Earnings Analysis                                                                 |  | 5   
|           |  | Financial Condition                                                                            |  | 11  
|           |  | Asset Quality                                                                                  |  | 17  
|           |  | Liquidity and Market Risk Management                                                           |  | 21  
|           |  | Capital                                                                                        |  | 26  
|           |  | Impact of Inflation and Changing Prices                                                        |  | 28  
|           |  | Impact of Accounting Standards Not Yet Adopted                                                 |  | 28  
|           |  | Fourth Quarter Summary                                                                         |  | 29  
|           |  | Consolidated Financial Statements                                                              |  | 30  
|           |  | Notes to Consolidated Financial Statements                                                     |  | 34  
|           |  | Independent Auditors Report                                                                   |  | 62  
|           |  | Statement of Management Responsibility                                                         |  | 63  
|Item 1.    |  | Business                                                                                       |  | 64  
|Item 2.    |  | Properties                                                                                     |  | 71  
|Item 3.    |  | Legal Proceedings                                                                              |  | 71  
|Item 4.    |  | Submission of Matters to a Vote of Security Holders                                            |  | 71  
|           | 
|Part II    |  |                                                                                               
|Item 5.    |  | Market for Registrants Common Equity and Related Shareholder Matters                          |  | 71  
|Item 6.    |  | Selected Financial Data                                                                        |  | 71  
|Item 7.    |  | Managements Discussion and Analysis of Financial Condition and Results of Operations          |  | 71  
|Item 7A.   |  | Quantitative and Qualitative Disclosures About Market Risk                                     |  | 72  
|Item 8.    |  | Financial Statements and Supplementary Data                                                    |  | 72  
|Item 9.    |  | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure           |  | 72  
|Item 9A.   |  | Controls and Procedures                                                                        |  | 72  
|           | 
|Part III   |  |                                                                                               
|Item 10.   |  | Directors and Executive Officers of the Registrant                                             |  | 73  
|Item 11.   |  | Executive Compensation                                                                         |  | 74  
|Item 12.   |  | Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters |  | 74  
|Item 13.   |  | Certain Relationships and Related Transactions                                                 |  | 74  
|Item 14.   |  | Principal Accountant Fees and Services                                                         |  | 74  
|           | 
|Part IV    |  |                                                                                               
|Item 15.   |  | Exhibits, Financial Statement Schedules, and Reports on Form 8-K                               |  | 75  
|Signatures |  | 77                                                                                            



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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 Corporation 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



|                                                     |  |      |            |   |      |   |            |      |  |   |            |   |  |      |            |   |  |   |            |  
|---------------------------------------------------- |  | ---- | ---------- | - | ---- | - | ---------- | ---- |  | - | ---------- | - |  | ---- | ---------- | - |  | - | ---------- | -
|(Dollars in Thousands, Except Per Share Data)        |  | 2003 |            |   | 2002 |   |            | 2001 |  |   | 2000       |   |  | 1999 |           
|Year-End Balance Sheet Data                          |  |      |            |   |      |   |            |      |  |   |            |   |  |      |            |   |  |   |            |  
|Total Assets                                         |  | $    | 2,193,137  |   |      | $ | 2,125,590  |      |  | $ | 2,046,657  |   |  | $    | 2,085,997  |   |  | $ | 1,979,774  |  
|Investment Securities                                |  |      | 240,410    |   |      |   | 161,320    |      |  |   | 170,354    |   |  |      | 180,375    |   |  |   | 178,246    |  
|Loans                                                |  |      | 1,814,991  |   |      |   | 1,837,633  |      |  |   | 1,756,486  |   |  |      | 1,784,475  |   |  |   | 1,702,181  |  
|Commercial                                           |  |      | 886,144    |   |      |   | 860,159    |      |  |   | 788,872    |   |  |      | 570,059    |   |  |   | 545,386    |  
|Consumer                                             |  |      | 612,025    |   |      |   | 666,150    |      |  |   | 675,111    |   |  |      | 748,291    |   |  |   | 675,761    |  
|Residential Mortgage                                 |  |      | 316,822    |   |      |   | 311,324    |      |  |   | 292,503    |   |  |      | 466,125    |   |  |   | 481,034    |  
|Deposits                                             |  |      | 1,489,972  |   |      |   | 1,339,204  |      |  |   | 1,379,478  |   |  |      | 1,399,983  |   |  |   | 1,312,115  |  
|Non-Interest-Bearing Demand                          |  |      | 235,811    |   |      |   | 180,389    |      |  |   | 165,023    |   |  |      | 123,836    |   |  |   | 113,780    |  
|Interest-Bearing Demand                              |  |      | 217,353    |   |      |   | 179,751    |      |  |   | 140,175    |   |  |      | 115,651    |   |  |   | 117,674    |  
|Savings                                              |  |      | 400,804    |   |      |   | 398,752    |      |  |   | 447,832    |   |  |      | 375,331    |   |  |   | 361,179    |  
|Certificates of Deposit                              |  |      | 636,004    |   |      |   | 580,312    |      |  |   | 626,448    |   |  |      | 785,165    |   |  |   | 719,482    |  
|Short-Term Borrowings                                |  |      | 147,074    |   |      |   | 170,956    |      |  |   | 121,082    |   |  |      | 117,725    |   |  |   | 98,754     |  
|Federal Home Loan Bank Advances                      |  |      | 265,488    |   |      |   | 346,532    |      |  |   | 296,647    |   |  |      | 336,754    |   |  |   | 366,854    |  
|Subordinated Notes                                   |  |      | 46,534     |   |      |   | 12,169     |      |  |   |           |   |  |      |           |   |  |   |           |  
|Shareholders Equity                                 |  |      | 208,894    |   |      |   | 221,211    |      |  |   | 209,031    |   |  |      | 198,812    |   |  |   | 177,103    |  
|Selected Operations Data                             |  |      |            |   |      |   |            |      |  |   |            |   |  |      |            |   |  |   |            |  
|Net Interest Income                                  |  | $    | 76,900     |   |      | $ | 73,780     |      |  | $ | 74,049     |   |  | $    | 77,768     |   |  | $ | 70,851     |  
|Provision for Loan Losses                            |  |      | 38,974     |   |      |   | 20,756     |      |  |   | 15,228     |   |  |      | 9,756      |   |  |   | 9,410      |  
|Non-Interest Income                                  |  |      | 49,563     |   |      |   | 46,765     |      |  |   | 43,963     |   |  |      | 25,638     |   |  |   | 26,958     |  
|Non-Interest Expense                                 |  |      | 83,637     |   |      |   | 66,502     |      |  |   | 70,501     |   |  |      | 53,728     |   |  |   | 52,346     |  
|Net Earnings                                         |  |      | 2,529      |   |      |   | 21,180     |      |  |   | 20,009     |   |  |      | 24,817     |   |  |   | 22,733     |  
|Basic Earnings Per Share                             |  |      | 0.16       |   |      |   | 1.36       |      |  |   | 1.29       |   |  |      | 1.58       |   |  |   | 1.45       |  
|Diluted Earnings Per Share                           |  |      | 0.16       |   |      |   | 1.34       |      |  |   | 1.25       |   |  |      | 1.55       |   |  |   | 1.42       |  
|Dividends Declared Per Common Share                  |  |      | 0.660      |   |      |   | 0.640      |      |  |   | 0.512      |   |  |      | 0.448      |   |  |   | 0.416      |  
|Selected Ratios                                      |  |      |            |   |      |   |            |      |  |   |            |   |  |      |            |   |  |   |            |  
|Net Interest Margin                                  |  |      | 3.69       | % |      |   | 3.73       | %    |  |   | 3.69       | % |  |      | 3.90       | % |  |   | 3.92       | %
|Return on Average Total Assets                       |  |      | 0.11       |   |      |   | 1.02       |      |  |   | 0.95       |   |  |      | 1.20       |   |  |   | 1.20       |  
|Return on Average Shareholders Equity               |  |      | 1.15       |   |      |   | 9.66       |      |  |   | 9.60       |   |  |      | 13.28      |   |  |   | 13.37      |  
|Average Shareholders Equity to Average Total Assets |  |      | 9.91       |   |      |   | 10.51      |      |  |   | 9.89       |   |  |      | 9.04       |   |  |   | 9.00       |  
|Dividend Payout Ratio                                |  |      | 412.50     |   |      |   | 47.06      |      |  |   | 39.69      |   |  |      | 28.35      |   |  |   | 28.69      |  
|Selected Value                                       |  |      |            |   |      |   |            |      |  |   |            |   |  |      |            |   |  |   |            |  
|Book Value per Share                                 |  | $    | 13.44      |   |      | $ | 14.23      |      |  | $ | 13.54      |   |  | $    | 12.77      |   |  | $ | 11.31      |  
|Average Common Shares Outstanding                    |  |      |            |   |      |   |            |      |  |   |            |   |  |      |            |   |  |   |            |  
|Basic                                                |  |      | 15,570,508 |   |      |   | 15,537,186 |      |  |   | 15,569,956 |   |  |      | 15,716,234 |   |  |   | 15,722,681 |  
|Diluted                                              |  |      | 15,720,691 |   |      |   | 15,809,380 |      |  |   | 15,998,976 |   |  |      | 15,997,179 |   |  |   | 16,049,598 |  





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OVERVIEW



First Indiana
Corporation (First Indiana or the Corporation) is the holding company for First Indiana Bank, N.A. (the Bank), the largest commercial bank headquartered in Indianapolis; and Somerset Financial Services, LLC
(Somerset), an accounting and consulting firm.



The
Corporations lines of business include community banking, consumer finance, trust and investment advisory services, and accounting and consulting services. The community banking segment is engaged primarily in the business of attracting
deposits from the general public and originating business, construction, and commercial real estate loans. The consumer finance segment originates home equity loans for sale and for the Banks portfolio. Through Somerset and a division of the
Bank, FirstTrust Indiana, First Indiana offers an array of financial services, including tax planning and preparation, accounting services, retirement and estate planning, investment advisory and trust services, and consulting services.



The Bank offers a full range of banking services through 33 offices in
Central Indiana. The Bank also originates home equity loans in 47 states through Bank loan officers and an independent agent network. The Bank has construction and consumer loan offices in Indiana, Arizona, Florida, Illinois, North Carolina, and
Ohio. Somerset provides services to clients located primarily in the state of Indiana.



First Indianas net income depends substantially upon its net interest income. Net interest income is income that remains after deducting the interest expense attributable to the funds required to support total
assets from total interest income generated by earning assets. Income from earning assets includes income from loans, investment securities, and short-term investments. The amount of interest income is dependent on many factors, including the volume
of earning assets, the general level of interest rates, and yields on a variety of earning assets, from investments to loans. The cost of funds varies with the amount of funds necessary to support total assets, the rates paid to attract and hold
deposits, the rates paid on borrowed funds, and the levels of interest-free funds.



The Corporations success is largely dependent on its ability to manage interest rate risk, which is defined as the exposure of net interest income, net earnings, and equity to changes in interest rates. First
Indiana manages risk from changes in market interest rates, in part, by controlling the mix of interest rate-sensitive assets and interest rate-sensitive liabilities. However, since the Corporation is currently in an asset-sensitive position (where
assets reprice faster than liabilities), significant improvement in net interest margin is unlikely until market interest rates increase. Although further interest rate reductions are not expected to occur, with interest rates currently at historic
lows, deposit rates would be unable to fully absorb additional market interest rate reductions and net interest income would be reduced.



Net income is also affected by the provision for loan losses. Making loans is an essential element of the Banks business, and there is a risk that
loans will not be repaid. The risk of loss on a loan is affected by a number of factors, including the duration of the loan; credit risks of a particular borrower; changes in economic or industry conditions; and in the case of a collateralized loan,
uncertainties about the future value of the collateral. A further economic downturn could contribute to the deterioration in the quality of the loan portfolio. Loans made up 83 percent of the Corporations assets at year-end 2003. If a further
economic downturn occurs in the economy as a whole, or in Indiana where First Indiana has approximately one-half of its loans, borrowers may be unable to repay their loans as scheduled and the value of real estate or other collateral that may secure
the loans could be adversely affected.



The risks and
challenges that management sees to improved profitability in 2004 are continued weak loan demand in its markets; yield compression as competition for loan growth intensifies; price and sales competition for deposits by new market entrants; and
continued high levels of non-performing assets and loan charge-offs. In 2003, the Corporation focused on rebuilding and positioning for 2004 and beyond. Particularly in the area of credit quality, management identified specific areas for improvement
and addressed internal policies and



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procedures. As a result, the Corporation has seen improvement in credit quality and expects it to continue. In order to compete more effectively for new
loans and deposits and better serve existing clients, the Bank has built or updated nine of its 27 branches in the past four years. Two branches are expected to be opened in 2004 to replace three outdated branches. In addition, the acquisition of
MetroBanCorp in 2003 added six new branches in Hamilton County, one of the fastest-growing counties in the Midwest. Opportunities in 2004 include interest rate increases, increased asset demand by purchasers of consumer finance bank loans, and
increased loan demand resulting from a recovery in the economy.



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 and general practices within the financial services industry. A summary of the
Corporations significant accounting policies is contained in Note 1 of the Notes to Consolidated Financial Statements. In fulfilling its responsibilities, the Audit Committee of the Board of Directors has reviewed the accounting and reporting
policies of the Corporation. 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 loan servicing rights, goodwill, and the determination of the valuation allowance for deferred taxes.



Allowance for Loan Losses



The allowance for loan losses is maintained at the level deemed adequate to cover losses inherent in the loan portfolio. The allowance for loan losses is
increased by the provision for loan losses charged to expense and reduced by loans charged off, net of recoveries. The determination of the adequacy of the allowance for loan losses is based on projections and estimates concerning portfolio trends
and credit losses, national and local economic trends, portfolio management and trends, the assessment of credit risk of performing and non-performing loans, and qualitative management factors. While management uses available information to
recognize losses on loans, future additions to the allowance may be necessary based on changes in economic conditions and historical loss experience. 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. The allowance for loan losses is included in the
community bank segment.



Loan Servicing Rights



As of December 31, 2003, First Indiana serviced for others a $433 million
portfolio of consumer and mortgage loans and has capitalized the associated servicing rights. Loan servicing rights represent the present value of the future servicing fees to be collected from the loans serviced for others. 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. Consumer loan
servicing rights are stratified based on lien position and year of origination. Mortgage loan servicing rights are stratified based on loan type (fixed or adjustable rate), investor type (FHLMC, GNMA, private), term, and note rate. 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 rates, servicing cost, ancillary servicing
income, conversion costs, float and escrow earnings, delinquency rates, and other factors, which are subject to change over time. Changes in these underlying assumptions could cause the estimated fair value of loan servicing rights, and the related
valuation allowance, to change significantly in the future. The most significant assumptions in the determination of fair value are prepayment speeds and the discount rate. The value of loan servicing rights is significantly affected by interest



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rates available in the market which influence loan prepayment speeds. Generally, during periods of declining interest rates, the value of loan servicing
rights declines due to increasing prepayments attributable to increased refinance activity. Conversely, during periods of rising interest rates, the value of loan servicing rights generally increases due to lower prepayments. Capitalized loan
servicing rights are included in the consumer finance bank segment.



Goodwill



The Corporation accounts for
goodwill under the provisions of FASB Statement No. 142, Goodwill and Other Intangible Assets, which requires that goodwill and other intangible assets with indefinite useful lives be tested for impairment at least annually. Assets and
liabilities, including goodwill, are assigned to reporting units. Reporting units with assigned goodwill are corporate banking, retail banking, and Somerset. Impairment tests indicated that the fair value of each reporting unit with assigned
goodwill exceeded its recorded investment (thus goodwill was not impaired). Risk factors considered in determining reporting unit fair value include future loan and deposit originations (and related revenues generated from this activity), future fee
revenues and costs associated with the services provided by each reporting unit, and the continued commitment of Corporation resources to each reporting unit. Future tests for impairment will also use this method. Should any of these risk factors
change, the fair value of a reporting unit could deteriorate, resulting in goodwill impairment. Goodwill is included in the community bank and Somerset segments.



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 in which the deferred tax assets are deductible, management believes it is more likely
than not that 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.



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STATEMENT OF EARNINGS ANALYSIS



Earnings
Summary



First Indiana reported net income of $2,529,000,
or $0.16 per diluted share, in 2003, compared with $21,180,000, or $1.34 per diluted share, in 2002. Net income in 2001 was $20,009,000, or $1.25 per diluted share. Earnings in 2003 were affected by an increase of $18,218,000 in the provision for
loan losses over 2002. The increase in the provision for loan losses reflects an increased level of charge-offs, results from the findings of an independent evaluation of the commercial loan portfolio, the continued evaluation of risks in the
portfolio, and the Banks revised approach for calculating the allowance for loan losses. Earnings in 2002 were affected by an increase of $5,528,000 in the provision for loan losses over 2001 due to increased levels of non-performing loans and
charge-offs and the uncertainty of the economic environment in Indiana. Non-interest expense in 2001 was unfavorably affected by the charge-off of $4,066,000 of overdrafts by a construction loan client.



On January 13, 2003, First Indiana acquired MetroBanCorp through a merger.
MetroBanCorp had $196,000,000 in assets. The acquisition was accounted for using the purchase method of accounting, and, accordingly, the financial results of the acquired entity are included in First Indianas consolidated financial statements
from the January 13, 2003 acquisition date.



Net Interest Income



Net interest income was $76,900,000 in 2003, compared
with $73,780,000 in 2002 and $74,049,000 in 2001. Earning assets averaged $2,083,300,000 in 2003, compared with $1,976,936,000 in 2002 and $2,006,008,000 in 2001. The acquisition of MetroBanCorp in January 2003 added approximately $126,685,000 in
earning assets. Net interest margin is calculated as the percentage of net interest income to average earning assets. Net interest margin was 3.69 percent in 2003, compared to 3.73 percent in 2002 and 3.69 percent in 2001. Historically low interest
rates continue to compress net interest margin and net interest income, as deposit rates have been unable to fully absorb reductions in market interest rates over the past several years. Increases in lower-cost demand and savings deposits in excess
of ten percent in both of the past two years helped to partially offset the impact of interest rate reductions on net interest margin. It is not expected that further interest rate cuts will occur. Since First Indiana continues to be positioned to
benefit from increasing rates, significant improvement in net interest margin is unlikely until market interest rates increase. See Asset/Liability Management for a more detailed discussion of the Corporations management of
interest rate risk.



The Federal Reserve Open Market Committee
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 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 net interest margin.



Net interest margin consists of two components: interest rate spread and the contribution of interest-free funds (primarily non-interest-bearing demand
deposits and shareholders equity). 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 2003 was 3.36 percent, compared with 3.25
percent in 2002 and 3.02 percent in 2001.



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. Interest-free funds averaged $334,547,000 in 2003, $306,678,000 in 2002, and $280,101,000 in 2001. Interest-free funds
provided 33 basis points to the margin in 2003, compared with 48 basis points in 2002 and 67 basis points in 2001. Although interest-free funds increased on average during the past two years, their impact has been declining as interest rates have
decreased. As a result of the decrease in contribution from interest-free funds, even though interest rate spread improved, the net interest margin declined.



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Net Interest Margin



|                                           |  |                |           |          |      |             |  |      |                |  |          |           |             |   |         |                |      |          |  |             |           |  |   |         |  |      |  
|------------------------------------------ |  | -------------- | --------- | -------- | ---- | ----------- |  | ---- | -------------- |  | -------- | --------- | ----------- | - | ------- | -------------- | ---- | -------- |  | ----------- | --------- |  | - | ------- |  | ---- | -
|                                           |  | 2003           |           |          | 2002 |             |  | 2001 |               
|(Dollars in Thousands)                     |  | AverageBalance |           | Interest |      | Yield /Rate |  |      | AverageBalance |  | Interest |           | Yield /Rate |   |         | AverageBalance |      | Interest |  | Yield /Rate |          
|Assets                                     |  |                |           |          |      |             |  |      |                |  |          |           |             |   |         |                |      |          |  |             |           |  |   |         |  |      |  
|Interest-Bearing Due from Banks            |  | $              | 5,014     |          | $    | 61          |  | 1.21 | %              |  | $        |          |             | $ |        |                |     | %        |  | $           |          |  | $ |        |  |     | %
|Federal Funds Sold                         |  |                | 227       |          |      | 3           |  | 1.23 |                |  |          | 1,412     |             |   | 20      |                | 1.41 |          |  |             | 13,463    |  |   | 478     |  | 3.55 |  
|Securities Available for Sale              |  |                | 177,898   |          |      | 8,035       |  | 4.52 |                |  |          | 145,172   |             |   | 8,501   |                | 5.86 |          |  |             | 155,767   |  |   | 9,880   |  | 6.34 |  
|Other Investments                          |  |                | 24,194    |          |      | 1,252       |  | 5.18 |                |  |          | 22,523    |             |   | 1,367   |                | 6.07 |          |  |             | 21,968    |  |   | 1,627   |  | 7.41 |  
|Loans (1)                                  |  |                |           |          |      |             |  |      |                |  |          |           |             |   |         |                |      |          |  |             |           |  |   |         |  |      |  
|Business                                   |  |                | 562,138   |          |      | 28,716      |  | 5.11 |                |  |          | 478,151   |             |   | 26,889  |                | 5.62 |          |  |             | 358,168   |  |   | 27,231  |  | 7.60 |  
|Consumer                                   |  |                | 648,890   |          |      | 42,448      |  | 6.54 |                |  |          | 678,640   |             |   | 50,197  |                | 7.40 |          |  |             | 719,516   |  |   | 63,972  |  | 8.89 |  
|Residential Mortgage                       |  |                | 299,519   |          |      | 15,563      |  | 5.20 |                |  |          | 293,316   |             |   | 18,683  |                | 6.37 |          |  |             | 394,583   |  |   | 27,629  |  | 7.00 |  
|Single-Family Construction                 |  |                | 204,068   |          |      | 9,333       |  | 4.57 |                |  |          | 223,567   |             |   | 11,795  |                | 5.28 |          |  |             | 231,125   |  |   | 17,341  |  | 7.50 |  
|Commercial Real Estate                     |  |                | 161,352   |          |      | 8,919       |  | 5.53 |                |  |          | 134,155   |             |   | 8,475   |                | 6.32 |          |  |             | 111,418   |  |   | 8,970   |  | 8.05 |  
|                                           |  |                |           |          |      |             |  |      |                |  |          |           |             |   |         |                |      |          |  |             |           |  |   |         |  |      |  
|Total Loans                                |  |                | 1,875,967 |          |      | 104,979     |  | 5.60 |                |  |          | 1,807,829 |             |   | 116,039 |                | 6.42 |          |  |             | 1,814,810 |  |   | 145,143 |  | 8.00 |  
|                                           |  |                |           |          |      |             |  |      |                |  |          |           |             |   |         |                |      |          |  |             |           |  |   |         |  |      |  
|Total Earning Assets                       |  |                | 2,083,300 |          |      | 114,330     |  | 5.49 |                |  |          | 1,976,936 |             |   | 125,927 |                | 6.37 |          |  |             | 2,006,008 |  |   | 157,128 |  | 7.83 |  
|Other Assets                               |  |                | 134,446   |          |      |             |  |      |                |  |          | 107,356   |             |   |         |                |      |          |  |             | 101,446   |  |   |         |  |      |  
|                                           |  |                |           |          |      |             |  |      |                |  |          |           |             |   |         |                |      |          |  |             |           |  |   |         |  |      |  
|Total Assets                               |  | $              | 2,217,746 |          |      |             |  |      |                |  | $        | 2,084,292 |             |   |         |                |      |          |  | $           | 2,107,454 |  |   |         |  |      |  
|                                           |  |                |           |          |      |             |  |      |                |  |          |           |             |   |         |                |      |          |  |             |           |  |   |         |  |      |  
|Liabilities and Shareholders Equity       |  |                |           |          |      |             |  |      |                |  |          |           |             |   |         |                |      |          |  |             |           |  |   |         |  |      |  
|Interest-Bearing Deposits                  |  |                |           |          |      |             |  |      |                |  |          |           |             |   |         |                |      |          |  |             |           |  |   |         |  |      |  
|Demand Deposits                            |  | $              | 210,922   |          | $    | 1,096       |  | 0.52 | %              |  | $        | 162,822   |             | $ | 1,319   |                | 0.81 | %        |  | $           | 124,139   |  | $ | 1,620   |  | 1.30 | %
|Savings Deposits                           |  |                | 423,401   |          |      | 3,076       |  | 0.73 |                |  |          | 418,224   |             |   | 5,582   |                | 1.33 |          |  |             | 413,397   |  |   | 13,526  |  | 3.27 |  
|Certificates of Deposit                    |  |                | 697,478   |          |      | 20,992      |  | 3.01 |                |  |          | 658,934   |             |   | 30,075  |                | 4.56 |          |  |             | 745,522   |  |   | 44,851  |  | 6.02 |  
|                                           |  |                |           |          |      |             |  |      |                |  |          |           |             |   |         |                |      |          |  |             |           |  |   |         |  |      |  
|Total Interest-Bearing Deposits            |  |                | 1,331,801 |          |      | 25,164      |  | 1.89 |                |  |          | 1,239,980 |             |   | 36,976  |                | 2.98 |          |  |             | 1,283,058 |  |   | 59,997  |  | 4.68 |  
|Short-Term Borrowings                      |  |                | 132,886   |          |      | 1,390       |  | 1.05 |                |  |          | 126,501   |             |   | 2,059   |                | 1.63 |          |  |             | 112,991   |  |   | 4,301   |  | 3.81 |  
|Federal Home Loan Bank Advances            |  |                | 262,666   |          |      | 9,360       |  | 3.56 |                |  |          | 301,710   |             |   | 12,962  |                | 4.30 |          |  |             | 329,858   |  |   | 18,781  |  | 5.69 |  
|Subordinated Notes                         |  |                | 21,400    |          |      | 1,516       |  | 7.08 |                |  |          | 2,067     |             |   | 150     |                | 7.26 |          |  |             |          |  |   |        |  |     |  
|                                           |  |                |           |          |      |             |  |      |                |  |          |           |             |   |         |                |      |          |  |             |           |  |   |         |  |      |  
|Total Interest-Bearing Liabilities         |  |                | 1,748,753 |          |      | 37,430      |  | 2.13 |                |  |          | 1,670,258 |             |   | 52,147  |                | 3.12 |          |  |             | 1,725,907 |  |   | 83,079  |  | 4.81 |  
|Non-Interest-Bearing Demand Deposits       |  |                | 209,126   |          |      |             |  |      |                |  |          | 154,148   |             |   |         |                |      |          |  |             | 126,910   |  |   |         |  |      |  
|Other Liabilities                          |  |                | 40,122    |          |      |             |  |      |                |  |          | 40,738    |             |   |         |                |      |          |  |             | 46,307    |  |   |         |  |      |  
|Shareholders Equity                       |  |                | 219,745   |          |      |             |  |      |                |  |          | 219,148   |             |   |         |                |      |          |  |             | 208,330   |  |   |         |  |      |  
|                                           |  |                |           |          |      |             |  |      |                |  |          |           |             |   |         |                |      |          |  |             |           |  |   |         |  |      |  
|Total Liabilities and Shareholders Equity |  | $              | 2,217,746 |          |      |             |  |      |                |  | $        | 2,084,292 |             |   |         |                |      |          |  | $           | 2,107,454 |  |   |         |  |      |  
|                                           |  |                |           |          |      |             |  |      |                |  |          |           |             |   |         |                |      |          |  |             |           |  |   |         |  |      |  
|Net Interest Income/Spread                 |  |                |           |          | $    | 76,900      |  | 3.36 | %              |  |          |           |             | $ | 73,780  |                | 3.25 | %        |  |             |           |  | $ | 74,049  |  | 3.02 | %
|                                           |  |                |           |          |      |             |  |      |                |  |          |           |             |   |         |                |      |          |  |             |           |  |   |         |  |      |  
|Net Interest Margin                        |  |                |           |          |      |             |  | 3.69 | %              |  |          |           |             |   |         |                | 3.73 | %        |  |             |           |  |   |         |  | 3.69 | %
|                                           |  |                |           |          |      |             |  |      |                |  |          |           |             |   |         |                |      |          |  |             |           |  |   |         |  |      |  

---

|(1) |  | Included in loans are loans held for sale totaling $68.6 million, $50.1 million, and $34.9 million in 2003, 2002, and 2001, respectively, and non-accrual loans.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------



6



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##### Table of Contents

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.



|                              |  |                                     |         |   |                         |   |        |                                     |      |   |           |        |  |   |         |   |  |   |        |   |  |   |         |  
|----------------------------- |  | ----------------------------------- | ------- | - | ----------------------- | - | ------ | ----------------------------------- | ---- | - | --------- | ------ |  | - | ------- | - |  | - | ------ | - |  | - | ------- | -
|                              |  | 2003 Compared with 2002             |         |   | 2002 Compared with 2001 |  
|                              |  | Increase (Decrease)Due to Change in |         |   | NetChange               |   |        | Increase (Decrease)Due to Change in |      |   | NetChange |       
|(Dollars in Thousands)        |  | Rate                                |         |   | Volume                  |   |        |                                     | Rate |   |           | Volume |  |  
|Interest Income               |  |                                     |         |   |                         |   |        |                                     |      |   |           |        |  |   |         |   |  |   |        |   |  |   |         |  
|Interest-Bearing Deposits     |  | $                                   |        |   |                         | $ | 61     |                                     |      | $ | 61        |        |  | $ |        |   |  | $ |       |   |  | $ |        |  
|Federal Funds Sold            |  |                                     | (3      | ) |                         |   | (14    | )                                   |      |   | (17       | )      |  |   | (184    | ) |  |   | (274   | ) |  |   | (458    | )
|Securities Available for Sale |  |                                     | (2,165  | ) |                         |   | 1,699  |                                     |      |   | (466      | )      |  |   | (731    | ) |  |   | (648   | ) |  |   | (1,379  | )
|Other Investments             |  |                                     | (211    | ) |                         |   | 96     |                                     |      |   | (115      | )      |  |   | (300    | ) |  |   | 40     |   |  |   | (260    | )
|Loans                         |  |                                     | (15,307 | ) |                         |   | 4,247  |                                     |      |   | (11,060   | )      |  |   | (28,548 | ) |  |   | (556   | ) |  |   | (29,104 | )
|                              |  |                                     |         |   |                         |   |        |                                     |      |   |           |        |  |   |         |   |  |   |        |   |  |   |         |  
|                              |  |                                     | (17,686 | ) |                         |   | 6,089  |                                     |      |   | (11,597   | )      |  |   | (29,763 | ) |  |   | (1,438 | ) |  |   | (31,201 | )
|Interest Expense              |  |                                     |         |   |                         |   |        |                                     |      |   |           |        |  |   |         |   |  |   |        |   |  |   |         |  
|Interest-Bearing Deposits     |  |                                     |         |   |                         |   |        |                                     |      |   |           |        |  |   |         |   |  |   |        |   |  |   |         |  
|Demand Deposits               |  |                                     | (550    | ) |                         |   | 327    |                                     |      |   | (223      | )      |  |   | (719    | ) |  |   | 418    |   |  |   | (301    | )
|Savings Deposits              |  |                                     | (2,574  | ) |                         |   | 68     |                                     |      |   | (2,506    | )      |  |   | (8,100  | ) |  |   | 156    |   |  |   | (7,944  | )
|Certificates of Deposit       |  |                                     | (10,754 | ) |                         |   | 1,671  |                                     |      |   | (9,083    | )      |  |   | (9,975  | ) |  |   | (4,801 | ) |  |   | (14,776 | )
|Short-Term Borrowings         |  |                                     | (768    | ) |                         |   | 99     |                                     |      |   | (669      | )      |  |   | (2,705  | ) |  |   | 463    |   |  |   | (2,242  | )
|FHLB Advances                 |  |                                     | (2,048  | ) |                         |   | (1,554 | )                                   |      |   | (3,602    | )      |  |   | (4,317  | ) |  |   | (1,502 | ) |  |   | (5,819  | )
|Subordinated Notes            |  |                                     | (4      | ) |                         |   | 1,370  |                                     |      |   | 1,366     |        |  |   |        |   |  |   | 150    |   |  |   | 150     |  
|                              |  |                                     |         |   |                         |   |        |                                     |      |   |           |        |  |   |         |   |  |   |        |   |  |   |         |  
|                              |  |                                     | (16,698 | ) |                         |   | 1,981  |                                     |      |   | (14,717   | )      |  |   | (25,816 | ) |  |   | (5,116 | ) |  |   | (30,932 | )
|                              |  |                                     |         |   |                         |   |        |                                     |      |   |           |        |  |   |         |   |  |   |        |   |  |   |         |  
|Net Interest Income           |  | $                                   | (988    | ) |                         | $ | 4,108  |                                     |      | $ | 3,120     |        |  | $ | (3,947  | ) |  | $ | 3,678  |   |  | $ | (269    | )
|                              |  |                                     |         |   |                         |   |        |                                     |      |   |           |        |  |   |         |   |  |   |        |   |  |   |         |  



Non-Interest Income



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



|                                     |  |                         |        |   |                     |   |        |         |  |                     |      |  |        |        |  |         |        |   |      |       |   |  |   |       
|------------------------------------ |  | ----------------------- | ------ | - | ------------------- | - | ------ | ------- |  | ------------------- | ---- |  | ------ | ------ |  | ------- | ------ | - | ---- | ----- | - |  | - | ------
|                                     |  | Years Ended December 31
|                                     |  |                         |        |   | Increase (Decrease) |   |        |         |  | Increase (Decrease) |      |  |       
|(Dollars in Thousands)               |  | 2003                    |        |   | Amount              |   |        | Percent |  |                     | 2002 |  | Amount |        |  | Percent |        |   | 2001
|Deposit Charges                      |  | $                       | 16,895 |   |                     | $ | 1,932  |         |  | 12.9                | %    |  | $      | 14,963 |  | $       | 3,419  |   |      | 29.6  | % |  | $ | 11,544
|Loan Servicing Income (Expense)      |  |                         | (2,079 | ) |                     |   | (2,492 | )       |  | (603.4              | )    |  |        | 413    |  |         | (549   | ) |      | (57.1 | ) |  |   | 962   
|Loan Fees                            |  |                         | 2,610  |   |                     |   | (113   | )       |  | (4.1                | )    |  |        | 2,723  |  |         | (1,013 | ) |      | (27.1 | ) |  |   | 3,736 
|Trust Fees                           |  |                         | 3,028  |   |                     |   | 414    |         |  | 15.8                |      |  |        | 2,614  |  |         | 330    |   |      | 14.4  |   |  |   | 2,284 
|Somerset Fees                        |  |                         | 11,900 |   |                     |   | 1,102  |         |  | 10.2                |      |  |        | 10,798 |  |         | 1,237  |   |      | 12.9  |   |  |   | 9,561 
|Investment Product Sales Commissions |  |                         | 1,717  |   |                     |   | (1,009 | )       |  | (37.0               | )    |  |        | 2,726  |  |         | 781    |   |      | 40.2  |   |  |   | 1,945 
|Sale of Loans                        |  |                         | 10,822 |   |                     |   | 2,391  |         |  | 28.4                |      |  |        | 8,431  |  |         | (809   | ) |      | (8.8  | ) |  |   | 9,240 
|Sale of Investment Securities        |  |                         | 7      |   |                     |   | (305   | )       |  | (97.8               | )    |  |        | 312    |  |         | (231   | ) |      | (42.5 | ) |  |   | 543   
|Other                                |  |                         | 4,663  |   |                     |   | 878    |         |  | 23.2                |      |  |        | 3,785  |  |         | (363   | ) |      | (8.8  | ) |  |   | 4,148 
|                                     |  |                         |        |   |                     |   |        |         |  |                     |      |  |        |        |  |         |        |   |      |       |   |  |   |       
|                                     |  | $                       | 49,563 |   |                     | $ | 2,798  |         |  | 6.0                 | %    |  | $      | 46,765 |  | $       | 2,802  |   |      | 6.4   | % |  | $ | 43,963
|                                     |  |                         |        |   |                     |   |        |         |  |                     |      |  |        |        |  |         |        |   |      |       |   |  |   |       



Non-interest income
totaled $49,563,000 in 2003, compared with $46,765,000 in 2002 and $43,963,000 in 2001. Included in non-interest income for the twelve months ended December 31, 2003, was $1,149,000 resulting from the acquisition of MetroBanCorp.



Deposit charges in 2003 increased 12.9 percent to $16,895,000 following a
29.6 percent increase to $14,963,000 in 2002. Included in deposit charges for the twelve months ended December 31, 2003, was



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##### Table of Contents

$1,075,000 resulting from the acquisition of MetroBanCorp. The remaining growth in deposit charges in 2003 and 2002 was in overdraft protection fees, account
analysis fees from business demand accounts, and debit card fees. Overdraft protection fees increased $2,701,000 in 2002 over 2001, primarily as a result of a new product offered to selected clients, which was introduced in 2001.



Loan servicing expense was $2,079,000 in 2003, compared with income of
$413,000 in 2002 and $962,000 in 2001. Loan servicing income consists of three related elements: fees received from servicing residential mortgage and home equity loans, amortization of capitalized servicing right assets, and changes in the
valuation allowance on servicing right assets. Loan prepayments caused by historically low residential mortgage and home equity loan rates resulted in a 30.5 percent decrease to $432,920,000 in loans serviced for others at December 31, 2003, from
$622,980,000 at December 31, 2002, and a 48.0 percent decrease from $833,336,000 at December 31, 2001. Rapid repayments accelerated the amortization of loan servicing rights and increased valuation impairment charges. In addition, fees collected
from servicing loans were reduced due to the lower loan volume. The loan servicing loss in 2003 reflects continued high prepayments and adjustments to certain assumptions used in determining the estimated market value of the loan servicing rights
portfolio. Valuation impairment charges in 2003 totaled $2,386,000. Additional information relating to loan servicing rights can be found in Note 3 of the Notes to the Consolidated Financial Statements.



Loan fees were $2,610,000 in 2003, down from $2,723,000 in 2002 and
$3,736,000 in 2001. The economic slowdown in 2003 and 2002 resulted in significantly lower fee income-producing activities in business and single-family construction lending when compared with 2001.



Assets under management by FirstTrust Indiana, the Banks investment
advisory and trust division, were $867,700,000, $658,357,000, and $673,668,000 at year-end 2003, 2002, and 2001, respectively. The increase in trust fees and assets under management by FirstTrust for 2003 compared to the same periods of 2002 and
2001, were mainly the result of successful efforts in developing new investment management relationships, as well as large additions to existing relationships.



Somerset fees increased primarily as a result of services rendered to new corporate clients that chose Somerset as their outside accountants and
consultants, and, to a lesser extent, an increase in the number of services provided to existing clients.



Investment and insurance product sales commissions generated by First Indiana Investor Services, the Banks investment products and insurance sales
subsidiary, fell in 2003 compared to a year ago, largely as the result of the lower interest rate environment, which caused the Banks insurance carriers to discontinue or offer less attractive products. Commission revenue also fell due to
lower commission rates received on new product sales. Revenue in 2003 would have been lower without the Banks expanded distribution system utilizing licensed branch associates in order to better meet client service needs.



Consumer loans sold were $344,638,000 in 2003, compared with $269,534,000 in
2002 and $257,698,000 in 2001. The increase in 2003 gains on sale of loans when compared to gains in 2002 reflected the 27.9 percent increase in consumer loan sales. Although the volume of loans sold in 2002 increased from 2001, the gain on sale of
loans decreased, primarily due to lower sales prices and profit margins. The gains on the sale of loans in 2002 and 2001 consist primarily of gains on the sale of fixed rate home equity loans. However, in 2003, sales of variable rate home equity
lines of credit (HELOC) grew to $160,788,000 (46.7 percent of consumer loan sales) compared with $40,158,000 (14.9 percent of consumer loan sales) in 2002. The shift from originations and sales of fixed rate home equity loans to HELOCs
reflected the markets growing preference for this type of product. HELOCs offer an attractive prime-based interest rate, the ability to draw down or pay back principal at any time during the term of the loan, and the option of an interest-only
monthly payment. Residential loans sold were $1,439,000 in 2003, compared with $314,000 in 2002 and $2,395,000 in 2001. The relatively low volume of 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.



8



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##### Table of Contents

Customer fee revenue included in other non-interest income increased over the three-year period as a
result of prepayment fees on consumer loans, increased fees, an expanded customer base, and new products. Other non-interest income included a gain on the sale of a former branch building totaling $561,000 in 2001.



Non-Interest Expense



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



|                                      |  |                         |        |                     |   |        |         |  |                     |      |  |        |        |  |         |        |   |      |        |    |  |   |       
|------------------------------------- |  | ----------------------- | ------ | ------------------- | - | ------ | ------- |  | ------------------- | ---- |  | ------ | ------ |  | ------- | ------ | - | ---- | ------ | -- |  | - | ------
|                                      |  | Years Ended December 31
|                                      |  |                         |        | Increase (Decrease) |   |        |         |  | Increase (Decrease) |      |  |       
|(Dollars in Thousands)                |  | 2003                    |        | Amount              |   |        | Percent |  |                     | 2002 |  | Amount |        |  | Percent |        |   | 2001
|Salaries                              |  | $                       | 40,447 |                     | $ | 9,805  |         |  | 32.0                | %    |  | $      | 30,642 |  | $       | 12     |   |      |       | %  |  | $ | 30,630
|Benefits                              |  |                         | 8,871  |                     |   | 1,709  |         |  | 23.9                |      |  |        | 7,162  |  |         | 1,072  |   |      | 17.6   |    |  |   | 6,090 
|Net Occupancy                         |  |                         | 4,831  |                     |   | 760    |         |  | 18.7                |      |  |        | 4,071  |  |         | 347    |   |      | 9.3    |    |  |   | 3,724 
|Equipment                             |  |                         | 6,751  |                     |   | 711    |         |  | 11.8                |      |  |        | 6,040  |  |         | (1,016 | ) |      | (14.4  | )  |  |   | 7,056 
|Professional Services                 |  |                         | 6,026  |                     |   | 1,263  |         |  | 26.5                |      |  |        | 4,763  |  |         | 641    |   |      | 15.6   |    |  |   | 4,122 
|Marketing                             |  |                         | 2,630  |                     |   | 279    |         |  | 11.9                |      |  |        | 2,351  |  |         | (73    | ) |      | (3.0   | )  |  |   | 2,424 
|Telephone, Supplies, and Postage      |  |                         | 4,034  |                     |   | 812    |         |  | 25.2                |      |  |        | 3,222  |  |         | (293   | ) |      | (8.3   | )  |  |   | 3,515 
|Other Intangible Asset Amortization   |  |                         | 736    |                     |   | 736    |         |  |                    |      |  |        |       |  |         |       |   |      |       |    |  |   |      
|Goodwill Amortization                 |  |                         |       |                     |   |       |         |  |                    |      |  |        |       |  |         | (920   | ) |      | (100.0 | )  |  |   | 920   
|Other Real Estate OwnedOperationsNet |  |                         | 691    |                     |   | 547    |         |  | 379.9               |      |  |        | 144    |  |         | (257   | ) |      | (64.1  | )  |  |   | 401   
|Deposit Insurance                     |  |                         | 236    |                     |   | (6     | )       |  | (2.5                | )    |  |        | 242    |  |         | (25    | ) |      | (9.4   | )  |  |   | 267   
|Miscellaneous                         |  |                         | 8,384  |                     |   | 519    |         |  | 6.6                 |      |  |        | 7,865  |  |         | (3,487 | ) |      | (30.7  | )  |  |   | 11,352
|                                      |  |                         |        |                     |   |        |         |  |                     |      |  |        |        |  |         |        |   |      |        |    |  |   |       
|                                      |  | $                       | 83,637 |                     | $ | 17,135 |         |  | 25.8                | %    |  | $      | 66,502 |  | $       | (3,999 | ) |      | (5.7   | )% |  | $ | 70,501
|                                      |  |                         |        |                     |   |        |         |  |                     |      |  |        |        |  |         |        |   |      |        |    |  |   |       



Included in
non-interest expense for the twelve months ended December 31, 2003 was $4,685,000 from the MetroBanCorp acquisition. Of these expenses, approximately $320,000 were directly associated with the integration of MetroBanCorp. Salary expense was
$40,447,000 in 2003, compared with $30,642,000 in 2002. Included in 2003 salary expense was a $1,053,000 increase in salary expense resulting from an adjustment in the accrual for salaries and $1,387,000 for expenses associated with the retirement
of the Banks president and chief executive officer. Management incentive bonus expense, although accrued at a reduced rate in 2003, was higher than in 2002, when previously accrued incentive awards totaling $1,828,000 were reversed. The
MetroBank staff and staffing increases in the community bank, Somerset, and consumer finance bank segments and normal salary increases in 2003 account for the remainder of the salary expense increase when compared to 2002. Employee benefits in 2003
increased $1,709,000, or 23.9 percent, due to the staffing increases mentioned above, increased medical insurance premiums, and higher pension expense. Expense categories reflecting the increased 2003 operating expenses of the expanded branch
network from the MetroBank merger as well as normal expense increases were net occupancy, equipment, and telephone, supplies, and postage expense. Marketing expense increased 11.9 percent over 2002 expense. In 2002, marketing expense was reduced as
part of an overall expense control effort. Professional services expense in 2003 increased 26.5 percent over 2002 expense due to increased legal and other professional expenses associated with loan delinquencies and foreclosures and executive search
services. Other intangible asset amortization commenced in 2003 reflecting the establishment and amortization of a core deposit intangible and non-compete agreement intangible related to the purchase of MetroBanCorp.



Non-interest expense in 2002 was $66,502,000, compared with $70,501,000 in
2001. Included in 2001 miscellaneous non-interest expense was the write-off of $4,066,000 in overdrafts by a construction loan client. Salary expense was $30,642,000 in 2002, compared with $30,630,000 in 2001. Management incentive bonus was not paid
to employees of First Indiana Corporation or First Indiana Bank for 2002 or 2001. In 2002, multi-year incentive awards and restricted stock awards were forfeited and the compensation expense associated with these



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awards which began accruing in 2000 was reversed. Excluding the impact of management incentive and restricted stock awards and the reversal of such accruals
in 2002, salary expense was $31,662,000 in 2002, compared with $29,461,000 in 2001, an increase of 7.5 percent. This increase consisted primarily of salaries for new associates in strategically targeted business reporting units including corporate
banking, retail banking, and Somerset, and normal salary increases. Employee benefits in 2002 increased $1,072,000, or 17.6 percent, due to the staffing increases mentioned above, increased medical insurance premiums, and higher pension expense.
Expense categories benefiting from expense control efforts in 2002 (when compared with 2001) were equipment expense, marketing, and telephone, supplies, and postage expense. These categories saw a total decrease of $1,382,000 in 2002. Due to the
adoption of a new accounting standard, First Indiana ceased amortization of goodwill in 2002. Goodwill amortization in 2001 was $920,000.



The Corporations efficiency ratio for the year 2003 was 66.14 percent, compared with 55.17 percent in 2002 and 59.74 percent in 2001. The efficiency
ratio of First Indiana Bank for the year 2003 was 59.15 percent, compared with 50.24 percent in 2002 and 53.61 percent in 2001. For both entities, the efficiency ratios in 2003 increased over the efficiency ratios in 2002, primarily due to the
increase in non-interest expense in 2003 compared with 2002. In 2002, the efficiency ratio decreased from the 2001 efficiency ratio due in large part to the increased level of non-interest income and the expense control reflected in lower
non-interest expense. The efficiency ratio is an indication of the amount of expense incurred to produce a dollar of revenue. The efficiency ratio is calculated by dividing non-interest expense by total revenue (the sum of net interest income and
non-interest income).



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.



|                           |  |      |       |   |      |   |        |      |  |   |        |  
|-------------------------- |  | ---- | ----- | - | ---- | - | ------ | ---- |  | - | ------ | -
|(Dollars in Thousands)     |  | 2003 |       |   | 2002 |   |        | 2001 | 
|Income Before Income Taxes |  | $    | 3,852 |   |      | $ | 33,287 |      |  | $ | 32,283 |  
|Income Taxes               |  |      | 1,323 |   |      |   | 12,107 |      |  |   | 12,274 |  
|Effective Tax Rate         |  |      | 34.3  | % |      |   | 36.4   | %    |  |   | 38.0   | %



The Corporations
effective tax rate has declined over the past three years, primarily as a result of a reduction in state income taxes. In connection with the decrease in earnings in 2003 and the Corporations state tax profile, the Corporation had a loss for
state income tax purposes. Additional data on income taxes can be found in Note 12 of the Notes to Consolidated Financial Statements.



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FINANCIAL CONDITION



First
Indianas total assets at December 31, 2003, were $2,193,137,000, compared with $2,125,590,000 at December 31, 2002, and $2,046,657,000 at December 31, 2001. The acquisition of MetroBanCorp in January 2003 added approximately $196,000,000 to
total assets. This increase in assets was partially offset by the use of cash for the acquisition as well as by prepayment activity in consumer loans as discussed below.



Loans



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.



|                                 |  |                |           |         |       |   |        |      |           |  |       |        |  |         |           |  |        |   |         |   |           |        |       |         |  |   |           |  |       |  
|-------------------------------- |  | -------------- | --------- | ------- | ----- | - | ------ | ---- | --------- |  | ----- | ------ |  | ------- | --------- |  | ------ | - | ------- | - | --------- | ------ | ----- | ------- |  | - | --------- |  | ----- | -
|                                 |  | At December 31 |          
|                                 |  | 2003           |           |         | 2002  |   |        | 2001 |           |  | 2000  |        |  | 1999    |          
|(Dollars in Thousands)           |  | Amount         |           | Percent |       |   | Amount |      | Percent   |  |       | Amount |  | Percent |           |  | Amount |   | Percent |   |           | Amount |       | Percent | 
|Commercial Loans                 |  |                |           |         |       |   |        |      |           |  |       |        |  |         |           |  |        |   |         |   |           |        |       |         |  |   |           |  |       |  
|Business Loans                   |  | $              | 515,316   |         | 28.4  | % |        | $    | 501,213   |  | 27.3  | %      |  | $       | 443,461   |  | 25.2   | % |         | $ | 263,750   |        | 14.8  | %       |  | $ | 211,005   |  | 12.4  | %
|Single-Family Construction Loans |  |                | 192,450   |         | 10.6  |   |        |      | 212,772   |  | 11.6  |        |  |         | 224,926   |  | 12.8   |   |         |   | 207,569   |        | 11.6  |         |  |   | 274,010   |  | 16.1  |  
|Commercial Real Estate Loans     |  |                | 178,378   |         | 9.8   |   |        |      | 146,174   |  | 8.0   |        |  |         | 120,485   |  | 6.9    |   |         |   | 98,740    |        | 5.5   |         |  |   | 60,371    |  | 3.5   |  
|Consumer Loans                   |  |                |           |         |       |   |        |      |           |  |       |        |  |         |           |  |        |   |         |   |           |        |       |         |  |   |           |  |       |  
|Home Equity Loans                |  |                | 591,565   |         | 32.6  |   |        |      | 654,930   |  | 35.6  |        |  |         | 664,692   |  | 37.8   |   |         |   | 737,371   |        | 41.4  |         |  |   | 665,177   |  | 39.1  |  
|Other Consumer Loans             |  |                | 20,460    |         | 1.1   |   |        |      | 11,220    |  | 0.6   |        |  |         | 10,419    |  | 0.6    |   |         |   | 10,920    |        | 0.6   |         |  |   | 10,584    |  | 0.6   |  
|Residential Mortgage Loans       |  |                | 316,822   |         | 17.5  |   |        |      | 311,324   |  | 16.9  |        |  |         | 292,503   |  | 16.7   |   |         |   | 466,125   |        | 26.1  |         |  |   | 481,034   |  | 28.3  |  
|                                 |  |                |           |         |       |   |        |      |           |  |       |        |  |         |           |  |        |   |         |   |           |        |       |         |  |   |           |  |       |  
|Total Loans                      |  | $              | 1,814,991 |         | 100.0 | % |        | $    | 1,837,633 |  | 100.0 | %      |  | $       | 1,756,486 |  | 100.0  | % |         | $ | 1,784,475 |        | 100.0 | %       |  | $ | 1,702,181 |  | 100.0 | %
|                                 |  |                |           |         |       |   |        |      |           |  |       |        |  |         |           |  |        |   |         |   |           |        |       |         |  |   |           |  |       |  



Commercial Loans.The Bank offers a variety of commercial loans, including business loans, single-family construction loans, and commercial real estate loans. Over the past four years, First Indiana has expanded its efforts in commercial lending and treasury
management services. Rather than concentrating exclusively on lending transactions, First Indianas sales force seeks to be its clients Trusted Advisor by taking a holistic approach, with the goal of learning about all of their
clients business and personal needs and recommending a comprehensive solution, including treasury management services, benefits consulting, and tax and estate planning. First Indianas merger with The Somerset Group in 2000 was designed
to facilitate this holistic approach. The commercial segment of the loan portfolio is diversified by industry and by relative size of loan relationships. The average outstanding balance of all commercial loans was $244,000 at December 31, 2003.



While business loans were up at year-end 2003 compared to
year-end 2002, business loans outstanding declined $36 million from the end of the third quarter to the end of the fourth quarter of 2003. There were two main reasons for this decrease. Business loan demand weakened throughout 2003 because of the
uncertain economy in the country in general and in Indiana specifically. In addition, First Indianas focus on improving credit quality had a direct effect on business loan volume. As the business portfolio was repositioned throughout the
latter part of 2003, the result was an intentional reduction in business loans outstanding. Since identified credit issues have been addressed, the Bank has returned to a focus on business development and expects to expand the business loan
portfolio in 2004.



Business loans include loans to small- and
middle-market companies in Central Indiana. As reflected in the table above, First Indianas strategies have resulted in significant growth in business loans over the last four years. Business loans as a percentage of total loans have grown
from 12.4 percent in 1999 to 28.4 percent in 2003. Strategies for 2004 and beyond call for continued growth in this market segment, as well as an overall increase in the market share of the Indianapolis area.



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



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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. The Bank had 12.0 percent of business loan commitments to a single industry group (specialty finance) at December 31, 2003. The next highest industry group
concentration was 7.9 percent of business loan commitments (mortgage bankers). The Bank has 123 loan relationships with commitments over $1,000,000.



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; Phoenix, Arizona; and Orlando, Florida. These loans have terms ranging from six months to one year. At December 31, 2003 and 2002, the Banks construction loans outstanding equaled
$192,450,000 and $212,772,000, respectively.



Commercial real
estate loans were $178,378,000 at December 31, 2003, compared with $146,174,000 one year earlier. Included in commercial real estate loans at December 31, 2003 and 2002, were $83,247,000 and $76,988,000 in land development loans, which are for the
acquisition and development of building lots for single-family housing units in the metropolitan areas of Indianapolis, Charlotte, Raleigh, Phoenix, and Orlando. 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. The remainder of the Banks portfolio of commercial real estate loans, an area of anticipated growth for the year 2004, includes office buildings, strip centers, and
multi-family units primarily in the Indianapolis market. The usual term of these loans is three to five years.



The following table presents the remaining maturities and interest rate sensitivity of commercial loans at December 31, 2003.



|                           |  |                      |         |                             |   |                |  |       |        |         |   |         |  |        |  
|-------------------------- |  | -------------------- | ------- | --------------------------- | - | -------------- |  | ----- | ------ | ------- | - | ------- |  | ------ | -
|                           |  | Remaining Maturities |         |                             |   |                | 
|(Dollars in Thousands)     |  | One Year or Less     |         | Over One Year to Five Years |   | Over FiveYears |  | Total |        | Percent |  
|Type of Loan:              |  |                      |         |                             |   |                |  |       |        |         |   |         |  |        |  
|Business                   |  | $                    | 451,883 |                             | $ | 63,433         |  | $     |       |         | $ | 515,316 |  | 58.15  | %
|Single-Family Construction |  |                      | 182,873 |                             |   | 9,577          |  |       |       |         |   | 192,450 |  | 21.72  |  
|Commercial Real Estate     |  |                      | 137,634 |                             |   | 24,936         |  |       | 15,808 |         |   | 178,378 |  | 20.13  |  
|                           |  |                      |         |                             |   |                |  |       |        |         |   |         |  |        |  
|Total                      |  | $                    | 772,390 |                             | $ | 97,946         |  | $     | 15,808 |         | $ | 886,144 |  | 100.00 | %
|                           |  |                      |         |                             |   |                |  |       |        |         |   |         |  |        |  
|Rate Sensitivity:          |  |                      |         |                             |   |                |  |       |        |         |   |         |  |        |  
|Fixed Rate                 |  | $                    | 33,207  |                             | $ | 70,624         |  | $     | 15,808 |         | $ | 119,639 |  | 13.50  | %
|Adjustable Rate            |  |                      | 739,183 |                             |   | 27,322         |  |       |       |         |   | 766,505 |  | 86.50  |  
|                           |  |                      |         |                             |   |                |  |       |        |         |   |         |  |        |  
|Total                      |  | $                    | 772,390 |                             | $ | 97,946         |  | $     | 15,808 |         | $ | 886,144 |  | 100.00 | %
|                           |  |                      |         |                             |   |                |  |       |        |         |   |         |  |        |  



Consumer Loans.Home equity loans and home equity lines of credit account for 96.7 percent and 98.3 percent of consumer loans at December 31, 2003 and 2002, respectively. Economic and market conditions coupled with the Banks consumer loan strategies led
to several significant trends in 2003 and 2002. As market interest rates decreased, borrowers preferences moved away from closed-end home equity loans to HELOCs. This product offers an attractive prime-based interest rate, the ability to draw
down or pay back principal at any time during the term of the loan, and the option of an interest-only monthly payment. Borrowers took advantage of the lower rate environment by paying off existing loans and refinancing their debt at lower rates. To
take advantage of this demand, the Bank developed and offered customers HELOC products with competitive rates and features through its national network of loan originators in 47 states along with the Banks loan originators. The Bank has
successfully developed expertise in selling both closed-end and line of credit home equity loans into the secondary market. As a result, First Indiana home equity loan origination and sales volume has grown each of the last three years. First
Indianas strategies in 2004 call for continued expansion of consumer originations and sales by maintaining existing relationships and expanding the loan origination network.



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The Bank originates a full range of fixed rate and adjustable rate consumer loans with varying levels of
credit risk. These range from A to sub-prime credits. The sub-prime loans typically involve lower credit scores with higher loan-to-value ratios up to 115 percent. Sub-prime loans are sold to investors. A credit quality loans
with typically lower loan-to-value ratios may be retained in the Banks portfolio or sold to investors. Home equity loan originations in 2003 totaled $481,828,000, of which 50.3 percent were HELOCs. This compares with 2002 home equity loan
originations of $464,187,000, of which 43.7 percent were HELOCs, and 2001 home equity loan originations of $394,676,000, of which 21.3 percent were HELOCs.



During 2003, the Bank sold $344,638,000 in home equity loans, a 27.9 percent increase from sales of $269,534,000 in 2002 and a 33.7 percent increase from
sales of $257,698,000 in 2001. Of the home equity loans sold in 2003, $160,788,000, or 46.7 percent, consisted of HELOCs compared with $40,158,000, or 14.9 percent, of home equity sales in 2002. Home equity loans sold as a percent of home equity
loans originated in 2003 and 2002 were 72 percent and 58 percent, respectively.



At December 31, 2003, consumer loans totaled $612,025,000, compared with $666,150,000 and $675,111,000 at December 31, 2002 and 2001, respectively. The Bank experienced a decrease in consumer loans outstanding in 2003
and 2002 as a result of prepayments and increased sales of consumer loan production. Partially offsetting this decrease was approximately $23,714,000 of consumer loans acquired from MetroBanCorp in 2003. Reflecting the trend previously discussed,
HELOC balances at December 31, 2003 totaled $342,236,000, or 55.9 percent, of consumer loans, compared with $328,796,000, or 49.4 percent, of consumer loans at December 31, 2002. Consumer loans generally have shorter terms and higher interest rates
than residential loans, but involve higher credit risk. Of the Banks consumer loans outstanding at December 31, 2003, 96.7 percent were secured by first or second mortgages on real property. At December 31, 2003, the Bank had $34,724,000 in
closed-end consumer loans held for sale and $33,881,000 in home equity lines of credit held for sale. At December 31, 2002, the Bank had $17,380,000 in closed-end consumer loans held for sale and $32,692,000 in home equity lines of credit held for
sale. At December 31, 2001, the Bank had $34,756,000 in home equity loans held for sale, which did not include any home equity lines of credit.



Additionally, the Bank makes loans secured by deposits and overdraft loans in connection with its checking accounts; auto loans; fixed rate and fixed term
secured and unsecured loans; and offers Visa credit cards through an agent.



Residential Mortgage Loans.Residential mortgage loans outstanding totaled $316,822,000 at December 31, 2003, compared with $311,324,000 and $292,503,000 at year-end 2002 and 2001, respectively. Due to
historically low residential loan interest rates in 2003 and 2002, First Indiana experienced significant loan prepayments in its residential loan portfolio. In 2003, the Bank originated $55,876,000 and purchased $109,789,000 in primarily adjustable
rate residential mortgage loans. In 2002, the Bank originated $14,264,000 and purchased $142,492,000 in primarily adjustable rate residential mortgage loans. This compares with loan originations of $771,000 in 2001. The Bank did not purchase
residential mortgage loans in 2001. While the Bank decided to de-emphasize the traditional mortgage banking business in 1999, there remains a need within the Banks loan portfolio for credit and yield diversification. Consequently, in light of
the strong residential mortgage loan prepayments during 2003 and 2002, the Bank pursued a strategy of maintaining a level of diversification by originating and purchasing residential mortgage loans. Sales of fixed rate residential mortgage loans
into the secondary market in 2003, 2002, and 2001 were $1,439,000, $314,000, and $2,395,000, respectively. Gains on residential loan sales in 2003 were $16,000, compared with $40,000 in 2002 and $63,000 in 2001.



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.



First Indianas residential loan strategy in 2004 calls for maintaining the residential loan portfolio at a level
consistent with the diversification goal of 2003 and 2002. Increased emphasis will be placed on developing sources and volumes of loan originations, coupled with a de-emphasis on loan purchases.



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As part of its residential loan origination activities, in 2003 First Indiana developed a network of
residential loan correspondents with whom the Bank links prospective borrowers. First Indiana does not fund these mortgages, but collects a fee for this service. In 2003, First Indiana produced $29,455,000 of residential loans for correspondents and
fees of $473,000 were recognized.



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.



At December 31, 2003, First
Indianas investments totaled $240,410,000, or 11.0 percent of total assets, and consisted of securities available for sale, carried at fair market value, and other investments, carried at cost.



The distribution of securities available for sale is detailed below.



|                                      |  |             |         |      |   |         |  |   |        
|------------------------------------- |  | ----------- | ------- | ---- | - | ------- |  | - | -------
|                                      |  | December 31
|(Dollars in Thousands)                |  | 2003        |         | 2002 |   | 2001   
|U.S. Treasuries & Government Agencies |  | $           | 130,543 |      | $ | 112,346 |  | $ | 110,555
|Mortgage-Backed Securities            |  |             | 84,910  |      |   | 26,046  |  |   | 34,569 
|Other Asset-Backed Securities         |  |             |        |      |   | 65      |  |   | 210    
|Corporate Debt Securities             |  |             |        |      |   |        |  |   | 2,529  
|                                      |  |             |         |      |   |         |  |   |        
|Total                                 |  | $           | 215,453 |      | $ | 138,457 |  | $ | 147,863
|                                      |  |             |         |      |   |         |  |   |        



At December 31, 2003,
securities available for sale had the following maturity and yield characteristics.



|                                      |  |                         |        |       |                                       |   |            |                                       |        |  |                     |            |  |       |        |  |            |   |       |   |       |            |      |       |  |   |         |  |      |  
|------------------------------------- |  | ----------------------- | ------ | ----- | ------------------------------------- | - | ---------- | ------------------------------------- | ------ |  | ------------------- | ---------- |  | ----- | ------ |  | ---------- | - | ----- | - | ----- | ---------- | ---- | ----- |  | - | ------- |  | ---- | -
|                                      |  | Due in One Year or Less |        |       | Due after One Year through Five Years |   |            | Due after Five Years throughTen Years |        |  | Due after Ten Years |            |  | Total |       
|(Dollars in Thousands)                |  | Book Value              |        | Yield |                                       |   | Book Value |                                       | Yield  |  |                     | Book Value |  | Yield |        |  | Book Value |   | Yield |   |       | Book Value |      | Yield | 
|U.S. Treasuries & Government Agencies |  | $                       | 40,879 |       | 5.60                                  | % |            | $                                     | 88,267 |  | 3.75                | %          |  | $     |       |  |           | % |       | $ | 1,397 |            | 3.20 | %     |  | $ | 130,543 |  | 4.32 | %
|Mortgage-Backed Securities            |  |                         |       |       |                                      |   |            |                                       | 1,353  |  | 6.33                |            |  |       | 78,266 |  | 3.58       |   |       |   | 5,291 |            | 6.48 |       |  |   | 84,910  |  | 3.80 |  
|                                      |  |                         |        |       |                                       |   |            |                                       |        |  |                     |            |  |       |        |  |            |   |       |   |       |            |      |       |  |   |         |  |      |  
|Total                                 |  | $                       | 40,879 |       | 5.60                                  | % |            | $                                     | 89,620 |  | 3.79                | %          |  | $     | 78,266 |  | 3.58       | % |       | $ | 6,688 |            | 5.79 | %     |  | $ | 215,453 |  | 4.14 | %
|                                      |  |                         |        |       |                                       |   |            |                                       |        |  |                     |            |  |       |        |  |            |   |       |   |       |            |      |       |  |   |         |  |      |  



For additional
information concerning securities available for sale, see Note 4 of the Corporations Consolidated Financial Statements.



Included in other investments are Federal Reserve Bank Stock, Federal Home Loan Bank Stock, and Common Securities in the Corporations grantor
trusts: First Indiana Capital Trust I and First Indiana Capital Statutory Trust II. The Bank is required by the Federal Reserve Board to own shares of Federal Reserve Bank (FRB) stock. FRB stock, which is a restricted investment
security, is carried at its cost. In addition, as a member of the Federal Home Loan Bank of Indianapolis (FHLB), the Bank is required to own shares of capital stock in the FHLB. FHLB stock is carried at its cost, since it is a restricted
investment security. The Bank is required to hold approximately $13,774,000 of FHLB stock. The Corporations holdings in FHLB stock are redeemable only upon five years notice to the FHLB. In connection with the formation of First Indiana
Capital Trust I (Trust I) and First Indiana Capital Statutory Trust II (Trust II), Trust I and Trust II issued Common



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Securities to the Corporation. The Common Securities for each trust are carried at their cost since they are restricted investment securities. The Common
Securities are not redeemable until the related subordinated notes are redeemed (according to the subordinated note terms).



The composition of other investments is summarized as follows.



|                                 |  |             |        |      |   |        |  |   |       
|-------------------------------- |  | ----------- | ------ | ---- | - | ------ |  | - | ------
|                                 |  | December 31
|(Dollars in Thousands)           |  | 2003        |        | 2002 |   | 2001  
|FRB Stock                        |  | $           | 1,110  |      | $ | 900    |  | $ | 900   
|FHLB Stock                       |  |             | 23,103 |      |   | 21,591 |  |   | 21,591
|Capital Trusts Common Securities |  |             | 744    |      |   | 372    |  |   |      
|                                 |  |             |        |      |   |        |  |   |       
|                                 |  | $           | 24,957 |      | $ | 22,863 |  | $ | 22,491
|                                 |  |             |        |      |   |        |  |   |       



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. First Indiana Corporations outside sources of funds include a $10,000,000 line of credit with a commercial bank and subordinated notes.



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, savings accounts, money market savings accounts, and fixed and variable rate certificates of deposit. Throughout 2002 and 2003, the
Bank has pursued a strategy of building core deposits (retail and commercial checking and savings accounts). Savings account balances declined in 2002 following an unusual increase in 2001, precipitated by the stock market decline and the aftermath
of September 11. Nevertheless, as a percentage of total deposits, demand and savings deposits increased to 57.3 percent at December 31, 2003, compared with 56.7 percent at December 31, 2002 and 54.6 percent at

December 31, 2001. In 2004, the Bank plans to continue to increase checking and savings accounts in an effort to reduce funding costs and strengthen core deposits, which
furthers the Banks Trusted Advisor strategy by forming the basis of long-term relationships.



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



|                            |  |                             |           |                             |   |                             |  |                             |           |  |                             |         |                             |  |   |                             |  |   |          |   |  |   |          
|--------------------------- |  | --------------------------- | --------- | --------------------------- | - | --------------------------- |  | --------------------------- | --------- |  | --------------------------- | ------- | --------------------------- |  | - | --------------------------- |  | - | -------- | - |  | - | ---------
|(Dollars in Thousands)      |  | Balance atDecember 31, 2003 |           | 2003 Net Increase(Decrease) |   | Balance atDecember 31, 2002 |  | 2002 Net Increase(Decrease) |           |  | Balance atDecember 31, 2001 |         | 2001 Net Increase(Decrease) |  |   | Balance atDecember 31, 2000
|Non-Interest-Bearing Demand |  | $                           | 235,811   |                             | $ | 55,422                      |  | $                           | 180,389   |  | $                           | 15,366  |                             |  | $ | 165,023                     |  | $ | 41,187   |   |  | $ | 123,836  
|Interest-Bearing Demand     |  |                             | 217,353   |                             |   | 37,602                      |  |                             | 179,751   |  |                             | 39,576  |                             |  |   | 140,175                     |  |   | 24,524   |   |  |   | 115,651  
|Savings                     |  |                             | 400,804   |                             |   | 2,052                       |  |                             | 398,752   |  |                             | (49,080 | )                           |  |   | 447,832                     |  |   | 72,501   |   |  |   | 375,331  
|CDs under $100,000          |  |                             | 312,051   |                             |   | 1,681                       |  |                             | 310,370   |  |                             | (42,396 | )                           |  |   | 352,766                     |  |   | (48,955  | ) |  |   | 401,721  
|CDs $100,000 and Greater    |  |                             | 323,953   |                             |   | 54,011                      |  |                             | 269,942   |  |                             | (3,740  | )                           |  |   | 273,682                     |  |   | (109,762 | ) |  |   | 383,444  
|                            |  |                             |           |                             |   |                             |  |                             |           |  |                             |         |                             |  |   |                             |  |   |          |   |  |   |          
|Totals                      |  | $                           | 1,489,972 |                             | $ | 150,768                     |  | $                           | 1,339,204 |  | $                           | (40,274 | )                           |  | $ | 1,379,478                   |  | $ | (20,505  | ) |  | $ | 1,399,983
|                            |  |                             |           |                             |   |                             |  |                             |           |  |                             |         |                             |  |   |                             |  |   |          |   |  |   |          



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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 Banks branches, the Internet, and the Banks Call Center. At December 31, 2003, these certificates of deposit included $47,227,000 in brokered
funds, $191,201,000 in public funds, and $85,511,000 in retail funds. The Banks certificates of deposit of $100,000 or more at December 31, 2003, the maturities of such deposits, and the percentage of total deposits represented by these
certificates are set forth in the table below.



|                                             |  |                     |         |                                 |   |                           |  |               |        |       |   |                    |  |   |         |  |      |  
|-------------------------------------------- |  | ------------------- | ------- | ------------------------------- | - | ------------------------- |  | ------------- | ------ | ----- | - | ------------------ |  | - | ------- |  | ---- | -
|(Dollars in Thousands)                       |  | Three Monthsor Less |         | Over Three Months to Six Months |   | Over SixMonths toOne Year |  | Over One Year |        | Total |   | Percent ofDeposits | 
|Certificates of Deposit $100,000 and Greater |  | $                   | 179,829 |                                 | $ | 45,218                    |  | $             | 38,550 |       | $ | 60,356             |  | $ | 323,953 |  | 21.7 | %
|                                             |  |                     |         |                                 |   |                           |  |               |        |       |   |                    |  |   |         |  |      |  



Borrowings.The
Federal Home Loan Bank 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, low loan-to-value home equity 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, 2003, the Bank had $265,488,000 in FHLB advances, with a weighted average interest rate of 3.30 percent. Of these advances, $135,000,000 carried floating
interest rates that reset daily or quarterly. The FHLB had the right to require the Bank to repay $110,000,000 in advances at certain designated dates.



The Bank and approved correspondent banks from time to time enter into short-term borrowing agreements that are classified as federal funds purchased.
These borrowings are not collateralized and generally have maturities from one to 30 days. At December 31, 2003, federal funds purchased totaled $6,000,000 with a weighted average interest rate of 1.25 percent.



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, 2003, the Bank had repurchase agreements totaling $141,074,000, with a weighted average interest rate of 0.84 percent. First Indianas repurchase agreements are collateralized by qualifying investment securities.



In October 2002, the Corporation formed First Indiana Capital Trust I
(Trust I) for the purpose of issuing $12,000,000 of trust preferred securities to the public. This unconsolidated grantor trusts sole assets are junior subordinated notes issued by the Corporation. The notes have a stated term of
30 years (October 30, 2032) but may be redeemed at par in part or in full beginning October 30, 2007, and any calendar quarter end date thereafter, subject to approval by the Federal Reserve Board. The notes have a fixed rate of interest of 6.92
percent through October 30, 2007, and a floating rate of interest, reset quarterly, equal to the London interbank offered rate (LIBOR) plus 3.35 percent thereafter to maturity. Interest is payable quarterly and the distribution rate of
the trust preferred securities is equal to the interest rate of the notes. The balance of the Trust I junior subordinated notes, net of unamortized discount, was $12,211,000 at December 31, 2003 and $12,169,000 at December 31, 2002.



In June 2003, First Indiana formed First Indiana Capital Statutory Trust II
(Trust II) for the purpose of issuing $12,000,000 in trust preferred securities through a private placement. The unconsolidated grantor trust invested the proceeds of such trust preferred securities in junior subordinated notes of the
Corporation. These trust preferred securities were issued at a discount of $240,000. The sole assets of the grantor trust are the notes held by the grantor trust. The notes have a stated term of 30 years (June 26, 2033) but may be redeemed at par in
part or in full beginning June 26, 2008, and quarterly thereafter, subject to approval by the Federal Reserve Board. The notes have a fixed rate of interest of 5.55 percent through June 26, 2008, and a floating rate of interest, reset quarterly,
equal to LIBOR plus 3.10 percent thereafter to maturity. Interest on the notes is payable



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quarterly in arrears. The distribution rate on the trust preferred securities equals the interest rate of the notes. The balance of the Trust II junior
subordinated notes, net of unamortized discount, was $12,156,000 at December 31, 2003.



In connection with the notes issued to Trust I and Trust II, the Corporation has the right to defer payment of interest on the notes at any time or from time to time for a period not to exceed five years, provided
that no extension period may extend beyond the stated maturity of the notes. During any such extension period, distributions on the trust preferred securities will also be deferred and First Indianas ability to pay dividends on its common
stock will be restricted.



With respect to Trust I and Trust
II, the trust preferred securities are subject to mandatory redemption upon repayment of the notes at their stated maturity dates or their earlier redemption at a redemption price equal to their liquidation amount plus accrued distributions to the
date fixed for redemption and the premium, if any, paid by the Corporation upon concurrent repayment of the notes.



Periodic cash payments and payments upon liquidation or redemption with respect to trust preferred securities are guaranteed by First Indiana to the
extent of funds held by the grantor trust (the Preferred Securities Guarantee). The Preferred Securities Guarantee, when taken together with the Corporations other obligations, including its obligations under the notes, will
constitute a full and unconditional guarantee, on a subordinated basis, by the Corporation of payments due on the trust preferred securities.



In December 2003, FASB issued revised Interpretation No. 46 Consolidation of Variable Interest Entities (FIN 46) that required the
deconsolidation of these statutory trusts. In July 2003, the Board of Governors of the Federal Reserve System issued a supervisory letter instructing bank holding companies to continue to include the trust preferred securities in their Tier 1
capital for regulatory capital purposes until notice is given to the contrary. The Federal Reserve intends to review the regulatory implications of any accounting treatment changes and, if necessary or warranted, provide further appropriate
guidance. There can be no assurance that the Federal Reserve will continue to allow institutions to include trust preferred securities in Tier 1 capital for regulatory capital purposes.



In November 2003, the Corporation issued $22,500,000 in ten-year subordinated notes with a 7.50 percent fixed rate of
interest. Interest is payable semi-annually and the notes qualify as Tier 2 capital for regulatory purposes. At December 31, 2003, the balance of these subordinated notes, net of discount, was $22,167,000.



ASSET QUALITY



General.The
Corporations asset quality is directly affected by the credit risk of the assets on the Banks balance sheet. Most of the Banks credit risk is concentrated in its loan portfolios. There are varying degrees of credit risk within each
of the individual loan portfolios. 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 Banks loan review process which now reports directly to the Audit Committee of the Board of Directors.



Additional information relating to non-performing assets, loan charge-offs, and impaired loans may be found in Note 1 and Note 6 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 other real estate owned (OREO). At December 31, 2003, non-performing assets were $38,882,000, compared with
$51,756,000 at December 31, 2002 and $46,803,000 at December 31, 2001.



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Non-performing business loans totaled $10,536,000 at December 31, 2003, compared with $21,769,000 at December 31, 2002, a decrease of $11,233,000. The
decrease was due to the resolution of several non-performing business loans in conjunction with payments received and, in several instances, additional charge-offs due to deterioration of the value of the underlying collateral securing the loans.
Loans totaling $5,747,000 were charged off and payments totaling $11,361,000 were received on existing non-performing business loans. Partially offsetting these reductions was a net addition of $5,875,000 in new non-performing business loans. During
2003, business loans totaling $22,100,000 were classified as non-performing, of which $16,225,000 was charged off. Non-performing single-family construction loans at December 31, 2003, totaled $7,519,000, compared with $4,286,000 at December 31,
2002, an increase of $3,233,000. This increase is largely due to the classification of the under-collateralized loan of an out-of-state builder as non-performing in the second quarter of 2003. Non-performing commercial real estate loans totaled
$4,743,000 at December 31, 2003, compared with $2,059,000 at December 31, 2002, an increase of $2,684,000. This increase is largely due to one loan placed on non-accrual status in the first quarter of 2003. At December 31, 2003, non-performing
consumer loans totaled $10,093,000, compared with $12,498,000 at December 31, 2002, a decrease of $2,405,000. This improvement is attributable to enhanced efforts in collection and liquidation of the non-performing consumer portfolio accomplished
through staffing, process, and technological improvements. These same efforts, along with continued success in liquidating OREO properties, have positively impacted the level of OREO, which declined to $3,780,000 at year-end 2003 from $8,670,000 a
year earlier.



The amount of interest on non-performing loans
that was contractually due in 2003 totaled $3,859,000. Of this amount, $1,023,000 was actually recorded in 2003.



Non-Performing Assets



|                                                       |  |             |        |   |      |   |        |      |  |   |        |   |  |      |        |   |  |   |        |  
|------------------------------------------------------ |  | ----------- | ------ | - | ---- | - | ------ | ---- |  | - | ------ | - |  | ---- | ------ | - |  | - | ------ | -
|                                                       |  | December 31 |       
|(Dollars in Thousands)                                 |  | 2003        |        |   | 2002 |   |        | 2001 |  |   | 2000   |   |  | 1999 |       
|Non-Performing Loans                                   |  |             |        |   |      |   |        |      |  |   |        |   |  |      |        |   |  |   |        |  
|Non-Accrual Loans                                      |  |             |        |   |      |   |        |      |  |   |        |   |  |      |        |   |  |   |        |  
|Business                                               |  | $           | 9,483  |   |      | $ | 20,234 |      |  | $ | 5,880  |   |  | $    | 1,970  |   |  | $ | 2,525  |  
|Consumer                                               |  |             | 7,402  |   |      |   | 9,405  |      |  |   | 13,532 |   |  |      | 9,008  |   |  |   | 4,282  |  
|Residential Mortgage                                   |  |             | 2,211  |   |      |   | 2,474  |      |  |   | 6,447  |   |  |      | 5,127  |   |  |   | 3,564  |  
|Single-Family Construction                             |  |             | 7,165  |   |      |   | 4,286  |      |  |   | 8,165  |   |  |      | 3,987  |   |  |   | 4,090  |  
|Commercial Real Estate                                 |  |             | 4,743  |   |      |   | 2,059  |      |  |   | 2,475  |   |  |      | 1,618  |   |  |   |       |  
|                                                       |  |             |        |   |      |   |        |      |  |   |        |   |  |      |        |   |  |   |        |  
|Total Non-Accrual Loans                                |  |             | 31,004 |   |      |   | 38,458 |      |  |   | 36,499 |   |  |      | 21,710 |   |  |   | 14,461 |  
|Accruing Loans                                         |  |             |        |   |      |   |        |      |  |   |        |   |  |      |        |   |  |   |        |  
|BusinessCurrent as to Interest and Principal          |  |             |       |   |      |   |       |      |  |   |       |   |  |      | 7,118  |   |  |   |       |  
|BusinessPast Due 90 Days or More                      |  |             | 1,053  |   |      |   | 1,535  |      |  |   | 307    |   |  |      |       |   |  |   |       |  
|ConsumerPast Due 90 Days or More                      |  |             | 2,691  |   |      |   | 3,093  |      |  |   | 3,005  |   |  |      | 3,720  |   |  |   | 3,211  |  
|Single-Family ConstructionPast Due 90 Days or More    |  |             | 354    |   |      |   |       |      |  |   |       |   |  |      |       |   |  |   |       |  
|                                                       |  |             |        |   |      |   |        |      |  |   |        |   |  |      |        |   |  |   |        |  
|Total Accruing Loans                                   |  |             | 4,098  |   |      |   | 4,628  |      |  |   | 3,312  |   |  |      | 10,838 |   |  |   | 3,211  |  
|                                                       |  |             |        |   |      |   |        |      |  |   |        |   |  |      |        |   |  |   |        |  
|Total Non-Performing Loans                             |  |             | 35,102 |   |      |   | 43,086 |      |  |   | 39,811 |   |  |      | 32,548 |   |  |   | 17,672 |  
|Other Real Estate Owned, Net                           |  |             | 3,780  |   |      |   | 8,670  |      |  |   | 6,992  |   |  |      | 2,593  |   |  |   | 1,227  |  
|                                                       |  |             |        |   |      |   |        |      |  |   |        |   |  |      |        |   |  |   |        |  
|Total Non-Performing Assets                            |  | $           | 38,882 |   |      | $ | 51,756 |      |  | $ | 46,803 |   |  | $    | 35,141 |   |  | $ | 18,899 |  
|                                                       |  |             |        |   |      |   |        |      |  |   |        |   |  |      |        |   |  |   |        |  
|Non-Performing Loans to Loans at End of Year           |  |             | 1.93   | % |      |   | 2.34   | %    |  |   | 2.27   | % |  |      | 1.82   | % |  |   | 1.04   | %
|Non-Performing Assets to Loans and OREO at End of Year |  |             | 2.14   |   |      |   | 2.80   |      |  |   | 2.65   |   |  |      | 1.97   |   |  |   | 1.11   |  



Potential Problem
Assets.The Bank had $51,578,000 in potential problem loans at December 31, 2003. Of this amount, $49,053,000 represented loans to 55 separate business credits with an average loan amount of



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$892,000. The largest single loan was $5,544,000 and only 15 credits had a current loan amount over $1,000,000. The remaining potential problem loans totaled
$2,525,000 and consisted of eight construction and commercial real estate credits. The largest single current loan amount was $620,000.



These are loans with a risk grade of substandard that are 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 real estate and other assets. The construction and
commercial real estate loans are collateralized with completed residential and commercial real estate and developed lots or land developments in progress and raw land.



Allowance for Loan Losses.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. Over the past three years, First Indiana has been making the transition from a savings bank to a commercial bank and has grown the commercial loan portfolio, both in loans outstanding
and as a percent of the total loan portfolio. In the third quarter of 2003, following an independent evaluation of the commercial loan portfolio, the Corporation revised its approach for calculating the allowance for loan losses. The allowance for
loan losses is maintained at the level deemed adequate to cover losses inherent in the loan portfolio. The allowance for loan losses is increased by the provision for loan losses charged to expense and reduced by loans charged off, net of
recoveries. While management uses available information to recognize losses on loans, future additions to the allowance may be necessary based on changes in economic conditions and historical loss experience. 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.



An assessment of the credit risk of each loan
greater than $250,000 in the commercial portfolio, including business, construction, and commercial real estate loans, is completed, which results in a risk rating (risk grade). Each relationship manager is responsible and accountable for the timely
and accurate risk rating of each credit within his or her loan portfolio. The Bank utilizes a ten grade risk rating system with six pass grades and 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.



The determination of the adequacy of the
allowance for loan losses is based on projections and estimates concerning portfolio trends and credit losses. However, there are several other factors which impact the projections and estimates, which include national and local economic trends,
portfolio management and trends, and the assessment of credit risk on performing loans and non-performing loans. Regardless of the extent of the analysis in determining the adequacy of the allowance for loan losses, certain inherent but undetected
losses are probable in the loan portfolio. These undetected losses are due to several factors, including delays in obtaining information concerning a customers financial condition, interpretation of economic trends and events, the sensitivity
of assumptions, and the judgmental nature of loss estimates. Therefore, the analysis incorporates qualitative management factors to address the external factors that impact credit losses and the level of imprecision in the analysis.



The reserve requirement for each loan portfolio is segmented into four
components: (i) the required reserve on pass loans; (ii) the required reserve on performing criticized loans; (iii) the required reserve on non-performing loans; and (iv) the qualitative management adjustment (Management Factors). The
loans and groups of loans in the criticized risk rating categories that are both performing and non-performing loans inherently have a higher degree of risk and are generally assigned a higher reserve requirement, or in the case of impaired
collateral dependent loans, the amount of the impairment may be charged-off. The allowance is allocated to each portfolio based on the sum of the reserve requirement established for each of the four components.



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The assessment of Management Factors is qualitative and their absolute impact to credit losses can not be
determined. Therefore, the required reserve is determined based on a range for the Management Factors. An upper limit is calculated based on the assigned weight plus 5.0 percentage points and a lower limit is established based on the assigned weight
less 2.5 percentage points.



Allocation of Allowance for Loan Losses



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



|                                        |  |             |        |                                   |       |   |        |      |                                   |  |       |        |  |                                   |        |  |        |   |                                   |   |        |        |       |                                   |  |   |        |  |       |  
|--------------------------------------- |  | ----------- | ------ | --------------------------------- | ----- | - | ------ | ---- | --------------------------------- |  | ----- | ------ |  | --------------------------------- | ------ |  | ------ | - | --------------------------------- | - | ------ | ------ | ----- | --------------------------------- |  | - | ------ |  | ----- | -
|                                        |  | December 31 |       
|                                        |  | 2003        |        |                                   | 2002  |   |        | 2001 |                                   |  | 2000  |        |  | 1999                              |       
|(Dollars in Thousands)                  |  | Amount      |        | Percent ofLoan Type to TotalLoans |       |   | Amount |      | Percent ofLoan Type to TotalLoans |  |       | Amount |  | Percent ofLoan Type to TotalLoans |        |  | Amount |   | Percent ofLoan Type to TotalLoans |   |        | Amount |       | Percent ofLoan Type to TotalLoans | 
|Balance at End of Period Applicable to: |  |             |        |                                   |       |   |        |      |                                   |  |       |        |  |                                   |        |  |        |   |                                   |   |        |        |       |                                   |  |   |        |  |       |  
|Business Loans                          |  | $           | 30,449 |                                   | 28.4  | % |        | $    | 15,959                            |  | 27.3  | %      |  | $                                 | 9,664  |  | 25.2   | % |                                   | $ | 6,830  |        | 14.8  | %                                 |  | $ | 3,797  |  | 12.4  | %
|Consumer Loans                          |  |             | 10,463 |                                   | 33.7  |   |        |      | 17,576                            |  | 36.2  |        |  |                                   | 19,170 |  | 38.4   |   |                                   |   | 16,212 |        | 42.0  |                                   |  |   | 10,665 |  | 40.4  |  
|Residential Mortgage Loans              |  |             | 656    |                                   | 17.5  |   |        |      | 546                               |  | 16.9  |        |  |                                   | 1,067  |  | 16.7   |   |                                   |   | 924    |        | 26.1  |                                   |  |   | 673    |  | 27.0  |  
|Single-Family Construction Loans        |  |             | 5,798  |                                   | 10.6  |   |        |      | 1,797                             |  | 11.6  |        |  |                                   | 2,516  |  | 12.8   |   |                                   |   | 2,923  |        | 11.6  |                                   |  |   | 5,464  |  | 16.4  |  
|Commercial Real Estate Loans            |  |             | 1,400  |                                   | 9.8   |   |        |      | 2,154                             |  | 8.0   |        |  |                                   | 2,124  |  | 6.9    |   |                                   |   | 1,209  |        | 5.5   |                                   |  |   | 876    |  | 3.8   |  
|Unallocated                             |  |             | 4,431  |                                   |      |   |        |      | 6,437                             |  |      |        |  |                                   | 2,594  |  |       |   |                                   |   | 5,480  |        |      |                                   |  |   | 7,284  |  |      |  
|                                        |  |             |        |                                   |       |   |        |      |                                   |  |       |        |  |                                   |        |  |        |   |                                   |   |        |        |       |                                   |  |   |        |  |       |  
|                                        |  | $           | 53,197 |                                   | 100.0 | % |        | $    | 44,469                            |  | 100.0 | %      |  | $                                 | 37,135 |  | 100.0  | % |                                   | $ | 33,578 |        | 100.0 | %                                 |  | $ | 28,759 |  | 100.0 | %
|                                        |  |             |        |                                   |       |   |        |      |                                   |  |       |        |  |                                   |        |  |        |   |                                   |   |        |        |       |                                   |  |   |        |  |       |  



Summary of
Allowance for Loan Loss Activity. The provision for loan losses was $38,974,000 for 2003, compared with $20,756,000 for 2002 and $15,228,000 for 2001. Net charge-offs for 2003 totaled $31,513,000, compared with $13,422,000 for 2002 and
$11,671,000 for 2001. In the second quarter of 2003, the Bank recorded a provision of $16,091,000 in response, principally, to the charge-off of two large business loans totaling $15,444,000, as well as managements overall evaluation of the
risks in the loan portfolio. In the third quarter of 2003, the Bank recorded a provision of $13,548,000 based on a further review of the business loan portfolio, including an analysis performed by an independent third party, a continued evaluation
of the risks in the loan portfolio, and the factors contained in the Banks revised approach for calculating the allowance for loan losses. Sixty-seven percent of the commercial loan portfolio commitments were reviewed by the independent
evaluation firm. Included in the review were the majority of the largest loans and all commercial loans in excess of $500,000 that were internally graded special mention or worse. Management fully agreed with the results of this independent review,
which resulted in a downgrade of 7 percent (by dollar amount) of the Banks commercial loans reviewed, including its business lending portfolio. In the fourth quarter of 2003, the Bank recorded charge-offs totaling $3,418,000 of commercial
loans that had been identified in previous portfolio reviews. The increase in the provision in 2002 compared with 2001 was principally due to the deterioration of several construction and business loan relationships. The aggregate credit facilities
of two business banking clients involved in the construction-related industry totaling $11,378,000 were added to non-performing loans in the fourth quarter of 2002, and $3,000,000 relating to these two clients loans was charged off during that
quarter.



The allowance for loan losses was $53,197,000 at
December 31, 2003, or 152 percent of non-performing loans.



The
allowance for loan losses to loans ratio at December 31, 2003 increased to 2.93 percent, compared with 2.42 percent and 2.11 percent at December 31, 2002 and 2001. Business loan charge-offs in 2003 increased significantly from comparable charge-offs
in 2002 and 2001 and were the principal reason for the increase in the charge-off ratio. Non-performing loans were $35,102,000 at December 31, 2003, compared with $43,086,000 at December 31, 2002, and $39,811,000 at December 31, 2001.



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Summary of Loan Loss Experience



|                                                          |  |                         |        |   |      |   |        |      |  |   |        |   |  |      |        |   |  |   |        |  
|--------------------------------------------------------- |  | ----------------------- | ------ | - | ---- | - | ------ | ---- |  | - | ------ | - |  | ---- | ------ | - |  | - | ------ | -
|                                                          |  | Years Ended December 31 |       
|(Dollars in Thousands)                                    |  | 2003                    |        |   | 2002 |   |        | 2001 |  |   | 2000   |   |  | 1999 |       
|Balance of Allowance for Loan Losses at Beginning of Year |  | $                       | 44,469 |   |      | $ | 37,135 |      |  | $ | 33,578 |   |  | $    | 28,759 |   |  | $ | 25,700 |  
|Charge-Offs                                               |  |                         |        |   |      |   |        |      |  |   |        |   |  |      |        |   |  |   |        |  
|Business                                                  |  |                         | 22,820 |   |      |   | 6,813  |      |  |   | 4,464  |   |  |      | 380    |   |  |   | 2,015  |  
|Consumer                                                  |  |                         | 5,737  |   |      |   | 6,323  |      |  |   | 6,528  |   |  |      | 5,019  |   |  |   | 5,114  |  
|Residential Mortgage                                      |  |                         | 157    |   |      |   | 150    |      |  |   | 160    |   |  |      | 68     |   |  |   | 30     |  
|Single-Family Construction                                |  |                         | 5,026  |   |      |   | 641    |      |  |   | 764    |   |  |      | 477    |   |  |   | 412    |  
|Commercial Real Estate                                    |  |                         | 101    |   |      |   | 729    |      |  |   | 855    |   |  |      |       |   |  |   |       |  
|                                                          |  |                         |        |   |      |   |        |      |  |   |        |   |  |      |        |   |  |   |        |  
|Total Charge-Offs                                         |  |                         | 33,841 |   |      |   | 14,656 |      |  |   | 12,771 |   |  |      | 5,944  |   |  |   | 7,571  |  
|Recoveries                                                |  |                         |        |   |      |   |        |      |  |   |        |   |  |      |        |   |  |   |        |  
|Business                                                  |  |                         | 1,155  |   |      |   | 293    |      |  |   | 181    |   |  |      | 213    |   |  |   | 22     |  
|Consumer                                                  |  |                         | 878    |   |      |   | 851    |      |  |   | 729    |   |  |      | 662    |   |  |   | 963    |  
|Residential Mortgage                                      |  |                         | 7      |   |      |   | 3      |      |  |   | 1      |   |  |      | 6      |   |  |   |       |  
|Single-Family Construction                                |  |                         | 254    |   |      |   | 72     |      |  |   | 188    |   |  |      | 126    |   |  |   | 235    |  
|Commercial Real Estate                                    |  |                         | 34     |   |      |   | 15     |      |  |   | 1      |   |  |      |       |   |  |   |       |  
|                                                          |  |                         |        |   |      |   |        |      |  |   |        |   |  |      |        |   |  |   |        |  
|Total Recoveries                                          |  |                         | 2,328  |   |      |   | 1,234  |      |  |   | 1,100  |   |  |      | 1,007  |   |  |   | 1,220  |  
|                                                          |  |                         |        |   |      |   |        |      |  |   |        |   |  |      |        |   |  |   |        |  
|Net Charge-Offs                                           |  |                         | 31,513 |   |      |   | 13,422 |      |  |   | 11,671 |   |  |      | 4,937  |   |  |   | 6,351  |  
|Provision for Loan Losses                                 |  |                         | 38,974 |   |      |   | 20,756 |      |  |   | 15,228 |   |  |      | 9,756  |   |  |   | 9,410  |  
|Allowance Related to Bank Acquired                        |  |                         | 1,709  |   |      |   |       |      |  |   |       |   |  |      |       |   |  |   |       |  
|Transfer to Reserve for Letters of Credit                 |  |                         | (442   | ) |      |   |       |      |  |   |       |   |  |      |       |   |  |   |       |  
|                                                          |  |                         |        |   |      |   |        |      |  |   |        |   |  |      |        |   |  |   |        |  
|Balance of Allowance for Loan Losses at End of Year       |  | $                       | 53,197 |   |      | $ | 44,469 |      |  | $ | 37,135 |   |  | $    | 33,578 |   |  | $ | 28,759 |  
|                                                          |  |                         |        |   |      |   |        |      |  |   |        |   |  |      |        |   |  |   |        |  
|Net Charge-Offs to Average Loans                          |  |                         | 1.68   | % |      |   | 0.74   | %    |  |   | 0.64   | % |  |      | 0.27   | % |  |   | 0.39   | %
|Allowance for Loan Losses to Loans at End of Year         |  |                         | 2.93   |   |      |   | 2.42   |      |  |   | 2.11   |   |  |      | 1.88   |   |  |   | 1.69   |  
|Allowance for Loan Losses to Non-Performing Loans         |  |                         | 151.55 |   |      |   | 103.21 |      |  |   | 93.28  |   |  |      | 103.16 |   |  |   | 162.73 |  



LIQUIDITY AND MARKET RISK MANAGEMENT



Liquidity
Management



First Indiana Corporation is a financial
holding company and conducts substantially all of its operations through the Bank and Somerset. As a result, the ability to finance the Corporations activities and fund interest on its debt depends primarily upon the receipt of earnings from
the Bank and, to a lesser degree, Somerset, that they pay to the holding company in the form of dividends and other distributions. The Corporation has no significant assets other than its investment in the Bank and Somerset and a receivable of
$30,012,000 due from the Bank at December 31, 2003. In October 2002, the Corporation, through an unconsolidated subsidiary, First Indiana Capital Trust I, issued $12,372,000 of subordinated notes to partially fund the purchase of MetroBanCorp in
January 2003. In June 2003, the Corporation, through an unconsolidated subsidiary, First Indiana Capital Statutory Trust II, issued $12,372,000 of subordinated notes to provide liquidity for general operating needs. In November 2003, the Corporation
issued $22,500,000 in ten-year subordinated notes to fund future growth and for other general corporate purposes. For a further description of these notes, see Financial Condition elsewhere in this report. Additionally, First Indiana
Corporation has a $10,000,000 line of credit with a commercial bank.



The Corporation is not subject to any bank 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



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regulatory approval is required if dividends to be declared by the Bank 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. Due to the payment of an $11,000,000 special dividend in January 2003 (to partially fund the acquisition of MetroBanCorp), the Bank sought and received approval from the
Office of the Comptroller of the Currency (OCC) to make its regularly scheduled dividend payments in 2003, not to exceed $28,571,000. The Bank paid dividends of $21,440,000 to the Corporation in 2003. The Bank sought and received
approval from the OCC to make its regularly scheduled dividend payments in 2004, not to exceed $19,000,000. The Bank will likely be required to seek OCC approval prior to making dividend payments in 2005. In determining whether to grant such
approval, the OCC will consider such factors as the reasonableness of the Banks request, including the Banks historical dividend payout ratio and projected dividend payment; the Banks historical trends and current projections for
capital growth through earnings retention; the Banks overall condition, with particular emphasis on current and projected capital adequacy; the reasons for which the Bank became subject to the dividend restrictions; and any other information
the OCC deems pertinent to reviewing its request. Moreover, under federal law, a depository institution is prohibited from paying a dividend if the depository institution would thereafter be undercapitalized as determined by the federal
bank regulatory agencies. While the Bank is currently classified as well-capitalized and should have sufficient net income to fund projected liquidity needs, any failure by the Bank in the future to generate sufficient net income or
maintain sufficient levels of capital to permit payment of dividends would result in its inability to pay dividends to the Corporation.



The Banks primary source of funds is deposits, which were $1,489,972,000 at December 31, 2003, and $1,339,204,000 at December 31, 2002. The Bank
also relies on advances from the Federal Home Loan Bank of Indianapolis, repurchase agreements, loan payments, loan payoffs, and sale of loans as sources of funds. Although the Bank continues to rely on core deposits (retail and commercial checking
and savings accounts) as its chief source of funds, the use of borrowed funds, including FHLB 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.



The Banks primary use of funds is loans, which totaled $1,814,991,000 at December 31, 2003, and $1,837,633,000 at December 31, 2002. In addition, the Bank invests in federal funds sold and securities available
for sale.



The Corporation and its subsidiaries had the
following obligations to make payments under long term debt (excluding interest), lease agreements, and pension plans at December 31, 2003.



|                                   |  |      |         |           |   |           |  |           |        |       |   |        |  |   |        
|---------------------------------- |  | ---- | ------- | --------- | - | --------- |  | --------- | ------ | ----- | - | ------ |  | - | -------
|(Dollars in Thousands)             |  | 2004 |         | 2005-2006 |   | 2007-2008 |  | After2008 |        | Total
|FHLB Advances(1)                   |  | $    | 172,000 |           | $ | 52,861    |  | $         | 10,000 |       | $ | 30,627 |  | $ | 265,488
|Subordinated Notes                 |  |      |        |           |   |          |  |           |       |       |   | 46,534 |  |   | 46,534 
|Operating Leases                   |  |      | 4,565   |           |   | 8,561     |  |           | 4,366  |       |   | 7,403  |  |   | 24,895 
|Defined Benefit Pension Plan(2)    |  |      | 1,927   |           |   |          |  |           |       |       |   |       |  |   | 1,927  
|Supplemental Pension(3)            |  |      | 2,464   |           |   | 566       |  |           | 2,908  |       |   | 2,850  |  |   | 8,788  
|                                   |  |      |         |           |   |           |  |           |        |       |   |        |  |   |        
|Total Contractual Cash Obligations |  | $    | 180,956 |           | $ | 61,988    |  | $         | 17,274 |       | $ | 87,414 |  | $ | 347,632
|                                   |  |      |         |           |   |           |  |           |        |       |   |        |  |   |        

---

|(1) |  | The FHLB has the option to require the Bank to repay $110,000,000 at certain designated dates.
|--- |  | ----------------------------------------------------------------------------------------------

|(2) |  | Estimated cash contributions for 2004 were based upon actuarial estimates. The Corporation was unable to develop a reasonable estimate for future contributions for years after 2004.
Future contributions are impacted by future levels of interest rates, investment fund performance, and increases in beneficiary compensation.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) |  | These calculations assume plan beneficiaries retire upon attaining age 65, or immediately if already over age 65, and elect a lump sum payment.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------



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At December 31, 2003, the Bank had the following outstanding commitments to fund lines of credit, letters
of credit, and loans.



|                                     |  |                   |         |                                            |   |           |  |           |         |            |   |       |  |   |        
|------------------------------------ |  | ----------------- | ------- | ------------------------------------------ | - | --------- |  | --------- | ------- | ---------- | - | ----- |  | - | -------
|                                     |  |                   |         | Amount of Commitment Expiration per Period
|(Dollars in Thousands)               |  | Total Commitments |         | Less than One Year                         |   | 1-3 years |  | 3-5 years |         | Thereafter
|Lines of Credit:                     |  |                   |         |                                            |   |           |  |           |         |            |   |       |  |   |        
|Business Loans                       |  | $                 | 156,304 |                                            | $ | 64,340    |  | $         | 77,016  |            | $ | 1,980 |  | $ | 12,968 
|Home Equity Loans                    |  |                   | 163,735 |                                            |   |          |  |           |        |            |   |      |  |   | 163,735
|Single-Family Construction Loans     |  |                   | 182,580 |                                            |   | 182,580   |  |           |        |            |   |      |  |   |       
|Commercial Real Estate Loans         |  |                   | 80,486  |                                            |   | 13,554    |  |           | 63,803  |            |   | 1,677 |  |   | 1,452  
|                                     |  |                   |         |                                            |   |           |  |           |         |            |   |       |  |   |        
|Total Lines of Credit                |  |                   | 583,105 |                                            |   | 260,474   |  |           | 140,819 |            |   | 3,657 |  |   | 178,155
|                                     |  |                   |         |                                            |  
|Standby Letters of Credit            |  |                   | 51,284  |                                            |   | 30,290    |  |           | 15,994  |            |   |      |  |   | 5,000  
|                                     |  |                   |         |                                            |  
|Commitments to Originate Loans:      |  |                   |         |                                            |   |           |  |           |         |            |   |       |  |   |        
|Business Loans                       |  |                   | 8,974   |                                            |   | 8,974     |  |           |        |            |   |      |  |   |       
|Home Equity Loans                    |  |                   | 19,370  |                                            |   | 19,370    |  |           |        |            |   |      |  |   |       
|Other Consumer Loans                 |  |                   | 1,350   |                                            |   | 1,350     |  |           |        |            |   |      |  |   |       
|Residential Loans                    |  |                   | 1,548   |                                            |   | 1,548     |  |           |        |            |   |      |  |   |       
|Commercial Real Estate Loans         |  |                   | 8,742   |                                            |   | 8,742     |  |           |        |            |   |      |  |   |       
|                                     |  |                   |         |                                            |   |           |  |           |         |            |   |       |  |   |        
|Total Commitments to Originate Loans |  |                   | 39,984  |                                            |   | 39,984    |  |           |        |            |   |      |  |   |       
|                                     |  |                   |         |                                            |  
|Mortgage Repurchase Obligation       |  |                   | 8,836   |                                            |   |          |  |           |        |            |   |      |  |   | 8,836  
|                                     |  |                   |         |                                            |   |           |  |           |         |            |   |       |  |   |        
|Total Commercial Commitments         |  | $                 | 683,209 |                                            | $ | 330,748   |  | $         | 156,813 |            | $ | 3,657 |  | $ | 191,991
|                                     |  |                   |         |                                            |   |           |  |           |         |            |   |       |  |   |        



Of the lines of credit
and commitments to fund loans at December 31, 2003, substantially all are variable interest rate products.



Standby letters of credit are contingent commitments issued by the Corporation to support the obligations of a customer to a third party. Standby letters
of credit are issued to support public and private financing, and other financial or performance obligations of customers. The credit risk involved in issuing standby letters of credit is the same as that involved in extending loans to customers
and, as such, is collateralized when necessary. Commercial and standby letters of credit are generally collateralized by assets of the borrower. Evaluation of the credit risk associated with these letters of credit is part of the Banks
commercial loan review process.



The Bank maintains back-up
letter of credit facility agreements with rated financial institutions covering certain of the Banks letters of credit. Due to a return on asset performance target in the back-up facilities not being met at June 30, 2003, September 30, 2003,
and December 31, 2003, the Bank has pledged collateral totaling $40,763,000 at December 31, 2003.



At December 31, 2003, the Bank had approximately $8,836,000 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.



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



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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 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, net earnings, and equity to changes in interest rates. ALCO is responsible for managing interest rate risk, and the Corporation has established 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 deposit, estimated borrowing
needs, 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, 2003, the model forecasts that a 100 basis point increase in interest rates over a 12-month period would result in a 4.8 percent increase in net interest income while a 100 basis point decrease
in interest rates would result in a 5.8 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 model forecasts may not be indicative of actual results. However, since First Indiana is in an asset-sensitive position, significant improvement in net interest income and net interest margin is unlikely
until market interest rates increase.



The Corporation also
monitors interest rate sensitivity using traditional gap analysis. Gap analysis is a static management tool used to identify mismatches in the repricing of assets and liabilities within specified periods of 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 may be made when the rate outlook changes.



At December 31, 2003, First Indianas six-month and one-year cumulative gap stood at a positive 10.93 percent and a
positive 13.54 percent of total interest-earning assets. This compares with a positive 12.11 percent and a positive 17.30 percent at December 31, 2002. This means that 10.93 and 13.54 percent of First Indianas assets will reprice within six
months and one year without a corresponding repricing of funding liabilities.



24



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##### Table of Contents

Interest Rate Sensitivity



The following table shows First Indianas interest rate sensitivity at December 31, 2003 and 2002.



|                                                  |  |                     |   |  |                                                                            |           |                |        |   |                |   |           |                         |  |   |                            |   |  |               |         |   |  |   |          |  
|------------------------------------------------- |  | ------------------- | - |  | -------------------------------------------------------------------------- | --------- | -------------- | ------ | - | -------------- | - | --------- | ----------------------- |  | - | -------------------------- | - |  | ------------- | ------- | - |  | - | -------- | -
|                                                  |  |                     |   |  | Rate Sensitivity by Period of Maturity or Rate Change at December 31, 2003 |          
|(Dollars in Thousands)                            |  | WeightedAverageRate |   |  | Balance                                                                    |           | PercentofTotal |        |   | Within180 Days |   |           | Over 180Days to OneYear |  |   | Over OneYear to Five Years |   |  | OverFiveYears |        
|Interest-Earning Assets                           |  |                     |   |  |                                                                            |           |                |        |   |                |   |           |                         |  |   |                            |   |  |               |         |   |  |   |          |  
|Interest-Bearing Due from Banks                   |  | 1.10                | % |  | $                                                                          | 1,715     |                | 0.08   | % |                | $ | 1,715     |                         |  | $ |                           |   |  | $             |        |   |  | $ |         |  
|Securities Available for Sale                     |  | 4.14                |   |  |                                                                            | 215,453   |                | 10.47  |   |                |   | 29,405    |                         |  |   | 28,402                     |   |  |               | 127,921 |   |  |   | 29,725   |  
|Other Investments                                 |  | 5.00                |   |  |                                                                            | 24,957    |                | 1.21   |   |                |   |          |                         |  |   |                           |   |  |               |        |   |  |   | 24,957   |  
|Loans (1)                                         |  |                     |   |  |                                                                            |           |                |        |   |                |   |           |                         |  |   |                            |   |  |               |         |   |  |   |          |  
|Business Loans                                    |  | 4.92                |   |  |                                                                            | 515,316   |                | 25.05  |   |                |   | 436,423   |                         |  |   | 15,460                     |   |  |               | 63,433  |   |  |   |         |  
|Consumer Loans                                    |  | 6.23                |   |  |                                                                            | 612,025   |                | 29.76  |   |                |   | 420,835   |                         |  |   | 35,270                     |   |  |               | 139,011 |   |  |   | 16,909   |  
|Residential Mortgage Loans                        |  | 5.00                |   |  |                                                                            | 316,822   |                | 15.40  |   |                |   | 99,027    |                         |  |   | 77,709                     |   |  |               | 111,769 |   |  |   | 28,317   |  
|Single-Family Construction Loans                  |  | 4.45                |   |  |                                                                            | 192,450   |                | 9.36   |   |                |   | 173,296   |                         |  |   | 9,577                      |   |  |               | 9,577   |   |  |   |         |  
|Commercial Real Estate Loans                      |  | 5.38                |   |  |                                                                            | 178,378   |                | 8.67   |   |                |   | 135,025   |                         |  |   | 2,609                      |   |  |               | 24,936  |   |  |   | 15,808   |  
|                                                  |  |                     |   |  |                                                                            |           |                |        |   |                |   |           |                         |  |   |                            |   |  |               |         |   |  |   |          |  
|                                                  |  | 5.23                |   |  | $                                                                          | 2,057,116 |                | 100.00 | % |                |   | 1,295,726 |                         |  |   | 169,027                    |   |  |               | 476,647 |   |  |   | 115,716  |  
|                                                  |  |                     |   |  |                                                                            |           |                |        |   |                |   |           |                         |  |   |                            |   |  |               |         |   |  |   |          |  
|Interest-Bearing Liabilities                      |  |                     |   |  |                                                                            |           |                |        |   |                |   |           |                         |  |   |                            |   |  |               |         |   |  |   |          |  
|Deposits                                          |  |                     |   |  |                                                                            |           |                |        |   |                |   |           |                         |  |   |                            |   |  |               |         |   |  |   |          |  
|Demand Deposits (2)                               |  | 0.44                |   |  | $                                                                          | 217,353   |                | 12.69  | % |                |   | 53,266    |                         |  |   |                           |   |  |               |        |   |  |   | 164,087  |  
|Savings Deposits (2)                              |  | 0.60                |   |  |                                                                            | 400,804   |                | 23.39  |   |                |   | 343,333   |                         |  |   | 1,489                      |   |  |               | 11,915  |   |  |   | 44,067   |  
|Certificates of Deposit under $100,000            |  | 3.34                |   |  |                                                                            | 312,051   |                | 18.21  |   |                |   | 131,231   |                         |  |   | 74,223                     |   |  |               | 106,540 |   |  |   | 57       |  
|Certificates of Deposit $100,000 or Greater       |  | 2.06                |   |  |                                                                            | 323,953   |                | 18.91  |   |                |   | 224,045   |                         |  |   | 39,553                     |   |  |               | 60,209  |   |  |   | 146      |  
|                                                  |  |                     |   |  |                                                                            |           |                |        |   |                |   |           |                         |  |   |                            |   |  |               |         |   |  |   |          |  
|                                                  |  | 1.63                |   |  |                                                                            | 1,254,161 |                | 73.20  |   |                |   | 751,875   |                         |  |   | 115,265                    |   |  |               | 178,664 |   |  |   | 208,357  |  
|                                                  |  |                     |   |  |                                                                            |           |               
|Borrowings                                        |  |                     |   |  |                                                                            |           |                |        |   |                |   |           |                         |  |   |                            |   |  |               |         |   |  |   |          |  
|Short-Term Borrowings                             |  | 0.85                |   |  |                                                                            | 147,074   |                | 8.58   |   |                |   | 147,074   |                         |  |   |                           |   |  |               |        |   |  |   |         |  
|FHLB Advances                                     |  | 3.30                |   |  |                                                                            | 265,488   |                | 15.50  |   |                |   | 172,000   |                         |  |   |                           |   |  |               | 62,860  |   |  |   | 30,628   |  
|Subordinated Notes                                |  | 7.26                |   |  |                                                                            | 46,534    |                | 2.72   |   |                |   |          |                         |  |   |                           |   |  |               | 24,367  |   |  |   | 22,167   |  
|                                                  |  |                     |   |  |                                                                            |           |                |        |   |                |   |           |                         |  |   |                            |   |  |               |         |   |  |   |          |  
|                                                  |  | 1.98                |   |  |                                                                            | 1,713,257 |                | 100.00 | % |                |   | 1,070,949 |                         |  |   | 115,265                    |   |  |               | 265,891 |   |  |   | 261,152  |  
|                                                  |  |                     |   |  |                                                                            |           |                |        |   |                |   |           |                         |  |   |                            |   |  |               |         |   |  |   |          |  
|NetOther (3)                                     |  |                     |   |  |                                                                            | 343,859   |                |        |   |                |   |           |                         |  |   |                            |   |  |               |         |   |  |   | 343,859  |  
|                                                  |  |                     |   |  |                                                                            |           |                |        |   |                |   |           |                         |  |   |                            |   |  |               |         |   |  |   |          |  
|Total                                             |  |                     |   |  | $                                                                          | 2,057,116 |                |        |   |                |   | 1,070,949 |                         |  |   | 115,265                    |   |  |               | 265,891 |   |  |   | 605,011  |  
|                                                  |  |                     |   |  |                                                                            |           |                |        |   |                |   |           |                         |  |   |                            |   |  |               |         |   |  |   |          |  
|Rate-Sensitivity Gap                              |  |                     |   |  |                                                                            |           |                |        |   |                | $ | 224,777   |                         |  | $ | 53,762                     |   |  | $             | 210,756 |   |  | $ | (489,295 | )
|                                                  |  |                     |   |  |                                                                            |           |                |        |   |                |   |           |                         |  |   |                            |   |  |               |         |   |  |   |          |  
|December 31, 2003 Cumulative Rate-Sensitivity Gap |  |                     |   |  |                                                                            |           |                |        |   |                | $ | 224,777   |                         |  | $ | 278,539                    |   |  | $             | 489,295 |   |  |   |          |  
|                                                  |  |                     |   |  |                                                                            |           |                |        |   |                |   |           |                         |  |   |                            |   |  |               |         |   |  |   |          |  
|Percent of Total Interest-Earning Assets          |  |                     |   |  |                                                                            |           |                |        |   |                |   | 10.93     | %                       |  |   | 13.54                      | % |  |               | 23.79   | % |  |   |          |  
|                                                  |  |                     |   |  |                                                                            |           |                |        |   |                |   |           |                         |  |   |                            |   |  |               |         |   |  |   |          |  
|December 31, 2002 Cumulative Rate-Sensitivity Gap |  |                     |   |  |                                                                            |           |                |        |   |                | $ | 241,982   |                         |  | $ | 345,783                    |   |  | $             | 468,200 |   |  |   |          |  
|                                                  |  |                     |   |  |                                                                            |           |                |        |   |                |   |           |                         |  |   |                            |   |  |               |         |   |  |   |          |  
|Percent of Total Interest-Earning Assets          |  |                     |   |  |                                                                            |           |                |        |   |                |   | 12.11     | %                       |  |   | 17.30                      | % |  |               | 23.43   | % |  |   |          |  
|                                                  |  |                     |   |  |                                                                            |           |                |        |   |                |   |           |                         |  |   |                            |   |  |               |         |   |  |   |          |  

---

|(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 consumer loans are $68.6 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 with minimal 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.
|--- |  | ---------------------------------------------------------------------------------------------------------



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##### Table of Contents

CAPITAL



At December 31, 2003,
shareholders equity was $208,894,000, or 9.52 percent of total assets, compared with $221,211,000, or 10.41 percent, at December 31, 2002. Shareholders equity as a percentage of total assets decreased in 2003 due to dividends paid to
shareholders exceeding earnings by $7,748,000, assets acquired through the merger with MetroBanCorp, and net purchases and redemptions of common stock.



First Indiana paid a dividend of $0.165 per common share during each quarter in 2003. This reflects a three percent increase from a quarterly dividend of
$0.16 per share in 2002. On January 16, 2002, the Board of Directors approved a five-for-four stock split. All share and per share information herein has been restated to reflect the stock split. On January 21, 2004, the Board of Directors approved
a quarterly dividend of $0.165 per common share. The cash dividend is payable March 16, 2004, to shareholders of record as of March 4, 2004. This will be the 69th consecutive quarter First Indiana has paid a cash dividend.



See Note 13 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 bank holding companies and financial holding companies by the Federal Reserve Board. The Office of the Comptroller of the Currency and the Federal
Deposit Insurance Corporation (FDIC) impose similar requirements on First Indiana Bank. 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, a bank holding companys or banks assets and certain off-balance
sheet commitments are assigned to four risk categories, each weighted differently based on credit risk. Total capital, in turn, is divided into two tiers:



| |  |  | Tier 1 capital, which includes common equity, certain qualifying cumulative and noncumulative perpetual preferred stock and related surplus, and minority interests in equity
accounts of consolidated subsidiaries; and
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Tier 2 capital, which includes perpetual preferred stock, and related surplus not meeting the Tier 1 definition, hybrid capital instruments, perpetual debt and mandatory convertible
securities, certain term subordinated debt, intermediate-term preferred stock, and allowances for loan and lease losses (subject to certain limitations).
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Goodwill, certain intangible assets, and certain other assets must be deducted in calculating the sum of the capital
elements.



The Federal Reserve Board, the FDIC, and the OCC
have incorporated market and interest rate risk components into their risk-based capital standards. Under these market risk requirements, capital is allocated to support the amount of market risk related to a financial institutions ongoing
trading activities. The Federal Reserve Board also requires a minimum leverage ratio (Tier 1 capital to adjusted average assets) of 3 percent for bank holding companies that have the highest regulatory rating or have implemented the
risk-based capital measures for market risk, or 4 percent for holding companies that do not meet either of these requirements. The Bank is subject to similar requirements adopted by the OCC.



While the federal regulators may set capital requirements higher than the
minimums noted above if circumstances warrant it, no federal banking regulator has imposed any such capital requirements on the Corporation or the Bank.



Under Federal Reserve Board policy, a bank holding company is expected to serve as a source of financial strength to its subsidiary bank and to stand
prepared to commit resources to support it (known as the Source of



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##### Table of Contents

Strength Doctrine). There are no specific quantitative rules on the holding companys potential liability. If the Bank were to encounter financial
difficulty, the Federal Reserve Board could invoke the doctrine and require a capital contribution from the holding company.



The Corporation formed statutory trusts for the purpose of issuing trust preferred securities. These trust preferred securities are included in the
Corporations Tier 1 capital and total capital at December 31, 2003. In December 2003, FASB issued a revision of FIN 46 that required the deconsolidation of these statutory trusts. In July 2003, the Board of Governors of the Federal Reserve
System issued a supervisory letter instructing bank holding companies to continue to include the trust preferred securities in their Tier 1 capital for regulatory capital purposes until notice is given to the contrary. The Federal Reserve intends to
review the regulatory implications of any accounting treatment changes and, if necessary or warranted, provide further appropriate guidance. There can be no assurance that the Federal Reserve will continue to allow institutions to include trust
preferred securities in Tier 1 capital for regulatory capital purposes. At December 31, 2003 and 2002, the balance of trust preferred securities, net of discount, was $24,367,000 and $12,169,000, respectively. First Indiana Corporations Tier 1
capital without trust preferred securities would have been $165,476,000 and $203,446,000 at December 31, 2003 and 2002, respectively. The Corporations adjusted ratios of Tier 1 capital to average assets and Tier 1 capital to risk-weighted
assets at December 31, 2003 would have been 7.62 percent and 8.89 percent, respectively. The adjusted ratios of Tier 1 capital to average assets and Tier 1 capital to risk-weighted assets at December 31, 2002 would have been 9.55 percent and 10.64
percent, respectively.



The following table shows the
Corporations and the Banks capital levels and compliance with all capital requirements at December 31, 2003. Additionally, the Bank exceeds the capital levels set by FDICIA for a bank to be considered well-capitalized.



|                                            |  |                   |         |       |                          |   |        |                        |         |  |      |        |  |       |         |  |       |  
|------------------------------------------- |  | ----------------- | ------- | ----- | ------------------------ | - | ------ | ---------------------- | ------- |  | ---- | ------ |  | ----- | ------- |  | ----- | -
|                                            |  | December 31, 2003 |        
|                                            |  | Actual            |         |       | Minimum Capital Adequacy |   |        | To be Well-Capitalized |        
|(Dollars in Thousands)                      |  | Amount            |         | Ratio |                          |   | Amount |                        | Ratio   |  |      | Amount |  | Ratio |        
|Leverage (Tier 1 Capital to Average Assets) |  |                   |         |       |                          |   |        |                        |         |  |      |        |  |       |         |  |       |  
|First Indiana Corporation                   |  | $                 | 189,034 |       | 8.71                     | % |        | $                      | 86,848  |  | 4.00 | %      |  |       | N/A     |  | N/A   |  
|First Indiana Bank, N.A.                    |  |                   | 172,184 |       | 8.06                     |   |        |                        | 85,442  |  | 4.00 |        |  | $     | 106,803 |  | 5.00  | %
|Tier 1 Capital to Risk-Weighted Assets      |  |                   |         |       |                          |   |        |                        |         |  |      |        |  |       |         |  |       |  
|First Indiana Corporation                   |  | $                 | 189,034 |       | 10.15                    | % |        | $                      | 74,462  |  | 4.00 | %      |  |       | N/A     |  | N/A   |  
|First Indiana Bank, N.A.                    |  |                   | 172,184 |       | 9.29                     |   |        |                        | 74,113  |  | 4.00 |        |  | $     | 111,169 |  | 6.00  | %
|Total Capital to Risk-Weighted Assets       |  |                   |         |       |                          |   |        |                        |         |  |      |        |  |       |         |  |       |  
|First Indiana Corporation                   |  | $                 | 234,845 |       | 12.62                    | % |        | $                      | 148,924 |  | 8.00 | %      |  |       | N/A     |  | N/A   |  
|First Indiana Bank, N.A.                    |  |                   | 195,721 |       | 10.56                    |   |        |                        | 148,226 |  | 8.00 |        |  | $     | 185,282 |  | 10.00 | %
|                                            | 
|                                            |  | December 31, 2002 |        
|                                            |  | Actual            |         |       | Minimum Capital Adequacy |   |        | To be Well-Capitalized |        
|                                            |  | Amount            |         | Ratio |                          |   | Amount |                        | Ratio   |  |      | Amount |  | Ratio |        
|Leverage (Tier 1 Capital to Average Assets) |  |                   |         |       |                          |   |        |                        |         |  |      |        |  |       |         |  |       |  
|First Indiana Corporation                   |  | $                 | 215,243 |       | 10.10                    | % |        | $                      | 85,241  |  | 4.00 | %      |  |       | N/A     |  | N/A   |  
|First Indiana Bank, N.A.                    |  |                   | 176,597 |       | 8.31                     |   |        |                        | 84,982  |  | 4.00 |        |  | $     | 106,228 |  | 5.00  | %
|Tier 1 Capital to Risk-Weighted Assets      |  |                   |         |       |                          |   |        |                        |         |  |      |        |  |       |         |  |       |  
|First Indiana Corporation                   |  | $                 | 215,243 |       | 11.26                    | % |        | $                      | 76,470  |  | 4.00 | %      |  |       | N/A     |  | N/A   |  
|First Indiana Bank, N.A.                    |  |                   | 176,597 |       | 9.27                     |   |        |                        | 76,218  |  | 4.00 |        |  | $     | 114,327 |  | 6.00  | %
|Total Capital to Risk-Weighted Assets       |  |                   |         |       |                          |   |        |                        |         |  |      |        |  |       |         |  |       |  
|First Indiana Corporation                   |  | $                 | 239,394 |       | 12.52                    | % |        | $                      | 152,941 |  | 8.00 | %      |  |       | N/A     |  | N/A   |  
|First Indiana Bank, N.A.                    |  |                   | 200,670 |       | 10.53                    |   |        |                        | 152,437 |  | 8.00 |        |  | $     | 190,546 |  | 10.00 | %



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##### Table of Contents

The decrease in the Corporations regulatory capital ratios from December 31, 2002, to December 31,
2003, is due to several factors. Capital ratios decreased due to goodwill and intangible assets totaling $28,618,000 acquired in the merger with MetroBanCorp. Goodwill and other intangible assets are deducted from capital when calculating the
regulatory capital ratios. Capital ratios were also reduced due to dividends paid to shareholders exceeding earnings by $7,748,000 in 2003 and net purchases and redemptions of common stock, which reduced shareholders equity by $3,292,000.
Partially offsetting these decreases in capital was the addition to Tier 1 capital of the trust preferred securities issued in the second quarter of 2003 and the addition to Tier 2 capital of the subordinated notes issued in November.



IMPACT OF INFLATION AND CHANGING PRICES



The consolidated financial statements and related data presented herein have been prepared to conform to accounting principles generally accepted in the United States of America, 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



The Corporation is not aware of any newly enacted financial accounting standards that will have a material impact on the Corporations financial statements when adopted.



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##### Table of Contents

FOURTH QUARTER SUMMARY



First
Indiana posted net earnings of $1,972,000, or $0.13 per diluted share, in the fourth quarter of 2003, compared with earnings of $1,059,000, or $0.07 per diluted share, for the same period of 2002. Earnings for the fourth quarter of 2003 were
affected by a loan servicing impairment charge and costs associated with the retirement of the Banks president and chief executive officer. Earnings for the fourth quarter of 2002 were affected by an increased loan loss provision.



Net interest income for the fourth quarter of 2003 was $18,330,000, with a
net interest margin of 3.55 percent, compared with fourth quarter 2002 net interest income of $18,712,000 and a net interest margin of 3.68 percent. Historically low interest rates continue to compress net interest margin and net interest income, as
deposit rates have been unable to absorb reductions in market interest rates over the past several years. Loans outstanding averaged $1,819,469,000 for the fourth quarter of 2003, compared with $1,866,878,000 for the fourth quarter of 2002. The
decrease was due primarily to continuing rapid prepayments on consumer and residential loans and increased sales of consumer loan production. Growth in demand deposits continued, with an average of $447,418,000 in the fourth quarter of 2003, an
increase of 19 percent over the same quarter one year ago, exclusive of the MetroBanCorp acquisition in January 2003.



The provision for loan losses was $3,098,000 for the fourth quarter of 2003, compared with $11,005,000 for the fourth quarter of 2002. In the fourth
quarter of 2002, the provision for loan losses increased due to increased levels of non-performing loans and charge-offs and the uncertainty of the economic situation in Indiana.



Non-interest income for the fourth quarter of 2003 was $10,599,000, compared with $11,205,000 for the same period in 2002.
Included in non-interest income for the fourth quarter 2003 was $308,000 from the MetroBanCorp acquisition. Also included in the fourth quarter of 2003 was a loan servicing loss of $1,759,000. This loss reflects continued high prepayments and
adjustments to certain assumptions used in determining the estimated market value of the loan servicing rights portfolio. Loan servicing rights valuation impairment charges totaled $1,835,000 in the fourth quarter of 2003. Gain on sale of loans was
$2,589,000 for the fourth quarter of 2003, an increase of $696,000 over the same quarter of 2002. This increase was the result of a combination of higher sales volume and better pricing in the fourth quarter of 2003 when compared with the same
period of 2002.



Non-interest expense for the fourth quarter of
2003 was $22,826,000, compared with $17,352,000 for the fourth quarter of 2002. Included in non-interest expense for the fourth quarter 2003 was $954,000 from the MetroBanCorp acquisition. Salaries and benefits in the fourth quarter of 2003
increased $3,311,000 over the comparable 2002 expense. In the fourth quarter 2003, the Corporation recorded $1,387,000 for expenses associated with the retirement of the Banks president and chief executive officer. Increased fourth quarter
expenses also reflect the addition of MetroBank staff and staffing increases in the community bank, Somerset, and consumer finance bank segments, plus normal salary increases and incentive bonus accruals.



Additional information relating to the fourth quarter of 2003 and 2002 can be
found in Note 19 of the Notes to the Consolidated Financial Statements.



29



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##### Table of Contents

CONSOLIDATED FINANCIAL STATEMENTS



FIRST INDIANA CORPORATION AND SUBSIDIARIES



CONSOLIDATED BALANCE SHEETS



|                                                                                                                   |  |             |           |   |      |   |           |  
|------------------------------------------------------------------------------------------------------------------ |  | ----------- | --------- | - | ---- | - | --------- | -
|                                                                                                                   |  | December 31 |          
|(Dollars in Thousands, Except Per Share Data)                                                                      |  | 2003        |           |   | 2002 |  
|Assets                                                                                                             |  |             |           |   |      |   |           |  
|Cash                                                                                                               |  | $           | 58,590    |   |      | $ | 76,050    |  
|Interest-Bearing Due from Banks                                                                                    |  |             | 1,715     |   |      |   |          |  
|                                                                                                                   |  |             |           |   |      |   |           |  
|Total Cash and Cash Equivalents                                                                                    |  |             | 60,305    |   |      |   | 76,050    |  
|Securities Available for Sale                                                                                      |  |             | 215,453   |   |      |   | 138,457   |  
|Other Investments                                                                                                  |  |             | 24,957    |   |      |   | 22,863    |  
|Loans                                                                                                              |  |             | 1,814,991 |   |      |   | 1,837,633 |  
|Allowance for Loan Losses                                                                                          |  |             | (53,197   | ) |      |   | (44,469   | )
|                                                                                                                   |  |             |           |   |      |   |           |  
|Net Loans                                                                                                          |  |             | 1,761,794 |   |      |   | 1,793,164 |  
|Premises and Equipment                                                                                             |  |             | 25,673    |   |      |   | 21,528    |  
|Accrued Interest Receivable                                                                                        |  |             | 9,353     |   |      |   | 10,771    |  
|Loan Servicing Rights                                                                                              |  |             | 5,985     |   |      |   | 9,065     |  
|Goodwill                                                                                                           |  |             | 37,042    |   |      |   | 13,045    |  
|Other Intangible Assets                                                                                            |  |             | 4,621     |   |      |   |          |  
|Other Assets                                                                                                       |  |             | 47,954    |   |      |   | 40,647    |  
|                                                                                                                   |  |             |           |   |      |   |           |  
|Total Assets                                                                                                       |  | $           | 2,193,137 |   |      | $ | 2,125,590 |  
|                                                                                                                   |  |             |           |   |      |   |           |  
|Liabilities                                                                                                        |  |             |           |   |      |   |           |  
|Non-Interest-Bearing Deposits                                                                                      |  | $           | 235,811   |   |      | $ | 180,389   |  
|Interest-Bearing Deposits                                                                                          |  |             | 1,254,161 |   |      |   | 1,158,815 |  
|                                                                                                                   |  |             |           |   |      |   |           |  
|Total Deposits                                                                                                     |  |             | 1,489,972 |   |      |   | 1,339,204 |  
|Short-Term Borrowings                                                                                              |  |             | 147,074   |   |      |   | 170,956   |  
|Federal Home Loan Bank Advances                                                                                    |  |             | 265,488   |   |      |   | 346,532   |  
|Subordinated Notes                                                                                                 |  |             | 46,534    |   |      |   | 12,169    |  
|Accrued Interest Payable                                                                                           |  |             | 2,156     |   |      |   | 2,294     |  
|Advances by Borrowers for Taxes and Insurance                                                                      |  |             | 1,533     |   |      |   | 1,820     |  
|Other Liabilities                                                                                                  |  |             | 31,486    |   |      |   | 31,404    |  
|                                                                                                                   |  |             |           |   |      |   |           |  
|Total Liabilities                                                                                                  |  |             | 1,984,243 |   |      |   | 1,904,379 |  
|                                                                                                                   |  |            
|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: 200317,473,764 Shares; 200217,295,351 Shares |  |             | 175       |   |      |   | 173       |  
|Capital Surplus                                                                                                    |  |             | 46,595    |   |      |   | 43,296    |  
|Retained Earnings                                                                                                  |  |             | 185,012   |   |      |   | 194,738   |  
|Accumulated Other Comprehensive Income                                                                             |  |             | 1,756     |   |      |   | 4,644     |  
|Treasury Stock at Cost: 20031,927,017 Shares; 20021,754,891 Shares                                               |  |             | (24,644   | ) |      |   | (21,640   | )
|                                                                                                                   |  |             |           |   |      |   |           |  
|Total Shareholders Equity                                                                                         |  |             | 208,894   |   |      |   | 221,211   |  
|                                                                                                                   |  |             |           |   |      |   |           |  
|Total Liabilities and Shareholders Equity                                                                         |  | $           | 2,193,137 |   |      | $ | 2,125,590 |  
|                                                                                                                   |  |             |           |   |      |   |           |  



See Notes to
Consolidated Financial Statements



30



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##### Table of Contents

FIRST INDIANA CORPORATION AND SUBSIDIARIES



CONSOLIDATED STATEMENTS OF EARNINGS



|                                                    |  |                         |         |   |      |   |         |  |   |        
|--------------------------------------------------- |  | ----------------------- | ------- | - | ---- | - | ------- |  | - | -------
|                                                    |  | Years Ended December 31
|(Dollars in Thousands, Except Per Share Data)       |  | 2003                    |         |   | 2002 |   | 2001   
|Interest Income                                     |  |                         |         |   |      |   |         |  |   |        
|Loans                                               |  | $                       | 104,979 |   |      | $ | 116,039 |  | $ | 145,143
|Securities Available for Sale                       |  |                         | 8,035   |   |      |   | 8,501   |  |   | 9,880  
|Dividends on Other Investments                      |  |                         | 1,252   |   |      |   | 1,367   |  |   | 1,627  
|Federal Funds Sold                                  |  |                         | 3       |   |      |   | 20      |  |   | 478    
|Interest-Bearing Due from Banks                     |  |                         | 61      |   |      |   |        |  |   |       
|                                                    |  |                         |         |   |      |   |         |  |   |        
|Total Interest Income                               |  |                         | 114,330 |   |      |   | 125,927 |  |   | 157,128
|Interest Expense                                    |  |                         |         |   |      |   |         |  |   |        
|Deposits                                            |  |                         | 25,164  |   |      |   | 36,976  |  |   | 59,997 
|Short-Term Borrowings                               |  |                         | 1,390   |   |      |   | 2,059   |  |   | 4,301  
|Federal Home Loan Bank Advances                     |  |                         | 9,360   |   |      |   | 12,962  |  |   | 18,781 
|Subordinated Notes                                  |  |                         | 1,516   |   |      |   | 150     |  |   |       
|                                                    |  |                         |         |   |      |   |         |  |   |        
|Total Interest Expense                              |  |                         | 37,430  |   |      |   | 52,147  |  |   | 83,079 
|                                                    |  |                         |         |   |      |   |         |  |   |        
|Net Interest Income                                 |  |                         | 76,900  |   |      |   | 73,780  |  |   | 74,049 
|Provision for Loan Losses                           |  |                         | 38,974  |   |      |   | 20,756  |  |   | 15,228 
|                                                    |  |                         |         |   |      |   |         |  |   |        
|Net Interest Income After Provision for Loan Losses |  |                         | 37,926  |   |      |   | 53,024  |  |   | 58,821 
|Non-Interest Income                                 |  |                         |         |   |      |   |         |  |   |        
|Deposit Charges                                     |  |                         | 16,895  |   |      |   | 14,963  |  |   | 11,544 
|Loan Servicing Income (Expense)                     |  |                         | (2,079  | ) |      |   | 413     |  |   | 962    
|Loan Fees                                           |  |                         | 2,610   |   |      |   | 2,723   |  |   | 3,736  
|Trust Fees                                          |  |                         | 3,028   |   |      |   | 2,614   |  |   | 2,284  
|Somerset Fees                                       |  |                         | 11,900  |   |      |   | 10,798  |  |   | 9,561  
|Investment Product Sales Commissions                |  |                         | 1,717   |   |      |   | 2,726   |  |   | 1,945  
|Sale of Loans                                       |  |                         | 10,822  |   |      |   | 8,431   |  |   | 9,240  
|Sale of Investment Securities                       |  |                         | 7       |   |      |   | 312     |  |   | 543    
|Other                                               |  |                         | 4,663   |   |      |   | 3,785   |  |   | 4,148  
|                                                    |  |                         |         |   |      |   |         |  |   |        
|Total Non-Interest Income                           |  |                         | 49,563  |   |      |   | 46,765  |  |   | 43,963 
|Non-Interest Expense                                |  |                         |         |   |      |   |         |  |   |        
|Salaries and Benefits                               |  |                         | 49,318  |   |      |   | 37,804  |  |   | 36,720 
|Net Occupancy                                       |  |                         | 4,831   |   |      |   | 4,071   |  |   | 3,724  
|Equipment                                           |  |                         | 6,751   |   |      |   | 6,040   |  |   | 7,056  
|Professional Services                               |  |                         | 6,026   |   |      |   | 4,763   |  |   | 4,122  
|Marketing                                           |  |                         | 2,630   |   |      |   | 2,351   |  |   | 2,424  
|Telephone, Supplies, and Postage                    |  |                         | 4,034   |   |      |   | 3,222   |  |   | 3,515  
|Goodwill Amortization                               |  |                         |        |   |      |   |        |  |   | 920    
|Other Intangible Asset Amortization                 |  |                         | 736     |   |      |   |        |  |   |       
|Other                                               |  |                         | 9,311   |   |      |   | 8,251   |  |   | 12,020 
|                                                    |  |                         |         |   |      |   |         |  |   |        
|Total Non-Interest Expense                          |  |                         | 83,637  |   |      |   | 66,502  |  |   | 70,501 
|                                                    |  |                         |         |   |      |   |         |  |   |        
|Earnings Before Income Taxes                        |  |                         | 3,852   |   |      |   | 33,287  |  |   | 32,283 
|Income Taxes                                        |  |                         | 1,323   |   |      |   | 12,107  |  |   | 12,274 
|                                                    |  |                         |         |   |      |   |         |  |   |        
|Net Earnings                                        |  | $                       | 2,529   |   |      | $ | 21,180  |  | $ | 20,009 
|                                                    |  |                         |         |   |      |   |         |  |   |        
|Basic Earnings Per Share                            |  | $                       | 0.16    |   |      | $ | 1.36    |  | $ | 1.29   
|                                                    |  |                         |         |   |      |   |         |  |   |        
|Diluted Earnings Per Share                          |  | $                       | 0.16    |   |      | $ | 1.34    |  | $ | 1.25   
|                                                    |  |                         |         |   |      |   |         |  |   |        
|Dividends Per Common Share                          |  | $                       | 0.660   |   |      | $ | 0.640   |  | $ | 0.512  
|                                                    |  |                         |         |   |      |   |         |  |   |        



See Notes to
Consolidated Financial Statements



31



---

##### Table of Contents

FIRST INDIANA CORPORATION AND SUBSIDIARIES



CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY



|                                                                                                                                             |  |              |   |                |        |     |                  |   |        |                                            |  |   |               |   |  |                          |        |   |  |   |         |   |  |   |         |  
|-------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------ | - | -------------- | ------ | --- | ---------------- | - | ------ | ------------------------------------------ |  | - | ------------- | - |  | ------------------------ | ------ | - |  | - | ------- | - |  | - | ------- | -
|                                                                                                                                             |  | Common Stock |   | CapitalSurplus |        |     | RetainedEarnings |   |        | AccumulatedOtherComprehensiveIncome (Loss) |  |   | TreasuryStock |   |  | TotalShareholdersEquity |       
|(Dollars in Thousands, Except Per Share Data)                                                                                                |  | Shares       |   |                | Amount |     |                  |   |        |                                           
|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$0.512 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 |  
|                                                                                                                                             |  |              |   |                |        |     |                  |   |        |                                            |  |   |               |   |  |                          |        |   |  |   |         |   |  |   |         |  
|Comprehensive Income:                                                                                                                        |  |              |   |                |        |     |                  |   |        |                                            |  |   |               |   |  |                          |        |   |  |   |         |   |  |   |         |  
|Net Earnings                                                                                                                                 |  |             |   |                |        |    |                  |   |       |                                            |  |   | 21,180        |   |  |                          |       |   |  |   |        |   |  |   | 21,180  |  
|Unrealized Gain on Securities Available for Sale of $925, Net of Income Taxes and Reclassification Adjustment of $189, Net of Income
Taxes   |  |             |   |                |        |    |                  |   |       |                                            |  |   |              |   |  |                          | 560    |   |  |   |        |   |  |   | 560     |  
|                                                                                                                                             |  |              |   |                |        |     |                  |   |        |                                            |  |   |               |   |  |                          |        |   |  |   |         |   |  |   |         |  
|Total Comprehensive Income                                                                                                                   |  |              |   |                |        |     |                  |   |        |                                            |  |   |               |   |  |                          |        |   |  |   |         |   |  |   | 21,740  |  
|Dividends on Common Stock$0.640 per share                                                                                                   |  |             |   |                |        |    |                  |   |       |                                            |  |   | (9,956        | ) |  |                          |       |   |  |   |        |   |  |   | (9,956  | )
|Exercise of Stock Options                                                                                                                    |  | 233,773      |   |                |        | 2   |                  |   | 2,103  |                                            |  |   |              |   |  |                          |       |   |  |   |        |   |  |   | 2,105   |  
|Forfeiture of Restricted Common Stock                                                                                                        |  | (46,009      | ) |                |        |    |                  |   | (921   | )                                          |  |   | 318           |   |  |                          |       |   |  |   |        |   |  |   | (603    | )
|Common Stock Issued under Deferred Compensation Plan                                                                                         |  |             |   |                |        |    |                  |   | (17    | )                                          |  |   |              |   |  |                          |       |   |  |   |        |   |  |   | (17     | )
|Purchase of Treasury Stock                                                                                                                   |  | (74,165      | ) |                |        |    |                  |   |       |                                            |  |   |              |   |  |                          |       |   |  |   | (1,407  | ) |  |   | (1,407  | )
|Reissuance of Treasury Stock                                                                                                                 |  | 3,751        |   |                |        |    |                  |   | 41     |                                            |  |   |              |   |  |                          |       |   |  |   | 24      |   |  |   | 65      |  
|Payment for Fractional Shares                                                                                                                |  | (529         | ) |                |        |    |                  |   | (11    | )                                          |  |   |              |   |  |                          |       |   |  |   |        |   |  |   | (11     | )
|Redemption of Common Stock                                                                                                                   |  | (19,655      | ) |                |        |    |                  |   | (377   | )                                          |  |   |              |   |  |                          |       |   |  |   |        |   |  |   | (377    | )
|Tax Benefit of Option Compensation                                                                                                           |  |             |   |                |        |    |                  |   | 641    |                                            |  |   |              |   |  |                          |       |   |  |   |        |   |  |   | 641     |  
|                                                                                                                                             |  |              |   |                |        |     |                  |   |        |                                            |  |   |               |   |  |                          |        |   |  |   |         |   |  |   |         |  
|Balance at December 31, 2002                                                                                                                 |  | 15,540,460   |   |                |        | 173 |                  |   | 43,296 |                                            |  |   | 194,738       |   |  |                          | 4,644  |   |  |   | (21,640 | ) |  |   | 221,211 |  
|                                                                                                                                             |  |              |   |                |        |     |                  |   |        |                                            |  |   |               |   |  |                          |        |   |  |   |         |   |  |   |         |  
|Comprehensive Income:                                                                                                                        |  |              |   |                |        |     |                  |   |        |                                            |  |   |               |   |  |                          |        |   |  |   |         |   |  |   |         |  
|Net Earnings                                                                                                                                 |  |             |   |                |        |    |                  |   |       |                                            |  |   | 2,529         |   |  |                          |       |   |  |   |        |   |  |   | 2,529   |  
|Unrealized Loss on Securities Available for Sale of $4,711, Net of Income Taxes and Reclassification Adjustment of $4, Net of Income
Taxes   |  |             |   |                |        |    |                  |   |       |                                            |  |   |              |   |  |                          | (2,888 | ) |  |   |        |   |  |   | (2,888  | )
|                                                                                                                                             |  |              |   |                |        |     |                  |   |        |                                            |  |   |               |   |  |                          |        |   |  |   |         |   |  |   |         |  
|Total Comprehensive Income (Loss)                                                                                                            |  |              |   |                |        |     |                  |   |        |                                            |  |   |               |   |  |                          |        |   |  |   |         |   |  |   | (359    | )
|Dividends on Common Stock$0.660 per share                                                                                                   |  |             |   |                |        |    |                  |   |       |                                            |  |   | (10,277       | ) |  |                          |       |   |  |   |        |   |  |   | (10,277 | )
|Exercise of Stock Options                                                                                                                    |  | 82,902       |   |                |        | 1   |                  |   | 897    |                                            |  |   |              |   |  |                          |       |   |  |   |        |   |  |   | 898     |  
|Common Stock Issued under Restricted Stock PlansNet of Amortization                                                                         |  | 114,909      |   |                |        | 1   |                  |   | 2,298  |                                            |  |   | (1,978        | ) |  |                          |       |   |  |   |        |   |  |   | 321     |  
|Common Stock Issued under Deferred Compensation Plan                                                                                         |  |             |   |                |        |    |                  |   | (35    | )                                          |  |   |              |   |  |                          |       |   |  |   |        |   |  |   | (35     | )
|Purchase of Treasury Stock                                                                                                                   |  | (176,975     | ) |                |        |    |                  |   |       |                                            |  |   |              |   |  |                          |       |   |  |   | (3,036  | ) |  |   | (3,036  | )
|Reissuance of Treasury Stock                                                                                                                 |  | 4,849        |   |                |        |    |                  |   | 68     |                                            |  |   |              |   |  |                          |       |   |  |   | 32      |   |  |   | 100     |  
|Redemption of Common Stock                                                                                                                   |  | (19,398      | ) |                |        |    |                  |   | (356   | )                                          |  |   |              |   |  |                          |       |   |  |   |        |   |  |   | (356    | )
|Option Consideration Related to Executive Retirement                                                                                         |  |             |   |                |        |    |                  |   | 324    |                                            |  |   |              |   |  |                          |       |   |  |   |        |   |  |   | 324     |  
|Tax Benefit of Option Compensation                                                                                                           |  |             |   |                |        |    |                  |   | 103    |                                            |  |   |              |   |  |                          |       |   |  |   |        |   |  |   | 103     |  
|                                                                                                                                             |  |              |   |                |        |     |                  |   |        |                                            |  |   |               |   |  |                          |        |   |  |   |         |   |  |   |         |  
|Balance at December 31, 2003                                                                                                                 |  | 15,546,747   |   |                | $      | 175 |                  | $ | 46,595 |                                            |  | $ | 185,012       |   |  | $                        | 1,756  |   |  | $ | (24,644 | ) |  | $ | 208,894 |  
|                                                                                                                                             |  |              |   |                |        |     |                  |   |        |                                            |  |   |               |   |  |                          |        |   |  |   |         |   |  |   |         |  



See Notes to
Consolidated Financial Statements



32



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##### Table of Contents

FIRST INDIANA CORPORATION AND SUBSIDIARIES



CONSOLIDATED STATEMENTS OF CASH FLOWS



|                                                                                   |  |                         |          |   |      |   |          |      |  |   |          |  
|---------------------------------------------------------------------------------- |  | ----------------------- | -------- | - | ---- | - | -------- | ---- |  | - | -------- | -
|                                                                                   |  | Years Ended December 31 |         
|(Dollars in Thousands)                                                             |  | 2003                    |          |   | 2002 |   |          | 2001 | 
|Cash Flows from Operating Activities                                               |  |                         |          |   |      |   |          |      |  |   |          |  
|Net Earnings                                                                       |  | $                       | 2,529    |   |      | $ | 21,180   |      |  | $ | 20,009   |  
|Adjustments to Reconcile Net Earnings to Net Cash Provided by Operating Activities |  |                         |          |   |      |   |          |      |  |   |          |  
|Gain on Sale of Loans and Investments, Net                                         |  |                         | (10,829  | ) |      |   | (8,743   | )    |  |   | (9,783   | )
|Amortization of Premium, Discount, and Intangibles, Net                            |  |                         | 5,346    |   |      |   | 1,545    |      |  |   | 2,819    |  
|Depreciation and Amortization of Premises and Equipment                            |  |                         | 2,957    |   |      |   | 2,718    |      |  |   | 3,324    |  
|Amortization of Net Deferred Loan Fees                                             |  |                         | 1,573    |   |      |   | 976      |      |  |   | 1,385    |  
|Provision for Loan Losses                                                          |  |                         | 38,974   |   |      |   | 20,756   |      |  |   | 15,228   |  
|Origination of Loans Held For Sale, Net of Principal Collected                     |  |                         | (364,610 | ) |      |   | (251,472 | )    |  |   | (245,744 | )
|Proceeds from Sale of Loans Held for Sale                                          |  |                         | 356,899  |   |      |   | 243,867  |      |  |   | 269,333  |  
|Tax Benefit of Option Compensation                                                 |  |                         | 103      |   |      |   | 641      |      |  |   | 652      |  
|Option Compensation Related to Executive Retirement                                |  |                         | 324      |   |      |   |         |      |  |   |         |  
|Change In:                                                                         |  |                         |          |   |      |   |          |      |  |   |          |  
|Accrued Interest Receivable                                                        |  |                         | 2,086    |   |      |   | 4,475    |      |  |   | 3,081    |  
|Other Assets                                                                       |  |                         | (12,294  | ) |      |   | (7,109   | )    |  |   | (26,303  | )
|Accrued Interest Payable                                                           |  |                         | (766     | ) |      |   | (1,514   | )    |  |   | (2,948   | )
|Other Liabilities                                                                  |  |                         | (3,000   | ) |      |   | (2,037   | )    |  |   | 13,346   |  
|                                                                                   |  |                         |          |   |      |   |          |      |  |   |          |  
|Net Cash Provided by Operating Activities                                          |  |                         | 19,292   |   |      |   | 25,283   |      |  |   | 44,399   |  
|                                                                                   |  |                         |          |   |      |   |          |      |  |   |          |  
|Cash Flows from Investing Activities                                               |  |                         |          |   |      |   |          |      |  |   |          |  
|Proceeds from Sale of Securities Available for Sale                                |  |                         | 12,650   |   |      |   | 20,312   |      |  |   | 20,000   |  
|Proceeds from Maturities of Securities Available for Sale                          |  |                         | 24,708   |   |      |   | 21,231   |      |  |   | 16,005   |  
|Purchase of Securities Available for Sale                                          |  |                         | (92,044  | ) |      |   | (30,000  | )    |  |   | (20,000  | )
|Purchase of Other Investments                                                      |  |                         | (582     | ) |      |   | (372     | )    |  |   | (900     | )
|Principal Collected on Loans, Net of Originations                                  |  |                         | 234,477  |   |      |   | 29,652   |      |  |   | 15,034   |  
|Proceeds from Sale of Loans                                                        |  |                         |         |   |      |   | 34,412   |      |  |   |         |  
|Purchase of Loans                                                                  |  |                         | (110,747 | ) |      |   | (143,573 | )    |  |   |         |  
|Acquisition of MetroBanCorp, Net of Cash Acquired                                  |  |                         | 14,691   |   |      |   |         |      |  |   |         |  
|Acquisition of Somerset, Net of Cash Acquired                                      |  |                         | (7       | ) |      |   | (127     | )    |  |   | (279     | )
|Purchase of Premises and Equipment                                                 |  |                         | (5,725   | ) |      |   | (3,784   | )    |  |   | (4,901   | )
|Proceeds from Sale of Premises and Equipment                                       |  |                         | 344      |   |      |   | 40       |      |  |   | 777      |  
|                                                                                   |  |                         |          |   |      |   |          |      |  |   |          |  
|Net Cash Provided (Used) by Investing Activities                                   |  |                         | 77,765   |   |      |   | (72,209  | )    |  |   | 25,736   |  
|                                                                                   |  |                         |          |   |      |   |          |      |  |   |          |  
|Cash Flows from Financing Activities                                               |  |                         |          |   |      |   |          |      |  |   |          |  
|Net Change in Deposits                                                             |  |                         | (11,733  | ) |      |   | (40,274  | )    |  |   | (20,505  | )
|Net Change in Short-Term Borrowings                                                |  |                         | (31,526  | ) |      |   | 49,874   |      |  |   | 3,357    |  
|Net Change in Advances by Borrowers for Taxes and Insurance                        |  |                         | (292     | ) |      |   | (1,227   | )    |  |   | (3,141   | )
|Repayment of Federal Home Loan Bank Advances                                       |  |                         | (822,122 | ) |      |   | (610,115 | )    |  |   | (275,107 | )
|Borrowings of Federal Home Loan Bank Advances                                      |  |                         | 732,000  |   |      |   | 660,000  |      |  |   | 235,000  |  
|Issuance of Subordinated Notes                                                     |  |                         | 33,577   |   |      |   | 12,169   |      |  |   |         |  
|Stock Option Proceeds                                                              |  |                         | 542      |   |      |   | 1,728    |      |  |   | 1,282    |  
|Fractional Shares                                                                  |  |                         |         |   |      |   | (11      | )    |  |   |         |  
|Deferred Compensation                                                              |  |                         | (35      | ) |      |   | (17      | )    |  |   |         |  
|Purchase of Treasury Stock                                                         |  |                         | (3,036   | ) |      |   | (1,407   | )    |  |   | (6,011   | )
|Reissuance of Treasury Stock                                                       |  |                         | 100      |   |      |   | 65       |      |  |   |         |  
|Dividends Paid                                                                     |  |                         | (10,277  | ) |      |   | (9,956   | )    |  |   | (7,977   | )
|                                                                                   |  |                         |          |   |      |   |          |      |  |   |          |  
|Net Cash Provided (Used) by Financing Activities                                   |  |                         | (112,802 | ) |      |   | 60,829   |      |  |   | (73,102  | )
|                                                                                   |  |                         |          |   |      |   |          |      |  |   |          |  
|Net Change in Cash and Cash Equivalents                                            |  |                         | (15,745  | ) |      |   | 13,903   |      |  |   | (2,967   | )
|Cash and Cash Equivalents at Beginning of Year                                     |  |                         | 76,050   |   |      |   | 62,147   |      |  |   | 65,114   |  
|                                                                                   |  |                         |          |   |      |   |          |      |  |   |          |  
|Cash and Cash Equivalents at End of Year                                           |  | $                       | 60,305   |   |      | $ | 76,050   |      |  | $ | 62,147   |  
|                                                                                   |  |                         |          |   |      |   |          |      |  |   |          |  



See Notes to
Consolidated Financial Statements



33



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##### Table of Contents

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 be a financial
holding company. First Indiana Bank, N.A. 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 commercial bank or bank holding company based in Indianapolis. 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 33 banking centers located throughout Central Indiana. In addition, the Bank has construction and consumer loan offices in Indiana, Arizona, Florida, Illinois, North Carolina, and Ohio.



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
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 amounts reported for assets and liabilities and disclosure of contingent 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, goodwill, and the determination of the valuation allowance for deferred taxes.



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



(B)    ReclassificationCertain amounts in
the 2002 and 2001 Consolidated Financial Statements have been reclassified to conform to the current year presentation.



(C)    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.



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FIRST INDIANA CORPORATION AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



As a member of the Federal Home Loan Bank of Indianapolis
(FHLB) and the Federal Reserve Bank (FRB), the Bank is required to own shares of capital stock in the FHLB and the FRB. FHLB stock and FRB stock are carried at their cost since they are restricted investment securities. In
connection with the formation of First Indiana Capital Trust I (Trust I) and First Indiana Capital Statutory Trust II (Trust II), Trust I and Trust II issued Common Securities to the Corporation. The Common Securities are
carried at their cost since they are restricted investment securities.



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.



(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 90 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The Bank originates fixed and adjustable rate residential mortgage loans and fixed and adjustable rate home equity loans. Throughout the year, the
Banks Asset/Liability Committee designates a portion of these loans to be held for investment purposes, with the intent of holding them to maturity. The remainder of these loans is identified as held for sale into the secondary market.



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.



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.



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FIRST INDIANA CORPORATION AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



(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 less estimated costs to sell at the date of foreclosure, establishing
a new cost basis. Subsequent to foreclosure, OREO is carried at the lower of cost or fair value. The initial OREO write-down, if required, is charged against the allowance for loan losses, with subsequent write-downs charged to OREO expense. A
review of OREO properties occurs in conjunction with the review of the loan portfolios. As of December 31, 2003 and 2002, the balance of OREO included in other assets was $3,780,000 and $8,670,000.



(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. The allowance for loan losses is maintained at
the level deemed adequate to cover 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 2003, 2002, and 2001 were computed by dividing net earnings by the weighted average shares of common stock outstanding (15,570,508, 15,537,186, and
15,569,956). Diluted earnings per share for 2003, 2002, and 2001 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 (15,720,691, 15,809,380, and 15,998,976). 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. Estimated useful lives for the various asset classes are as follows: buildings, 40 years; leasehold improvements,
the lesser of the remaining lease term or 10 years; furniture, fixtures and equipment, 10 years; computer equipment, 3 years; and computer software, 3 years.



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



(O)    Goodwill and Other Intangible AssetsEffective January 1, 2002, the Corporation adopted Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible
Assets (SFAS 142). In accordance with the new standard, goodwill and intangible assets with indefinite lives are no longer amortized.



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FIRST INDIANA CORPORATION AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Goodwill is tested for impairment at the reporting unit level at least
annually. Intangible assets with finite useful lives are amortized over their useful lives to their residual values in proportion to the economic benefits consumed. Intangible assets with indefinite useful lives are not amortized until their useful
lives are determined to be no longer indefinite. Intangible assets are tested for impairment at least annually.



(P)    Recent Accounting PronouncementsIn November 2002, the Financial Accounting Standards Board (FASB)
issued Interpretation No. 45, Guarantors Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others (FIN 45), which requires additional disclosures by a guarantor
about its obligations under certain guarantees that it has issued. FIN 45 also clarifies that a guarantor is required to recognize, at the inception of a guarantee, a liability for the fair value of the obligation undertaken in issuing the
guarantee. The most significant instruments impacted for the Corporation are standby letters of credit. The disclosure requirements of FIN 45 became effective for the Corporation on December 31, 2002. The recognition requirements of FIN 45 became
effective for the Corporation on January 1, 2003, on a prospective basis and are disclosed in Note 14.



In December 2003, FASB issued revised Interpretation No. 46 Consolidation of Variable Interest Entities (FIN 46), which provides
guidance with respect to the identification and consolidation of variable interest entities. A variable interest entity exists and is required to be consolidated when either the total equity investment at risk is not sufficient to permit the entity
to finance its activities by itself, or the equity investors lack one of three characteristics associated with owning a controlling financial interest. Those characteristics include the direct or indirect ability to make decisions about an
entitys activities through voting rights or similar rights, the obligation to absorb the expected losses of an entity if they occur, and the right to receive the expected residual returns of the entity if they occur. FIN 46 was effective
immediately for new entities that were created or acquired after January 31, 2003, and is effective on December 31, 2003, for entities in which the Corporation had a variable interest prior to February 1, 2003.



The Corporation formed statutory trusts for the purpose of issuing trust
preferred securities. FIN 46 requires the deconsolidation of these statutory trusts. Accordingly, all financial statements and related Notes have been adjusted for this requirement. The deconsolidation did not have a material effect on the
Corporations consolidated balance sheet or consolidated statement of earnings. In July 2003, the Board of Governors of the Federal Reserve System issued a supervisory letter instructing bank holding companies to continue to include the trust
preferred securities in their Tier 1 capital for regulatory capital purposes until notice is given to the contrary. The Federal Reserve intends to review the regulatory implications of any accounting treatment changes and, if necessary or warranted,
provide further appropriate guidance. There can be no assurance that the Federal Reserve will continue to allow institutions to include trust preferred securities in Tier 1 capital for regulatory capital purposes.



The Corporation is a limited partner in two low income housing developments
that do not meet the FIN 46 criteria for consolidation. As of December 31, 2003, the Corporations investment in these partnerships was $674,000, with no future funding commitment. The maximum risk of loss is equal to the Corporations
recorded investment in these partnerships.



(Q)     Stock-Based CompensationAt December 31, 2003, First Indiana had three stock-based employee compensation plans, which are described more fully in Note 15. First Indiana accounts for those plans under
recognition and measurement principles of Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees and related Interpretations. No stock-based employee compensation cost has been recognized in respect to stock
option grants under the plans, except for deferred compensation expense in



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FIRST INDIANA CORPORATION AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



connection with certain Somerset options that was being amortized over the
life of the respective options and compensation expense recognized in 2003 in connection with the retirement of an executive officer of the Corporation. The following table illustrates the effect on net earnings and earnings per share if the
Corporation had applied the fair value recognition provisions of Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation, to stock-based employee compensation.



|                                                                                                                                            |  |                         |        |   |      |   |        |      |  |   |        |  
|------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------- | ------ | - | ---- | - | ------ | ---- |  | - | ------ | -
|                                                                                                                                            |  | Years Ended December 31 |       
|(Dollars in Thousands, Except Per Share Data)                                                                                               |  | 2003                    |        |   | 2002 |   |        | 2001 | 
|Net Earnings, As Reported                                                                                                                   |  | $                       | 2,529  |   |      | $ | 21,180 |      |  | $ | 20,009 |  
|Add: Stock option employee compensation expense included in reported net income, net of related tax effects                                 |  |                         | 227    |   |      |   | 109    |      |  |   | 247    |  
|Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax
effects |  |                         | (1,026 | ) |      |   | (976   | )    |  |   | (1,069 | )
|                                                                                                                                            |  |                         |        |   |      |   |        |      |  |   |        |  
|Pro Forma Net Earnings                                                                                                                      |  | $                       | 1,730  |   |      | $ | 20,313 |      |  | $ | 19,187 |  
|                                                                                                                                            |  |                         |        |   |      |   |        |      |  |   |        |  
|Basic Earnings Per Share                                                                                                                    |  |                         |        |   |      |   |        |      |  |   |        |  
|As Reported                                                                                                                                 |  | $                       | 0.16   |   |      | $ | 1.36   |      |  | $ | 1.29   |  
|Pro Forma                                                                                                                                   |  |                         | 0.11   |   |      |   | 1.31   |      |  |   | 1.23   |  
|Diluted Earnings Per Share                                                                                                                  |  |                         |        |   |      |   |        |      |  |   |        |  
|As Reported                                                                                                                                 |  | $                       | 0.16   |   |      | $ | 1.34   |      |  | $ | 1.25   |  
|Pro Forma                                                                                                                                   |  |                         | 0.11   |   |      |   | 1.28   |      |  |   | 1.20   |  



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 2003, 2002, and 2001, respectively: dividend yield of 3.0 percent for all years; expected
volatility of 20 percent, 33 percent, and 41 percent; weighted average risk-free interest rates of 3.85 percent, 4.45 percent, and 5.11 percent; and expected lives of seven years for all years.



(2)    Business Combinations



On January 13, 2003, First Indiana acquired Carmel, Indiana-based
MetroBanCorp through a merger. MetroBanCorp was the holding company for MetroBank, with assets of $196,000,000 and seven offices in Carmel, Fishers, and Noblesville, Indiana. The acquisition was accounted for using the purchase method of accounting,
and accordingly, the financial results of the acquired entity were included in First Indianas consolidated financial statements from the January 13, 2003, acquisition date. In the merger, MetroBanCorp shareholders received $17.00 in cash in
exchange for each share of MetroBanCorp stock. The cost of the acquisition was approximately $37,500,000. Goodwill of $23,997,000, a core deposit intangible of $4,357,000, and a non-compete agreement intangible of $1,000,000 were recorded in
connection with the merger. The goodwill has been assigned to the community bank segment. The weighted average life of the core deposit intangible and the non-compete agreement intangible are 7.2 years and 1.5 years, respectively. The weighted
average life of these intangible assets in total is 6.1 years.



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FIRST INDIANA CORPORATION AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



(3)    Loan Servicing Rights, Goodwill, and Other
Intangible Assets



The following table shows the change in
the carrying amount of capitalized loan servicing rights.



|                                 |  |                        |        |   |      |   |        |      |  |   |        |  
|-------------------------------- |  | ---------------------- | ------ | - | ---- | - | ------ | ---- |  | - | ------ | -
|                                 | 
|                                 |  | Year Ended December 31 |       
|(Dollars in Thousands)           |  | 2003                   |        |   | 2002 |   |        | 2001 | 
|Balance at Beginning of Period   |  | $                      | 9,065  |   |      | $ | 9,819  |      |  | $ | 8,249  |  
|Additions                        |  |                        | 1,612  |   |      |   | 2,288  |      |  |   | 3,962  |  
|Amortization of Servicing Rights |  |                        | (2,306 | ) |      |   | (2,585 | )    |  |   | (2,320 | )
|Change in Valuation Reserves     |  |                        | (2,386 | ) |      |   | (457   | )    |  |   | (72    | )
|                                 |  |                        |        |   |      |   |        |      |  |   |        |  
|Balance at End of Period         |  | $                      | 5,985  |   |      | $ | 9,065  |      |  | $ | 9,819  |  
|                                 |  |                        |        |   |      |   |        |      |  |   |        |  



The following table
shows the changes in the valuation allowance for loan servicing rights in 2003, 2002, and 2001.



|                               |  |                        |       |      |   |      |  |   |   
|------------------------------ |  | ---------------------- | ----- | ---- | - | ---- |  | - | --
|                               |  | Year Ended December 31
|(Dollars in Thousands)         |  | 2003                   |       | 2002 |   | 2001
|Balance at Beginning of Period |  | $                      | 529   |      | $ | 72   |  | $ |  
|Additions                      |  |                        | 2,386 |      |   | 457  |  |   | 72
|                               |  |                        |       |      |   |      |  |   |   
|Balance at End of Period       |  | $                      | 2,915 |      | $ | 529  |  | $ | 72
|                               |  |                        |       |      |   |      |  |   |   



Consumer loans
serviced for others amounted to $298,699,000 and $361,517,000 at December 31, 2003 and 2002, respectively. Residential loans serviced for others amounted to $134,221,000 and $261,463,000 at December 31, 2003 and 2002, respectively.



The estimated fair value of loan servicing rights was $6,786,000 and
$9,988,000 at December 31, 2003 and 2002, respectively.



Effective January 1, 2002, the Corporation adopted Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets, resulting in no goodwill impairment. In accordance with the new standard, goodwill and
intangible assets with indefinite lives are no longer amortized, but are subject to impairment tests at least annually. The Corporation had no existing intangible assets acquired in prior purchase business combinations and recognized no impairment
loss relating to intangible assets upon adoption of SFAS 142.



The following table shows information relating to the effects of the adoption of SFAS 142.



|                                              |  |                         |       |      |   |        |  |   |       
|--------------------------------------------- |  | ----------------------- | ----- | ---- | - | ------ |  | - | ------
|                                              | 
|                                              |  | Years Ended December 31
|(Dollars in Thousands, Except Per Share Data) |  | 2003                    |       | 2002 |   | 2001  
|Net Earnings                                  |  | $                       | 2,529 |      | $ | 21,180 |  | $ | 20,009
|Add Back: Goodwill Amortization               |  |                         |      |      |   |       |  |   | 920   
|                                              |  |                         |       |      |   |        |  |   |       
|Adjusted Net Earnings                         |  | $                       | 2,529 |      | $ | 21,180 |  | $ | 20,929
|                                              |  |                         |       |      |   |        |  |   |       
|                                              |  |                         |      
|Basic Earnings Per Share                      |  | $                       | 0.16  |      | $ | 1.36   |  | $ | 1.29  
|Add Back: Goodwill Amortization               |  |                         |      |      |   |       |  |   | 0.06  
|                                              |  |                         |       |      |   |        |  |   |       
|Adjusted Basic Earnings Per Share             |  | $                       | 0.16  |      | $ | 1.36   |  | $ | 1.35  
|                                              |  |                         |       |      |   |        |  |   |       
|                                              |  |                         |      
|Diluted Earnings Per Share                    |  | $                       | 0.16  |      | $ | 1.34   |  | $ | 1.25  
|Add Back: Goodwill Amortization               |  |                         |      |      |   |       |  |   | 0.06  
|                                              |  |                         |       |      |   |        |  |   |       
|Adjusted Diluted Earnings Per Share           |  | $                       | 0.16  |      | $ | 1.34   |  | $ | 1.31  
|                                              |  |                         |       |      |   |        |  |   |       



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FIRST INDIANA CORPORATION AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



The following table shows changes in the carrying amount
of goodwill for the years ended December 31, 2003 and 2002.



|                                         |  |                        |        |                  |   |       |  |   |       
|---------------------------------------- |  | ---------------------- | ------ | ---------------- | - | ----- |  | - | ------
|                                         |  |                        |       
|(Dollars in Thousands)                   |  | Community Bank Segment |        | Somerset Segment |   | Total
|Balance as of January 1, 2002            |  | $                      | 6,685  |                  | $ | 6,360 |  | $ | 13,045
|Changes during the Year                  |  |                        |       |                  |   |      |  |   |      
|                                         |  |                        |        |                  |   |       |  |   |       
|Balance as of December 31, 2002          |  |                        | 6,685  |                  |   | 6,360 |  |   | 13,045
|Addition Due to MetroBanCorp Acquisition |  |                        | 23,997 |                  |   |      |  |   | 23,997
|                                         |  |                        |        |                  |   |       |  |   |       
|Balance as of December 31, 2003          |  | $                      | 30,682 |                  | $ | 6,360 |  | $ | 37,042
|                                         |  |                        |        |                  |   |       |  |   |       



The following table
summarizes the carrying amount of other intangible assets at December 31, 2003.



|                                |  |                         |       |   |                                  |   |       |       |  |   |       |  
|------------------------------- |  | ----------------------- | ----- | - | -------------------------------- | - | ----- | ----- |  | - | ----- | -
|(Dollars in Thousands)          |  | Core Deposit Intangible |       |   | Non-compete Agreement Intangible |   |       | Total | 
|Gross Carrying Amount           |  | $                       | 4,357 |   |                                  | $ | 1,000 |       |  | $ | 5,357 |  
|Less: Accumulated Amortization  |  |                         | (403  | ) |                                  |   | (333  | )     |  |   | (736  | )
|                                |  |                         |       |   |                                  |   |       |       |  |   |       |  
|Net Carrying Amount             |  | $                       | 3,954 |   |                                  | $ | 667   |       |  | $ | 4,621 |  
|                                |  |                         |       |   |                                  |   |       |       |  |   |       |  
|Amortization recognized in 2003 |  |                         | 403   |   |                                  |   | 333   |       |  |   | 736   |  
|                                |  |                         |       |   |                                  |   |       |       |  |   |       |  



Projected annual
intangible amortization for the years 2004 through 2008 is $718,000, $697,000, $342,000, $321,000, and $300,000, respectively.



(4)    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.



|                                      |  |                   |         |                   |        |                        |  |               |       |                  |        |                        |  |   |         |  |   |       |  |   |   |  |   |        
|------------------------------------- |  | ----------------- | ------- | ----------------- | ------ | ---------------------- |  | ------------- | ----- | ---------------- | ------ | ---------------------- |  | - | ------- |  | - | ----- |  | - | - |  | - | -------
|                                      |  | December 31, 2003 |         | December 31, 2002
|                                      |  | AmortizedCost     |         | Gross Unrealized  |        | Fair Value(Book Value) |  | AmortizedCost |       | Gross Unrealized |        | Fair Value(Book Value)
|(Dollars in Thousands)                |  |                   | Gains   |                   | Losses |                        |  |               | Gains |                  | Losses |                       
|U.S. Treasuries & Government Agencies |  | $                 | 127,533 |                   | $      | 3,466                  |  | $             | 456   |                  | $      | 130,543                |  | $ | 105,894 |  | $ | 6,452 |  | $ |  |  | $ | 112,346
|Mortgage-Backed Securities            |  |                   |         |                   |        |                        |  |               |       |                  |        |                        |  |   |         |  |   |       |  |   |   |  |   |        
|FHLMC                                 |  |                   | 53,148  |                   |        | 307                    |  |               | 547   |                  |        | 52,908                 |  |   | 10,052  |  |   | 555   |  |   |  |  |   | 10,607 
|FNMA                                  |  |                   | 31,872  |                   |        | 309                    |  |               | 179   |                  |        | 32,002                 |  |   | 14,770  |  |   | 669   |  |   |  |  |   | 15,439 
|Other Asset-Backed Securities         |  |                   |        |                   |        |                       |  |               |      |                  |        |                       |  |   | 65      |  |   |      |  |   |  |  |   | 65     
|                                      |  |                   |         |                   |        |                        |  |               |       |                  |        |                        |  |   |         |  |   |       |  |   |   |  |   |        
|Total                                 |  | $                 | 212,553 |                   | $      | 4,082                  |  | $             | 1,182 |                  | $      | 215,453                |  | $ | 130,781 |  | $ | 7,676 |  | $ |  |  | $ | 138,457
|                                      |  |                   |         |                   |        |                        |  |               |       |                  |        |                        |  |   |         |  |   |       |  |   |   |  |   |        



Securities totaling
$199,848,000 were pledged as collateral for repurchase agreements, letters of credit, and the treasury, tax, and loan account on December 31, 2003.



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FIRST INDIANA CORPORATION AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



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



|                                       |  |                   |         |            |   |        
|-------------------------------------- |  | ----------------- | ------- | ---------- | - | -------
|                                       |  | December 31, 2003
|(Dollars in Thousands)                 |  | Amortized Cost    |         | Fair Value
|Due in one year or less                |  | $                 | 39,954  |            | $ | 40,879 
|Due after one year through five years  |  |                   | 87,426  |            |   | 89,620 
|Due after five years through ten years |  |                   | 78,616  |            |   | 78,266 
|Due after ten years                    |  |                   | 6,557   |            |   | 6,688  
|                                       |  |                   |         |            |   |        
|Total                                  |  | $                 | 212,553 |            | $ | 215,453
|                                       |  |                   |         |            |   |        



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



|                       |  |      |   |      |   |      |  |   |    
|---------------------- |  | ---- | - | ---- | - | ---- |  | - | ---
|(Dollars in Thousands) |  | 2003 |   | 2002 |   | 2001
|Realized Gains         |  | $    | 7 |      | $ | 312  |  | $ | 543
|Realized Losses        |  |      |  |      |   |     |  |   |   
|                       |  |      |   |      |   |      |  |   |    
|Net Gains (Losses)     |  | $    | 7 |      | $ | 312  |  | $ | 543
|                       |  |      |   |      |   |      |  |   |    



For securities with
unrealized losses at December 31, 2003, the following schedule identifies the length of time (in consecutive months) these securities fair values have been below their amortized cost.



|                                      |  |                     |        |                     |   |           |  |                  |   |           |   |                  |  |   |        |  |   |      
|------------------------------------- |  | ------------------- | ------ | ------------------- | - | --------- |  | ---------------- | - | --------- | - | ---------------- |  | - | ------ |  | - | -----
|                                      |  | Less than 12 Months |        | 12 Months or Longer |   | Total    
|(Dollars in Thousands)                |  | FairValue           |        | UnrealizedLosses    |   | FairValue |  | UnrealizedLosses |   | FairValue |   | UnrealizedLosses
|U.S. Treasuries & Government Agencies |  | $                   | 26,052 |                     | $ | 456       |  | $                |  |           | $ |                 |  | $ | 26,052 |  | $ | 456  
|Mortgage-Backed Securities            |  |                     |        |                     |   |           |  |                  |   |           |   |                  |  |   |        |  |   |      
|FHLMC                                 |  |                     | 14,920 |                     |   | 547       |  |                  |  |           |   |                 |  |   | 14,920 |  |   | 547  
|FNMA                                  |  |                     | 8,781  |                     |   | 179       |  |                  |  |           |   |                 |  |   | 8,781  |  |   | 179  
|                                      |  |                     |        |                     |   |           |  |                  |   |           |   |                  |  |   |        |  |   |      
|Total                                 |  | $                   | 49,753 |                     | $ | 1,182     |  | $                |  |           | $ |                 |  | $ | 49,753 |  | $ | 1,182
|                                      |  |                     |        |                     |   |           |  |                  |   |           |   |                  |  |   |        |  |   |      



The relative mix of
investment securities and loans in the Corporation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. Of the securities held at year-end 2003, none have been downgraded in credit rating by security rating firms. Unrealized losses on available for sale securities
at December 31, 2003, reflect changes in market interest rates when compared to interest rates of securities owned.



(5)    Other Investments



Included in other investments are Federal Reserve Bank Stock, Federal Home Loan Bank Stock, and Common Securities in the Corporations grantor
trusts: First Indiana Capital Trust I and First Indiana Capital



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Statutory Trust II. 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. In addition, as a member of the Federal Home Loan Bank of Indianapolis, the Bank is required to own shares of capital stock in the FHLB. FHLB
stock is carried at its cost, since it is a restricted investment security. The Bank is required to hold approximately $13,774,000 of FHLB stock. The Corporations holdings in FHLB stock are redeemable only upon five years notice to the
FHLB. In connection with the formation of the capital trusts, Trust I and Trust II issued Common Securities to the Corporation. The Common Securities for each trust are carried at their cost since they are restricted investment securities. The
Common Securities are not redeemable until the related subordinated notes are redeemed (according to the subordinated note terms).



The composition of other investments is summarized as follows.



|                                 |  |             |        |      |   |       
|-------------------------------- |  | ----------- | ------ | ---- | - | ------
|                                 |  | December 31
|(Dollars in Thousands)           |  | 2003        |        | 2002
|FRB Stock                        |  | $           | 1,110  |      | $ | 900   
|FHLB Stock                       |  |             | 23,103 |      |   | 21,591
|Capital Trusts Common Securities |  |             | 744    |      |   | 372   
|                                 |  |             |        |      |   |       
|                                 |  | $           | 24,957 |      | $ | 22,863
|                                 |  |             |        |      |   |       



(6)    Loans



The composition of loans is summarized as follows.



|                                 |  |             |           |      |   |          
|-------------------------------- |  | ----------- | --------- | ---- | - | ---------
|                                 |  | December 31
|(Dollars in Thousands)           |  | 2003        |           | 2002
|Commercial Loans                 |  |             |           |      |   |          
|Business Loans                   |  | $           | 515,316   |      | $ | 501,213  
|Single-Family Construction Loans |  |             | 192,450   |      |   | 212,772  
|Commercial Real Estate Loans     |  |             | 178,378   |      |   | 146,174  
|Consumer Loans                   |  |             |           |      |   |          
|Home Equity Loans                |  |             | 591,565   |      |   | 654,930  
|Other Consumer Loans             |  |             | 20,460    |      |   | 11,220   
|Residential Mortgage Loans       |  |             | 316,822   |      |   | 311,324  
|                                 |  |             |           |      |   |          
|                                 |  | $           | 1,814,991 |      | $ | 1,837,633
|                                 |  |             |           |      |   |          



Loans are net of
deferred costs and net unearned discounts of $8,591,000 and $8,886,000 at December 31, 2003 and 2002.



The weighted average yield on loans was 5.37 percent and 5.86 percent at December 31, 2003 and 2002.



Home equity loans totaling $334,638,000, $269,534,000, and $257,698,000 were
sold in 2003, 2002, and 2001, respectively. The Bank had $68,605,000, $50,072,000, and $34,756,000 in home equity loans held for sale at December 31, 2003, 2002, and 2001, respectively. The Bank sold $1,439,000, $314,000, and $2,395,000 of
residential loans in 2003, 2002, and 2001. The Bank had $108,000 of residential mortgage loans classified as held for sale at December 31, 2001.



During 2003, 2002, and 2001, the Bank transferred $6,783,000, $15,980,000, and $14,450,000 from loans to other real estate owned.



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FIRST INDIANA CORPORATION AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



The geographic distribution of loans at December 31, 2003,
is presented below.



|                            |  |         |  
|--------------------------- |  | ------- | -
|Location                    |  | Percent |  
|Indiana                     |  | 47      | %
|Contiguous States           |  | 6       |  
|North Carolina              |  | 9       |  
|Florida                     |  | 6       |  
|Arizona                     |  | 5       |  
|California                  |  | 7       |  
|Other States (less than 5%) |  | 20      |  
|                            |  |         |  
|Total                       |  | 100     | %
|                            |  |         |  



A loan is 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. Certain loans, such as small-balance homogeneous loans (e.g., consumer and residential mortgage
loans), are exempt from impairment determinations for disclosure purposes. 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. 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.



Information relating to the Banks impaired loans is outlined in the tables below.



|                                                  |  |             |        |      |   |       
|------------------------------------------------- |  | ----------- | ------ | ---- | - | ------
|                                                  |  | December 31
|(Dollars in Thousands)                            |  | 2003        |        | 2002
|Impaired Loans with Related Specific Allowance    |  | $           | 493    |      | $ | 8,676 
|Impaired Loans with No Related Specific Allowance |  |             | 20,897 |      |   | 17,903
|                                                  |  |             |        |      |   |       
|Total Impaired Loans                              |  | $           | 21,390 |      | $ | 26,579
|                                                  |  |             |        |      |   |       
|                                                  |  |            
|Specific Allowance on Impaired Loans              |  | $           | 493    |      | $ | 1,500 
|                                                  |  |             |        |      |   |       



|                                             |  |                         |        |      |   |        |  |   |       
|-------------------------------------------- |  | ----------------------- | ------ | ---- | - | ------ |  | - | ------
|                                             |  | Years Ended December 31
|                                             |  | 2003                    |        | 2002 |   | 2001  
|Average Balance of Impaired Loans            |  | $                       | 22,573 |      | $ | 17,252 |  | $ | 15,330
|Interest Income Recognized on Impaired Loans |  |                         |       |      |   |       |  |   |      



Non-accrual loans
totaled $31,004,000 on December 31, 2003, and $38,458,000 on December 31, 2002. Loans past due 90 days or more and still accruing interest totaled $4,098,000 on December 31, 2003, and $4,628,000 on December 31, 2002.



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



(7)    Allowance for Loan Losses



A summary of activity in the allowance for loan losses for the three years
ended December 31, 2003, follows.



|                                          |  |      |         |   |      |   |         |      |  |   |         |  
|----------------------------------------- |  | ---- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|(Dollars in Thousands)                    |  | 2003 |         |   | 2002 |   |         | 2001 | 
|Balance at Beginning of Year              |  | $    | 44,469  |   |      | $ | 37,135  |      |  | $ | 33,578  |  
|Charge-Offs                               |  |      | (33,841 | ) |      |   | (14,656 | )    |  |   | (12,771 | )
|Recoveries                                |  |      | 2,328   |   |      |   | 1,234   |      |  |   | 1,100   |  
|                                          |  |      |         |   |      |   |         |      |  |   |         |  
|Net Charge-Offs                           |  |      | (31,513 | ) |      |   | (13,422 | )    |  |   | (11,671 | )
|Provision for Loan Losses                 |  |      | 38,974  |   |      |   | 20,756  |      |  |   | 15,228  |  
|Addition Related to Bank Acquired         |  |      | 1,709   |   |      |   |        |      |  |   |        |  
|Transfer to Reserve for Letters of Credit |  |      | (442    | ) |      |   |        |      |  |   |        |  
|                                          |  |      |         |   |      |   |         |      |  |   |         |  
|Balance at End of Year                    |  | $    | 53,197  |   |      | $ | 44,469  |      |  | $ | 37,135  |  
|                                          |  |      |         |   |      |   |         |      |  |   |         |  



(8)    Premises
and Equipment



|                         |  |             |         |   |      |   |         |  
|------------------------ |  | ----------- | ------- | - | ---- | - | ------- | -
|                         |  | December 31 |        
|(Dollars in Thousands)   |  | 2003        |         |   | 2002 |  
|Land                     |  | $           | 6,117   |   |      | $ | 4,753   |  
|Buildings                |  |             | 12,470  |   |      |   | 9,749   |  
|Leasehold Improvements   |  |             | 1,706   |   |      |   | 1,558   |  
|Furniture and Equipment  |  |             | 23,552  |   |      |   | 29,246  |  
|Accumulated Depreciation |  |             | (18,172 | ) |      |   | (23,778 | )
|                         |  |             |         |   |      |   |         |  
|                         |  | $           | 25,673  |   |      | $ | 21,528  |  
|                         |  |             |         |   |      |   |         |  



(9)    Interest-Bearing Deposits



|                                            |  |             |           |      |   |          
|------------------------------------------- |  | ----------- | --------- | ---- | - | ---------
|                                            |  | December 31
|(Dollars in Thousands)                      |  | 2003        |           | 2002
|Interest-Bearing Demand                     |  | $           | 217,353   |      | $ | 179,751  
|Savings                                     |  |             | 400,804   |      |   | 398,752  
|Certificates of Deposit under $100,000      |  |             | 312,051   |      |   | 310,370  
|Certificates of Deposit $100,000 or Greater |  |             | 323,953   |      |   | 269,942  
|                                            |  |             |           |      |   |          
|                                            |  | $           | 1,254,161 |      | $ | 1,158,815
|                                            |  |             |           |      |   |          



Following is a table
of maturities for certificates of deposit outstanding at December 31, 2003.



|                       |  |        |        
|---------------------- |  | ------ | -------
|(Dollars in Thousands) |  | Amount
|2004                   |  | $      | 456,199
|2005                   |  |        | 91,667 
|2006                   |  |        | 21,861 
|2007                   |  |        | 59,442 
|2008                   |  |        | 6,640  
|Thereafter             |  |        | 195    
|                       |  |        |        
|                       |  | $      | 636,004
|                       |  |        |        



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FIRST INDIANA CORPORATION AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Cash paid during the year for interest on deposits,
advances, and other borrowed money was $37,563,000, $53,658,000, and $86,027,000 for 2003, 2002, and 2001, respectively.



(10)    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.



|                                      |  |      |         |   |      |   |         |      |  |   |         |  
|------------------------------------- |  | ---- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|(Dollars in Thousands)                |  | 2003 |         |   | 2002 |   |         | 2001 | 
|Balance at Year-End                   |  | $    | 147,074 |   |      | $ | 170,956 |      |  | $ | 121,082 |  
|Average during the Year               |  |      | 132,886 |   |      |   | 126,501 |      |  |   | 112,991 |  
|Maximum Month-End Balance             |  |      | 156,912 |   |      |   | 175,114 |      |  |   | 132,740 |  
|Weighted Average Rate during the Year |  |      | 1.05    | % |      |   | 1.63    | %    |  |   | 3.81    | %
|Weighted Average Rate at Year-End     |  |      | 0.85    |   |      |   | 1.16    |      |  |   | 1.77    |  



At December 31, 2003,
the Bank had $54,000,000 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, 2003, the Corporation had a $10,000,000
unused revolving line of credit on which it paid $25,000 in fees in 2003.



(11)    Federal Home Loan Bank Advances and Subordinated Debt



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, 2003, were as follows.



|                       |  |        |        
|---------------------- |  | ------ | -------
|(Dollars in Thousands) |  | Amount
|2004                   |  | $      | 172,000
|2005                   |  |        | 52,649 
|2006                   |  |        | 211    
|2007                   |  |        |       
|2008                   |  |        | 10,000 
|Thereafter             |  |        | 30,628 
|                       |  |        |        
|                       |  | $      | 265,488
|                       |  |        |        



FHLB advances
outstanding at December 31, 2003, mature from February 2004 through May 2019. Of the $265,488,000 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 1.10 percent to 8.57 percent. The weighted average interest rate at December 31, 2003 and 2002, was 3.30 percent and 3.13 percent, respectively. The FHLB advances are collateralized with FHLB stock and other qualifying assets. As of
December 31, 2003 and 2002, 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.



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FIRST INDIANA CORPORATION AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



The following table is a summary of subordinated debt at
December 31.



|                                     |  |      |        |      |   |       
|------------------------------------ |  | ---- | ------ | ---- | - | ------
|(Dollars in Thousands)               |  | 2003 |        | 2002
|Subordinated Notes due November 2013 |  | $    | 22,167 |      | $ |      
|Subordinated Notes due October 2032  |  |      | 12,211 |      |   | 12,169
|Subordinated Notes due June 2033     |  |      | 12,156 |      |   |      
|                                     |  |      |        |      |   |       
|                                     |  | $    | 46,534 |      | $ | 12,169
|                                     |  |      |        |      |   |       



In November 2003, the
Corporation issued $22,500,000 in ten-year subordinated notes with a 7.50 percent fixed rate of interest. Interest is payable semi-annually and the notes qualify as Tier 2 capital for regulatory purposes.



In October 2002, the Corporation formed First Indiana Capital Trust I for the
purpose of issuing $12,000,000 of trust preferred securities through a private placement. This unconsolidated grantor trusts sole assets are junior subordinated notes issued by the Corporation. The notes have a stated term of 30 years (October
30, 2032) but may be redeemed at par in part or in full beginning October 30, 2007, and any calendar quarter end date thereafter, subject to approval by the Federal Reserve Board. The notes have a fixed rate of interest of 6.92 percent through
October 30, 2007, and a floating rate of interest, reset quarterly, equal to the London interbank offered rate (LIBOR) plus 3.35 percent thereafter to maturity. Interest is payable quarterly and the distribution rate of the trust
preferred securities is equal to the interest rate of the notes.



In June 2003, First Indiana formed First Indiana Capital Statutory Trust II for the purpose of issuing $12,000,000 in trust preferred securities through a private placement. The unconsolidated grantor trust invested the proceeds of such
trust preferred securities in junior subordinated notes of the Corporation. These trust preferred securities were issued at a discount of $240,000. The sole assets of the grantor trust are the notes held by the grantor trust. The notes have a stated
term of 30 years (June 26, 2033) but may be redeemed at par in part or in full beginning June 26, 2008, and quarterly thereafter subject to approval by the Federal Reserve Board. The notes have a fixed rate of interest of 5.55 percent through June
26, 2008, and a floating rate of interest, reset quarterly, equal to LIBOR plus 3.10 percent thereafter to maturity. Interest on the notes is payable quarterly in arrears. The distribution rate on the trust preferred securities equals the interest
rate of the notes.



In connection with the notes issued to
Trust I and Trust II, the Corporation has the right to defer payment of interest on the notes at any time or from time-to-time for a period not to exceed five years provided that no extension period may extend beyond the stated maturity of the
notes. During any such extension period, distributions on the trust preferred securities will also be deferred and First Indianas ability to pay dividends on its Common Stock will be restricted.



With respect to Trust I and Trust II, the trust preferred securities are
subject to mandatory redemption upon repayment of the notes at their stated maturity dates or their earlier redemption at a redemption price equal to their liquidation amount plus accrued distributions to the date fixed for redemption and the
premium, if any, paid by the Corporation upon concurrent repayment of the notes.



Periodic cash payments and payments upon liquidation or redemption with respect to trust preferred securities are guaranteed by First Indiana to the extent of funds held by the grantor trust (the Preferred
Securities Guarantee). The Preferred Securities Guarantee, when taken together with the Corporations other obligations, including its obligations under the notes, will constitute a full and unconditional guarantee, on a subordinated
basis, by the Corporation of payments due on the trust preferred securities.



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



The trust preferred securities qualify as Tier 1 capital
of the Corporation for regulatory capital purposes. The Corporation formed statutory trusts for the purpose of issuing trust preferred securities. In December 2003, FASB issued a revision of FIN 46 that required the deconsolidation of these
statutory trusts. In July 2003, the Board of Governors of the Federal Reserve System issued a supervisory letter instructing bank holding companies to continue to include the trust preferred securities in their Tier 1 capital for regulatory capital
purposes until notice is given to the contrary. The Federal Reserve intends to review the regulatory implications of any accounting treatment changes and, if necessary or warranted, provide further appropriate guidance. There can be no assurance
that the Federal Reserve will continue to allow institutions to include trust preferred securities in Tier 1 capital for regulatory capital purposes. At December 31, 2003 and 2002, the balance of trust preferred securities, net of discount was
$24,367,000 and $12,169,000, respectively.



(12)    Income Taxes



Income tax expense attributable to earnings before income taxes consists of the following.



|                             |  |         |        |          |   |        |       |  |   |        |  
|---------------------------- |  | ------- | ------ | -------- | - | ------ | ----- |  | - | ------ | -
|(Dollars in Thousands)       |  | Current |        | Deferred |   |        | Total | 
|Year Ended December 31, 2003 |  |         |        |          |   |        |       |  |   |        |  
|Federal                      |  | $       | 6,478  |          | $ | (4,943 | )     |  | $ | 1,535  |  
|State and Local              |  |         | 636    |          |   | (848   | )     |  |   | (212   | )
|                             |  |         |        |          |   |        |       |  |   |        |  
|                             |  | $       | 7,114  |          | $ | (5,791 | )     |  | $ | 1,323  |  
|                             |  |         |        |          |   |        |       |  |   |        |  
|Year Ended December 31, 2002 |  |         |        |          |   |        |       |  |   |        |  
|Federal                      |  | $       | 14,975 |          | $ | (3,610 | )     |  | $ | 11,365 |  
|State and Local              |  |         | 786    |          |   | (44    | )     |  |   | 742    |  
|                             |  |         |        |          |   |        |       |  |   |        |  
|                             |  | $       | 15,761 |          | $ | (3,654 | )     |  | $ | 12,107 |  
|                             |  |         |        |          |   |        |       |  |   |        |  
|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 |  
|                             |  |         |        |          |   |        |       |  |   |        |  



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



|                       |  |                         |   |  |      |   |  |      |  
|---------------------- |  | ----------------------- | - |  | ---- | - |  | ---- | -
|                       |  | Years Ended December 31 |  
|                       |  | 2003                    |   |  | 2002 |   |  | 2001 |  
|Statutory Rate         |  | 35.0                    | % |  | 35.0 | % |  | 35.0 | %
|State Income Taxes     |  | (3.6                    | ) |  | 1.5  |   |  | 2.2  |  
|Goodwill               |  |                        |   |  |     |   |  | 0.9  |  
|Nondeductible Expenses |  | 3.3                     |   |  | 0.3  |   |  | 0.2  |  
|Other                  |  | (0.4                    | ) |  | (0.4 | ) |  | (0.3 | )
|                       |  |                         |   |  |      |   |  |      |  
|Effective Rate         |  | 34.3                    | % |  | 36.4 | % |  | 38.0 | %
|                       |  |                         |   |  |      |   |  |      |  



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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.



|                                |  |             |        |      |   |       
|------------------------------- |  | ----------- | ------ | ---- | - | ------
|                                |  | December 31
|(Dollars in Thousands)          |  | 2003        |        | 2002
|Deferred Tax Assets             |  |             |        |      |   |       
|Allowance for Loan Losses       |  | $           | 21,652 |      | $ | 16,998
|Pension and Retirement Benefits |  |             | 4,294  |      |   | 3,873 
|Interest Credited               |  |             | 794    |      |   | 800   
|Premises and Equipment          |  |             | 396    |      |   | 596   
|Accrued Compensation            |  |             | 671    |      |   |      
|Loans Held for Sale             |  |             | 1,856  |      |   | 982   
|Non-Accrual of Interest         |  |             | 1,057  |      |   | 720   
|Deposits                        |  |             | 239    |      |   |      
|Other                           |  |             | 162    |      |   | 241   
|                                |  |             |        |      |   |       
|                                |  |             | 31,121 |      |   | 24,210
|                                |  |             |        |      |   |       
|Deferred Tax Liabilities        |  |             |        |      |   |       
|Loan Servicing Rights           |  |             | 2,402  |      |   | 3,642 
|FHLB Stock Dividends            |  |             | 914    |      |   | 538   
|Net Deferred Loan Fees          |  |             | 3,752  |      |   | 3,706 
|Unrealized Gain on Investments  |  |             | 1,143  |      |   | 3,032 
|Core Deposit Intangible         |  |             | 1,587  |      |   |      
|Other                           |  |             | 273    |      |   | 30    
|                                |  |             |        |      |   |       
|                                |  |             | 10,071 |      |   | 10,948
|                                |  |             |        |      |   |       
|Net Deferred Tax Assets         |  | $           | 21,050 |      | $ | 13,262
|                                |  |             |        |      |   |       



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 assets 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 $7,173,000,
$14,402,000, and $13,725,000 for 2003, 2002, and 2001, respectively.



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FIRST INDIANA CORPORATION AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



(13)    Shareholders Equity, Regulatory
Capital, and Dividend Restrictions



In April 2003, the
Corporations Board of Directors authorized the repurchase from time-to-time of up to $10,000,000 in the Corporations outstanding common stock. At December 31, 2003, $2,038,000 of outstanding common stock had been repurchased 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. The following tables show the Corporations and
the Banks compliance with all capital requirements at December 31, 2003, and December 31, 2002.



|                                            |  |                   |         |       |                         |   |        |                        |         |  |      |        |  |       |         |  |       |  
|------------------------------------------- |  | ----------------- | ------- | ----- | ----------------------- | - | ------ | ---------------------- | ------- |  | ---- | ------ |  | ----- | ------- |  | ----- | -
|                                            |  | December 31, 2003 |        
|                                            |  | Actual            |         |       | Minimum CapitalAdequacy |   |        | To be Well-Capitalized |        
|(Dollars in Thousands)                      |  | Amount            |         | Ratio |                         |   | Amount |                        | Ratio   |  |      | Amount |  | Ratio |        
|Leverage (Tier 1 Capital to Average Assets) |  |                   |         |       |                         |   |        |                        |         |  |      |        |  |       |         |  |       |  
|First Indiana Corporation                   |  | $                 | 189,034 |       | 8.71                    | % |        | $                      | 86,848  |  | 4.00 | %      |  |       | N/A     |  | N/A   |  
|First Indiana Bank, N.A.                    |  |                   | 172,184 |       | 8.06                    |   |        |                        | 85,442  |  | 4.00 |        |  | $     | 106,803 |  | 5.00  | %
|Tier 1 Capital to Risk-Weighted Assets      |  |                   |         |       |                         |   |        |                        |         |  |      |        |  |       |         |  |       |  
|First Indiana Corporation                   |  | $                 | 189,034 |       | 10.15                   | % |        | $                      | 74,462  |  | 4.00 | %      |  |       | N/A     |  | N/A   |  
|First Indiana Bank, N.A.                    |  |                   | 172,184 |       | 9.29                    |   |        |                        | 74,113  |  | 4.00 |        |  | $     | 111,169 |  | 6.00  | %
|Total Capital to Risk-Weighted Assets       |  |                   |         |       |                         |   |        |                        |         |  |      |        |  |       |         |  |       |  
|First Indiana Corporation                   |  | $                 | 234,845 |       | 12.62                   | % |        | $                      | 148,924 |  | 8.00 | %      |  |       | N/A     |  | N/A   |  
|First Indiana Bank, N.A.                    |  |                   | 195,721 |       | 10.56                   |   |        |                        | 148,226 |  | 8.00 |        |  | $     | 185,282 |  | 10.00 | %



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FIRST INDIANA CORPORATION AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



|                                            |  |                   |         |       |                         |   |        |                        |         |  |      |        |  |       |         |  |       |  
|------------------------------------------- |  | ----------------- | ------- | ----- | ----------------------- | - | ------ | ---------------------- | ------- |  | ---- | ------ |  | ----- | ------- |  | ----- | -
|                                            |  | December 31, 2002 |        
|                                            |  | Actual            |         |       | Minimum CapitalAdequacy |   |        | To be Well-Capitalized |        
|                                            |  | Amount            |         | Ratio |                         |   | Amount |                        | Ratio   |  |      | Amount |  | Ratio |        
|Leverage (Tier 1 Capital to Average Assets) |  |                   |         |       |                         |   |        |                        |         |  |      |        |  |       |         |  |       |  
|First Indiana Corporation                   |  | $                 | 215,243 |       | 10.10                   | % |        | $                      | 85,241  |  | 4.00 | %      |  |       | N/A     |  | N/A   |  
|First Indiana Bank, N.A.                    |  |                   | 176,597 |       | 8.31                    |   |        |                        | 84,982  |  | 4.00 |        |  | $     | 106,228 |  | 5.00  | %
|Tier 1 Capital to Risk-Weighted Assets      |  |                   |         |       |                         |   |        |                        |         |  |      |        |  |       |         |  |       |  
|First Indiana Corporation                   |  | $                 | 215,243 |       | 11.26                   | % |        | $                      | 76,470  |  | 4.00 | %      |  |       | N/A     |  | N/A   |  
|First Indiana Bank, N.A.                    |  |                   | 176,597 |       | 9.27                    |   |        |                        | 76,218  |  | 4.00 |        |  | $     | 114,327 |  | 6.00  | %
|Total Capital to Risk-Weighted Assets       |  |                   |         |       |                         |   |        |                        |         |  |      |        |  |       |         |  |       |  
|First Indiana Corporation                   |  | $                 | 239,394 |       | 12.52                   | % |        | $                      | 152,941 |  | 8.00 | %      |  |       | N/A     |  | N/A   |  
|First Indiana Bank, N.A.                    |  |                   | 200,670 |       | 10.53                   |   |        |                        | 152,437 |  | 8.00 |        |  | $     | 190,546 |  | 10.00 | %



The Corporation is not
subject to any bank 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. Due to the payment of an $11,000,000 special dividend in January 2003 (to partially fund the
acquisition of MetroBanCorp), the Bank sought and received approval from the Office of the Comptroller of the Currency to make its regularly scheduled dividend payments in 2003, not to exceed $28,571,000. The Bank paid dividends of $21,440,000 to
the Corporation in 2003. The Bank sought and received approval from the OCC to make its regularly scheduled dividend payments in 2004, not to exceed $19,000,000. The Bank will likely be required to seek OCC approval prior to making dividend payments
in 2005.



(14)    Commitments and Contingencies



At December 31, 2003 and 2002, the Bank had the following
outstanding commitments to fund loans.



|                                 |  |             |         |      |   |        
|-------------------------------- |  | ----------- | ------- | ---- | - | -------
|                                 |  | December 31
|(Dollars in Thousands)           |  | 2003        |         | 2002
|Commitments to Fund:             |  |             |         |      |   |        
|Business Loans                   |  | $           | 165,278 |      | $ | 164,013
|Consumer Loans                   |  |             |         |      |   |        
|Home Equity Loans                |  |             | 183,105 |      |   | 170,157
|Other                            |  |             | 1,350   |      |   | 594    
|Residential Mortgage Loans       |  |             | 1,548   |      |   | 4,856  
|Single-Family Construction Loans |  |             | 182,580 |      |   | 160,551
|Commercial Real Estate Loans     |  |             | 89,228  |      |   | 96,852 
|                                 |  |             |         |      |   |        
|                                 |  | $           | 623,089 |      | $ | 597,023
|                                 |  |             |         |      |   |        



Of the commitments to
fund loans at December 31, 2003, substantially all are commitments to fund variable-rate products.



At December 31, 2003, the Bank had approximately $8,836,000 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.



50



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##### Table of Contents

FIRST INDIANA CORPORATION AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



In November 2002, the Financial Accounting Standards Board
issued Interpretation No. 45, Guarantors Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others, which requires additional disclosures by a guarantor about its obligations
under certain guarantees that it has issued. FIN 45 also clarifies that a guarantor is required to recognize, at the inception of a guarantee, a liability for the fair value of the obligation undertaken in issuing the guarantee. The most significant
instruments impacted for the Corporation are standby letters of credit.



Standby letters of credit are contingent commitments issued by the Corporation to support the obligations of a customer to a third party. Standby letters of credit are issued to support public and private financing, and other financial or
performance obligations of customers. The credit risk involved in issuing standby letters of credit is the same as that involved in extending loans to customers and, as such, is collateralized when necessary.



As of December 31, 2003, the Corporation had issued $51,284,000 in standby
letters of credit, predominately with remaining terms of three years or less. Of these commitments, $45,623,000 have been issued or renewed since December 31, 2002, and, in accordance with FIN 45, the Corporation has recognized a liability at
December 31, 2003, of $216,000 relating to these commitments.



At December 31, 2003, the Corporation had a reserve of $442,000 for standby letters of credit. Prior to the adoption of FIN 45, commitments related to standby letters of credit were considered by the Corporation in determining the adequacy
of the allowance for loan losses.



The Bank maintains back up
letter of credit facility agreements with rated financial institutions covering certain of the Banks letters of credit. Due to a return on asset performance target in the back up facilities not being met at June 30, 2003, September 30, 2003,
and December 31, 2003, the Bank has pledged collateral totaling $40,763,000 at December 31, 2003.



Rental ObligationsObligations under non-cancelable operating leases for office space at December 31, 2003, require minimum future payments of
$2,486,000 in 2004, $2,308,000 in 2005, $2,221,000 in 2006, $2,188,000 in 2007, $2,178,000 in 2008, and $7,403,000 thereafter. Minimum future payments have not been reduced by minimum sublease rental income of $75,000 receivable in the future
non-cancelable subleases. Rental expense on office buildings was $2,815,000, $2,501,000, and $2,384,000 for 2003, 2002, and 2001, respectively.



Other Contingencies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.



(15)    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, plan contributions of $1,793,000 and $1,068,000 are required for the plan years beginning
July 1, 2003, and July 1, 2002, respectively. The accrued contribution liability was $117,000 and $530,000 at December 31, 2003, and December 31, 2002 respectively. First Indianas pension expense under this plan was $1,437,000, $537,000, and
$15,000 for 2003, 2002, and 2001, respectively.



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



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FIRST INDIANA CORPORATION AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



employee contributions in such uniform amounts or percentages as annually
determined by the employer. The Corporations expenses under both plans for matching contributions in 2003, 2002, and 2001 were $554,000, $500,000, and $463,000, respectively. In addition, Somerset made discretionary contributions to its plan
for the calendar years 2003, 2002, and 2001 of $220,000, $216,000, and $185,000 (equal to three percent of each participants compensation up to $200,000 in 2003, $200,000 in 2002, and $170,000 in 2001).



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. Additionally, the Bank maintains non-qualified retirement
plans for the advisory directors of its Mooresville and Rushville divisions. 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.



|                                                                                              |  |                        |         |   |      |   |        |      |  |   |        |  
|--------------------------------------------------------------------------------------------- |  | ---------------------- | ------- | - | ---- | - | ------ | ---- |  | - | ------ | -
|                                                                                              |  | Year Ended December 31 |        
|(Dollars in Thousands)                                                                        |  | 2003                   |         |   | 2002 |   |        | 2001 | 
|Change in Projected Benefit Obligation                                                        |  |                        |         |   |      |   |        |      |  |   |        |  
|Projected Benefit Obligation at the Beginning of the Year                                     |  | $                      | 9,921   |   |      | $ | 9,434  |      |  | $ | 8,494  |  
|Service Cost                                                                                  |  |                        | 285     |   |      |   | 236    |      |  |   | 227    |  
|Interest Cost                                                                                 |  |                        | 613     |   |      |   | 622    |      |  |   | 624    |  
|Actuarial (Gain) or Loss                                                                      |  |                        | 413     |   |      |   | (162   | )    |  |   | 289    |  
|Benefits Paid                                                                                 |  |                        | (488    | ) |      |   | (209   | )    |  |   | (200   | )
|                                                                                              |  |                        |         |   |      |   |        |      |  |   |        |  
|Projected Benefit Obligation at the End of the Year                                           |  | $                      | 10,744  |   |      | $ | 9,921  |      |  | $ | 9,434  |  
|                                                                                              |  |                        |         |   |      |   |        |      |  |   |        |  
|Accumulated Benefit Obligation at the End of the Year                                         |  | $                      | 8,444   |   |      | $ | 8,143  |      |  | $ | 7,684  |  
|                                                                                              |  |                        |         |   |      |   |        |      |  |   |        |  
|Change in Plan Assets                                                                         |  |                        |         |   |      |   |        |      |  |   |        |  
|Fair Value of Plan Assets at the Beginning of the Year                                        |  | $                      |        |   |      | $ |       |      |  | $ |       |  
|Benefits Paid                                                                                 |  |                        | (488    | ) |      |   | (209   | )    |  |   | (200   | )
|Employer Contributions                                                                        |  |                        | 488     |   |      |   | 209    |      |  |   | 200    |  
|                                                                                              |  |                        |         |   |      |   |        |      |  |   |        |  
|Fair Value of Assets at the End of the Year                                                   |  | $                      |        |   |      | $ |       |      |  | $ |       |  
|                                                                                              |  |                        |         |   |      |   |        |      |  |   |        |  
|Net Amount Recognized                                                                         |  |                        |         |   |      |   |        |      |  |   |        |  
|Funded Status                                                                                 |  | $                      | (10,744 | ) |      | $ | (9,921 | )    |  | $ | (9,434 | )
|Unrecognized Transition Obligation (Asset)                                                    |  |                        | 110     |   |      |   | 122    |      |  |   | 134    |  
|Unrecognized Prior Service Cost                                                               |  |                        |        |   |      |   |       |      |  |   |       |  
|Unrecognized Net (Gain) or Loss                                                               |  |                        | 1,303   |   |      |   | 890    |      |  |   | 1,052  |  
|                                                                                              |  |                        |         |   |      |   |        |      |  |   |        |  
|Net Amount Recognized                                                                         |  | $                      | (9,331  | ) |      | $ | (8,909 | )    |  | $ | (8,248 | )
|                                                                                              |  |                        |         |   |      |   |        |      |  |   |        |  
|Amounts Recognized in the Statement of Financial Position                                     |  |                        |         |   |      |   |        |      |  |   |        |  
|Accrued Benefit Cost                                                                          |  | $                      | (9,331  | ) |      | $ | (8,909 | )    |  | $ | (8,248 | )
|                                                                                              |  |                        |         |   |      |   |        |      |  |   |        |  
|Information for Pension Plans with an Accumulated Benefit Obligation in Excess of Plan Assets |  |                        |         |   |      |   |        |      |  |   |        |  
|Projected Benefit Obligation                                                                  |  | $                      | 10,744  |   |      | $ | 9,921  |      |  | $ | 9,434  |  
|Accumulated Benefit Obligation                                                                |  |                        | 8,444   |   |      |   | 8,143  |      |  |   | 7,684  |  
|Fair Value of Plan Assets                                                                     |  |                        |        |   |      |   |       |      |  |   |       |  
|                                                                                              |  |                        |        
|Weighted Average Assumptions at the End of the Year                                           |  |                        |         |   |      |   |        |      |  |   |        |  
|Discount Rate                                                                                 |  |                        | 6.00    | % |      |   | 6.50   | %    |  |   | 7.00   | %
|Rate of Compensation Increase                                                                 |  |                        | 5.00    | % |      |   | 5.00   | %    |  |   | 5.00   | %



52



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FIRST INDIANA CORPORATION AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Net periodic pension cost included in the results of
operations is as follows.



|                                                                     |  |                        |      |   |      |   |      |      |  |   |      |  
|-------------------------------------------------------------------- |  | ---------------------- | ---- | - | ---- | - | ---- | ---- |  | - | ---- | -
|                                                                     |  | Year Ended December 31 |     
|(Dollars in Thousands)                                               |  | 2003                   |      |   | 2002 |   |      | 2001 | 
|Service Cost                                                         |  | $                      | 285  |   |      | $ | 236  |      |  | $ | 227  |  
|Interest Cost                                                        |  |                        | 613  |   |      |   | 622  |      |  |   | 624  |  
|Expected Return on Plan Assets                                       |  |                        |     |   |      |   |     |      |  |   |     |  
|Amortization of Net (Gain) or Loss                                   |  |                        |     |   |      |   |     |      |  |   |     |  
|Amortization of Prior Service Cost                                   |  |                        |     |   |      |   |     |      |  |   |     |  
|Amortization of Transition Obligation/(Asset)                        |  |                        | 12   |   |      |   | 12   |      |  |   | 12   |  
|                                                                     |  |                        |      |   |      |   |      |      |  |   |      |  
|Total FAS 87 Net Periodic Pension Cost                               |  |                        | 910  |   |      |   | 870  |      |  |   | 863  |  
|FAS 88 Charges / (Credits)                                           |  |                        |      |   |      |   |      |      |  |   |      |  
|Settlement                                                           |  |                        |     |   |      |   |     |      |  |   |     |  
|Curtailment                                                          |  |                        |     |   |      |   |     |      |  |   |     |  
|Special Termination Benefits                                         |  |                        |     |   |      |   |     |      |  |   |     |  
|                                                                     |  |                        |      |   |      |   |      |      |  |   |      |  
|Total                                                                |  |                        |     |   |      |   |     |      |  |   |     |  
|                                                                     |  |                        |      |   |      |   |      |      |  |   |      |  
|Total Net Periodic Pension Cost                                      |  | $                      | 910  |   |      | $ | 870  |      |  | $ | 863  |  
|                                                                     |  |                        |      |   |      |   |      |      |  |   |      |  
|Additional Information                                               |  |                        |      |   |      |   |      |      |  |   |      |  
|Increase in Minimum Liability Included in Other Comprehensive Income |  | $                      |     |   |      | $ |     |      |  | $ |     |  
|Weighted Average Assumptions                                         |  |                        |      |   |      |   |      |      |  |   |      |  
|Discount Rate                                                        |  |                        | 6.50 | % |      |   | 7.00 | %    |  |   | 7.00 | %
|Expected Return on Plan Assets                                       |  |                        | N/A  |   |      |   | N/A  |      |  |   | N/A  |  
|Rate of Compensation Increase                                        |  |                        | 5.00 | % |      |   | 5.00 | %    |  |   | 5.00 | %



Postretirement
Benefits Other Than PensionThe projected benefit obligations for postretirement medical, dental, and life insurance programs for Board members and certain officers of acquired institutions are as follows.



|                                                                           |  |                        |        |   |      |   |        |      |  |   |        |  
|-------------------------------------------------------------------------- |  | ---------------------- | ------ | - | ---- | - | ------ | ---- |  | - | ------ | -
|                                                                           |  | Year Ended December 31 |       
|(Dollars in Thousands)                                                     |  | 2003                   |        |   | 2002 |   |        | 2001 | 
|Change in Projected Benefit Obligation                                     |  |                        |        |   |      |   |        |      |  |   |        |  
|Accumulated Postretirement Benefit Obligation at the Beginning of the Year |  | $                      | 938    |   |      | $ | 842    |      |  | $ | 697    |  
|Service Cost                                                               |  |                        | 12     |   |      |   | 11     |      |  |   | 11     |  
|Interest Cost                                                              |  |                        | 59     |   |      |   | 57     |      |  |   | 54     |  
|Actuarial (Gain) or Loss                                                   |  |                        | 32     |   |      |   | 27     |      |  |   | 80     |  
|Benefits Paid                                                              |  |                        |       |   |      |   |       |      |  |   |       |  
|                                                                           |  |                        |        |   |      |   |        |      |  |   |        |  
|Projected Benefit Obligation at the End of the Year                        |  | $                      | 1,041  |   |      | $ | 937    |      |  | $ | 842    |  
|                                                                           |  |                        |        |   |      |   |        |      |  |   |        |  
|Net Amount Recognized                                                      |  |                        |        |   |      |   |        |      |  |   |        |  
|Funded Status                                                              |  | $                      | (1,041 | ) |      | $ | (937   | )    |  | $ | (842   | )
|Unrecognized Transition Obligation (Asset)                                 |  |                        |       |   |      |   |       |      |  |   |       |  
|Unrecognized Prior Service Cost                                            |  |                        |       |   |      |   |       |      |  |   |       |  
|Unrecognized Net (Gain) or Loss                                            |  |                        | (210   | ) |      |   | (271   | )    |  |   | (333   | )
|                                                                           |  |                        |        |   |      |   |        |      |  |   |        |  
|Net Amount Recognized                                                      |  | $                      | (1,251 | ) |      | $ | (1,208 | )    |  | $ | (1,175 | )
|                                                                           |  |                        |        |   |      |   |        |      |  |   |        |  
|Amounts Recognized in the Statement of Financial Position                  |  |                        |        |   |      |   |        |      |  |   |        |  
|Accrued Benefit Cost                                                       |  | $                      | (1,251 | ) |      | $ | (1,208 | )    |  | $ | (1,175 | )
|                                                                           |  |                        |        |   |      |   |        |      |  |   |        |  
|Weighted Average Assumptions at the End of the Year                        |  |                        |        |   |      |   |        |      |  |   |        |  
|Discount Rate                                                              |  |                        | 6.00   | % |      |   | 6.50   | %    |  |   | 7.00   | %
|Rate of Compensation Increase                                              |  |                        | N/A    |   |      |   | N/A    |      |  |   | N/A    |  
|Assumed Health Care Cost Trend Rates                                       |  |                        |        |   |      |   |        |      |  |   |        |  
|Health Care Trend Rate Assumed for Next Year                               |  |                        | 5.50   | % |      |   | 5.50   | %    |  |   | 5.50   | %
|Ultimate Rate                                                              |  |                        | 5.50   | % |      |   | 5.50   | %    |  |   | 5.50   | %
|Year that the Ultimate Rate is Reached                                     |  |                        | 2003   |   |      |   | 2002   |      |  |   | 2001   |  



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



The accumulated postretirement benefit did not take into
consideration the effect on these programs of the Medicare Prescription Drug Improvement and Modernization Act of 2003 enacted by Congress and signed into law by the President in late 2003. The Corporation is currently reviewing this legislation and
its options to modify benefits provided by these plans. The components of the net periodic benefit cost of postretirement plans are as follows.



|                                                |  |                        |      |   |      |   |      |      |  |   |      |  
|----------------------------------------------- |  | ---------------------- | ---- | - | ---- | - | ---- | ---- |  | - | ---- | -
|                                                |  | Year Ended December 31 |     
|(Dollars in Thousands)                          |  | 2003                   |      |   | 2002 |   |      | 2001 | 
|Service Cost                                    |  | $                      | 12   |   |      | $ | 11   |      |  | $ | 11   |  
|Interest Cost                                   |  |                        | 59   |   |      |   | 57   |      |  |   | 54   |  
|Expected Return on Plan Assets                  |  |                        |     |   |      |   |     |      |  |   |     |  
|Amortization of Net (Gain) or Loss              |  |                        |     |   |      |   |     |      |  |   |     |  
|Amortization of Prior Service Cost              |  |                        |     |   |      |   |     |      |  |   |     |  
|Amortization of Transition Obligation/(Asset)   |  |                        | (28  | ) |      |   | (35  | )    |  |   | (39  | )
|                                                |  |                        |      |   |      |   |      |      |  |   |      |  
|Total Net Periodic Benefit Cost                 |  | $                      | 43   |   |      | $ | 33   |      |  | $ | 26   |  
|                                                |  |                        |      |   |      |   |      |      |  |   |      |  
|Weighted Average Assumptions                    |  |                        |      |   |      |   |      |      |  |   |      |  
|Discount Rate                                   |  |                        | 6.50 | % |      |   | 7.00 | %    |  |   | 7.00 | %
|Expected Return on Plan Assets                  |  |                        | N/A  |   |      |   | N/A  |      |  |   | N/A  |  
|Rate of Compensation Increase                   |  |                        | N/A  |   |      |   | N/A  |      |  |   | N/A  |  
|Assumed Health Care Cost Trend Rates            |  |                        |      |   |      |   |      |      |  |   |      |  
|Health Care Trend Rate Assumed for Current Year |  |                        | 5.50 | % |      |   |      |      |  |   |      |  
|Ultimate Rate                                   |  |                        | 5.50 | % |      |   |      |      |  |   |      |  
|Year that the Ultimate Rate is Reached          |  |                        | 2003 |   |      |   |      |      |  |   |      |  



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.



|                                                        |  |                      |    |          |   |     |  
|------------------------------------------------------- |  | -------------------- | -- | -------- | - | --- | -
|                                                        |  | One Percentage Point |   
|(Dollars in Thousands)                                  |  | Increase             |    | Decrease |  
|Effect on total of service and interest cost components |  | $                    | 6  |          | $ | (5  | )
|Effect on postretirement benefit obligation             |  |                      | 67 |          |   | (62 | )



Fixed Stock Option
PlansUnder the 2002 Stock Incentive Plan, First Indiana is authorized to grant awards (which may be options, restricted stock, or specified other stock-based awards) to its employees, directors, and consultants for up to 2,625,000 shares
of common stock. This includes 1,649,771 shares which may be issued only to the extent they are not issued pursuant to grants made before April 30, 2002, under the following plans that were discontinued on that date: the 1991 First Indiana Stock
Option and Incentive Plan, the First Indiana 1992 Directors Stock Option Plan, the First Indiana Corporation 1998 Stock Incentive Plan, and the Somerset Group, Inc. 1991 and 1998 Stock Incentive Plans. In the case of all options heretofore
granted under the 2002 Plan and the prior plans, the options maximum term has been five years or ten years and each option has fully vested at the end of a period ranging from one to five years from the date of grant. The 2002 Plan authorizes
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. Under the 2002 Plan and the prior 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. Shares exchanged in the swap transaction must
have been held by the optionee for a period of at least six months before the swap transaction. In addition to the options outstanding at December 31, 2003, 712,042 shares of common stock were available for future grants or awards under the 2002
Plan.



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



The following table summarizes information about stock
options outstanding at December 31, 2003.



|                         |  |                                 |  |                                           |  |                                 |       |                                  |         |                                 |   |      
|------------------------ |  | ------------------------------- |  | ----------------------------------------- |  | ------------------------------- | ----- | -------------------------------- | ------- | ------------------------------- | - | -----
|                         |  | Options Outstanding             |  | Options Exercisable                      
|Range of Exercise Prices |  | Outstanding atDecember 31, 2003 |  | WeightedRemainingContractual Life (Years) |  | Weighted Average Exercise Price |       | Exercisable at December 31, 2003 |         | Weighted Average Exercise Price
|$  5.01$10.00           |  | 54,130                          |  | 1.17                                      |  | $                               | 8.03  |                                  | 54,130  |                                 | $ | 8.03 
|10.01  15.00            |  | 303,484                         |  | 2.96                                      |  |                                 | 13.19 |                                  | 266,984 |                                 |   | 12.95
|15.01  20.00            |  | 1,053,924                       |  | 7.43                                      |  |                                 | 18.07 |                                  | 408,666 |                                 |   | 17.92
|20.01  22.00            |  | 34,868                          |  | 5.04                                      |  |                                 | 21.35 |                                  | 29,410  |                                 |   | 21.30
|                         |  |                                 |  |                                           |  |                                 |       |                                  |         |                                 |   |      
|5.01  22.00             |  | 1,446,406                       |  | 6.20                                      |  |                                 | 16.75 |                                  | 759,190 |                                 |   | 15.60
|                         |  |                                 |  |                                           |  |                                 |       |                                  |         |                                 |   |      



A summary of the
status of First Indianas fixed stock option plans as of December 31, 2003, 2002, and 2001, and changes during the years then ended is presented below.



|                                                               |  |        |           |      |                              |      |        |  |   |                              |   |        |   |       |                              |   |           |   |  |   |      
|-------------------------------------------------------------- |  | ------ | --------- | ---- | ---------------------------- | ---- | ------ |  | - | ---------------------------- | - | ------ | - | ----- | ---------------------------- | - | --------- | - |  | - | -----
|                                                               |  | 2003   |           | 2002 |                              | 2001
|                                                               |  | Shares |           |      | WeightedAverageExercisePrice |      | Shares |  |   | WeightedAverageExercisePrice |   | Shares |   |       | WeightedAverageExercisePrice
|Outstanding at Beginning of Year                               |  |        | 1,495,738 |      |                              | $    | 16.43  |  |   | 1,276,769                    |   |        | $ | 14.36 |                              |   | 1,234,751 |   |  | $ | 12.48
|Granted                                                        |  |        | 180,850   |      |                              |      | 18.14  |  |   | 488,208                      |   |        |   | 18.38 |                              |   | 289,283   |   |  |   | 18.71
|Exercised                                                      |  |        | (82,902   | )    |                              |      | 10.84  |  |   | (233,773                     | ) |        |   | 9.01  |                              |   | (197,043  | ) |  |   | 8.56 
|Surrendered                                                    |  |        | (147,280  | )    |                              |      | 18.52  |  |   | (35,466                      | ) |        |   | 17.81 |                              |   | (50,222   | ) |  |   | 15.91
|                                                               |  |        |           |      |                              |      |        |  |   |                              |   |        |   |       |                              |   |           |   |  |   |      
|Outstanding at End of Year                                     |  |        | 1,446,406 |      |                              |      | 16.75  |  |   | 1,495,738                    |   |        |   | 16.43 |                              |   | 1,276,769 |   |  |   | 14.36
|                                                               |  |        |           |      |                              |      |        |  |   |                              |   |        |   |       |                              |   |           |   |  |   |      
|Options Exercisable at Year-End                                |  |        | 759,190   |      |                              |      |        |  |   | 715,869                      |   |        |   |       |                              |   | 732,751   |   |  |   |      
|                                                               |  |        |           |      |                              |      |        |  |   |                              |   |        |   |       |                              |   |           |   |  |   |      
|Weighted Average Fair Value of Options Granted During the Year |  | $      | 3.38      |      |                              |      |        |  | $ | 5.54                         |   |        |   |       |                              | $ | 6.83      |   |  |   |      
|                                                               |  |        |           |      |                              |      |        |  |   |                              |   |        |   |       |                              |   |           |   |  |   |      



The following table
summarizes equity compensation plan information.



|                                                           |  |                                                                                            |  |                                                                           |       |                                                                                                                                         |        
|---------------------------------------------------------- |  | ------------------------------------------------------------------------------------------ |  | ------------------------------------------------------------------------- | ----- | --------------------------------------------------------------------------------------------------------------------------------------- | -------
|                                                           |  | (a)                                                                                        |  | (b)                                                                       |       | (c)                                                                                                                                    
|Plan category                                              |  | Number of securities to be issued upon exerciseof outstanding options,warrants, and rights |  | Weighted-averageexercise price ofoutstanding options,warrants, and rights |       | Number of securities remainingavailable for future issuanceunder equity compensation plans(excluding securities reflected
incolumn (a))
|Equity compensation plans approved by security holders     |  | 1,446,406                                                                                  |  | $                                                                         | 16.75 |                                                                                                                                         | 712,042
|Equity compensation plans not approved by security holders |  |                                                                                           |  |                                                                           |      |                                                                                                                                         |       
|                                                           |  |                                                                                            |  |                                                                           |       |                                                                                                                                         |        
|Total                                                      |  | 1,446,406                                                                                  |  | $                                                                         | 16.75 |                                                                                                                                         | 712,042
|                                                           |  |                                                                                            |  |                                                                           |       |                                                                                                                                         |        



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Performance-Based Stock PlansUnder the 2002
Stock Incentive Plan, First Indiana is authorized to grant awards which may be options, restricted stock, or specified other stock-based awards to employees, directors, and consultants. 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 were subject to forfeiture in the event certain specified performance objectives were not
met by December 31, 2002, and March 31, 2006, respectively. At December 31, 2002, the officer awarded 1,009 shares of restricted stock was no longer employed by First Indiana and the December 31, 2002, performance measures restricting the 45,000
share grants were not met. Consequently 46,009 shares of restricted stock were forfeited and compensation expense in 2002 was reduced by $1,095,000. On January 20, 2003, First Indiana awarded 36,000 shares of restricted stock among three executive
officers. During 2003, 12,000 of these restricted stock shares were forfeited. The remaining 24,000 shares are subject to forfeiture in the event certain specified performance objectives are not met by December 31, 2005. On July 23, 2003, First
Indiana awarded 90,909 shares of restricted stock to an officer. These restricted shares are subject to forfeiture in the event certain specified performance objectives are not met by July 23, 2011. First Indiana expensed $453,000, $(1,095,000), and
$615,000 in 2003, 2002, and 2001, respectively, in connection with restricted stock awards.



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 41 percent of eligible employees participated in the plan in 2003. Under the terms of the Plans, employees and directors can choose to have up to 10 percent of their annual base earnings or all of their directors fees withheld to
purchase the Corporations common stock. The Corporation matches the employee contribution at rates ranging from 20 percent to 50 percent according to the criteria specified within the plan. The contributions are paid to a trustee, who
purchases the Corporations stock bi-weekly at the then prevailing market price. First Indianas matching contributions were $194,000, $209,000, and $261,000 for the years ended 2003, 2002, and 2001, respectively.



(16)    Parent Company Only Statements



|                                           |  |             |         |      |   |        
|------------------------------------------ |  | ----------- | ------- | ---- | - | -------
|Condensed Balance Sheets                   |  | December 31
|(Dollars in Thousands)                     |  | 2003        |         | 2002
|Assets                                     |  |             |         |      |   |        
|Cash and Due from Banks                    |  | $           | 2       |      | $ | 1      
|Certificate of Deposit with the Bank       |  |             | 500     |      |   | 500    
|Due from the Bank                          |  |             | 30,012  |      |   | 29,799 
|Investment in the Bank                     |  |             | 209,348 |      |   | 188,000
|Investment in Somerset                     |  |             | 12,572  |      |   | 11,871 
|Investment in Grantor Trusts               |  |             | 744     |      |   | 372    
|Other Assets                               |  |             | 4,264   |      |   | 3,233  
|                                           |  |             |         |      |   |        
|Total Assets                               |  | $           | 257,442 |      | $ | 233,776
|                                           |  |             |         |      |   |        
|Liabilities                                |  |             |         |      |   |        
|Subordinated Notes                         |  | $           | 46,534  |      | $ | 12,169 
|Other Liabilities                          |  |             | 1,975   |      |   | 396    
|                                           |  |             |         |      |   |        
|Total Liabilities                          |  |             | 48,509  |      |   | 12,565 
|Shareholders Equity                       |  |             | 208,933 |      |   | 221,211
|                                           |  |             |         |      |   |        
|Total Liabilities and Shareholders Equity |  | $           | 257,442 |      | $ | 233,776
|                                           |  |             |         |      |   |        



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



|                                                                                          |  |                         |         |   |      |   |         |      |  |   |         |  
|----------------------------------------------------------------------------------------- |  | ----------------------- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|Condensed Statements of Earnings                                                          |  | Years Ended December 31 |        
|(Dollars in Thousands)                                                                    |  | 2003                    |         |   | 2002 |   |         | 2001 | 
|Income                                                                                    |  |                         |         |   |      |   |         |      |  |   |         |  
|Dividends from the Bank                                                                   |  | $                       | 21,440  |   |      | $ | 22,400  |      |  | $ | 17,948  |  
|Income from Investments                                                                   |  |                         | 47      |   |      |   | 13      |      |  |   | 22      |  
|Non-Interest Income                                                                       |  |                         | 285     |   |      |   | 82      |      |  |   |        |  
|                                                                                          |  |                         |         |   |      |   |         |      |  |   |         |  
|Total Income                                                                              |  |                         | 21,772  |   |      |   | 22,495  |      |  |   | 17,970  |  
|Expense                                                                                   |  |                         |         |   |      |   |         |      |  |   |         |  
|Interest Expense                                                                          |  |                         | 1,532   |   |      |   | 150     |      |  |   |        |  
|Non-Interest Expense                                                                      |  |                         | 4,392   |   |      |   | 1,390   |      |  |   | 3,651   |  
|                                                                                          |  |                         |         |   |      |   |         |      |  |   |         |  
|Total Expense                                                                             |  |                         | 5,924   |   |      |   | 1,540   |      |  |   | 3,651   |  
|                                                                                          |  |                         |         |   |      |   |         |      |  |   |         |  
|Earnings Before Income Taxes                                                              |  |                         | 15,848  |   |      |   | 20,955  |      |  |   | 14,319  |  
|Income Tax Benefit                                                                        |  |                         | (2,106  | ) |      |   | (481    | )    |  |   | (1,163  | )
|                                                                                          |  |                         |         |   |      |   |         |      |  |   |         |  
|Earnings Before Equity in Undistributed Net Earnings of Subsidiaries                      |  |                         | 17,954  |   |      |   | 21,436  |      |  |   | 15,482  |  
|Equity in Undistributed Net Earnings of the Bank                                          |  |                         | (16,126 | ) |      |   | (698    | )    |  |   | 4,174   |  
|Equity in Undistributed Net Earnings of Somerset                                          |  |                         | 701     |   |      |   | 442     |      |  |   | 353     |  
|                                                                                          |  |                         |         |   |      |   |         |      |  |   |         |  
|Net Earnings                                                                              |  | $                       | 2,529   |   |      | $ | 21,180  |      |  | $ | 20,009  |  
|                                                                                          |  |                         |         |   |      |   |         |      |  |   |         |  
|                                                                                          | 
|Condensed Statements of Cash Flows                                                        |  | Years Ended December 31 |        
|(Dollars in Thousands)                                                                    |  | 2003                    |         |   | 2002 |   |         | 2001 | 
|Cash Flows from Operating Activities                                                      |  |                         |         |   |      |   |         |      |  |   |         |  
|Net Earnings                                                                              |  | $                       | 2,529   |   |      | $ | 21,180  |      |  | $ | 20,009  |  
|Adjustments to Reconcile Net Earnings to Net Cash (Used) Provided by Operating Activities |  |                         |         |   |      |   |         |      |  |   |         |  
|Equity in Undistributed Earnings                                                          |  |                         | 15,425  |   |      |   | 256     |      |  |   | (4,527  | )
|Amortization of Restricted Stock Plan                                                     |  |                         | 321     |   |      |   |        |      |  |   | 339     |  
|Forfeiture of Restricted Common Stock                                                     |  |                         |        |   |      |   | (603    | )    |  |   |        |  
|Tax Benefit of Option Compensation                                                        |  |                         | 103     |   |      |   | 641     |      |  |   | 652     |  
|Option Compensation Related to Executive Retirement                                       |  |                         | 324     |   |      |   |        |      |  |   |        |  
|Change in Other Liabilities                                                               |  |                         | 1,579   |   |      |   | 409     |      |  |   | (71     | )
|Change in Due from the Bank and Other Assets                                              |  |                         | (4,645  | ) |      |   | (23,914 | )    |  |   | (3,417  | )
|                                                                                          |  |                         |         |   |      |   |         |      |  |   |         |  
|Net Cash (Used) Provided by Operating Activities                                          |  |                         | 15,636  |   |      |   | (2,031  | )    |  |   | 12,985  |  
|                                                                                          |  |                         |         |   |      |   |         |      |  |   |         |  
|Cash Flows from Investing Activities                                                      |  |                         |         |   |      |   |         |      |  |   |         |  
|Investment in Equity Security                                                             |  |                         | (372    | ) |      |   | (372    | )    |  |   |        |  
|Acquisition of MetroBanCorpNet of Cash Acquired Transferred to Bank                      |  |                         | (36,805 | ) |      |   |        |      |  |   |        |  
|Acquisition of Somerset                                                                   |  |                         | (7      | ) |      |   | (127    | )    |  |   | (279    | )
|                                                                                          |  |                         |         |   |      |   |         |      |  |   |         |  
|Net Cash Used by Investing Activities                                                     |  |                         | (37,184 | ) |      |   | (499    | )    |  |   | (279    | )
|                                                                                          |  |                         |         |   |      |   |         |      |  |   |         |  
|Cash Flows from Financing Activities                                                      |  |                         |         |   |      |   |         |      |  |   |         |  
|Issuance of Subordinated Notes                                                            |  |                         | 34,323  |   |      |   | 12,169  |      |  |   |        |  
|Stock Option Proceeds                                                                     |  |                         | 542     |   |      |   | 1,728   |      |  |   | 1,282   |  
|Purchase of Treasury StockNet                                                            |  |                         | (3,004  | ) |      |   | (1,383  | )    |  |   | (6,011  | )
|Payment for Fractional Shares                                                             |  |                         |        |   |      |   | (11     | )    |  |   |        |  
|Common Stock Issued under Deferred Compensation Plan                                      |  |                         | (35     | ) |      |   | (17     | )    |  |   |        |  
|Dividends Paid                                                                            |  |                         | (10,277 | ) |      |   | (9,956  | )    |  |   | (7,977  | )
|                                                                                          |  |                         |         |   |      |   |         |      |  |   |         |  
|Net Cash (Used) Provided by Financing Activities                                          |  |                         | 21,549  |   |      |   | 2,530   |      |  |   | (12,706 | )
|                                                                                          |  |                         |         |   |      |   |         |      |  |   |         |  
|Net Change in Cash and Cash Equivalents                                                   |  |                         | 1       |   |      |   |        |      |  |   |        |  
|Cash and Cash Equivalents at the Beginning of the Year                                    |  |                         | 501     |   |      |   | 501     |      |  |   | 501     |  
|                                                                                          |  |                         |         |   |      |   |         |      |  |   |         |  
|Cash and Cash Equivalents at the End of the Year                                          |  | $                       | 502     |   |      | $ | 501     |      |  | $ | 501     |  
|                                                                                          |  |                         |         |   |      |   |         |      |  |   |         |  



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FIRST INDIANA CORPORATION AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



(17)    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.



Other Investments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. Capital
securities issued by Trust I and Trust II are valued at cost since they may only be redeemed by the grantor trust that issued them.



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.



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



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Estimated Fair Value of Financial Instruments



|                                            |  |                   |         |                      |   |                 |  |                      |         |  |   |         |  
|------------------------------------------- |  | ----------------- | ------- | -------------------- | - | --------------- |  | -------------------- | ------- |  | - | ------- | -
|                                            |  | December 31, 2003 |         | December 31, 2002    |  
|(Dollars in Thousands)                      |  | Carrying Amount   |         | Estimated Fair Value |   | Carrying Amount |  | Estimated Fair Value |        
|Assets                                      |  |                   |         |                      |   |                 |  |                      |         |  |   |         |  
|Cash and Cash Equivalents                   |  | $                 | 60,305  |                      | $ | 60,305          |  | $                    | 76,050  |  | $ | 76,050  |  
|Securities Available for Sale               |  |                   | 215,453 |                      |   | 215,453         |  |                      | 138,457 |  |   | 138,457 |  
|Other Investments                           |  |                   | 24,957  |                      |   | 24,957          |  |                      | 22,863  |  |   | 22,863  |  
|Loans                                       |  |                   |         |                      |   |                 |  |                      |         |  |   |         |  
|Business                                    |  |                   | 484,867 |                      |   | 486,678         |  |                      | 484,947 |  |   | 485,527 |  
|Consumer                                    |  |                   | 601,562 |                      |   | 605,912         |  |                      | 648,257 |  |   | 648,420 |  
|Residential Mortgage                        |  |                   | 316,166 |                      |   | 318,898         |  |                      | 310,768 |  |   | 314,704 |  
|Single-Family Construction                  |  |                   | 186,652 |                      |   | 186,652         |  |                      | 210,942 |  |   | 210,942 |  
|Commercial Real Estate                      |  |                   | 176,978 |                      |   | 179,703         |  |                      | 145,542 |  |   | 147,229 |  
|Accrued Interest Receivable                 |  |                   | 9,353   |                      |   | 9,353           |  |                      | 10,771  |  |   | 10,771  |  
|Liabilities                                 |  |                   |         |                      |   |                 |  |                      |         |  |   |         |  
|Deposits                                    |  |                   |         |                      |   |                 |  |                      |         |  |   |         |  
|Non-Interest-Bearing Demand Deposits        |  |                   | 235,811 |                      |   | 235,811         |  |                      | 180,389 |  |   | 180,389 |  
|Interest-Bearing Demand Deposits            |  |                   | 217,353 |                      |   | 217,353         |  |                      | 179,751 |  |   | 179,751 |  
|Savings                                     |  |                   | 400,804 |                      |   | 400,804         |  |                      | 398,752 |  |   | 398,752 |  
|Certificates of Deposit under $100,000      |  |                   | 312,051 |                      |   | 323,625         |  |                      | 269,942 |  |   | 273,671 |  
|Certificates of Deposit $100,000 or Greater |  |                   | 323,953 |                      |   | 326,125         |  |                      | 310,370 |  |   | 319,393 |  
|Borrowings                                  |  |                   |         |                      |   |                 |  |                      |         |  |   |         |  
|Short-Term Borrowings                       |  |                   | 147,074 |                      |   | 147,074         |  |                      | 170,956 |  |   | 170,968 |  
|FHLB Advances                               |  |                   | 265,488 |                      |   | 271,144         |  |                      | 346,532 |  |   | 357,875 |  
|Subordinated Notes                          |  |                   | 46,534  |                      |   | 50,190          |  |                      | 12,169  |  |   | 12,169  |  
|                                            |  |                   |         |                     
|Accrued Interest Payable                    |  |                   | 2,156   |                      |   | 2,156           |  |                      | 2,294   |  |   | 2,294   |  
|Off-Balance-Sheet Instruments               |  |                   |         |                      |   |                 |  |                      |         |  |   |         |  
|Commitments to Extend Credit                |  |                   |        |                      |   | 3,338           |  |                      |        |  |   | (912    | )



(18)    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 community bank segment includes the Banks branch network and investment and insurance subsidiary and encompasses the
home equity, installment, and residential loan portfolios. The community bank segment also 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. The consumer finance segment includes the origination, sale, and servicing activities of home equity, installment, and residential loans. The Somerset segment includes all activities of
Somerset, an accounting and consulting firm. FirstTrust Indiana includes the services, fees, and costs of the trust segment. Investment portfolio management is included in the treasury segment. 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 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



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##### Table of Contents

FIRST INDIANA CORPORATION AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



reviewing the earning assets and costing liabilities held by each unit and
assigning an appropriate expense or income offset based on the external cost of funds. The Corporation accounts for intersegment revenues, expenses, and transfers based on estimates of the actual costs to perform the intersegment services.



Segment Reporting(1)



|                                  |  |                |           |   |                       |   |        |            |  |   |          |   |  |          |         |   |             |   |         |                          |  |   |         |   |  |   |           |  
|--------------------------------- |  | -------------- | --------- | - | --------------------- | - | ------ | ---------- |  | - | -------- | - |  | -------- | ------- | - | ----------- | - | ------- | ------------------------ |  | - | ------- | - |  | - | --------- | -
|(Dollars in Thousands)            |  | Community Bank |           |   | Consumer Finance Bank |   |        | FirstTrust |  |   | Somerset |   |  | Treasury |         |   | Non-Segment |   |         | 2003 Consolidated Totals | 
|Average Segment Assets            |  | $              | 1,871,390 |   |                       | $ | 65,879 |            |  | $ | 599      |   |  | $        | 14,538  |   |             | $ | 231,685 |                          |  | $ | 33,655  |   |  | $ | 2,217,746 |  
|Net Interest Income (Expense)(2)  |  |                | 67,281    |   |                       |   | 3,580  |            |  |   | (28      | ) |  |          | 42      |   |             |   | 11,147  |                          |  |   | (5,122  | ) |  |   | 76,900    |  
|Provision for Loan Losses         |  |                | (38,974   | ) |                       |   |       |            |  |   |         |   |  |          |        |   |             |   |        |                          |  |   |        |   |  |   | (38,974   | )
|Non-Interest Income               |  |                | 22,114    |   |                       |   | 11,471 |            |  |   | 3,028    |   |  |          | 11,946  |   |             |   | 88      |                          |  |   | 916     |   |  |   | 49,563    |  
|Intangible Amortization           |  |                | (736      | ) |                       |   |       |            |  |   |         |   |  |          |        |   |             |   |        |                          |  |   |        |   |  |   | (736      | )
|Other Non-Interest Expense        |  |                | (45,794   | ) |                       |   | (8,617 | )          |  |   | (2,340   | ) |  |          | (10,844 | ) |             |   | (1,839  | )                        |  |   | (13,467 | ) |  |   | (82,901   | )
|Intersegment Income (Expense)(3)  |  |                | (8,717    | ) |                       |   | 5,897  |            |  |   |         |   |  |          |        |   |             |   |        |                          |  |   | 2,820   |   |  |   |          |  
|                                  |  |                |           |   |                       |   |        |            |  |   |          |   |  |          |         |   |             |   |         |                          |  |   |         |   |  |   |           |  
|Earnings (Loss) before Income Tax |  | $              | (4,826    | ) |                       | $ | 12,331 |            |  | $ | 660      |   |  | $        | 1,144   |   |             | $ | 9,396   |                          |  | $ | (14,853 | ) |  | $ | 3,852     |  
|                                  |  |                |           |   |                       |   |        |            |  |   |          |   |  |          |         |   |             |   |         |                          |  |   |         |   |  |   |           |  
|                                  |  |                |           |   |                       |   |       
|                                  |  | Community Bank |           |   | Consumer Finance Bank |   |        | FirstTrust |  |   | Somerset |   |  | Treasury |         |   | Non-Segment |   |         | 2002 Consolidated Totals | 
|Average Segment Assets            |  | $              | 1,823,246 |   |                       | $ | 40,103 |            |  | $ | 528      |   |  | $        | 13,543  |   |             | $ | 180,454 |                          |  | $ | 26,418  |   |  | $ | 2,084,292 |  
|Net Interest Income (Expense)(2)  |  |                | 62,228    |   |                       |   | 1,651  |            |  |   | (18      | ) |  |          | 52      |   |             |   | 12,454  |                          |  |   | (2,587  | ) |  |   | 73,780    |  
|Provision for Loan Losses         |  |                | (20,756   | ) |                       |   |       |            |  |   |         |   |  |          |        |   |             |   |        |                          |  |   |        |   |  |   | (20,756   | )
|Non-Interest Income               |  |                | 19,822    |   |                       |   | 12,484 |            |  |   | 2,614    |   |  |          | 10,764  |   |             |   | 404     |                          |  |   | 677     |   |  |   | 46,765    |  
|Other Non-Interest Expense        |  |                | (37,734   | ) |                       |   | (8,688 | )          |  |   | (1,919   | ) |  |          | (10,024 | ) |             |   | (1,300  | )                        |  |   | (6,837  | ) |  |   | (66,502   | )
|Intersegment Income (Expense)(3)  |  |                | (10,236   | ) |                       |   | 10,630 |            |  |   |         |   |  |          |        |   |             |   |        |                          |  |   | (394    | ) |  |   |          |  
|                                  |  |                |           |   |                       |   |        |            |  |   |          |   |  |          |         |   |             |   |         |                          |  |   |         |   |  |   |           |  
|Earnings (Loss) before Income Tax |  | $              | 13,324    |   |                       | $ | 16,077 |            |  | $ | 677      |   |  | $        | 792     |   |             | $ | 11,558  |                          |  | $ | (9,141  | ) |  | $ | 33,287    |  
|                                  |  |                |           |   |                       |   |        |            |  |   |          |   |  |          |         |   |             |   |         |                          |  |   |         |   |  |   |           |  
|                                  |  |                |           |   |                       |   |       
|                                  |  | Community Bank |           |   | Consumer Finance Bank |   |        | FirstTrust |  |   | Somerset |   |  | Treasury |         |   | Non-Segment |   |         | 2001 Consolidated Totals | 
|Average Segment Assets            |  | $              | 1,779,689 |   |                       | $ | 33,156 |            |  | $ | 714      |   |  | $        | 12,696  |   |             | $ | 234,568 |                          |  | $ | 46,631  |   |  | $ | 2,107,454 |  
|Net Interest Income (Expense)(2)  |  |                | 61,418    |   |                       |   | 1,393  |            |  |   |         |   |  |          | 74      |   |             |   | 10,361  |                          |  |   | 803     |   |  |   | 74,049    |  
|Provision for Loan Losses         |  |                | (15,228   | ) |                       |   |       |            |  |   |         |   |  |          |        |   |             |   |        |                          |  |   |        |   |  |   | (15,228   | )
|Non-Interest Income               |  |                | 17,670    |   |                       |   | 13,056 |            |  |   | 2,284    |   |  |          | 9,558   |   |             |   | 597     |                          |  |   | 798     |   |  |   | 43,963    |  
|Goodwill Amortization             |  |                | (121      | ) |                       |   |       |            |  |   |         |   |  |          | (450    | ) |             |   |        |                          |  |   | (349    | ) |  |   | (920      | )
|Other Non-Interest Expense        |  |                | (37,546   | ) |                       |   | (6,295 | )          |  |   | (1,804   | ) |  |          | (8,361  | ) |             |   | (1,749  | )                        |  |   | (13,826 | ) |  |   | (69,581   | )
|Intersegment Income (Expense)(3)  |  |                | (4,766    | ) |                       |   | 5,397  |            |  |   |         |   |  |          |        |   |             |   |        |                          |  |   | (631    | ) |  |   |          |  
|                                  |  |                |           |   |                       |   |        |            |  |   |          |   |  |          |         |   |             |   |         |                          |  |   |         |   |  |   |           |  
|Earnings (Loss) before Income Tax |  | $              | 21,427    |   |                       | $ | 13,551 |            |  | $ | 480      |   |  | $        | 821     |   |             | $ | 9,209   |                          |  | $ | (13,205 | ) |  | $ | 32,283    |  
|                                  |  |                |           |   |                       |   |        |            |  |   |          |   |  |          |         |   |             |   |         |                          |  |   |         |   |  |   |           |  

---

|(1) |  | First Indiana implemented a new management reporting structure in the first quarter of 2003. Amounts shown for 2002 and 2001 have been reclassified to reflect the change in
management reporting format.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) |  | The net interest income amounts in the segment results reflect the actual interest income and expense from segment activities and amounts for transfer income and expense to match
fund each segment. Transfer income and expense is assigned to assets and liabilities based on the cost of funds.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) |  | Intersegment revenues are received by one segment for performing a service for another segment. In the case of residential and consumer portfolios, the amount paid to the consumer
loan processing office is capitalized and amortized over a four-year period. These entries are not included in the Corporations actual results.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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FIRST INDIANA CORPORATION AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



(19)    Interim Quarterly Results (Unaudited)



|                                              |  |               |        |                |   |        |               |  |   |                |   |  |   |       
|--------------------------------------------- |  | ------------- | ------ | -------------- | - | ------ | ------------- |  | - | -------------- | - |  | - | ------
|(Dollars in Thousands, Except Per Share Data) |  | First Quarter |        | Second Quarter |   |        | Third Quarter |  |   | Fourth Quarter
|2003                                          |  |               |        |                |   |        |               |  |   |                |   |  |   |       
|Total Interest Income                         |  | $             | 30,148 |                | $ | 29,533 |               |  | $ | 27,651         |   |  | $ | 26,998
|Net Interest Income                           |  |               | 19,541 |                |   | 20,250 |               |  |   | 18,779         |   |  |   | 18,330
|Provision for Loan Losses                     |  |               | 6,237  |                |   | 16,091 |               |  |   | 13,548         |   |  |   | 3,098 
|Non-Interest Income                           |  |               | 13,919 |                |   | 12,534 |               |  |   | 12,511         |   |  |   | 10,599
|Non-Interest Expense                          |  |               | 19,759 |                |   | 19,661 |               |  |   | 21,391         |   |  |   | 22,826
|Earnings (Loss) Before Income Taxes           |  |               | 7,464  |                |   | (2,968 | )             |  |   | (3,649         | ) |  |   | 3,005 
|Net Earnings (Loss)                           |  |               | 4,728  |                |   | (1,723 | )             |  |   | (2,448         | ) |  |   | 1,972 
|Basic Earnings (Loss) Per Share               |  |               | 0.30   |                |   | (0.11  | )             |  |   | (0.16          | ) |  |   | 0.13  
|Diluted Earnings (Loss) Per Share             |  |               | 0.30   |                |   | (0.11  | )             |  |   | (0.16          | ) |  |   | 0.13  
|2002                                          |  |               |        |                |   |        |               |  |   |                |   |  |   |       
|Total Interest Income                         |  | $             | 31,615 |                | $ | 31,869 |               |  | $ | 32,009         |   |  | $ | 30,430
|Net Interest Income                           |  |               | 17,194 |                |   | 18,473 |               |  |   | 19,401         |   |  |   | 18,712
|Provision for Loan Losses                     |  |               | 2,610  |                |   | 4,159  |               |  |   | 2,982          |   |  |   | 11,005
|Non-Interest Income                           |  |               | 12,494 |                |   | 11,955 |               |  |   | 11,111         |   |  |   | 11,205
|Non-Interest Expense                          |  |               | 17,090 |                |   | 15,293 |               |  |   | 16,767         |   |  |   | 17,352
|Earnings Before Income Taxes                  |  |               | 9,988  |                |   | 10,976 |               |  |   | 10,763         |   |  |   | 1,560 
|Net Earnings                                  |  |               | 6,383  |                |   | 6,896  |               |  |   | 6,842          |   |  |   | 1,059 
|Basic Earnings Per Share                      |  |               | 0.41   |                |   | 0.44   |               |  |   | 0.44           |   |  |   | 0.07  
|Diluted Earnings Per Share                    |  |               | 0.41   |                |   | 0.43   |               |  |   | 0.43           |   |  |   | 0.07  



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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, 2003 and 2002 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, 2003. 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, 2003 and 2002
and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2003 in conformity with accounting principles generally accepted in the United States of America.



As discussed in Note 3 to the consolidated financial statements, effective
January 1, 2002, the Corporation adopted Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets.



LOGO



Indianapolis,
Indiana

February 27, 2004



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##### Table of Contents

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, through the auspices of the Audit Committee of the Corporations Board of Directors, 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 the Form 10-Q 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                                       |  | /s/ William J. Brunner                    
|Marni McKinney Vice Chairman and Chief Executive Officer |  | William J. Brunner Chief Financial Officer



February 27, 2004



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##### Table of Contents

PART I



Item 1. Business



Description of Business



First Indiana Corporation (First Indiana or
the Corporation) is an Indiana corporation formed in 1986. It is the holding company for First Indiana Bank, N.A. (the Bank), the largest commercial bank headquartered in Indianapolis, and for Somerset Financial Services, LLC
(Somerset), an accounting and consulting firm. The Corporation acquired The Somerset Group, Inc. (the parent of Somerset) in a merger completed on September 29, 2000.



The Corporation had total assets of $2.19 billion at December 31, 2003, an increase of $67.5 million from $2.13 billion at
December 31, 2002. Loans outstanding were $1.81 billion and deposits were $1.49 billion at December 31, 2003.



Effective August 1, 2001, the Bank was converted from a federal savings bank to a national bank and First Indiana became a bank holding company registered
with the Federal Reserve Board. 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. Approximately five years prior to becoming a national bank, the Corporation had begun shifting its business plan and asset management, moving away from emphasizing consumer and mortgage
lending to a greater emphasis on commercial lending.



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 through its offices in Central Indiana. The Bank also originates home
equity loans in 47 states through Bank loan officers and an independent agent network. The Bank has construction and consumer loan service offices in Indiana, Arizona, Florida, Illinois, North Carolina, and Ohio. One Investment Partners, a
subsidiary of the Bank, holds loans originated outside of Indiana.



Through Somerset and FirstTrust Indiana, a division of the Bank, the Corporation 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.



On January 13, 2003, the Corporation acquired Carmel, Indiana-based
MetroBanCorp through a merger. MetroBanCorp was the holding company for MetroBank, with assets of approximately $196 million and seven offices in Carmel, Fishers, and Noblesville, Indiana. The acquisition was accounted for using the purchase method
of accounting, and, accordingly, the financial results of the acquired entity are included in the consolidated financial statements from the acquisition date. Upon completion of the merger, the Bank had 33 banking centers in Central Indiana. The
merger gave the Bank the largest market share of deposits in Hamilton County, which is one of the fastest growing counties in the Midwest.



First Indiana Corporation common stock is traded on the NASDAQ National Market under the ticker symbol FINB. The principal executive offices are located
at 135 North Pennsylvania Street, Suite 2800, Indianapolis, Indiana 46204, and the telephone number is (317) 269-1200. The website address is www.firstindiana.com. The information on the website does not constitute part of this Form 10-K.



Business Segments



Information about the Corporations business segments is contained in
Note 18 of the Notes to the Consolidated Financial Statements.



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##### Table of Contents

Competition



The Bank faces substantial competition in originating both commercial and consumer loans. This competition comes principally from other banks, savings
institutions, mortgage banking companies, and other lenders. Many of these competitors have competitive advantages, including greater financial resources and higher lending limits, a wider geographic presence, more accessible branch office
locations, the ability to offer a wider array of services or more favorable pricing alternatives, as well as lower origination and operating costs. This competition could reduce the Corporations net income by decreasing the number and size of
loans that the Bank originates and the interest rates it may charge on these loans.



In attracting business and consumer deposits, the Bank faces substantial competition from other insured depository institutions such as banks, savings institutions, and credit unions, as well as institutions offering
uninsured investment alternatives, including money market funds. Many of these competitors enjoy advantages, including greater financial resources, more aggressive marketing campaigns, better brand recognition, and more branch locations. These
competitors may offer higher interest rates than the Bank, which could decrease the deposits that it attracts or require the Bank to increase its rates to retain existing deposits or attract new deposits. Increased deposit competition could
adversely affect the Corporations ability to generate the funds necessary for lending operations, which could increase the cost of funds.



The Bank and Somerset also compete with nonbank providers of financial services, such as brokerage firms, consumer finance companies, credit unions,
insurance companies, and governmental organizations, which may offer more favorable terms. Some of these nonbank competitors are not subject to the same extensive regulations that govern banks and bank holding companies. As a result, such nonbank
competitors may have advantages over the Bank and Somerset in providing certain products and services. This competition may reduce or limit margins on banking and nonbanking services, reduce First Indianas market share, and adversely affect
the Corporations earnings and financial condition.



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 Bank, the Corporations principal subsidiary, is a national bank and is subject to the provisions of the National Bank Act. The Bank is under the
supervision of, and subject to periodic examination by, the Office of the Comptroller of the Currency (OCC), and is subject to the rules and regulations of the OCC, the Federal Reserve Board, and the Federal Deposit Insurance Corporation
(FDIC). The Bank is subject to supervision and examination by the FDIC because the FDIC insures its deposits to the extent provided by law. The Corporations ownership of Somerset and any other nonbank subsidiaries is also subject
to the regulations of the Federal Reserve Board, and Somerset is supervised and regulated by other federal and state agencies.



Regulations governing First Indiana and the Bank restrict extensions of credit by the Bank to First Indiana Corporation and, with some exceptions, other
affiliates of the Corporation. For these purposes, extensions of credit include loans and advances to and guarantees and letters of credit on behalf of First Indiana and such affiliates. These regulations also restrict investments by the Bank in the
stock or other securities of First Indiana and the covered affiliates, as well as the acceptance of such stock or other securities as collateral for loans to any borrower, whether or not related to First Indiana.



The Bank is subject to comprehensive federal regulations dealing with a wide
variety of subjects, including reserve requirements, loan limitations, restrictions as to interest rates on loans and deposits, restrictions as to dividend payments, requirements governing the establishment of branches, and numerous other aspects of
its operations. These regulations generally have been adopted to protect depositors and creditors rather than shareholders or holders of subordinated debt.



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Payment of Dividends



Federal Reserve Board policy provides that, as a matter of prudent banking, a bank holding company generally should not
maintain a rate of cash dividends unless its net income available to common shareholders has been sufficient to fully fund the dividends, and the prospective rate of earnings retention appears to be consistent with the holding companys capital
needs, asset quality, and overall financial condition.



There
are various statutory restrictions on the ability of the Bank to pay dividends or make other payments to First Indiana Corporation, which are described below. Prior regulatory approval is required if dividends to be declared by the Bank 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. Due to the payment of an $11,000,000 special dividend in January 2003 (to partially fund the acquisition of
MetroBanCorp), the Bank sought and received approval from the OCC to make its regularly scheduled dividend payments in 2003, not to exceed $28,571,000. The Bank paid dividends of $21,440,000 to the Corporation in 2003. The Bank sought and received
approval from the OCC to make its regularly scheduled dividend payments in 2004, not to exceed $19,000,000. The Bank will likely be required to seek OCC approval prior to making dividend payments in 2005. In determining whether to grant such
approval, the OCC will consider such factors as the reasonableness of the Banks request, including the Banks historical dividend payout ratio and projected dividend payment; the Banks historical trends and current projections for
capital growth through earnings retention; the Banks overall condition, with particular emphasis on current and projected capital adequacy; the reasons for which the Bank became subject to the dividend restrictions; and any other information
the OCC deems pertinent to reviewing its request.



Under
federal law, a depository institution is prohibited from paying a dividend if the depository institution would thereafter be undercapitalized as determined by the federal bank regulatory agencies. The relevant federal agencies also have
the authority to prohibit a bank from engaging in what agencies determine are unsafe or unsound practices in conducting its business. The payment of dividends could, depending upon the financial condition of a bank, be deemed to constitute an unsafe
or unsound practice.



Capital Requirements



First Indiana is subject to capital requirements and guidelines imposed on
bank holding companies and financial holding companies by the Federal Reserve Board. The OCC and the FDIC impose similar requirements on the Bank. These capital requirements establish higher capital standards for banks and bank holding companies
that assume greater risks. For this purpose, a bank holding companys or banks assets and certain off-balance sheet commitments are assigned to four risk categories, each weighted differently based on the credit risk. Total capital, in
turn, is divided into two tiers:



| |  |  | Tier 1 capital, which includes common equity, certain qualifying cumulative and noncumulative perpetual preferred stock and related surplus, and minority interests in equity
accounts of consolidated subsidiaries; and
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Tier 2 capital, which includes perpetual preferred stock, and related surplus not meeting the Tier 1 definition, hybrid capital instruments, perpetual debt and mandatory convertible
securities, certain term subordinated debt, intermediate-term preferred stock, and allowances for loan and lease losses (subject to certain limitations).
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Goodwill, certain intangible assets, and certain other assets must be deducted in calculating the sum of the capital
elements.



First Indiana, like other bank holding companies, is
required to maintain Tier 1 capital and total capital equal to at least 4 percent and 8 percent, respectively, of total risk-weighted assets. As of December 31, 2003, the Corporation met both requirements, with Tier 1 and total capital equal to
10.15 percent and 12.62 percent, respectively, of total risk-weighted assets. The Bank was also in compliance with its applicable minimum capital requirement at December 31, 2003, with Tier 1 capital and total capital equal to 9.29 percent and 10.56
percent, respectively, of its total risk-weighted assets.



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The Federal Reserve Board, the FDIC, and the OCC have incorporated market and interest rate risk
components into their risk-based capital standards. Under these market risk requirements, capital is allocated to support the amount of market risk related to a financial institutions ongoing trading activities. The Federal Reserve Board also
requires a minimum leverage ratio (Tier 1 capital to adjusted average assets) of 3 percent for bank holding companies that have the highest regulatory rating or have implemented the risk-based capital measures for market risk, or 4
percent for holding companies that do not meet either of these requirements. The Bank is subject to similar requirements adopted by the OCC. As of December 31, 2003, the Corporations leverage ratio was 8.71 percent, and the Banks was
8.06 percent.



While federal regulators may set capital
requirements higher than the minimums noted above if circumstances warrant it, no federal banking regulator has imposed any such special capital requirement on the Corporation or the Bank.



Source of Strength Doctrine



Under Federal Reserve Board policy, a bank holding company is expected to
serve as a source of financial strength to its subsidiary bank and to stand prepared to commit resources to support its subsidiary bank. There are no specific quantitative rules on the holding companys potential liability. If the Bank were to
encounter financial difficulty, the Federal Reserve Board could invoke the doctrine and require a capital contribution. In addition, and as a separate legal matter, a holding company is required to guarantee the capital plan of an undercapitalized
subsidiary bank. See FDICIA below.



FDICIA



The Federal Deposit Insurance Corporation Improvement Act of 1991
(FDICIA) requires federal regulators to take prompt corrective action against any undercapitalized institution. FDICIA establishes five capital categories: well-capitalized, adequately capitalized, undercapitalized, significantly
undercapitalized, and critically undercapitalized. Well-capitalized institutions significantly exceed the required minimum level for each capital measure (currently, risk-based and leverage). Adequately capitalized
institutions include depository institutions that meet the required minimum level for each capital measure. Undercapitalized institutions consist of those that fail to meet the required minimum level for one or more relevant capital
measures. Significantly undercapitalized characterizes depository institutions with capital levels significantly below the minimum requirements. Critically undercapitalized refers to depository institutions with minimal
capital and at serious risk for government seizure.



Under
certain circumstances, a well-capitalized, adequately capitalized, or undercapitalized institution may be treated as if the institution were in the next lower capital category. A depository institution is generally prohibited from making capital
distributions, including paying dividends or paying management fees to a holding company, if the institution would thereafter be undercapitalized. Institutions that are adequately but not well-capitalized cannot accept, renew, or rollover brokered
deposits except with a waiver from the FDIC and are subject to restrictions on the interest rates that can be paid on such deposits. Undercapitalized institutions may not accept, renew, or rollover brokered deposits.



The banking regulatory agencies are permitted or, in certain cases, required
to take certain actions with respect to institutions falling within one of the three undercapitalized categories. Depending on the level of an institutions capital, the agencys corrective powers include, among other things:



| |  |  | prohibiting the payment of principal and interest on subordinated debt;
| | - |  | -----------------------------------------------------------------------



| |  |  | prohibiting the holding company from making distributions without prior regulatory approval;
| | - |  | --------------------------------------------------------------------------------------------



| |  |  | placing limits on asset growth and restrictions on activities;
| | - |  | --------------------------------------------------------------



| |  |  | placing additional restrictions on transactions with affiliates;
| | - |  | ----------------------------------------------------------------



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| |  |  | restricting the interest rate the institution may pay on deposits;
| | - |  | ------------------------------------------------------------------



| |  |  | prohibiting the institution from accepting deposits from correspondent banks; and
| | - |  | ---------------------------------------------------------------------------------



| |  |  | in the most severe cases, appointing a conservator or receiver for the institution.
| | - |  | -----------------------------------------------------------------------------------



A banking institution that is undercapitalized is required to submit a capital restoration plan, and such a plan will not be
accepted unless, among other things, the banking institutions holding company guarantees the plan up to a certain specified amount. Any such guarantee from a depository institutions holding company is entitled to a priority of payment in
bankruptcy.



FDICIA also contains a variety of other provisions
that may affect First Indianas operations, including reporting requirements, regulatory standards for real estate lending, truth in savings provisions, and the requirement that a depository institution give notice to customers and
regulatory authorities before closing any branch. As of December 31, 2003, the Bank exceeded the required capital ratios for classification as well-capitalized.



FDIC Insurance and Financing Corporation Assessments



The FDICs deposit insurance assessments currently are calculated under a risk-based system. The risk-based system
places a bank in one of nine risk categories, principally on the basis of its capital level and an evaluation of the banks risk to the relevant deposit insurance fund, and bases premiums on the probability of loss to the FDIC with respect to
each individual bank. Under the Federal Deposit Insurance Act, a depository institution may not pay interest on indebtedness, if such interest is required to be paid out of net profits, or distribute any of its capital assets while it remains in
default on any assessment due to the FDIC.



In accordance with
the Deposit Insurance Funds Act of 1996, the Financing Corporation (FICO) debt service assessment became applicable to all insured institutions as of January 1, 1997. The FICO debt service assessment due is based upon a quarterly
multiplier which is not tied to the FDIC risk classification. The FICO rates for the Bank Insurance Fund (BIF) and the Savings Association Insurance Fund (SAIF) are determined quarterly.



Transactions with Affiliates



Transactions between the Bank and its affiliates are governed by Sections
23A and 23B of the Federal Reserve Act. The affiliates of the Bank include First Indiana Corporation and any entity controlled by First Indiana Corporation. Generally, Sections 23A and 23B (1) limit the extent to which the Bank may engage in
covered transactions with any one affiliate to an amount equal to 10 percent of the Banks capital stock and surplus, and maintain an aggregate limit on all such transactions with affiliates to an amount equal to 20 percent of the
Banks capital stock and surplus, (2) require that the Banks extensions of credit to such affiliates be fully collateralized (with 100 percent to 130 percent collateral coverage, depending on the type of collateral), (3) prohibit the Bank
from purchasing or accepting as collateral from an affiliate any low quality assets (including non-performing loans), and (4) require that all covered transactions be on terms substantially the same, or at least as favorable,
to the Bank or its subsidiary as those provided to a non-affiliate. The term covered transaction includes the making of loans, purchase of assets, issuance of a guarantee, and other similar types of transactions.



Loans to Insiders



The Federal Reserve Act and related regulations impose specific restrictions on loans to directors, executive officers, and
principal stockholders of banks. Under Section 22(h) of the Federal Reserve Act and its implementing regulations, loans to a director, an executive officer, or a principal stockholder of a bank, and some affiliated entities of any of the foregoing,
may not exceed, together with all other outstanding loans to such person and affiliated entities, the banks loan-to-one-borrower limit. Loans in the aggregate to insiders and their



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related interests as a class may not exceed the banks unimpaired capital and unimpaired surplus. Section 22(h) and its implementing regulations also
prohibit loans, above amounts prescribed by the appropriate federal banking agency, to directors, executive officers and principal stockholders of a bank or bank holding company, and their respective affiliates, unless such loan is approved in
advance by a majority of the board of directors of the bank with any interested director not participating in the voting. Section 22(h) generally requires that loans to directors, executive officers, and principal stockholders be made on
terms and underwriting standards substantially the same as offered in comparable transactions to other persons.



Community Reinvestment Act



Under the Community Reinvestment Act and related regulations, depository institutions have an affirmative obligation to assist in meeting the credit needs
of their market areas, including low and moderate income areas, consistent with safe and sound banking practices. The Community Reinvestment Act requires the adoption by each institution of a Community Reinvestment Act statement for each of its
market areas describing the depository institutions efforts to assist in its communitys credit needs. Depository institutions are periodically examined for compliance with the Community Reinvestment Act and are periodically assigned
ratings in this regard. Banking regulators consider a depository institutions Community Reinvestment Act rating when reviewing applications to establish new branches, undertake new lines of business, and/or acquire part or all of another
depository institution. An unsatisfactory rating can significantly delay or even prohibit regulatory approval of a proposed transaction by a bank holding company or its depository institution subsidiary. The most recent Community Reinvestment Act
rating the Bank has received was satisfactory.



Fair Lending;
Consumer Laws



In addition to the Community Reinvestment
Act, other federal and state laws regulate various lending and consumer aspects of the banking business. Governmental agencies, including the Department of Housing and Urban Development, the Federal Trade Commission, and the Department of Justice,
have become concerned that in some cases prospective borrowers experience unlawful discrimination in their efforts to obtain loans from depository and other lending institutions. These agencies have brought litigation against some depository
institutions alleging discrimination against borrowers. Many of these suits have been settled, in some cases for material sums, short of a full trial.



Recently, these governmental agencies have clarified what they consider to be lending discrimination and have specified various factors that they will use
to determine the existence of lending discrimination under the Equal Credit Opportunity Act and the Fair Housing Act. These factors include evidence that a lender discriminated on a prohibited basis, evidence that a lender treated applicants
differently based on prohibited factors in the absence of evidence that the treatment was the result of prejudice or a conscious intention to discriminate, and evidence that a lender applied an otherwise neutral non-discriminatory policy uniformly
to all applicants, but the practice had a discriminatory effect, unless the practice could be justified as a business necessity.



Banks and other depository institutions also are subject to numerous consumer-oriented laws and regulations. These laws, which include the Truth in
Lending Act, the Truth in Savings Act, the Real Estate Settlement Procedures Act, the Electronic Funds Transfer Act, the Equal Credit Opportunity Act, and the Fair Housing Act, require compliance by depository institutions with various disclosure
requirements and requirements regulating the availability of funds after deposit or the making of certain loans to customers.



Gramm-Leach-Bliley Act of 1999



The Gramm-Leach-Bliley Act of 1999 (the GLBA) was signed into law on November 12, 1999. The GLBA covers a broad range of issues, including a
repeal of most of the restrictions on affiliations among depository institutions, securities firms and insurance companies. The following description summarizes some of its significant provisions.



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The GLBA repeals sections 20 and 32 of the Glass-Steagall Act, thus permitting unrestricted affiliations
between banks and securities firms. It also permits bank holding companies to elect to become financial holding companies. A financial holding company may engage in or acquire companies that engage in a broad range of financial services, including
securities activities such as underwriting, dealing, investment, merchant banking, insurance underwriting, sales, and brokerage activities. In order to become a financial holding company, the bank holding company and all of its affiliated depository
institutions must be well-capitalized, well-managed, and have at least a satisfactory Community Reinvestment Act rating.



The GLBA provides that the states continue to have the authority to regulate insurance activities, but prohibits the states in most instances from
preventing or significantly interfering with the ability of a bank, directly or through an affiliate, to engage in insurance sales, solicitations, or cross-marketing activities. Although the states generally must regulate bank insurance activities
in a nondiscriminatory manner, the states may continue to adopt and enforce rules that specifically regulate bank insurance activities in specific areas identified under the law. Under the law, the federal bank regulatory agencies adopted insurance
consumer protection regulations that apply to sales practices, solicitations, advertising, and disclosures.



The GLBA repeals the broad exemption of banks from the definitions of broker and dealer for purposes of the Securities Exchange
Act of 1934, as amended, and identifies sets of specific activities, including traditional bank trust and fiduciary activities, in which a bank may engage without being deemed a broker or a dealer.



The GLBA also contains extensive customer privacy protection provisions.
Under these provisions, a financial institution must provide to its customers, both at the inception of the customer relationship and on an annual basis, the institutions policies and procedures regarding the handling of customers
nonpublic personal financial information. The GLBA provides that, except for specific limited exceptions, an institution may not provide such personal information to unaffiliated third parties unless the institution discloses to the customer that
such information may be so provided and the customer is given the opportunity to opt out of such disclosure. An institution may not disclose to a non-affiliated third party, other than to a consumer reporting agency, customer account
numbers or other similar account identifiers for marketing purposes. The GLBA also provides that the states may adopt customer privacy protections that are more strict than those contained in the GLBA.



Future Legislation



Because federal and state regulation of financial institutions changes regularly and is the subject of constant legislative
debate, we cannot forecast how federal and state regulation of financial institutions may change in the future and impact the Corporations operations. Although Congress in recent years has sought to reduce the regulatory burden on financial
institutions with respect to the approval of specific transactions, First Indiana fully expects that the financial services industry will remain heavily regulated in the near future and that additional laws or regulations may be adopted further
regulating specific banking practices.



Employees



At December 31, 2003, the Corporation and its subsidiaries employed 788
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.



Reports on Corporation Website



First Indiana Corporation makes available free of charge through its Internet website the Corporations annual report on Form 10-K, quarterly reports
on Form 10-Q, current reports on Form 8-K, and amendments to those reports as soon as practicable after they are electronically filed or furnished pursuant to the Section 13(1) or 15(d) of the Exchange Act. These reports are available by going to
the Corporations website (www.firstindiana.com) and selecting Investor Relations and then SEC Filings.



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Item 2. Properties



At December
31, 2003, the Corporation operated through 33 full-service banking centers and seven 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, and FirstTrust Indiana, the Banks investment advisory and trust division, lease their facility on the north side of Indianapolis. The
Corporation leases 16 of the branches and the seven origination offices and owns the remaining locations. The aggregate carrying value at December 31, 2003, of the properties owned or leased, including headquarters properties and leasehold
improvements at the leased offices, was $16,193,000. See Notes 8 and 14 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, 2003.



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. As of February 12, 2004, there were approximately 1,733
holders of record of the Corporations common stock. The following table contains high and low bid information as reported by NASDAQ.



|               |  |      |       |      |   |            |  |      |       |     |   |            |  |   |       |  |   |      
|-------------- |  | ---- | ----- | ---- | - | ---------- |  | ---- | ----- | --- | - | ---------- |  | - | ----- |  | - | -----
|               |  | 2003 |       | 2002
|               |  | High |       | Low  |   | Book Value |  | High |       | Low |   | Book Value
|First Quarter  |  | $    | 20.37 |      | $ | 15.32      |  | $    | 14.30 |     | $ | 22.68      |  | $ | 16.44 |  | $ | 13.70
|Second Quarter |  |      | 18.45 |      |   | 15.70      |  |      | 14.00 |     |   | 22.48      |  |   | 19.00 |  |   | 14.01
|Third Quarter  |  |      | 20.16 |      |   | 17.40      |  |      | 13.51 |     |   | 23.20      |  |   | 16.74 |  |   | 14.39
|Fourth Quarter |  |      | 19.94 |      |   | 17.74      |  |      | 13.44 |     |   | 20.99      |  |   | 16.51 |  |   | 14.23



For restrictions on
the Corporations and the Banks present or future ability to pay dividends, see Liquidity and Market Risk Management  Liquidity Management and Note 13 of the Notes to the Consolidated Financial Statements.



For equity compensation plan information, see Note 15 of the Notes to
Consolidated Financial Statements.



The Corporation paid a cash
dividend of $0.165 per share outstanding in each quarter of 2003 and $0.160 per share outstanding in each quarter of 2002. 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 following subsections of Financial Review:



| |  |  | Overview
| | - |  | --------



| |  |  | Critical Accounting Policies
| | - |  | ----------------------------



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| |  |  | Statement of Earnings Analysis
| | - |  | ------------------------------



| |  |  | Financial Condition
| | - |  | -------------------



| |  |  | Asset Quality
| | - |  | -------------



| |  |  | Liquidity and Market Risk Management
| | - |  | ------------------------------------



| |  |  | Capital
| | - |  | -------



| |  |  | Impact of Inflation and Changing Prices
| | - |  | ---------------------------------------



| |  |  | Impact of Accounting Standards Not Yet Adopted
| | - |  | ----------------------------------------------



| |  |  | Fourth Quarter Summary
| | - |  | ----------------------



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.



Item 8. Financial Statements and Supplementary Data



Information required by this item is shown under the headings Consolidated Financial Statements, Notes to Consolidated Financial Statements, and Independent Auditors Report.
The Corporations unaudited quarterly financial information for each of the years in the two-year period ended December 31, 2003 is shown in Note 19 of Notes to Consolidated Financial Statements.



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



None.



Item 9A. Controls and Procedures



Disclosure controls and procedures are controls and other procedures designed to ensure that information required to be disclosed in the Corporations reports filed under the Securities Exchange Act of 1934, such as this Annual Report,
is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission. Disclosure controls and procedures are also designed to ensure that such information is accumulated
and communicated to management, including the chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure.



As of the end of the period covered by this Report on Form 10-K, First Indiana evaluated the effectiveness of the design and
operation of its disclosure controls and procedures under the supervision and with the participation of management, including its chief executive officer and chief financial officer. The evaluation of First Indianas disclosure controls and
procedures included a review of the controls objectives and design, First Indianas implementation of the controls and the effect of the controls on the information generated for use in this Annual Report. Included as exhibits to this
Annual Report are Certifications of First Indianas chief executive officer and chief financial officer in accordance with Rule 13a-14 of the Securities Exchange Act of 1934. This Controls and Procedures section of the Annual Report
includes the information concerning the controls evaluation referred to in Rule 13a-15, and it should be read in conjunction with the Rule 13a-14 Certifications for a more complete understanding of the topics presented.



First Indianas management, including the chief executive officer and
chief financial officer, does not expect that the Corporations disclosure controls and procedures will prevent all errors. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that
the control systems objectives will be met.



During the
most recent fiscal quarter, there has been no change in internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, First Indianas internal control over financial reporting.



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Based upon their evaluation as of the end of the period covered by this Report on Form 10-K, First
Indianas chief executive officer and chief financial officer have concluded that, subject to the limitations noted above, the Corporations disclosure controls and procedures are effective to ensure that material information relating to
the Corporation is made known to management, including the chief executive officer and chief financial officer, particularly during the period when the Corporations periodic reports are being prepared.



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 Proposal No. 1: Election of Directors and the
information relating to compliance by officers and directors with Section 16(a) is incorporated by reference to the Corporations Proxy Statement under the heading Section 16(a) Beneficial Ownership Reporting Compliance. The
information required by this item with respect to the Corporations Audit Committee and financial experts is incorporated by reference to the Corporations Proxy Statement under the headings Proposal No. 1: Election of
Directors and Corporate Governance  Audit Committee.



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.



|                   |  |                                                                                                                                                                        |  |     |  |                           
|------------------ |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --- |  | --------------------------
|Name               |  | Position                                                                                                                                                               |  | Age |  | Year First Elected Officer
|William J. Brunner |  | Vice President, Chief Financial Officer and Treasurer of the Corporation; Chief Financial Officer and Senior Vice President, Financial Management Division of the Bank |  | 44  |  | 2000                      
|Patrick J. Early   |  | President, Somerset Financial Services                                                                                                                                 |  | 46  |  | 2000                      
|David A. Lindsey   |  | President, Consumer Finance Bank Division of the Bank                                                                                                                  |  | 53  |  | 1983                      
|David L. Maraman   |  | Senior Vice President, Community Bank  Corporate Banking Division of the Bank                                                                                         |  | 55  |  | 2003                      
|Ralph G. Nowak     |  | President, FirstTrust Division of the Bank                                                                                                                             |  | 52  |  | 1998                      
|Timothy J. ONeill |  | Senior Vice President, Real Estate Lending Department of the Bank                                                                                                      |  | 56  |  | 1972                      
|Kenneth L. Turchi  |  | Senior Vice President, Community Bank  Retail Banking Division of the Bank                                                                                            |  | 45  |  | 1987                      



William J. Brunner has
been with the Bank since May 2000, and currently serves as the Corporations chief financial officer, 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.



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.



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David A. Lindsey has been with the Bank since 1983, currently serving as president, consumer finance bank
division of the Bank. He oversees the Banks national consumer lending operations. These include originations, processing and underwriting, secondary marketing, and loan servicing.



David L. Maraman joined the Bank in July 2003 and serves as the Banks chief lending officer and senior vice president,
community bank  corporate banking division of the Bank. He is responsible for commercial lending and treasury management. In addition, he is acting chief credit officer of the Bank. Prior to joining First Indiana, Mr. Maraman served as
chairman and chief executive officer of CIB Bank in Indianapolis, Indiana, since March 1998.



Ralph G. Nowak has been with the bank since November 1998 serving as president of 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 senior vice president of the Bank, real estate lending department. He is
responsible for the Banks construction and commercial real estate lending.



Kenneth L. Turchi joined First Indiana in 1985 and currently serves as senior vice president, community bank  retail banking division of the Bank. He is responsible for strategic planning, marketing and public
relations, First Indianas branch system, information technology, community bank operations, the Banks call center, and First Indiana Investor Services, the Banks investment products and insurance division.



The Corporations code of ethics that applies to its principal executive
officer, principal accounting officer or controller, or persons performing similar functions, and others is posted on its Internet website (www.firstindiana.com) under Investor Relations, Governance. Disclosures pertaining to amendments to, or
waivers from, a provision of this code of ethics will be posted on the Corporations Internet website (www.firstindiana.com) under Investor Relations, Governance.



Item 11. Executive Compensation



The information required by this item is incorporated by reference to the material under the headings Executive Compensation and Corporate Governance  Compensation of Directors in the Corporations Proxy
Statement.



Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters



The information required by this item is incorporated by reference to the material under the heading Stock Ownership by Directors, Officers and
Certain Shareholders in the Corporations Proxy Statement and is shown in Note 15 of the Notes to the Consolidated Financial Statements.



Item 13. Certain Relationships and Related Transactions



The information required by this item is incorporated by reference to the material under the heading Corporate Governance  Certain Transactions in the Corporations Proxy Statement.



Item 14. Principal Accountant Fees and Services



The information required by this item is incorporated by reference to the material under the headings Proposal No. 2: Ratification of the Selection of KPMG as Auditors  Fees to Independent Auditors for
2003 and 2002 and Proposal No. 2: Ratification of the Selection of KPMG as Auditors  Engagement of the Independent Auditors and Approval of Services in the Corporations Proxy Statement.



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PART IV



Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K



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|------------------------------------------------------------ |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ----- |  | -----
|                                                             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |       |  | Pages
|(a) (1) Financial Statements                                 |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|                                                             |  | Consolidated Balance Sheets as of December 31, 2003 and 2002                                                                                                                                                                                                                                                                                                                                                                                           |  | 30   
|                                                             |  | Consolidated Statements of Earnings for the Three Years Ended December 31, 2003                                                                                                                                                                                                                                                                                                                                                                        |  | 31   
|                                                             |  | Consolidated Statements of Shareholders Equity for the Three Years Ended December 31, 2003                                                                                                                                                                                                                                                                                                                                                            |  | 32   
|                                                             |  | Consolidated Statements of Cash Flows for the Three Years Ended December 31, 2003                                                                                                                                                                                                                                                                                                                                                                      |  | 33   
|                                                             |  | Notes to the Consolidated Financial Statements                                                                                                                                                                                                                                                                                                                                                                                                         |  | 34-61
|                                                             |  | Independent Auditors Report                                                                                                                                                                                                                                                                                                                                                                                                                           |  | 62   
|                                                             | 
|(2) Financial Statement Schedules Required by Regulation S-X |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|                                                             | 
|                                                             |  | None                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|                                                             | 
|(3) Exhibits                                                 |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|                                                             | 
|3(a)                                                         |  | Articles of Incorporation of First Indiana Corporation, incorporated by reference to Exhibit 3(a) of the Registrants Form 10-K filed on March 12, 2001.                                                                                                                                                                                                                                                                                              
|3(b)                                                         |  | Amended and Restated Bylaws of First Indiana Corporation, as amended by amendment adopted January 21, 2004. *A                                                                                                                                                                                                                                                                                                                                        
|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)                                                         |  | Rights Agreement dated as of November 14, 1997, incorporated by reference to Exhibit 4 of the Registrants Form 8-A filed December 2, 1997, and Amendment to Rights Agreement,
incorporated by reference to Exhibit 4 of the Registrants Form 10-Q filed on May 13, 2002.                                                                                                                                                                            
|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 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(f)                                                        |  | First Indiana Corporation Supplemental Benefit Plan Agreement effective May 1, 1997 between the 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(g)                                                        |  | Form of First Indiana Corporation Supplemental Benefit Plan Agreement effective May 1, 1997 between the Registrant 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                                                                                                                                                                             
|10(h)                                                        |  | Form of Supplemental Benefit Plan Agreement effective May 1, 1997 between the Registrant and each of David A. Lindsey, Timothy J. ONeill, and Kenneth L. Turchi, and
effective May 6, 2000 between the Registrant and William J. Brunner, and effective July 23, 2003 between the Registrant and David L. Maraman, 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(i)                                                        |  | Form of Employment Agreement between the Registrant and each of Robert H. McKinney 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                                                                                                                                                                                                             



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|      |  |                                                                                                                                                                                                                                                                                                                               |  |  |  | 
|----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  |  |  | 
|10(j) |  | Form of Employment Agreement between First Indiana Bank and each of William J. Brunner, David A. Lindsey, David L. Maraman, Merrill E. Matlock, Timothy J. ONeill, and
Kenneth L. Turchi, 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(k) |  | 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(l) |  | 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(m) |  | The Somerset Group, Inc. Employee Stock Purchase Plan, incorporated by reference to the Registrants Form 10-K filed on March 12, 2001. *B                                                                                                                                                                                   
|10(n) |  | Agreement and Plan of Merger dated September 4, 2002, by and among MetroBanCorp, Inc. and MetroBank and First Indiana Corporation, FIC Acquisition Corp. and First Indiana Bank,
National Association, incorporated by reference, to the Registrants Form 8-K filed on September 6, 2002.                                   
|10(o) |  | Employment Continuation Agreement dated as of December 29, 2003, between the Registrant and Owen B. Melton, Jr. *A *B                                                                                                                                                                                                        
|10(p) |  | Pursuant to item 601(b)(4)(iii)(A) of Regulation S-K, the Registrant has not filed its Junior Subordinated Indenture dated as of October 30, 2002 as an exhibit. The Registrant
hereby agrees to furnish a copy of this Indenture to the Commission upon request.                                                            
|10(q) |  | Pursuant to item 601(b)(4)(iii)(A) of Regulation S-K, the Registrant has not filed its Junior Subordinated Indenture dated as of June 26, 2003 as an exhibit. The Registrant hereby
agrees to furnish a copy of this Indenture to the Commission upon request.                                                               
|10(r) |  | Pursuant to item 601(b)(4)(iii)(A) of Regulation S-K, the Registrant has not filed its Subordinated Indenture dated as of November 14, 2003 as an exhibit. The Registrant hereby
agrees to furnish a copy of this Indenture to the Commission upon request.                                                                  
|21    |  | Subsidiaries of First Indiana Corporation and First Indiana Bank. *A                                                                                                                                                                                                                                                         
|23    |  | Consent of KPMG LLP.*A                                                                                                                                                                                                                                                                                                       
|31(a) |  | Rule 13a-14(a) Certification of Principal Executive Officer. *A                                                                                                                                                                                                                                                              
|31(b) |  | Rule 13a-14(a) Certification of Principal Financial Officer. *A                                                                                                                                                                                                                                                              
|32(a) |  | Section 1350 Certification of Chief Executive Officer. *A                                                                                                                                                                                                                                                                    
|32(b) |  | Section 1350 Certification of Chief Financial Officer. *A                                                                                                                                                                                                                                                                    

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|*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 or furnished the following Current Reports on Form 8-K between October 1, 2003 and February 12, 2004:
|--- |  | ---------------------------------------------------------------------------------------------------------------------------



|                  |  |                                                                                                                                      
|----------------- |  | -------------------------------------------------------------------------------------------------------------------------------------
|Date              |  | Item Reported                                                                                                                        
|October 3, 2003   |  | On October 3, 2003, a Form 8-K was filed related to the announcement of conference call to be held on October 15, 2003.              
|October 14, 2003  |  | On October 14, 2003, a Form 8-K was furnished related to the third quarter 2003 earnings release.                                    
|October 17, 2003  |  | On October 17, 2003, a Form 8-K was furnished related to the October 15, 2003 conference call regarding third quarter 2003 earnings. 
|November 3, 2003  |  | On November 3, 2003, a form 8-K was filed related to the declaration of a quarterly cash dividend.                                   
|December 17, 2003 |  | On December 17, 2003, a form 8-K was furnished related to the announcement of the appointment of an interim CEO.                     
|January 9, 2004   |  | On January 9, 2004, a form 8-K was filed related to the announcement of conference call to be held on January 22, 2004.              
|January 21, 2004  |  | On January 21, 2004, a form 8-K was furnished related to the fourth quarter 2003 earnings release.                                   
|January 21, 2004  |  | On January 21, 2004, a form 8-K was filed related to the declaration of a quarterly cash dividend.                                   
|January 26, 2004  |  | On January 26, 2004, a Form 8-K was furnished related to the January 22, 2004 conference call regarding fourth quarter 2003 earnings.



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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/S/ MARNI MCKINNEYMarni McKinney Vice Chairman and Chief Executive Officer (Principal Executive Officer) Date: March 3, 2004




Pursuant to the
requirements of the Securities Exchange Act of 1934, this annual report has been signed below by the following officers and directors on behalf of the Registrant and in the capacities indicated on March 3, 2004.



Officers



|    |  |                                                                                        |  |     |  |                                                                                                          
|--- |  | -------------------------------------------------------------------------------------- |  | --- |  | ---------------------------------------------------------------------------------------------------------
|By: |  | /S/ MARNI MCKINNEY                                                                     |  | By: |  | /S/ WILLIAM J. BRUNNER                                                                                   
|    |  | Marni McKinney Vice Chairman and Chief Executive Officer (Principal Executive Officer) |  |     |  | William J. Brunner Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)



Directors



|    |  |                         |  |     |  |                       
|--- |  | ----------------------- |  | --- |  | ----------------------
|By: |  | /s/ GERALD L. BEPKO     |  | By: |  | /s/ MARNI MCKINNEY    
|    |  | Gerald L. Bepko         |  |     |  | Marni McKinney        
|    |  |                         | 
|By: |  | /s/ ANAT BIRD           |  | By: |  | /s/ ROBERT H. MCKINNEY
|    |  |                         | 
|    |  | Anat Bird               |  |     |  | Robert H. McKinney    
|    |  |                         | 
|By: |  | /s/ PEDRO P. GRANADILLO |  | By: |  | /s/ PHYLLIS W. MINOTT 
|    |  |                         | 
|    |  | Pedro P. Granadillo     |  |     |  | Phyllis W. Minott     
|    |  |                         | 
|By: |  | /S/ WILLIAM G. MAYS     |  | By: |  | /s/ MICHAEL L. SMITH  
|    |  |                         | 
|    |  | William G. Mays         |  |     |  | Michael L. Smith      



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