##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, DC 20549
 FORM 10-Q
 þ
    
    Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the quarterly period ended March 31, 2007.
 or
 o
    
    Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the transition period from  to .
 Commission file number: 0-13585
 INTEGRA BANK CORPORATION
  INDIANA
    
    35-1632155(State or other jurisdiction of incorporation or organization)
    
    (IRS Employee Identification No.)PO BOX 868, EVANSVILLE, INDIANA
    
    47705-0868(Address of principal executive offices)
    
    (Zip Code)
  Yes þ No o
 o þ o
 Yes o No þ
  CLASS
    
    OUTSTANDING AT APRIL 30, 2007(Common stock, $1.00 Stated Value)
    
    20,770,217




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##### 



INTEGRA BANK CORPORATION
 INDEX
 PART I  FINANCIAL INFORMATION
 PAGE NO.Item 1.
    
    Unaudited Financial StatementsConsolidated balance sheets - March 31, 2007 and December 31, 2006
    
    
    3Consolidated statements of income - Three months ended March 31, 2007 and 2006
    
    
    4Consolidated statements of comprehensive income - Three months ended March 31, 2007 and 2006
    
    
    5Consolidated statements of changes in shareholders equity - Three months ended March 31, 2007
    
    
    6Consolidated statements of cash flow - Three months ended March 31, 2007 and 2006
    
    
    7Notes to unaudited consolidated financial statements
    
    
    9Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    18Item 3.
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    
    27Item 4.
    
    Controls and Procedures
    
    
    27PART II  OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    
    28Item 1A.
    
    Risk Factors
    
    
    28Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    28Item 3.
    
    Defaults Upon Senior Securities
    
    
    28Item 4.
    
    Submissions of Matters to a Vote of Security Holders
    
    
    28Item 5.
    
    Other Information
    
    
    28Item 6.
    
    Exhibits
    
    
    29Signatures
    
    
    30Exhibit 10.1Exhibit 10.2Exhibit 31.1Exhibit 31.2Exhibit 32
   2




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##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 Item 1. Unaudited Financial Statements
 
 INTEGRA BANK CORPORATION and Subsidiaries
Unaudited Consolidated Balance Sheets
 March 31,
    
    
    December 31,2007
    
    
    2006ASSETSCash and due from banks
    
    $
    58,474
    
    
    $
    65,400Federal funds sold and other short-term investments
    
    
    3,996
    
    
    
    3,998Total cash and cash equivalents
    
    
    62,470
    
    
    
    69,398Loans held for sale (at lower of cost or fair value)
    
    
    1,311
    
    
    
    1,764Securities available for sale
    
    
    595,988
    
    
    
    614,718Regulatory stock
    
    
    24,362
    
    
    
    24,410Loans, net of unearned income
    
    
    1,790,060
    
    
    
    1,790,976Less: Allowance for loan losses
    
    
    (21,165
    )
    
    
    (21,155
    )Net loans
    
    
    1,768,895
    
    
    
    1,769,821Premises and equipment
    
    
    45,964
    
    
    
    46,157Goodwill
    
    
    44,491
    
    
    
    44,491Other intangible assets
    
    
    6,599
    
    
    
    6,832Other assets
    
    
    106,131
    
    
    
    106,888TOTAL ASSETS
    
    $
    2,656,211
    
    
    $
    2,684,479LIABILITIESDeposits:Non-interest-bearing demand
    
    $
    250,474
    
    
    $
    252,851Interest-bearing:Savings, interest checking and money market accounts
    
    
    795,234
    
    
    
    794,280Time deposits of $100 or more
    
    
    411,150
    
    
    
    372,356Other interest-bearing
    
    
    538,870
    
    
    
    534,365Total deposits
    
    
    1,995,728
    
    
    
    1,953,852Short-term borrowings
    
    
    208,667
    
    
    
    217,518Long-term borrowings
    
    
    187,426
    
    
    
    254,521Other liabilities
    
    
    25,683
    
    
    
    23,114TOTAL LIABILITIES
    
    
    2,417,504
    
    
    
    2,449,005SHAREHOLDERS EQUITYPreferred stock - 1,000,000 shares authorizedNone outstandingCommon stock  $1.00 stated value:Shares authorized: 29,000,000Shares outstanding: 17,675,423 and 17,794,289 respectively
    
    
    17,675
    
    
    
    17,794Additional paid-in capital
    
    
    132,465
    
    
    
    135,054Retained earnings
    
    
    92,706
    
    
    
    88,355Accumulated other comprehensive income (loss)
    
    
    (4,139
    )
    
    
    (5,729
    )TOTAL SHAREHOLDERS EQUITY
    
    
    238,707
    
    
    
    235,474TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
    
    $
    2,656,211
    
    
    $
    2,684,479
   3




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##### Table of Contents



INTEGRA BANK CORPORATION and Subsidiaries
Unaudited Consolidated Statements of Income
 Three Months EndedMarch 31,2007
    
    
    2006INTEREST INCOMEInterest and fees on loans:Taxable
    
    $
    32,029
    
    
    $
    28,630Tax-exempt
    
    
    101
    
    
    
    101Interest and dividends on securities:Taxable
    
    
    6,246
    
    
    
    6,618Tax-exempt
    
    
    1,043
    
    
    
    1,120Dividends on regulatory stock
    
    
    346
    
    
    
    406Interest on loans held for sale
    
    
    28
    
    
    
    31Interest on federal funds sold and other short-term investments
    
    
    49
    
    
    
    208Total interest income
    
    
    39,842
    
    
    
    37,114INTEREST EXPENSEInterest on deposits
    
    
    14,684
    
    
    
    11,053Interest on short-term borrowings
    
    
    2,018
    
    
    
    1,760Interest on long-term borrowings
    
    
    2,811
    
    
    
    4,183Total interest expense
    
    
    19,513
    
    
    
    16,996NET INTEREST INCOME
    
    
    20,329
    
    
    
    20,118Provision for loan losses
    
    
    735
    
    
    
    394Net interest income after provision for loan losses
    
    
    19,594
    
    
    
    19,724NON-INTEREST INCOMEService charges on deposit accounts
    
    
    4,218
    
    
    
    4,055Other service charges and fees
    
    
    1,204
    
    
    
    1,174Debit card income-interchange
    
    
    895
    
    
    
    738Trust income
    
    
    614
    
    
    
    632Net securities gains (losses)
    
    
    166
    
    
    
    Gain on sale of other assets
    
    
    539
    
    
    
    91Bank-owned life insurance income
    
    
    414
    
    
    
    431Other
    
    
    1,165
    
    
    
    940Total non-interest income
    
    
    9,215
    
    
    
    8,061NON-INTEREST EXPENSESalaries and employee benefits
    
    
    10,765
    
    
    
    10,463Occupancy
    
    
    2,107
    
    
    
    1,997Equipment
    
    
    824
    
    
    
    845Professional fees
    
    
    1,137
    
    
    
    720Communication and transportation
    
    
    1,171
    
    
    
    1,258Processing
    
    
    510
    
    
    
    444Software
    
    
    467
    
    
    
    433Marketing
    
    
    588
    
    
    
    464Low income housing project losses
    
    
    617
    
    
    
    628Amortization of intangible assets
    
    
    233
    
    
    
    233Other
    
    
    1,748
    
    
    
    1,673Total non-interest expense
    
    
    20,167
    
    
    
    19,158Income before income taxes
    
    
    8,642
    
    
    
    8,627Income tax expense
    
    
    1,286
    
    
    
    2,070NET INCOME
    
    $
    7,356
    
    
    $
    6,557Earnings per share:Basic
    
    $
    0.42
    
    
    $
    0.38Diluted
    
    
    0.41
    
    
    
    0.37Weighted average shares outstanding:Basic
    
    
    17,678
    
    
    
    17,434Diluted
    
    
    17,786
    
    
    
    17,521Dividends per share
    
    $
    0.17
    
    
    $
    0.16
   4




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##### Table of Contents



INTEGRA BANK CORPORATION and Subsidiaries
Unaudited Consolidated Statements of Comprehensive Income
 Three Months EndedMarch 31,2007
    
    
    2006Net income
    
    $
    7,356
    
    
    $
    6,557Other comprehensive income, net of tax:Unrealized gain (loss) on securities:Unrealized gain (loss) arising in period
(net of tax of $1,118 and $(1,293), respectively)
    
    
    1,683
    
    
    
    (1,711
    )Reclassification of realized amounts
(net of tax of $(67) and $0, respectively)
    
    
    (99
    )
    
    
    Net unrealized gain (loss) on securities
    
    
    1,584
    
    
    
    (1,711
    )Unrealized gain on derivative hedging instruments arising in period
(net of tax of $4 and $0, respectively)
    
    
    6
    
    
    
    Net unrealized gain (loss), recognized in other comprehensive income
    
    
    1,590
    
    
    
    (1,711
    )Comprehensive income
    
    $
    8,946
    
    
    $
    4,846
   5




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##### Table of Contents



INTEGRA BANK CORPORATION and Subsidiaries
Unaudited Consolidated Statements of Changes In Shareholders Equity
 AccumulatedAdditional
    
    
    
    
    
    
    OtherCommon
    
    
    Common
    
    
    Paid-in
    
    
    Retained
    
    
    ComprehensiveShares
    
    
    Stock
    
    
    Capital
    
    
    Earnings
    
    
    Income (Loss)
    
    
    TotalBALANCE AT DECEMBER 31, 2006
    
    
    17,794,289
    
    
    $
    17,794
    
    
    $
    135,054
    
    
    $
    88,355
    
    
    $
    (5,729
    )
    
    $
    235,474Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,356
    
    
    
    
    
    
    
    7,356Cash dividend declared ($0.17 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,005
    )
    
    
    
    
    
    
    (3,005
    )Repurchase of outstanding shares
    
    
    (122,450
    )
    
    
    (122
    )
    
    
    (2,880
    )
    
    
    
    
    
    
    
    
    
    
    (3,002
    )Change, net of tax, in unrealized gain (loss) on:
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,584
    
    
    
    1,584Interest rate swaps
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6
    
    
    
    6Exercise of stock options
    
    
    3,000
    
    
    
    3
    
    
    
    65
    
    
    
    
    
    
    
    
    
    
    
    68Grant of restricted stock, net of forfeitures
    
    
    584
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Stock-based compensation expense
    
    
    
    
    
    
    
    
    
    
    226
    
    
    
    
    
    
    
    
    
    
    
    226BALANCE AT MARCH 31, 2007
    
    
    17,675,423
    
    
    $
    17,675
    
    
    $
    132,465
    
    
    $
    92,706
    
    
    $
    (4,139
    )
    
    $
    238,707
   6




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##### Table of Contents



INTEGRA BANK CORPORATION and Subsidiaries
Unaudited Consolidated Statements of Cash Flow
 Three Months EndedMarch 31,2007
    
    
    2006CASH FLOWS FROM OPERATING ACTIVITIESNet income
    
    $
    7,356
    
    
    $
    6,557Adjustments to reconcile net income to
net cash provided by operating activities:Amortization and depreciation
    
    
    1,389
    
    
    
    1,572Provision for loan losses
    
    
    735
    
    
    
    394Net securities (gains) losses
    
    
    (166
    )
    
    
    (Gain) loss on sale of premises and equipment
    
    
    
    
    
    
    (92
    )Gain on sale of other real estate owned
    
    
    3
    
    
    
    1Gain on sale of other assets
    
    
    12
    
    
    
    Gain on sale of mortgage servicing rights
    
    
    (555
    )
    
    
    Loss on low-income housing investments
    
    
    617
    
    
    
    628Increase (decrease) in deferred taxes
    
    
    (43
    )
    
    
    Net gain on sale of loans held for sale
    
    
    (159
    )
    
    
    (108
    )Proceeds from sale of loans held for sale
    
    
    11,459
    
    
    
    10,442Origination of loans held for sale
    
    
    (10,847
    )
    
    
    (11,435
    )Change in other operating
    
    
    2,754
    
    
    
    (1,126
    )Net cash flows provided by operating activities
    
    
    12,555
    
    
    
    6,833CASH FLOWS FROM INVESTING ACTIVITIESProceeds from maturities of securities available for sale
    
    
    27,474
    
    
    
    29,685Purchase of securities available for sale
    
    
    (6,000
    )
    
    
    (22,656
    )(Increase) decrease in loans made to customers
    
    
    (164
    )
    
    
    1,981Purchase of premises and equipment
    
    
    (806
    )
    
    
    (313
    )Proceeds from sale of premises and equipment
    
    
    
    
    
    
    119Proceeds from sale of other real estate owned
    
    
    42
    
    
    
    129Net cash flows provided by investing activities
    
    
    20,546
    
    
    
    8,945CASH FLOWS FROM FINANCING ACTIVITIESNet increase (decrease) in deposits
    
    
    41,876
    
    
    
    147,424Excess income tax benefit from employee stock-based awards
    
    
    4
    
    
    
    Net increase (decrease) in short-term borrowed funds
    
    
    (8,851
    )
    
    
    (53,432
    )Proceeds from long-term borrowings
    
    
    36,000
    
    
    
    Repayment of long-term borrowings
    
    
    (103,095
    )
    
    
    (103,085
    )Repurchase of common stock
    
    
    (3,002
    )
    
    
    Dividends paid
    
    
    (3,025
    )
    
    
    (2,794
    )Proceeds from exercise of stock options
    
    
    64
    
    
    
    447Net cash flows used in financing activities
    
    
    (40,029
    )
    
    
    (11,440
    )Net increase (decrease) in cash and cash equivalents
    
    
    (6,928
    )
    
    
    4,338Cash and cash equivalents at beginning of year
    
    
    69,398
    
    
    
    62,755Cash and cash equivalents at end of period
    
    $
    62,470
    
    
    $
    67,093
   7




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##### Table of Contents



INTEGRA BANK CORPORATION and Subsidiaries
Unaudited Consolidated Statements of Cash Flow (Continued)
 Three Months EndedMarch 31,2007
    
    
    2006SUPPLEMENTAL DISCLOSURE OF NONCASH TRANSACTIONSChange in allowance for unrealized (gain)/loss on securities available for sale
    
    $
    (2,583
    )
    
    $
    3,193Change in deferred taxes attributable to securities available for sale
    
    
    1,050
    
    
    
    (1,293
    )Change in fair value of derivative hedging instruments
    
    
    6
    
    
    
    Other real estate acquired in settlement of loans
    
    
    355
    
    
    
    172Dividends declared and not paid
    
    
    3,005
    
    
    
    2,798
   8




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##### Table of Contents



INTEGRA BANK CORPORATION and Subsidiaries
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 BASIS OF PRESENTATION:
    RECENT ACCOUNTING PRONOUNCEMENTS:
     9




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##### Table of Contents



STOCK-BASED COMPENSATION:
    10




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##### Table of Contents



2007
    
    
    2006Number of options granted
    
    
    8,000
    
    
    
    259,106Stock price
    
    $
    25.62
    
    
    $
    23.17Risk-free interest rate
    
    
    4.78
    %
    
    
    4.99
    %Expected life, in years
    
    
    6
    
    
    
    6Expected volatility
    
    
    22.65
    %
    
    
    24.49
    %Expected dividend yield
    
    
    2.70
    %
    
    
    2.80
    %Estimated fair value per option
    
    $
    5.91
    
    
    $
    5.65
   March 31, 2007Weighted AverageShares
    
    
    Exercise PriceOptions outstanding at December 31, 2006
    
    
    1,266,511
    
    
    $
    21.91Options granted
    
    
    8,000
    
    
    
    25.62Options exercised
    
    
    (3,000
    )
    
    
    21.25Options forfeited/expired
    
    
    (3,715
    )
    
    
    22.88Options outstanding at March 31, 2007
    
    
    1,267,796
    
    
    $
    21.93Options exercisable at March 31, 2007
    
    
    1,013,322
   Weighted AverageRange of
    
    
    
    
    
    
    
    
    Weighted Average
    
    
    Aggregate
    
    
    Remaining
    
    
    
    
    
    
    Weighted Average
    
    
    AggregateExercise
    
    
    
    
    Number
    
    
    Exercise
    
    
    Intrinsic
    
    
    Contractual Life
    
    
    Number
    
    
    Exercise
    
    
    IntrinsicPrice
    
    
    
    
    Outstanding
    
    
    Price
    
    
    Value
    
    
    (in years)
    
    
    Exercisable
    
    
    Price
    
    
    Value$
    17.00 - 20.00
    
    
    
    
    
    283,232
    
    
    $
    18.28
    
    
    $
    1,135
    
    
    
    5.8
    
    
    
    283,232
    
    
    $
    18.28
    
    
    $
    1,13520.01 - 23.50
    
    
    
    
    
    817,668
    
    
    
    21.91
    
    
    
    545
    
    
    
    7.2
    
    
    
    595,194
    
    
    
    21.57
    
    
    
    54323.51 - 27.00
    
    
    
    
    
    125,200
    
    
    
    25.71
    
    
    
    N/A
    
    
    
    4.3
    
    
    
    93,200
    
    
    
    25.56
    
    
    
    N/A27.01 - 38.00
    
    
    
    
    
    41,696
    
    
    
    35.79
    
    
    
    N/A
    
    
    
    1.1
    
    
    
    41,696
    
    
    
    35.79
    
    
    
    N/A1,267,796
    
    
    $
    21.93
    
    
    $
    1,680
    
    
    
    6.4
    
    
    
    1,013,322
    
    
    $
    21.60
    
    
    $
    1,678
   11




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##### Table of Contents



March 31,2007SharesRestricted shares outstanding, December 31, 2006
    
    
    62,865Shares granted
    
    
    2,000Shares vested
    
    
    Shares forfeited
    
    
    (1,416
    )Restricted shares outstanding, March 31, 2007
    
    
    63,449Weighted average fair value per share at grant date
    
    $
    25.82
    NOTE 2. ACQUISITION OF PRAIRIE FINANCIAL CORPORATION
    12




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NOTE 3. EARNINGS PER SHARE
  Three Months EndedMarch 31,2007
    
    
    2006Net income
    
    $
    7,356
    
    
    $
    6,557Weighted average shares outstanding  Basic
    
    
    17,678,483
    
    
    
    17,433,963Incremental shares related to stock compensation
    
    
    107,137
    
    
    
    86,779Average shares outstanding  Diluted
    
    
    17,785,620
    
    
    
    17,520,742Earnings per share  Basic
    
    $
    0.42
    
    
    $
    0.38Effect of incremental shares related to stock compensation
    
    
    0.01
    
    
    
    0.01Earnings per share  Diluted
    
    $
    0.41
    
    
    $
    0.37
  NOTE 4. SECURITIES
  Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    Losses
    
    
    ValueMarch 31, 2007:U.S. Government agencies
    
    $
    16,175
    
    
    $
    14
    
    
    $
    29
    
    
    $
    16,160Mortgage-backed securities
    
    
    129,958
    
    
    
    273
    
    
    
    1,864
    
    
    
    128,367Collateralized Mortgage Obligations
    
    
    307,658
    
    
    
    64
    
    
    
    7,406
    
    
    
    300,316States & political subdivisions
    
    
    71,144
    
    
    
    2,270
    
    
    
    3
    
    
    
    73,411Other securities
    
    
    76,983
    
    
    
    863
    
    
    
    112
    
    
    
    77,734Total
    
    $
    601,918
    
    
    $
    3,484
    
    
    $
    9,414
    
    
    $
    595,988
 Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    Losses
    
    
    ValueDecember 31, 2006:U.S. Government agencies
    
    $
    16,175
    
    
    $
    24
    
    
    $
    34
    
    
    $
    16,165Mortgage-backed securities
    
    
    135,885
    
    
    
    265
    
    
    
    2,520
    
    
    
    133,630Collateralized Mortgage Obligations
    
    
    322,666
    
    
    
    68
    
    
    
    9,317
    
    
    
    313,417States & political subdivisions
    
    
    73,580
    
    
    
    2,566
    
    
    
    3
    
    
    
    76,143Other securities
    
    
    74,924
    
    
    
    560
    
    
    
    121
    
    
    
    75,363Total
    
    $
    623,230
    
    
    $
    3,483
    
    
    $
    11,995
    
    
    $
    614,718
  13




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Less than 12 Months
    
    
    12 Months or More
    
    
    TotalUnrealized
    
    
    
    
    
    
    Unrealized
    
    
    
    
    
    
    UnrealizedMarch 31, 2007
    
    Fair Value
    
    
    Losses
    
    
    Fair Value
    
    
    Losses
    
    
    Fair Value
    
    
    LossesU.S. government agencies
    
    $
    50
    
    
    $
    
    
    
    $
    10,821
    
    
    $
    29
    
    
    $
    10,871
    
    
    $
    29Mortgage-backed securities
    
    
    625
    
    
    
    5
    
    
    
    112,880
    
    
    
    1,859
    
    
    
    113,505
    
    
    
    1,864Collateralized mortgage obligations
    
    
    1,957
    
    
    
    2
    
    
    
    292,908
    
    
    
    7,404
    
    
    
    294,865
    
    
    
    7,406State & political subdivisions
    
    
    93
    
    
    
    2
    
    
    
    141
    
    
    
    1
    
    
    
    234
    
    
    
    3Other securities
    
    
    
    
    
    
    
    
    
    
    10,405
    
    
    
    112
    
    
    
    10,405
    
    
    
    112Total
    
    $
    2,725
    
    
    $
    9
    
    
    $
    427,155
    
    
    $
    9,405
    
    
    $
    429,880
    
    
    $
    9,414
  NOTE 5. INCOME TAXES
  Three Months EndedMarch 31,2007
    
    
    2006Federal income tax computed at the statutory rates
    
    $
    3,025
    
    
    $
    3,019Adjusted for effects of:Tax refunds
    
    
    (886
    )
    
    
    Tax exempt interest
    
    
    (351
    )
    
    
    (381
    )Nondeductible expenses
    
    
    60
    
    
    
    54Low income housing credit
    
    
    (545
    )
    
    
    (609
    )Cash surrender value of life insurance policies
    
    
    (145
    )
    
    
    (151
    )Dividend received deduction
    
    
    (51
    )
    
    
    (54
    )State taxes, net of federal tax benefit
    
    
    50
    
    
    
    66Other differences
    
    
    129
    
    
    
    126Total income taxes
    
    $
    1,286
    
    
    $
    2,070
   14




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##### Table of Contents



NOTE 6. SHORT-TERM BORROWINGS
  March 31,
    
    
    December 31,2007
    
    
    2006Federal funds purchased
    
    $
    24,000
    
    
    $
    45,700Securities sold under agreements to repurchase
    
    
    119,667
    
    
    
    131,818Short-term Federal Home Loan Bank advances
    
    
    65,000
    
    
    
    40,000Total short-term borrowed funds
    
    $
    208,667
    
    
    $
    217,518
  NOTE 7. LONG-TERM BORROWINGS
  March 31,
    
    
    December 31,2007
    
    
    2006Federal Home Loan Bank (FHLB) AdvancesFixed maturity advances (weighted average rate of 5.35% and
2.64% as of March 31, 2007 and December 31, 2006, respectively)
    
    $
    36,000
    
    
    $
    102,500Amortizing and other advances (weighted average rate of 5.49% and
5.55% as of March 31, 2007 and December 31, 2006, respectively)
    
    
    2,722
    
    
    
    3,079Total FHLB Advances
    
    
    38,722
    
    
    
    105,579Securities sold under repurchase agreements with maturities
at various dates through 2008 (weighted average fixed rate of 2.78%
as of March 31, 2007 and December 31, 2006)
    
    
    75,000
    
    
    
    75,000Notes payable, secured by equipment, with a fixed interest rate of 7.26%,
due at various dates through 2012
    
    
    5,579
    
    
    
    5,817Subordinated debt, unsecured, with a floating interest rate equal to three-
month LIBOR plus 3.20%, with a maturity date of April 24, 2013
    
    
    10,000
    
    
    
    10,000Subordinated debt, unsecured, with a floating interest rate equal to three-
month LIBOR plus 2.85%, with a maturity date of April 7, 2014
    
    
    4,000
    
    
    
    4,000Floating Rate Capital Securities, with an interest rate equal to six-month
LIBOR plus 3.75%, with a maturity date of July 25, 2031, and callable
effective July 25, 2011 at par
    
    
    18,557
    
    
    
    18,557Floating Rate Capital Securities, with an interest rate equal to three-month
LIBOR plus 3.10%, with a maturity date of June 26, 2033 and callable
effective June 26, 2008 at par
    
    
    35,568
    
    
    
    35,568Total long-term borrowings
    
    $
    187,426
    
    
    $
    254,521
   NOTE 8. COMMITMENTS AND CONTINGENCIES
   15




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##### Table of Contents



March 31,
    
    
    December 31,2007
    
    
    2006Commitments to extend credit
    
    $
    622,980
    
    
    $
    570,421Standby letters of credit
    
    
    16,741
    
    
    
    17,535Non-reimbursable standby letters of credit
    
    
    2,260
    
    
    
    2,380
 NOTE 9. INTEREST RATE CONTRACTS
     NOTE 10. SEGMENT INFORMATION
   16




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##### Table of Contents



For three months ended March 31, 2007
    
    Banking
    
    
    Other
    
    
    TotalInterest income
    
    $
    39,790
    
    
    $
    52
    
    
    $
    39,842Interest expense
    
    
    18,042
    
    
    
    1,471
    
    
    
    19,513Net interest income (loss)
    
    
    21,748
    
    
    
    (1,419
    )
    
    
    20,329Provision for loan losses
    
    
    735
    
    
    
    
    
    
    
    735Other income
    
    
    9,081
    
    
    
    134
    
    
    
    9,215Other expense
    
    
    19,906
    
    
    
    261
    
    
    
    20,167Earnings before income taxes
    
    
    10,188
    
    
    
    (1,546
    )
    
    
    8,642Income tax expense (benefit)
    
    
    1,877
    
    
    
    (591
    )
    
    
    1,286Net income
    
    $
    8,311
    
    
    $
    (955
    )
    
    $
    7,356Segment assets
    
    $
    2,648,541
    
    
    $
    7,670
    
    
    $
    2,656,211
 For three months ended March 31, 2006
    
    Banking
    
    
    Other
    
    
    TotalInterest income
    
    $
    37,069
    
    
    $
    45
    
    
    $
    37,114Interest expense
    
    
    15,666
    
    
    
    1,330
    
    
    
    16,996Net interest income (loss)
    
    
    21,403
    
    
    
    (1,285
    )
    
    
    20,118Provision for loan losses
    
    
    394
    
    
    
    
    
    
    
    394Other income
    
    
    7,953
    
    
    
    108
    
    
    
    8,061Other expense
    
    
    18,833
    
    
    
    325
    
    
    
    19,158Earnings before income taxes
    
    
    10,129
    
    
    
    (1,502
    )
    
    
    8,627Income tax expense (benefit)
    
    
    2,643
    
    
    
    (573
    )
    
    
    2,070Net income
    
    $
    7,486
    
    
    $
    (929
    )
    
    $
    6,557Segment assets
    
    $
    2,675,770
    
    
    $
    23,436
    
    
    $
    2,699,206
  17




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 INTRODUCTION
   OVERVIEW
   
    
    Add new customers and do more with them as we continue our growth initiatives;
    
    Improve our net interest income by growing commercial loans and lower cost deposits,
while allowing our residential mortgage and indirect marine and recreational vehicle loans
to amortize;
    
    Increase our presence in faster growing metro markets by recruiting successful and
experienced lending and product teams and executing selective acquisitions;
    
    Improve operating leverage (grow revenue faster than expenses) by reducing expenses in
lower growth and lower profitability lines of business and by investing in higher growth
and higher return lines of business; and
    
    Allocate capital to the most profitable uses to increase total shareholder returns, and
return excess capital to shareholders through dividends and stock repurchases.
    
    
    The net interest margin improved 14 basis points to 3.48%. The increase in the
net interest margin from the first quarter of 2006 included an increase in the yield on
earning assets of 65 basis points, compared to a 58 basis point increase in the cost of
interest bearing liabilities, largely due to continued improvement in our earning asset
mix. The yield on average loan balances increased 65 basis points to 7.25%. This
contributed to a $211 increase in net interest income.
  18




---



##### Table of Contents




    
    Our earning asset mix continued to improve, driven by commercial loan growth.
Commercial loan average balances increased $63,914, or 6.7%, from the first quarter of
2006, and reflect continued successful execution of this key component of our strategy to
improve our loan mix and overall yields.
    
    Non-interest income increased $1,154, or 14.4%, from the first quarter of 2006.
The increase included an increase in deposit service charges of $163, or 4.0%, an increase
in debit card interchange fees of $157, or 21.2%, a gain on the sale of our mortgage
servicing portfolio of $555, securities gains of $166, and $152 of interest income on an
income tax refund recognized during the quarter.
    
    Credit quality results were excellent, with net charge-offs totaling 17 basis points
and allowance coverage to total and non-performing loans remaining the same as those at
December 31, 2006. The allowance for loan losses at March 31, 2007, was 239% of
non-performing loans and 1.18% of total loans, compared to 105% and 1.33%, respectively, at
March 31, 2006.
    
    The IRS audit that had been in process since 2004 was successfully resolved.
The successful completion of the federal income tax audit resulted in recognition of a
refund of $886, along with interest income on that refund of $152. Receipt of this refund
is expected to occur during the second quarter of 2007.
    
    Non-interest expense increased $1,009, or 5.3%, from the first quarter of 2006.
The primary components of this increase were higher salaries and employee benefits expense
of $302, and $425 of legal and other professional fees for collection activities related to
the Trans Continental Airlines related loans charged off during the fourth quarter of 2006.
      CRITICAL ACCOUNTING POLICIES
  NET INTEREST INCOME
   19




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##### Table of Contents




    
    Increases to interest income and the resulting margin were due largely to higher average
loan yields, which increased 65 basis points to 7.25% from 6.60%, and were driven by an
increase in commercial loan yields, including loan fees, of 78 basis points to 7.62%. The
increases in yields for commercial, and to a lesser extent residential mortgage and
consumer loans continued to be, in large part, due to increases in market interest rates
and the resulting changes to our pricing for new loans and upward adjustments for existing
variable rate products.
    
    The improvement in our earning asset mix contributed positively to both the net interest
margin and net interest income. Total average loan balances increased $29,684, or 1.7%,
highlighted by increases in higher yielding commercial loans of $63,914, or 6.7%. The
yield during the first quarter of 2007 for commercial loans of 7.62% was 37 basis points
higher than the yield on total loans of 7.25%, and 245 basis points higher than the yield
on investment securities of 5.17%. Securities balances declined $68,517, or 10.1%. Total
average commercial loans represented 42.3% of earning assets for the first quarter of 2007,
compared to 38.6% for the first quarter of 2006, evidencing the improvement in our mix of
earning assets to higher yielding assets. Higher yields on mortgage and consumer loans
more than offset declines in average balances.
    
    Our margin and net interest income have been negatively impacted since the first quarter
of 2006 by an industry-wide shift in balances from lower rate checking and savings accounts
to higher cost money market accounts and certificates of deposit, as the rates on those
products increased and have become more attractive to our customers. This shift in
customer preferences resulted in slight declines in the average balances of non-interest
bearing deposits of $7,098, interest checking deposits of $9,964 and savings deposits of
$6,599. The cost of interest bearing liabilities was also negatively impacted by the
maturity and refinancing of $177,500 fixed-term debt that carried a weighted average rate
of 3.06% and matured in March 2006. Declines in the average balances of repurchase
agreements and Federal Home Loan Bank advances were largely offset by higher average
balances for retail and brokered time deposits and money market accounts.
  For Three Months Ended March 31,
    
    2007
    
    
    2006Average
    
    
    Interest
    
    
    Yield/
    
    
    Average
    
    
    Interest
    
    
    Yield/EARNING ASSETS:
    
    Balances
    
    
    & Fees
    
    
    Cost
    
    
    Balances
    
    
    & Fees
    
    
    CostShort-term investments
    
    $
    3,576
    
    
    $
    49
    
    
    
    5.47
    %
    
    $
    18,479
    
    
    $
    208
    
    
    
    4.54
    %Loans held for sale
    
    
    1,607
    
    
    
    28
    
    
    
    7.01
    %
    
    
    1,782
    
    
    
    31
    
    
    
    7.01
    %Securities
    
    
    607,625
    
    
    
    7,851
    
    
    
    5.17
    %
    
    
    676,142
    
    
    
    8,347
    
    
    
    4.94
    %Regulatory Stock
    
    
    24,360
    
    
    
    346
    
    
    
    5.68
    %
    
    
    33,102
    
    
    
    406
    
    
    
    4.90
    %Loans
    
    
    1,780,249
    
    
    
    32,184
    
    
    
    7.25
    %
    
    
    1,750,565
    
    
    
    28,786
    
    
    
    6.60
    %Total earning assets
    
    
    2,417,417
    
    
    $
    40,458
    
    
    
    6.76
    %
    
    
    2,480,070
    
    
    $
    37,778
    
    
    
    6.11
    %Allowance for loan loss
    
    
    (21,128
    )
    
    
    
    
    
    
    
    
    
    
    (24,165
    )Other non-earning assets
    
    
    262,496
    
    
    
    
    
    
    
    
    
    
    
    262,388TOTAL ASSETS
    
    $
    2,658,785
    
    
    
    
    
    
    
    
    
    
    $
    2,718,293INTEREST-BEARING LIABILITIES:DepositsSavings and interest-bearing demand
    
    $
    489,480
    
    
    $
    1,102
    
    
    
    0.91
    %
    
    $
    506,043
    
    
    $
    951
    
    
    
    0.73
    %Money market accounts
    
    
    306,951
    
    
    
    3,069
    
    
    
    4.06
    %
    
    
    259,491
    
    
    
    2,143
    
    
    
    3.35
    %Certificates of deposit and other time
    
    
    935,064
    
    
    
    10,513
    
    
    
    4.56
    %
    
    
    856,317
    
    
    
    7,959
    
    
    
    3.77
    %Total interest-bearing deposits
    
    
    1,731,495
    
    
    
    14,684
    
    
    
    3.44
    %
    
    
    1,621,851
    
    
    
    11,053
    
    
    
    2.75
    %Short-term borrowings
    
    
    164,837
    
    
    
    2,018
    
    
    
    4.90
    %
    
    
    159,083
    
    
    
    1,760
    
    
    
    4.43
    %Long-term borrowings
    
    
    251,988
    
    
    
    2,811
    
    
    
    4.46
    %
    
    
    437,405
    
    
    
    4,183
    
    
    
    3.83
    %Total interest-bearing liabilities
    
    
    2,148,320
    
    
    $
    19,513
    
    
    
    3.68
    %
    
    
    2,218,339
    
    
    $
    16,996
    
    
    
    3.10
    %Non-interest bearing deposits
    
    
    248,959
    
    
    
    
    
    
    
    
    
    
    
    256,057Other noninterest-bearing liabilities and
shareholders equity
    
    
    261,506
    
    
    
    
    
    
    
    
    
    
    
    243,897TOTAL LIABILITIES AND
SHAREHOLDERS EQUITY
    
    $
    2,658,785
    
    
    
    
    
    
    
    
    
    
    $
    2,718,293Interest income/earning assets
    
    
    
    
    
    $
    40,458
    
    
    
    6.76
    %
    
    
    
    
    
    $
    37,778
    
    
    
    6.11
    %Interest expense/earning assets
    
    
    
    
    
    
    19,513
    
    
    
    3.28
    %
    
    
    
    
    
    
    16,996
    
    
    
    2.77
    %Net interest income/earning assets
    
    
    
    
    
    $
    20,945
    
    
    
    3.48
    %
    
    
    
    
    
    $
    20,782
    
    
    
    3.34
    %
 
  20




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##### Table of Contents



NON-INTEREST INCOME
  
    
    The sale of our mortgage servicing rights portfolio in March 2007 for a gain of $555.
    
    An increase in deposit service charges of $163, or 4.0%, to $4,218. This increase is
largely the result of a greater number of accounts.
    
    An increase in debit card interchange income of $157, or 21.2%, to $895. The increase
in debit card interchange income is driven by an increase in the number of transaction
accounts, as well as customer preferences towards greater usage of debit cards as a method
of payment.
    
    Securities gains of $166, compared to none during the first quarter of 2006. The gains
were a result of securities that were called by the issuer in March 2007.
    
    Other interest income of $152 that was accrued on the refund due from the Internal
Revenue Service.
 NON-INTEREST EXPENSE
  
    
    An increase in salaries and employee benefits expense of $302. The net increase
resulted from salaries and benefits expense of the commercial loan production team added
during the second and third quarters of 2006, less efficiencies gained in other areas.
Slight increases in severance related expenses and stock option expense were partially
offset by lower health insurance costs. The increase in stock option expense was due to
the requirements of SFAS No. 123(R) to expense stock options, which affected us beginning
in the second quarter of 2006. The average number of full time equivalent employees for
the first quarter of 2007 was 790 compared to 807 for the first quarter of 2006.
    
    An increase in professional fees of $417 from the year ago quarter. The increase was
primarily attributable to legal and professional fees of $425 incurred in connection with
collection activities on the Trans Continental Airlines loans charged off during the fourth
quarter of 2006.
    
    Increases in occupancy expense of $110 and marketing expense of $124, offset by a
decline in communication and transportation expense of $87.
    
    Expenses related to integration activities for the Prairie acquisition of approximately
$100. These expenses were in the areas of travel, training, computer programming and
printing.
 INCOME TAX EXPENSE
     21




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##### Table of Contents



FINANCIAL POSITION
  SECURITIES
    REGULATORY STOCK
  LOANS HELD FOR SALE
  LOANS
      22




---



##### Table of Contents



March 31,
    
    
    December 31,2007
    
    
    2006Commercial, industrial and
agricultural loans
    
    $
    560,607
    
    
    $
    568,841Economic development loans and
other obligations of state and
political subdivisions
    
    
    7,300
    
    
    
    7,179Lease financing
    
    
    5,252
    
    
    
    5,495Total commercial
    
    
    573,159
    
    
    
    581,515Commercial real estateCommercial mortgages
    
    
    185,157
    
    
    
    180,249Construction and development
    
    
    286,546
    
    
    
    260,314Total commercial real estate
    
    
    471,703
    
    
    
    440,563Residential mortgages
    
    
    423,414
    
    
    
    436,309Home equity
    
    
    131,308
    
    
    
    132,704Consumer loans
    
    
    190,478
    
    
    
    199,887Total loans
    
    
    1,790,062
    
    
    
    1,790,978Less: unearned income
    
    
    2
    
    
    
    2Loans, net of unearned income
    
    $
    1,790,060
    
    
    $
    1,790,976
 ASSET QUALITY
        23




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##### Table of Contents



Three Months EndedMarch 31,2007
    
    
    2006Beginning Balance
    
    $
    21,155
    
    
    $
    24,392Loans charged off
    
    
    (1,073
    )
    
    
    (1,926
    )Recoveries
    
    
    348
    
    
    
    374Provision for loan losses
    
    
    735
    
    
    
    394Ending Balance
    
    $
    21,165
    
    
    $
    23,234Percent of total loans
    
    
    1.18
    %
    
    
    1.33
    %Annualized % of average loans:Net charge-offs
    
    
    0.17
    %
    
    
    0.36
    %Provision for loan losses
    
    
    0.17
    %
    
    
    0.09
    %
   March 31,
    
    
    December 31,2007
    
    
    2006Nonaccrual loans
    
    $
    8,816
    
    
    $
    8,62590 days or more past due loans
    
    
    49
    
    
    
    228Total non-performing loans (1)
    
    
    8,865
    
    
    
    8,853Other real estate owned
    
    
    1,246
    
    
    
    936Total non-performing assets
    
    $
    10,111
    
    
    $
    9,789Ratios:Non-performing Loans to Loans
    
    
    0.50
    %
    
    
    0.49
    %Non-performing Assets to Loans and Other Real Estate Owned
    
    
    0.56
    %
    
    
    0.55
    %Allowance for Loan Losses to Non-performing Loans
    
    
    238.75
    %
    
    
    238.96
    %
 (1)
    
    Includes non-performing loans classified as loans held for sale
 DEPOSITS
    SHORT-TERM BORROWINGS
    24




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##### Table of Contents



LONG-TERM BORROWINGS
   CAPITAL EXPENDITURES
  OFF-BALANCE SHEET ARRANGEMENTS AND AGGREGATE CONTRACTUAL OBLIGATIONS
  CAPITAL RESOURCES AND LIQUIDITY
  Regulatory Guidelines
    
    
    ActualMinimum
    
    
    Well-
    
    
    March 31,
    
    
    December 31,Requirements
    
    
    Capitalized
    
    
    2007
    
    
    2006Integra Bank Corporation:Total Capital (to Risk-Weighted Assets)
    
    
    8.00
    %
    
    
    N/A
    
    
    
    12.71
    %
    
    
    12.51
    %Tier 1 Capital (to Risk-Weighted Assets)
    
    
    4.00
    %
    
    
    N/A
    
    
    
    11.01
    %
    
    
    10.80
    %Tier 1 Capital (to Average Assets)
    
    
    4.00
    %
    
    
    N/A
    
    
    
    8.78
    %
    
    
    8.42
    %Integra Bank N.A.:Total Capital (to Risk-Weighted Assets)
    
    
    8.00
    %
    
    
    10.00
    %
    
    
    12.19
    %
    
    
    11.91
    %Tier 1 Capital (to Risk-Weighted Assets)
    
    
    4.00
    %
    
    
    6.00
    %
    
    
    11.16
    %
    
    
    10.88
    %Tier 1 Capital (to Average Assets)
    
    
    4.00
    %
    
    
    5.00
    %
    
    
    8.92
    %
    
    
    8.49
    %
    25




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##### Table of Contents



Item 3. Quantitative and Qualitative Disclosures about Market Risk
     Earnings at Risk (EAR).
  Estimated Change in EAR from the Base Interest Rate Scenario-200 basis points
    
    
    +200 basis pointsMarch 31, 2007
    
    
    -3.50
    %
    
    
    +1.70
    %December 31, 2006
    
    
    +0.28
    %
    
    
    -1.78
    %
  Economic Value of Equity (EVE).
  26




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##### Table of Contents



Estimated Change in EVE from the Base Interest Rate Scenario-200 basis points
    
    
    +200 basis pointsMarch 31, 2007
    
    
    +0.90
    %
    
    
    -5.60
    %December 31, 2006
    
    
    +0.97
    %
    
    
    -6.58
    %
  
 Item 4: Controls and Procedures
    27




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##### Table of Contents



PART II  OTHER INFORMATION
 
 Item 1. LEGAL PROCEEDINGS
  
 Item 1A. RISK FACTORS
  Our Acquisition of Prairie Financial Corporation May Not Produce the Results We Expect.
  
 Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
  Total Number of
    
    
    ApproximateShares Purchased
    
    
    Dollar Value ofas Part of
    
    
    Shares that MayTotal Number
    
    
    
    
    
    
    Publicly
    
    
    Yet be Purchasedof Shares
    
    
    Average Price
    
    
    Announced Plans
    
    
    Under PlansPurchased
    
    
    Paid per Share
    
    
    or Programs
    
    
    or ProgramsJanuary 2007
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    10,000February 2007
    
    
    117,350
    
    
    
    24.51
    
    
    
    117,350
    
    
    
    7,119March 2007
    
    
    5,100
    
    
    
    23.87
    
    
    
    5,100
    
    
    
    6,997Total
    
    
    122,450
    
    
    $
    24.48
    
    
    
    122,450
    
    
    $
    6,997
 *
    
    In April 2006, our Board of Directors authorized the repurchase of up to $10 million or
2.5% of the outstanding shares of common stock, through June 30, 2007.
 
 Item 3. DEFAULTS UPON SENIOR SECURITIES
  
 Item 4. SUBMISSIONS OF MATTERS TO A VOTE OF SECURITY HOLDERS
  
 Item 5. OTHER INFORMATION
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##### Table of Contents



Item 6. EXHIBITS
  10.1
    
    Employment Agreement dated April 9, 2007, between Integra Bank Corporation and Bradley M. Stevens *10.2
    
    Performance Criteria for 2007 Under Integra Bank Corporation Annual Cash Incentive Plan *31.1
    
    Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of Chief Executive Officer31.2
    
    Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of Chief Financial Officer32
    
    Certification of Chief Executive Officer and Chief Financial Officer
 
    
    The indicated exhibit is a management contract, compensatory plan or arrangement
required to be filed by Item 601 of Regulation S-K.
  29




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##### Table of Contents



SIGNATURES
  INTEGRA BANK CORPORATIONBy /s/ Michael T. VeaChairman of the Board, ChiefExecutive Officer and PresidentMay 9, 2007/s/ Martin M. ZornExecutive Vice President, Chief Financial OfficerMay 9, 2007  30




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##### Table of Contents



EXHIBIT INDEX
 ExhibitNumber
    
    Description10.1
    
    Employment Agreement dated April 9, 2007, between Integra Bank Corporation and Bradley M.
Stevens *10.2
    
    Performance Criteria for 2007 Under Integra Bank Corporation Annual Cash Incentive Plan *31.1
    
    Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of Chief Executive
Officer31.2
    
    Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of Chief
Financial Officer32
    
    Certification of Chief Executive Officer and Chief Financial Officer
 
    
    The indicated exhibit is a management contract, compensatory plan or arrangement
required to be filed by Item 601 of Regulation S-K.
  31