##### 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, 2009.
 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
 Yes o No o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 Yes o No þ
  CLASS
    
    OUTSTANDING AT APRIL 30, 2009(Common stock, $1.00 Stated Value)
    
    20,742,779




---



##### 



INTEGRA BANK CORPORATION
 INDEX
 PAGE NO.PART I  FINANCIAL INFORMATIONItem 1. Unaudited Financial StatementsConsolidated balance sheets
March 31, 2009 and December 31, 2008
    
    
    3Consolidated statements of income
Three months ended March 31, 2009 and 2008
    
    
    4Consolidated statements of comprehensive income
Three months ended March 31, 2009 and 2008
    
    
    5Consolidated statements of changes in shareholders equity
Three months ended March 31, 2009
    
    
    6Consolidated statements of cash flowThree months ended March 31, 2009 and 2008
    
    
    7Notes to unaudited consolidated financial statements
    
    
    9Item 2. Managements Discussion and Analysis of Financial
Condition and Results of Operations
    
    
    25Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    37Item 4. Controls and Procedures
    
    
    38PART II  OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    39Item 1A. Risk Factors
    
    
    39Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    39Item 3. Defaults Upon Senior Securities
    
    
    39Item 4. Submissions of Matters to a Vote of Security Holders
    
    
    39Item 5. Other Information
    
    
    40Item 6. Exhibits
    
    
    40Signatures
    
    
    41Exhibit 10.5Exhibit 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 31,2009
    
    
    2008ASSETSCash and due from banks
    
    $
    353,743
    
    
    $
    62,354Federal funds sold and other short-term investments
    
    
    514
    
    
    
    419Total cash and cash equivalents
    
    
    354,257
    
    
    
    62,773Loans held for sale (at lower of cost or fair value)
    
    
    7,956
    
    
    
    5,776Securities available for sale
    
    
    541,883
    
    
    
    561,739Regulatory stock
    
    
    29,137
    
    
    
    29,155Loans, net of unearned income
    
    
    2,425,999
    
    
    
    2,490,243Less: Allowance for loan losses
    
    
    (78,525
    )
    
    
    (64,437
    )Net loans
    
    
    2,347,474
    
    
    
    2,425,806Premises and equipment
    
    
    46,834
    
    
    
    48,500Other intangible assets
    
    
    9,507
    
    
    
    9,928Other assets
    
    
    218,485
    
    
    
    213,423TOTAL ASSETS
    
    $
    3,555,533
    
    
    $
    3,357,100LIABILITIESDeposits:Non-interest-bearing demand
    
    $
    299,454
    
    
    $
    284,032Interest-bearing:Savings, interest checking and money market accounts
    
    
    997,910
    
    
    
    901,785Time deposits of $100 or more
    
    
    749,205
    
    
    
    603,519Other interest-bearing
    
    
    533,474
    
    
    
    550,856Total deposits
    
    
    2,580,043
    
    
    
    2,340,192Short-term borrowings
    
    
    277,040
    
    
    
    415,006Long-term borrowings
    
    
    392,562
    
    
    
    360,917Other liabilities
    
    
    44,386
    
    
    
    36,194TOTAL LIABILITIES
    
    
    3,294,031
    
    
    
    3,152,309Commitments and contingent liabilities (Note 9)
    
    
    
    
    
    
    SHAREHOLDERS EQUITYPreferred stock  no par, $1,000 per share liquidation preference:Shares authorized: 1,000,000Shares outstanding: 83,586
    
    
    81,761
    
    
    
    Common stock  $1.00 stated value:Shares authorized: 29,000,000Shares outstanding: 20,744,612 and 20,748,880 respectively
    
    
    20,745
    
    
    
    20,749Additional paid-in capital
    
    
    209,168
    
    
    
    208,732Retained earnings
    
    
    (44,435
    )
    
    
    (15,754
    )Accumulated other comprehensive income (loss)
    
    
    (5,737
    )
    
    
    (8,936
    )TOTAL SHAREHOLDERS EQUITY
    
    
    261,502
    
    
    
    204,791TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
    
    $
    3,555,533
    
    
    $
    3,357,100
   3




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##### Table of Contents



INTEGRA BANK CORPORATION and Subsidiaries
 
 Unaudited Consolidated Statements of Income
  Three Months EndedMarch 31,2009
    
    
    2008INTEREST INCOMEInterest and fees on loans:Taxable
    
    $
    25,749
    
    
    $
    38,701Tax-exempt
    
    
    203
    
    
    
    81Interest and dividends on securities:Taxable
    
    
    5,466
    
    
    
    6,480Tax-exempt
    
    
    1,008
    
    
    
    1,312Dividends on regulatory stock
    
    
    521
    
    
    
    376Interest on loans held for sale
    
    
    103
    
    
    
    103Interest on federal funds sold and other short-term investments
    
    
    93
    
    
    
    38Total interest income
    
    
    33,143
    
    
    
    47,091INTEREST EXPENSEInterest on deposits
    
    
    12,187
    
    
    
    16,392Interest on short-term borrowings
    
    
    763
    
    
    
    2,166Interest on long-term borrowings
    
    
    2,710
    
    
    
    5,015Total interest expense
    
    
    15,660
    
    
    
    23,573NET INTEREST INCOME
    
    
    17,483
    
    
    
    23,518Provision for loan losses
    
    
    31,394
    
    
    
    3,634Net interest income after provision for loan losses
    
    
    (13,911
    )
    
    
    19,884NON-INTEREST INCOMEService charges on deposit accounts
    
    
    4,413
    
    
    
    4,699Other service charges and fees
    
    
    836
    
    
    
    998Commissions on annuities
    
    
    257
    
    
    
    581Debit card income-interchange
    
    
    1,257
    
    
    
    1,243Trust income
    
    
    459
    
    
    
    559Net securities gains (losses)
    
    
    (1,170
    )
    
    
    24Gain on sale of other assets
    
    
    2,496
    
    
    
    Warrant fair value adjustment
    
    
    (4,738
    )
    
    
    Cash surrender value life insurance
    
    
    690
    
    
    
    643Other
    
    
    992
    
    
    
    1,987Total non-interest income
    
    
    5,492
    
    
    
    10,734NON-INTEREST EXPENSESalaries and employee benefits
    
    
    12,075
    
    
    
    12,394Occupancy
    
    
    2,581
    
    
    
    2,560Equipment
    
    
    849
    
    
    
    928Professional fees
    
    
    1,730
    
    
    
    1,218Communication and transportation
    
    
    1,161
    
    
    
    1,222Processing
    
    
    757
    
    
    
    718Software
    
    
    620
    
    
    
    559Marketing
    
    
    416
    
    
    
    482Loan and OREO expense
    
    
    5,448
    
    
    
    452FDIC assessment
    
    
    950
    
    
    
    78Low income housing project losses
    
    
    690
    
    
    
    651Amortization of intangible assets
    
    
    421
    
    
    
    431Other
    
    
    1,775
    
    
    
    2,428Total non-interest expense
    
    
    29,473
    
    
    
    24,121Income (Loss) before income taxes
    
    
    (37,892
    )
    
    
    6,497Income tax expense (benefit)
    
    
    (9,831
    )
    
    
    1,524Net income (loss)
    
    
    (28,061
    )
    
    
    4,973Preferred stock dividends and discount accretion
    
    
    413
    
    
    
    Net income (loss) available to common shareholders
    
    $
    (28,474
    )
    
    $
    4,973Earnings (Loss) per common share:Basic
    
    $
    (1.37
    )
    
    $
    0.24Diluted
    
    
    (1.37
    )
    
    
    0.24Weighted average common shares outstanding:Basic
    
    
    20,732
    
    
    
    20,537Diluted
    
    
    20,732
    
    
    
    20,544Dividends per common share
    
    $
    0.01
    
    
    $
    0.18
   4




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##### Table of Contents



INTEGRA BANK CORPORATION and Subsidiaries
 
 Unaudited Consolidated Statements of Comprehensive Income
  Three Months EndedMarch 31,2009
    
    
    2008Net income (loss)
    
    $
    (28,061
    )
    
    $
    4,973Other comprehensive income (loss), net of tax:Unrealized gain (loss) on securities:Unrealized gain (loss) arising in period
(net of tax of $1,599 and $2,508, respectively)
    
    
    2,631
    
    
    
    3,280Reclassification of amounts realized through impairment charges
and sales (net of tax of $442 and $(9), respectively)
    
    
    728
    
    
    
    (15
    )Net unrealized gain (loss) on securities
    
    
    3,359
    
    
    
    3,265Change in net pension plan liability
(net of tax of $9 and $15, respectively)
    
    
    15
    
    
    
    25Unrealized gain (loss) on derivative hedging instruments arising in period
(net of tax of $(106) and $185, respectively)
    
    
    (175
    )
    
    
    374Net unrealized gain (loss), recognized in other comprehensive income (loss)
    
    
    3,199
    
    
    
    3,664Comprehensive income (loss)
    
    $
    (24,862
    )
    
    $
    8,637
   5




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##### Table of Contents



INTEGRA BANK CORPORATION and Subsidiaries
 
 Unaudited Consolidated Statements of Changes In Shareholders Equity
  AccumulatedShares of
    
    
    
    
    
    
    Additional
    
    
    
    
    
    
    OtherPreferred
    
    
    Common
    
    
    Common
    
    
    Paid-in
    
    
    Retained
    
    
    ComprehensiveStock
    
    
    Stock
    
    
    Stock
    
    
    Capital
    
    
    Earnings
    
    
    Income (Loss)
    
    
    TotalBALANCE AT DECEMBER 31, 2008
    
    $
    
    
    
    
    20,748,880
    
    
    $
    20,749
    
    
    $
    208,732
    
    
    $
    (15,754
    )
    
    $
    (8,936
    )
    
    $
    204,791Net income (loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (28,061
    )
    
    
    
    
    
    
    (28,061
    )Cash dividend declared ($0.01 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (207
    )
    
    
    
    
    
    
    (207
    )Net change, net of tax, in accumulated
other comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,199
    
    
    
    3,199Preferred stock
    
    
    83,586
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    83,586Discount on preferred stock
    
    
    (1,825
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,825
    )Preferred stock dividend and discount accretion
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (413
    )
    
    
    
    
    
    
    (413
    )Exercise of stock options and
restricted shares, net
    
    
    
    
    
    
    (618
    )
    
    
    (1
    )
    
    
    (14
    )
    
    
    
    
    
    
    
    
    
    
    (15
    )Grant of restricted stock, net of forfeitures
    
    
    
    
    
    
    (3,650
    )
    
    
    (3
    )
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    Stock-based compensation expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    447
    
    
    
    
    
    
    
    
    
    
    
    447BALANCE AT MARCH 31, 2009
    
    $
    81,761
    
    
    
    20,744,612
    
    
    $
    20,745
    
    
    $
    209,168
    
    
    $
    (44,435
    )
    
    $
    (5,737
    )
    
    $
    261,502
   6




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##### Table of Contents



INTEGRA BANK CORPORATION and Subsidiaries
 
 Unaudited Consolidated Statements of Cash Flow
  Three Months EndedMarch 31,2009
    
    
    2008CASH FLOWS FROM OPERATING ACTIVITIESNet income (loss)
    
    $
    (28,061
    )
    
    $
    4,973Adjustments to reconcile net income to
net cash provided by operating activities:Amortization and depreciation
    
    
    1,800
    
    
    
    1,789Provision for loan losses
    
    
    31,394
    
    
    
    3,634Net securities (gains) losses
    
    
    
    
    
    
    (24
    )Impairment charge on available for sale securities
    
    
    1,170
    
    
    
    Net held for trading (gains) losses
    
    
    
    
    
    
    (321
    )(Gain) loss on sale of premises and equipment
    
    
    (1
    )
    
    
    (Gain) loss on sale of other real estate owned
    
    
    54
    
    
    
    Gain on sale of branches
    
    
    (2,549
    )
    
    
    Loss on low-income housing investments
    
    
    690
    
    
    
    651Proceeds from maturities of held for trading securities
    
    
    
    
    
    
    1,682Net change in held for trading securities
    
    
    
    
    
    
    52,421Increase (decrease) in deferred taxes
    
    
    (3,045
    )
    
    
    Net gain on sale of loans held for sale
    
    
    (207
    )
    
    
    (291
    )Proceeds from sale of loans held for sale
    
    
    31,897
    
    
    
    36,739Origination of loans held for sale
    
    
    (33,870
    )
    
    
    (37,000
    )Change in other operating
    
    
    8,752
    
    
    
    (21,303
    )Net cash flows provided by (used in) operating activities
    
    
    8,024
    
    
    
    42,950CASH FLOWS FROM INVESTING ACTIVITIESProceeds from maturities of securities available for sale
    
    
    29,142
    
    
    
    35,708Proceeds from sales of securities available for sale
    
    
    50
    
    
    
    7,957Purchase of securities available for sale
    
    
    (5,240
    )
    
    
    (87,671
    )(Increase) decrease in loans made to customers
    
    
    16,678
    
    
    
    (31,966
    )Decrease in loans from sale of branches
    
    
    26,940
    
    
    
    Purchase of premises and equipment
    
    
    (588
    )
    
    
    (833
    )Proceeds from sale of premises and equipment from branch sale
    
    
    1,148
    
    
    
    Proceeds from sale of premises and equipment
    
    
    11
    
    
    
    Proceeds from sale of other real estate owned
    
    
    697
    
    
    
    Net cash flows provided by (used in) investing activities
    
    
    68,838
    
    
    
    (76,805
    )CASH FLOWS FROM FINANCING ACTIVITIESNet increase (decrease) in deposits
    
    
    290,612
    
    
    
    (32,069
    )Decrease in deposits from sale of branches
    
    
    (50,796
    )
    
    
    Net increase (decrease) in short-term borrowed funds
    
    
    (137,966
    )
    
    
    94,752Proceeds from long-term borrowings
    
    
    50,000
    
    
    
    50,000Repayment of long-term borrowings
    
    
    (18,354
    )
    
    
    (65,953
    )Proceeds from issuance of TARP preferred stock and warrants
    
    
    81,731
    
    
    
    Accrued dividends on preferred stock
    
    
    (383
    )
    
    
    Dividends paid
    
    
    (207
    )
    
    
    (3,717
    )Proceeds from exercise of stock options and restricted shares, net
    
    
    (15
    )
    
    
    Net cash flows provided by (used in) financing activities
    
    
    214,622
    
    
    
    43,013Net increase (decrease) in cash and cash equivalents
    
    
    291,484
    
    
    
    9,158Cash and cash equivalents at beginning of year
    
    
    62,773
    
    
    
    75,990Cash and cash equivalents at end of period
    
    $
    354,257
    
    
    $
    85,148
   7




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##### Table of Contents



INTEGRA BANK CORPORATION and Subsidiaries
Unaudited Consolidated Statements of Cash Flow (Continued)
 Three Months EndedMarch 31,2009
    
    
    2008SUPPLEMENTAL DISCLOSURE OF NONCASH TRANSACTIONSOther real estate acquired in settlement of loans
    
    $
    3,320
    
    
    $
    321Dividends for common shareholders declared and not paid
    
    
    207
    
    
    
    3,718
   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:
    ACCOUNTING ESTIMATES:
      9




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##### Table of Contents



RECENT ACCOUNTING PRONOUNCEMENTS:
       FAIR
VALUE MEASUREMENT:
  Level 1
 Level 2:
 Level 3
  10




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##### Table of Contents



Securities
    
    
    Credit quality of the collateral is estimated using average risk-neutral probability
of default values for each industry (i.e. banks, real estate investment trusts and
insurance companies are evaluated separately);
 
    
    Asset defaults are generated by accounting for both the probability of default of the
asset and an assumed level of correlation among the assets (e.g. banks with other
banks);
 
    
    A higher level of correlation is assumed among assets from the same industry (e.g.
banks with other banks);
 
    
    Loss given default was assumed to be 95% (i.e. a 5% recovery);
 
    
    Cash flows were forecast for underlying collateral and applied to each CDO tranche to
determine the resulting distribution among the securities;
 
    
    The calculations were modeled in several thousand scenarios using a Monte Carlo
engine;
 
    
    The expected cash flows for each scenario were discounted at the risk-free rate plus
200 basis points (for illiquidity) to calculate the present value of the security; and
 
    
    The average price was used for valuation purposes.
   
    
    The one and five year default probability was determined for each issuer in the pool
based on the Kamakura Risk Information Services model;
 
    
    The default probability for insurance issuers was developed using 22 macro factors
which drive the default for mid-size insurance companies through the use of a logistic
regression model;
 
    
    Twenty-seven macro factors were candidate variables for macro driven default rates;
and
 
    
    100,000 Monte-Carlo simulations were run in annual time stops until maturity to
derive a fair market value.
  11




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##### Table of Contents



Loans held for sale
 Derivatives
 Impaired Loans
 Other Real Estate Owned:
  Quoted Pricesin ActiveMarkets for
    
    
    SignificantIdentical
    
    
    Other
    
    
    SignificantAssets and
    
    
    Observable
    
    
    UnobservableLiabilities
    
    
    Inputs
    
    
    Inputs
    
    
    Balance as of(Level 1)
    
    
    (Level 2)
    
    
    (Level 3)
    
    
    March 31, 2009AssetsSecurities, available for sale
    
    $
    
    
    
    $
    526,046
    
    
    $
    15,837
    
    
    $
    541,883Derivatives
    
    
    
    
    
    
    11,668
    
    
    
    
    
    
    
    11,668LiabilitiesDerivatives
    
    $
    
    
    
    $
    11,183
    
    
    $
    
    
    
    $
    11,183
  12




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##### Table of Contents



Quoted Pricesin ActiveMarkets for
    
    
    SignificantIdentical
    
    
    Other
    
    
    SignificantAssets and
    
    
    Observable
    
    
    UnobservableLiabilities
    
    
    Inputs
    
    
    Inputs
    
    
    Balance as of(Level 1)
    
    
    (Level 2)
    
    
    (Level 3)
    
    
    December 31, 2008AssetsSecurities, available for sale
    
    $
    
    
    
    $
    544,204
    
    
    $
    17,535
    
    
    $
    561,739Derivatives
    
    
    
    
    
    
    12,296
    
    
    
    
    
    
    
    12,296LiabilitiesDerivatives
    
    $
    
    
    
    $
    11,851
    
    
    $
    
    
    
    $
    11,851
  Quoted Pricesin ActiveMarkets for
    
    
    SignificantIdentical
    
    
    Other
    
    
    SignificantAssets and
    
    
    Observable
    
    
    UnobservableLiabilities
    
    
    Inputs
    
    
    Inputs
    
    
    Balance as of(Level 1)
    
    
    (Level 2)
    
    
    (Level 3)
    
    
    March 31, 2009AssetsImpaired loans
    
    $
    
    
    
    $
    
    
    
    $
    90,754
    
    
    $
    90,754Loans held for sale
    
    
    
    
    
    
    7,956
    
    
    
    
    
    
    
    7,956Other real estate owned
    
    
    
    
    
    
    
    
    
    
    16,016
    
    
    
    16,016Liabilities
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
 Quoted Pricesin ActiveMarkets for
    
    
    SignificantIdentical
    
    
    Other
    
    
    SignificantAssets and
    
    
    Observable
    
    
    UnobservableLiabilities
    
    
    Inputs
    
    
    Inputs
    
    
    Balance as of(Level 1)
    
    
    (Level 2)
    
    
    (Level 3)
    
    
    December 31, 2008AssetsImpaired loans
    
    $
    
    
    
    $
    
    
    
    $
    69,590
    
    
    $
    69,590Loans held for sale
    
    
    
    
    
    
    5,776
    
    
    
    
    
    
    
    5,776Liabilities
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
   13




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##### Table of Contents



Fair Value Measurements Using SignificantUnobservable Inputs (Level 3)SecuritiesAvailable for sale
    
    
    TotalBeginning Balance at January 1, 2009
    
    $
    17,535
    
    
    $
    17,535Gains (Losses) included in other comprehensive income
    
    
    (528
    )
    
    
    (528
    )Gains (Losses) included in earnings
    
    
    (1,170
    )
    
    
    (1,170
    )Ending Balance
    
    $
    15,837
    
    
    $
    15,837
   STOCK
OPTION PLAN AND AWARDS:
    March 31, 2009Weighted AverageWeighted Average
    
    
    Remaining TermShares
    
    
    Exercise Price
    
    
    (In years)Options/SARs outstanding at December 31, 2008
    
    
    1,415,433
    
    
    $
    20.53Options/SARs granted
    
    
    
    
    
    
    Options/SARs exercised
    
    
    
    
    
    
    Options/SARs forfeited/expired
    
    
    (6,833
    )
    
    
    14.47Options/SARs outstanding at March 31, 2009
    
    
    1,408,600
    
    
    $
    20.56
    
    
    
    5.5Options/SARs exercisable at March 31, 2009
    
    
    1,059,183
    
    
    $
    21.26
    
    
    
    4.5
   14




---



##### Table of Contents



Weighted-AverageGrant-DateShares
    
    
    Fair ValueRestricted shares outstanding, December 31, 2008
    
    
    179,613
    
    
    $
    17.57Shares granted
    
    
    1,500Shares vested
    
    
    (4,974
    )Shares forfeited
    
    
    (5,150
    )Restricted shares outstanding, March 31, 2009
    
    
    170,989
    
    
    $
    17.55
   NOTE 2. EARNINGS PER SHARE
   Three Months EndedMarch 31,2009
    
    
    2008Net income (loss)
    
    $
    (28,061
    )
    
    $
    4,973Preferred dividends and discount accretion
    
    
    (413
    )
    
    
    Net income (loss) available to common shareholders
    
    $
    (28,474
    )
    
    $
    4,973Weighted average common shares outstanding  Basic
    
    
    20,731,957
    
    
    
    20,536,760Incremental shares related to stock compensation
    
    
    
    
    
    
    7,218Average common shares outstanding  Diluted
    
    
    20,731,957
    
    
    
    20,543,978Earnings (Loss) per common share  Basic
    
    $
    (1.37
    )
    
    $
    0.24Effect of incremental shares related to stock compensation
    
    
    
    
    
    
    Earnings (Loss) per common share  Diluted
    
    $
    (1.37
    )
    
    $
    0.24
   15




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##### Table of Contents



NOTE 3. SECURITIES
  Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    Losses
    
    
    ValueMarch 31, 2009:U.S. Government agencies
    
    $
    667
    
    
    $
    5
    
    
    $
    4
    
    
    $
    668Collateralized mortgage obligations:Agency
    
    
    261,255
    
    
    
    6,540
    
    
    
    
    
    
    
    267,795Private label
    
    
    33,590
    
    
    
    
    
    
    
    5,553
    
    
    
    28,037Mortgage-backed securities
    
    
    122,609
    
    
    
    2,695
    
    
    
    2
    
    
    
    125,302Trust preferred
    
    
    37,711
    
    
    
    991
    
    
    
    15,035
    
    
    
    23,667States & political subdivisions
    
    
    85,022
    
    
    
    2,950
    
    
    
    190
    
    
    
    87,782Other securities
    
    
    8,640
    
    
    
    5
    
    
    
    13
    
    
    
    8,632Total
    
    $
    549,494
    
    
    $
    13,186
    
    
    $
    20,797
    
    
    $
    541,883
 Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    Losses
    
    
    ValueDecember 31, 2008:U.S. Government agencies
    
    $
    742
    
    
    $
    19
    
    
    $
    
    
    
    $
    761Collateralized mortgage obligations:Agency
    
    
    272,038
    
    
    
    3,040
    
    
    
    1,002
    
    
    
    274,076Private label
    
    
    35,341
    
    
    
    
    
    
    
    6,731
    
    
    
    28,610Mortgage-backed securities
    
    
    130,367
    
    
    
    1,179
    
    
    
    293
    
    
    
    131,253Trust preferred
    
    
    38,759
    
    
    
    969
    
    
    
    11,327
    
    
    
    28,401States & political subdivisions
    
    
    88,765
    
    
    
    1,710
    
    
    
    447
    
    
    
    90,028Other securities
    
    
    8,641
    
    
    
    
    
    
    
    31
    
    
    
    8,610Total
    
    $
    574,653
    
    
    $
    6,917
    
    
    $
    19,831
    
    
    $
    561,739
  Less than 12 Months
    
    
    12 Months or More
    
    
    TotalUnrealized
    
    
    
    
    
    
    Unrealized
    
    
    
    
    
    
    UnrealizedFair Value
    
    
    Losses
    
    
    Fair Value
    
    
    Losses
    
    
    Fair Value
    
    
    LossesMarch 31, 2009U.S. Government agencies
    
    $
    236
    
    
    $
    4
    
    
    $
    
    
    
    $
    
    
    
    $
    236
    
    
    $
    4Collateralized mortgage obligations:Agency
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Private label
    
    
    5,756
    
    
    
    1,596
    
    
    
    22,280
    
    
    
    3,957
    
    
    
    28,036
    
    
    
    5,553Mortgage-backed securities
    
    
    3,653
    
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    3,653
    
    
    
    2Trust preferred
    
    
    3,550
    
    
    
    6,438
    
    
    
    4,927
    
    
    
    8,597
    
    
    
    8,477
    
    
    
    15,035State & political subdivisions
    
    
    5,151
    
    
    
    119
    
    
    
    819
    
    
    
    71
    
    
    
    5,970
    
    
    
    190Other securities
    
    
    
    
    
    
    
    
    
    
    12
    
    
    
    13
    
    
    
    12
    
    
    
    13Total
    
    $
    18,346
    
    
    $
    8,159
    
    
    $
    28,038
    
    
    $
    12,638
    
    
    $
    46,384
    
    
    $
    20,797
  16




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##### Table of Contents



Issuer
    
    Ratings at Purchase
    
    Ratings as of March 31, 2009
    
    Subsequent RatingsPreTSL VI
    
    A1 (Moodys) / A+ (Fitch)
    
    Caa1 (Moodys) / A+ (Fitch)
    
    CCC (Fitch)PreTSL XIV
    
    A2 (Moodys) / A (Fitch)
    
    Ca (Moodys) / A (Fitch)
    
    CC (Fitch)Alesco 10A C1
    
    A3 (Moodys) / A- (Fitch)
    
    Ca (Moodys) / A- (Fitch)
    
    CC (Fitch)Trapeza 11A D1
    
    A- (Fitch)
    
    BB+ (Fitch)
    
    C (Fitch)Trapeza 12A D1
    
    A- (Fitch)
    
    A- (Fitch)
    
    C (Fitch)US Capital Funding
    
    A3 (Moodys) / A- (Fitch)
    
    Caa3 (Moodys) / A- (Fitch)
    
    CC (Fitch)
       17




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##### Table of Contents



18




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##### Table of Contents



NOTE 4. ALLOWANCE FOR LOAN LOSSES
   Three Months EndedMarch 31,2009
    
    
    2008Beginning Balance
    
    $
    64,437
    
    
    $
    27,261Loans charged off
    
    
    (17,636
    )
    
    
    (2,753
    )Recoveries
    
    
    330
    
    
    
    448Provision for loan losses
    
    
    31,394
    
    
    
    3,634Ending Balance
    
    $
    78,525
    
    
    $
    28,590Percent of total loans
    
    
    3.24
    %
    
    
    1.22
    %Annualized % of average loans:Net charge-offs
    
    
    2.86
    %
    
    
    0.40
    %Provision for loan losses
    
    
    5.18
    %
    
    
    0.63
    %
    March 31,
    
    
    December 31,2009
    
    
    2008Nonaccrual loans
    
    $
    186,770
    
    
    $
    150,00290 days or more past due loans
    
    
    2,444
    
    
    
    897Total non-performing loans
    
    
    189,214
    
    
    
    150,899Other real estate owned
    
    
    19,848
    
    
    
    19,396Total non-performing assets
    
    $
    209,062
    
    
    $
    170,295Ratios:Non-performing Loans to Loans
    
    
    7.80
    %
    
    
    6.06
    %Non-performing Assets to Loans and Other Real Estate Owned
    
    
    8.55
    %
    
    
    6.79
    %Allowance for Loan Losses to Non-performing Loans
    
    
    41.50
    %
    
    
    42.70
    %
 NOTE 5. BRANCH DIVESTITURES
   19




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##### Table of Contents



NOTE 6. INCOME TAXES
      NOTE 7. SHORT-TERM BORROWINGS
 March 31,
    
    
    December 31,2009
    
    
    2008Federal funds purchased
    
    $
    
    
    
    $
    25,000Securities sold under agreements to repurchase
    
    
    87,040
    
    
    
    88,106Short-term Federal Home Loan Bank advances
    
    
    90,000
    
    
    
    125,000Term Auction Facility borrowings
    
    
    100,000
    
    
    
    176,900Total short-term borrowed funds
    
    $
    277,040
    
    
    $
    415,006
    20




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##### Table of Contents



NOTE 8. LONG-TERM BORROWINGS
  March 31,
    
    
    December 31,2009
    
    
    2008Federal Home Loan Bank AdvancesFixed maturity advances (weighted average rate of 2.96% and 3.02%
as of March 31, 2009 and December 31, 2008, respectively)
    
    $
    136,008
    
    
    $
    136,009Amortizing and other advances (weighted average rate of 4.89% and
4.98% as of March 31, 2009 and December 31, 2008, respectively)
    
    
    628
    
    
    
    706Total FHLB Advances
    
    
    136,636
    
    
    
    136,715Securities sold under repurchase agreements with maturities
at various dates through 2013 (weighted average fixed rate of 3.30%
as of March 31, 2009 and December 31, 2008)
    
    
    100,000
    
    
    
    100,000Note payable, secured by equipment, with a fixed interest rate of 7.26%,
due at various dates through 2012
    
    
    3,504
    
    
    
    3,780Note payable, unsecured, with a floating interest rate equal to one-month
LIBOR plus 0.875%, with a maturity date of April 1, 2012
    
    
    
    
    
    
    18,000Subordinated 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
quarterly, at par
    
    
    35,568
    
    
    
    35,568Floating Rate Capital Securities, with an interest rate equal to three-month
LIBOR plus 1.57%, with a maturity date of June 30, 2037, and callable
effective June 30, 2012, at par
    
    
    20,619
    
    
    
    20,619Floating Rate Capital Securities, with an interest rate equal to three-month
LIBOR plus 1.70%, with a maturity date of December 15, 2036, and callable
effective December 15, 2011, at par
    
    
    10,310
    
    
    
    10,310Senior unsecured debt guaranteed by FDIC under the TLGP, with a fixed
rate of 2.625%, with a maturity date of March 30, 2012
    
    
    50,000
    
    
    
    Other
    
    
    3,368
    
    
    
    3,368Total long-term borrowings
    
    $
    392,562
    
    
    $
    360,917
     21




---



##### Table of Contents



NOTE 9. COMMITMENTS AND CONTINGENCIES
    March 31,
    
    
    December 31,2009
    
    
    2008Commitments to extend credit
    
    $
    447,565
    
    
    $
    684,245Standby letters of credit
    
    
    21,386
    
    
    
    22,320Non-reimbursable standby letters of credit and commitments
    
    
    1,934
    
    
    
    2,574
 NOTE 10. INTEREST RATE CONTRACTS
     22




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##### Table of Contents



March 31, 2009
    
    
    December 31, 2008Assets
    
    


    (Liabilities)

    
    
    Derivative
    
    
    Assets
    
    
    (Liabilities)
    
    
    DerivativeCarrying
    
    
    Carrying
    
    
    Net Carrying
    
    
    Carrying
    
    
    Carrying
    
    
    Net CarryingValue
    
    
    Value
    
    
    Value
    
    
    Value
    
    
    Value
    
    
    ValueDerivatives designated as
hedging instruments:Interest rate contracts
    
    $
    11,198
    
    
    $
    (11,182
    )
    
    $
    16
    
    
    $
    12,080
    
    
    $
    (11,835
    )
    
    $
    245Derivatives not designated
as hedging instruments:Mortgage banking derivatives
    
    
    470
    
    
    
    (2
    )
    
    
    468
    
    
    
    216
    
    
    
    (16
    )
    
    
    200
    NOTE 11. SEGMENT INFORMATION
    23




---



##### Table of Contents



For three months ended March 31, 2009
    
    Banking
    
    
    Other
    
    
    TotalInterest income
    
    $
    33,109
    
    
    $
    34
    
    
    $
    33,143Interest expense
    
    
    14,595
    
    
    
    1,065
    
    
    
    15,660Net interest income (loss)
    
    
    18,514
    
    
    
    (1,031
    )
    
    
    17,483Provision for loan losses
    
    
    31,394
    
    
    
    
    
    
    
    31,394Other income
    
    
    10,141
    
    
    
    (4,649
    )
    
    
    5,492Other expense
    
    
    29,199
    
    
    
    274
    
    
    
    29,473Earnings before income taxes
    
    
    (31,938
    )
    
    
    (5,954
    )
    
    
    (37,892
    )Income tax expense (benefit)
    
    
    (9,380
    )
    
    
    (451
    )
    
    
    (9,831
    )Net income
    
    $
    (22,558
    )
    
    $
    (5,503
    )
    
    $
    (28,061
    )Segment assets
    
    $
    3,546,768
    
    
    $
    8,765
    
    
    $
    3,555,533
 For three months ended March 31, 2008
    
    Banking
    
    
    Other
    
    
    TotalInterest income
    
    $
    47,027
    
    
    $
    64
    
    
    $
    47,091Interest expense
    
    
    21,581
    
    
    
    1,992
    
    
    
    23,573Net interest income (loss)
    
    
    25,446
    
    
    
    (1,928
    )
    
    
    23,518Provision for loan losses
    
    
    3,634
    
    
    
    
    
    
    
    3,634Other income
    
    
    10,642
    
    
    
    92
    
    
    
    10,734Other expense
    
    
    23,824
    
    
    
    297
    
    
    
    24,121Earnings before income taxes
    
    
    8,630
    
    
    
    (2,133
    )
    
    
    6,497Income tax expense (benefit)
    
    
    2,328
    
    
    
    (804
    )
    
    
    1,524Net income
    
    $
    6,302
    
    
    $
    (1,329
    )
    
    $
    4,973Segment assets
    
    $
    3,393,521
    
    
    $
    7,803
    
    
    $
    3,401,324
 NOTE 12. REGULATORY CAPITAL
  Regulatory Guidelines
    
    
    ActualMinimum
    
    
    Well-
    
    
    March 31,
    
    
    December 31,Requirements
    
    
    Capitalized
    
    
    2009
    
    
    2008Integra Bank Corporation:Total Capital (to Risk-Weighted Assets)
    
    
    8.00
    %
    
    
    N/A
    
    
    
    11.73
    %
    
    
    9.75
    %Tier 1 Capital (to Risk-Weighted Assets)
    
    
    4.00
    %
    
    
    N/A
    
    
    
    10.01
    %
    
    
    7.68
    %Tier 1 Capital (to Average Assets)
    
    
    4.00
    %
    
    
    N/A
    
    
    
    7.99
    %
    
    
    6.41
    %Integra Bank N.A.:Total Capital (to Risk-Weighted Assets)
    
    
    8.00
    %
    
    
    10.00
    %
    
    
    10.79
    %
    
    
    10.07
    %Tier 1 Capital (to Risk-Weighted Assets)
    
    
    4.00
    %
    
    
    6.00
    %
    
    
    9.51
    %
    
    
    8.81
    %Tier 1 Capital (to Average Assets)
    
    
    4.00
    %
    
    
    5.00
    %
    
    
    7.61
    %
    
    
    7.37
    %
  24




---



##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 INTRODUCTION
   OVERVIEW
         25




---



##### Table of Contents




    
    pursuing opportunities to improve our regulatory capital and tangible capital levels;
 
    
    stabilizing and then improving our credit profile (as measured by non-performing
assets);
 
    
    returning to profitability, then to future acceptable and sustainable profitability;
 
    
    growing core deposits faster than loans; and
 
    
    generating positive operating leverage (revenue growth that exceeds expense growth).
 CRITICAL ACCOUNTING POLICIES
  NET INTEREST INCOME
   26




---



##### Table of Contents




    
    Average loan yields decreased 235 basis points to 4.26% for the quarter ended March 31,
2009, from 6.61% in the quarter ended March 31, 2008, led by a decrease in commercial loan
yields, including loan fees, of 294 basis points to 3.60%. The decreases in yields for
commercial loans occurred as loans repriced in response to declines in prime and LIBOR. At
March 31, 2009, approximately 40% of our variable rate loans are tied to prime, 49% to
LIBOR and 11% to other floating rate indices. During the twelve months ended March 31,
2009, the national prime lending rate declined 200 basis points, while one and three month
LIBOR declined 221 and 151 basis points, respectively. Approximately 69.7% of our loans
were variable rate at March 31, 2009. Commercial loan yields also declined in large part
because of the increase in non-accrual loans we experienced during the past four quarters.
The impact of total non-accrual loans on the net interest margin has increased since early
2008, and was 46 basis points for the first quarter of 2009, up from 11 basis points during
the first quarter of 2008.
 
    
    Changes in our earning asset mix adversely impacted both the net interest margin and net
interest income. Total average commercial loan balances increased $200,263, or 12.2% from
the year ago quarter. The impact to our net interest margin from the higher percentage of
commercial loans positively impacted our net interest margin for the first part of 2008,
but has negatively impacted it since then reflecting the declines in prime and LIBOR rates.
Total commercial loan average balances represented 60.3% of total earning assets in the
first quarter of 2009, up from 54.4% for the first quarter of 2008. The yield on
commercial loans for the first quarter of 2009 was 142 basis points lower than the yield on
securities during the first quarter of 2008, a 268 basis point change from the first
quarter of 2008, when commercial loan yields were 126 basis points higher than more stable
securities yields.
 
    
    The decline in interest rates throughout 2008 and early 2009 resulted in lower
liabilities costs. The average rate paid on interest bearing liabilities was 2.16% for the
first quarter of 2009, a 131 basis point decline from the first quarter of 2008. Time
deposit rates declined 134 basis points and money market rates declined 139 basis points.
The average rate paid on sources of funds other than time and transaction deposits, which
include repurchase agreements, Federal Home Loan Bank advances and other sources, decreased
from 4.19% to 1.94% during the quarter ended March 31, 2009, as compared to the quarter
ended March 31, 2008. Changes in funding sources included TAF borrowing under the Federal
Reserves Term Auction Facility (TAF), which averaged $179,521 during the first quarter of
2009 compared to none during the first quarter of 2008 and increases in time deposits and
savings average balances of $146,880 and $75,655. These increases were partially offset by
a decline in national market repurchase agreements of $72,082.
  27




---



##### Table of Contents



2009
    
    
    2008Average
    
    
    Interest
    
    
    Yield/
    
    
    Average
    
    
    Interest
    
    
    Yield/For Three Months Ended March 31,
    
    Balances
    
    
    & Fees
    
    
    Cost
    
    
    Balances
    
    
    & Fees
    
    
    CostEARNING ASSETS:Short-term investments
    
    $
    496
    
    
    $
    93
    
    
    
    76.17
    %
    
    $
    4,869
    
    
    $
    38
    
    
    
    3.19
    %Loans held for sale
    
    
    8,347
    
    
    
    103
    
    
    
    4.92
    %
    
    
    6,617
    
    
    
    103
    
    
    
    6.22
    %Securities
    
    
    559,606
    
    
    
    7,017
    
    
    
    5.02
    %
    
    
    643,517
    
    
    
    8,499
    
    
    
    5.28
    %Regulatory Stock
    
    
    29,154
    
    
    
    521
    
    
    
    7.14
    %
    
    
    29,179
    
    
    
    376
    
    
    
    5.15
    %Loans
    
    
    2,456,113
    
    
    
    26,061
    
    
    
    4.26
    %
    
    
    2,333,059
    
    
    
    38,825
    
    
    
    6.61
    %Total earning assets
    
    
    3,053,716
    
    
    $
    33,795
    
    
    
    4.47
    %
    
    
    3,017,241
    
    
    $
    47,841
    
    
    
    6.37
    %Allowance for loan loss
    
    
    (66,858
    )
    
    
    
    
    
    
    
    
    
    
    (28,030
    )Other non-earning assets
    
    
    513,543
    
    
    
    
    
    
    
    
    
    
    
    384,654TOTAL ASSETS
    
    $
    3,500,401
    
    
    
    
    
    
    
    
    
    
    $
    3,373,865INTEREST-BEARING LIABILITIES:DepositsSavings and interest-bearing demand
    
    $
    618,753
    
    
    $
    1,365
    
    
    
    0.90
    %
    
    $
    536,124
    
    
    $
    1,246
    
    
    
    0.93
    %Money market accounts
    
    
    326,299
    
    
    
    1,177
    
    
    
    1.46
    %
    
    
    391,890
    
    
    
    2,777
    
    
    
    2.85
    %Certificates of deposit and other time
    
    
    1,274,752
    
    
    
    9,645
    
    
    
    3.07
    %
    
    
    1,127,872
    
    
    
    12,369
    
    
    
    4.41
    %Total interest-bearing deposits
    
    
    2,219,804
    
    
    
    12,187
    
    
    
    2.23
    %
    
    
    2,055,886
    
    
    
    16,392
    
    
    
    3.21
    %Short-term borrowings
    
    
    362,670
    
    
    
    763
    
    
    
    0.84
    %
    
    
    262,187
    
    
    
    2,166
    
    
    
    3.27
    %Long-term borrowings
    
    
    354,376
    
    
    
    2,710
    
    
    
    3.06
    %
    
    
    415,933
    
    
    
    5,015
    
    
    
    4.77
    %Total interest-bearing liabilities
    
    
    2,936,850
    
    
    $
    15,660
    
    
    
    2.16
    %
    
    
    2,734,006
    
    
    $
    23,573
    
    
    
    3.47
    %Non-interest bearing deposits
    
    
    293,573
    
    
    
    
    
    
    
    
    
    
    
    272,811Other noninterest-bearing liabilities and
shareholders equity
    
    
    269,978
    
    
    
    
    
    
    
    
    
    
    
    367,048TOTAL LIABILITIES AND
SHAREHOLDERS EQUITY
    
    $
    3,500,401
    
    
    
    
    
    
    
    
    
    
    $
    3,373,865Interest income/earning assets
    
    
    
    
    
    $
    33,795
    
    
    
    4.47
    %
    
    
    
    
    
    $
    47,841
    
    
    
    6.37
    %Interest expense/earning assets
    
    
    
    
    
    
    15,660
    
    
    
    2.08
    %
    
    
    
    
    
    
    23,573
    
    
    
    3.14
    %Net interest income/earning assets
    
    
    
    
    
    $
    18,135
    
    
    
    2.39
    %
    
    
    
    
    
    $
    24,268
    
    
    
    3.23
    %
 Tax exempt income presented on a tax equivalent basis based on a 35% federal tax rate.Federal tax equivalent adjustments on securities are $543 and $707 for 2009 and 2008, respectively.Federal tax equivalent adjustments on loans are $109 and $43 for 2009 and 2008, respectively. NON-INTEREST INCOME
  
    
    The first quarter of 2009 included a $4,738 reduction to non-interest income for a
non-tax deductible mark to market adjustment for the Treasury Warrant. The Treasury
Warrant was reflected as a liability because it was not fully exercisable at the time of
issuance. In April 2009, our shareholders approved an increase in the authorized shares
of common stock and the issuance of Warrant Shares, at which point we began accounting for
the Treasury Warrant as equity, as prescribed by Emerging Issues Task Force 00-19
Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a
Companys Own Stock. The value of the Treasury Warrant increased $1,407 in April 2009
prior to being transferred to equity. This resulted in $1,407 of expense in the second
quarter.
 
    
    The first quarter of 2008 included trading securities gains of $321, as well as
positive mark-to-market adjustments on free-standing derivatives of $506. We have not had
any securities classified as trading or any free-standing derivatives in 2009.
  28




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##### Table of Contents




    
    Deposit service charges decreased $286, or 6.1%, to $4,413 as the result of a lower
level of activity, likely due to the slowing economy.
 
    
    Annuity commissions decreased $324, or 55.8%, to $257. The decrease resulted from
changes in customer preferences.
 
    
    Other-than-temporary securities impairment during the first quarter of 2009 was $1,170.
Note 3 of the Notes to the unaudited consolidated financial statements included in this
report provides additional information on the other-than-temporary impairment. There were
$24 of securities gains in the first quarter of 2008.
  NON-INTEREST EXPENSE
  
    
    An increase in loan and other real estate owned expense of $4,996 consisting of
increases in loan collection costs of $3,548, other real estate owned related costs of $659
and $766 of other real estate owned writedowns, compared to none in the first
quarter of 2008. The primary component of the loan collection and real estate owned
collection costs are the accrual of real estate taxes for properties we own or for properties
securing non-performing loans.
 
    
    FDIC insurance premiums increased $872 to $950, as rates charged by the FDIC increased
in the first quarter of 2009 and also because our one-time credit was fully utilized during
the first quarter of 2009.
 
    
    Professional fees increased $512, or 42.0%, consisting primarily of higher legal fees of
$408.
   INCOME TAX EXPENSE (BENEFIT)
  FINANCIAL POSITION
  SECURITIES AVAILABLE FOR SALE AND TRADING SECURITIES
   REGULATORY STOCK
   29




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##### Table of Contents



LOANS HELD FOR SALE
  LOANS
         30




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##### Table of Contents



March 31,
    
    
    December 31,2009
    
    
    2008Commercial, industrial and
agricultural loans
    
    $
    729,758
    
    
    $
    748,446Economic development loans and
other obligations of state and
political subdivisions
    
    
    25,717
    
    
    
    24,502Lease financing
    
    
    5,430
    
    
    
    5,397Total commercial
    
    
    760,905
    
    
    
    778,345Commercial real estateCommercial mortgages
    
    
    434,982
    
    
    
    436,336Construction and development
    
    
    638,946
    
    
    
    641,460Total commercial real estate
    
    
    1,073,928
    
    
    
    1,077,796Residential mortgages
    
    
    281,675
    
    
    
    309,397Home equity
    
    
    164,928
    
    
    
    171,241Consumer loans
    
    
    144,563
    
    
    
    153,464Total loans
    
    
    2,425,999
    
    
    
    2,490,243
 ASSET QUALITY
   31




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##### Table of Contents



Three Months EndedMarch 31,2009
    
    
    2008Beginning Balance
    
    $
    64,437
    
    
    $
    27,261Loans charged off
    
    
    (17,636
    )
    
    
    (2,753
    )Recoveries
    
    
    330
    
    
    
    448Provision for loan losses
    
    
    31,394
    
    
    
    3,634Ending Balance
    
    $
    78,525
    
    
    $
    28,590Percent of total loans
    
    
    3.24
    %
    
    
    1.22
    %Annualized % of average loans:Net charge-offs
    
    
    2.86
    %
    
    
    0.40
    %Provision for loan losses
    
    
    5.18
    %
    
    
    0.63
    %
     32




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##### Table of Contents




    
    Since April 1, 2008 we have obtained new appraisals on approximately 85% of the
properties securing our Chicago area non-performing loans and have used those appraisals to
help determine the need for and amount of specific reserves within the allowance for loan
losses. As of March 31, 2009 we have appraisals aged nine months or less on approximately
82% of the properties securing our Chicago area non-performing loans. We are continuing to
order new or updated appraisals for any commercial real estate loans that warrant it.
 
    
    We discontinued pursuing new residential loan relationships in Chicago in the second
quarter of 2008. We continue to direct the focus of our Chicago lending staff to managing
the stressed and non-performing loans in their portfolio and have hired additional personnel
during the first quarter of 2009 to assist with managing the more troubled relationships.
 
    
    We discontinued pursuing new CRE opportunities, regardless of property type, starting in
the third quarter of 2008. We expect our CRE balances will continue to grow in the
short-term, however, as we fund committed credit facilities. As this credit cycle unfolds,
we will continue to evaluate the size of this portfolio.
 
    
    We have instituted a new portfolio review process in which relationship managers are
required to present selected loans in their portfolio to credit administration and executive
management. The loans to be presented are selected by credit administration based upon a
number of factors, including the size and age of the loan, product type, industry type and
delinquency.
 
    
    We have implemented other policy and process changes, including actions to reduce our
concentration risk as well as tightening our loan approval standards and processes.
  33




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##### Table of Contents



March 31,
    
    
    December 31,2009
    
    
    2008Nonaccrual loans
    
    $
    186,770
    
    
    $
    150,00290 days or more past due loans
    
    
    2,444
    
    
    
    897Total non-performing loans
    
    
    189,214
    
    
    
    150,899Other real estate owned
    
    
    19,848
    
    
    
    19,396Total non-performing assets
    
    $
    209,062
    
    
    $
    170,295Ratios:Non-performing Loans to Loans
    
    
    7.80
    %
    
    
    6.06
    %Non-performing Assets to Loans and Other Real Estate Owned
    
    
    8.55
    %
    
    
    6.79
    %Allowance for Loan Losses to Non-performing Loans
    
    
    41.50
    %
    
    
    42.70
    %
 DEPOSITS
   SHORT-TERM BORROWINGS
   LONG-TERM BORROWINGS
   CAPITAL EXPENDITURES
  OFF-BALANCE SHEET ARRANGEMENTS AND AGGREGATE CONTRACTUAL OBLIGATIONS
   34




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##### Table of Contents



March 31,
    
    
    December 31,2009
    
    
    2008Commitments to extend credit
    
    $
    447,565
    
    
    $
    684,245Standby letters of credit
    
    
    21,386
    
    
    
    22,320Non-reimbursable standby letters of credit and commitments
    
    
    1,934
    
    
    
    2,574
  CAPITAL RESOURCES AND LIQUIDITY
  Regulatory Guidelines
    
    
    ActualMinimum
    
    
    Well-
    
    
    March 31,
    
    
    December 31,Requirements
    
    
    Capitalized
    
    
    2009
    
    
    2008Integra Bank Corporation:Total Capital (to Risk-Weighted Assets)
    
    
    8.00
    %
    
    
    N/A
    
    
    
    11.73
    %
    
    
    9.75
    %Tier 1 Capital (to Risk-Weighted Assets)
    
    
    4.00
    %
    
    
    N/A
    
    
    
    10.01
    %
    
    
    7.68
    %Tier 1 Capital (to Average Assets)
    
    
    4.00
    %
    
    
    N/A
    
    
    
    7.99
    %
    
    
    6.41
    %Integra Bank N.A.:Total Capital (to Risk-Weighted Assets)
    
    
    8.00
    %
    
    
    10.00
    %
    
    
    10.79
    %
    
    
    10.07
    %Tier 1 Capital (to Risk-Weighted Assets)
    
    
    4.00
    %
    
    
    6.00
    %
    
    
    9.51
    %
    
    
    8.81
    %Tier 1 Capital (to Average Assets)
    
    
    4.00
    %
    
    
    5.00
    %
    
    
    7.61
    %
    
    
    7.37
    %
      35




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##### Table of Contents




    
    Improving and retaining our level of earnings;
 
    
    Reducing CRE lending; we may also sell assets to reduce the size of our balance
sheet;
 
    
    Issuing new capital in an opportunistic basis as we feel necessary and as conditions
warrant; and
 
    
    Delevering through the sales of loans and securities.
           36




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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
    
    
    -100 basis points
    
    
    +200 basis pointsMarch 31, 2009
    
    
    -7.57
    %
    
    
    -4.36
    %
    
    
    10.43
    %December 31, 2008
    
    
    -12.63
    %
    
    
    -5.72
    %
    
    
    4.35
    %
 Economic Value of Equity (EVE).
  37




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##### Table of Contents



Estimated Change in EVE from the Base Interest Rate Scenario-200 basis points
    
    
    -100 basis points
    
    
    +200 basis pointsMarch 31, 2009
    
    
    -9.26
    %
    
    
    -3.62
    %
    
    
    2.57
    %December 31, 2008
    
    
    -13.35
    %
    
    
    -6.07
    %
    
    
    0.57
    %
  
 Item 4: Controls and Procedures
    38




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##### Table of Contents



PART II  OTHER INFORMATION
 
 Item 1. LEGAL PROCEEDINGS
   
 Item 1A. RISK FACTORS
  We Are Subject to the Risk of Additional Impairment Charges Relating to Our Securities Portfolio.
  Our Ability to Fully Utilize the Value of Our Deferred Tax Asset Is Uncertain.
  
 Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
  
 Item 3. DEFAULTS UPON SENIOR SECURITIES
  
 Item 4. SUBMISSIONS OF MATTERS TO A VOTE OF SECURITY HOLDERS
   39




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##### Table of Contents



Item 5. OTHER INFORMATION
  
 Item 6. EXHIBITS
  3.1
    
    
    Articles of Amendment to the Amended and Restated Articles of Incorporation of Integra
Bank Corporation (incorporated by reference to Exhibit 3.1 to the Current Report on
Form 8-K dated March 2, 2009)3.2
    
    
    Amendment to By-Laws of Integra Bank Corporation (incorporated by reference to Exhibit
3.2 to the Current Report on Form 8-K dated March 2, 2009)4.1
    
    
    Form of Certificate for the Fixed Rate Cumulative Perpetual Preferred Stock, Series B
(incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K dated March 2,
2009)4.2
    
    
    Warrant for the Purchase of Shares of Common Stock of Integra Bank Corporation
(incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K dated March 2,
2009)10.1
    
    
    Letter Agreement, dated February 27, 2009, between Integra Bank Corporation and the
United States Department of Treasury, which includes the Securities Purchase
Agreement-Standard Terms attached thereto (incorporated by reference to Exhibit 10.1 to the
Current Report on Form 8-K dated March 2, 2009)10.2
    
    
    Form of Senior Officer Letter Agreement (incorporated by reference to Exhibit 10.2 to the
Current Report on Form 8-K dated March 2, 2009)10.3
    
    
    Form of Waiver (incorporated by reference to Exhibit 10.3 to the Current Report on Form
8-K dated March 2, 2009)10.4
    
    
    ARRA Letter Agreement, dated February 27, 2009, between Integra Bank Corporation and the
United States Department of the Treasury (incorporated by reference to Exhibit 10.4 to the
Current Report on Form 8-K dated March 2, 2009)10.5
    
    
    Integra Bank Corporation 2007 Equity Incentive Plan as amended April 15, 200931.1
    
    
    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
  40




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##### Table of Contents



SIGNATURES
  INTEGRA BANK CORPORATIONBy

/s/ Michael J. AlleyInterim Chairman of the Board  andChief Executive Officer May 7, 2009/s/ Martin M. ZornChief Operating Officer andChief Financial Officer May 7, 2009  41




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##### Table of Contents



EXHIBIT INDEX
 Exhibit No.
    

Description3.1
    
    
    Articles of Amendment to the Amended and Restated Articles of Incorporation of Integra
Bank Corporation (incorporated by reference to Exhibit 3.1 to the Current Report on
Form 8-K dated March 2, 2009)3.2
    
    
    Amendment to By-Laws of Integra Bank Corporation (incorporated by reference to Exhibit
3.2 to the Current Report on Form 8-K dated March 2, 2009)4.1
    
    
    Form of Certificate for the Fixed Rate Cumulative Perpetual Preferred Stock, Series B
(incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K dated March 2,
2009)4.2
    
    
    Warrant for the Purchase of Shares of Common Stock of Integra Bank Corporation
(incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K dated March 2,
2009)10.1
    
    
    Letter Agreement, dated February 27, 2009, between Integra Bank Corporation and the
United States Department of Treasury, which includes the Securities Purchase
Agreement-Standard Terms attached thereto (incorporated by reference to Exhibit 10.1 to the
Current Report on Form 8-K dated March 2, 2009)10.2
    
    
    Form of Senior Officer Letter Agreement (incorporated by reference to Exhibit 10.2 to the
Current Report on Form 8-K dated March 2, 2009)10.3
    
    
    Form of Waiver (incorporated by reference to Exhibit 10.3 to the Current Report on Form
8-K dated March 2, 2009)10.4
    
    
    ARRA Letter Agreement, dated February 27, 2009, between Integra Bank Corporation and the
United States Department of the Treasury (incorporated by reference to Exhibit 10.4 to the
Current Report on Form 8-K dated March 2, 2009)10.5
    
    
    Integra Bank Corporation 2007 Equity Incentive Plan as amended April 15, 200931.1
    
    
    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
  42