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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the fiscal year ended December 31, 1996

or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from____ to ____

Commission File Number 0-14354

FIRST INDIANA CORPORATION
(Exact name of registrant as specified in its charter)


Indiana 35-1692825
(State of Incorporation) (I.R.S. Employer Identification No.)

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


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

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

NONE

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

Name of Each Exchange
Title of Each Class on Which Registered
Common Stock, $.01 par value NASDAQ
______________________________________

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

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

State the aggregate market value of the voting stock held
by non-affiliates of the registrant: $174,658,000 as of February 28,
1997.

On February 28, 1997, the registrant had 10,509,263 shares of
common stock outstanding, $.01 par value (as adjusted for five-for-four
stock split paid March 18, 1997).

Documents Incorporated by Reference: See Page 2.

1

DOCUMENTS INCORPORATED BY REFERENCE



Documents Form 10-K Reference


Annual Report to Shareholders for 1996 Part II

Proxy Statement Dated March 12, 1997 Part III

Total Number of Pages in this Report 107

List of Exhibits on Pages 34-36

2

FIRST INDIANA CORPORATION

FORM 10-K

Table of Contents

Page

PART I 4

Item 1. Business 4

Item 2. Properties 24

Item 3. Legal Proceedings 28

Item 4. Submission of Matters to a Vote
of Security Holders 28

PART II 28

Item 5. Market for Registrant's Common Equity
and Related Shareholder Matters 28

Item 6. Selected Financial Data 28

Item 7. Management's Discussion and Analysis
of Financial Condition and Results
of Operation 28

Item 8. Financial Statements and
Supplementary Data 29

Item 9. Changes in and Disagreements with
Accountants on Accounting and
Financial Disclosure 29

PART III 29

Item 10. Directors and Executive Officers
of the Registrant 29

Item 11. Executive Compensation 30

Item 12. Security Ownership of Certain
Beneficial Owners and Management 30

Item 13. Certain Relationships and
Related Transactions 30

PART IV 31

Item 14. Exhibits, Financial Statement
Schedules, and Reports on Form 8-K 31

SIGNATURES 33

EXHIBIT INDEX 34

3

PART I

Item I. Business

First Indiana Corporation

First Indiana Corporation, an Indiana corporation formed
in 1986 (the "Corporation"), is a nondiversified, unitary savings
and loan holding company. The principal asset of the Corporation
is the outstanding stock of First Indiana Bank ("First Indiana" or the
"Bank"), its wholly owned subsidiary. The Corporation has no
separate operations, and its business consists only of First Indiana
and its subsidiaries. First Indiana's subsidiaries include One
Mortgage Corporation, a mortgage origination subsidiary, and One
Property Corporation, a real estate investment subsidiary.

First Indiana Bank

First Indiana is a federally chartered stock savings bank
whose depository accounts are insured by the Savings Association
Insurance Fund ("SAIF") of the Federal Deposit Insurance
Corporation (the "FDIC"). Established in 1934, First Indiana was
operated as a federally chartered, mutual savings and loan
institution until August 1983, when it converted to a federal stock
savings bank. First Indiana has $1.5 billion in assets and is the
largest publicly-held bank based in Indianapolis.

First Indiana is engaged primarily in the business of
attracting deposits from the general public and originating
residential mortgage loans, commercial loans, and consumer loans.
First Indiana offers a full range of banking services through 28
banking offices located throughout metropolitan Indianapolis,
Evansville, Franklin, Pendleton, Westfield, Mooresville and
Rushville, Indiana. The Bank's divisions in Evansville,
Mooresville, and Rushville operated under the names Mid-West
Federal Savings Bank, Mooresville Savings Bank, and First
Federal Savings and Loan of Rushville until June 1996, when all
three divisions adopted the First Indiana Bank name.

First Indiana's subsidiary, One Mortgage Corporation,
operates mortgage origination offices in Florida and North
Carolina. First Indiana has mortgage and consumer loan service
offices throughout Indiana, Florida, Georgia, Illinois, North
Carolina, and Ohio. First Indiana's investment and insurance
subsidiaries, One Investment Corporation and One Insurance
Agency, Inc., were sold in the second quarter of 1996 to The
Somerset Group, Inc., a publicly held affiliate which owns
approximately 22 percent of the Corporation's stock.

The six-county area served by First Indiana consists of
Indianapolis, the State's largest city and capital, together with
outlying suburban and agricultural areas in the central part of the
State. The population of the six-county metropolitan Indianapolis
area in 1990 was approximately 1,200,000. Indianapolis'
diversified economy includes manufacturing and service industries,
such as Eli Lilly & Company (pharmaceuticals), the federal and
state governments, General Motors (engines), and Ameritech
(communications).

First Indiana's Evansville Division is based in the third
largest metropolitan area in Indiana, and conducts business through
five offices in Evansville and surrounding communities. The 1990
population of the Evansville metropolitan statistical area was about
280,000. The local economy is primarily agricultural- and
manufacturing-based, with local industries including aluminum,
plastics, health care products, and major household appliances.
Among the largest local employers are Bristol-Myers Squibb
(nutritional and pharmaceutical products), Whirlpool (refrigerators
and freezers), and General Electric Co. (plastics). Evansville is the
regional hub for a tri-state area which includes portions of Indiana,
Kentucky and Illinois.

First Indiana experiences substantial competition in
attracting and retaining deposits and in lending funds. The primary
factors in competing for deposits are the ability to offer attractive
interest rates and the availability of convenient office locations and
flexible hours. Direct competition for deposits comes from other
savings institutions, commercial banks, money market mutual
funds, and other investment products. The primary factors in
competing for loans are interest rates,


4


loan origination fees, and loan product variety. Competition for origination
of loans normally comes from other banks, brokers, and insurance companies.

Lending Activities

General. First Indiana offers a broad range of lending
products to selected segments of the markets it serves. The Bank
has expanded upon its heritage as a single-family mortgage lender
by offering a complete array of loans secured primarily by real
estate. In addition to first mortgage loans, the Bank now has a
substantial market presence in residential construction lending,
commercial real estate lending, business loans to selected segments
of the market, and consumer loans, primarily home equity loans
originated both on a direct and indirect basis.

The Bank's management believes that the surest path for
the Bank's long-term success is to concentrate on selected product
lines sold to certain segments of the market. Accordingly, in 1994
the Bank discontinued its indirect (dealer) auto lending business to
redirect resources toward real estate-focused activities. The Bank
also implemented a series of process and operational enhancements
that enable it to act as both a mortgage banker and portfolio lender
with maximum efficiencies as interest rates cause consumer
preferences to shift between these two types of residential
mortgage loan products.

To minimize the mismatch between the duration of its
interest-rate-sensitive assets and liabilities, First Indiana has a
policy of (i) increasing its portfolio of adjustable-rate and shorter-term
mortgage, consumer and business loans; (ii) selling almost all
fixed-rate, longer-term loans to the secondary market unless those
loans can be funded by liabilities of a similar maturity; and (iii)
increasing transaction accounts, which are less volatile than
certificates of deposit.

Loan Portfolio Composition. The following tables set
forth information concerning the composition of First Indiana's loan
portfolio in dollar amounts and in percentages, by type of security,
and by type of loan. Also presented is a reconciliation of total
loans receivable and mortgage-backed securities ("loans") before
net items to loans receivable after net items. Net items consist of
loans in process (undisbursed portion of loan balances), deferred
income, unearned discounts and unamortized premiums, and
allowances for loan losses.


5





Loan Portfolio Composition
(Dollars in Thousands) At December 31,
---------------
1996 1995 1994
Amount Percent Amount Percent Amount Percent
------ ------- ------ ------- ------ -------

Loans by Type of Security:
First Mortgage Loans Secured by:
Single-Family Units $ 640,743 47.3% $ 625,133 45.0%$ 583,345 47.1%
2-4 Family Units 1,643 0.1% 1,885 0.1% 2,173 0.2%
Over 4 Family Units 9,586 0.7% 18,946 1.4% 21,881 1.8%
Mortgage-Backed Securities 36,152 2.8% 49,089 3.6% 69,061 5.6%
Commercial Real Estate and
Other Mortgage Loans 37,735 2.8% 46,137 3.3% 45,647 3.7%
Consumer Loans 526,769 38.9% 575,009 41.4% 474,465 38.3%
Business Loans 100,513 7.4% 72,146 5.2% 41,770 3.4%
---------- ------ ---------- ---------------- ------
Total Mortgage-Backed
Securities and Loans Receivable
(Before Net Items) $1,353,141 100.0% $1,388,345 100.0%$1,238,342 100.0%
========== ====== ========== ================ ======
Loans by Type of Loan:
Real Estate:
Conventional:
Loans on Existing Property $ 463,211 34.2% $ 464,604 33.5%$ 450,935 36.4%
Construction Loans:
Commercial Real Estate Loans 11 0.0% 6,835 0.5% 9,019 0.7%
Residential Loans 214,433 15.8% 207,957 15.0% 186,145 15.0%
Insured or Guaranteed:
Mortgage-Backed Securities 36,152 2.8% 49,089 3.5% 69,061 5.6%
FHA and VA Loans 12,052 0.9% 12,705 0.9% 6,947 0.6%

Total Real Estate Loans 725,859 53.7% 741,190 53.4% 722,107 58.3%

Consumer Loans 526,769 38.9 575,009 41.4 474,465 38.3

Business Loans 100,513 7.4 72,146 5.2 41,770 3.4
---------- ----- ---------- ----- -------- -----
Total Mortgage-Backed Securities
and Loans Receivable
(Before Net Items) $1,353,141 100.0% $1,388,345 100.0%$1,238,342 100.0%
========== ====== ========== ================ ======



At December 31,
----------------
1993 1992
Amount Percent Amount Percent
------ ------- ------ -------

Loans by Type of Security:
First Mortgage Loans Secured by:
Single-Family Units $ 561,413 48.7% $ 563,783 48.4%
2-4 Family Units 1,909 0.2% 4,033 0.3%
Over 4 Family Units 27,990 2.4% 25,166 2.2%
Mortgage-Backed Securities 100,924 8.7% 180,211 15.5%
Commercial Real Estate and
Other Mortgage Loans 50,294 4.4% 77,576 6.7%
Consumer Loans 382,360 33.1% 298,206 25.6%
Business Loans 29,308 2.5% 15,542 1.3%
---------- ------ ---------- ------
Total Mortgage-Backed
Securities and Loans Receivable
(Before Net Items) $1,154,198 100.0% $1,164,517 100.0%
========== ====== ========== ======
Loans by Type of Loan:
Real Estate:
Conventional:
Loans on Existing Property $ 454,560 39.4% $ 566,445 48.7%
Construction Loans:
Commercial Real Estate Loans 3,213 0.3% 5,178 0.4%
Residential Loans 167,077 14.5% 78,435 6.7%
Insured or Guaranteed:
Mortgage-Backed Securities 100,924 8.7% 180,211 15.5%
FHA and VA Loans 16,756 1.5% 20,500 1.8%

Total Real Estate Loans 742,530 64.3% 850,769 73.1%

Consumer Loans 382,360 33.1 298,206 25.6

Business Loans 29,308 2.5 15,542 1.3
---------- ----- ---------- -----
Total Mortgage-Backed Securities
and Loans Receivable
(Before Net Items) $1,154,198 100.0% $1,164,517 100.0%
========== ====== ========== ======



6




Loan Portfolio Composition
(Continued) At December 31,
----------------
1996 1995 1994 1993 1992
(Dollars in Thousands) ---- ---- ---- ---- ----

Total Mortgage-Backed Securities $ 1,353,141 $ 1,388,345 $ 1,238,342 $ 1,154,198 $ 1,164,517
and Loans Receivable
(Before Net Items)

Less:
Undisbursed Portion of Loans 84,173 72,511 78,588 63,382 54,482
Deferred Income, Unearned Discounts,
and Unamortized Premiums (1,762) (624) (521) 646 2,016

Plus:
Loan Valuation Adjustment
for Acquisitions 0 0 341 682 1,024
---------- ---------- --------- --------- ---------
Total Mortgage-Backed Securities and Loans
Receivable Before Allowance for
Loan Losses 1,270,730 1,316,458 1,160,616 1,090,852 1,109,043

Less:
Allowance for Loan Losses 18,768 16,234 12,525 11,506 8,748
----------- ----------- ----------- ----------- -----------
Mortgage-Backed Securities and Loans
Receivable - Net $ 1,251,962 $ 1,300,224 $ 1,148,091 $ 1,079,346 $ 1,100,295
=========== =========== =========== =========== ===========


7

Adjustable- and Fixed-Rate Loans. The following
table sets forth the balances at the dates indicated of all loans
receivable and mortgage-backed securities before net items which
have fixed interest rates and adjustable interest rates. Adjustable-rate
loans include all loans with original maturities of five years or less.





At December 31,
---------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
(Dollars in Thousands)

Residential Mortgage Loans
Fixed Rates $ 166,968 $ 186,886 $ 157,706 $ 225,305 $ 317,808
Adjustable Rates 512,965 491,681 494,090 440,381 424,492
----------- ----------- ----------- ----------- -----------
Total $ 679,933 $ 678,567 $ 651,796 $ 665,686 $ 742,300
=========== =========== =========== =========== ===========

Commercial Real Estate Loans
Fixed Rates $ 17,213 $ 11,948 $ 15,770 $ 21,835 $ 39,434
Adjustable Rates 28,713 50,676 54,541 55,009 69,035
----------- ----------- ----------- ----------- -----------
Total $ 45,926 $ 62,624 $ 70,311 $ 76,844 $ 108,469
=========== =========== =========== =========== ===========

Total Residential Mortgage and
Commercial Real Estate Loans
Fixed Rates $ 184,181 $ 198,833 $ 173,476 $ 247,140 $ 357,242
Adjustable Rates 541,678 542,357 548,631 495,390 493,527
----------- ----------- ----------- ----------- -----------
Total $ 725,859 $ 741,190 $ 722,107 $ 742,530 $ 850,769
=========== =========== =========== =========== ===========

Consumer Loans
(Includes Home Equity Loans)
Fixed Rates $ 368,697 $ 411,030 $ 307,136 $ 251,297 $ 189,551
Adjustable Rates 158,072 163,980 167,329 131,063 108,655
----------- ----------- ----------- ----------- -----------
Total $ 526,769 $ 575,009 $ 474,465 $ 382,360 $ 298,206
=========== =========== =========== =========== ===========

Business Loans
Fixed Rates $ 20,479 $ 5,699 $ 2,028 $ 172 $ 0
Adjustable Rates 80,034 66,447 39,742 29,136 15,542
----------- ----------- ----------- ----------- -----------
Total $ 100,513 $ 72,146 $ 41,770 $ 29,308 $ 15,542
=========== =========== =========== =========== ===========

Total Mortgage-Backed Securities
and Loans Receivable
Fixed Rates $ 573,357 $ 615,562 $ 482,640 $ 498,609 $ 546,793
Adjustable Rates 779,784 772,783 755,702 655,589 617,724
----------- ----------- ----------- ----------- -----------
Total $ 1,353,141 $ 1,388,345 $ 1,238,342 $ 1,154,198 $ 1,164,517
=========== =========== =========== =========== ===========



8


Residential Mortgage Loans. The original contractual
loan payment period for residential loans originated by First
Indiana normally ranges from 10 to 30 years. Because borrowers
may refinance or prepay their loans, however, such loans normally
remain outstanding for a substantially shorter period. First Indiana
sells almost all fixed-rate residential loans to secondary market
investors, including the Federal Home Loan Mortgage Corporation
("FHLMC") and the Federal National Mortgage Association
("FNMA").

Residential originations amounted to $346 million in
1996, a 2.3 percent decrease from 1995. First Indiana sold
residential mortgage loans into the secondary market as part of the
Bank's normal mortgage banking activity, resulting in pre-tax
gains of $1.4 million during 1996.

First Indiana's fixed-rate mortgage loans include a due-on-sale clause,
which gives the Bank the right to declare a loan
immediately due and payable if, among other things, the borrower
sells or otherwise disposes of the real property subject to the
mortgage and the loan is not repaid. Due-on-sale clauses are
generally considered important tools to prevent both the
unrestricted transfer of low interest-rate loans in high interest-rate
environments and the corresponding increase in the average life of
such loans. First Indiana's policy is to enforce these clauses in its
loan contracts.

Commercial Loans. First Indiana offers a variety of
commercial loans, primarily residential construction loans,
business loans, and commercial real estate loans (including land
development loans).

First Indiana's construction loans are made both to
individuals and builders. These loans have terms ranging from six
months to one year and include options for the home buyer to
convert the loan to fixed- or adjustable-rate permanent financing.
The interest rate on construction loans is generally one percent
over the Bank's prime rate and adjusts upon changes in the prime
rate. At December 31, 1996 and 1995, the Bank's gross
construction loans outstanding equaled $214 million and $208
million.

Also included in business loans are $15 million in land
development loans, which are exclusively for the acquisition and
development of land into individual single-family building lots.
The interest rate on land development loans is generally one and
one-quarter percent over the Bank's prime rate, which adjusts upon
changes in the prime rate, and the term of these loans is generally
36 months.

The following table presents the remaining maturities and
rate sensitivity of residential construction and business loans.





Remaining Maturities
--------------------

One Year Over One Year Over
or Less to Five Years Five Years Total Percent
(Dollars in Thousands) -------- ------------- ---------- ----- -------

Type of Loan:
Residential Construction $ 124,577 $13,558 $ - $138,135 59.9 %
Business 61,239 20,477 10,843 92,559 40.1
------------- ------- ------- -------- -------
Total $ 185,816 $34,035 $ 10,843 $230,694 100.0 %
============= ======= ======= ======== =======
Rate Sensitivity:
Fixed Rate $ - $ 9,636 $ 10,843 $ 20,479 8.9 %
Adjustable Rate 185,816 24,399 - 210,215 91.1
------------- ------- ------- -------- -------
Total $ 185,816 $34,035 $ 10,843 $230,694 100.0 %
============= ======= ======= ======== =======



9

Multi-family and commercial real estate lending was a
substantial part of First Indiana's business activities from the early
1970's until 1991, when such activity was largely curtailed because
of the economic environment. With the changing environment and
improved market for commercial real estate lending, the Bank
intends to increase somewhat its volume of these loans to include
permanent financing for selected apartments, office buildings and
warehouses. The Bank's management continues to monitor the
credit quality of these loans aggressively, both with respect to new
originations and loans already in the portfolio.

The following table shows, as of December 31, 1996 and
1995, outstanding multi-family and commercial real estate loans
originated and purchased by First Indiana.





1996 1995
(Dollars in Millions) Amount Percent Amount Percent

Loans Originated $44.7 97.4 $54.5 97.7

Loans Purchased 1.2 2.6 1.3 2.3
----- ---- ----- ----
$45.9 100.0 $55.8 100.0
===== ===== ===== =====



Consumer Lending. As part of its strategy for growth
in interest income, First Indiana has increased its origination and
purchase of consumer loans, primarily home equity loans and home
equity lines of credit. At December 31, 1996, such loans totaled
$526.8 million, or 38.9 percent of total mortgage-backed securities
and loans receivable, compared with $575.0 million, or 41.4
percent of total mortgage-backed securities and loans receivable,
at December 31, 1995. Much of the decrease in 1996 occurred
when the Bank completed the sale of approximately $32.8 million
of its indirect automobile portfolio during the third quarter at a loss
of $898,000. However, the Bank was able to recapture
$1,021,000 of its loan loss provision as a result of this sale.


Consumer loans generally have shorter terms and higher
interest rates than residential loans but involve somewhat higher
credit risks, particularly for unsecured lending. Of the $526.8
million of consumer loans outstanding at December 31, 1996, 94.7
percent were secured by first or second mortgages on real property,
0.7 percent was secured by deposits, and 4.6 percent were secured
by personal property.

First Indiana offers revolving lines of credit and loans
secured by a lien on the equity in the borrower's home in amounts
up to 100 percent of the appraised value of the real estate. For
lines of credit at or below an 80 percent loan-to-value ("LTV")
ratio, the interest rate is the Wall Street Journal prime rate plus one
or two percent, depending on the amount of the loan. The interest
rate rises in various increments as the LTV ratio increases. The
highest rate charged is the Wall Street Journal prime rate plus 3.5
percent for lines of credit at a 100 percent LTV. At December 31,
1996, the Bank had approximately $223.4 million in loans above
80 percent LTV. Each month, holders of revolving lines of credit
with up to an 80 percent LTV ratio are billed monthly for interest
at the daily periodic rate due on the daily loan balances for the
billing cycle. Holders of revolving lines of credit above 85 percent
LTV are required to pay at least two percent of the outstanding
loan balance.

First Indiana also offers variable- and fixed-rate term
home equity loans with up to a 100 percent LTV ratio. Borrowers
of fixed-rate term loans make fixed payments over a term ranging
from one to 15 years. Variable-rate term loans in excess of 80
percent LTV feature monthly payments equal to two percent of the
outstanding loan balance. At December 31, 1996, First Indiana
had approved $238 million of 80 percent LTV lines of credit, of
which $118 million were outstanding, compared with $260
million of such lines which had been approved at December 31,
1995, $154 million of which were outstanding.

10


Until August 1994, First Indiana offered indirect auto
lending through a network of dealers throughout the Midwest. The
Bank discontinued this activity as part of its strategic plan to focus
its resources on core real estate businesses in which management
believes it can differentiate itself from the competition more
effectively. The Bank completed the sale of approximately $32.8
million of its indirect automobile portfolio during the third quarter
at a loss of $898,000. The balances of First Indiana's installment
loans were $22 million and $83 million (including the remaining
portfolio of automobile loans) at December 31, 1996 and 1995.
This portfolio is expected to decline further; although First Indiana
will continue to offer direct automobile loans through its banking
centers as an accommodation to its customers. These loans will be
made generally for terms of one to five years at variable and fixed
rates of interest.

First Indiana makes loans secured by deposits and
overdraft loans in connection with its checking accounts. First
Indiana also offers fixed-rate, fixed-term loans primarily for home
improvement purposes; unsecured loans; and Visa credit cards
through an agent.

Consumer loans may entail greater risk than residential
mortgage loans, particularly in the case of consumer loans that are
unsecured or secured by rapidly depreciating assets such as
automobiles. First Indiana has endeavored to reduce certain of
these risks by, among other things, employing individuals
experienced in this type of lending and emphasizing prompt
collection efforts. In addition, First Indiana adds general provisions
to its loan loss allowance, in amounts determined to be adequate to
cover future loan losses, at the time the loans are originated.

Federal regulations limit the amount of consumer loans
that savings institutions are able to originate and hold in their loan
portfolios. First Indiana complies with such regulations, and the
amount of its consumer loan portfolio is approximately $153
million below the maximum permitted.

Origination, Purchase, and Sale of Loans. As a
federally chartered savings bank, First Indiana has general authority
to make real estate loans throughout the United States. At
December 31, 1996, however, most of First Indiana's real estate
loans receivable were secured by real estate located in Indiana.
First Indiana also originates mortgage loans in Georgia and through
a subsidiary in Florida and North Carolina. The Bank originates
home equity loans through consumer loan offices in those states
and in Ohio and Illinois and in selected other states via an
origination network of loan agents.

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

Loan originations come from a number of sources.
Residential loan originations are attributable primarily to referrals
from real estate brokers, builders, and walk-in customers.
Construction loan originations are obtained primarily by direct
solicitation of builders and repeat business from builders. Multi-family
and commercial real estate loan originations are obtained
from previous borrowers and direct contacts with First Indiana.
Consumer loans come from walk-in customers, loan brokers,
agents and originators. First Indiana aggressively solicits
residential loans with a sales force that works with real estate
brokers and builders to obtain referrals.

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

Income from Lending Activities. In making long-term
one- to four-family home mortgage loans, First Indiana generally
charges an origination fee of one percent of the loan amount. As
part of the loan application, the applicant also reimburses First
Indiana for its out-of-pocket costs in reviewing the application,
such as the appraisal fee, whether or not the loan is closed. The
interest rate charged is normally the prevailing market rate at the
time the loan application is received. Commitments to home
purchasers generally have a term of 60 days or less from the date
First Indiana issues the loan commitment.

11


In the case of one-to-four-family residential construction
loans, First Indiana charges a one to three percent non-refundable
commitment fee. Interest rates on construction loans are based on
the prevailing market rate at the time the commitment is extended.
Commitment fees and other terms of commercial real estate and
business loans are individually negotiated.

First Indiana earns fees on existing loans, including
prepayment charges, late charges, and assumption fees.

Servicing Activity. First Indiana's sale of whole loans
and loan participations in the secondary market generates income
and provides additional funds for loan originations. In the case of
mortgage loans sold with servicing retained where the stated
servicing fee differs materially from a current, normal servicing fee,
the sales price is adjusted to provide a normal servicing fee in each
subsequent year for purposes of determining gain or loss on the
sale. At December 31, 1996, the balance of deferred excess
servicing was approximately $636,000. The resulting deferred
balance is amortized in proportion to the related net servicing
income over the estimated life of the loans.

In the second quarter of 1995, First Indiana purchased
servicing rights for approximately $310 million in mortgage loans.
The related December 31, 1996 purchased mortgage servicing
rights balance of $2.9 million is being amortized in proportion to
the related net servicing income over the estimated life of the loans.

At December 31, 1996, First Indiana serviced
approximately $1.1 billion in loans and loan participations which
it had sold. As of December 31, 1996, approximately $20.5
million in loans, or about 1.6 percent of First Indiana's mortgage-backed
securities and loans receivable after net items, were
serviced by others.

Effective January 1, 1996, the Bank adopted Statement of
Financial Accounting Standard No. 122, "Accounting for Mortgage
Servicing Rights" ("FAS 122 "). For servicing retained loan sales,
FAS 122 requires capitalization of the cost of mortgage servicing
rights, regardless of whether those rights were acquired through
purchase or origination. Prior to adoption of FAS 122, only
purchased and excess loan servicing rights were capitalized.

Beginning in 1996, the total cost of mortgage loans
originated with the intent to sell is allocated between the loan
servicing right and the mortgage loan without servicing based on
their relative fair values at the date of sale. The capitalized cost of
loan servicing rights is amortized in proportion to, and over the
period of, estimated net servicing revenue. For this purpose,
estimated servicing revenues include late charges and other
ancillary income. Estimated servicing costs include direct costs
associated with performing the servicing function and appropriate
allocations of other costs.

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

Fair values for individual strata are based on the present
value of estimated future cash flows using a discount rate
commensurate with the risks involved. Estimates of fair value
include assumptions about prepayment, default and interest rates,
and other factors which are subject to change over time. Changes
in these underlying assumptions could cause the fair value of loan
servicing rights, and the related valuation allowance, to change
significantly in the future. At December 31, 1996 the balance of
originated mortgage servicing rights included in other assets was
$894,000, with a fair market value of $1,102,000. The amount
capitalized in 1996 was $986,000, and the amount amortized
against loan servicing income was $92,000. There were no
valuation allowances at December 31, 1996, and no activity for the
year then ended.

Asset Quality

General. First Indiana's asset quality is directly affected
by the credit risk of the assets on its balance sheet. Most of First
Indiana's credit risk is concentrated in its loan portfolios and, to a
lesser extent, its real estate owned ("REO") portfolio.
Consequently, First Indiana has established policies and procedures
to ensure accurate and timely assessment of credit risk from the
date the loan is originated.


12


The procedures for reviewing the quality of First Indiana's
loans, the appropriateness of loan and REO classifications, and the
adequacy of loan and REO loss allowances fall within the purview
of First Indiana's Board of Directors. To manage these tasks, the
Board of Directors has established a two-tiered asset review
system. Under this system, standing management committees
regularly discuss and review potential losses on all loans and REO
and the adequacy of First Indiana's loan and REO loss allowances.
Recommendations on the allowances are forwarded to the
Investment Committee of First Indiana's Board of Directors for
approval each quarter, then presented to the full Board of Directors
for approval and ratification. Management committees also
recommend loan and REO classifications which, if approved by the
Advisory Committee of the Board of Directors, are referred to the
full Board for final approval and ratification.

The other part of First Indiana's asset review system is
managed by an independent credit review officer appointed by the
Board of Directors. The credit review officer makes an
independent evaluation of First Indiana's portfolio and
management's recommendations on allowances for loan and REO
losses. He regularly reviews these recommendations with First
Indiana's Chairman. These meetings give the credit review officer
a forum for discussing asset quality issues with a member of the
Board of Directors who has no loan approval authority. This
system provides an independent check on management's
recommendations about loan and REO classifications and loss
allowances. This entire process is subject to the continual review
and approval by the Board of Directors.

First Indiana establishes general allowances as
percentages of loans outstanding. The percentages are based on a
model that incorporates empirical data about loss experience,
credit risk, geographic diversity, general economic trends, and
other factors.

Management believes that First Indiana's current loan and
REO loss allowances are sufficient to absorb potential future
losses; however, there can be no assurance that additional
allowances will not be required or that the amount of any such
allowances will not be significant. In addition, various regulatory
agencies, as an integral part of their examinations, periodically
review these allowances and may require First Indiana to recognize
additions to the allowances based on their judgment about
information available at the time of their examination. No such
additions were required by the Office of Thrift Supervision (the
"OTS") in their most recent examinations of First Indiana.

The Bank reviews all loans for evidence of impairment
except those with smaller balances and homogeneous loans. The
homogeneous loan portfolios include residential mortgage loans
secured by one- to four-family dwellings, consumer loans, and
certain business and residential construction loans which do not
meet the Bank's parameters for review. Loans subject to review
include commercial real estate loans and larger business and
residential construction loans which, because of their size, nature
and unique characteristics, could negatively affect the Bank if the
borrower experiences credit deterioration.

First Indiana places loans on non-accrual status when
payments of principal or interest become 90 days or more past due,
or earlier when an analysis of a borrower's creditworthiness
indicates that payments could become past due. A loan is deemed
impaired when, in the opinion of management, full collection of the
contractual principal and interest is not probable.

At December 31, 1995, the Bank identified an impaired
loan totaling $3,306,000 with an allocated reserve of $167,000.
This loan was repaid in the first quarter of 1996, and the allocated
reserve was absorbed into the general loan loss allowances of the
Bank.

The Investment Committee of First Indiana's Board of
Directors is responsible for monitoring and reviewing First
Indiana's liquidity and investments. The Investment Committee
approves investment policies and meets quarterly to review
transactions. Credit risk is controlled by limiting the number and
size of investments and by approving the brokers and dealers
through which investments are made.

Regulatory Classification of Assets. Federal
regulations require that each savings institution regularly classify
its own assets. In addition, in connection with examinations of
savings institutions, the OTS and the FDIC examiners have
authority to identify problem assets and, if appropriate, to require
them to be classified.

13


There are three classifications for problem assets:
Substandard, Doubtful and Loss. Substandard assets have one or
more defined weaknesses and are characterized by the distinct
possibility that the institution will sustain some loss if the
deficiencies are not corrected. Doubtful assets have the
weaknesses of Substandard assets, with the additional
characteristic that the weaknesses make collection or liquidation in
full on the basis of currently existing facts, conditions and values
questionable, and there is a significant possibility of loss. An asset
classified as Loss is considered uncollectible and of such little
value that continuation as an asset of the depository institution is
not warranted.

Assets classified as Substandard or Doubtful require the
depository institution to establish prudent general allowances for
loan losses. If an asset or portion thereof is classified as Loss, the
depository institution must either establish specific allowances for
loan losses in the amount of 100 percent of the portion of the asset
classified Loss or charge off such amount. If a depository
institution does not agree with an examiner's classification of an
asset, it may appeal this determination to the District Director of
the OTS.

On the basis of management's review of its assets as of
December 31, 1996 on a net basis, First Indiana had classified
$36.7 million as Substandard, compared with $34.5 million and
$31.2 million at December 31, 1995 and 1994. The amount of
First Indiana's Doubtful and Loss loans at each such date was
immaterial.

Non-Performing Assets. First Indiana categorizes its
non-performing assets into four categories: Non-Accrual Loans,
Impaired Loans, Restructured Loans, and Real Estate Owned.

First Indiana places loans on non-accrual status when
payments of principal or interest become 90 days or more past due,
or earlier when an analysis of a borrower's creditworthiness
indicates that payments could become past due. Total non-accrual
loans were $15.4 million at December 31, 1996, compared with
$14.7 and $11.0 million at December 31, 1995 and 1994.

At December 31, 1995, First Indiana identified an
impaired loan totaling $3,306,000 which had an allocated reserve
of $167,000. This loan was repaid in the first quarter of 1996, and
the allocated reserve was absorbed into the general loan loss
allowances of the Bank.

Loan modifications classified as troubled debt
restructuring as defined in Statement of Financial Accounting
Standard No. 15, "Accounting by Debtors and Creditors for
Troubled Debt Restructuring," amounted to $6.9 million at
December 31, 1996, compared with $6.9 and $10.7 million at
December 31, 1995 and 1994. Management modified the payment
terms, interest rates, and contractual maturities of these loans with
the objective of improving the likelihood of recovery of First
Indiana's investment.

REO is generally acquired by deed in lieu of foreclosure
and is carried at the lower of cost (the unpaid balance at the date of
acquisition plus foreclosure and other related costs) or fair market
value. A review of REO properties, including the adequacy of the
loss allowance and decisions whether to charge off REO, occurs in
conjunction with the review of the loan portfolios.

First Indiana has carefully managed its loan portfolio,
including its non-performing assets, to reduce exposure to the
commercial real estate loan sector and to diversify its assets
geographically and by type of loan. Accordingly, First Indiana has
not experienced the difficulties faced by depository institutions
which have had concentrations in areas of the country most
adversely affected by economic cycles. First Indiana's non-performing
assets fell slightly in 1996 to $27.1 million at
December 31, 1996 from $27.2 million one year earlier.

Summary of Loan Loss Experience. First Indiana
regularly reviews the status of all non-performing assets to evaluate
the adequacy of the allowances for losses on loans and REO. For
additional information relating to the Corporation's loan and REO
loss allowances, see the Corporation's Consolidated Financial
Statements, including Note 5 thereto.

14

Investment Activities

Federally chartered savings institutions have authority to
invest in various types of liquid assets, including United States
Treasury obligations, securities of various federal agencies, certain
certificates of deposits of insured banks and savings institutions,
certain bankers' acceptances, and federal funds. Subject to various
restrictions, federally chartered savings institutions may also invest
a portion of their assets in commercial paper and corporate debt
securities and in mutual funds whose assets conform to the
investments a federally chartered savings institution is otherwise
authorized to make directly.

As an Indiana corporation, the Corporation has authority
to invest in any type of investment permitted under Indiana law. As
a savings and loan holding company, however, its investments are
subject to certain regulatory restrictions described under "Savings
Institution Regulation."

The relative mix of investment securities and loans in
First Indiana's portfolio is dependent upon management's
evaluation of the yields available on loans compared to investment
securities. The Board of Directors has established an investment
policy, and the Investment Committee of the Board meets quarterly
with management to establish more specific investment guidelines
about types of investments, relative amounts, and maturities. First
Indiana's current investment guidelines do not permit investment
purchases in below investment grade corporate bonds (minimum
investment rating of A-) or "junk" bonds. Liquid investments are
managed to ensure that regulatory liquidity requirements are
satisfied.

At December 31, 1996, First Indiana's investments
totaled $106.9 million, or 7.14 percent of total assets, and
consisted primarily of U.S. Treasury and agency obligations,
corporate debt securities and asset-backed securities. For
additional information concerning investments held by the
Corporation at certain dates, see the Corporation's Consolidated
Financial Statements, including Note 2 thereto.

Sources of Funds

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

Deposits. First Indiana has a wide variety of deposit
programs designed to attract both short-term and long-term
deposits from the general public. These deposit accounts include
passbook accounts, non-interest-bearing consumer and commercial
demand accounts, NOW accounts, and money market checking
accounts, as well as fixed-rate certificates and money market
accounts. In 1997, First Indiana intends to increase consumer and
commercial checking accounts and certificates of deposit in an
effort to reduce funding costs and strengthen core deposits.

15


The following table shows the distribution of First
Indiana's deposits by interest-rate categories at each of the dates
indicated:




At December 31,
(Dollars in Thousands) 1996 1995 1994

Rate

Under 3.00% $259,798 $213,082 $285,042

3.00 - 5.00 110,786 177,524 315,168

5.01 - 7.00 689,390 695,103 403,449

7.01 - 9.00 35,156 50,354 26,537

9.01 - 11.00 356 917 1,584

11.01 - 13.00 - - 131
--------- -------- -------
$1,095,486 $1,136,980 $1,031,911



The following table reflects the increase (decrease) in
deposits for various types of deposit programs offered by First
Indiana for each of the periods indicated:



At December 31,
1996 1995 1994
(Dollars in Thousands)

NOW Checking and
Non-Interest-Bearing
Deposits $ 12,300 $ 18,136 $ (1,950)

Money Market
Checking (2,344) (3,355) (10,503)

Passbook and
Statement Savings 55,252 34,797 854

Money Market Savings (4,495) (8,860) (8,804)

Jumbo Certificates of
$100 or More (23,067) 54,943 7,831

Fixed-Rate Certificates (79,140) 9,408 14,226
-------- -------- --------
Total Increase (Decrease) $(41,494) $105,069 $ 1,654
======== ======== ========



16


First Indiana's jumbo certificates of $100,000 or more at
December 31, 1996, the maturities of such deposits, and the
percentage of total deposits represented by these certificates are set
forth in the table below:



Over
Three
Three Months to Over Six % of
Months or Six Months to Over One Total
Less Months One Year Year Total Deposits
(Dollars in Thousands) --------- ---------- --------- ---- ----- --------

Jumbo Certificates of $100
or More $24,981 $22,189 $12,652 $37,576 $97,398 8.89%



Borrowings. The FHLB functions as a central reserve
bank providing credit for depository institutions in Indiana and
Michigan. As a member of the FHLB, First Indiana is required to
own capital stock in the FHLB and is authorized to apply for
advances on the security of such stock and certain of First Indiana's
residential mortgage loans and other assets, subject to credit
standards. The FHLB advances are made pursuant to several
different credit programs, each with its own interest rate and range
of maturities.

The FHLB prescribes the acceptable uses for advances
and imposes size limits on them. Acceptable uses have included
expansion of residential mortgage lending and short-term liquidity
needs. Depending on the program, limitations on the amount of
advances are generally based on the FHLB's assessment of the
institution's creditworthiness. At December 31, 1996, First Indiana
had $215.5 million in FHLB advances (14.40 percent of total
assets), with a weighted average rate of 5.60 percent.

First Indiana also enters into repurchase agreements as a
short-term source of borrowing, but only with registered
government securities dealers.

Borrowings Balances. The following table sets forth
certain information regarding repurchase agreements and federal
funds purchased (short-term borrowings) at and for the years ended
on the dates indicated.




At December 31,
1996 1995 1994

(Dollars in Thousands)

Highest Month-End Balance of Short-Term Borrowings
During the Year $39,651 $61,982 $35,922

Average Month-End Balance of Short-Term Borrowings
During The Year 18,133 41,963 6,137

Weighted Average Interest Rate of Short-Term Borrowings
During the Year 5.53% 6.17% 5.23%

Weighted Average Interest Rate of Short-Term Borrowings
at End of the Year 4.80 5.81 6.14




Regulatory Capital

Risk-Based Capital. Savings institutions are required
to have risk-based capital of eight percent of risk-weighted assets.
At December, 31, 1996, First Indiana's risk-based capital was
$144.6 million, or 12.53 percent of risk-weighted assets. Risk-based
capital is defined as common equity, less goodwill, the
excess portion of land loans with a loan-to-value ratio of greater
than 80 percent, and investments in non-mortgage-lending-related
subsidiaries, plus general allowances for


17


loan losses. Risk-weighting of assets is derived from assigning one of
four risk-weighted categories to an institution's assets, based on the degree
of credit risk associated with the asset. The categories range from
zero percent for low-risk assets (such as United States Treasury
securities) to 100 percent for high-risk assets (such as real estate
owned). The carrying value of each asset is then multiplied by the
risk-weighting applicable to the asset category. The sum of the
products of the calculation equals total risk-weighted assets.

Core Capital. Savings institutions are also required to
maintain a minimum leverage ratio, under which core (Tier One)
capital must equal at least three percent of total assets, but not less
than the minimum required by the Office of the Comptroller of the
Currency (the "OCC") for national banks, which minimum
currently stands at four percent. First Indiana's primary regulator,
the OTS, is expected to adopt the OCC minimum. The
components of core capital are the same as those set by the OCC
for national banks, and consist of common equity, plus non-cumulative
preferred stock and minority interest in consolidated
subsidiaries, minus certain intangible assets, including purchased
loan servicing. At December 31, 1996, First Indiana's core capital
and leverage ratio were $131.3 million and 8.78 percent.

Tangible Capital. Savings institutions must also
maintain minimum tangible capital of 1.5 percent of total assets.
First Indiana's tangible capital and tangible capital ratio at
December 31, 1996, were $131.3 million and 8.78 percent
respectively. Management intends to maintain capital well in
excess of regulatory minimums.

Capital Regulations. The OTS has minimum capital
standards that place savings institutions into one of five categories,
from "critically undercapitalized" to "well-capitalized," depending
on levels of three measures of capital. A well-capitalized
institution as defined by the regulations has a total risk-based
capital ratio of at least ten percent, a Tier One (core) risk-based
capital ratio of at least six percent, and a leverage (core) risk-based
capital ratio of at least five percent. At December 31, 1996 First
Indiana was classified as "well-capitalized."

Effective January 1, 1994, the OTS adopted regulations
adding an interest-rate risk component to the proposed capital
regulations. Under this component, an institution with an "above
normal" level of interest-rate risk exposure is subject to an "add-on" to
its risk-based capital requirement. "Above normal" interest-rate risk is
defined as a reduction in "market value portfolio equity"
(as defined) resulting from a 200 basis point increase or decrease
in interest rates, if the decline in value exceeds two percent of the
institution's assets. Institutions failing to meet this test will be
required to add to their risk-based capital.

The OTS issued this final rule to implement the portions
of Section 305 of the Federal Deposit Insurance Corporation
Improvement Act of 1991, which requires the agencies to revise
their risk-based capital standards for insured depository institutions
to ensure that those standards take adequate account of
concentration of credit risk and the risks of nontraditional activities.
The final rule amends the risk-based capital standards by explicitly
identifying concentration of credit risk and certain risks arising
from nontraditional activities, as well as an institution's ability to
manage these risks, as important factors in assessing an institution's
overall capital adequacy. Based on its interest-rate risk at
December 31, 1996, First Indiana was not required to add to its
risk-based capital under the new regulation.

Impact of Inflation and Changing Prices

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

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

18



Regulation

Federal Deposit Insurance Corporation Improvement Act
of 1991

The Federal Deposit Insurance Corporation Improvement
Act of 1991 ("FDICIA"), contains various provisions intended to
recapitalize the Bank Insurance Fund and enacts a number of
regulatory reforms that affect all insured depository institutions,
regardless of the insurance fund in which they participate. Among
other things, FDICIA grants the OTS broader regulatory authority
to take prompt corrective action against insured institutions that do
not meet capital requirements, including placing severely under-capitalized
institutions into conservatorship or receivership. Since
First Indiana exceeded all capital requirements at December 31,
1996, these provisions are not expected to have any significant
impact on its operations.

Savings and Loan Holding Company Regulations

General. Under the Home Owner's Loan Act ("HOLA"),
as amended, the Director of the OTS has regulatory jurisdiction
over savings and loan holding companies. The Corporation, as a
savings and loan holding company within the meaning of HOLA,
is subject to regulation, supervision and examination by and the
reporting requirements of the Director of OTS.

Savings Institution Regulation

General. As a SAIF-insured savings institution, First
Indiana is subject to supervision and regulation by the Director of
OTS. Under OTS regulations, First Indiana is required to obtain
audits by independent auditors and to be examined periodically by
the Director of OTS. First Indiana is subject to assessments by
OTS and the FDIC to cover the costs of such examinations. The
OTS may revalue assets of First Indiana based upon appraisals and
require the establishment of specified reserves in amounts equal to
the difference between such revaluation and the book value of the
assets. The Director of the OTS also is authorized to promulgate
regulations to ensure the safe and sound operations of savings
institutions and may impose various requirements and restrictions
on the activities of savings institutions.

The regulations and policies of the Director of the OTS
for the safe and sound operations of savings institutions can be no
less stringent than those established by the OCC for national
banks. Additionally, under the FDICIA, the OTS prescribed safety
and soundness regulations in 1995 relating to (i) internal controls,
information systems, and internal audit systems; (ii) loan
documentation; (iii) credit underwriting; (iv) interest-rate
exposure; (v) asset growth; and (vi) compensation and benefit
standards for officers, directors, employees and principal
shareholders. These regulations did not have a material effect on
First Indiana.

As a member of SAIF, First Indiana is also subject to
regulation and supervision by the FDIC, in its capacity as
administrator of SAIF, to ensure the safety and soundness of SAIF.


Qualified Thrift Lender Requirement. In order for
First Indiana to exercise the powers granted to federally chartered
savings institutions and maintain full access to FHLB advances, it
must be a "qualified thrift lender" ("QTL"). A savings institution
is a QTL if its qualified thrift investments equal or exceed 65
percent of the savings institution's portfolio assets on a monthly
average basis in nine out of 12 months. As amended by the
FDICIA, qualified thrift investments generally consist of (i) various
housing related loans and investments (such as residential
construction and mortgage loans, home improvement loans, mobile
home loans, home equity loans, and mortgage-backed securities);
(ii) certain obligations of the FDIC, the Federal Savings and Loan
Insurance Corporation Resolution Fund and the Resolution Trust
Corporation (for limited periods); and (iii) shares of stock issued
by any Federal Home Loan Bank, the Federal Home Loan
Mortgage Corporation, or the Federal National Mortgage
Association.

At December 31, 1996, the qualified thrift investment
percentage test for First Indiana was in excess of 88 percent. First
Indiana complies with the new QTL test as revised upon enactment
of FDICIA.

19

Liquidity. Under applicable federal regulations, savings
institutions are required to maintain an average daily balance of
liquid assets (including cash, certain time deposits, certain banker's
acceptances, certain corporate debt securities and highly rated
commercial paper, securities of certain mutual funds and specified
Untied States government, state or federal agency obligations)
equal to a monthly average of not less than a specified percentage
of withdrawable deposits plus short-term borrowings. Under
HOLA, this liquidity requirement may be changed from time to
time by the Director of the OTS to any amount within the range of
four percent to ten percent, depending upon economic conditions
and the deposit flows of member institutions. The Bank's liquidity
ratio at December 31, 1996 was 8.20 percent. A savings
institution is also required to maintain an average daily balance of
short-term liquid assets at a specified percentage (currently one
percent) of the total of the average daily balance of its net
withdrawable deposits and short-term borrowing. At December
31, 1996, First Indiana was in compliance with these liquidity
requirements.

Loans-to-One-Borrower Limitations. HOLA generally
requires savings institutions to comply with the loans-to-one-borrower
limitations applicable to national banks. In general,
national banks may make loans to one borrower in amounts up to
15 percent of the bank's unimpaired capital and surplus, plus an
additional 10 percent of capital and surplus for loans secured by
readily marketable collateral. At December 31, 1996, First
Indiana's loan-to-one borrower limitation was approximately
$21.7 million, and no loans to a single borrower exceeded that
amount.

Commercial Real Property Loans. HOLA limits the
aggregate amount of commercial real estate loans that a federal
savings institution may make to an amount not in excess of 400
percent of the savings institution's capital. First Indiana was in
compliance with the commercial real property loan limitation at
December 31, 1996.

Limitation on Capital Distributions. Under OTS
regulations, a savings institution is classified as a tier 1 institution,
a tier 2 institution or a tier 3 institution, depending on its level of
regulatory capital both before and after giving effect to a proposed
capital distribution. A tier 1 institution may generally make capital
distributions in any calendar year up to 100 percent of its net
income to date during the calendar year plus the amount that would
reduce by one-half its "surplus capital ratio" (i.e., the percentage by
which the institution's capital-to-assets ratio exceeds the ratio of its
fully-phased-in capital requirements to its assets) at the beginning
of the calendar year. No regulatory approval of the capital
distribution is required, but prior notice must be given to the OTS.
Restrictions exist on the ability of tier 2 and tier 3 institutions to
make capital distributions. For purposes of these regulations, First
Indiana is a tier 1 institution.

Limitation of Equity Risk Investments. Under
applicable regulations, First Indiana is generally prohibited from
investing directly in equity securities and real estate (other than that
used for offices and related facilities or acquired through, or in lieu
of, foreclosure or on which a contract purchaser has defaulted). In
addition, OTS regulations limit the aggregate investment by
savings institutions in certain equity risk investments including
equity securities, real estate, service corporations and operating
subsidiaries and loans for the purchase of land and construction
loans made after February 27, 1987 on non-residential properties
with loan-to-value ratios exceeding 80 percent. At December 31,
1996, First Indiana was in compliance with the equity risk
investment limitations.

Insurance of Deposits. FDIC-insured institutions pay
deposit insurance premiums depending on their placement within
one of nine categories. The categories are determined by (i) the
insured institution's placement in capital group 1, 2, or 3,
depending on its classification as "well-capitalized," "adequately
capitalized," or "undercapitalized," and (ii) its supervisory rating of
A, B, or C. Prior to October 1, 1996, well-capitalized institutions
with a supervisory rating of A paid $.23 per $100 of deposits,
while undercapitalized institutions with a rating of C paid $.31 per
$100 of deposits.

In the third quarter of 1996, the FDIC levied an industry-wide special
assessment to recapitalize the Savings Association
Insurance Fund ("SAIF"), which insures First Indiana Bank's
customers' deposits. The Bank incurred a one-time pre-tax charge
to earnings of $6,749,000 to comply with this assessment. At that
time, an interim schedule of deposit insurance premiums ranging
from $.18 to $.27 per $100 of deposits was published for use
through the last quarter of 1996. Beginning January 1, 1997,
deposit insurance premiums between $.00 and $.27 per $100 of
deposits will be in effect, based on the same nine-category rating
system discussed in the previous paragraph. The Deposit
Insurance Funds Act of 1996 ("Funds Act") also separates,
effective January 1, 1997, the Financing Corporation ("FICO")
assessment to service the interest on its bond obligations from the
SAIF assessment. As part of the deposit insurance assessments,
institutions pay

20


a FICO assessment for debt service requirements.
The FICO assessment rate is subject to change on a quarterly basis,
depending on the debt service requirements. First Indiana most
recently paid $.0648 per $100 of deposits to comply with this
assessment.

First Indiana was a well-capitalized institution throughout
1996, and paid the lowest deposit insurance premium rate in effect
at each assessment date. Because it is well-capitalized, First
Indiana will continue to pay the lowest rate of deposit insurance
premiums in 1997, but these premiums could increase in the future
from their current levels if the aggregate SAIF premiums paid by
all SAIF-insured institutions do not equal or exceed 1.25% of
insurable deposits.

Community Reinvestment Act. Ratings of depository
institutions under the Community Reinvestment Act of 1977
("CRA") must be disclosed. The disclosure includes both a four-tier
descriptive rating using terms such as satisfactory and
unsatisfactory and a written evaluation of each institution's
performance. Also, the FHLB is required to adopt regulations
establishing standards of community investment and service for
members of the FHLB System to meet to be eligible for long-term
advances. Those regulations are required to take into account a
savings institution's CRA record and the member's record of
lending to first-time home buyers. The Corporation intends to
maintain its long-standing record of community lending and to
meet or exceed the CRA standards under FIRREA.

Transactions with Affiliates

Pursuant to HOLA, transactions engaged in by a savings
institution or one of its subsidiaries with affiliates of the savings
institution generally are subject to the affiliate transaction
restrictions contained in Sections 23A and 23B of the Federal
Reserve Act. Section 23A of the Federal Reserve Act imposes
both quantitative and qualitative restrictions on transactions
engaged in by a member depository institution or one of its
subsidiaries with an affiliate, while Section 23B of the Federal
Reserve Act requires, among other things, that all transactions with
affiliates be on terms substantially the same as and at least as
favorable to the member bank or its subsidiary as the terms that
would apply to or would be offered in a comparable transaction
with an unaffiliated party.

Section 22(h) of the Federal Reserve Act imposes
restrictions on loans to executive officers, directors and principal
shareholders. Under Section 22(h), loans to an executive officer
or to a greater than 10 percent shareholder of a savings institution,
or certain affiliated entities of either, may not exceed the
institution's loan-to-one-borrower limit when considered with all
other outstanding loans to such person and affiliated entities.
Section 22(h) also prohibits loans above amounts prescribed by the
appropriate federal banking agency to directors, executive officers
and greater than 10 percent shareholders of a savings institution
and their respective affiliates, unless the loan is approved in
advance by a majority of the board of directors of the institution
with any interested director not participating in the voting. The
Federal Reserve Board has prescribed the loan amount (which
includes all other outstanding loans to such person) for which such
prior board of director approval is required, as the greater of
$25,000 or 5 percent of capital and surplus (up to $500,000).
Further, the Federal Reserve Board requires that loans to directors,
executive officers and principal shareholders be made on terms
substantially the same as offered in comparable transactions to
other persons. First Indiana was in compliance with these
regulations at December 31, 1996.

Federal Home Loan Bank System

The Federal Home Loan Bank System ("FHLBanks")
consists of 12 regional FHLBanks, each subject to supervision and
regulation by the Federal Housing Finance Board. The FHLBanks
provide a central credit facility for member savings institutions. As
a member of the FHLB, First Indiana is required to own shares of
capital stock in the FHLB in an amount at least equal to one
percent of the aggregate principal amount of its unpaid residential
mortgage loans, home purchase contracts and similar obligations
at the beginning of each year, or 1/20 of its advances (borrowings)
from the FHLB, whichever is greater. As of December 31, 1996,
First Indiana was in compliance with this requirement.

21


Federal Reserve System

The Federal Reserve Board has adopted regulations that
require savings institutions to maintain non-earning reserves
against their transaction accounts (primarily NOW and regular
checking accounts) and non-personal time deposits (those which
are transferable or held by a person other than a natural person)
with an original maturity of less than one and one-half years. At
December 31, 1996, First Indiana was in compliance with these
requirements. These reserves may be used to satisfy liquidity
requirements imposed by the Director of the OTS. Because
required reserves must be maintained in the form of vault cash or
non-interest-bearing account at a Federal Reserve Bank, the effect
of this reserve requirement is to reduce the amount of the
institution's interest-earning assets.

Savings institutions also have the authority to borrow
from the Federal Reserve discount window. Federal Reserve
Board regulations, however, require savings institutions to exhaust
all the FHLB sources before borrowing from a Federal Reserve
Bank. The FDICIA places limitations upon a Federal Reserve
Bank's ability to extend advances to under-capitalized and critically
under-capitalized depository institutions. The FDICIA provides
that a Federal Reserve bank generally may not have advances
outstanding to an under-capitalized institution for more than 60
days in any 120-day period.

Taxation

Federal. The Corporation, on behalf of itself, First
Indiana and its subsidiaries, files a calendar tax year consolidated
federal income tax return and reports items of income and expense
using the accrual method of accounting.

Savings institutions are generally taxed in the same
manner as other corporations. In August 1996, President Clinton
signed the Small Business Job Protection Act (the "Act") into law.
One provision of the Act repeals the reserve method of accounting
for bad debts for savings institutions, effective for taxable years
beginning after 1995. Another provision of the Act disallows the
use of the experience method of accounting for bad debt for "large"
institutions, defined to include institutions with greater than $500
million in total assets. The Bank therefore will be required to use
the specific charge-off method on its tax returns for 1996 and
thereafter. Beginning in 1996, the Bank is required to recapture
ratably over six years its "applicable excess reserves," which are
its federal tax bad debt reserves in excess of the base year reserve
amount described in the following paragraph. The Bank has
approximately $1,001,000 of applicable excess reserves and has
provided a deferred tax liability related to this recapture.

In accordance with Statement of Financial Accounting
Standard No. 109, "Accounting for Income Taxes" ("SFAS 109"),
a deferred liability has not been established for the Bank's tax bad
debt base year reserves of $16,586,000. The base year reserves
are generally the balance of reserves as of December 31, 1987,
reduced proportionally for reductions in the Bank's loan portfolio
since that date. The base year reserves will continue to be subject
to recapture and the Bank could be required to recognize a tax
liability if: (i) the Bank fails to qualify as a "bank" for federal
income tax purposes; (ii) certain distributions are made with
respect to the stock of the Bank; (iii) the bad debt reserves are used
for any purpose other than to absorb bad debt losses; or (iv) there
is a change in tax law. The enactment of this legislation is
expected to have no material impact on the Corporation's
operations or financial position.

Under SFAS 109, the Corporation may recognize
deferred tax assets for deductible temporary differences based on
an evaluation of the likelihood of realizing the underlying tax
benefits. The realization of these benefits principally depends upon
the following sources of taxable income: (i) taxable income in the
current year or prior years that is available through carryback
(potential recovery of taxes paid for the current year or prior years);
(ii) future taxable income that will result from the reversal of
existing taxable temporary differences (potential offsetting of
deferred tax liabilities); or (iii) future taxable income, exclusive of
the reversal of existing temporary differences, that is generated by
future operations.

In addition, tax-planning strategies may be available to
accelerate taxable income or deductions, change the character of
taxable income or deductions, or switch from tax-exempt to taxable
investments so that there would be sufficient taxable income of the
appropriate character and in the appropriate periods to allow for
realization of the tax benefits.

22


The Federal Financial Institutions Examination Council
(the "FFIEC") has adopted all provisions of SFAS 109 for
regulatory reporting purposes, including those provisions related
to deferred tax assets. However, the FFIEC agencies have imposed
a limitation on the amount of net deferred tax assets that may be
included in the calculation of regulatory capital. The limitation
requires an institution to deduct from capital, when computing its
regulatory capital ratios, any amount of net deferred tax asset that
is not supported by the sum of the carryback potential of the
institution plus the lower of the next twelve months' estimated
earnings or ten percent of Tier 1 capital. At December 31, 1996,
First Indiana met all the above requirements and had no
adjustments to regulatory capital.

The Internal Revenue Service has examined the tax
returns of First Indiana through 1991.

As a result of a routine tax audit, the IRS adjusted certain
income taxes owed by First Indiana for the years ended December
31, 1985 and 1986. The adjustments involved the timing of First
Indiana's deduction of interest expense paid on customers'
certificate of deposit accounts. First Indiana paid the taxes and
interest and subsequently filed for a refund of these amounts. A
settlement has been reached, final governmental approval has been
obtained, and the Bank is awaiting the government's preparation
of the final closing agreement.

State. The State of Indiana imposes a franchise tax on
the "adjusted gross income" of depository institutions at a fixed rate
of 8.5 percent per year. This franchise tax is imposed in lieu of the
gross income tax, adjusted gross income tax, savings and loan
excise tax and supplemental net income tax otherwise imposed on
certain corporate entities and depository institutions. "Adjusted
gross income" is computed by making certain modifications to an
institution's federal taxable income. For example, tax-exempt
interest is included in the depository institution's adjusted gross
income for state franchise tax purposes.

The Indiana Department of Revenue has examined the
state income tax returns of First Indiana through 1994.

Service Corporation Subsidiaries

OTS regulations permit federal savings institutions to
invest in the capital stock, obligations or specified types of
securities of subsidiaries (referred to as "service corporations") and
to make loans to such subsidiaries and joint ventures in which such
subsidiaries are participants in an aggregate amount not exceeding
two percent of an institution's assets, plus an additional one percent
of assets if the amount over two percent is used for specified
community or inner-city development purposes. In addition,
federal regulations permit institutions to make specified types of
loans to such subsidiaries (other than special-purpose finance
subsidiaries), in which the institution owns more than ten percent
of the stock, in an aggregate amount not exceeding 50 percent of
the institution's regulatory capital if the institution's regulatory
capital is in compliance with applicable regulations. FIRREA
requires a savings institution which acquires a non-savings
institution subsidiary, or which elects to conduct a new activity
within a subsidiary, to give the FDIC and the OTS at least 30 days'
advance written notice. The FDIC may, after consultation with the
OTS, prohibit specific activities if it determines such activities
pose a serious threat to the SAIF. Moreover, savings institutions
must deduct from capital, for purposes of meeting the leverage
limit, tangible capital, and risk-based capital requirements, their
entire investment in and loans to a subsidiary engaged in activities
permissible for a national bank (other than exclusively agency
activities for its customers or mortgage banking subsidiaries).

One Mortgage Corporation. One Mortgage
Corporation is a wholly owned mortgage banking subsidiary which
originates single-family residential mortgage loans outside of
Indiana for sale to First Indiana or for sale into the secondary
market. It originates loans through offices located in Tampa and
Orlando, Florida, and in Charlotte and Raleigh, North Carolina.

One Property Corporation. One Property Corporation
is a wholly owned subsidiary formed in 1985 to engage in
commercial real estate investment activities. To date, One
Property Corporation has not engaged in any such activities.

23


Pioneer Service Corporation. Pioneer Service
Corporation is a wholly owned subsidiary of the Bank. In April
1990, Pioneer Service Corporation invested in a limited
partnership which was formed to develop and own a 112-unit
apartment complex in Greencastle, Indiana.

Employees

At December 31, 1996, the Corporation and its
subsidiaries employed 601 persons, including part-time employees.
Management considers its relations with its employees to be
excellent. None of these employees is represented by any
collective bargaining group.

The Corporation and its subsidiaries currently maintain
a comprehensive employee benefit program providing, among
other benefits, a qualified pension plan, a 401(k) plan,
hospitalization and major medical insurance, paid sick leave, long-term
disability insurance, life insurance, an employees' stock
purchase plan, and reduced loan rates for employees who qualify.

Item 2. Properties

At December 31, 1996, the Corporation operated through
28 full-service banking centers and nine loan origination offices.
The aggregate carrying value at December 31, 1996 of the
properties owned or leased, including headquarters properties and
leasehold improvements at the leased offices, was $13.7 million.
See Note 6 to the Corporation's Consolidated Financial Statements.
The carrying value of First Indiana's data processing equipment at
December 31, 1996 was $1.7 million.

The following table sets forth information with respect to
the Corporation's offices and office leases as of December 31,
1996:






Year Owned Expiration
Opened or or Date
Office Location Acquired Leased of Lease
- --------------- --------- ------ ----------

First Indiana
- -------------
Downtown Banking Center 1988 Leased Mar. 1998 (a)
and Corporate Headquarters
135 N. Pennsylvania Street
Indianapolis, Indiana

Eastgate Banking Center 1957 Leased Jan. 1999 (b)
7150 E. Washington Street
Indianapolis, Indiana

West Side Banking Center 1988 Leased Oct. 2003 (c)
925 N. High School Road
Indianapolis, Indiana

Nora Plaza Banking Center 1959 Leased Mar. 1997
1300 E. 86th Street
Indianapolis, Indiana

Southern Plaza Banking Center 1960 Leased Apr. 1999(b)
4200 S. East Street
Indianapolis, Indiana


24


Esquire Plaza Banking Center 1962 Leased May 2002(b)
8205 Pendleton Pike
Indianapolis, Indiana

Allisonville Banking Center 1972 Leased Sep. 2001
6254 Allisonville Road
Indianapolis, Indiana

Carmel Banking Center 1973 Owned
2138 E. 116th Street
Carmel, Indiana

Zionsville Banking Center 1973 Leased June 1998
75 Boone Village Shopping Center
Zionsville, Indiana

Greenwood Banking Center 1988 Leased Nov. 2008 (c)
8675 U.S. 31 South
Indianapolis, Indiana

Washington Square Banking Center 1988 Owned
10040 E. Washington Street
Indianapolis, Indiana

Brownsburg Banking Center 1979 Leased Dec. 2004 (b)
1073 N. Green Street
Brownsburg, Indiana

West 86th Banking Center 1983 Owned
1180 West 86th Street
Indianapolis, Indiana

Franklin Banking Center 1982 Owned
198 N. Main Street
Franklin, Indiana

North Shadeland Banking Center 1981 Owned
7652 N. Shadeland Avenue
Indianapolis, Indiana

Westfield Banking Center 1981 Owned
111 E. Main Street
Westfield, Indiana

Pendleton Banking Center 1981 Owned
115 W. State Street
Pendleton, Indiana

Fishers Banking Center 1990 Owned
11991 Fishers Crossing Drive
Fishers, Indiana

North 31 Banking Center 1993 Owned
14841 Greyhound Ct.
Carmel, Indiana


25


Carmel Mortgage Services Office 1991 Leased Jan. 2000
10401 N. Meridian, Suite 100
Carmel, Indiana

Washington Square Office 1977 Owned
10044 E. Washington Street
Indianapolis, Indiana

Greenwood Mortgage 1984 Leased June 1997
Services Office
720 Fry Road
Indianapolis, Indiana

South Bend Consumer Loan Office 1992 Leased July 1997
6910 N. Main Street Suite 13D
Box 33
Granger, Indiana

Chicago Consumer Loan Office 1996 Leased Nov. 1998
825 N. Cass Avenue, Suite 206
Westmont, Illinois

Columbus Consumer Loan Office 1994 Leased Sep. 1997
425 W. Shrock, Suite 102
Westerville, Ohio

Fort Wayne Consumer Loan Office 1995 Leased Sep. 1997
3711 Rupp Drive, Suite 208
Fort Wayne, Indiana

Louisville Consumer Loan Office 1992 Leased Apr. 1997
3303 Plaza Drive, Suite 1
New Albany, Indiana

One Mortgage Corporation 1984 Leased June 1998
2100 Rexford Road, Suite 204
Charlotte, North Carolina

One Mortgage Corporation 1985 Leased Sep. 1997
4700 Homewood Court Suite 100
Raleigh, North Carolina

One Mortgage Corporation 1992 Leased May 1998
445 North Wymore Road,
Suite 201
Winter Park, Florida

One Mortgage Corporation 1990 Leased Jan. 2000
Sable Business Ctrs. V
3922 Coconut Palm Dr., Suite 106
Brandon, Florida

One Mortgage Corporation 1992 Leased Aug. 1997
9123 N. Military Trail Suite 216
Palm Beach Gardens, Florida


26


Greenwood Operations Center 1993 Owned
1300 Windhorst Way
Greenwood, Indiana

Land - Outlot #1 1993 Owned
Meridian Oaks Commercial
Subdivision
State Road 135 South
Greenwood, Indiana

Downtown Evansville Banking Center 1977 Owned
123 Main Street
Evansville, Indiana

Mount Vernon Banking Center 1965 Owned
405 E. 4th Street
Mt. Vernon, Indiana

East Side Banking Center 1980 Owned
4720 Lincoln Avenue
Evansville, Indiana

Bell Oaks Banking Center 1980 Owned
8388 Bell Oaks Drive
Newburgh, Indiana

North Brook Banking Center 1986 Owned
3540 First Avenue
Evansville, Indiana

Mooresville Banking Center 1952 Owned
24 West Main Street
Mooresville, Indiana

Drive-Up Banking Center 1982 Owned
33 West Main Street
Mooresville, Indiana

Spring Mill Drive-Up Banking Center 1984 Owned
24 Springmill Court
Mooresville, Indiana

Rushville Banking Center 1985 Owned
201 Harcourt Way
Rushville, Indiana

Downtown Rushville Banking Center 1955 Owned (d)
201 Harcourt Way
Rushville, Indiana

(a) The lease also provides six ten-year renewal options.
(b) The lease also provides a five-year renewal option.
(c) The lease also provides two five-year renewal options.
(d) This banking center was closed in February 1997, and the building
donated to the Rushville United Way.



27


Item 3. Legal Proceedings

As a result of a routine tax audit, the Internal Revenue
Service assessed additional income taxes of approximately
$1,500,000 related to the years ended December 31, 1986 and
1985. The assessment involved the timing of First Indiana's
deduction for accrued interest expense relating to customers'
certificate of deposit accounts. The assessed tax and interest were
paid in the tax year ending December 31, 1990 and claim for
refund was subsequently filed. The Corporation negotiated a
settlement with the United States Department of Justice - Tax
Division and is awaiting final closing documents to be prepared by
the government.

Other than the above mentioned item, there are no
pending legal proceedings to which the Corporation or any
subsidiary was a party or to which any of their property is subject
other than litigation which, in the opinion of management, is not
material to the Corporation's business, operations, or financial
condition.

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

No matters were submitted to a vote of the Corporation's
security holders during the three months ended December 31,
1996.

Part II

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

The information required by this item is incorporated by
reference from page 40 of the Corporation's 1996 Annual Report
under the heading, "Corporate Information."

For restrictions on the Corporation's present or future
ability to pay dividends, see Note 11 of "Notes to Consolidated
Financial Statements" on page 32 - 33 of the Corporation's 1996
Annual Report, which is incorporated herein by reference.

The Corporation paid a cash dividend of $.11 per share
outstanding in each quarter of 1996 and $.10 per share outstanding
in each quarter of 1995, as adjusted for a five-for-four stock split
on March 18, 1997 and a six-for-five stock split on March 1, 1996.


Item 6. Selected Financial Data

The information required by this item is incorporated by
reference to page 17 of the Corporation's 1996 Annual Report from
the material under the heading "Five-Year Summary of Selected
Financial Data."


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

The information required by this item is incorporated by
reference to pages 7 - 16 of the Corporation's 1996 Annual Report
from the material under the heading "Financial Review."

28


Item 8. Financial Statements and Supplementary Data

The Corporation's Consolidated Financial Statements and
Notes to Consolidated Financial Statements at December 31, 1996
and 1995 and for each of the years in the three-year period ended
December 31, 1996 are incorporated by reference to pages 18 - 39
of the Corporation's 1996 Annual Report. The Corporation's
unaudited quarterly financial data for the two-year period ended
December 31, 1996 is incorporated by reference to Note 15 of
"Notes to Consolidated Financial Statements" on page 38 of the
Corporation's 1996 Annual Report.

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

None.


Part III

Item 10. Directors and Executive Officers of the
Registrant

The information required by this item with respect to the
directors is incorporated by reference to pages 3-5 and page 15 of
the Corporation's Proxy Statement dated March 12, 1997 under the
heading "Election of Directors," and "Section 16(a) Beneficial
Ownership Reporting Compliance."

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





Year First
Name Position Age Elected Officer
------------- ------------- ------- ---------------

David L. Gray Vice President and Treasurer 53 1981
of the Corporation; Chief
Financial Officer, Treasurer,
and Senior Vice President,
Internal Support Services
Division of the Bank

David A. Lindsey Senior Vice President, 46 1983
Consumer Banking Sales
Division of the Bank;
President, One Mortgage Corporation

Merrill E. Matlock Senior Vice President, 47 1984
Commercial Banking Division
of the Bank

Timothy J. O'Neill Senior Vice President, 49 1972
Consumer Banking Services
Division of the Bank

Kenneth L. Turchi Senior Vice President, Retail 38 1987
Banking, Marketing, and Strategic
Planning Division of the Bank



David L. Gray has been with the Bank since July 1981,
and currently serves as the Corporation's vice president and
treasurer, and the Bank's chief financial officer, treasurer, and
senior vice president, Internal Support Services Division. He also
serves as the chairman of the Bank's Asset/Liability Committee.

David A. Lindsey has been with the Bank since January
1983, serving as the Bank's senior vice president, Consumer
Banking Sales Division. His duties include mortgage and
consumer lending and management of the Bank's mortgage banking
subsidiary.

29

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

Timothy J. O'Neill has been with the Bank since 1970.
He currently serves as the Bank's senior vice president, Consumer
Banking Services Division. He is responsible for the
administration of the processing and servicing of the Bank's
lending and deposit products.

Kenneth L. Turchi joined First Indiana in September 1985
and currently serves as senior vice president, Retail Banking,
Marketing, and Strategic Planning Division. His duties include
strategic planning, marketing, advertising, market research,
investor and public relations, and supervision of retail banking
center sales and operations.


Item 11. Executive Compensation.

The information required by this item with respect to
executive compensation is incorporated by reference to pages 7-14
of the material under the heading "Executive Compensation" in the
Corporation's Proxy Statement.

Item 12. Security Ownership of Certain Beneficial
Owners and Management

The information required by this item is incorporated by
reference to pages 1-7 of the material under the heading "Voting
Securities and Beneficial Owners" and "Proposal No 1: Election of
Directors" in the Corporation's Proxy Statement.

Item 13. Certain Relationships and Related Transactions

The information required by this item is incorporated by
reference to pages 6 - 7 of the material under the heading "Certain
Transactions" in the Corporation's Proxy Statement.

30


Part IV

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

a. The following documents are filed as part of this report:

1996 Annual
Report
(Exhibit 13)
Financial Statements Page(s)
-------------------- ------------

Consolidated Balance Sheets as of
December 31, 1996 and 1995 18

Consolidated Statements of Earnings
for the Years Ended December 31, 1996, 1995 and 1994 19

Consolidated Statements of Shareholders' Equity
for the Years Ended December 31, 1996, 1995 and 1994 20

Consolidated Statements of Cash Flows
for the Years Ended December 31, 1996, 1995 and 1994 21

Notes to Consolidated Financial Statements 22-39

Independent Auditors' Report 41

31


Exhibits
Refer to list of exhibits on pages 34-36

b. Reports on Form 8-K
No Reports on Form 8-K were filed during the three
months ended December 31, 1996.

c. The exhibits filed herewith or incorporated by reference
herein are set forth on the Exhibit index on pages 34-36.

d. Financial Statement Schedules required by Regulation S-X.

None


32

Signatures


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

FIRST INDIANA CORPORATION

By: /s/Owen B. Melton, Jr.
Owen B. Melton, Jr.
President and Chief Operating Officer
Date: March 19, 1997

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

Officers


By: /s/Robert H. McKinney By: /s/David L. Gray
Robert H. McKinney David L. Gray
Chairman and Chief Vice President and
Executive Officer Treasurer
Date: March 19, 1997 Date: March 19, 1997

Directors


By: /s/Gerald L. Bepko By: /s/Robert H. McKinney
Gerald L. Bepko Robert H. McKinney
Date: March 19, 1997 Date: March 19, 1997

By: /s/Douglas W. Huemme By: /s/Owen B. Melton, Jr.
Douglas W. Huemme Owen B. Melton, Jr.
Date: March 19, 1997 Date: March 19, 1997

By: /s/Marni McKinney By: /s/Phyllis W. Minott
Marni McKinney Phyllis W. Minott
Date: March 19, 1997 Date: March 19, 1997

By: /s/John W. Wynne By: /s/Michael L. Smith
John W. Wynne Michael L. Smith
Date: March 19, 1997 Date: March 19, 1997

By: /s/H.J. Baker
H.J. Baker
Date: March 19, 1997

33




Exhibit Index

Page(s)
Exhibit (by Sequential
Number Numbering System)

2(a) Amended and Restated Merger Agreement, dated as of February 28,
1992 and restated as of September 8, 1992, among Registrant,
Mooresville Savings Bank ("Mooresville"), and First Indiana.*

2(b) Amended and Restated Merger Agreement, dated as of November 8,
1991 and restated as of September 4, 1992, among Registrant, First
Federal Savings and Loan Association of Rushville ("Rushville"), and
First Indiana.*

2(c) Amended and Restated Mooresville Plan of Merger Conversion. *

2(d) Amended and Restated Rushville Plan of Merger Conversion. *

3(a) Articles of Incorporation and Bylaws of First Indiana Corporation,
incorporated by reference to Exhibit 3(a) of the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1994.

4(a) Form of Certificate of Common Stock of Registrant, incorporated by
reference to Exhibit 4(c) of the Registrant's registration statement on
Form S-1, filed as No. 33-46547 on March 20, 1992.

10(a) First Indiana Bank 1983 Stock Option and Incentive Plan,
incorporated by reference to Exhibit 10(a) of the Registrant's statement
on Form S-4 filed as File No. 33-3273 on February 18, 1986, as
amended.

10(b) First Indiana Bank 1988 Management Performance Incentive Plan,
incorporated by reference to Exhibit 10(b) of the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1987.

10(c) First Indiana Bank 1988 Long-Term Management Performance Plan,
incorporated by reference to Exhibit 10(c) of the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1987.

10(d) First Indiana Corporation 1987 Stock Option and Incentive Plan,
incorporated by reference to Exhibit 1 of the Registrant's February 27,
1987 Proxy Statement pages E-1 to E-8.

10(e) First Indiana Corporation Directors' Deferred Fee Plan, incorporated
by reference to Exhibit 10(e) of the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1988.

10(f) First Indiana Bank 1990 Management Performance Incentive Plan,
incorporated by reference to Exhibit 10(f) of the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1988.

10(g) Form of Employment Agreement between Registrant and Maurice E.
Mobley, incorporated by reference to Exhibit 10(a) of the Registrant's
registration statement on Form S-1, filed as File No. 33-27459 on
March 9, 1989.

34

10(h) Form of Amended and Restated Supplemental Pension Benefits
Agreement between Registrant and Maurice E. Mobley, incorporated
by reference to Exhibit 10(b) of the Registrant's registration statement
on Form S-1, filed as File No. 33-27459 on March 9, 1989.

10(i) First Indiana Corporation 1989 Stock Option Plan, incorporated by
reference to Exhibit 10(i) of the Registrant's Annual Report on Form
10-K for the year ended December 31, 1989.

10(j) First Indiana Bank 1991 Management Performance Incentive Plan,
incorporated by reference to Exhibit 10(j) of the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1990.

10(k) First Indiana Bank 1991 Long-Term Management Performance
Incentive Plan, incorporated by reference to Exhibit 10(k) of the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1990.

10(l) Mid-West Federal Savings Bank Nonqualified Retirement Plan for
Directors, incorporated by reference to Exhibit 10(l) of the Registrant's
Annual Report on Form 10-K for the year ended December 31, 1990.

10(m) Nonqualified Deferred Compensation Program for the Directors of
Mid-West Federal Savings Bank, incorporated by reference to Exhibit
10(m) of the Registrant's Annual Report on Form 10-K for the year
ended December 31, 1990.

10(n) First Indiana Corporation 1991 Stock Option and Incentive Plan,
incorporated by reference to Exhibit A of the Registrant's March 20,
1991 Proxy Statement, Pages A-1 to A-8.

10(o) First Indiana Corporation 1992 Director Stock Option Plan,
incorporated by reference to Exhibit A of the Registrant's March 13,
1992 Proxy Statement, Pages A-1 to A-3.

10(p) Form of Employment Agreement between First Indiana and each of
Boyd C. Head, N. Thomas Lloyd and John D. Ehrhart (included as
Exhibits A, B and C, respectively, to Exhibit 2(a) above).

10(q) Form of Employment Agreement between First Indiana and each of
Eugene Spurlin and Garry E. Cooley (included as Exhibits A and B,
respectively, to Exhibit 2(b) above).

10(r) Form of Executive Supplement Retirement Income Agreement
between First Indiana and each of Boyd C. Head, N. Thomas Lloyd and
John D. Ehrhart (included as Exhibits D, E and F, respectively, to
Exhibit 2(a) above.

10(s) First Indiana Corporation 1992 Stock Option Plan, incorporated by
reference to Exhibit A of the Registrant's March 12, 1993 Proxy
Statement, pages 15 to 19.

13 1996 Annual Report. 10-K 37-84

21 Subsidiaries of First Indiana Corporation and First Indiana Bank. 10-K 85

35

22 Definitive Proxy Statement relating to the 1997 Annual Meeting of
Shareholders. 10-K 86-105

23 Consent of KPMG Peat Marwick LLP. 10-K 106

27 Financial Data Schedule. 10-K 107

* Previously Filed


36