NATIONAL BANK OF INDIANAPOLIS CORP - 10-Q Quarterly Report

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2005

OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 000-21671
THE NATIONAL BANK OF INDIANAPOLIS CORPORATION
(Exact name of Registrant as Specified in its Charter)

Indiana 35-1887991
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)

107 North Pennsylvania Street 46204
Indianapolis, Indiana (Zip Code)
(Address of Principal Executive Offices)

(317) 261-9000
(Registrant's Telephone Number, Including Area Code)

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

Indicate by check mark whether registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act) Yes [ ] No [X]

The number of shares of the registrant's Common Stock outstanding May 9,
2005 was 2,340,181.

Table of Contents
The National Bank of Indianapolis Corporation

Report on Form 10-Q
for Quarter Ended
March 31, 2005

PART I - FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements (Unaudited)
Consolidated Balance Sheets - March 31, 2005
and December 31, 2004..............................................1
Consolidated Statements of Income - Three Months
ended March 31, 2005 and 2004......................................2
Consolidated Statements of Cash Flows - Three Months
ended March 31, 2005 and 2004......................................3
Consolidated Statements of Shareholders' Equity - Three Months
ended March 31, 2005 and 2004......................................4
Notes to Consolidated Financial Statements......................5-13

Item 2. Management's Discussion and Analysis...........................13-24

Item 3. Quantitative and Qualitative Disclosures about Market Risk........24

Item 4. Controls and Procedures...........................................25

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.................................................26
Item 2. Changes in Securities, Use of Proceeds, and Issuer Purchases
Equity Securities..............................................26-27
Item 3. Defaults Upon Senior Securities...................................27
Item 4. Submission of Matters to a Vote of Security Holders...............27
Item 5. Other Information ................................................27
Item 6. Exhibits and Reports on Form 8-K...............................27-28

Signatures ..................................................................29

Part I - Financial Information

Item 1. Financial Statements

The National Bank of Indianapolis Corporation
Consolidated Balance Sheets

March 31, December 31,
2005 2004
(Unaudited) (Note)
----------------------------------------

Assets
Cash and due from banks $ 66,919,535 $ 22,824,622
Reverse repurchase agreements 5,000,000 5,000,000
Federal funds sold 27,197,627 31,766,783
Investment securities
Available-for-sale securities 91,125,552 92,414,044
Held-to-maturity securities 55,266,723 55,706,453
----------------------------------------
Total investment securities 146,392,275 148,120,497

Loans 662,412,361 656,452,569
Less: Allowance for loan losses (7,692,846) (7,795,803)
----------------------------------------
Net loans 654,719,515 648,656,766
Premises and equipment 10,156,497 9,676,268
Accrued interest 3,891,880 4,000,738
Stock in federal banks 3,707,200 3,678,300
Other assets 7,729,938 7,189,805
----------------------------------------
Total assets $ 925,714,467 $ 880,913,779
========================================

Liabilities and shareholders' equity
Deposits:
Noninterest-bearing demand deposits $ 159,806,600 $ 153,674,215
Money market and savings deposits 452,673,020 423,254,826
Time deposits over $100,000 49,824,776 49,039,847
Other time deposits 68,812,648 67,462,157
----------------------------------------
Total deposits 731,117,044 693,431,045
Security repurchase agreements 91,111,736 84,162,626
FHLB advances 32,000,000 32,000,000
Subordinated debt 5,000,000 5,000,000
Junior subordinated debentures owed to unconsolidated subsidiary trust 13,918,000 13,918,000
Other liabilities 5,427,923 5,858,421
----------------------------------------
Total liabilities 878,574,703 834,370,092

Shareholders' equity:
Common stock, no par value:
Authorized shares 2005 and 2004 - 3,000,000 shares; issued 2,632,954 in
2005 and 2,628,497 in 2004;
outstanding 2,350,781 in 2005 and 2,349,174 in 2004 20,554,520 20,595,989
Unearned compensation (554,191) (624,543)
Additional paid in capital 3,875,380 3,836,613
Retained earnings 24,794,484 23,365,151
Accumulated other comprehensive loss (1,530,429) (629,523)
----------------------------------------
Total shareholders' equity 47,139,764 46,543,687
----------------------------------------
Total liabilities and shareholders' equity $ 925,714,467 $ 880,913,779
========================================

Note: The balance sheet at December 31, 2004 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. See notes to consolidated financial statements.

1

The National Bank of Indianapolis Corporation
Consolidated Statements of Income
(Unaudited)

Three months ended
March 31,
2005 2004
------------------------------------

Interest income:
Interest and fees on loans $ 9,704,840 $ 7,672,473
Interest on investment securities 1,292,542 950,418
Interest on federal funds sold 232,064 105,769
Interest on reverse repurchase agreements 27,569 30,267
------------------------------------
Total interest income 11,257,015 8,758,927

Interest expense:
Interest on deposits 3,070,985 1,997,736
Interest on repurchase agreements 336,072 78,114
Interest on FHLB advances 406,251 517,777
Interest on long term debt 431,384 386,468
------------------------------------
Total interest expense 4,244,692 2,980,095
------------------------------------
Net interest income 7,012,323 5,778,832

Provision for loan losses 425,000 300,000
------------------------------------
Net interest income after provision for loan losses 6,587,323 5,478,832

Other operating income:
Wealth management fees 708,206 573,104
Rental income 113,391 132,732
Service charges and fees on deposit accounts 469,074 569,517
Net gain (loss) on sale of mortgage loans (24,560) 90,907
Interchange income 155,383 131,983
Net loss on sale of securities - (83,739)
Other income 325,898 318,413
------------------------------------
Total operating income 1,747,392 1,732,917

Other operating expenses:
Salaries, wages and employee benefits 3,580,785 3,217,917
Occupancy 406,034 368,606
Furniture and equipment 209,242 213,282
Professional services 354,212 302,709
Data processing 384,417 358,463
Business development 317,265 281,634
Mortgage servicing rights impairment recoveries (66,190) (45,172)
Other 855,476 779,392
------------------------------------
Total other operating expenses 6,041,241 5,476,831
------------------------------------
Net income before tax 2,293,474 1,734,918
Federal and state income tax 864,141 685,628
------------------------------------
Net income after tax $ 1,429,333 $ 1,049,290
====================================

Basic earnings per share $ 0.62 $ 0.46
====================================

Diluted earnings per share $ 0.60 $ 0.43
====================================

See notes to consolidated financial statements.

2

The National Bank of Indianapolis Corporation
Consolidated Statements of Cash Flows
(Unaudited)

Three months ended
March 31,
2005 2004
--------------------------------

Operating Activities
Net Income $ 1,429,333 $ 1,049,290
Adjustments to reconcile net income to net cash
provided (used) by operating activities:
Provision for loan losses 425,000 300,000
Depreciation and amortization 341,158 326,467
Mortgage servicing rights impairment recoveries (66,190) (45,172)
Loss on sales of investment securities available for sale - 83,739
(Gain) loss on sale of loans 24,560 (90,907)
Gain on sale of fixed assets (23,100) -
Income tax benefit from exercise of warrants & options 38,767 50,107
Net accretion of investments 73,720 71,179
Unearned compensation amortization 68,868 86,148
(Increase) decrease in:
Accrued interest receivable 108,858 249,535
Other assets (164,519) (586,059)
Increase (decrease) in:
Other liabilities (430,498) 276,255

--------------------------------
Net cash provided by operating activities 1,825,957 1,770,582
--------------------------------

Investing Activities
Net change in federal funds sold 4,569,156 (23,413,941)
Proceeds from maturities of investment securities held
to maturity 368,052 -
Proceeds from maturities of investment securities available
for sale 20,507,620 23,159,417
Proceeds from sales of investment securities available for sale - 19,952,500
Purchases of investment securities held to maturity (28,900) (41,251,350)
Purchases of investment securities available for sale (20,494,843) (499,305)
Net increase in loans (14,547,826) (3,298,149)
Proceeds from sale of loans 8,035,517 12,228,129
Purchases of bank premises and equipment (734,944) (39,135)

--------------------------------
Net cash used by investing activities (2,326,168) (13,161,834)
--------------------------------

Financing Activities
Net increase in deposits 37,685,999 50,113,066
Net increase in security repurchase agreements 6,949,110 21,383,190
Net change in FHLB borrowings - (5,000,000)
Proceeds from issuance of stock 63,000 55,000
Repurchase of stock (102,985) (359,375)

--------------------------------
Net cash provided by financing activities 44,595,124 66,191,881
--------------------------------

Increase in cash and cash equivalents 44,094,913 54,800,629

Cash and cash equivalents at beginning of year 22,824,622 44,383,402
--------------------------------

Cash and cash equivalents at end of period $ 66,919,535 $ 99,184,031
================================

Interest paid $ 4,496,649 $ 3,285,213
================================

Income taxes paid $ 632,371 $ 128,386
================================

See notes to consolidated financial statements.

3

The National Bank of Indianapolis Corporation
Consolidated Statement of Shareholders' Equity
(Unaudited)

Accumulated
Additional and Other
Common Unearned Paid In Retained Comprehensive
Stock Compensation Capital Earnings Income TOTAL
---------------------------------------------------------------------------------------

Balance at December 31, 2003 $ 22,858,900 $ (894,679) $ 3,019,003 $ 17,684,102 $ 11,078 $ 42,678,404

Comprehensive income:
Net income 1,049,290 1,049,290
Other comprehensive income
Net unrealized gain on investments,
net of tax of $348,093 530,708 530,708
---------------
Total comprehensive income 1,579,998

Income tax benefit from exercise of
warrants & options 50,107 50,107
Issuance of stock (5,100 shares) 50,725 4,275 55,000
Repurchase of stock (11,000 shares) (359,375) (359,375)
Compensation earned 86,148 86,148
---------------------------------------------------------------------------------------
Balance at March 31, 2004 $ 22,550,250 $ (804,256) $ 3,069,110 $ 18,733,392 $ 541,786 $ 44,090,282
=======================================================================================

Balance at December 31, 2004 $ 20,595,989 $ (624,543) $ 3,836,613 $ 23,365,151 $ (629,523) $ 46,543,687

Comprehensive income:
Net income 1,429,333 1,429,333
Other comprehensive income
Net unrealized loss on investments,
net of tax of $504,502 (769,171) (769,171)
Net unrealized loss on swap
net of tax $86,405 (131,735) (131,735)

---------------
Total comprehensive income 528,427

Income tax benefit from exercise of
warrants & options 38,767 38,767
Issuance of stock (4,457 shares) 61,516 1,484 63,000
Repurchase of stock (2,850 shares) (102,985) (102,985)
Compensation earned 68,868 68,868
---------------------------------------------------------------------------------------
Balance at March 31, 2005 $ 20,554,520 $ (554,191) $ 3,875,380 $ 24,794,484 $ (1,530,429) $ 47,139,764
=======================================================================================

See notes to consolidated financial statements.

4

The National Bank of Indianapolis
Corporation

Notes to Consolidated Financial Statements

March 31, 2005

Note 1: Basis of Presentation

The accompanying unaudited condensed consolidated financial statements include
the accounts of The National Bank of Indianapolis Corporation ("Corporation")
and its wholly-owned subsidiary The National Bank of Indianapolis ("Bank"). All
intercompany transactions between the Corporation and its subsidiary have been
properly eliminated. The consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in the United States
for interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by accounting principles generally accepted
in the United States for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for the
three month period ended March 31, 2005 are not necessarily indicative of the
results that may be expected for the year ended December 31, 2005. For further
information, refer to the consolidated financial statements and footnotes
thereto included in the Corporation's Form 10-K for the year ended December 31,
2004.

Note 2: Trust Preferred Securities

In September 2000, NBIN Statutory Trust I ("the Trust"), a Connecticut statutory
business trust owned by the Corporation, issued $13,500,000 of company obligated
mandatorily redeemable capital securities. The proceeds from the issuance of the
capital securities and the proceeds from the issuance of the common securities
of $418,000 were used by the Trust to purchase $13,918,000 Fixed Rate Junior
Subordinated Debentures from the Corporation. The capital securities mature
September 7, 2030, or upon earlier redemption as provided by the Indenture. The
Corporation has the right to redeem the capital securities, in whole or in part,
but in all cases in a principal amount with integral multiples of $1,000, on any
March 7 or September 7 on or after September 7, 2010 at a premium, declining
ratably to par on September 7, 2020. The capital securities have a fixed
interest rate of 10.60%, and are guaranteed by the Bank. The subordinated
debentures are the sole assets of the Trust and the Corporation owns all of the
common securities of the Trust. The net proceeds received by the Corporation
from the sale of capital securities were used for general corporate purposes.

Interest payments made on the capital securities or the junior subordinated
debentures are reported as a component of interest expense on long-term debt.

5

Note 3: Investment Securities

The securities available for sale are summarized as follows:

Available-for-Sale Securities
-----------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gain Loss Value
-----------------------------------------------------------

March 31, 2005
U.S. Treasury securities $ 2,008,988 $ -- $ 12,368 $ 1,996,620
U.S. Government agencies 91,000,000 -- 1,925,910 89,074,090
Collateralized mortgage obligations 54,862 -- 20 54,842
-----------------------------------------------------------
$93,063,850 $ -- $ 1,938,298 $91,125,552
===========================================================

December 31, 2004
U.S. Treasury securities $ 2,016,184 $ -- $ 7,704 $ 2,008,480
U.S. Government agencies 91,000,000 112,700 769,680 90,343,020
Collateralized mortgage obligations 62,486 58 -- 62,544
-----------------------------------------------------------
$93,078,670 $ 112,758 $ 777,384 $92,414,044
===========================================================

Held-to-Maturity Securities
-----------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gain Loss Value
-----------------------------------------------------------

March 31, 2005
Municipals $ 5,455,512 $ 406,921 $ -- $ 5,862,433
Collateralized mortgage obligations 49,561,211 -- 1,465,123 48,096,088
Other securities 250,000 4,474 544 253,930
-----------------------------------------------------------
$55,266,723 $ 411,395 $ 1,465,667 $54,212,451
===========================================================

December 31, 2004
Municipals $ 5,444,198 $ 484,166 $ -- $ 5,928,364
Collateralized mortgage obligations 50,012,255 -- 836,980 49,175,275
Other securities 250,000 4,584 221 254,363
-----------------------------------------------------------
$55,706,453 $ 488,750 $ 837,201 $55,358,002
===========================================================

The Corporation held sixteen investment securities as of March 31, 2005 of which
the amortized cost was greater than market value. Management does not believe
any individual unrealized loss as of March 31, 2005 represents an other-than
temporary impairment. The unrealized losses relate primarily to securities
issued by the U.S. treasury and the Federal Home Loan Mortgage Corporation
(FHLMC). These unrealized losses are primarily attributable to changes in
interest rates and individually were 4.2% or less of their respective amortized
cost basis. The Corporation has both the intent and ability to hold these
securities for a time necessary to recover the amortized cost.

6

Available - for - Sale Securities
---------------------------------

Less than 6 months Greater than 6 months
In an unrealized loss position In an unrealized loss position
---------------------------------- ---------------------------------
Total Total
Unrealized Number Unrealized Number Unrealized Estimated
Loss of Estimated Loss of Estimated Loss Fair
Amount Securities Fair Value Amount Securities Fair Value Amount Value
--------------------------------- -------------------------------------------------------------

Investment securities:
U.S. treasury securities $ (4,098) 2 $ 989,025 $ (8,270) 2 $ 1,007,595 $ (12,368) $ 1,996,620
U. S. government agencies $(293,800) 1 $19,706,200 $(1,632,110) 5 $69,367,890 $(1,925,910) $89,074,090
CMO's - Floating Rate $ -- $ -- $ -- $ (20) 1 $ 54,842 $ (20) $ 54,842
-------------------------------------------------------------------------------------------------
Total $(297,898) 3 $20,695,225 $(1,640,400) 8 $70,430,327 $(1,938,298) $91,125,552
=================================================================================================

Held - to - Maturity Securities
-------------------------------

Less than 6 months Greater than 6 months
In an unrealized loss position In an unrealized loss position
---------------------------------- ---------------------------------
Total Total
Unrealized Number Unrealized Number Unrealized Estimated
Loss of Estimated Loss of Estimated Loss Fair
Amount Securities Fair Value Amount Securities Fair Value Amount Value
--------------------------------- -------------------------------------------------------------

Investment securities:
Collateralized mortgage
obligations $ -- -- $ -- $(1,465,123) 3 $48,096,088 $(1,465,123) $48,096,088
Other securities $ -- -- $ -- $ (544) 2 $ 49,456 $ (544) $ 49,456
-------------------------------------------------------------------------------------------------
Total $ -- -- $ -- $(1,465,667) 5 $48,145,544 $(1,465,667) $48,145,544
=================================================================================================

7

Note 4: Loans
Loans consist of the following:

March 31, 2005 December 31, 2004
----------------------- ---------------------

Residential loans secured by real estate $240,332,337 $243,717,433
Commercial loans secured by real estate 126,536,472 127,772,683
Other commercial and industrial loans 242,057,994 235,704,551
Loans to individuals for household, family, and other
consumer expenditures 53,485,558 49,257,902
----------------------- ---------------------
Total loans 662,412,361 656,452,569
----------------------- ---------------------
Less allowance for loan losses (7,692,846) (7,795,803)
----------------------- ---------------------
Total loans, net $654,719,515 $648,656,766
======================= =====================

Activity in the allowance for loan losses was as follows:

Three months ended
March 31,
2005 2004
------------------- --------------------

Beginning balance $7,795,803 $8,029,596
Loans charged off (net) (527,957) (198,098)
Provision for loan losses 425,000 300,000
------------------- --------------------
Ending balance $7,692,846 $8,131,498
=================== ====================

Note 5: Subordinated Term Loan Agreement

On June 6, 2003, the Bank entered into a $5,000,000 Subordinated Term Loan
Agreement with Harris Trust and Savings Bank. The final maturity date of the
loan is June 6, 2010. The outstanding principal balance is due at maturity, but
prepayment of the principal balance is permitted prior to maturity with prior
consent from the Federal Reserve.

Under the terms of the agreement, there are various interest rate options
available. Each floating rate option is available for a fixed term of 1-3
months. The Bank is currently paying Adjusted 3-month LIBOR plus 2.0% which
equates to 4.75 %. Interest payments are due at the expiration of the fixed term
option.

8

Note 6: Derivative Instruments and Hedging Activities

During 2004, the Corporation entered into an interest rate swap to reduce the
volatility of variable interest payments received on a portion of its overnight
federal funds sold. This interest rate swap qualified as and is being accounted
for as a cash flow hedge pursuant to Statement of Financial Accounting Standard
No. 133, "Accounting for Derivative Instruments and Hedging Activities",
(SFAS133). SFAS 133 requires changes in the fair value of cash flow hedges to be
reported as a component of Other Comprehensive Income, net of deferred taxes.

March 31, 2005 December 31, 2004
Net Ineffective Net Ineffective
Notional Derivative Hedge Gains Notional Derivative Hedge Gains
Amount Liability (Losses) Amount Liability (Losses)
----------------------------------------- ---------------------------------------

Cash Flow Hedge
Overnight Federal Funds Sold
Receive fixed interest rate swap $20,000,000 $ 595,945 $ -- $20,000,000 $ 377,804 $ --

Note 7: Exercise of Options

During the first quarter of 2005, one director and one officer of the
Corporation exercised options to purchase 4,500 common shares in aggregate. The
weighted average exercise price was $14.00 and the weighted average fair market
value of the stock was $35.95.

Due to the exercise of these options for the three months ended March 31, 2005,
the Corporation will receive a deduction for tax purposes for the difference
between the fair value of the stock at the date of exercise and the exercise
price. In accordance with Accounting Principles Board Opinion No. 25,
"Accounting for Stock-Based Compensation," (APB 25) the Corporation has recorded
the income tax benefit of $38,767 as additional paid in capital for the three
months period ended March 31, 2005.

9

Note 8: Earnings per Share

The following table sets forth the computation of basic and diluted earnings per
share:

Three months ended
March 31,
2005 2004
-------------- ---------------

Basic average shares outstanding 2,304,420 2,298,353
============== ===============

Net income $1,429,333 $ 1,049,290
============== ===============

Basic net income per common share $ 0.62 $ 0.46
============== ===============

Diluted
Average shares outstanding 2,304,420 2,298,353
Nonvested restricted stock 27,000 29,580
Common stock equivalents
Net effect of the assumed exercise of stock options 63,528 93,552
-------------- ---------------
Diluted average shares 2,394,948 2,421,485
============== ===============

Net income $1,429,333 $ 1,049,290
============== ===============

Diluted net income per common share $ 0.60 $ 0.43
============== ===============

10

Note 9: Comprehensive Income

The following is a summary of activity in accumulated other comprehensive
income:

Three months ended
March 31,
2005 2004
----------- -----------

Accumulated unrealized gains on securities available for
sale at beginning of period, net of tax $ (401,367) $ 11,078
Net unrealized gains (losses) for period (1,273,673) 878,801
Tax benefit (expense) 504,502 (348,093)
----------- -----------
Ending other comprehensive income (loss) at end of
period, net of tax $(1,170,538) $ 541,786
=========== ===========

Accumulated unrealized gains on swap at beginning of
period, net of tax $ (228,156) $ --
Net unrealized loss for period (218,140) --
Tax benefit 86,405 --
----------- -----------
Ending other comprehensive loss at end of period, net
of tax $ (359,891) $ --
=========== ===========

Accumulated other comprehensive income at beginning
of period, net of tax $ (629,523) $ 11,078
Other comprehensive income (loss), net of tax (900,906) 530,708
----------- -----------
Accumulated other comprehensive income at end of
period, net of tax $(1,530,429) $ 541,786
=========== ===========

11

Note 10: Stock Based Compensation

The Corporation follows APB 25 in accounting for its stock option plans. Under
APB 25, compensation expense is generally not recognized if the exercise price
of the option equals the fair value of the stock on the date of grant. The
following table illustrates the effect on net income and earnings per share if
the Corporation had applied the fair value recognition provisions of Statement
No. 123 to stock-based compensation. For purposes of pro forma disclosures, the
estimated fair value of the options is amortized to expense over their vesting
periods.

Three months ended
March 31,
2005 2004
------------- -------------

Net income, as reported $ 1,429,333 $ 1,049,290

Add: stock-based compensation expense, net of 41,590 52,025
related taxes
Less: total stock-based compensation expense (77,725) (106,170)
determined under fair-value based method, net
of taxes
------------- -------------
Pro forma net income $ 1,393,198 $ 995,145
============= =============

Earnings per share:
Basic, as reported $ 0.62 $ 0.46
Basic, pro forma $ 0.60 $ 0.43

Diluted, as reported $ 0.60 $ 0.43
Diluted, pro forma $ 0.58 $ 0.41

Note 11: Commitments and Contingencies

A summary of the contractual amount:

March 31, 2005 December 31, 2004
-------------- -----------------

Commercial credit lines $167,987,490 $181,996,327
Revolving home equity and credit card lines 83,254,797 82,362,909
Standby letters of credit 11,366,372 13,538,965
Other loans 2,802,288 2,811,446
------------------------------------
$265,410,947 $280,709,647
====================================

Commitments to extend credit are agreements to lend money. Since many of the
commitments to extend credit may expire without being drawn upon, the total
commitment amounts do not necessarily represent future cash-flow requirements.

Standby letters of credit are conditional commitments issued to guarantee the
performance of a customer to a third party. Standby letters of credit generally
are contingent upon the failure of the customer to perform according to the
terms of the underlying contract with the third party.

The credit risk associated with loan commitments and standby letters of credit
is essentially the same as that involved in extending loans to customers and is
subject to normal credit policies. Collateral may be obtained based on
management's credit assessment of the customer.

12

Note 12: Recent Accounting Pronouncements

In March 2004, The Emerging Issues Task Force (EITF), a standard setting body
working under the auspices of the FASB, issued EITF No. 03-1, "The Meaning of
Other than Temporary Impairments and its Application to Certain Investments". In
the revised guidance, the EITF reached a Consensus regarding the model to be
used in determining whether an investment is other-than-temporarily impaired,
and the required disclosures about unrealized losses on available-for-sale debt
and equity securities. In September 2004, The Financial Accounting Standards
Board (FASB) announced that the effective date for applying Paragraph 16 will be
delayed pending further discussion. Paragraph 16 of the Consensus relates to
debt securities that cannot be contractually prepaid or otherwise settled for an
amount less than the investor's cost. Management continues to evaluate the
impact of adopting EITF 03-1 and it is not expected to have a material impact on
the Corporation's financial condition, results of operations, or cash flow.

In December 2004, the FASB issued Statement No. 123(R) (revised 2004),
Share-Based Payment, which is a revision of Statement No. 123, "Accounting for
Stock-Based Compensation". Statement 123(R) supersedes APB 25 and amends FASB
Statement No. 95, Statement of Cash Flows. Statement 123(R) requires all
share-based payments to employees, including grants of employee stock options,
to be recognized in the income statement based on their fair values. Pro forma
disclosure will no longer be an alternative. Statement 123(R) was initially to
be adopted no later than the beginning of the first interim period beginning
after June 15, 2005.

In April 2005, the Securities and Exchange Commission (SEC) announced that it
would provide for a phased-in implementation process for FASB Statement No.
123(R). The SEC would require that registrants that are not small business
issuers adopt Statement 123 (R)'s fair value method of accounting for
share-based payments to employees no later than the beginning of the first
fiscal year beginning after June 15, 2005.

Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operation

Corporation Overview:

The primary source of the Bank's revenue is net interest income from loans and
deposits, and fees from financial services provided to customers. Overall
economic factors including market interest rates, business spending, and
consumer confidence, as well as competitive conditions within the marketplace
tend to influence business volumes.

The National Bank of Indianapolis recorded net income of $1,429,333 or $0.60 per
diluted share for the first quarter of 2005 compared to $1,049,290 or $0.43 per
diluted share for the first quarter of 2004.

A new Bank office located at 106th and Michigan Road opened for business during
the first quarter of 2005. The Corporation believes the location is excellent
for customer convenience and visibility, and the initial growth is ahead of
plan. The Corporation has decided to upgrade our Greenwood Bank Office to a
full-size, freestanding building. The Greenwood area is a highly competitive
market with an excellent target client base and the Corporation wishes to be
fully competitive.

The risks and challenges that management believes will be important during 2005
are price competition for loans and deposits by new market entrants as well as
established competitors.

13

Forward Looking Information

This section contains forward looking statements. Forward looking statements
give current expectations or forecasts of future events and are not guarantees
of future performance. The forward looking statements are based on management's
expectations and are subject to a number of risks and uncertainties. Although
management believes the expectations reflected in such forward looking
statements are reasonable, actual results may differ materially from those
expressed or implied in such statements. Risks and uncertainties that could
cause actual results to differ materially include, without limitation, the
Corporation's ability to execute its business plans; changes in general economic
and financial market conditions; changes in interest rates; changes in
competitive conditions; continuing consolidation in the financial services
industry; new litigation or changes in existing litigation; losses, customer
bankruptcy, claims and assessments; changes in banking regulations or other
regulatory or legislative requirements that impact the Corporation's business;
and changes in accounting policies and procedures as may be required by the
Financial Accounting Standards Board or other regulatory agencies. Additional
information concerning factors that could cause actual results to differ
materially from those expressed or implied in the forward-looking statements is
available in the Corporation's Annual Report on Form 10-K for the year ended
December 31, 2004.

Critical Accounting Policies

The Corporation's consolidated financial statements are prepared in accordance
with accounting principles generally accepted in the United States and follow
general practices within the industries in which it operates. Application of
these principles requires management to make estimates, assumptions, and
judgments that affect the amounts reported in the financial statements and
accompanying notes. These estimates, assumptions, and judgments are based on
information available as of the date of the financial statements; accordingly,
as this information changes, the financial statements could reflect different
estimates, assumptions, and judgments. Certain policies inherently have a
greater reliance on the use of estimates, assumptions, and judgments and as such
have a greater possibility of producing results that could be materially
different than originally reported. Estimates, assumptions, and judgments are
necessary when assets and liabilities are required to be recorded at fair value,
when a decline in the value of an asset not carried on the financial statements
at fair value warrants an impairment write-down or valuation reserve to be
established, or when an asset or liability needs to be recorded contingent upon
a future event. Carrying assets and liabilities at fair value inherently results
in more financial statement volatility. The fair values and the information used
to record valuation adjustments for certain assets are based either on quoted
market prices or are provided by other third-party sources, when available. When
third-party information is not available, valuation adjustments are estimated in
good faith by management primarily through the use of internal cash flow
modeling techniques.

Based on the valuation techniques used and the sensitivity of financial
statement amounts to the methods, assumptions, and estimates underlying those
amounts, management has identified the determination of the allowance for loan
losses and the valuation of the mortgage servicing asset, to be the accounting
areas that require the most subjective or complex judgments, and as such could
be most subject to revision as new information becomes available.

14

Allowance for Loan Losses
The allowance for loan losses is established through provisions for loan losses
charged against income. Loans deemed to be uncollectible are charged against the
allowance for loan losses, and subsequent recoveries, if any, are credited to
the allowance. The allowance for loan losses allocated to loans that are
identified as impaired is based on cash flows using the loan's initial effective
interest rate or the fair value of the collateral for collateral dependent
loans.

The allowance for loan losses is maintained at a level believed adequate by
management to absorb inherent losses in the loan portfolio. The determination of
the allowance is based on factors which, in management's judgment, deserve
recognition under existing economic conditions in estimating probable loan
losses. This evaluation is inherently subjective as it requires material
estimates including the amounts and timing of future cash flows expected to be
received on impaired loans that may be susceptible to significant change. The
allowance is increased by provisions for loan losses charged against income and
reduced by net charge-offs.

The allowance for loan losses is allocated to each loan category based on
management's estimate of expected losses, which is determined by, among other
things, the Bank's historical loss experience and peer median charge off
percentages by loan category added to actual reserves maintained for
non-performing or specifically identified loans requiring a reserve. Although
the loan loss reserve is allocated by loan category, the entire allowance is
available to cover any loan loss that may occur.

Mortgage Servicing Assets
Mortgage service assets are recorded in connection with the Bank's sales of
mortgage loans and are classified in other assets. The mortgage servicing asset
is established and accounted for based on discounted cash flow modeling
techniques which require management to make estimates regarding the amount and
timing of expected future cash flows, including assumptions about loan repayment
rates, credit loss experience, and costs to service, as well as discount rates
that consider the risk involved. Because the values of these assets are
sensitive to changes in assumptions, the valuation of the mortgage servicing
asset is considered a critical accounting estimate.

Derivative Instruments and Hedging Activities
During the second quarter of 2004, the Corporation entered into an interest rate
swap to protect the risk of adverse interest rate movements on the value of
future cash flows related to its investment in overnight Federal Funds sold.
Pursuant to SFAS 133, cash flow hedges are accounted for by recording the fair
value of the derivative instrument on the balance sheet as either an asset or
liability, with a corresponding offset recorded in other comprehensive income
within shareholders' equity, net of tax.

Under the cash flow hedge accounting method, derivative gains and losses not
effective in hedging the change in expected cash flows of the hedged item are
recognized immediately in the income statement. At the hedge's inception and
quarterly thereafter, a formal assessment is performed to determine whether
changes in cash flows of the derivative instrument have been highly effective in
offsetting changes in the cash flows of the hedged item and whether they are
expected to be highly effective in the future. If it is determined a derivative
instrument has not been or will not continue to be highly effective as a hedge,
hedge accounting is discontinued. See Note 6 Derivative Instruments and Hedging
Activities in the Notes to the Consolidated Financial Statements under Item 1 of
this report for further information.

15

Results of Operations

Net Interest Income
- -------------------
This section should be reviewed in conjunction with the daily average earning
assets balances and interest bearing liabilities and funding tables found on
page 20.

Three months ended March 31, 2005 compared to the three months ended March 31,
2004:

The Corporation's results of operations depend primarily on the level of its net
interest income, its non-interest income and its operating expenses. Net
interest income depends on the volume of and rates associated with interest
earning assets and interest bearing liabilities which results in the net
interest spread. The Corporation had net interest income of $7,012,323, for the
three months ended March 31, 2005 compared to net interest income of $5,778,832,
for the three months ended March 31, 2004. This growth in net interest income
was primarily the result of earning asset growth and a wider spread between the
yield earned on loans and the yield paid on deposits due to higher short-term
interest rates in 2005 compared to the same period the previous year.

Provision for Loan Losses
- -------------------------
The amount charged to the provision for loan losses by the Bank is based on
management's evaluation as to the amounts required to maintain an allowance
adequate to provide for probable losses inherent in the loan portfolio. The
level of this allowance is dependent upon the total amount of past due and
non-performing loans, general economic conditions and management's assessment of
probable losses based upon internal credit evaluations of loan portfolios and
particular loans. Loans are principally to borrowers in central Indiana.

The provision for loan losses was $425,000 for the three months ended March 31,
2005 compared to a $300,000 provision for loan losses for the three months ended
March 31, 2004. Based on management's risk assessment and evaluation of the
probable losses of the loan portfolio, management believes that the current
allowance for loan losses is adequate to provide for probable losses in the loan
portfolio.

16

The following table sets forth activity in the allowance for loan losses:

Three months ended
March 31,
2005 2004
----------------- -----------------
Beginning of Period $ 7,795,803 $ 8,029,596
Provision for loan losses 425,000 300,000

Losses charged to the reserve
Commercial 527,231 32
Real Estate - 164,426
Consumer - 32,366
Credit Cards 8,196 6,924
----------------- -----------------
535,427 203,748

Recoveries
Commercial 7,470 3,413
Consumer - 676
Credit Cards - 1,561
----------------- -----------------
7,470 5,650

----------------- -----------------
End of Period $ 7,692,846 $ 8,131,498
================= =================

Allowance as a % of Loans 1.16% 1.38%

Loans past due over 30 days totaled $4,278,031, or .65% of total loans at March
31, 2005 compared to $4,622,473 or .79% of total loans at March 31, 2004.

Loans are considered to be impaired if the contractual principal and interest
payment is greater than 90 days past due and/or the outstanding balance is not
accruing interest. At March 31, 2005 thirty-eight loans with a combined balance
of $3,979,052 were considered to be impaired. At March 31, 2004, thirty-four
loans with a combined balance of $3,595,230 were considered to be impaired.

At March 31, 2005 and 2004 there were approximately $1,000 and $41,000 of loans
greater than 90 days and still accruing interest.

17

Other Operating Income
- ----------------------
The following table details the components of other operating income:

Three months ended
March 31 $ %
2005 2004 Change Change
------------------------------------------------

Wealth Management $ 708,206 $ 573,104 $ 135,102 23.6%
Service charges and fees on deposit accounts 469,074 569,517 (100,443) -17.6%
Rental income 113,391 132,732 (19,341) -14.6%
Net gain (loss) on sale of mortgage loans (24,560) 90,907 (115,467) -127.0%
Interchange income 155,383 131,983 23,400 17.7%
Net loss on sale of securities - (83,739) 83,739 100.0%
Other 325,898 318,413 7,485 2.4%
------------------------------------------------
Total operating income $ 1,747,392 $ 1,732,917 $ 14,475 0.8%
------------------------------------------------

Other operating income for the three months ended March 31, 2005 increased as
compared to the three months ended March 31, 2004.

Wealth management fees increased for the three months ended March 31, 2005 as
compared to the three months ended March 31, 2004. The net increase in trust
income is attributable to the overall price appreciation in the stock and
treasury markets and an increase in assets under management.

Service charges and fees on deposit accounts decreased for the three months
ended March 31, 2005 as compared to the three months ended March 31, 2004 and is
attributable to lower overdraft and NSF fees assessed. Also, contributing to the
decrease was an increase in the earnings credit rate paid on business demand
deposits which decreases the service charges assessed.

Rental income from the other tenants in the Corporation's main office building
decreased for the three months ended March 31, 2005 as compared to the three
months ended March 31, 2004 due to fewer tenants in the building in 2005
compared to the same period the previous year and the Corporation occupying more
space in the building.

During the first quarter of 2005, long term interest rates remained low. The
Corporation had an opportunity to sell some lower yielding mortgage loans to
better position the portfolio and produce an overall higher yield. The loans
were sold at a net loss of $24,560.

Interchange income increased for the three months ended March 31, 2005 as
compared to the three months ended March 31, 2004. The increase is attributable
to higher transaction volumes for debit and credit cards in 2005 compared to the
same period the previous year.

During the first quarter of 2004, a net loss on the sale of two available for
sale securities was recorded. The securities were replaced with higher yielding
investments to place the portfolio in a better position during a period of
rising interest rates. During the first quarter of 2005, there were no sales of
securities.

18

Other Operating Expenses
- ------------------------
The following table details the components of other operating expense:

Three months ended
March 31 $ %
2004 2003 Change Change
----------------------------------------------

Salaries, wages and employee benefits $3,580,785 $3,217,917 $ 362,868 11.3%
Occupancy 406,034 368,606 37,428 10.2%
Furniture and equipment 209,242 213,282 (4,040) -1.9%
Professional services 354,212 302,709 51,503 17.0%
Data processing 384,417 358,463 25,954 7.2%
Business development 317,265 281,634 35,631 12.7%
Mortgage servicing rights impairment
recoveries (66,190) (45,172) (21,018) 46.5%
Other 855,476 779,392 76,084 9.8%
----------------------------------------------
Total other operating expenses $6,041,241 $5,476,831 $ 564,410 10.3%
----------------------------------------------

Other operating expenses for the three months ended March 31, 2005 increased as
compared to the three months ended March 31, 2004.

Salaries, wages and employee benefits increased for the three months ended March
31, 2005 as compared to the three months ended March 31, 2004. The increase is
due to an increase in full-time equivalent employees, annual merit increases for
many employees, increased FICA expense related to the cliff vesting of
restricted stock for officers of the Bank, increase in assessed SUTA expense,
employee relations, and training expense.

Occupancy expense increased for the three months ended March 31, 2005 as
compared to the three months ended March 31, 2004. This is due to the opening of
a new banking center location at 106th Street and Michigan Road in late January.

Professional services expense increased for the three months ended March 31,
2005 as compared to the three months ended March 31, 2004 due to increased
accounting fees related to the implementation of the Sarbanes-Oxley Act of 2002,
legal fees, advertising agency fees, and consulting fees.

Data processing expenses increased for the three months ended March 31, 2005 as
compared to the three months ended March 31, 2004 primarily due to increased
service bureau fees relating to increased transaction activity by the Bank and
the wealth management department.

Business development expenses increased for the three months ended March 31,
2005 as compared to the three months ended March 31, 2004 due to increased
advertising, customer entertainment and customer relations costs.

As of December 2004, a valuation reserve of $350,136 was recorded for mortgage
servicing rights. The Corporation reduced the valuation reserve during the first
quarter of 2005 due to the slowing prepayment speeds on the underlying mortgage
loans resulting from the rising interest rate environment.

19

AVERAGE EARNING ASSETS
The following table is a summary of the daily average of earning assets:

Three months ended
March 31 $ %
2005 2004 Change Change
-------------------------------------------------------------

Loans
Commercial $ 358,000,000 $ 310,000,000 $ 48,000,000 15.5%
Real Estate - Commercial 126,000,000 119,000,000 7,000,000 5.9%
Real Estate - Residential 158,000,000 142,000,000 16,000,000 11.3%
Other 11,000,000 13,000,000 (2,000,000) -15.4%
-------------------------------------------------------------
Total loans 653,000,000 584,000,000 69,000,000 11.8%

Investments 168,000,000 153,000,000 15,000,000 9.8%
Federal Funds Sold 38,000,000 44,000,000 (6,000,000) -13.6%
Reverse Repurchase Agreements 5,000,000 15,000,000 (10,000,000) -66.7%

-------------------------------------------------------------
Total Earning Assets $ 864,000,000 $ 796,000,000 $ 68,000,000 8.5%
=============================================================

AVERAGE INTEREST BEARING LIABILITIES AND FUNDING
The following table is a summary of the daily average of interest bearing
liabilities and funding:

Three months ended
March 31 $ %
2005 2004 Change Change
---------------------------------------------------------------------------

Noninterest bearing deposits $ 151,000,000 $ 141,000,000 $ 10,000,000 7.1%
Interest bearing deposits 581,000,000 522,000,000 59,000,000 11.3%
---------------------------------------------------------------------------
Total core deposits 732,000,000 663,000,000 69,000,000 10.4%

Security repurchase agreements 74,000,000 75,000,000 (1,000,000) -1.3%
FHLB advances 32,000,000 40,000,000 (8,000,000) -20.0%
Subordinated debt 5,000,000 2,000,000 3,000,000
Long-term debt 14,000,000 14,000,000 - 0.0%
Shareholders' equity 47,000,000 44,000,000 3,000,000 6.8%
---------------------------------------------------------------------------
Total funding $ 904,000,000 $ 838,000,000 $ 66,000,000 7.9%
===========================================================================

...........................................................................
Total interest bearing liabilities $ 706,000,000 $ 653,000,000 $ 53,000,000 8.1%
...........................................................................

Total interest expense (annualized)/
Total interest bearing liabilities 2.4% 1.8%

20

Liquidity and Interest Rate Sensitivity

The Corporation must maintain an adequate liquidity position in order to respond
to the short-term demand for funds caused by withdrawals from deposit accounts,
extensions of credit and for the payment of operating expenses. Maintaining this
position of adequate liquidity is accomplished through the management of a
combination of liquid assets - those which can be converted into cash - and
access to additional sources of funds. The Corporation must monitor its
liquidity ratios as established in the Asset/Liability ("ALCO") Committee
Policy. In addition, the Corporation has established a contingency funding plan
to address liquidity needs in the event of depressed economic conditions. The
liquidity position is continually monitored and reviewed by ALCO.

The Corporation has many sources of funds available, they include: overnight
federal funds sold, investments available for sale, maturity of investments held
for sale, deposits, Federal Home Loan Bank ("FHLB") advances, and issuance of
debt. Funding sources did not change significantly during the first three months
of 2005. Deposits are the most significant funding source and loans are the most
significant use of funds for the three months ended March 31, 2005 and 2004. The
Corporation maintains a $5,000,000 revolving credit agreement with Harris Trust
and Savings Bank to provide additional liquidity support to the Bank, if needed.

There were no borrowings under this agreement at March 31, 2005 or 2004.
Primary liquid assets of the Corporation are cash and due from banks, federal
funds sold, investments held as available for sale, and maturing loans. Federal
funds sold represented the Corporation's primary source of immediate liquidity
and were maintained at a level adequate to meet immediate needs. Federal funds
sold averaged approximately $38,000,000 for the three months ended March 31,
2005, an decrease of approximately $6,000,000 from $44,000,000 for the three
months ended March 31, 2004. Reverse repurchase agreements may serve as a source
of liquidity, but are primarily used as collateral for customer balances in
overnight repurchase agreements. Maturities in the Corporation's loan and
investment portfolios are monitored regularly to manage the maturity dates of
deposits to coincide with long-term loans and investments. Other assets and
liabilities are also monitored to provide the proper balance between liquidity,
safety, and profitability. This monitoring process must be continuous due to the
constant flow of cash which is inherent in a financial institution.

The Corporation's management believes its liquidity sources are adequate to meet
its operating needs and does not know of any trends, events or uncertainties
that may result in a significant adverse effect on the Corporation's liquidity
position.

The Corporation actively manages its interest rate sensitive assets and
liabilities to reduce the impact of interest rate fluctuations. At March 31,
2005, the Corporation's rate sensitive liabilities exceeded rate sensitive
assets due within one year by $10,368,000.

As part of managing liquidity, the Corporation monitors its loan to deposit
ratio on a daily basis. At March 31, 2005 the ratio was 90.6 percent.

The Corporation experienced an increase in cash and cash equivalents, another
primary source of liquidity, of $44,094,913 during the first three months of
2005. Deposit growth provided net cash of $37,685,999, investments provided net
cash of $351,929, and federal funds sold provided net cash of $4,569,156, offset
somewhat by $14,547,826 used in lending activities.

21

The purpose of the Bank's Investment Committee is to manage and balance interest
rate risk, to provide a readily available source of liquidity to cover deposit
runoff and loan growth, and to provide a portfolio of safe, secure assets of
high quality that generate a supplemental source of income in concert with the
overall asset/liability policies and strategies of the Bank.

Capital Resources

The Corporation's only sources of capital since commencing operations have been
from issuance of common stock, results of operations, issuance of long-term debt
to a non-affiliated third party, and the issuance of company obligated
mandatorily redeemable preferred capital securities.

The Corporation maintains a Revolving Credit Agreement with Harris Trust and
Savings Bank in the amount of $5,000,000 that will mature September 28, 2005. As
of March 31, 2005, there were no amounts outstanding under this Revolving Credit
Agreement.

In September 2000, the Trust, which is wholly owned by the Corporation, issued
$13,500,000 of company obligated mandatorily redeemable capital securities. The
proceeds from the issuance of the capital securities and the proceeds from the
issuance of the common securities of $418,000 were used by the Trust to purchase
from the Corporation $13,918,000 Fixed Rate Junior Subordinated Debentures. The
capital securities mature September 7, 2030, or upon earlier redemption as
provided by the Indenture. The Corporation has the right to redeem the capital
securities, in whole or in part, but in all cases in a principal amount with
integral multiples of $1,000, on any March 7 or September 7 on or after
September 7, 2010 at a premium, declining ratably to par on September 7, 2020.
The capital securities have a fixed interest rate of 10.60%, and are guaranteed
by the Bank. The net proceeds received by the Corporation from the sale of
capital securities were used for general corporate purposes.

The Bank entered into an agreement in the amount of $5,000,000 pursuant to a
Subordinated Term Loan Agreement with Harris Trust and Savings Bank dated June
6, 2003. The first advance was made in the amount of $2,000,000 on June 6, 2003.
The second advance was made in the amount of $3,000,000 on May 3, 2004. The
final maturity date of the loan is June 6, 2010. The outstanding principal
balance is due at maturity, but prepayment of the principal balance is permitted
prior to maturity with prior consent from the Federal Reserve.

Under the terms of the agreement, there are many different interest rate options
available. Each floating rate option is available for a fixed term of 1-3
months. The Bank is currently paying Adjusted 3-month LIBOR plus 2.0% which
equates to 4.75%. Interest payments are due at the expiration of the fixed term
option.

22

The Bank has incurred indebtedness pursuant to FHLB advances as follows:

Amount Rate Maturity
------ ---- --------
$5,000,000 5.14% 08/01/2005
3,000,000 5.39% 10/03/2005
5,000,000 5.43% 03/16/2006
5,000,000 5.32% 05/08/2006
8,000,000 4.19% 07/24/2007
3,000,000 5.57% 08/13/2007
3,000,000 5.55% 10/02/2008
-------------
$32,000,000

The Bank may add indebtedness of this nature in the future if determined to be
in the best interest of the Bank.

Capital for the Bank is at or above the well-capitalized regulatory requirements
at March 31, 2005. Pertinent capital ratios for the Bank as of March 31, 2005
are as follows:

Well Adequately
Actual Capitalized Capitalized
------ ----------- -----------
Tier 1 risk-based capital ratio 8.67% 6.0% 4.0%
Total risk-based capital ratio 10.52% 10.0% 8.0%
Leverage ratio 6.56% 5.0% 4.0%

Dividends from the Bank to the Corporation may not exceed the undivided profits
of the Bank (included in consolidated retained earnings) without prior approval
of a federal regulatory agency. In addition, Federal banking laws limit the
amount of loans the Bank may make to the Corporation, subject to certain
collateral requirements. The Bank declared and made a $325,000 dividend to the
Corporation during the three months ended March 31, 2005. There were no
dividends declared or made during the three months ended March 31, 2004. No
loans from the Bank to the Corporation were made during the three months ended
March 31, 2005 or 2004.

In January 2003, the Board of Directors of the Corporation authorized a stock
repurchase program entitled "Program One" which covers employees and directors
and is effective through December 2005 unless terminated earlier by the Board.
Under Program One, the Corporation may spend up to $5,500,000 in individually
negotiated transactions to repurchase its shares from employees and directors
who wish to sell. The repurchase program may be suspended or discontinued at any
time if management determines that additional purchases are not warranted or if
the cost of the repurchase program reaches $5,500,000.

In January 2003, the Board of the Corporation authorized a separate stock
repurchase program entitled "Program Two" which covers all other shareholders
and was initially due to expire December 2004 unless terminated earlier by the
Board. During the fourth quarter of 2004, the Board of Directors authorized the
extension of Program Two until December 2005 unless terminated earlier by the
Board of Directors. Under Program Two, the Corporation may spend up to
$7,600,000 in individually negotiated transactions to repurchase its shares from
shareholders who wish to sell. The repurchase program may be suspended or
discontinued at any time if management determines that additional purchases are
not warranted or if the cost of the repurchase program reaches $7,600,000.

23

The amount and timing of shares repurchased under the repurchase program, as
well as the specific price, will be determined by management after considering
market conditions, company performance and other factors.

Recent Accounting Pronouncements and Developments

Note 12 to the Consolidated Financial Statements under Item 1 discusses new
accounting policies adopted by the Corporation during 2005 and the expected
impact of accounting policies. Note 12 also discusses recently issued or
proposed new accounting policies but not yet required to be adopted and the
impact of the accounting policies if known. To the extent the adoption of new
accounting standards materially affects financial conditions; results of
operations, or liquidity, the impacts if known are discussed in the applicable
section(s) of notes to consolidated financial statements.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Market risk is the risk of loss due to adverse changes in market prices and
rates. The Corporation's market risk arises primarily from interest rate risk
inherent in its lending and deposit taking activities. Management actively
monitors and manages its interest rate exposure and makes monthly reports to the
Asset/Liability ("ALCO") Committee. The ALCO Committee is responsible for
reviewing the interest rate sensitivity position and establishing policies to
monitor and limit exposure to interest rate risk. The guidelines established by
ALCO are reviewed by the ALCO/Investment Committee of the Corporation's Board of
Directors.

The Corporation's profitability is affected by fluctuations in interest rates. A
sudden and substantial increase in interest rates may adversely impact the
Corporation's earnings to the extent that the interest rates earned by assets
and paid on liabilities do not change at the same speed, to the same extent, or
on the same basis. The Corporation monitors the impact of changes in interest
rates on its net interest income. The Corporation attempts to maintain a
relatively neutral gap between earning assets and liabilities at various time
intervals to minimize the effects of interest rate risk. One of the primary
goals of asset/liability management is to maximize net interest income and the
net value of future cash flows within authorized risk limits. Net interest
income is affected by changes in the absolute level of interest rates. Net
interest income is also subject to changes in the shape of the yield curve. In
general, a flattening of the yield curve would result in a decline in earnings
due to the compression of earning asset yields and funding rates, while a
steepening would result in increased earnings as investment margins widen.
Earnings are also affected by changes in spread relationships between certain
rate indices, such as prime rate.

At March 31, 2005, the interest rate risk position of the Corporation was
liability sensitive. Maintaining an liability sensitive interest rate risk
position means that net income should decrease as rates rise and increase as
rates fall.

See further discussion liquidity and interest rate sensitivity on pages 21 - 22
of this report.

There have been no material changes in the quantitative analysis used by the
Corporation since filing the 2004 Form 10-K, for further discussion of the
quantitative analysis used by the Corporation refer to page 42 of the 2004 Form
10-K filed on March 29, 2005.

24

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures. The Corporation's principal
executive officer and principal financial officer have concluded that the
Corporation's disclosure controls and procedures (as defined under Rules
13a-15(e) or Rules 15d-15(e) under the Securities Exchange Act of 1934, as
amended), based on their evaluation of these controls and procedures as of the
end of the period covered by this Form 10-Q, are effective.

Changes in Internal Control. There have been no changes in internal control over
financial reporting that occurred during the quarter ended March 31, 2005, that
have materially affected, or are reasonably likely to materially affect, the
registrant's internal control over financial reporting.

Limitations on the Effectiveness of Controls. The Corporation's management,
including its principal executive officer and principal financial officer, does
not expect that the Corporation's disclosure controls and procedures and other
internal controls will prevent all error and all fraud. A control system, no
matter how well conceived and operated, can provide only reasonable, not
absolute, assurance that the objectives of the control system are met. Further,
the design of a control system must reflect the fact that there are resource
constraints, and the benefits of controls must be considered relative to their
costs. Because of the inherent limitations in all control systems, no evaluation
of controls can provide absolute assurance that all control issues and instances
of fraud, if any, within the Corporation have been detected. These inherent
limitations include the realities that judgments in decision-making can be
faulty, and that breakdowns can occur because of simple error or mistake.
Additionally, controls can be circumvented by the individual acts of some
persons, by collusion of two or more people, or by management override of the
control.

The design of any system of controls also is based in part upon certain
assumptions about the likelihood of future events, and there can only be
reasonable assurance that any design will succeed in achieving its stated goals
under all potential future conditions; over time, control may become inadequate
because of changes in conditions, or the degree of compliance with the policies
or procedures may deteriorate. Because of the inherent limitations in a
cost-effective control system, misstatements due to error or fraud may occur and
not be detected.

CEO and CFO Certifications. Appearing as an exhibit to this report there are
Certifications of the Corporation's principal executive officer and principal
financial officer. The Certifications are required in accord with Section 302 of
the Sarbanes-Oxley Act of 2002 (the "Section 302 Certifications"). This Item of
this report which you are currently reading is the information concerning the
evaluation referred to in the Section 302 Certifications and this information
should be read in conjunction with the Section 302 Certifications for a more
complete understanding of the topics presented.

25

Part II - Other Information.

Item 1. Legal Proceedings

Neither The National Bank of Indianapolis Corporation nor its
subsidiaries are involved in any pending legal proceedings at
this time, other than routine litigation incidental to its
business.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

(a) On March 4, 2005 the Corporation sold a total of 2,000
shares of common stock for an aggregate amount of $38,000 to
one officer of the Corporation pursuant to the exercise of
stock options by the officer.

On March 29, 2005 the Corporation sold a total of 2,500
shares of common stock for an aggregate amount of $25,000 to
one director of the Corporation pursuant to the exercise of
stock options by the director.

All of these shares were sold in private placements pursuant
to Section 4(2) of the Securities Act of 1933.

(b) Not applicable.

(c) The following table sets forth the issuer repurchases of
equity securities that are registered by the Corporation
pursuant to Section 12 of the 1934 Act during the first
quarter of 2005:

Issuer Purchases of Equity Securities.
--------------------------------------

-------------------------------------------------------------------------------------------
Maximum Number (or
Total Number of Approximate Dollar
Total Number of Shares Purchased as Value) of Shares that
Shares Part of Publicly May Yet be Purchased
Purchased during Average Price Announced Plans or Under the Plans or
Period 1st quarter 2005 Paid per Share Programs** Programs
-------------------------------------------------------------------------------------------

01/01/05 -
1/31/05 -- -- -- $4,295,679
-------------------------------------------------------------------------------------------
02/01/05 -
2/28/05 500 $35.200 500 $4,278,079
-------------------------------------------------------------------------------------------
03/01/05 -
3/31/05 2,350 $36.334 2,350 $4,192,694
--------------------------------------------------------------------
Total 2,850 * 2,850
--------------------------------------------------------------------
* The weighted average price per share for the period January 2005 through Mach
2005 was $36.14. ** All shares repurchased by the Corporation during 2005 were
completed pursuant to Program One and Program Two.

In January 2003, the Board of Directors of the Corporation
authorized a repurchase program entitled "Program One" and
"Program Two". Program One covers employees and directors and is
effective through December 2005 unless terminated earlier by the
Board. Under Program One, the Corporation may spend up to
$5,500,000 in individually negotiated transactions to repurchase
its shares from employees and directors who wish to sell their
stock. Program One was initially disclosed in the September 30,
2003 Form 10-Q. Program Two covers all other shareholders and was
initially due to expire December 2004 unless terminated earlier
by the Board. During the fourth quarter of 2004, the Board of
Directors authorized the extension of Program Two until December
2005 unless terminated earlier by the Board of Directors. Under
Program Two, the

26

Corporation may spend up to $7,600,000 in individually negotiated
transactions to repurchase its shares from shareholders who wish
to sell. On June 3, 2003, a letter was sent to all shareholders
announcing the Board's authorization of Program Two. Neither plan
was terminated during the first three months of 2005.

Item 3. Defaults Upon Senior Securities - Not applicable

Item 4. Submission of Matters to a Vote of Security Holders -
Not applicable

Item 5. Other Information - Not applicable

Item 6. Exhibit s

3(i) Articles of Incorporation of the Corporation, filed as
Exhibit 3(i) to the Corporation's Form 10-QSB as of
September 30, 1995 are incorporated by reference and
Articles of Amendment filed as Exhibit 3(i) to the Form 10-K
for the fiscal year ended December 31, 2001

3(ii) Bylaws of the Corporation, filed as Exhibit 3(ii) to the
Corporation's Form 10-Q as of September 30, 1996 are
incorporated by reference

10(a) 1993 Key Employees' Stock Option Plan of the Corporation,
as amended, filed as Exhibit 10(a) to the Form 10-K for the
fiscal year ended December 31, 2004 is incorporated by
reference

10(b) 1993 Directors' Stock Option Plan of the Corporation, as
amended, filed as Exhibit 10(b) to the Corporation's Form
10-Q as of June 30, 2001 is incorporated by reference

10(c) 1993 Restricted Stock Plan of the Corporation, as amended,
filed as Exhibit 10(c) to the Form 10-K for the fiscal year
ended December 31, 2004 is incorporated by reference

10(d) Form of agreement under the 1993 Key Employees Stock
Option Plan, filed as Exhibit 10(d) to the Form 10-K for the
fiscal year ended December 31, 2004 is incorporated by
reference

10(e) Form of agreement under the 1993 Restricted Stock Plan,
filed as Exhibit 10(e) to the Form 10-K for the fiscal year
ended December 31, 2004 is incorporated by reference

10(f) Schedule of Directors Compensation Arrangements, filed as
Exhibit 10(f) to the Form 10-K for the fiscal year ended
December 31, 2004 is incorporated by reference

10(g) Schedule of Executive Officers Compensation Arrangements,
filed as Exhibit 10(g) to the Form 10-K for the fiscal year
ended December 31, 2004 is incorporated by reference

27

31.1 Certificate of Chief Executive Officer pursuant to Rule
13a-14(a)/Rule 15d-14(a) of the Securities Exchange Act of
1934, as amended

31.2 Certificate of Chief Financial Officer pursuant to Rule
13a-14(a)/Rule 15d-14(a) of the Securities Exchange Act of
1934, as amended

32.1 Chief Executive Officer Certification pursuant to 18 U.S.C.
Section 1350

32.2 Chief Financial Officer Certification pursuant to 18 U.S.C.
Section 1350

28

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.

Date: May 9, 2005

THE NATIONAL BANK OF INDIANAPOLIS CORPORATION

/s/ Debra L. Ross
-----------------------------------------
Debra L. Ross
Chief Financial Officer
(Principal Financial Officer)

29

EXHIBIT INDEX
- -------------

3(i) Articles of Incorporation of the Corporation, filed as Exhibit
3(i) to the Corporation's Form 10-QSB as of September 30, 1995
are incorporated by reference and Articles of Amendment filed as
Exhibit 3(i) to the Form 10-K for the fiscal year ended December
31, 2001

3(ii) Bylaws of the Corporation, filed as Exhibit 3(ii) to the
Corporation's Form 10-Q as of September 30, 1996 are incorporated
by reference

10(a) 1993 Key Employees' Stock Option Plan of the Corporation, as
amended, filed as Exhibit 10(a) to the Form 10-K for the fiscal
year ended December 31, 2004 is incorporated by reference

10(b) 1993 Directors' Stock Option Plan of the Corporation, as amended,
filed as Exhibit 10(b) to the Corporation's Form 10-Q as of June
30, 2001 is incorporated by reference

10(c) 1993 Restricted Stock Plan of the Corporation, as amended, filed
as Exhibit 10(c) to the Form 10-K for the fiscal year ended
December 31, 2004 is incorporated by reference

10 (d) Form of agreement under the 1993 Key Employees Stock Option Plan,
filed as Exhibit 10(d) to the Form 10-K for the fiscal year ended
December 31, 2004 is incorporated by reference

10 (e) Form of agreement under the 1993 Restricted Stock Plan, filed as
Exhibit 10(e) to the Form 10-K for the fiscal year ended December
31, 2004 is incorporated by reference

10 (f) Schedule of Directors Compensation Arrangements, filed as Exhibit
10(f) to the Form 10-K for the fiscal year ended December 31,
2004 is incorporated by reference

10 (g) Schedule of Executive Officers Compensation Arrangements, filed
as Exhibit 10(g) to the Form 10-K for the fiscal year ended
December 31, 2004 is incorporated by reference

31.1 Certificate of Chief Executive Officer pursuant to Rule
13a-14(a)/Rule 15d-14(a) of the Securities Exchange Act of 1934,
as amended

31.2 Certificate of Chief Financial Officer pursuant to Rule
13a-14(a)/Rule 15d-14(a) of the Securities Exchange Act of 1934,
as amended

32.1 Chief Executive Officer Certification pursuant to 18 U.S.C.
Section 1350

32.2 Chief Financial Officer Certification pursuant to 18 U.S.C.
Section 1350

30