10-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-K

þ	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the fiscal year ended December 31, 2006
OR
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from          to

Commission file number 0-13585

INTEGRA BANK CORPORATION

(Exact name of registrant as specified in its charter)

Indiana	35-1632155
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification number)
21 S.E. Third Street, P.O. Box 868, Evansville, IN	47705-0868 (Zip Code)
(Address of principal executive offices)

Registrant’s telephone number, including area code:

812-464-9677

Securities registered pursuant to Section 12(b) of the Act:

COMMON STOCK, $1.00 STATED VALUE

(Title of Class)

Securities registered pursuant to Section 12(g) of the Act:

NONE

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes o     No þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  Yes o     No þ

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 þ     No o

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.  þ

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o     Accelerated filer þ     Non-accelerated filer o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes o     No þ

Based on the closing sales price as of June 30, 2006 (the last business day of the registrant’s most recently completed second quarter), the aggregate market value of the voting stock held by non-affiliates of the registrant was approximately $323,768,000.

The number of shares outstanding of the registrant’s common stock was 17,675,423 at March 1, 2007.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s Proxy Statement for the 2007 Annual Meeting of Shareholders (Part III).

INTEGRA BANK CORPORATION

2006 FORM 10-K ANNUAL REPORT

Table of Contents

		Page
		Number
PART I
Item 1.	Business		3
Item 1A.	Risk Factors		9
Item 1B.	Unresolved Staff Comments		13
Item 2.	Properties		13
Item 3.	Legal Proceedings		13
Item 4.	Submission of Matters to a Vote of Security Holders		13
PART II
Item 5.	Market for Registrant’s Common Equity and Related Stockholder Matters		14
Item 6.	Selected Financial Data		16
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operation		17
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk		41
Item 8.	Financial Statements and Supplementary Data		43
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure		87
Item 9A.	Controls and Procedures		87
Item 9B.	Other Information		87
PART III
Item 10.	Director’s and Executive Officers and Corporate Governance		87
Item 11.	Executive Compensation		87
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		87
Item 13.	Certain Relationships and Related Transactions and Director Independence		87
Item 14.	Principal Accountant Fees and Services		87
PART IV
Item 15.	Exhibits and Financial Statement Schedules		88
Signatures			89
Employees' 401(k) Plan
First Amendment to Employees' 401(k) Plan
Second Amendment to Employees' 401(k) Plan
Third Amendment to Employees' 401(k) Plan
Summary Sheet of 2007 Compensation
Employment Agreement - Roger M. Duncan
Subsidiaries of the Registrant
Consent of PricewaterhouseCoopers LLP
Consent of Crowe Chizek and Company LLC
Certification Pursuant to Section 302 of CEO
Certification Pursuant to Section 302 of CFO
Certification Pursuant to Section 906

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FORM 10-K

INTEGRA BANK CORPORATION

December 31, 2006

PART I

ITEM 1.   BUSINESS

General

Integra Bank Corporation is a bank holding company that is based in Evansville, Indiana, whose principal subsidiary is Integra Bank N.A., a national banking association, or Integra Bank. As used in this report and unless the context provides otherwise, the terms we, us, the company and Integra refer to Integra Bank Corporation and its subsidiaries. At December 31, 2006, we had total consolidated assets of $2.7 billion. We provide services and assistance to our wholly-owned subsidiaries and Integra Bank’s subsidiaries in the areas of strategic planning, administration, and general corporate activities. In return, we receive income and/or dividends from Integra Bank, where most of our business activities take place.

Integra Bank provides a wide range of financial services to the communities it serves in Indiana, Kentucky, Illinois and Ohio. These services include commercial, consumer and mortgage loans, lines of credit, credit cards, transaction accounts, time deposits, repurchase agreements, letters of credit, corporate cash management services, correspondent banking services, mortgage servicing, brokerage and annuity products and services, credit life and other selected insurance products, safe deposit boxes, online banking, and complete personal and corporate trust services.

Integra Bank’s products and services are delivered through its customers’ channel of preference. At December 31, 2006, Integra Bank had 74 banking centers, 128 automatic teller machines and four loan production offices. Integra Bank also provides telephone banking services, and a suite of Internet-based products and services that can be found at our website, http://www.integrabank.com.

At December 31, 2006, we had 802 full-time equivalent employees. We provide a wide range of employee benefits, are not a party to any collective bargaining agreements, and in the opinion of management, enjoy good relations with our employees. We are an Indiana corporation which was formed in 1985.

COMPETITION

We have active competition in all areas in which we presently engage in business. Integra Bank competes for commercial and individual deposits, loans and financial services with other bank and non-bank institutions. Since the amount of money a bank may lend to a single borrower, or to a group of related borrowers, is limited to a percentage of the bank’s capital, competitors larger than Integra Bank have higher lending limits than Integra Bank.

In addition to competing with depository institutions operating in the same market areas, we compete with various money market and other mutual funds, brokerage houses, other financial institutions, insurance companies, leasing companies, regulated small loan companies, credit unions, governmental agencies, and commercial entities offering financial services and products.

FOREIGN OPERATIONS

We and our subsidiaries have no foreign banking centers or significant business with foreign obligors or depositors.

REGULATION AND SUPERVISION

General

We are a registered bank holding company under the Bank Holding Company Act of 1956, or BHCA, and as such are subject to regulation by the Board of Governors of the Federal Reserve System, or the Federal Reserve. We

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file periodic reports with the Federal Reserve regarding our business operations, and are subject to examination by the Federal Reserve.

Integra Bank is supervised and regulated primarily by the Office of the Comptroller of the Currency, or the OCC. It is also a member of the Federal Reserve System and subject to the applicable provisions of the Federal Reserve Act and the Federal Deposit Insurance Act.

The federal banking agencies have broad enforcement powers, including the power to terminate deposit insurance, impose substantial fines and other civil and criminal penalties, and appoint a conservator or receiver. Failure to comply with applicable laws, regulations, and supervisory agreements could subject us, Integra Bank, as well as our officers, directors, and other institution-affiliated parties, to administrative sanctions and potentially substantial civil money penalties. In addition to the measures discussed under “Deposit Insurance,” the appropriate federal banking agency may appoint the Federal Deposit Insurance Corporation, or FDIC, as conservator or receiver for a banking institution (or the FDIC may appoint itself, under certain circumstances) if one or more of a number of circumstances exist, including, without limitation, the banking institution becoming undercapitalized and having no reasonable prospect of becoming adequately capitalized, it fails to become adequately capitalized when required to do so, it fails to submit a timely and acceptable capital restoration plan, or it materially fails to implement an accepted capital restoration plan. Supervision and regulation of bank holding companies and their subsidiaries is intended primarily for the protection of depositors, the deposit insurance funds of the FDIC, and the banking system as a whole, not for the protection of bank holding company shareholders or creditors.

Acquisitions and Changes in Control

Under the BHCA, without the prior approval of the Federal Reserve, we may not acquire direct or indirect control of more than 5% of the voting stock or substantially all of the assets of any company, including a bank, and may not merge or consolidate with another bank holding company. In addition, the BHCA generally prohibits us from engaging in any non-banking business unless such business is determined by the Federal Reserve to be so closely related to banking as to be a proper incident thereto. Under the BHCA, the Federal Reserve has the authority to require a bank holding company to terminate any activity or relinquish control of a non-bank subsidiary (other than a non-bank subsidiary of a bank) upon the Federal Reserve’s determination that such activity or control constitutes a serious risk to the financial soundness and stability of any bank subsidiary of the bank holding company.

The Change in Bank Control Act prohibits a person or group of persons from acquiring “control” of a bank holding company unless the Federal Reserve has been notified and has not objected to the transaction. Under a rebuttable presumption established by the Federal Reserve, the acquisition of 10% or more of a class of voting stock of a bank holding company with a class of securities registered under Section 12 of the Securities Exchange Act of 1934 would, under the circumstances set forth in the presumption, constitute acquisition of control of the Company. In addition, any company is required to obtain the approval of the Federal Reserve, under the BHCA, before acquiring 25% (5% in the case of an acquirer that is a bank holding company) or more of our outstanding common stock, or otherwise obtaining control or a “controlling influence” over us.

Dividends and Other Relationships with Affiliates

The parent holding company is a legal entity separate and distinct from its subsidiaries. The primary source of the parent company’s cash flow, including cash flow to pay dividends on our common stock, is the payment of dividends to it by Integra Bank. Generally, such dividends are limited to the lesser of: undivided profits (less bad debts in excess of the allowance for credit losses); and absent regulatory approval, the net profits for the current year combined with retained net profits for the preceding two years. Further, a depository institution may not pay a dividend if it would become “undercapitalized” as determined by federal banking regulatory agencies; or if, in the opinion of the appropriate banking regulator, the payment of dividends would constitute an unsafe or unsound practice.

Integra Bank is subject to additional restrictions on its transactions with affiliates, including the parent company. State and federal statutes limit credit transactions with affiliates, prescribing forms and conditions deemed consistent with sound banking practices, and imposing limits on permitted collateral for credit extended.

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Under Federal Reserve policy, the parent company is expected to serve as a source of financial and managerial strength to Integra Bank. The Federal Reserve requires the parent company to stand ready to use its resources to provide adequate capital funds during periods of financial stress or adversity. This support may be required by the Federal Reserve at times when the parent company may not have the resources to provide it or, for other reasons, would not be inclined to provide it. Additionally, under the Federal Deposit Insurance Corporation Improvements Act of 1991, the parent company may be required to provide limited guarantee of compliance of any insured depository institution subsidiary that may become “undercapitalized” with the terms of any capital restoration plan filed by such subsidiary with its appropriate federal banking agency.

Regulatory Capital Requirements

We and Integra Bank are subject to risk-based and leverage capital requirements imposed by the appropriate primary bank regulator. Both complied with applicable minimums as of December 31, 2006, and Integra Bank qualified as “well capitalized” under the regulatory framework. See Note 16 of the Notes to Consolidated Financial Statements for an additional discussion of regulatory capital.

Failure to meet capital requirements could result in a variety of enforcement remedies, including the termination of deposit insurance or measures by banking regulators to correct the deficiency in the manner least costly to the deposit insurance fund.

Deposit Insurance

Integra Bank is subject to federal deposit insurance assessments by the FDIC. The assessment rate is based on classification of a depository institution into a risk assessment category. Such classification is based upon the institution’s capital level and certain supervisory evaluations of the institution by its primary regulator.

The FDIC may terminate the deposit insurance of any insured depository institution if the FDIC determines, after a hearing, that the institution has engaged or is engaging in unsafe or unsound practices, is in an unsafe or unsound condition to continue operations, or has violated any applicable law, regulation, order, or any condition imposed in writing by, or written agreement with, the FDIC. The FDIC may also suspend deposit insurance temporarily during the hearing process for a permanent termination of insurance if the institution has no tangible capital. Management is not aware of any activity or condition that could result in termination of the deposit insurance of Integra Bank.

Community Reinvestment Act

The Community Reinvestment Act of 1977 (“CRA”) requires financial institutions to meet the credit needs of their entire communities, including low-income and moderate-income areas. CRA regulations impose a performance-based evaluation system, which bases the CRA rating on an institution’s actual lending, service, and investment performance. Federal banking agencies may take CRA compliance into account when regulating a bank or bank holding company’s activities; for example, CRA performance may be considered in approving proposed bank acquisitions. A copy of the CRA public evaluation issued by the OCC for Integra Bank is available at each banking center location.

Gramm-Leach-Bliley Act

The Gramm-Leach-Bliley Act (the “GLB Act”) has fostered further consolidation among banks, securities firms, and insurance companies by creating a new type of financial services company called a “financial holding company,” a bank holding company with expanded powers. Financial holding companies can offer banking, securities underwriting, insurance (both agency and underwriting) and merchant banking services.

The Federal Reserve serves as the primary “umbrella” regulator of financial holding companies, with jurisdiction over the parent company and more limited oversight over its subsidiaries. The primary regulator of each subsidiary of a financial holding company depends on the activities conducted by the subsidiary. A financial holding company need not obtain Federal Reserve approval prior to engaging, either de novo or through acquisitions, in financial activities previously determined to be permissible by the Federal Reserve. Instead, a

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financial holding company need only provide notice to the Federal Reserve within 30 days after commencing the new activity or consummating the acquisition. We have no present plans to become a financial holding company.

Under the GLB Act, federal banking regulators adopted rules limiting the ability of banks and other financial institutions to disclose nonpublic information about consumers to nonaffiliated third parties. The rules require disclosure of privacy policies to consumers and, in some circumstances, allow consumers to prevent disclosure of certain personal information to nonaffiliated third parties. The privacy provisions of the GLB Act affect how consumer information is transmitted through diversified financial services companies and conveyed to outside vendors.

We do not disclose any nonpublic personal information about any current or former customers to anyone except as permitted by law and subject to contractual confidentiality provisions which restrict the release and use of such information.

USA Patriot Act of 2001

The Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 or USA Patriot Act increased the power of the United States Government to obtain access to information and to investigate a full array of criminal activities. In the area of money laundering activities, the statute added terrorism, terrorism support, and foreign corruption to the definition of money laundering offenses and increased the civil and criminal penalties for money laundering; applied certain anti-money laundering measures to United States bank accounts used by foreign persons; prohibited financial institutions from establishing, maintaining, administering or managing a correspondent account with a foreign shell bank; provided for certain forfeitures of funds deposited in United States interbank accounts by foreign banks; provided the Secretary of the Treasury with regulatory authority to ensure that certain types of bank accounts are not used to hide the identity of customers transferring funds and to impose additional reporting requirements with respect to money laundering activities; and included other measures. The Department of Treasury has issued a final rule concerning compliance by covered United States financial institutions with the new statutory anti-money laundering requirement regarding correspondent accounts established or maintained for foreign banking institutions, including the requirement that financial institutions take reasonable steps to ensure that correspondent accounts provided to foreign banks are not being used to indirectly provide banking services to foreign shell banks.

Integra Bank has policies, procedures and controls in place to detect, prevent and report money laundering and terrorist financing. Integra has implemented policies and procedures to comply with regulations including: (1) due diligence requirements that administer, maintain, or manage private bank accounts or correspondent accounts for non-U.S. persons; (2) standards for verifying customer identification at account opening; and (3) rules to promote cooperation among financial institutions, regulators and law enforcement entities in identifying parties that may be involved in terrorism or money laundering.

Additional Regulation, Government Policies, and Legislation

In addition to the restrictions discussed above, the activities and operations of us and Integra Bank are subject to a number of additional complex and, sometimes overlapping, laws and regulations. These include state usury and consumer credit laws, state laws relating to fiduciaries, the Federal Truth-in-Lending Act, the Federal Equal Credit Opportunity Act, the Fair and Accurate Credit Transactions Act (FACT Act), the Fair Credit Reporting Act, the Truth-in-Savings Act, anti-redlining legislation, and antitrust laws.

The actions and policies of banking regulatory authorities have had a significant effect on our operating results and those of Integra Bank in the past and are expected to do so in the future.

Finally, the earnings of Integra Bank are affected by actions of the Federal Reserve to regulate aggregate national credit and the money supply through such means as open market dealings in securities, establishment of the discount rate on member bank borrowings from the Federal Reserve, establishment of the federal funds rate on member bank borrowings among themselves, and changes in reserve requirements against member bank deposits. The Federal Reserve’s policies may be influenced by many factors, including inflation, unemployment, short-term

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and long-term changes in the international trade balance and fiscal policies of the United States Government. The effects of Federal Reserve actions on future performance cannot be predicted.

STATISTICAL DISCLOSURE

The statistical disclosure concerning us and Integra Bank, on a consolidated basis, included in response to Item 7 of this report is hereby incorporated by reference herein.

AVAILABLE INFORMATION

Our Internet website address is http://www.integrabank.com. Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act are available or may be accessed free of charge through the Investor Relations section of our Internet website as soon as reasonably practicable after it electronically files such material with, or furnishes it to, the Securities and Exchange Commission. Our Internet website and the information contained therein or connected thereto are not intended to be incorporated into this Annual Report on Form 10-K.

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The following corporate governance documents are also available through the Investor Relations section of our Internet website or may be obtained in print form by request to Secretary, Integra Bank Corporation, 21 S. E. Third Street, P. O. Box 868, Evansville, IN 47705-0868: ALCO and Finance Committee Charter, Audit Committee Charter, Code of Business Conduct and Ethics, Compensation Committee Charter and Nominating and Governance Committee Charter, Corporate Governance Principles, Credit and Risk Management Committee Charter, and Wealth Management Committee Charter.

EXECUTIVE OFFICERS OF THE COMPANY

Certain information concerning our executive officers as of March 1, 2007, is set forth in the following table.

Name	Age		Office and Business Experience
Michael T. Vea		48	Chairman of the Board, President, and Chief Executive Officer of the Company (January 2000 to present); Chairman of the Board and Chief Executive Officer of the Company (September 1999 to January 2000); President and Chief Executive Officer, Bank One, Cincinnati, OH (1995-1999).
Archie M. Brown		46	Executive Vice President, Commercial and Consumer Banking of the Company (October 2003 to present); Executive Vice President, Retail Manager and Community Markets Manager of the Company (March 2001 to October 2003); Senior Vice President, Firstar Bank, N.A. (1997 to 2001).
Martin M. Zorn		50	Executive Vice President Finance and Risk, Chief Financial Officer (April 2006 to present); Executive Vice President, Chief Risk Officer (March 2002 to April, 2006); Executive Vice President, Commercial and Metro Markets Manager (March 2001 to March 2002); Regional Vice President and Region Executive, Wachovia Corporation (1999 to 2001).
Roger M. Duncan		54	Executive Vice President, Integra Bank, President of Evansville Region and Community Banking Division, (October 2006 to present); Market Executive, Community Banking Division (January 2000 to October, 2006); Chairman and Chief Executive Officer, National City Bank (April, 1998 to January, 2000).
Roger D. Watson		53	Executive Vice President of Commercial and Corporate Real Estate, Integra Bank (April 2003 to present); Executive Vice President, responsible for the Eastern Commercial Real Estate line of business, US Bank (February 2001 to November 2002); Executive Vice President and Division Manager for Commercial Real Estate, Firstar Bank, formerly Star Bank (January 1991 to February 2001).

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Name	Age		Office and Business Experience
Raymond D. Beck		51	Executive Vice President and Chief Credit Officer, Integra Bank (September 2006 to present); Senior Vice President, Commercial Loan Workout Group, National City Corporation (August 2004 to September 2006); Senior Vice President and Senior Credit Officer, Provident Bank (May 2002 to August 2004); Special Assets Manager, Provident Bank (December 2001 to May 2002); Executive Vice President, US Bank, (August 1996 to May 2001).
Michael B. Carroll		45	Senior Vice President and Controller of the Company (December 2005 to present); Senior Vice President and Risk Manager of the Company (May 2002 to December 2005); Vice President — Risk Manager, United Fidelity Bank (2001 to 2002), Certified Public Accountant, Olive LLP, (1988 to 2001).

The above information includes business experience during the past five years for each of our executive officers. Our executive officers serve at the discretion of the Board of Directors. There is no family relationship between any of our directors or executive officers.

ITEM 1A.   RISK FACTORS

The following are the material risks and uncertainties that we believe are relevant to us. You should carefully consider the risks and uncertainties described below together with all of the other information included or incorporated by reference in this report. These are not the only risks facing us. Additional risks and uncertainties that management is not aware of, focused on, or that we currently deem immaterial may also impair our business operations. Any forward looking statements in this report are qualified by reference to these risk factors. See Item 7 “Management Discussion and Analysis of Financial Condition and Results of Operations” for an explanation of forward looking statements.

If any of the following risks actually occur, our financial condition and results of operations could be materially and adversely affected.

RISKS RELATED TO OUR BUSINESS

We Are Subject to Interest Rate Risk.

Our earnings and cash flows are largely dependent upon our net interest income. Net interest income is the difference between interest income earned on interest-earning assets such as loans and securities and interest expense paid on interest-bearing liabilities such as deposits and borrowed funds. Interest rates are highly sensitive to many factors that are beyond our control, including general economic conditions and policies of various governmental and regulatory agencies and, in particular, the Federal Reserve. Changes in monetary policy, including changes in interest rates, could influence not only the interest we receive on loans and securities and the amount of interest we pay on deposits and borrowings, but such changes could also affect (1) our ability to originate loans and obtain deposits, (2) the fair value of our financial assets and liabilities, and (3) the average duration of our earning assets. If the interest rates paid on deposits and other borrowings increase at a faster rate than the interest rates received on loans and other investments, our net interest income, and therefore earnings, could be adversely affected. Earnings could also be adversely affected if the interest rates received on loans and other investments fall more quickly than the interest rates paid on deposits and other borrowings.

Although we believe we have implemented effective asset and liability management strategies to reduce the potential effects of changes in interest rates on our results of operations, any substantial, unexpected, prolonged change in market interest rates or continual flattening or inversion of the yield curve could have a material adverse effect on our financial condition and results of operations.

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We Are Subject to Lending Risk.

There are inherent risks associated with our lending activities. These risks include, among other things, the impact of changes in interest rates and changes in the economic conditions in the markets where we operate. Increases in interest rates, minimum required payments, energy prices and/or weakening economic conditions could adversely impact the ability of borrowers to repay outstanding loans, the value of the collateral securing loans, or demand for our loan products. We are also subject to various laws and regulations that affect our lending activities. Failure to comply with applicable laws and regulations could subject us to regulatory enforcement action that could result in the assessment of significant civil money penalties.

As of December 31, 2006, approximately 57% of our loan portfolio consisted of commercial and industrial, agricultural, construction and commercial real estate loans. These types of loans are typically larger than residential real estate and consumer loans, which made up the remaining 43% of our loan portfolio. Because the portfolio contains a significant number of commercial and industrial, agricultural, construction and commercial real estate loans with relatively large balances, the deterioration of one or a few of these loans could cause a significant increase in non-performing loans. An increase in non-performing loans could result in a net loss of earnings from these loans, an increase in the provision for loan losses and an increase in loan charge-offs, all of which could have a material adverse effect on our financial condition and results of operations. This risk materialized for us during the fourth quarter of 2006, with the charge off of one lending relationship totaling $17.7 million.

Our Allowance for Possible Loan Losses May be Insufficient.

We maintain an allowance for loan losses, which is a reserve established through a provision for loan losses charged to expense. This reserve represents our best estimate of probable losses that have been incurred within the existing portfolio of loans. The allowance, in our judgment is necessary to reserve for estimated loan losses and risks inherent in the loan portfolio. The level of the allowance reflects our ongoing evaluation of various factors, including growth of the portfolio, an analysis of individual credits, adverse situations that could affect a borrower’s ability to repay, prior and current loss experience, the results of regulatory examinations, and current economic conditions. The determination of the appropriate level of the allowance for loan losses inherently involves a high degree of subjectivity and requires us to make significant estimates of current credit risks and future trends, all of which may undergo material changes. Changes in economic conditions affecting borrowers, new information regarding existing loans, identification of additional problem loans and other factors, both within and outside of our control, may require an increase in the allowance for loan losses. In addition, bank regulatory agencies periodically review our allowance for loan losses and may require an increase in the provision for loan losses or the recognition of further loan charge-offs, based on judgments different than those of management. In addition, if charge-offs in future periods exceed the allowance for possible loan losses, we will need additional provisions to increase the allowance for possible loan losses. Any increases in the allowance for possible loan losses will result in a decrease in net income and, possibly, capital, and may have a material adverse effect on our financial condition and results of operations.

Our Profitability Depends Significantly on Local Economic Conditions.

Our success depends primarily on the general economic conditions of the specific local markets in which we operate. Unlike larger national or other regional banks that are more geographically diversified, we provide banking and financial services primarily to customers in Southern Indiana, Southern and Central Illinois, Western, Central and Northern Kentucky and Southwest Ohio. We have commercial real estate loan production offices located in Cleveland, Cincinnati, and Columbus, Ohio, as well as Louisville, Kentucky. During the second and third quarters of 2006, we hired an experienced commercial banking team in the Cincinnati, Ohio area. The local economic conditions in these areas have a significant impact on the demand for our products and services as well as the ability of our customers to repay loans, the value of the collateral securing loans and the stability of our deposit funding sources. A significant decline in general economic conditions, caused by inflation, recession, acts of terrorism, outbreak of hostilities or other domestic occurrences, unemployment, changes in securities markets or other factors could impact these local economic conditions and, in turn, have a material adverse effect on our financial condition and results of operations.

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We Operate in a Highly Competitive Industry and Market Area.

We face substantial competition in all areas of our operations from a variety of different competitors, many of which are larger and may have more financial resources. Such competitors primarily include national, regional, and community banks within the various markets in which we operate. We also face competition from many other types of financial institutions, including, without limitation, savings and loans, credit unions, finance companies, brokerage firms, insurance companies, factoring companies and other financial intermediaries. Additionally, technology has lowered barriers to entry and made it possible for non-banks to offer products and services traditionally provided by banks, such as automatic transfer and automatic payment systems. Some of our competitors have fewer regulatory constraints and may have lower cost structures. Additionally, due to their size, many competitors may be able to achieve economies of scale and, as a result, may offer a broader range of products and services as well as better pricing for those products and services than we can. Local or privately held community banking organizations in certain markets may price or structure their products in such a way that it makes it difficult for us to compete in those markets in a way that allows us to meet our profitability or credit goals. Any competitor may choose to offer pricing on loans and deposits that we think is irrational and choose to not compete with. Competitors may also be willing to extend credit without obtaining covenants or collateral and by offering weaker loan structures than we are willing to accept.

Our ability to compete successfully depends on a number of factors, including, among other things:

•  The ability to develop, maintain and build upon long-term customer relationships;

•  The ability to expand our market position;

•  The scope, relevance and pricing of products and services;

•  Our reputation with consumers who reside in the markets we serve;

•  The rate at which we introduce new products and services;

•  Customer satisfaction; and

•  Industry and general economic trends.

If we fail to perform in any of these areas, our competitive position and ability to grow would be weakened, which, in turn, could have a material adverse effect on our financial condition and results of operations.

We Are Subject to Extensive Government Regulation and Supervision and Face Legal Risks.

We are subject to extensive federal and state regulation and supervision. Banking regulations are primarily intended to protect depositors’ funds, federal deposit insurance funds and the banking system as a whole, not shareholders. These regulations affect several areas, including our lending practices, capital structure, investment practices, dividend policy and growth, and requirements to maintain the confidentially of information relating to our customers. Congress and federal agencies continually review banking laws, regulations and policies for possible changes. Changes to statutes, regulations or regulatory policies, including changes in interpretation of statutes, regulations or policies could affect us in substantial and unpredictable ways. Such changes could subject us to additional costs, limit the types of financial services and products we may offer and/or increase the ability of non-banks to offer competing financial services and products, among other things. Failure to comply with laws, regulations or policies could result in sanctions by regulatory agencies, civil money penalties and/or reputation damage, which could have a material adverse effect on our business, financial condition and results of operations. While we have policies and procedures designed to prevent any such violations, there can be no assurance that such violations will not occur. Additionally, the number of regulations we must comply with and the financial resources required to comply with those regulations has continually increased. The costs of complying with these regulations makes it more difficult to remain competitive.

Additionally, we are continually subject to various legal risks. We may be perceived by some to have “deep pockets” and could be subject to various forms of actual or threatened litigation. We utilize in-house and external counsel to help us proactively manage those risks.

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Our Controls and Procedures May Fail or be Circumvented.

We regularly review and update our internal controls, disclosure controls and procedures, and corporate governance policies and procedures. Any system of controls, however well designed and operated, is based in part on certain assumptions and can provide only reasonable, not absolute, assurances that the objectives of the system are met. Any failure or circumvention of our controls and procedures or failure to comply with regulations related to controls and procedures could result in fraud, operational or other losses that adversely impact our business, results of operations and financial condition. Fraud risks could include fraud by employees, vendors, customers or anyone we or our customers do business or come in contact with.

The Parent Company Relies On Dividends From Integra Bank For Most Of Its Revenue.

Our parent company is a separate and distinct legal entity from its subsidiaries. It receives substantially all of its revenue from dividends from Integra Bank. These dividends are the principal source of funds to pay dividends on our common stock and interest and principal on our debt. Federal and/or state laws and regulations limit the amount of dividends that the Bank may pay to the parent company. Also, a holding company’s right to participate in a distribution of assets upon a subsidiary’s liquidation or reorganization is subject to the prior claims of the subsidiary’s creditors. In the event Integra Bank is unable to pay dividends to the parent company, the parent company may not be able to service debt, pay obligations or pay dividends on its common stock. The inability to receive dividends from Integra Bank could have a material adverse effect on our business, financial condition and results of operations.

Potential Acquisitions may Disrupt Our Business and Dilute Shareholder Value.

We seek merger or acquisition partners that are culturally similar, have experienced management and possess either significant market presence or have potential for improved profitability through financial management, economies of scale or expanded services. Acquiring other banks, businesses, or branches involves various risks commonly associated with acquisitions, including, among other things:

•  Potential exposure to unknown or contingent liabilities of the target company;

•  Exposure to potential asset quality issues of the target company;

•  Difficulty and expense of integrating the operations and personnel of the target company;

•  Potential disruption to our business;

•  Potential diversion of our management’s time and attention;

•  The possible loss of key employees and customers of the target company; and

•  Difficulty in estimating the value of the target company.

We evaluate merger and acquisition opportunities and conduct due diligence activities related to possible transactions with other financial institutions and financial services companies. As a result, merger or acquisition discussions and, in some cases, negotiations may take place and future mergers or acquisitions involving cash, debt or equity securities may occur at any time. Acquisitions typically involve the payment of a premium over book and market values, and, therefore, some dilution of our tangible book value and net income per common share may occur in connection with any future transaction. Furthermore, if we fail to realize the expected revenue increases, cost savings, increases in geographic or product presence, and/or other projected benefits from an acquisition, our financial condition and results of operations could be materially and adversely affected.

We May Not Be Able to Attract and Retain Skilled People.

Our success depends, in large part, on our ability to attract and retain key people. Competition for the best people in most activities engaged in by us can be intense and we may not be able to hire people or to retain them. The unexpected loss of services of one or more of our key personnel could have a material adverse impact on our business because of their skills, knowledge of our local markets, years of industry experience and the difficulty of promptly finding qualified replacement personnel.

12

Our Information Systems May Experience an Interruption or Breach in Security.

We rely heavily on communications and information systems to conduct our business. Any failure, interruption or breach in security of these systems could result in failures or disruptions in our general ledger, deposit, loan and other systems, including risks to data integrity. While we have policies and procedures designed to prevent or limit the effect of the failure, interruption or security breach of our information systems, there can be no assurance that any such failures, interruptions or security breaches will not occur or, if they do occur, that they will be adequately addressed. The occurrence of any failures, interruptions or security breaches of our information systems could damage our reputation, result in a loss of customer business, subject us to additional regulatory scrutiny, or expose us to civil litigation and possible financial liability, any of which could have a material adverse effect on our financial condition and results of operations.

We Continually Encounter Technological Change.

The financial services industry is continually undergoing rapid technological change with frequent introductions of new technology-driven products and services. The effective use of technology increases efficiency and enables financial institutions to better serve customers and to reduce costs. Our future success depends, in part, upon our ability to address the needs of our customers by using technology to provide products and services that will satisfy customer demands, as well as to create additional efficiencies in our operations. Many of our competitors have substantially greater resources to invest in technological improvements. We may not be able to effectively implement new technology-driven products and services or be successful in marketing these products and services to our customers. Failure to successfully keep pace with technological change affecting the financial services industry could have a material adverse impact on our business and, in turn, our financial condition and results of operations.

ITEM 1B.   UNRESOLVED STAFF COMMENTS

None.

ITEM 2.   PROPERTIES

Our and our subsidiaries net investment in real estate and equipment at December 31, 2006, was $46,157. Our offices are located at 21 S.E. Third Street, Evansville, Indiana. The main and all banking center and loan production offices of Integra Bank, and other subsidiaries are located on premises either owned or leased. None of the property is subject to any major encumbrance.

ITEM 3.   LEGAL PROCEEDINGS

We previously reported that the Internal Revenue Service, or IRS, has been examining our 2002 federal income tax return, and that we filed an appeal on September 29, 2005 with the IRS Office of Appeals. The IRS Office of Appeals completed their review in December 2006, which was favorable to us with respect to the mark to market issue. The case is now subject to review by the staff of the Congressional Joint Committee on Taxation. While the staff can not directly modify the proposed results of the IRS examination, they will comment on those results. Based on those comments, the IRS may change their position. Although the IRS examination will not be final until after the Joint Committee staff completes their review, and assurance cannot be given as to the possible outcome, we believe that our position accords with the law and customary practices in the banking industry.

We and our subsidiaries are involved from time to time in other legal proceedings arising in the ordinary course of business. None of such legal proceedings are, in the opinion of management, expected to have a materially adverse effect on our consolidated financial position or results of operations or cash flows.

ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

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PART II

ITEM 5.   MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Our common stock is traded on the Nasdaq Global Market under the symbol IBNK.

The following table lists the stock price for the past two years and dividend information for our common stock.

	Range of Stock Price				Dividends
Quarter	High		Low		Declared
2006
1st	$	22.86	$	19.81	$	0.160
2nd		23.10		20.80		0.170
3rd		26.50		21.10		0.170
4th		28.30		24.75		0.170
2005
1st	$	23.46	$	20.42	$	0.160
2nd		23.15		19.77		0.160
3rd		23.60		20.70		0.160
4th		22.48		19.47		0.160

We have paid quarterly cash dividends every year since 1923. The holding company generally depends upon the dividends from Integra Bank to pay cash dividends to its shareholders. The ability of Integra Bank to pay such dividends is governed by banking laws and regulations. Additional discussion regarding dividends is included in the Liquidity section of Management’s Discussion and Analysis of Financial Condition and Results of Operations.

As of February 1, 2007, there were approximately 2,098 holders of record of our common stock.

In April 2006, we authorized a common stock repurchase program under which we may purchase up to 2.5 percent of our outstanding common shares, or approximately 450,000 shares, or a maximum aggregate purchase amount of $10 million through June 30, 2007. Stock repurchases under this program may be made through open market and privately negotiated transactions at such times and in such amounts as we deem appropriate. The timing and actual number of shares repurchased will depend on a variety of factors including price, corporate and regulatory requirements, and other market conditions. We do not intend to publicly announce any suspension of the program. There have been no purchases made under this program through December 31, 2006.

We did not sell any equity securities which were not registered under the Securities Act of 1933 during the fourth quarter of 2006.

The information required by this Item concerning equity compensation plans is incorporated by reference in Item 12 “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters” to this report.

14

The following is a line graph comparing the cumulative total shareholder return over the years 2001 through 2006 among the Company (IBNK); broad-based industry peer group index (NASDAQ Composite); and Midwest bank index (SNL Midwest Bank Index). It assumes that $100 was invested December 31, 2001, and all dividends were reinvested. The shareholder return shown on the graph is not necessarily indicative of future performance.

TOTAL RETURN PERFORMANCE

	Period Ending
Index	12/31/01		12/31/02		12/31/03		12/31/04		12/30/05		12/31/06
Integra Bank Corporation		100.00		89.58		116.30		126.12		119.91		158.93
NASDAQ Composite		100.00		68.76		103.67		113.16		115.57		127.58
SNL Midwest Bank Index		100.00		96.47		123.48		139.34		134.26		155.19

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ITEM 6.   SELECTED FINANCIAL DATA

Integra Bank Corporation and Subsidiaries

Year Ended December 31,	2006			2005			2004			2003			2002
	(In thousands, except per share data and ratios)
Net interest income	$	82,306		$	82,621		$	84,467		$	72,242		$	73,845
Provision for loan losses		20,294			5,764			1,305			4,945			3,143
Non-interest income		35,827			35,878			33,607			32,793			36,281
Non-interest expense		75,877			77,557			138,180			82,267			82,877
Income (Loss) before income taxes		21,962			35,178			(21,411	)		17,823			24,106
Income taxes (benefit)		2,415			7,879			(14,791	)		58			3,778
Net income (loss)	$	19,547		$	27,299		$	(6,620	)	$	17,765		$	20,328
PER COMMON SHARE
Net income (loss):
Basic	$	1.11		$	1.57		$	(0.38	)	$	1.03		$	1.18
Diluted		1.11			1.56			(0.38	)		1.03			1.18
Cash dividends declared		0.67			0.64			0.72			0.94			0.94
Book value		13.23			12.60			12.05			13.46			13.45
Weighted average shares:
Basic		17,546			17,382			17,318			17,285			17,276
Diluted		17,658			17,468			17,318			17,300			17,283
AT YEAR-END
Total assets	$	2,684,479		$	2,708,142		$	2,757,165		$	2,958,294		$	2,857,738
Securities		614,718			681,030			801,059			974,111			949,500
Loans, net of unearned income		1,790,976			1,750,192			1,665,324			1,699,688			1,606,155
Deposits		1,953,852			1,808,503			1,896,541			1,812,630			1,781,948
Shareholders’ equity		235,474			220,098			209,291			232,992			232,600
Shares outstanding		17,794			17,465			17,375			17,311			17,291
AVERAGE BALANCES
Total assets	$	2,719,056		$	2,746,425		$	2,758,924		$	2,949,016		$	2,906,846
Securities, at amortized cost		659,142			757,694			810,716			967,327			934,586
Loans, net of unearned income		1,782,918			1,688,547			1,644,471			1,670,938			1,596,462
Interest-bearing deposits		1,725,655			1,618,027			1,613,000			1,606,116			1,614,167
Shareholders’ equity		230,017			216,278			210,280			234,948			230,298
FINANCIAL RATIOS
Return on average assets		0.72	%		0.99	%		(0.24	) %		0.60	%		0.70	%
Return on average equity		8.50			12.62			(3.15	)		7.56			8.83
Net interest margin		3.43			3.44			3.52			2.87			2.96
Cash dividends payout		59.26			40.82			N/M*			91.26			79.66
Average shareholders’ equity to average assets		8.46			7.87			7.62			7.97			7.92

* Number is not meaningful.

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ITEM 7.   MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION

INTRODUCTION

The discussion and analysis which follows is presented to assist in the understanding and evaluation of our financial condition and results of operations as presented in the following consolidated financial statements and related notes. The text of this review is supplemented with various financial data and statistics. All amounts presented are in thousands, except for share and per share data and ratios.

Certain statements made in this report may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. When used in this report, the words “may,” “will,” “should,” “would,” “anticipate,” “estimate,” “expect,” “plan,” “believe,” “intend,” and similar expressions identify forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements to be materially different from the results, performance or achievements expressed or implied by such forward-looking statements. Such factors include the risks and uncertainties described in Item 1A “Risk Factors” and other risks and uncertainties described in our periodic reports. We undertake no obligation to release revisions to these forward-looking statements or to reflect events or conditions occurring after the date of this report, except as required in our periodic reports.

OVERVIEW

2006 was the third year of a three-year strategic plan we announced in 2004 to build shareholder value by improving our performance relative to a peer group of other publicly held Midwest banking companies of similar size. The plan consisted of four key elements:

•  Accelerate revenue growth;

•  Improve operating efficiency;

•  Provide quality service, develop employees and continue to increase our managerial depth; and

•  Lower our risk profile by reducing non-performing loans.

In 2006, we met or exceeded the goals in the areas of accelerating revenue growth, improving operating efficiency, providing quality service, developing existing employees and increasing our managerial depth. Our ratio of non-performing to total loans at December 31, 2006 was .49%, the lowest in several years. However, in the fourth quarter we charged off a $17,749 lending relationship, as a result of suspected fraud by the borrower, significantly affecting our earnings for 2006. This charge-off is further discussed below and in the “Credit Management” section of this document.

New customers continued to be the primary driver of increased revenue in several key areas. Our asset mix continued to improve, with higher yielding commercial loans growing $108,681, or 12.3% from 2005 and making up about 40.1% of average total earning assets, compared to 35.6% in 2005 and 33.9% in 2004. Positive loan growth continued in commercial banking, led primarily by commercial real estate. The growth in commercial real estate continued to exceed expectations and was accompanied by excellent credit results, helping us maintain a stable net interest margin, despite the inversion of the yield curve for most of 2006. The continuing success of our “High Performance Checking” initiative first rolled out in 2005 has exceeded our expectations, as even more new accounts were opened in 2006 and the level of activity in those accounts increased.

Net income for the year was $19,547, a decrease of $7,752 or 28.4% from 2005. The decrease was directly a result of the fourth quarter charge-off and related provision. Additional results for 2006 were as follows:

•  Diluted earnings per share for 2006 were $1.11 compared to $1.56 in 2005;

•  Return on assets decreased to 0.72% from 0.99%;

•  Return on equity decreased to 8.50% from 12.62%;

•  Efficiency ratio was 62.3% compared to 65.7%;

•  Net interest margin was 3.43%, a decrease of 1 basis point;

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•  The provision for loan losses was $20,294 and included the $17,749 charge-off;;

•  The number of checking accounts grew by 6.0% in 2006;

•  Service charge income grew by 23.0% in 2006 after growing 23.7% in 2005;

•  Debit card fee income and trust fees increased by 35.4% and 19.3%; and

•  Non-interest expense declined by $1,680 or 2.2%.

We continued to be disciplined in our management of capital in 2006. The ratio of tangible equity to tangible assets increased 67 basis points to 6.99%.

The provision for loan losses was negatively impacted by the fourth quarter charge-off of the $17,749 lending relationship, raising our provision for loan losses to $20,294. This lending relationship was made up of four loans to a charter airline and its majority owner and was secured by what we understood to be the majority owner’s preferred stock in the charter airline. More details related to this charge-off are included in the below “Credit Management” section of this Form 10-K, as well as in our December 31, 2006 audited financial statements, which are included in this report. Total net charge-offs for 2006 were $23,531.

In October 2006, we announced that we entered into a definitive agreement to acquire Prairie Financial Corporation of Bridgeview, Illinois (“Prairie”). Prairie is a privately-held, 15-year-old community bank with five offices in the Chicago Metropolitan Statistical Area. Under the terms of the merger agreement, which has been unanimously approved by our and Prairie’s boards of directors, each share of Prairie stock will be converted into the right to receive 5.914 shares of Integra stock and $65.26 in cash. Based on our closing stock price on October 4, 2006 of $26.18 per share, the merger consideration is equivalent to $220.09 per share of Prairie common stock or $117,200 in total. The combined company expects to achieve total annual cost savings of approximately $1,200 pre-tax, of which 70% is expected to be achieved in 2007. The merger is expected to be 4-5 cents accretive to our earnings per share in 2007, excluding merger related expenses of 5-6 cents and then 7-8 cents accretive to earnings per share in 2008. We look forward to the opportunities this merger will provide to us. Additionally, during the second quarter of 2006, we added an experienced commercial banking team in the Cincinnati, Ohio area that, during the third and fourth quarters, showed solid growth in terms of new loans and deposits.

Our top priority in 2006 was to achieve peer median performance in the key areas described above. We believe we achieved our goals in these areas, with the exception of the impact to net charge-offs and provision caused by the fourth quarter charge-off. We executed a future expansion into the high-growth Chicago, Illinois, market, as well as increasing our presence and product offerings in the Cincinnati, Ohio, area and continued our strong commercial loan growth and High Performance checking initiatives, all while lowering expenses. We continued our focus to provide excellent customer service and convenience. We believe we have a talented employee base and have seen benefits from our initiatives to improve management depth and succession.

Our management team has developed and our Board of Directors has approved a new three-year plan that will end in 2009. Our goal is to achieve earnings growth and total shareholder return in the first quartile of our Midwest peer group. The key components of our plan are to continue to:

•  Acquire new customers and do more with them as we continue our growth initiatives;

•  Improve our net interest income/spread income by increasing loan yields by replacing residential mortgage and indirect marine and recreational vehicle loans with commercial loans and by growing total loans and lower cost deposits;

•  Increase our presence in faster growing metro markets by executing selective acquisitions like Prairie and by continuing to recruit successful and experienced lending and product teams;

•  Improve operating leverage (grow revenue faster than expenses) by reducing expenses in lower growth and profitability lines of business and by investing in higher growth and higher return lines of business; and

•  Allocate capital to increase total shareholder returns by achieving organic growth, executing acquisitions and providing returns to shareholders through dividends and stock buybacks.

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CRITICAL ACCOUNTING POLICIES

Our accounting and reporting policies conform with accounting principles generally accepted in the United States and general practices within the financial services industry. The preparation of financial statements in conformity with generally accepted accounting principles requires us to make estimates and assumptions 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. We consider our critical accounting policies to include the following:

Allowance for Loan Losses:  The allowance for loan losses represents our best estimate of probable losses inherent in the existing loan portfolio. The allowance for loan losses is increased by the provision for losses, and reduced by loans charged off, net of recoveries. The provision for loan losses is determined based on our assessment of several factors: actual loss experience, changes in composition of the loan portfolio, evaluation of specific borrowers and collateral, current economic conditions, trends in past-due and non-accrual loan balances, and the results of recent regulatory examinations. The section labeled “Credit Management” below provides additional information on this subject.

We consider loans impaired when, based on current information and events, it is probable we will not be able to collect all amounts due in accordance with the contractual terms. The measurement of impaired loans is generally based on the present value of expected future cash flows discounted at the historical effective interest rate stipulated in the loan agreement, except that all collateral-dependent loans are measured for impairment based on the market value of the collateral, less estimated cost to liquidate. In measuring the market value of the collateral, we use assumptions and methodologies consistent with those that would be utilized by unrelated third parties.

Changes in the financial condition of individual borrowers, economic conditions, historical loss experience and the conditions of the various markets in which the collateral may be liquidated may all affect the required level of the allowance for loan losses and the associated provision for loan losses.

Estimation of Market Value:  The estimation of market value is significant to several of our assets, including loans held for sale, investment securities available for sale, mortgage servicing rights, other real estate owned, as well as market values associated with derivative financial instruments and goodwill and other intangibles. These are all recorded at either market value or the lower of cost or market value. Market values are determined based on third party sources, when available. Furthermore, accounting principles generally accepted in the United States require disclosure of the market value of financial instruments as a part of the notes to the consolidated financial statements. Market values may be influenced by a number of factors, including market interest rates, prepayment speeds, discount rates and the shape of yield curves.

Market values for securities available for sale are based on quoted market prices. If a quoted market price is not available, market values are estimated using quoted market prices for similar securities. The market values for loans held for sale are based upon quoted market values while the market values of mortgage servicing rights are based on discounted cash flow analysis utilizing dealer consensus prepayment speeds and market discount rates. The market values of other real estate owned are typically determined based on appraisals by third parties, less estimated costs to sell. The market values of derivative financial instruments are estimated based on current market quotes.

Goodwill represents the excess of the cost of an acquisition over the fair value of the net assets acquired. We assess goodwill for impairment no less than annually by applying a fair-value-based test using net present value of estimated net cash flows. Impairment exists when the net book value of the reporting unit exceeds its fair value and the carrying amount of the goodwill exceeds its implied fair value. Other intangible assets represent purchased assets that also lack physical substance but can be distinguished from goodwill because of contractual or other legal rights or because the asset is capable of being sold or exchanged either on its own or in combination with an asset or liability. Core deposit intangibles are recorded at fair value, based on a discounted cash model valuation at the time of acquisition and are evaluated periodically for impairment.

19

Mortgage servicing rights, or MSRs, represent an estimate of the present value of future cash servicing income, net of estimated costs, we expect to receive on loans sold with servicing retained. MSRs are capitalized as separate assets when loans are sold and servicing is retained. The carrying value of MSRs is amortized in proportion to and over the period of net servicing income and this amortization is recorded as a reduction to income.

The carrying value of MSRs is periodically reviewed for impairment based on fair value. We disaggregate our servicing rights portfolio based on loan type and interest rate, which are the predominant risk characteristics of the underlying loans. Any impairment would need to be reported as a valuation allowance. A primary factor influencing the fair value is the estimated life of the underlying loans serviced. The estimated life of the loans serviced is significantly influenced by market interest rates. During a period of declining interest rates, the fair value of the MSRs should decline due to an expected increase in prepayments within the portfolio. Alternatively, during a period of rising interest rates the fair value of MSRs should increase as prepayments on the underlying loans would be expected to decline. On an ongoing basis, management considers relevant factors to estimate the fair value of the MSRs to be recorded when the loans are initially sold with servicing retained.

Income Taxes:  The provision for income taxes is based on income as reported in the financial statements. Deferred income tax assets and liabilities are computed for differences between the financial statement and tax basis of assets and liabilities that will result in taxable or deductible amounts in the future. The deferred tax assets and liabilities are computed based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to an amount expected to be realized. Income tax expense is the tax payable or refundable for the period plus or minus the change during the period in deferred tax assets and liabilities. Tax credits are recorded as a reduction to tax provision in the period for which the credits may be utilized.

NET INCOME (LOSS)

Net income (loss) for 2006 was $19,547 compared to $27,299 in 2005 and $(6,620) in 2004. Earnings (loss) per share on a diluted basis were $1.11, $1.56 and $(0.38) for 2006, 2005 and 2004, respectively. Return on average assets and return on average equity were 0.72% and 8.50% for 2006, 0.99% and 12.62% for 2005, and (0.24)% and (3.15)% for 2004. The 2004 loss was due primarily to the first quarter balance sheet restructuring, which resulted in a net after-tax loss of $31,914. Results for 2006 were negatively impacted by the fourth quarter charge-off of the $17,749 lending relationship.

20

NET INTEREST INCOME

Net interest income in the following tables is on a tax equivalent basis and is the difference between interest income on earning assets, such as loans and investments, and interest expense paid on liabilities, such as deposits and borrowings. Net interest income is affected by the general level of interest rates, changes in interest rates, and by changes in the amount and composition of interest-earning assets and interest-bearing liabilities. Changes in net interest income for the last two years are presented in the schedule following the three-year average balance sheet analysis. The change in net interest income not solely due to changes in volume or rates has been allocated in proportion to the absolute dollar amounts of the change in each.

AVERAGE BALANCE SHEET AND ANALYSIS OF NET INTEREST INCOME

	2006								2005								2004
	Average			Interest		Yield/			Average			Interest		Yield/			Average			Interest		Yield/
Year Ended December 31,	Balances			& Fees		Cost			Balances			& Fees		Cost			Balances			& Fees		Cost
EARNING ASSETS:
Interest-bearing deposits in banks	$	1,718		$	81		4.71	%	$	99		$	6		6.06	%	$	268		$	2		0.75	%
Federal funds sold & other short-term investments		5,437			252		4.63	%		3,423			118		3.45	%		6,070			83		1.37	%
Loans held for sale		1,950			140		7.18	%		5,698			355		6.23	%		2,760			179		6.49	%
Securities:
Taxable		567,452			26,525		4.67	%		641,755			27,519		4.29	%		696,549			29,221		4.20	%
Tax-exempt		91,690			6,853		7.47	%		115,939			9,170		7.91	%		114,167			9,134		8.00	%
Total securities		659,142			33,378		5.06	%		757,694			36,689		4.84	%		810,716			38,355		4.73	%
Regulatory Stock		29,368			1,479		5.04	%		33,052			1,528		4.62	%		32,981			1,518		4.60	%
Loans		1,782,918			125,728		7.05	%		1,688,547			104,455		6.19	%		1,644,471			95,565		5.81	%
Total earning assets		2,480,533		$	161,058		6.49	%		2,488,513		$	143,151		5.75	%		2,497,266		$	135,702		5.44	%
Fair value adjustment on securities available for sale		(13,767	)							(2,838	)							4,671
Allowance for loan loss		(21,990	)							(24,123	)							(25,154	)
Other non-earning assets		274,280								284,873								282,141
TOTAL ASSETS	$	2,719,056							$	2,746,425							$	2,758,924
INTEREST-BEARING LIABILITIES:
Deposits
Savings and interest-bearing demand	$	497,237		$	4,197		0.84	%	$	547,148		$	3,768		0.69	%	$	561,117		$	2,650		0.47	%
Money market accounts		281,480			10,589		3.76	%		234,798			5,687		2.42	%		220,465			3,207		1.45	%
Certificates of deposit and other time		946,938			39,635		4.19	%		836,081			25,569		3.06	%		831,418			19,895		2.39	%
Total interest-bearing deposits		1,725,655			54,421		3.15	%		1,618,027			35,024		2.16	%		1,613,000			25,752		1.60	%
Short-term borrowings		178,976			8,574		4.79	%		167,443			5,877		3.51	%		165,913			1,938		1.17	%
Long-term borrowings		305,881			13,092		4.28	%		470,040			16,657		3.54	%		505,055			20,214		4.00	%
Total interest-bearing liabilities		2,210,512		$	76,087		3.44	%		2,255,510		$	57,558		2.55	%		2,283,968		$	47,904		2.10	%
Non-interest bearing deposits		257,625								252,358								245,538
Other noninterest-bearing liabilities and shareholders’ equity		250,919								238,557								229,418
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	2,719,056							$	2,746,425							$	2,758,924
Interest income/earning assets				$	161,058		6.49	%				$	143,151		5.75	%				$	135,702		5.44	%
Interest expense/earning assets					76,087		3.06	%					57,558		2.31	%					47,904		1.92	%
Net interest income/earning assets				$	84,971		3.43	%				$	85,593		3.44	%				$	87,798		3.52	%

Note:   Tax-exempt income presented on a tax-equivalent basis based on a 35% federal tax rate.

Interest and fees on loans include loan fees of $1,881, $1,192, and $2,590 for 2006, 2005, and 2004, respectively.

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Loans include nonaccrual loans.

Securities yields are calculated on an amortized cost basis.

Federal tax equivalent adjustments on securities are $2,441, $2,743, and $3,089 for 2006, 2005, and 2004, respectively.

Federal tax equivalent adjustments on loans are $224, $229, and $242 for 2006, 2005, and 2004, respectively.

CHANGES IN NET INTEREST INCOME (INTEREST ON A FEDERAL-TAX-EQUIVALENT BASIS)

	2006 Compared to 2005									2005 Compared to 2004
	Change Due to									Change Due to
	a Change in						Total			a Change in						Total
Increase (Decrease)	Volume			Rate			Change			Volume			Rate			Change
Interest income
Loans	$	6,103		$	15,170		$	21,273		$	2,584		$	6,306		$	8,890
Securities		(4,924	)		1,613			(3,311	)		(2,545	)		879			(1,666	)
Regulatory Stock		(180	)		131			(49	)		3			7			10
Loans held for sale		(262	)		47			(215	)		183			(7	)		176
Other short-term investments		159			50			209			(51	)		90			39
Total interest income		896			17,011			17,907			174			7,275			7,449
Interest expense
Deposits		2,459			16,938			19,397			81			9,191			9,272
Short-term borrowings		429			2,268			2,697			18			3,921			3,939
Long-term borrowings		(6,582	)		3,017			(3,565	)		(1,338	)		(2,219	)		(3,557	)
Total interest expense		(3,694	)		22,223			18,529			(1,239	)		10,893			9,654
Net interest income	$	4,590		$	(5,212	)	$	(622	)	$	1,413		$	(3,618	)	$	(2,205	)

The following discussion of results of operations is on a tax-equivalent basis. Tax-exempt income, such as interest on loans and securities of state and political subdivisions, has been increased to an amount that would have been earned had such income been taxable.

Net interest income for 2006 was $84,971, or 0.7% lower than 2005. The decrease was primarily due to the effects of a flattening yield curve during 2005 that became inverted during 2006 and increased funding costs quicker than the increase in asset yields; offset by an improved earning asset mix, particularly within total loans. The inversion of the yield curve had a negative effect on us because more of our liabilities matured or repriced in the short-term than did some of the assets those liabilities were funding.

Major contributors to the change in net interest income from 2005 to 2006 are as follows:

•  Average earning assets decreased $7,980 or 0.3%, driven by decreases in average securities balances of $98,552 and residential mortgage loans of $26,786. These decreases were largely offset by increases in average commercial loan balances of $108,681 and direct consumer loans of $9,315. This change in the composition of earning assets was in line with our strategy of improving our mix of earning assets by reducing lower yielding securities, residential mortgage loan and indirect consumer loan balances and offsetting those declines with increases in higher yielding commercial loans. The increase in average commercial loan balances for 2006 was driven by increases in commercial real estate loans of $99,278, and also from the commercial lending team added during the second and third quarters in the Cincinnati, Ohio area. This group ended the year with outstanding balances of $42,637.

•  The average rate of commercial loans increased 109 basis points, as loans repriced throughout 2006 to higher rates brought about by 2005 market rate increases and new originations were priced at higher rates than during 2005.

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•  Non-interest bearing deposit average balances increased $5,267, while the average balances of savings and interest-bearing demand deposits, which have an average cost of 84 basis points, declined $49,911. These core deposits were largely offset by increases in the average balances of money market accounts, which had an average cost of 3.76%, of $46,682. The shift from low and very low cost deposits to higher yielding money market accounts occurred throughout the first three quarters of 2006 for us and throughout the banking industry, as consumers opted for higher rate investment alternatives and deposit products. During the fourth quarter, this migration abated.

•  A shift in funding sources occurred in 2006. The average balance of brokered certificates of deposit increased $102,836, while long-term borrowing average balances declined $164,159, helping result in an lower overall balance of interest-bearing liabilities of $44,998. This shift took place during 2006 in part due to the maturity and refinancing of $177,500 of fixed-term debt that carried a weighted average rate of 3.06% and matured in March, 2006. This shift in funding removed bullet risk by layering maturities over a one to three year period. It also helped us improve our overall liquidity position and demonstrated a lower level of reliance on FHLB funding.

•  Fourth quarter 2006 net interest income was negatively impacted by the reversal of accrued interest of $484 from the $17,749 loan that was charged off during the quarter. The impact to the net interest margin for the fourth quarter of 2006 was approximately 5 basis points.

•  Daily overdraft fees increased $274 or 18.9% as a result of a higher number of accounts and a higher level of activity within those accounts.

Net interest income for 2005 was $85,593, or 2.5% lower than 2004. The decrease was primarily due to the effects of a flattening yield curve during 2005 which resulted in increased funding costs that exceeded the increase in asset yields; and a reduction in the securities portfolio that was offset by an increase in loans, partially offset by a net reduction of borrowings. The flattening of the yield curve negatively impacted us as more liabilities matured or repriced in the short-term than did some of the assets those liabilities were funding.

Major contributors to the change in net interest income from 2004 to 2005 are as follows:

•  Average earning assets decreased $8,753 or 0.35%, driven by decreases in average securities balances of $53,022, partially offset by increases in average loan balances of $44,076. This change was in line with our strategy of reducing the size of our securities portfolio and improving the mix of our earning assets. The increase in average loan balances was driven by increases in commercial loans of $40,228, the majority of which came in the area of commercial real estate, increases in consumer loans of $28,536 and declines in residential mortgages of $24,688.

•  The reduction in the securities portfolio also reduced the wholesale borrowings funding that portfolio.

•  A change in the timing of assessing daily overdraft fees on overdraft loans reduced these fees by $590. This change was by design and was a component of our High Performance Checking initiative. This initiative included the simplification of our transaction accounts, and changes in several of the fees associated with those accounts, including the daily overdraft fee.

•  During the second quarter of 2005, we sold three branches that included $13,772 in loans and $68,448 in deposits, including $30,000 in valuable core deposits.

•  Average loan yields increased 0.38%, contributing $6,306 of additional income over 2004.

•  Higher deposit rates increased interest expense by $9,191, while the average cost of borrowings increased 1.91% adding $4,548 in interest expense. The majority of the securities portfolio was comprised of fixed rate instruments, while wholesale funding included a considerable volume of short term public certificates of deposit, repurchase agreements and other floating rate debt. As rates increased, the spread between the investments and the liabilities funding them decreased. While this spread declined during 2005, it remained positive.

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•  During the second quarter of 2005, a write-down of $383 of premiums for acquired loans was recorded in connection with an evaluation of the remaining period of amortization. Prepayments of the related loans were occurring more frequently than originally estimated.

NON-INTEREST INCOME

Non-interest income for 2006 was $35,827, or 0.1% lower than 2005. Results for 2006 included increases in deposit service charges of $3,524, debit card interchange revenue of $863, and trust revenue of $382. Additionally, 2006 also included securities gains of $577, while 2005 included losses on sales of securities of $1,532. Results for 2005 also included gains from the sale of three branches of $6,218, as well as a gain from the sale of our merchant credit card portfolio of $417.

Major contributors to the change in non-interest income from 2005 to 2006 are as follows:

•  The increase in deposit service charges is a result of the success of our High Performance Checking initiative. This program resulted in a net increase of approximately 15,000 checking accounts since the beginning of 2005, and, coupled with higher levels of customer activity, resulted in the higher level of fee income. The increase in number of accounts, coupled with a higher usage of debit cards as a method of payment by our customers, resulted in higher interchange fees.

•  The increase in trust revenue was a result of an increase in assets managed by our trust department at December 31, 2006 of 18.0% from December 31, 2005. This occurred as a result of both a greater number of customers and assets managed, as well as an increase in the market value of equity securities within customer accounts, which increased as the market improved throughout 2006.

•  Securities gains of $589 occurred during the fourth quarter of 2006, as issuers of bonds exercised call options to redeem them at premiums ranging from 103% to 104% of their current outstanding balance.

•  Life insurance income declined $182 or 7.8% from 2005. This was primarily the result of bank owned life insurance death benefits that we received in 2006 of $448, as compared to $754 in 2005.

Non-interest income for 2005 was $35,878, or 6.8% higher than 2004. The increase was primarily due to a gain on sale of three branches of $6,218, a gain on the sale of our merchant credit card portfolio of $417, increases in service charges on deposits of $2,941, debit card interchange income of $805 and death benefits from life insurance claims of $754. These items were partially offset by a reduction in credit card fee income of $1,318, a reduction in securities gains of $6,009, and a reduction in mortgage banking and gain on sale of mortgage loans of a combined $464. The level of deposit account fee income is highly dependent on both the number of accounts and the level of activity on those accounts. Lending fees are highly dependent on the number of loans originated.

Major contributors to the change in non-interest income from 2004 to 2005 are as follows:

•  We sold three branches in Southern Illinois during the second quarter of 2005 for a gain of $6,218. The sale included $13,772 in loans and $68,448 in deposits.

•  We rolled out our High Performance Checking products in 2005, which included the redesign of transaction accounts, a reduction of several of the fees associated with those accounts, and a sales and marketing approach designed to emphasize new account openings. As a result of this initiative, we almost doubled the number of new checking account openings in 2005 as compared to 2004, and increased overall product usage. This resulted in an increase in service charges of $2,941, or 23.7%. The increased number of accounts and greater debit card usage also contributed to an $805 increase in debit card interchange income.

•  We received death benefits from two bank owned life insurance policies in 2005. The first of these, totaling $338, was received during the third quarter with the second, totaling $416, being received in the fourth quarter.

•  During the first quarter of 2005, we sold our merchant credit card portfolio for a gain of $417. The sale of this portfolio, and elimination of related expense, has been and continues to be expected to improve net income. We continue to receive fee income for the merchant portfolio.

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•  The securities gains we recognized in 2004 resulted largely from the first quarter 2004 balance sheet restructuring and offset a portion of the costs associated with the restructuring. In 2005, securities losses of $1,532 included an other-than- temporary impairment charge of $455 on $13,168 of agency perpetual preferred securities that do not have a maturity date or contractual cash flows that come back to us. These securities are not actively traded, resulting in impairment. Additionally, two agency-backed collateralized mortgage obligations with a book value of $21,411 were determined to be other than temporarily impaired, when we decided to sell them, resulting in a first quarter loss of $742. These securities were sold during the second quarter and an additional loss of $340 was incurred.

•  Credit card fees in 2005 declined due to the sale of that portfolio in 2004. Fees for 2005 include fees received from revenue sharing agreements with the purchaser of the portfolio. We also benefit from a reduced loan loss provision and reduced processing expenses.

•  The decline in mortgage banking revenue and gains on sale of mortgage loans in 2005 resulted from a continued increase in interest rates, resulting in lower demand, including less refinance activity. The flattening of the yield curve narrowed the rate differential between fixed and adjustable rate products, contributing to a 20% reduction in adjustable rate mortgage originations which we typically retain on our balance sheet.

NON-INTEREST EXPENSE

Non-interest expense for 2006 was $75,877 compared to $77,557 in 2005, a decrease of 2.2%. Non-interest expense for 2006 included reductions in professional fees of $1,407, salaries expense of $773, incentives of $685, processing expense of $533, and franchise, sales, state and local taxes of $371. Partially offsetting these items were increases in medical expense of $833, postretirement health insurance of $324, stock option expense of $225, occupancy expense of $352 and low income housing partnership losses of $316.

Major contributors to the net reduction of non-interest expense from 2005 to 2006 are as follows:

•  Professional fees declined largely as a result of our changing audit firms for 2006. Total audit fees were reduced by $612 or 58.6% from 2005. Legal fees declined $466 or 51.6% largely due to 2005 expenses related to the ongoing audit of our tax returns, by having our in-house counsel we hired in 2004 deal with issues we previously outsourced, and a reduced level of litigation. Other professional fees declined due to lower expenses in the area of branch mystery shopping and facilities design.

•  The reduction in salaries expense was a result of a further reduction to our workforce, from 840 average FTEs during 2005 to 804 average FTEs in 2006. Continued ongoing initiatives to find and execute efficiencies were successful, allowing us to reallocate resources to higher yielding businesses, such as the commercial lending team added during the second and third quarters of 2006. At December 31, 2006, we had 802 full-time equivalent employees compared to 843 in 2005 and 839 in 2004.

•  Incentives declined from 2005 largely due to a reduction in executive incentive compensation expense that resulted because of the fourth quarter 2006 loan charge-off.

•  Processing expense declined from 2005 largely due to successful execution of expense reduction initiatives that resulted in new contracts and lower costs, particularly in the area of ATM and debit card transaction processing.

•  Franchise, sales, state and local tax expense declined because of the filing of a franchise tax refund claim for a prior year, a sales tax liability paid in 2005 that did not reoccur in 2006 and resulted from a 2005 audit, and lower franchise tax liabilities, as well as lower state and local deposit taxes.

•  The increase in medical expense was primarily the result of two items. First, we began to offer and pay for health insurance benefits to part-time employees in 2006. Second, in 2006, we had a higher level of individually significant claims that approached or exceeded the stop loss amounts included in our self-insured health plan. We continue to focus on several initiatives in the area of preventive care in an effort to have a healthier workforce and lower overall health insurance costs.

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•  During 2006, we adopted Statement of Financial Accounting Standards No. 123, which resulted in the recognition of $245 of stock option expense for options issued during 2006. Prior to 2006, this expense was not recognized in the statement of income, but rather recognized on a pro-forma basis in the footnotes to the financial statements. Total expense recognized for all stock-based compensation for employees and directors, including restricted stock, was $810 in 2006 compared to $385 in 2005.

•  The increase in occupancy expense was caused by the lease of additional space in an existing facility during the fourth quarter of the year, a switch in facilities management companies and related transition expenses, higher real property taxes and higher utilities expense.

•  The increase in low income housing partnership investment expenses was due to higher than expected operating losses from the partnerships we have investments in. The returns we receive on these investments consist of the tax benefits we receive from the tax deductible losses the partnerships generate, plus low income housing tax credits we receive, less the actual losses.

Non-interest expense for 2005 was $77,557 as compared to $138,180 in 2004. The decrease was primarily due to $56,998 of debt prepayment fees incurred during 2004, decreases in several categories including $3,037 in salaries and employee benefits, $880 in processing, $679 in amortization of intangible assets, and $639 in other expenses. These items were partially offset by increases in occupancy expense of $981 and communication and transportation of $1,315.

Major contributors to the net reduction of non-interest expense from 2004 to 2005 are as follows:

•  The 2004 balance sheet restructuring resulted in debt prepayment penalties of $56,998; there were no such costs incurred in 2005.

•  The salaries and employee benefits reduction was primarily due to three items. First, we reduced our workforce from 863 average FTEs during 2004 to 840 average FTEs in 2005. A continued emphasis on finding and executing efficiencies, along with changes in our business, such as the sale of the three Illinois banking centers and the sale of the merchant credit card portfolio were largely responsible for these reductions. At December 31, 2005, we had 843 full-time equivalent employees compared to 839 in 2004. Second, medical costs under our self-insured health plan were lower than anticipated. Average claims were positively impacted by a focus on preventive care, as well as a relatively low level of individually significant claims that reached our stop loss insurance policy minimums. Third, we implemented a new retail incentive plan that more closely matched incentive pay with performance.

•  The increase in occupancy expense is due primarily to new banking centers opened in late 2004 and early 2005, partially offset by a reduction resulting from the second quarter 2005 branch sale. Banking centers opened in late 2004 and early 2005 include Evansville, Indiana (July 2004), Henderson, Kentucky (December 2004), and Florence, Kentucky (May 2005).

•  Communication and transportation expenses include an increase in postage of $1,331, as compared to 2004. The postage increase is largely the result of a higher number of mailings to promote deposit products and the High Performance Checking initiative.

•  The decline in processing costs is largely attributable to sale of the merchant credit card portfolio during the first quarter of 2005 and the elimination of related processing costs of $1,066.

•  The decline in amortization of intangible assets occurred because the amortization period for a portion of our core deposit intangibles ended in December 2004. This resulted in elimination of amortization expense of $660 in 2005, as compared to 2004. Goodwill and certain other intangible assets are regularly tested for impairment. We completed this testing in 2005 and found no impairment.

•  The decline in other expense was in large part due to a third quarter 2004 $410 write-down of a property held in other real estate owned.

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INCOME TAXES

We recognized income tax expense of $2,415 in 2006, as compared to $7,879 in 2005, and a benefit of $14,791 in 2004. The effective tax rate for 2006 was 11.0% and includes the benefits of $2,389 of low income tax housing credits. These credits are a direct offset to tax expense and a large component of lowering tax expense in each of the three years presented. This compares to an effective tax rate of 22.4% and total tax credits of $2,510 in 2005. The 2006 tax rate declined from 2005 because of a lower level of pre-tax income, which is attributed largely to the $17,749 fourth quarter loan charge off and its effect on the provision for loan losses and taxable income. The 2004 benefit resulted from the loss incurred as a result of the balance sheet restructuring completed that year.

We expect to be able to utilize all available carried forward net operating losses and tax credits in future periods.

Investments in bank-owned life insurance policies on certain officers, a tax-exempt item, generated $2,166 of income in 2006, $2,348 in 2005, and $1,547 during 2004. The 2005 increase in tax exempt life insurance income was driven by the receipt of $754 in death benefits, while $448 of this income was recognized in 2006. See Note 12 of the Notes to the Consolidated Financial Statements for an additional discussion of our income taxes.

INTERIM FINANCIAL DATA

The following tables reflect summarized quarterly data for the periods described:

	2006
Three Months Ended	December 31			September 30		June 30		March 31
Interest income	$	40,802		$	41,035	$	39,442	$	37,114
Interest expense		20,174			20,218		18,699		16,996
Net interest income		20,628			20,817		20,743		20,118
Provision for loan losses		18,091			950		859		394
Non-interest income		9,443			9,206		9,117		8,061
Non-interest expense		18,860			18,599		19,260		19,158
Income (loss) before income taxes		(6,880	)		10,474		9,741		8,627
Income taxes (benefits)		(4,280	)		2,274		2,351		2,070
NET INCOME (LOSS)	$	(2,600	)	$	8,200	$	7,390	$	6,557
Earnings per share:
Basic	$	(0.15	)	$	0.47	$	0.42	$	0.38
Diluted		(0.15	)		0.46		0.42		0.37
Average shares:
Basic		17,697			17,589		17,466		17,434
Diluted		17,864			17,752		17,562		17,521

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	2005
Three Months Ended	December 31		September 30		June 30		March 31
Interest income	$	36,566	$	35,417	$	34,700	$	33,496
Interest expense		16,130		15,089		13,904		12,435
Net interest income		20,436		20,328		20,796		21,061
Provision for loan losses		515		558		4,316		375
Non-interest income		8,278		7,945		13,111		6,544
Non-interest expense		18,729		19,524		20,075		19,229
Income before income taxes		9,470		8,191		9,516		8,001
Income taxes		2,616		1,585		2,066		1,612
NET INCOME	$	6,854	$	6,606	$	7,450	$	6,389
Earnings per share:
Basic	$	0.39	$	0.38	$	0.43	$	0.37
Diluted		0.39		0.38		0.43		0.37
Average shares:
Basic		17,418		17,400		17,365		17,343
Diluted		17,480		17,504		17,440		17,414

FINANCIAL CONDITION

Total assets at December 31, 2006, were $2,684,479, compared to $2,708,142 at December 31, 2005.

CASH AND CASH EQUIVALENTS

Cash and cash equivalents, including federal funds sold and other short-term investments totaled $69,398 at December 31, 2006 compared to $62,755 one-year prior. The balance of this account fluctuates daily based on our and our customers’ needs.

SECURITIES AVAILABLE FOR SALE

Total investment securities, which are all classified as available for sale, comprised 22.9% of total assets at December 31, 2006, compared to 25.1% at December 31, 2005, representing a $66,312 decrease. The securities portfolio represents our second largest earning asset after commercial loans. During 2006, we continued an ongoing initiative to reduce the level of our securities portfolio, while increasing our commercial loan portfolio. This has resulted in an improved interest rate risk profile, a stable net interest margin and an improved mix of earning assets. Mortgage-backed securities and collateralized mortgage obligations, or CMOs, represented 72.7% of the securities portfolio at December 31, 2006, as compared to 77.6% at December 31, 2005. Mortgage-backed securities carry an inherent prepayment risk, which occurs when borrowers prepay their obligations due to market fluctuations and rates. Prepayment rates generally can be expected to increase during periods of lower interest rates as underlying mortgages are refinanced at lower rates. Our present investment strategy focuses on shorter duration securities with more predictable cash flows in a variety of interest rate scenarios.

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SECURITIES PORTFOLIO

	December 31,
(At Fair Value)	2006		2005		2004
U.S. Government agencies	$	16,165	$	1,119	$	1,095
Mortgage-backed securities		133,630		166,504		230,685
Collateralized Mortgage Obligations		313,417		362,313		407,126
State & political subdivisions		76,143		85,254		97,813
Other securities		75,363		65,840		64,340
Total	$	614,718	$	681,030	$	801,059

The amortized cost and fair value of the securities as of December 31, 2006, by contractual maturity, except for mortgage-backed securities and collateralized mortgage obligations which are based on estimated average lives, are shown below. Expected maturities may differ from contractual maturities in mortgage-backed securities, because certain mortgages may be called or prepaid without penalties.

Maturity of securities available for sale:

	Less Than 1 Year					1 — 5 Years					5 — 10 Years					Over 10 Years
	Maturity					Maturity					Maturity					Maturity					Total
	Amount		Yield			Amount		Yield			Amount		Yield			Amount		Yield			Amount		Yield
U.S. government agencies	$	—		—		$	16,000		5.38	%	$	175		5.77	%	$	—		—		$	16,175		5.38	%
Mortgage-backed securities		10,687		4.64	%		123,188		4.33	%		1,379		3.90	%		631		5.61	%		135,885		4.35	%
Collateralized mortgage obligations		—		—			90,956		4.59	%		221,321		4.35	%		10,389		4.20	%		322,666		4.41	%
States & political subdivisions		3,162		7.30	%		17,463		7.44	%		44,308		7.65	%		8,647		8.41	%		73,580		7.67	%
Other securities		—		—			51		5.90	%		—		—			74,873		7.25	%		74,924		7.25	%
Amortized Cost	$	13,849		5.25	%	$	247,658		4.71	%	$	267,183		4.89	%	$	94,540		7.01	%	$	623,230		5.15	%
Fair Value	$	13,969				$	244,108				$	261,749				$	94,892				$	614,718

Note: The yield is calculated on a 35 percent federal-tax-equivalent basis.

REGULATORY STOCK

Regulatory stock includes mandatory equity securities which do not have a readily determinable fair value and are therefore carried at cost on the balance sheet. This includes both Federal Reserve and Federal Home Loan Bank, or FHLB stock. From time to time, we purchase this dividend paying stock according to capital requirements set by the respective regulatory agencies. During 2006, we redeemed $8,747 of our FHLB stock back to the FHLB at par.

LOANS

Loans, net of unearned income, at December 31, 2006, totaled $1,790,976 compared to $1,750,192 at year-end 2005, reflecting an increase of $40,784, or 2.3%. Commercial loans, which include commercial, industrial and agricultural; commercial real estate; and construction and development, increased $69,384 at December 31, 2006, compared to year-end 2005. This increase was driven primarily by an increase in commercial construction and development loans originated by our commercial real estate line of business. This line of business was initiated in the second half of 2003 when we opened loan production offices, or LPOs, in metro Cincinnati and Cleveland, Ohio, and Louisville, Kentucky. We opened a fourth LPO in Columbus, Ohio in 2006. In 2006, the commercial real estate lending group originated approximately $303,200 in new loans, compared to $218,541 in 2005 and $117,903 in 2004. Outstanding balances for loans managed by this group totaled $363,100 at December 31, 2006 compared to

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$281,358 at December 31, 2005. The majority of these loans were made within the areas the LPOs serve. These loans were used to finance a variety of construction and development projects that included apartments, residential land developments, condominiums, retail centers, office buildings, as well as some hospitality and industrial type properties. Loans are occasionally made on projects outside the markets served by the LPOs to borrowers who are either located within our market area or who have previous lending relationships with our commercial real estate lenders. Competition for these credits typically comes from larger national and regional commercial banks. Since the inception of this line of business, this portfolio has not experienced any charge-offs, while generating returns in excess of those originally forecasted when the strategy was launched.

Commercial, industrial and agricultural loans decreased $4,095 or 0.7% from year-end 2005. The net decrease was due to a decline in outstanding balances originated in our community markets and a fourth quarter $17,749 charge off, offset by the outstanding balance of loans originated by the commercial lending team which began operations in the Cincinnati, Ohio metro area during the second and third quarters of 2006. Total commercial and industrial loans for this group totaled $42,637 at December 31, 2006.

Residential mortgage loans decreased $10,941 or 2.4% from year-end 2005, while total originations increased slightly. The current interest rate environment resulted in customer preferences toward fixed rate loan products, which we typically sell to the secondary market after they are originated, as well as a lower level of refinance activity. In 2006, approximately $101,774, or 76.4% of new originations were through direct retail channels, while approximately $31,438 or 23.6% were originated on a wholesale basis. This compares to $110,000 or 88% and $15,000 or 12% in 2005. The inversion of the yield curve resulted in increased customer demand for fixed rate products. This led to a decline in new originations that are retained and recorded on our balance sheet. The decline was also a component of our efforts to improve our mix of earning assets. The level of higher yielding commercial loans increased, while residential mortgage, indirect consumer and securities balances decreased. In early 2007, we made the decision to private label our residential mortgage processing, underwriting, closing and servicing. Under this business model, the number of loans we originate and retain on our balance sheet will continue to decline, as will the outstanding balances of this portfolio.

Home equity loans decreased $2,981 or 2.2% at December 31, 2006, as the rising interest rate environment continued to negatively impact the origination of variable rate products, causing many borrowers to refinance into fixed rate home equity loans or mortgages. Home equity loans are generally collateralized by a second mortgage on the customer’s primary residence.

Consumer loans decreased $13,192, or 6.2% at December 31, 2006, primarily due to a decrease in indirect dealer originations of $33,304 from 2005. Consumer loans include both direct and indirect loans. The indirect loans are to borrowers located primarily in the Midwest and are generally secured by recreational vehicle or marine assets. Indirect loans at December 31, 2006, were $124,864 compared to $134,749 at December 31, 2005. Indirect loan balances declined in part due to a decision to limit origination of lower yielding indirect marine and recreational vehicle loans during 2006, while using those funds, along with funds generated from paydowns from lower yielding residential mortgage and securities balances, to generate higher yielding commercial loans. We stopped originating indirect marine and recreational vehicle loans in December 2006.

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LOAN PORTFOLIO AT YEAR END

	2006		2005		2004		2003		2002
Commercial, industrial and agricultural loans	$	568,841	$	572,936	$	563,382	$	586,159	$	644,084
Economic development loans and other obligations of state and political subdivisions		7,179		8,422		13,195		20,951		18,360
Lease financing		5,495		5,740		5,731		6,796		7,366
Commercial mortgages		180,249		180,907		224,066		238,261		172,640
Construction and development		260,314		186,177		72,517		53,108		36,981
Residential mortgages		436,309		447,250		456,007		477,895		451,920
Home equity lines of credit		132,704		135,685		143,037		132,101		126,257
Consumer loans		199,887		213,079		187,395		184,426		148,580
Total loans		1,790,978		1,750,196		1,665,330		1,699,697		1,606,188
Less: unearned income		2		4		6		9		33
Loans, net of unearned income	$	1,790,976	$	1,750,192	$	1,665,324	$	1,699,688	$	1,606,155

Different types of loans are subject to varying levels of risk. We mitigate this risk through portfolio diversification as well as geographic diversification. We concentrate substantially all of our lending activity by lending to customers located in the geographic market areas that we serve, primarily Indiana, Illinois, Kentucky and Ohio. The loan portfolio is also diversified by type of loan and industry.

We lend to customers in various industries including real estate, agricultural, health and other related services, and manufacturing. There is no concentration of loans in any single industry exceeding 10% of the portfolio nor does the portfolio contain any loans to finance speculative transactions or loans to foreign entities. In 2005, we had one loan of approximately $224 to a foreign subsidiary of a domestic company. This loan was guaranteed by the domestic parent which hedges the currency through a Eurodollar agent and was paid off in 2006.

LOAN MATURITIES AND RATE SENSITIVITIES AT DECEMBER 31, 2006

Total Loans

				After 1 Year
	Within			But Within			Over
Rate Sensitivities:	1 Year			5 Years			5 Years			Total
Fixed rate loans	$	68,630		$	355,034		$	299,051		$	722,715
Variable rate loans		762,040			247,150			50,446			1,059,636
Subtotal	$	830,670		$	602,184		$	349,497			1,782,351
Percent of total		46.60	%		33.79	%		19.61	%
Nonaccrual loans											8,625
Total loans										$	1,790,976

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LOAN MATURITIES AND RATE SENSITIVITIES AT DECEMBER 31, 2006

Commercial, Industrial, Agricultural, Economic Development, Obligations of State and Political Division, Construction and Development Loans

				After 1 Year
	Within			But Within			Over
	1 Year			5 Years			5 Years			Total
Commercial, industrial and agriculture loans	$	294,149		$	220,188		$	52,238		$	566,575
Economic development loans and other obligations of state and political subdivisions		5,013			1,841			325			7,179
Construction and development		251,477			8,266			565			260,308
Total	$	550,639		$	230,295		$	53,128		$	834,062
Fixed rate	$	49,485		$	198,527		$	50,404		$	298,416
Variable rate		501,154			31,768			2,724			535,646
Subtotal	$	550,639		$	230,295		$	53,128			834,062
Percent of total		66.02	%		27.61	%		6.37	%
Nonaccrual loans											2,272
Total										$	836,334

NON-PERFORMING ASSETS

Non-performing assets consist primarily of nonaccrual loans, restructured loans, loans past due 90 days or more and other real estate owned. Nonaccrual loans are loans on which interest recognition has been suspended because of doubts as to the borrower’s ability to repay principal or interest according to the terms of the contract. Loans are generally placed on nonaccrual status after becoming 90 days past due if the ultimate collectability of the loan is in question or when we determine the loan is impaired. Loans which are current, but as to which serious doubt exists about repayment ability, may also be placed on nonaccrual status. Restructured loans are loans for which the terms have been renegotiated to provide a reduction or deferral of principal or interest because of the borrower’s financial position. Loans 90 days or more past due, which totaled $228 at December 31, 2006, are loans that are continuing to accrue interest, but which are contractually past due 90 days or more as to interest or principal payments. Other real estate owned represents properties obtained for debts previously contracted. We are not aware of any loans which have not been disclosed as non-performing assets that represent or result from unfavorable trends or uncertainties which we reasonably believe will materially adversely affect future operating results, liquidity or capital resources, or represent material credits as to which we have serious doubt as to the ability of such borrower to comply with loan repayment terms.

NON-PERFORMING ASSETS AT YEAR END

	2006		2005		2004		2003		2002
Non-performing loans:(1)
Nonaccrual	$	8,625	$	25,013	$	17,971	$	15,725	$	20,010
90 days past due and still accruing interest		228		40		576		2,566		2,367
Total non-performing loans		8,853		25,053		18,547		18,291		22,377
Defaulted municipal securities		—		—		—		2,692		2,536
Other real estate owned		936		440		243		1,341		2,286
Total non-performing assets	$	9,789	$	25,493	$	18,790	$	22,324	$	27,199

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(1) Includes non-performing loans classified as loans held for sale.

Non-performing loans were 0.49% and 1.43% of loans, net of unearned income at the end of 2006 and 2005, respectively. We actively manage non-performing loans in order to minimize this level. The change in the components of non-performing assets was due primarily to the second quarter 2006 payoff of a loan that was classified as non-performing during the second quarter of 2005. We had a 30% participation in this loan, which, at the time it was classified to non-performing, had an outstanding balance of $14,256. During the second quarter of 2006, this loan, which then carried a balance of $12,643, was paid off. We charged off $1,671 of the specific reserve of $2,905 we had established in 2005.

The interest recognized on nonaccrual loans was approximately $105, $134 and $109 in 2006, 2005 and 2004, respectively. The amount of interest that would have been earned had these nonaccrual loans remained in accruing status was $193, $968 and $1,148 for 2006, 2005 and 2004, respectively.

We maintain a watch list of commercial loans and review those loans quarterly. For the most part, assets are designated as watch list loans to ensure more frequent monitoring. The assets are reviewed to ensure proper earning status and management strategy. If it is determined that there is serious doubt as to performance in accordance with the original terms of the contract then the loan is placed on nonaccrual. We also review non-accrual loans on an ongoing basis.

CREDIT MANAGEMENT

Our credit management procedures include Board oversight of the lending function by the Board’s Credit and Risk Management Committee, which meets at least quarterly. The committee monitors credit quality through its review of information such as delinquencies, non-performing loans and assets, problem and watch list loans and charge-offs. The lending policies address risks associated with each type of lending, including collateralization, loan-to-value ratios, loan concentrations, insider lending and other pertinent matters and are regularly reviewed to ensure that they remain appropriate for the current lending environment. In addition, a sample of loans is reviewed by an independent loan review department or outside independent third party, as well as by a compliance department and regulatory agencies.

Consumer, mortgage and small business loans are centrally underwritten and approved while commercial loans are approved through a combination of low individual lending authorities, independent senior credit officers and a Corporate Credit Committee. A limited number of officers have the authority, in certain cases and for certain loan types, to override centrally denied loan requests. Those overrides are subject to certain stipulations and are centrally tracked and monitored for performance. The Corporate Credit Committee approves or ratifies all loans of $2,500 or more.

The allowance for loan losses is that amount which, in management’s opinion, is adequate to absorb probable inherent loan losses as determined by our ongoing evaluation of the loan portfolio. This evaluation is based upon consideration of various factors including growth of the portfolio, an analysis of individual credits, adverse situations that could affect a borrower’s ability to repay, industry concentrations, prior and current loss experience, the results of recent regulatory examinations and economic conditions. Loans that are deemed to be uncollectible are charged to the allowance, while recoveries of previously charged off amounts are credited to the allowance. The provision for loan losses is the amount charged to operations to provide assurance that the allowance for loan losses is sufficient to absorb probable losses.

The adequacy of the allowance for loan losses is based on ongoing quarterly assessments of the probable losses inherent in the credit portfolios. The methodology for assessing the adequacy of the allowance establishes both an allocated and unallocated component. The allocated component of the allowance for commercial loans is based on a review of specific loans as well as delinquency, classification levels and historic charge-offs for pools of non-reviewed loans. For consumer loans, the allocated component is based on loan payment status and historical loss rates.

A periodic review of selected loans (based on risk rating and size) is conducted to identify loans with heightened risk or probable losses. The primary responsibility for this review rests with the relationship manager

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responsible for the credit relationship. This review is supplemented by the loan review area, which provides information assisting in the timely identification of problems and potential problems and in deciding whether the credit represents a probable loss or risk which should be recognized. Where appropriate, an allocation is made to the allowance for individual loans based on our estimate of the borrower’s ability to repay the loan given the availability of collateral, other sources of cash flow and legal options available to us.

Included in the review of individual loans are those that are impaired as provided in SFAS No. 114, Accounting by Creditors for Impairment of a Loan. We consider loans impaired when, based on current information and events, it is probable we will not be able to collect all amounts due in accordance with the contractual terms. The allowance established for impaired loans is generally based, for all collateral-dependent loans, on the market value of the collateral, less estimated cost to liquidate. For non-collateral dependent loans, the allowance is based on the present value of expected future cash flows discounted at the historical effective interest rate stipulated in the loan agreement.

Homogeneous pools of loans, such as consumer installment and residential real estate loans, are not individually reviewed. An allowance is established for each pool of loans based upon historical loss ratios, based on the net charge-off history by loan category. In addition, the allowance reflects other risks affecting the loan portfolio, such as economic conditions in our geographic areas, specific industry financial conditions and other factors.

The unallocated portion of the allowance covers general economic uncertainties as well as the imprecision inherent in any loan and lease loss forecasting methodology. At December 31, 2006, the unallocated reserve included within the allowance for loan losses was $1,182 as compared to $310 at December 31, 2005.

The factors used to evaluate homogenous loans in accordance with the SFAS No. 5, Accounting for Contingencies are reviewed at least quarterly and are updated as conditions warrant. The provision for loan losses is the amount necessary to adjust the allowance for loan losses to an amount that is adequate to absorb estimated loan losses as determined by our periodic evaluations of the loan portfolio. Our evaluation is based upon consideration of actual loss experience, changes in composition of the loan portfolio, evaluation of specific borrowers and collateral, current economic conditions, trends in past-due and non-accrual loan balances and the results of recent regulatory examinations.

The adequacy of the allowance for loan losses is reviewed on a quarterly basis and presented to the Audit Committee of the Board of Directors for approval. The accounting policies related to the allowance for loan losses are significant policies that involve the use of estimates and a high degree of subjectivity. We have developed appropriate policies and procedures for assessing the adequacy of the allowance for loan losses that reflect the assessment of credit risk after careful consideration of known relevant facts. In developing this assessment, we must rely on estimates and exercise judgment regarding matters where the ultimate outcome is unknown such as economic factors, developments affecting companies in specific industries or issues with respect to single borrowers. Depending on changes in circumstances, future assessments of credit risk may yield different results, which may require an increase or decrease in the allowance for loan losses.

Our process to perform this analysis includes expanded data analysis, back-testing and continued refinements to documentation surrounding the adequacy of the allowance. The allowance provides reliable measures of the probability of default and risk of loss for our categories of loans with similar risk characteristics and analyzes loss data over a period of time that we believe is appropriate and which is periodically reevaluated. This improves the measure of inherent loss over a complete economic cycle and reduces the impact for qualitative adjustments. This process does not impact losses estimated in accordance with Financial Accounting Standard 114, Accounting by Creditors for Impairment of a Loan.

We continue to enhance our loan portfolio monitoring system to enhance our risk management capabilities. In 2004, we implemented the Markov migration model for our commercial portfolio. Among the most significant enhancements were expanded score band performance, loan to value analysis, and vintage analysis. Initiatives implemented in 2005 and 2006 include the use of custom scorecards to forecast defaults as well as losses within our consumer portfolio, creation of a default model based off of historical data to help determine credit costs, and

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creation of a foundation for risk based capital allocation using the Markov model. These initiatives have and will continue to help in refining our capital allocation for estimated loan losses.

The provision for loan losses totaled $20,294 in 2006, an increase of $14,530 from 2005. At December 31, 2006, the allowance for loan losses as a percentage of loans was 1.18% as compared to 1.39% at year-end 2005. The allowance for loan losses to non-performing loans at December 31, 2006 was 239.0% compared to 97.4% at December 31, 2005.

The higher provision in 2006, as compared to 2005, was primarily due to three items:

•  The impact of the charge-off of the $17,749 lending relationship during the fourth quarter of 2006. This relationship is described further below.

•  Additionally, we experienced a higher level of charge-offs in our consumer portfolio, particularly in the areas of indirect marine and recreational vehicle loans, which had net charge-offs of $1,227 compared to $784 in 2005.

•  Partially offsetting these items were net recoveries in 2006 of $108 for commercial mortgage and commercial construction and development real estate credits, as opposed to net charge-offs of $588 for 2005. These loans make up 24.6% of our portfolio at December 31, 2006.

The fourth quarter includes the charge-off of the previously mentioned $17,749 lending relationship. On December 29, 2006, we instituted legal action against our borrower. Subsequent to our legal action, a number of developments occurred that led us to reevaluate the likelihood of collection. This resulted in our decision to charge-off the entire lending relationship. Those developments include the filing of eleven other collection suits, including six by other financial institutions. As the result of an investigation by the state of Florida, a state court in Florida has appointed a receiver to take over the operations of our borrower. As of February 6, 2007, the receiver has found that our borrower owes $204,600 to individuals that purchased an employee investment savings account and an additional $112,700 in a stock program. The Florida regulators have called the program “a massive fraud”. This is in addition to the claims that have been made by the various financial institutions. As of February 6, 2007, the total of all claims filed against our borrower total almost $500,000, of which ours comprises approximately $18,000.

The relationship to this borrower began in 1997 as a part of a strategy to originate out of market credits through a broker network.. There are no other loans remaining in our portfolio from that strategy.

We are actively pursuing our rights and remedies to collect the outstanding balance of the loans, as well as accrued interest and legal and other fees.

The higher provision in 2005, as compared to 2004, was primarily due to three items:

•  The establishment of a specific reserve against the loan to a regional grocery store chain. When this loan was paid off in 2006, we charged off $1,671.

•  We reclassified approximately $9,788 of under performing loans to loans held for sale and recorded $1,461 in charge-offs and related provision expense during the second quarter of 2005; and

•  Consumer bankruptcies increased during the fourth quarter largely attributed to the October 2005 passage of new bankruptcy laws, coupled with rising fuel prices, increased minimum credit card payments by many issuers, and other economic factors contributed to an increase in consumer net charge-offs of $682 from 2004. The increase came primarily from the indirect recreational vehicle portfolio.

Net charge-offs to average loans for 2006 increased to 132 basis points compared to 31 basis points in 2005. The $17,749 charge off recorded during the fourth quarter of the year represented 100 basis points of the 101 basis point increase in 2006. The 2005 increase from 15 to 31 basis points was attributed to the effects of the loan sale, the charge-offs from which totaled 9 basis points, and increases in commercial and consumer charge-offs, partially offset by a reduction in net residential mortgage charge-offs.

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SUMMARY OF LOAN LOSS EXPERIENCE (ANALYSIS OF THE ALLOWANCE FOR LOAN LOSSES)

	2006			2005			2004			2003			2002
Allowance for loan losses, January 1	$	24,392		$	23,794		$	25,403		$	24,632		$	23,868
Loans charged off:
Commercial, industrial and agriculture		21,509			3,461			1,550			2,330			1,235
Lease financing		—			—			—			59			—
Commercial mortgages		66			620			859			840			492
Construction and development		—			—			13			—			—
Residential mortgages		704			589			1,321			1,734			2,236
Home Equity		397			130			154			180			266
Consumer		2,665			1,818			961			1,367			1,480
Total		25,341			6,618			4,858			6,510			5,709
Recoveries on charged off loans:
Commercial, industrial and agriculture		633			621			1,386			1,105			1,192
Lease financing		—			—			—			119			4
Commercial mortgages		174			32			242			86			138
Construction and development		—			—			24			—			—
Residential mortgages		171			166			249			405			1,266
Home Equity		41			64			24			1			33
Consumer		791			569			394			620			697
Total		1,810			1,452			2,319			2,336			3,330
Net charge-offs		23,531			5,166			2,539			4,174			2,379
Provision for loan losses		20,294			5,764			1,305			4,945			3,143
Allowance related to loans sold		—			—			(299	)		—			—
Transfer to reserve for unfunded commitments		—			—			(76	)		—			—
Allowance for loan losses, December 31	$	21,155		$	24,392		$	23,794		$	25,403		$	24,632
Total loans at year-end, net of unearned income	$	1,790,976		$	1,750,192		$	1,665,324		$	1,699,688		$	1,606,155
Average loans		1,782,918			1,688,547			1,644,471			1,670,938			1,596,462
Total non-performing loans		8,853			25,053			18,547			18,291			22,377
Net charge-offs to average loans		1.32	%		0.31	%		0.15	%		0.25	%		0.15	%
Provision for loan losses to average loans		1.14			0.34			0.08			0.30			0.20
Allowance for loan losses to loans		1.18			1.39			1.43			1.50			1.53
Allowance for loan losses to non-performing loans		238.96			97.36			128.29			138.88			110.08

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ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSES AT DECEMBER 31

	Allowance Applicable to										Percent of Loans to Total Gross Loans
Loan Type	2006		2005		2004		2003		2002		2006			2005			2004			2003			2002
Commercial, industrial and agriculture	$	7,337	$	11,713	$	10,326	$	12,789	$	13,421		32	%		33	%		34	%		35	%		40	%
Economic development loans and other obligations of state and political subdivisions		—		—		86		135		117		—			—			1	%		1	%		1	%
Lease financing		1		56		63		105		129		—			—			—			—			1	%
Commercial mortgages		1,804		2,173		3,127		3,130		2,198		10	%		10	%		14	%		14	%		11	%
Construction and development		2,537		1,904		763		344		280		15	%		11	%		4	%		3	%		2	%
Residential mortgages		3,688		4,105		3,622		1,845		2,347		24	%		26	%		27	%		28	%		28	%
Home equity		1,172		885		1,059		778		529		8	%		8	%		9	%		8	%		8	%
Consumer		3,434		3,246		2,291		3,095		3,046		11	%		12	%		11	%		11	%		9	%
Allocated		19,973		24,082		21,337		22,221		22,067		100	%		100	%		100	%		100	%		100	%
Unallocated		1,182		310		2,457		3,182		2,565
Total	$	21,155	$	24,392	$	23,794	$	25,403	$	24,632

DEPOSITS

Total deposits were $1,953,852 at December 31, 2006, compared to $1,808,503 at December 31, 2005. The increase in deposits was in time deposits under $100, which increased $35,269 or 7.1%, brokered deposits, which increased $56,229 or 77.5% and money market accounts, which increased $50,477 or 20.5%. These increases were slightly offset by declines in non-interest bearing accounts, which decreased $10,244 or 3.9%, savings accounts, which decreased $8,002 or 6.2% and interest checking, which decreased $9,078 or 2.3%. During the first three quarters of 2006, and consistent with trends in banking, our customers transferred funds from checking and savings deposits to higher rate money market and certificate of deposit accounts. This trend abated during the fourth quarter of 2006. Year-end 2006 balances for non-interest bearing deposits and interest bearing checking accounts increased $2,548 and $11,556 from those at September 30, 2006, while savings account balances declined $4,638.

Implementation of the High Performance Checking initiative resulted in an increase in the number of accounts at December 31, 2006 of 6.0% compared to December 31, 2005. The higher number of accounts, coupled with higher levels of customer account activity, resulted in an increase in deposit service charges of $3,524 or 23.0% in 2006, compared to an increase of $2,941 or 23.7% in 2005.

The increase in brokered deposits occurred primarily during the first quarter of 2006 when $177,500 of fixed-term debt that carried a weighted average rate of 3.06% matured and was replaced with a combination of brokered and retail deposits.

TIME DEPOSITS OF $100 OR MORE AT DECEMBER 31, 2006

Maturing:
3 months or less	$	103,919
Over 3 to 6 months		115,706
Over 6 to 12 months		78,707
Over 12 months		74,024
Total	$	372,356

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SHORT-TERM BORROWINGS

Short-term borrowings totaled $217,518 at December 31, 2006, an increase of $15,855 from year-end 2005. Short-term borrowings primarily include federal funds purchased, which are purchased from other financial institutions, generally on an overnight basis, securities sold under agreements to repurchase, which are collateralized transactions acquired in national markets as well as from our commercial customers as a part of a cash management service, and short-term FHLB advances.

At December 31, 2006, we had an unsecured, unused line of credit for $15,000 with another financial institution, available federal funds purchased lines of $364,300 and availability of $516,049 under the Federal Reserve borrower in custody program.

LONG-TERM BORROWINGS

Long-term borrowings have original maturities greater than one year and include advances from the FHLB, securities sold under repurchase agreements, term notes from other financial institutions, floating rate unsecured subordinated debt and trust preferred securities. Long-term borrowings decreased $200,266 during 2006 to $254,521 from $454,787 at December 31, 2005. At December 31, 2005, FHLB advances included bullet or fixed maturity advances, which carried a weighted average interest rate of 2.64% with final maturities in 2007, as well as amortizing and other advances, which carried a weighted average interest rate of 5.55%.

As part of the 2004 balance sheet restructuring, we added $75,000 in fixed rate national market repurchase agreements and issued $4,000 of floating rate unsecured subordinated debt. These repurchase agreements have an average fixed rate of 2.78%, with $10,000 maturing in 2007 and $65,000 maturing in 2008.

The unsecured subordinated debt includes $4,000 of debt that has a floating rate of three-month LIBOR plus 2.85% and will mature on April 7, 2014. Issuance costs of $141 were paid by us and are being amortized over the life of the debt. A second issue includes $10,000 of floating rate-subordinated debt issued in April 2003 that has a floating rate of three-month LIBOR plus 3.20%, which will mature on April 24, 2013. Issuance costs of $331 were paid by us and are being amortized over the life of the debt.

In July 2001, we issued $18,000 of floating rate capital securities as a participant in a pooled trust preferred fund. The trust preferred securities have a liquidation amount of $1,000 per security with a variable per annum rate equal to six-month LIBOR plus 3.75% with interest payable semiannually. The issue matures on July 25, 2031. Issuance costs of $581 were paid by us and are being amortized over the life of the securities. We have the right to call these securities at par effective July 25, 2011.

During the second quarter of 2003, we issued an additional $34,500 in trust preferred securities as a participant in a pooled fund with a floating interest rate of three-month LIBOR plus 3.10%. The issue matures on June 26, 2033. Issuance costs of $1,045 were paid by us and are being amortized over the life of the debt. We have the right to call these securities at par effective June 25, 2008.

We continuously review our liability composition. Any modifications could adversely affect our profitability and capital levels over the near term, but would be undertaken if we believe that restructuring the balance sheet will improve our interest rate risk and liquidity risk profile on a longer-term basis.

OFF-BALANCE SHEET ARRANGEMENTS AND AGGREGATE CONTRACTUAL OBLIGATIONS

We have obligations and commitments to make future payments under contracts. Our long-term borrowings represent FHLB advances with various terms and rates collateralized primarily by first mortgage loans and certain specifically assigned securities, securities sold under repurchase agreements, notes payable secured by equipment, subordinated debt and trust preferred securities. We are also committed under various operating leases for premises and equipment.

In the normal course of our business, there are various outstanding commitments and contingencies, including letters of credit and standby letters of credit, that are not reflected in the consolidated financial statements. Our exposure to credit loss in the event the nonperformance by the other party to the commitment is limited to the contractual amount. Many commitments expire without being used. Therefore, the amounts stated below do not

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necessarily represent future cash commitments. We use the same credit policies in making commitments and conditional obligations as we do for other on-balance sheet instruments.

The following table lists our significant contractual obligations and significant commitments coming due in the periods indicated at December 31, 2006. Further discussion of these obligations or commitments is included in Note 19 to the consolidated financial statements.

			Less Than		1 to 3		3 to 5		After 5
As of December 31, 2006	Total		One Year		Years		Years		Years
Contractual On Balance Sheet Obligations
Long-term debt	$	254,521	$	113,957	$	69,330	$	2,568	$	68,666
Operating leases		14,910		2,003		3,183		2,090		7,634
Total contractual cash obligations	$	269,431	$	115,960	$	72,513	$	4,658	$	76,300
Off Balance Sheet Obligations
Lines of credit	$	358,683	$	165,944	$	33,277	$	21,480	$	137,982
Standby letters of credit		19,915		11,687		8,228		—		—
Other commitments		214,697		93,662		77,858		20,759		22,418
Total other commitments	$	593,295	$	271,293	$	119,363	$	42,239	$	160,400

CAPITAL RESOURCES

Shareholders’ equity totaled $235,474 at December 31, 2006, an increase of $15,376 or 7.0% from 2005. The increase was primarily the result of net income of $19,547, proceeds from the exercise of stock options of $6,365 and a decrease in the unrealized loss on securities, net of taxes, of $1,090, partially offset by cash dividends of $11,814.

At December 31, 2005, shareholders’ equity totaled $220,098, an increase of $10,807, or 5.2%, from 2004. This increase was primarily the result of net income of $27,299, partially offset by cash dividends of $11,158 and an increase in the unrealized loss on securities, net of tax of $7,005.

The dividend payout ratio for 2006 was 59.3%, compared to 40.8% for 2005. During the second quarter of 2006, we increased our quarterly dividend 6.25% to $0.17 per share. The average equity to average asset ratio was 8.46% and 7.87% for 2006 and 2005, respectively.

We opened one new banking center in 2005 and none in 2006. We sold three banking centers in Southern Illinois during the second quarter of 2005. We are currently in process of building a new banking center in Florence, Kentucky that is expected to be completed during the second quarter of 2007. At December 31, 2006, there was a future contractual commitment of $976 related to this expenditure.

We and the banking industry are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can elicit certain mandatory actions by regulators that, if undertaken, could have a direct material effect on our financial statements. Capital adequacy in the banking industry is evaluated primarily by the use of ratios that measure capital against assets and certain off-balance sheet items. Certain ratios weight these assets based on risk characteristics according to regulatory accounting practices. At December 31, 2006 and 2005, we and Integra Bank exceeded the regulatory minimums and Integra Bank met the regulatory definition of well capitalized. See additional discussion in Note 16.

Capital trust preferred securities currently qualify as Tier 1 capital for the parent holding company under Federal Reserve guidelines. As a result of the issuance of FASB Interpretation No. 46 (“FIN 46”), the Federal Reserve adopted a rule that allows the limited inclusion of trust preferred securities in Tier 1 capital, subject to stricter qualitative limits.

39

LIQUIDITY

Liquidity of a banking institution reflects the ability to provide funds to meet loan requests, to accommodate possible outflows in deposits and other borrowings and to protect us against interest rate volatility. We continuously monitor our current and prospective business activity in order to match maturities of specific categories of short-term and long-term loans and investments with specific types of deposits and borrowings.

The primary sources of short-term asset liquidity for Integra Bank include federal funds sold, commercial paper, interest-bearing deposits with other financial institutions and securities available for sale. Short-term asset liquidity is also provided by scheduled principal paydowns and maturing loans and securities. The balance between these sources and the need to fund loan demand and deposit withdrawals is monitored under our capital markets policy. When these sources are not adequate, we may use federal fund purchases, brokered deposits, repurchase agreements, sales of investment securities or utilize our borrowing capacity with the FHLB. At December 31, 2006 and 2005, federal funds sold and other short-term investments were $3,998 and $112, respectively. Additionally, at December 31, 2006, we had $364,300 available from unused Federal Funds lines and in excess of $277,346 in unencumbered securities available for repurchase agreements or liquidation. We also have access to funds from the Federal Reserve Bank totaling $516,049 as part of its borrower in custody program.

For the parent holding company, liquidity is provided by dividends from Integra Bank, cash balances, credit line availability, liquid assets, proceeds from employee exercises of stock options and proceeds from capital market transactions. Federal banking law limits the amount of capital distributions that national banks can make to their holding companies without obtaining prior regulatory approval. A national bank’s dividend paying capacity is affected by several factors, including the amount of its net profits (as defined by statute) for the two previous calendar years and net profits for the current year up to the date of dividend declaration. We also have an unsecured line of credit available which permits us to borrow up to $15,000. There was no balance outstanding on this line at December 31, 2006.

Liquidity for the parent holding company is required to support its operational expenses, pay taxes, meet outstanding debt and trust preferred securities obligations, provide dividends to shareholders, fund stock repurchases and other general corporate purposes. The Board of Directors has approved a dividend payout ratio of 35% to 50% of net earnings. We believe that funds to fulfill these obligations for the foreseeable future will be available from currently available cash and marketable securities, dividends from Integra Bank, the credit line availability, or other sources that management expects to be available during the year.

We believe that we have adequate liquidity to meet our foreseeable needs, and are currently in process of evaluating alternatives to fund the cash portion of the Prairie acquisition, which is expected to approximate $38,800.

ACCOUNTING CHANGES

For information regarding accounting standards issued which will be adopted in future periods, see Note 1 to the Consolidated Financial Statements included in this report.

40

ITEM 7A.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest rate risk is the exposure of earnings and capital to changes in interest rates. Fluctuations in rates affect earnings by changing net interest income and other interest-sensitive income and expense levels. Interest rate changes affect the market value of capital by altering the underlying value of assets, liabilities and off balance sheet instruments. Our interest rate risk management program is comprised of several components. The components include Board of Directors’ oversight, senior management oversight, risk limits and control, risk identification and measurement, risk monitoring and reporting and independent review. We strive to manage the impact of interest rate volatility on earnings and capital through our interest rate risk management processes.

We manage interest rate risk with oversight through the ALCO and Finance Committee of the Board of Directors, or Board ALCO. The Board ALCO meets at least twice a quarter and is responsible for the establishment of policies, risk limits and authorization levels. A committee comprised of senior officers, the Corporate ALCO Committee, meets at least quarterly and is responsible for implementing policies and procedures, overseeing the entire interest rate risk management process and establishing internal controls.

Interest rate risk is measured and monitored on a proactive basis by utilizing a simulation model. We use the following key methodologies to measure interest rate risk.

Earnings at Risk (“EAR”).  We consider EAR to be our best measure for managing short-term interest rate risk (one year time frame). This measure reflects the dollar amount of net interest income that will be impacted by changes in interest rates. We use a simulation model to run immediate and parallel changes in interest rates from a “Base” scenario using implied forward rates. The standard simulation analysis assesses the impact on net interest income over a 12-month horizon by shocking the implied forward yield curve up and down 100, 200, and 300 basis points. Additional yield curve scenarios are tested from time to time to assess the risk to changes in the slope of the yield curve and changes in basis relationships. These interest rate scenarios are executed against a balance sheet utilizing projected growth and composition. Additional simulations are run from time to time to assess the risk to earnings and liquidity from balance sheet growth occurring faster or slower than anticipated as well as the impact of faster or slower prepayments in the loan and securities portfolio. This simulation model projects the net interest income forecasted under each scenario and calculates the percentage change from the “Base” interest rate scenario. The Board ALCO has approved policy limits for changes in one year EAR from the “Base” interest rate scenario of minus 10 percent to a 200 basis point rate shock in either direction. At December 31, 2006, we would experience a positive 0.28% change in EAR, if interest rates moved downward 200 basis points. If interest rates moved upward 200 basis points, we would experience a negative 1.78% change in net interest income. Both simulation results are within the policy limits established by the Board ALCO. Rising interest rates caused mortgage prepayments to decline which had a positive impact to EAR in the down 200 basis point scenario in 2006 relative to 2005. The small increase in EAR in the up 200 basis point scenario is a reflection of the migration of deposit accounts to higher interest bearing money market accounts that are more market rate sensitive, aging of fixed rate debt, and slower prepayment assumptions (extension risk) on mortgage related securities and mortgage loans. The impact of these more rate sensitive liabilities was offset by growth in variable rate commercial loans so that the net impact to EAR was small.

Trends in Earnings at Risk

	Estimated Change in EAR from the Base
	Interest Rate Scenario
	−200 basis points			+200 basis points
December 31, 2006		0.28	%		(1.78	)%
December 31, 2005		(3.76	)%		(0.99	)%

Economic Value of Equity (“EVE”).  We consider EVE to be our best analytical tool for measuring long-term interest rate risk. This measure reflects the dollar amount of net equity that will be impacted by changes in interest rates. We use a simulation model to evaluate the impact of immediate and parallel changes in interest rates from a “Base” scenario using implied forward rates. The standard simulation analysis assesses the impact on EVE by shocking the implied forward yield curve up and down 100, 200, and 300 basis points. This simulation model projects the estimated economic value of assets and liabilities under each scenario. The difference between the economic value of total assets and the economic value of total liabilities is referred to as the economic value of

41

equity. The simulation model calculates the percentage change from the “Base” interest rate scenario. For EVE calculations, future balance sheet composition is not a factor.

The Board ALCO has approved policy limits for changes in EVE. The variance limit for EVE is measured in an environment when the “Base” interest rate scenario is shocked up or down 200 basis points within a range of plus or minus 15%.

At December 31, 2006, we would experience a positive 0.97% change in EVE if interest rates moved downward 200 basis points. If interest rates moved upward 200 basis points, we would experience a negative 6.58% change in EVE. Both of these measures are within Board approved policy limits. The year to year change in the downward rate scenario is largely the result of the decrease in assumed prepayment speeds on mortgage related securities due to the steady rise in interest rates and the migration of deposits to more rate sensitive money market accounts. Likewise, the same factors caused EVE risk in the +200 basis point scenario to increase slightly from December 31, 2005.

Trends in Economic Value of Equity

	Estimated Change in EVE from the Base
	Interest Rate Scenario
	−200 basis points			+200 basis points
December 31, 2006		0.97	%		(6.58	)%
December 31, 2005		(0.51	)%		(6.35	)%

The assumptions in any of these simulation runs are inherently uncertain. Any simulation cannot precisely estimate net interest income or economic value of the assets and liabilities or predict the impact of higher or lower interest rates on net interest income or on the economic value of the assets and liabilities. Actual results will differ from simulated results due to the timing, magnitude and frequency of interest-rate changes, the difference between actual experience and the characteristics assumed, as well as changes in market conditions and management strategies.

42

ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

The management of Integra Bank Corporation is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) promulgated under the Securities Exchange Act of 1934 as a process designed by, or under the supervision of, our principal executive and principal financial officers and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles and includes those policies and procedures that:

•  Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;

•  Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and

•  Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Our management assessed the effectiveness of the our internal control over financial reporting as of December 31, 2006. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control-Integrated Framework.

Based on that assessment, we believe that, as of December 31, 2006, our internal control over financial reporting is effective based on those criteria.

Our assessment of the effectiveness of our internal control over financial reporting as of December 31, 2006 has been audited by Crowe Chizek and Company LLC, our independent registered public accounting firm, as stated in their report dated March 12, 2007 which appears on page 45 of this Annual Report on Form 10-K.

/s/  Michael T. Vea	/s/  Martin M. Zorn
Chairman of the Board, Chief Executive	Chief Financial Officer;
Officer and President	Executive Vice President-Finance and Risk

43

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON

FINANCIAL STATEMENTS

Shareholders and Board of Directors

Integra Bank Corporation

Evansville, Indiana

We have audited the accompanying consolidated balance sheet of Integra Bank Corporation as of December 31, 2006 and the related consolidated statements of income, comprehensive income, changes in shareholders’ equity and cash flows for the year ended December 31, 2006. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit. The financial statements of Integra Bank Corporation as of December 31, 2005 and for each of the two years in the period ended December 31, 2005 were audited by other auditors whose report dated March 10, 2006, expressed an unqualified opinion on those statements.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2006, and the results of its operations and its cash flows for the year ended December 31, 2006, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of Integra Bank Corporation’s internal control over financial reporting as of December 31, 2006, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 12, 2007, expressed an unqualified opinion thereon.

/s/  Crowe Chizek and Company, LLC

Louisville, Kentucky

March 12, 2007

44

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM ON INTERNAL CONTROL

Shareholders and Board of Directors

Integra Bank Corporation

Evansville, Indiana

We have audited management’s assessment, included in the accompanying Management’s Report on Internal Control over Financial Reporting, that Integra Bank Corporation maintained effective internal control over financial reporting as of December 31, 2006, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Integra Bank Corporation’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, management’s assessment that Integra Bank Corporation maintained effective internal control over financial reporting as of December 31, 2006, is fairly stated, in all material respects, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Also in our opinion, Integra Bank Corporation maintained, in all material respects, effective internal control over financial reporting as of December 31, 2006, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of Integra Bank Corporation as of December 31, 2006, and related consolidated statements of income, comprehensive income, changes in shareholders’ equity and cash flows for the year ended December 31, 2006 and our report dated March 12, 2007 expressed an unqualified opinion on those consolidated financial statements.

/s/  Crowe Chizek and Company LLC

Louisville, Kentucky

March 12, 2007

45

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of

Integra Bank Corporation:

In our opinion, the accompanying consolidated balance sheet as of December 31, 2005 and the related consolidated statements of income, of comprehensive income, of changes in shareholders’ equity and of cash flows for each of two years in the period ended December 31, 2005 present fairly, in all material respects, the financial position of Integra Bank Corporation and its subsidiaries (“the Company”) at December 31, 2005, and the results of their operations and their cash flows for each of the two years in the period ended December 31, 2005, in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

/s/  PricewaterhouseCoopers LLP

Columbus, Ohio

March 10, 2006

46

INTEGRA BANK CORPORATION and Subsidiaries

Consolidated Balance Sheets

	December 31,
	2006			2005
	(In thousands, except share data)
ASSETS
Cash and due from banks	$	65,400		$	62,643
Federal funds sold and other short-term investments		3,998			112
Total cash and cash equivalents		69,398			62,755
Loans held for sale (at lower of cost or fair value)		1,764			522
Securities available for sale		614,718			681,030
Regulatory stock		24,410			33,102
Loans, net of unearned income		1,790,976			1,750,192
Less: Allowance for loan losses		(21,155	)		(24,392	)
Net loans		1,769,821			1,725,800
Premises and equipment		46,157			50,106
Goodwill		44,491			44,491
Other intangible assets		6,832			7,765
Other assets		106,888			102,571
TOTAL ASSETS	$	2,684,479		$	2,708,142
LIABILITIES
Deposits:
Non-interest-bearing demand	$	252,851		$	263,095
Interest-bearing:
Savings, interest checking and money market accounts		794,280			760,883
Time deposits of $100 or more		372,356			285,429
Other interest-bearing		534,365			499,096
Total deposits		1,953,852			1,808,503
Short-term borrowings		217,518			201,663
Long-term borrowings		254,521			454,787
Other liabilities		23,114			23,091
TOTAL LIABILITIES		2,449,005			2,488,044
Commitments and contingent liabilities (Note 19)		—			—
SHAREHOLDERS’ EQUITY
Preferred stock — 1,000,000 shares authorized
None outstanding
Common stock — $1.00 stated value:
Shares authorized: 29,000,000
Shares outstanding: 17,794,289 and 17,464,948 respectively		17,794			17,465
Additional paid-in capital		135,054			127,980
Retained earnings		88,355			80,622
Accumulated other comprehensive income (loss)		(5,729	)		(5,969	)
TOTAL SHAREHOLDERS’ EQUITY		235,474			220,098
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	2,684,479		$	2,708,142

See Accompanying Notes to Consolidated Financial Statements.

47

INTEGRA BANK CORPORATION and Subsidiaries

Consolidated Statements of Income

	Year Ended December 31,
	2006		2005			2004
	(In thousands, except per
	share data)
INTEREST INCOME
Interest and fees on loans:
Taxable	$	125,088	$	103,801		$	94,874
Tax-exempt		416		425			449
Interest and dividends on securities:
Taxable		26,525		28,591			29,221
Tax-exempt		4,412		5,355			6,045
Dividends on regulatory stock		1,479		1,528			1,518
Interest on loans held for sale		140		355			179
Interest on federal funds sold and other short-term investments		333		124			85
Total interest income		158,393		140,179			132,371
INTEREST EXPENSE
Interest on deposits		54,421		35,024			25,752
Interest on short-term borrowings		8,574		5,877			1,938
Interest on long-term borrowings		13,092		16,657			20,214
Total interest expense		76,087		57,558			47,904
NET INTEREST INCOME		82,306		82,621			84,467
Provision for loan losses		20,294		5,764			1,305
Net interest income after provision for loan losses		62,012		76,857			83,162
NON-INTEREST INCOME
Service charges on deposit accounts		18,879		15,355			12,414
Other service charges and fees		3,807		3,962			4,434
Debit card income-interchange		3,301		2,438			1,633
Credit card fee income		348		742			2,060
Trust income		2,361		1,979			2,025
Net securities gains (losses)		577		(1,532	)		4,477
Gain on sale of other assets		93		6,786			1,360
Bank-owned life insurance income		2,166		2,348			1,547
Other		4,295		3,800			3,657
Total non-interest income		35,827		35,878			33,607
NON-INTEREST EXPENSE
Salaries and employee benefits		39,990		39,870			42,907
Occupancy		8,182		7,830			6,846
Equipment		3,412		3,584			4,052
Professional fees		2,955		4,362			4,264
Communication and transportation		4,933		4,742			3,427
Processing		2,083		2,616			3,496
Software		1,684		1,609			1,841
Marketing		1,941		2,075			2,179
Debt prepayment fees		—		—			56,998
Low income housing project losses		2,526		2,210			2,193
Amortization of intangible assets		933		933			1,612
Other		7,238		7,726			8,365
Total non-interest expense		75,877		77,557			138,180
Income (loss) before income taxes		21,962		35,178			(21,411	)
Income taxes (benefit)		2,415		7,879			(14,791	)
NET INCOME (LOSS)	$	19,547	$	27,299		$	(6,620	)
Earnings (loss) per share:
Basic	$	1.11	$	1.57		$	(0.38	)
Diluted	$	1.11	$	1.56		$	(0.38	)
Weighted average shares outstanding:
Basic		17,546		17,382			17,318
Diluted		17,658		17,468			17,318

See Accompanying Notes to Consolidated Financial Statements.

48

INTEGRA BANK CORPORATION and Subsidiaries

Consolidated Statements of Comprehensive Income

	Year Ended December 31,
	2006			2005			2004
	(In thousands)
Net income (loss)	$	19,547		$	27,299		$	(6,620	)
Other comprehensive income, net of tax:
Unrealized gain (loss) on securities:
Unrealized gain (loss) arising in period (net of tax of $955, $(5,482) and $(2,181) respectively)		1,433			(7,916	)		(3,202	)
Reclassification of realized amounts (net of tax of $(234), $621 and $(1,814) respectively)		(343	)		911			(2,663	)
Net unrealized gain (loss) on securities		1,090			(7,005	)		(5,865	)
Unrealized gain (loss) on hedged derivatives arising in period (net of tax of $13 and $155 for 2006 and 2004 respectively)		19			—			227
Net unrealized gain (loss), recognized in other comprehensive income		1,109			(7,005	)		(5,638	)
Comprehensive income (loss)	$	20,656		$	20,294		$	(12,258	)

See Accompanying Notes to Consolidated Financial Statements.

49

INTEGRA BANK CORPORATION and Subsidiaries

Consolidated Statements of Changes In Shareholders’ Equity

											Accumulated
	Shares of				Additional						Other			Total
	Common		Common		Paid-In			Retained			Comprehensive			Shareholders’
	Stock		Stock		Capital			Earnings			Income (Loss)			Equity
	(In thousands, except share and per share data)
BALANCE AT JANUARY 1, 2004		17,310,782	$	17,311	$	125,497		$	83,510		$	6,674		$	232,992
Net income		—		—		—			(6,620	)		—			(6,620	)
Cash dividend declared (0.715 per share)		—		—		—			(12,409	)		—			(12,409	)
Change, net of tax, in unrealized gain/loss on:
Securities		—		—		—			—			(5,865	)		(5,865	)
Interest rate swaps		—		—		—			—			227			227
Exercise of stock options		38,648		39		688			—			—			727
Grant of restricted stock		25,574		25		(25	)		—			—			—
Stock-based compensation expense		—		—		239			—			—			239
BALANCE AT DECEMBER 31, 2004	$	17,375,004	$	17,375	$	126,399		$	64,481		$	1,036		$	209,291
Net income		—		—		—			27,299			—			27,299
Cash dividend declared ($0.64 per share)		—		—		—			(11,158	)		—			(11,158	)
Change, net of tax, in unrealized gain/loss on:
Securities		—		—		—			—			(7,005	)		(7,005	)
Interest rate swaps		—		—		—			—			—			—
Exercise of stock options		71,723		72		1,227			—			—			1,299
Grant of restricted stock, net of forfeitures		18,221		18		(18	)		—			—			—
Acceleration of stock option vesting		—		—		20			—			—			20
Stock-based compensation expense		—		—		352			—			—			352
BALANCE AT DECEMBER 31, 2005		17,464,948	$	17,465	$	127,980		$	80,622		$	(5,969	)	$	220,098
Net income		—		—		—			19,547			—			19,547
Cash dividend declared ($0.67 per share)		—		—		—			(11,814	)		—			(11,814	)
Change, net of tax, in unrealized gain/loss on:
Securities		—		—		—			—			1,090			1,090
Interest rate swaps		—		—		—			—			19			19
Adjustment to initially apply SFAS No. 158, net of tax												(869	)		(869	)
Exercise of stock options		289,862		290		6,075			—			—			6,365
Grant of restricted stock, net of forfeitures		39,479		39		(39	)		—			—			—
Stock-based compensation expense		—		—		1,038			—			—			1,038
BALANCE AT DECEMBER 31, 2006		17,794,289	$	17,794	$	135,054		$	88,355		$	(5,729	)	$	235,474

See Accompanying Notes to Consolidated Financial Statements.

50

INTEGRA BANK CORPORATION and Subsidiaries

Consolidated Statements of Cash Flows

	Year Ended December 31,
	2006			2005			2004
	(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)	$	19,547		$	27,299		$	(6,620	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Amortization and depreciation		5,950			7,030			8,991
Provision for loan losses		20,294			5,764			1,305
Net securities (gains) losses		(577	)		1,532			(4,477	)
(Gain) loss on sale of premises and equipment		(65	)		202			24
Gain on sale of other real estate owned		(28	)		(109	)		(145	)
Gain on sale of loans		—			—			(1,158	)
Gain on sale of merchant processing program		—			(411	)		—
Gain on sale of branches		—			(6,204	)		—
Loss on low-income housing investments		2,526			2,210			2,193
Increase (decrease) in deferred taxes		(3,461	)		5,892			(13,192	)
Net gain on sale of loans held for sale		(640	)		(681	)		(618	)
Proceeds from sale of loans held for sale		58,683			66,956			81,352
Origination of loans held for sale		(59,285	)		(65,624	)		(81,665	)
Change in other operating		5,283			8,028			1,063
Net cash flows provided by (used in) operating activities		48,227			51,884			(12,947	)
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from maturities of securities available for sale		126,535			179,152			209,824
Proceeds from sales of securities available for sale		7,904			30,595			373,630
Purchase of securities available for sale		(66,132	)		(104,210	)		(417,778	)
(Increase) decrease in loans made to customers		(65,389	)		(103,806	)		24,892
Decrease in loans from sale of branches		—			13,772			—
Proceeds from sale of loans		—			—			7,043
Proceeds from sale of merchant processing program		—			585			—
Purchase of premises and equipment		(292	)		(4,869	)		(5,439	)
Proceeds from sale of premises and equipment from sale of branches		—			608			—
Proceeds from sale of premises and equipment		125			211			5,512
Proceeds from sale of other real estate owned		516			724			1,598
Net cash flows provided by (used in) investing activities		3,267			12,762			199,282
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in deposits		145,349			(19,590	)		83,911
Decrease in deposits from sale of branches		—			(68,448	)		—
Excess income tax benefit from employee stock-based awards		416			—			—
Net increase (decrease) in short-term borrowed funds		15,284			26,641			(124,118	)
Proceeds from long-term borrowings		10,000			—			334,003
Repayment of long-term borrowings		(210,266	)		(2,483	)		(470,269	)
Dividends paid		(11,583	)		(11,144	)		(13,698	)
Proceeds from exercise of stock options		5,949			1,299			727
Net cash flows provided by (used in) financing activities		(44,851	)		(73,725	)		(189,444	)
Net increase (decrease) in cash and cash equivalents		6,643			(9,079	)		(3,109	)
Cash and cash equivalents at beginning of year		62,755			71,834			74,943
Cash and cash equivalents at end of year	$	69,398		$	62,755		$	71,834

Consolidated Statements of Cash Flows are continued on the following page

51

INTEGRA BANK CORPORATION and Subsidiaries

Consolidated Statements of Cash Flows — (Continued)

	Year Ended December 31,
	2006			2005			2004
	(In thousands)
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the year:
Interest	$	73,722		$	55,239		$	48,702
Income taxes (benefit)		7,920			(288	)		(681	)
SUPPLEMENTAL DISCLOSURE OF NONCASH TRANSACTIONS
Change in allowance for unrealized (gain)/loss on securities available for sale	$	(1,757	)	$	12,013		$	9,860
Change in deferred taxes attributable to securities available for sale		721			(4,861	)		(3,995	)
Change in fair value of derivative hedging instruments		19			—			—
Other real estate acquired in settlement of loans		1,074			836			843
Dividends declared and not paid		3,025			2,794			2,780

See Accompanying Notes to Consolidated Financial Statements.

52

INTEGRA BANK CORPORATION and Subsidiaries

Notes to Consolidated Financial Statements

(In Thousands, Except Share and Per Share Data)

NOTE 1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

DESCRIPTION OF BUSINESS

Integra Bank Corporation is a bank holding company that is based in Evansville, Indiana, whose principal subsidiary is Integra Bank N.A., a national banking association, or Integra Bank. As used in these notes, and unless the context provides otherwise, the terms we, us, our, the company and Integra refer to Integra Bank Corporation and its subsidiaries. We own Integra Reinsurance Company, Ltd. which was formed under the laws of the Turks and Caicos Islands and the state of Arizona. We also have a controlling interest in Integra Capital Trust II and Integra Capital Statutory Trust III, our trust securities affiliates. We provide services and assistance to our wholly owned subsidiaries and Integra Bank’s subsidiaries in the areas of strategic planning, administration, and general corporate activities. In return, we receive income and/or dividends from Integra Bank, where most of our activities take place.

Integra Bank provides a wide range of financial services to the communities it serves in Indiana, Kentucky, Illinois and Ohio. These services include various types of personal and commercial banking services and products, investment and trust services and selected insurance services. Specifically, these products and services include commercial, consumer and mortgage loans, lines of credit, credit cards, transaction accounts, time deposits, repurchase agreements, letters of credit, corporate cash management services, correspondent banking services, mortgage servicing, brokerage and annuity products and services, credit life and other selected insurance products, securities safekeeping, safe deposit boxes, online banking, and complete personal and corporate trust services. Integra Bank also has a 60% ownership interest in Total Title Services, LLC, a provider of residential title insurance.

Integra Bank’s products and services are delivered through its customers’ channel of preference. At December 31, 2006, Integra Bank serves its customers through 74 banking centers, 128 automatic teller machines and four loan production offices. Integra Bank also serves its customers through its telephone banking and offers a suite of Internet-based products and services that can be found at our website, http://www.integrabank.com.

Integra Reinsurance Company, Ltd. is an insurance company formed in June 2002 under the laws of the Turks and Caicos Islands as an exempted company for twenty years under the companies Ordinance 1981. It operates as an alien corporation in the state of Arizona and as such is subject to the rules and regulations of the National Association of Insurance Companies (“NAIC”). The company sells only Allied Solutions credit life and disability policies and operates within the Bank’s banking center system. Integra Reinsurance Company began operations in May 2003.

Our consolidated financial statements have been prepared in conformity with generally accepted accounting principles in the United States. The following is a description of our significant accounting policies.

BASIS OF CONSOLIDATION

The accompanying consolidated financial statements include the accounts of Integra Bank Corporation and certain of our subsidiaries. At December 31, 2006, our subsidiaries included in the consolidated financial statements consisted of Integra Bank and a reinsurance company. Our two statutory business trusts are not consolidated due to the guidance of FASB Interpretation (“FIN”) No. 46, Consolidation of Variable Interest Entities (“VIEs”).

All significant intercompany transactions and balances have been eliminated. We utilize the accrual basis of accounting. Certain prior period amounts have been reclassified to conform to the 2006 financial reporting presentation.

To prepare the consolidated financial statements in accordance with U.S. generally accepted accounting principles, we are required to make estimates and assumptions based on available information that affect the amounts reported in the consolidated financial statements. Significant estimates which are particularly susceptible to short-term changes include the valuation of the securities portfolio, the determination of the allowance for loan

53

INTEGRA BANK CORPORATION and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)

losses and valuation of real estate and other properties acquired in connection with foreclosures or in satisfaction of amounts due from borrowers on loans. Actual results could differ from those estimates.

CASH AND CASH EQUIVALENTS

Cash and cash equivalents include cash on hand, amounts due from banks, commercial paper and federal funds sold which are readily convertible to known amounts of cash. Interest-bearing deposits in banks, regardless of maturity, are considered short-term investments and included as cash equivalents.

TRUST ASSETS

Property held for customers in fiduciary or agency capacities, other than trust cash on deposit at Integra Bank, is not included in the accompanying consolidated financial statements since such items are not assets of ours.

SECURITIES

Securities can be classified as trading, available for sale and held to maturity. Currently, we only classify securities as available for sale.

Securities classified as available for sale are those debt and equity securities that we intend to hold for an indefinite period of time, but not necessarily to maturity. Any decision to sell a security classified as available for sale would be based on various factors, including significant movements in interest rates, changes in the maturity mix of assets and liabilities, liquidity needs, regulatory capital considerations, and other similar factors. Securities available for sale are carried at fair value. Unrealized gains or losses are reported as increases or decreases in shareholders’ equity, net of the related deferred tax effect. Interest income includes amortization of premiums or discounts. Premiums and discounts are amortized on the level yield method without anticipating prepayments, except for mortgage-backed securities, where prepayments are anticipated. Realized gains or losses, determined on the basis of the cost of specific securities sold, are included as a component of net income. Security transactions are accounted for on a trade date basis.

Declines in the fair value of available for sale securities below their cost that are deemed to be other than temporary are reflected in earnings as realized losses. In estimating other than temporary impairment losses, we consider the length of time and the extent to which the fair value has been less than cost, the financial condition and near term prospects of the issuer, and our intent and ability to retain our investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value.

REGULATORY STOCK

Regulatory stock includes mandatory equity securities which do not have a readily determinable fair value and are therefore carried at cost on the balance sheet. This includes both Federal Reserve and Federal Home Loan Bank, or FHLB stock. From time to time, we purchase this dividend paying stock according to capital requirements set by the respective regulatory agencies. During 2006, we sold $8,747 of our FHLB stock back to the FHLB at par.

LOANS

Loans are stated at the principal amount outstanding, net of unearned income. Loans held for sale are valued at the lower of aggregate cost or fair value.

Interest income on loans is based on the principal balance outstanding, with the exception of interest on discount basis loans, computed using a method which approximates the effective interest rate. Loan origination fees, certain direct costs and unearned discounts are amortized as an adjustment to the yield over the term of the loan. We endeavor to recognize as quickly as possible situations where the borrower’s repayment ability has become impaired or the collectability of interest is doubtful or involves more than the normal degree of risk. Generally, we

54

INTEGRA BANK CORPORATION and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)

place a loan on non-accrual status upon becoming 90 days past due as to interest or principal (unless both well-secured and in the process of collection), when the full timely collection of interest or principal becomes uncertain or when a portion of the principal balance has been charged-off. Real estate 1 — 4 family loans (both first and junior liens) are placed on nonaccrual status within 120 days of becoming past due as to interest or principal, regardless of security. We adhere to the standards for classification and treatment of open and closed-end credit extended to individuals for household, family and other personal expenditures, including consumer loans and credit cards, that are established by the Uniform Retail Classification and Account Management Policy (OCC Bulletin 2000-20). At the time a loan is placed in nonaccrual status, all unpaid accrued interest is reversed and deferred loan fees or costs amortization is discontinued. When doubt exists as to the collectability of the remaining book balance of a loan placed in nonaccrual status, any payments received will be applied to reduce principal to the extent necessary to eliminate such doubt. Nonaccrual loans are returned to accrual status when, in the opinion of management, the financial position of the borrower indicates there is no longer any reasonable doubt as to the timely collectability of interest and principal. Past due loans are loans that are contractually past due as to interest or principal payments.

ALLOWANCE FOR LOAN LOSSES

The allowance for loan losses is that amount which, in our opinion, is adequate to absorb probable incurred loan losses as determined by our ongoing evaluation of the loan portfolio and its inherent risks. Our evaluation is based upon consideration of various factors including growth of the portfolio, an analysis of individual credits, adverse situations that could affect a borrower’s ability to repay, prior and current loss experience, the results of recent regulatory examinations and economic conditions. Our process includes expanded data analysis, back-testing and continued refinements to documentation surrounding the adequacy of the allowance. The allowance provides more reliable measures of the probability of default and risk of loss given default for our categories of loans with similar risk characteristics, analyzes loss data over a period of time that we believe is appropriate and which is periodically reevaluated. This improves the measure of inherent loss over a complete economic cycle and reduces the impact for qualitative adjustments.

Loans that are deemed to be uncollectible are charged-off to the allowance, while recoveries of previously charged off amounts are credited to the allowance. A provision for loan losses is expensed to operations at levels deemed necessary to provide assurance that the allowance for loan losses is sufficient to absorb probable incurred losses based on our ongoing evaluation of the loan portfolio.

A periodic review of selected loans (based on risk rating and size) is conducted to identify loans with heightened risk or probable losses. The primary responsibility for this review rests with the relationship manager responsible for the credit relationship. This review is supplemented by the loan review area, which provides information assisting in the timely identification of problems and potential problems and in deciding whether the credit represents a probable loss or risk which should be recognized. Where appropriate, an allocation is made to the allowance for individual loans based on our estimate of the borrower’s ability to repay the loan given the availability of collateral, other sources of cash flow and legal options available to us.

Included in the review of individual loans are those that are impaired as provided in Statement of Financial Accounting Standards “SFAS” No. 114, Accounting by Creditors for Impairment of a Loan.  We consider loans impaired when, based on current information and events, it is probable we will not be able to collect all amounts due in accordance with the contractual terms. The allowance established for impaired loans is generally based, for all collateral-dependent loans, on the market value of the collateral, less estimated cost to liquidate. For non-collateral dependent loans, the allowance is based on the present value of expected future cash flows discounted at the historical effective interest rate stipulated in the loan agreement.

Historical loss ratios are applied to other homogeneous pools of loans, such as consumer installment and residential real estate loans. In addition, the allowance reflects other risks affecting the loan portfolio, such as economic conditions in the bank’s geographic areas, specific industry financial conditions and other factors.

55

INTEGRA BANK CORPORATION and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)

The unallocated portion of the allowance is determined based on our assessment of economic conditions and specific economic factors in the individual markets in which we operate.

OTHER REAL ESTATE OWNED

Properties acquired through foreclosure and unused bank premises are initially recorded at market value, reduced by estimated selling costs and are accounted for at lower of cost or fair value. The market values of other real estate are typically determined based on appraisals by independent third parties. Write-downs of the related loans at or prior to the date of foreclosure are charged to the allowance for losses on loans. Subsequent write-downs, income and expense incurred in connection with holding such assets, and gains and losses realized from the sales of such assets, are included in non-interest income and expense. At December 31, 2006 and 2005, net other real estate owned was $936 and $440, respectively.

PREMISES AND EQUIPMENT

Land is carried at cost. Premises and equipment, including leasehold improvements, are stated at cost less accumulated depreciation and amortization. Depreciation is calculated using the straight-line method based on estimated useful lives of up to thirty-nine years for premises and three to ten years for furniture and equipment. Costs of major additions and improvements are capitalized. Maintenance and repairs are charged to operating expenses as incurred.

INTANGIBLE ASSETS

Goodwill results from business acquisitions and represents the excess of the purchase price over the fair value of acquired tangible assets and liabilities and identified intangible assets. We assess goodwill for impairment annually by applying a fair-value-based test using net present value of estimated net cash flows. Impairment exists when the net book value of the reporting unit exceeds its fair value and the carrying amount of the goodwill exceeds its implied fair value. Other intangible assets represent purchased assets that also lack physical substance but can be distinguished from goodwill because of contractual or other legal rights or because the asset is capable of being sold or exchanged either on its own or in combination with an asset or liability.

Intangible assets, primarily core deposit intangibles, are amortized over their estimated useful lives, which is estimated at 15 years and also are subject to impairment testing.

BANK OWNED LIFE INSURANCE

Bank owned life insurance is recorded at its cash surrender value, or the amount that can be realized upon surrender.

SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE

Securities sold under agreements to repurchase are generally treated as collateralized financing transactions and are recorded at the amounts at which the securities were sold plus accrued interest. Securities, generally U.S. government and federal agency securities, pledged as collateral under these financing arrangements cannot be sold or repledged by the secured party. The market value of collateral provided to a third party is continually monitored and additional collateral provided, obtained or requested to be returned to us as deemed appropriate.

MORTGAGE SERVICING RIGHTS

Mortgage servicing rights, or MSRs, represent an estimate of the present value of future cash servicing income, net of estimated costs, we expect to receive on loans sold with servicing retained. MSRs are capitalized as separate assets when loans are sold and servicing is retained. The carrying value of MSRs is amortized in proportion to and over the period of, net servicing income and this amortization is recorded as a reduction to income.

56

INTEGRA BANK CORPORATION and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)

The carrying value of the MSRs asset is periodically reviewed for impairment based on the fair value of the MSRs. We disaggregate the servicing rights portfolio based on loan type and interest rate, which are the predominant risk characteristics of the underlying loans. Any impairment would need to be reported as a valuation allowance. A primary factor influencing the fair value is the estimated life of the underlying loans serviced. The estimated life of the loans serviced is significantly influenced by market interest rates. During a period of declining interest rates, the fair value of the MSRs should decline due to an expected increase in prepayments within the portfolio. Alternatively, during a period of rising interest rates the fair value of MSRs should increase as prepayments on the underlying loans would be expected to decline. On an ongoing basis, we consider relevant factors to estimate the fair value of the MSRs to be recorded when the loans are initially sold with servicing retained.

Fees received for servicing mortgage loans owned by investors are based on a percentage of the outstanding monthly principal balance of such loans and are included in income as loan payments are received. Costs of servicing loans are charged to expense as incurred. At December 31, 2006 and 2005, we had mortgage servicing rights assets of $2,005 and $2,588, respectively.

DERIVATIVE FINANCIAL INSTRUMENTS

We maintain an overall interest rate risk management strategy that incorporates the use of derivative instruments to minimize significant unplanned fluctuations in earnings and cash flows caused by interest rate volatility. Our interest rate risk management strategy involves modifying the repricing characteristics of certain assets and liabilities so that changes in interest rates do not adversely affect the net interest margin and cash flows. Derivative instruments that we may use as part of our interest rate risk management strategy include interest rate swaps, interest rate floors, interest rate caps, forward contracts and both futures contracts and options on futures contracts. Interest rate swap contracts are exchanges of interest payments, such as fixed-rate payments for floating-rate payments, based on a common notional amount and maturity date. Forward contracts are contracts in which the buyer agrees to purchase and the seller agrees to make delivery of a specific financial instrument at a predetermined price or yield. Futures contracts represent the obligation to buy or sell a predetermined amount of debt subject to the contract’s specific delivery requirements at a predetermined date and a predetermined price. Options on futures contracts represent the right but not the obligation to buy or sell. Freestanding derivatives also include derivative transactions entered into for risk management purposes that do not otherwise qualify for hedge accounting.

All derivatives are recorded as either assets or liabilities in the statement of financial condition and measured at fair value. On the date we enter into a derivative contract, we designate the derivative instrument as either a fair value hedge, cash flow hedge or as a freestanding derivative instrument. For a fair value hedge, changes in the market value of the derivative instrument and changes in the market value of the hedged asset or liability or of an unrecognized firm commitment attributable to the hedged risk are recorded in current period net income. For a cash flow hedge, changes in the market value of the derivative instrument, to the extent that it is effective, are recorded as a component of accumulated other comprehensive income within shareholders’ equity and subsequently reclassified to net income in the same period that the hedged transaction impacts net income. For freestanding derivative instruments, changes in the market values are reported in current period net income.

Net cash settlements on derivatives that qualify for hedge accounting are recorded in interest income or interest expense, based on the item being hedged. Net cash settlements on derivatives that do not qualify for hedge accounting are reported in non-interest income. Cash flows on hedges are classified in the cash flow statement the same as the cash flows of the items being hedged.

Prior to entering a hedge transaction, we formally document the relationship between hedging instruments and hedged items, as well as the risk management objective and strategy for undertaking various hedge transactions. This process includes linking all derivative instruments that are designated as fair value or cash flow hedges to specific assets and liabilities on the balance sheet or to specific forecasted transactions along with a formal assessment at both inception of the hedge and on an ongoing basis as to the effectiveness of the derivative instrument in offsetting changes in market values or cash flows of the hedged item. We consider hedge instruments with a

57

INTEGRA BANK CORPORATION and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)

correlation from 80% to 125% to be sufficiently effective to qualify as a hedge instrument. If it is determined that the derivative instrument is no longer highly effective as a hedge or if the hedge instrument is terminated, hedge accounting is discontinued and the adjustment to market value of the derivative instrument is recorded in net income.

Derivative transactions that do not qualify for hedge accounting treatment under FAS 133 would be considered free-standing derivative instruments. Gains or losses from these instruments would be marked — to-market on a monthly basis and the impact recorded in net income.

INCOME TAXES

We and our subsidiaries file a consolidated federal income tax return with each organization computing its taxes on a separate company basis. The provision for income taxes is based on income as reported in the financial statements. Deferred income tax assets and liabilities are computed annually for differences between the financial statement and tax basis of assets and liabilities that will result in taxable or deductible amounts in the future. The deferred tax assets and liabilities are computed based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to an amount expected to be realized. Income tax expense is the tax payable or refundable for the period plus or minus the change during the period in deferred tax assets and liabilities. Low income housing tax credits are recorded as a reduction to tax provision in the period for which the credits may be utilized.

COMPREHENSIVE INCOME

Comprehensive income consists of net income and other comprehensive income. Other comprehensive income includes unrealized gains and losses on securities available for sale, unrealized gains and losses on cash flow hedges and changes in our minimum postretirement health and life plan, which are recognized as separate components of equity.

LOSS CONTINGENCIES

Loss contingencies, including claims and legal actions arising in the ordinary course of business, are recorded as liabilities when the likelihood of loss is probable and an amount or range of loss can be reasonably estimated. We do not believe there are now such matters that will have a material effect on the financial statements.

STOCK-BASED COMPENSATION

Prior to 2006, stock options were accounted for using the intrinsic value method following Accounting Principles Board (“APB”) Opinion No. 25, Accounting for Stock Issued to Employees and related interpretations. Had compensation costs been determined based on the grant date market values of awards (the method described in SFAS No. 123, Accounting for Stock-Based Compensation), reported net income and earnings per common share would have been reduced to the proforma amounts shown below.

58

INTEGRA BANK CORPORATION and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)

	For the Year Ended December 31,
	2005		2004
Net income (loss):
As reported	$	27,299	$	(6,620	)
Add: Stock-based compensation expense included in reported net income (loss), net of tax		221		142
Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of tax		2,505		1,021
Proforma	$	25,015	$	(7,499	)
Earnings (loss) per share:
Basic
As reported	$	1.57	$	(0.38	)
Proforma		1.44		(0.43	)
Diluted
As reported	$	1.56	$	(0.38	)
Proforma		1.43		(0.43	)

The weighted average fair value of each stock option included in the preceding proforma amounts for 2005 and 2004 was estimated using the Black-Scholes option-pricing model and is amortized over the vesting period of the underlying options. The following assumptions were utilized in computing the fair values:

	2006			2005			2004
Number of options granted		259,106			300,154			304,772
Stock price	$	23.17		$	21.67		$	20.45
Risk-free interest rate		4.99	%		4.04	%		3.97	%
Expected life, in years		6			7			7
Expected volatility		24.49	%		33.20	%		33.16	%
Expected dividend yield		2.80	%		3.00	%		3.13	%
Estimated fair value per option	$	5.65		$	6.43		$	5.89

On January 1, 2006, we adopted SFAS 123(R). The revised standard eliminated the intrinsic value method of accounting required under APB 25. We adopted SFAS 123(R) using the prospective method of adoption, which does not require restatement of prior periods. Under application of this method, compensation expense recognized in 2006 for all share-based awards granted in 2006 is based on the grant date fair value of the stock grants less estimated forfeitures. For 2006, adopting this standard resulted in a reduction in income before taxes for stock option expense of $245, a reduction in net income of $154, and a decrease in basic and diluted earnings per share of $0.01. The amortized stock option and restricted stock expense is included in the statement of changes in shareholders’ equity as stock-based compensation expense.

RECENT ACCOUNTING PRONOUNCEMENTS

In May 2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections” (“SFAS No. 154”), which changes the accounting for and reporting of a change in accounting principle. This statement applies to all voluntary changes in accounting principle and changes required by an accounting pronouncement in the unusual instance that the pronouncement does not include specific transition provisions. This statement requires retrospective application to prior period financial statements of changes in accounting principle, unless it is impractical

59

INTEGRA BANK CORPORATION and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)

to determine either the period-specific or cumulative effects of the change. There was no impact to our financial statements from the 2006 adoption of this statement.

In December 2004, the FASB issued Statement No. 123 (revised 2004), “Share-Based Payment” (“SFAS No. 123(R)”), which requires the recognition of share based payments cost in earnings. This Statement replaces Statement No. 123, “Accounting for Stock-Based Compensation” (“SFAS No. 123”) and supersedes Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB No. 25”), which permitted the recognition of compensation expense using the intrinsic value method. The adoption of SFAS No. 123(R)applies to awards issued after January 1, 2006, with expense being recognized for future grants. We use the Black-Scholes model to determine the value of the options granted. We adopted SFAS No. 123(R) on January 1, 2006, using the prospective application method. We have recorded expense in accordance with SFAS No. 123(R) for all awards granted since the adoption date. In November, 2005, the FASB issued FASB Staff Position (“FSP”) No. 123(R)-3, which provides a practical transition election related to accounting for the tax effects of share based payment awards to employees. Following the short-cut method specified in FSP No. 123(R)-3, we determined that there was no impact to shareholders equity at December 31, 2006.

In September 2006, the FASB issued Statement No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans-an amendment to FASB Statements No. 87, 88, 106, and 132(R)” (“SFAS No. 158”). This statement requires that an employer (a) recognize the funded status of a benefit plan, measured as the difference between plan assets at fair value and the benefit obligation, in its statement of financial position, (b) beginning in 2007, recognize as a component of other comprehensive income, net of tax, the gains or losses and prior service costs or credits that arise during the period but are not recognized as components of net periodic benefit cost pursuant to FASB Statement No. 106, “Employers’ Accounting for Postretirement Benefits Other than Pensions”, (c) measure defined benefit plan assets and obligations as of the date of the employer’s fiscal year-end statement of financial position beginning in 2008, and (d) disclose in the notes to the financial statements additional information about certain effects on net periodic benefit cost for the next fiscal year that arise from delayed recognition of the gains and losses, prior service costs or credits, and transition assets or obligations. We adopted this pronouncement on December 31, 2006. The adoption had the following effect on individual line items in the 2006 financial statements:

	Before						After
	Application of						Application of
	SFAS No. 158			Adjustments			SFAS No. 158
Deferred income taxes	$	18,568		$	512		$	19,080
Total assets		2,683,967			512			2,684,479
Liability for postretirement plan		866			1,381			2,247
Total liabilities		2,447,624			1,381			2,449,005
Accumulated other comprehensive income		(4,860	)		(869	)		(5,729	)
Total stockholders’ equity		236,343			(869	)		235,474

In September 2006, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 108 Topic 1N, “Financial Statements — Considering the Effects of Prior Year Misstatements When Quantifying Misstatements in Current Year Financial Statements” (“SAB 108”). SAB 108 requires that a dual approach be used to compute the amount of a financial statement misstatement. More specifically, the amount should be computed using both the “rollover” (current year income statement perspective) and “iron curtain” (year-end balance sheet perspective) methods. A registrant’s financial statements require adjustment when either approach results in quantifying a misstatement that is material, after considering all relevant quantitative and qualitative factors. Registrants are not required to restate prior period financial statements when initially applying SAB 108 if management properly applied its previous approach (i.e. rollover or iron curtain) given that all relevant qualitative factors were considered. SAB 108 states that, upon initial application, registrants may elect to (a) restate prior periods, or (b) record the cumulative effect of the initial application of SAB 108 in the carrying amounts of assets

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Notes to Consolidated Financial Statements — (Continued)

and liabilities, with the offsetting adjustment made to retained earnings. To the extent that registrants elect to record the cumulative effect of initially applying SAB 108, they will disclose the nature and amount of each individual error being corrected in the cumulative adjustment. The disclosure will also include when and how each error being corrected arose and the fact that the errors had previously been considered immaterial. SAB 108 was effective for us for the fiscal year ending December 31, 2006 and had no impact on our 2006 financial statements.

Effect of Newly Issued But Not Yet Effective Accounting Standards

In February 2006, the FASB issued SFAS No. 155, “Accounting for Certain Hybrid Financial Instruments,” which amends SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities” (SFAS No. 133) and SFAS No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities” (SFAS No. 140). This statement amends SFAS No. 133 to permit fair value remeasurement for any hybrid instrument that contains an embedded derivative that otherwise would require bifurcation. This statement also eliminates the interim guidance in SFAS No. 133 Implementation Issue D-1, which provides that beneficial interests in securitized financial assets are not subject to the provisions of SFAS No. 133. In October 2006, the FASB issued an exposure draft, which would reverse this and make the guidance of D-1 permanent for certain securities. Finally, this statement amends SFAS No. 140 to eliminate the restriction on the passive derivative instruments that a qualifying special-purpose entity (SPE) may hold. This statement is effective for us for all financial instruments acquired or issued in 2007, and is not expected to have a material impact on our consolidated financial position or results of operations.

In March 2006, the FASB issued Statement No. 156, “Accounting for Servicing of Financial Assets — an amendment of FASB Statement No. 140”, which changes the accounting for all servicing rights which are recorded as the result of purchasing a servicing right or selling a loan with servicing retained. Statement No. 156 amends the current accounting guidance for servicing rights in that it allows companies to carry their servicing rights at fair value. Presently servicing rights are recorded at inception at cost, allocated on a fair value basis and then assessed for impairment based on their fair value at each reporting date, using lower of cost or market value. This pronouncement is effective for us beginning January 1, 2007. We have evaluated the impact the adoption of SFAS No. 156 will have on our financial statements, and determined that the impact will not be material since we will not carry our servicing rights at fair value.

In June 2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes — an interpretation of FASB Statement No. 109” (“FIN 48”), which prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. FIN 48 is effective beginning in 2007. We have determined that the adoption of FIN 48 will not have a material impact on our financial statements.

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS No. 157”), which defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. More specifically, this statement clarifies the definition of fair value, establishes a fair valuation hierarchy based upon observable (e.g. quoted prices, interest rates, yield curves) and unobservable market inputs, and expands disclosure requirements to include the inputs used to develop estimates of fair value and the effects of the estimates on income for the period. This statement does not require any new fair value measurements. This pronouncement is effective for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. We are in the process of evaluating the impact, if any, the adoption of SFAS No. 157 will have on our financial statements.

In September 2006, the FASB ratified the Emerging Issues Task Force’s (EITF) consensus on Issue 06-4, “Accounting for Deferred Compensation and Postretirement Benefit Aspects of Endorsement Split-Dollar Life Insurance Arrangements”, which requires entities to recognize a liability and related compensation costs for endorsement split-dollar life insurance policies that provide a benefit to an employee that extends to postretirement

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Notes to Consolidated Financial Statements — (Continued)

periods. The liability should be recognized in accordance with SFAS No. 106, “Employers’ Accounting for Postretirement Benefits Other Than Pensions”, based on the substantive agreement with the employee. This Issue is effective for us beginning January 1, 2008. The Issue can be applied as either (a) a change in accounting principle through a cumulative-effect adjustment to retained earnings as of the beginning of the year of adoption, or (b) a change in accounting principle through retrospective application to all periods. We are in the process of evaluating the impact, if any, the adoption of Issue 06-4 will have on our financial statements.

In September 2006, the FASB ratified the Emerging Issues Task Force’s (EITF) consensus on Issue 06-5, “Accounting for Purchases of Life Insurance — Determining the Amount that Could Be Realized in Accordance with FASB Technical Bulletin No. 85-4, “Accounting for Purchases of Life Insurance”. FASB Technical Bulletin No. 85-4 requires that assets such as bank owned life insurance be carried at their cash surrender value (CSV) or the amount that could be realized, with changes in CSV reported in earnings. Issue 06-5 requires that a policyholder consider any additional amounts (e.g. claims stabilization reserves and deferred acquisition costs) included in the contractual terms of the policy in determining the amount that could be realized under the insurance contract. Certain life insurance contracts provide the policyholder with an amount that, upon surrender, is greater if all individual policies are surrendered at the same time rather than if the policies were surrendered over a period of time. The Issue requires that policyholders determine the amount that could be realized under the life insurance contract assuming the surrender of an individual-life by individual-life policy. This Issue is effective for us beginning January 1, 2007. The Issue can be applied as either (a) a change in accounting principle through a cumulative-effect adjustment to retained earnings as of the beginning of the year of adoption, or (b) a change in accounting principle through retrospective application to all periods. We are in process of evaluating the impact upon adoption and do not anticipate that the adoption of Issue 06-5 will have a material impact on our financial statements.

NOTE 2 — DEFINITIVE AGREEMENT TO ACQUIRE PRAIRIE FINANCIAL CORPORATION

On October 5, 2006, we announced that we had entered into a definitive agreement to acquire Prairie Financial Corporation of Bridgeview, Illinois (“Prairie”). Prairie is a privately held, 15-year-old community bank with five offices in the Chicago Metropolitan Statistical Area. Under the terms of the merger agreement, which has been unanimously approved by our and Prairie’s boards of directors, each share of Prairie stock will be converted into the right to receive 5.914 shares of our common stock and $65.26 in cash. The merger consideration is subject to reduction if Prairie does not make a Section 338(h) election for tax purposes. The merger consideration is equivalent to $220.09 per share of Prairie common stock or $117,200 in total, plus approximately $4,000 to buy out existing options.

The transaction is expected to close early in the second quarter of 2007, subject to Prairie stockholder approval and other customary closing conditions. Based upon financial data for us and Prairie as of December 31, 2006, the combined company will have approximately $3,200,000 in total assets, $2,400,000 in deposits and $2,200,000 in loans.

NOTE 3.   EARNINGS PER SHARE

Basic earnings per share is computed by dividing net income (loss) for the year by the weighted average number of shares outstanding. Diluted earnings per share is computed as above, adjusted for the dilutive effects of stock options and restricted stock. Weighted average shares of common stock have been increased for the assumed exercise of stock options with proceeds used to purchase treasury stock at the average market price for the period.

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Notes to Consolidated Financial Statements — (Continued)

The following provides a reconciliation of basic and diluted earnings per share:

	For the Year Ended December 31,
	2006		2005			2004
Net income (loss)	$	19,547	$	27,299		$	(6,620	)
Weighted average shares outstanding — Basic		17,546,260		17,381,682			17,318,299
Stock option adjustment		99,820		54,759			—
Restricted stock adjustment		12,381		31,102			—
Average shares outstanding — Diluted		17,658,461		17,467,543			17,318,299
Earnings per share-Basic	$	1.11	$	1.57		$	(0.38	)
Effect of stock options and restricted shares		—		(0.01	)		—
Earnings per share — Diluted	$	1.11	$	1.56		$	(0.38	)

Options to purchase 180,946 shares, 625,113 shares, and 1,058,281 shares were outstanding at December 31, 2006, 2005 and 2004, respectively, were not included in the computation of net income per diluted share because the exercise price of these options was greater than the average market price of the common shares, and therefore, the effect would be antidilutive.

Average shares outstanding were used in calculating both basic and diluted earnings per share for 2006 and 2005. In a loss situation, as was experienced in 2004, the effect of any stock options or restricted stock would be antidilutive. For 2004, the antidilutive amount of the stock options was 63,777 shares and the restricted stock was 17,585 shares.

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Notes to Consolidated Financial Statements — (Continued)

NOTE 4.   SECURITIES

On December 31, 2006 and 2005, all of our securities were available for sale. Amortized cost, market value and the related gross unrealized gains and losses recognized in accumulated other comprehensive income (loss) of securities were as follows:

			Gross Unrealized		Gross Unrealized
	Amortized Cost		Gains		Losses		Fair Value
December 31, 2006:
U.S. Government agencies	$	16,175	$	24	$	34	$	16,165
Mortgage-backed securities		135,885		265		2,520		133,630
Collateralized Mortgage Obligations		322,666		68		9,317		313,417
States & political subdivisions		73,580		2,566		3		76,143
Other securities		74,924		560		121		75,363
Total	$	623,230	$	3,483	$	11,995	$	614,718
December 31, 2005:
U.S. Government agencies	$	1,149	$	—	$	30	$	1,119
Mortgage -backed securities		169,942		292		3,730		166,504
Collateralized Mortgage Obligations		373,198		—		10,885		362,313
States & political subdivisions		82,415		2,935		96		85,254
Other securities		64,595		1,605		360		65,840
Total	$	691,299	$	4,832	$	15,101	$	681,030

The fair value of the securities as of December 31, 2006, by contractual maturity, except for mortgage-backed securities and collateralized mortgage obligations which are based on estimated average lives, are shown below. Expected maturities may differ from contractual maturities in mortgage-backed securities, because certain mortgages may be called or prepaid without penalties.

Available for Sale Securities	Fair Value
Due in one year or less	$	13,969
Due from one to five years		244,108
Due from five to ten years		261,749
Due after ten years		94,892
Total	$	614,718

Securities available for sale realized gains and (losses) are summarized as follows:

	2006			2005			2004
Gross realized gains	$	597		$	89		$	5,635
Gross realized losses		(20	)		(1,621	)		(1,158	)
Total	$	577		$	(1,532	)	$	4,477

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Notes to Consolidated Financial Statements — (Continued)

Securities with unrealized losses at December 31, 2006 and 2005, aggregated by investment category and length of time the individual securities have been in a continuous unrealized loss position, are as follows:

	Less Than 12 Months				12 Months or More				Total
			Unrealized				Unrealized				Unrealized
December 31, 2006	Fair Value		Losses		Fair Value		Losses		Fair Value		Losses
U.S. government agencies	$	10,106	$	19	$	835	$	15	$	10,941	$	34
Mortgage-backed securities		1,365		4		116,439		2,516		117,804		2,520
Collateralized mortgage obligations		13,793		105		293,903		9,212		307,696		9,317
State & political subdivisions		99		1		143		2		242		3
Other securities		5,038		6		21,212		115		26,250		121
Total	$	30,401	$	135	$	432,532	$	11,860	$	462,933	$	11,995

	Less Than 12 Months				12 Month s or More				Total
			Unrealized				Unrealized				Unrealized
December 31, 2005	Fair Value		Losses		Fair Value		Losses		Fair Value		Losses
U.S. government agencies	$	830	$	19	$	289	$	11	$	1,119	$	30
Mortgage-backed securities		69,997		1,267		84,899		2,463		154,896		3,730
Collateralized mortgage obligations		83,213		1,381		279,100		9,504		362,313		10,885
State & political subdivisions		605		94		150		2		755		96
Other securities		26,917		331		8,080		29		34,997		360
Total	$	181,562	$	3,092	$	372,518	$	12,009	$	554,080	$	15,101

We do not believe any individual unrealized loss in the securities portfolio represents other-than-temporary impairment. The factors we consider in evaluating the securities include whether the securities are backed by the U.S. government or its agencies or the securities’ public ratings, if available, and how that affects credit quality and recovery of the full principal balance, the relationship of the unrealized losses to increases in market interest rates, the length of time the securities have had temporary impairment, and our ability to hold the securities for the time necessary to recover the amortized cost. At December 31, 2006, the market value of every security held by us was at least 90% of the book value, with the differences being primarily attributable to changes in interest rates.

We regularly review the composition of our securities portfolio, taking into account market risks, the current and expected interest rate environment, liquidity needs, and our overall interest rate risk profile and strategic goals.

During the first quarter of 2005, we determined that two securities, with a book value of $21,411, should be treated as other-than-temporarily impaired, which resulted in a loss of $742 for that quarter. These securities were sold in the second quarter of 2005. We also recognized an other-than-temporary impairment on four agency perpetual preferred securities with a book value of $13,168, which resulted in a loss of $455 during the third quarter of 2005.

We have determined that there were no additional other-than-temporary impairments associated with the above securities at December 31, 2006.

At December 31, 2006 and 2005, the carrying value of securities pledged to secure public deposits, trust funds, repurchase agreements and FHLB advances was $332,580 and $435,574, respectively.

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Notes to Consolidated Financial Statements — (Continued)

NOTE 5.   LOANS

A summary of loans as of December 31, follows:

	2006		2005
Commercial
Commercial, industrial and agricultural loans	$	568,841	$	572,936
Economic development loans and other obligations of state and political subdivisions		7,179		8,422
Lease financing		5,495		5,740
Total commercial		581,515		587,098
Commercial real estate
Commercial mortgages		180,249		180,907
Construction and development		260,314		186,177
Total commercial real estate		440,563		367,084
Residential mortgages		436,309		447,250
Home equity		132,704		135,685
Consumer loans		199,887		213,079
Total loans		1,790,978		1,750,196
Less: unearned income		2		4
Loans, net of unearned income	$	1,790,976	$	1,750,192

A summary of non-performing loans, including those classified as loans held for sale, as of December 31 follows:

	2006		2005		2004
Nonaccrual	$	8,625	$	25,013	$	17,971
90 days past due		228		40		576
Total non-performing loans	$	8,853	$	25,053	$	18,547

The following table presents data on impaired loans at December 31:

	2006		2005		2004
Impaired loans for which there is a related allowance for loan losses	$	338	$	17,010	$	4,241
Impaired loans for which there is no related allowance for loan losses		2,316		8,109		13,730
Total impaired loans	$	2,654	$	25,119	$	17,971
Allowance for loan losses for impaired loans included in the allowance for loan losses	$	233	$	4,380	$	2,482
Average recorded investment in impaired loans		6,083		24,378		19,224
Interest income recognized from impaired loans		87		338		58
Cash basis interest income recognized from impaired loans		13		134		109

There are no unused commitments available on any impaired loans.

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Notes to Consolidated Financial Statements — (Continued)

The amount of loans serviced by us for the benefit of others is not included in the accompanying consolidated balance sheets. The amount of unpaid principal balances of these loans was $290,284, $309,493, and $304,292 as of December 31, 2006, 2005 and 2004, respectively.

NOTE 6.   RELATED PARTY TRANSACTIONS

Integra Bank makes loans to its executive officers and directors and to companies and individuals affiliated with officers and directors of Integra Bank and us. The activity in these loans during 2006 is as follows:

	2006			2005
Balance as of January 1	$	1,233		$	3,225
New loans		1,852			1,710
Repayments		(1,108	)		(2,209	)
Director and officer changes		1,405			(1,493	)
Balance as of December 31	$	3,382		$	1,233
The balance of related party deposits as of December 31	$	9,822		$	6,797

NOTE 7.   ALLOWANCE FOR LOAN LOSSES

Changes in the allowance for loan losses were as follows during the three years ended December 31:

	2006			2005			2004
Balance at beginning of year	$	24,392		$	23,794		$	25,403
Loans charged to allowance		(25,341	)		(6,618	)		(4,858	)
Recoveries credited to allowance		1,810			1,452			2,319
Net charge-offs		(23,531	)		(5,166	)		(2,539	)
Provision for loan losses		20,294			5,764			1,305
Allowance related to loans sold		—			—			(299	)
Reclassification of allowance related to unfunded commitments to other liabilities		—			—			(76	)
Balance at end of year	$	21,155		$	24,392		$	23,794

Total charge-offs include the charge-off of a $17,749 lending relationship to one borrower, which consisted of two loans to a charter airline and two to its majority owner.

NOTE 8.   PREMISES AND EQUIPMENT

Premises and equipment as of December 31 consist of:

	2006		2005
Land	$	7,232	$	7,232
Buildings and lease improvements		62,876		63,218
Equipment		21,928		23,009
Construction in progress		998		1,790
Total cost		93,034		95,249
Less accumulated depreciation		46,877		45,143
Net premises and equipment	$	46,157	$	50,106

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Notes to Consolidated Financial Statements — (Continued)

Depreciation and amortization expense for 2006, 2005 and 2004 was $4,155, $4,226 and $4,240 respectively.

NOTE 9.   INTANGIBLE ASSETS

	December 31, 2006							December 31, 2005
	Gross					Net		Gross					Net
	Carrying		Accumulated			Carrying		Carrying		Accumulated			Carrying
	Amount		Amortization			Amount		Amount		Amortization			Amount
Goodwill (Non-amortizing)	$	44,491	$	—		$	44,491	$	44,491	$	—		$	44,491
Core deposits (Amortizing)		17,080		(10,248	)		6,832		17,080		(9,315	)		7,765
Total intangible assets	$	61,571	$	(10,248	)	$	51,323	$	61,571	$	(9,315	)	$	52,256

Amortization expense for core deposit intangibles for 2006, 2005 and 2004 was $933, $933 and $1,612, respectively. Core deposit intangibles amortize over varying periods through 2014. Goodwill decreased by $348 in 2005 as a result of the sale of the West Kentucky Insurance subsidiary. There were no valuation impairments for goodwill or core deposit intangibles for 2006 or 2005.

Estimated intangible asset amortization expense for each of the succeeding years is as follows:

Year Ending December 31,
2007	$	933
2008		933
2009		933
2010		933
2011		933
Thereafter		2,167

NOTE 10.   MORTGAGE SERVICING RIGHTS

A summary of capitalized MSRs at December 31, which are included in other assets follows:

	2006			2005			2004
Balance at beginning of year	$	2,588		$	2,806		$	2,744
Amount capitalized		230			573			751
Amount amortized		(813	)		(791	)		(689	)
Change in valuation allowance		—			—			—
Balance at end of year	$	2,005		$	2,588		$	2,806
Fair Market Value	$	3,213		$	3,590		$	3,154

An increase in prepayment speeds of 10% and 20% may result in a decline in fair value of $85 and $165 respectively. The effect of a variation in a particular assumption on the fair value of the MSRs is calculated independently without changing any other assumption. In reality, changes in one factor may result in changes in another (for example, changes in mortgage interest rates, which drive changes in prepayment rate estimates, could result in changes in the discount rates), which might magnify or counteract the sensitivities. There was no valuation reserve at December 31, 2006 or 2005.

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Notes to Consolidated Financial Statements — (Continued)

NOTE 11.   DEPOSITS

As of December 31, 2006, the scheduled maturities of time deposits are as follows:

2007	$	674,755
2008		165,539
2009		40,010
2010		11,903
2011 and thereafter		14,514
Total	$	906,721

We had $128,793 in brokered deposits at December 31, 2006 and $72,564 at December 31, 2005.

NOTE 12.   INCOME TAXES

The components of income tax expense for the three years ended December 31 are as follows:

	2006			2005			2004
Federal:
Current	$	5,874		$	1,205		$	(2,988	)
Deferred		(3,227	)		6,261			(9,879	)
Total		2,647			7,466			(12,867	)
State:
Current	$	—		$	781		$	1,389
Deferred		(232	)		(368	)		(3,313	)
Total		(232	)		413			(1,924	)
Total income taxes (benefit)	$	2,415		$	7,879		$	(14,791	)

The portion of the tax provision relating to net realized securities gains or losses amounted to $234, $(621) and $1,814 for 2006, 2005 and 2004, respectively.

A reconciliation of income taxes in the statement of income, with the amount computed by applying the statutory rate of 35%, is as follows:

	2006			2005			2004
Federal income tax computed at the statutory rates	$	7,687		$	12,313		$	(7,494	)
Adjusted for effects of:
Tax exempt interest		(1,475	)		(1,761	)		(1,939	)
Nondeductible expenses		241			221			321
Low income housing credit		(2,389	)		(2,510	)		(2,625	)
Cash surrender value of life insurance policies		(758	)		(822	)		(542	)
Dividend received deduction		(215	)		(215	)		(253	)
State taxes, net of Federal benefit		(151	)		807			(1,251	)
Other differences		(525	)		(154	)		(1,008	)
Total income taxes	$	2,415		$	7,879		$	(14,791	)

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Notes to Consolidated Financial Statements — (Continued)

The tax effects of principal temporary differences are shown in the following table:

	December 31,
	2006			2005
Adjustment to initially apply SFAS No. 158	$	512		$	—
Allowance for loan losses		14,012			9,004
Alternative minimum tax credit carryforward		2,994			3,545
Low income housing tax credit carryforward		9,544			9,473
Net operating loss carryforward		2,141			2,387
Unrealized loss on securities available for sale		3,433			4,154
Other, net		1,109			1,919
Total deferred tax assets		33,745			30,482
Direct financing and leveraged leases		(4,661	)		(5,228	)
Fair value adjustments from acquisitions		(552	)		(648	)
FHLB dividend		(1,518	)		(1,582	)
Goodwill and core deposit intangibles		(1,025	)		(455	)
Mortgage servicing rights		(743	)		(959	)
Partnership income		(1,609	)		(1,148	)
Premises and equipment		(4,557	)		(4,634	)
Total deferred tax liabilities		(14,665	)		(14,654	)
Net deferred tax asset	$	19,080		$	15,828

At December 31, 2006, we had state net operating loss carryforwards of $38,277 which begin to expire in 2022. Our low income housing tax credit carryforwards also begin to expire in 2022. Our alternative minimum tax credit carryforwards do not have an expiration date.

We have determined that no valuation allowance is required with respect to the deferred tax assets.

NOTE 13.   SHORT-TERM BORROWINGS

Information concerning short-term borrowings at December 31 were as follows:

	2006			2005
Federal funds purchased	$	45,700		$	44,400
Securities sold under agreements to repurchase		131,818			117,263
Short-term Federal Home Loan Bank advances		40,000			40,000
Total short-term borrowed funds	$	217,518		$	201,66
A summary of selected data related to short-term borrowed funds follows:
Average amount outstanding	$	178,976		$	167,443
Maximum amount at any month-end		217,518			227,889
Weighted average interest rate:
During year		4.79	%		3.51	%
End of year		5.03	%		3.78	%

At December 31, 2006, we had $364,300 available from unused federal funds purchased lines. In addition, we have an unsecured line of credit available which permits it to borrow up to $15,000. At December 31, 2006, $15,000

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Notes to Consolidated Financial Statements — (Continued)

remained available for future use. At December 31, 2006, we were in compliance with all debt covenants associated with short-term borrowings with the exception of one, for which a waiver has been obtained.

NOTE 14.   LONG-TERM BORROWINGS

Long-term borrowings at December 31 consist of the following:

	2006		2005
Federal Home Loan Bank (FHLB) Advances
Fixed maturity advances (weighted average rate of 2.64% and 2.26% as of December 31, 2006 and 2005, respectively)	$	102,500	$	215,000
Amortizing and other advances (weighted average rate of 5.55% and 5.74% as of December 31, 2006 and 2005, respectively)		3,079		4,931
Total FHLB Advances		105,579		219,931
Securities sold under repurchase agreements with maturities at various dates through 2008 (weighted average fixed rate of 2.78% and 3.85% as of December 31, 2006 and 2005, respectively)		75,000		160,000
Notes payable, secured by equipment, with a fixed interest rate of 7.26%, due at various dates through 2012		5,817		6,731
Subordinated debt, unsecured, with a floating interest rate equal to three-month LIBOR plus 3.20%, with a maturity date of April 24, 2013		10,000		10,000
Subordinated debt, unsecured, with a floating interest rate equal to three-month LIBOR plus 2.85%, with a maturity date of April 7, 2014		4,000		4,000
Floating Rate Capital Securities, with an interest rate equal to six-month LIBOR plus 3.75%, with a maturity date of July 25, 2031, and callable effective July 25, 2011		18,557		18,557
Floating Rate Capital Securities, with an interest rate equal to three-month LIBOR plus 3.10%, with a maturity date of June 26, 2033 and callable effective June 26, 2008		35,568		35,568
Total long-term borrowings	$	254,521	$	454,787

Aggregate maturities required on long-term borrowings at December 31, 2006 are due in future years as follows:

2007	$	113,957
2008		67,301
2009		2,029
2010		1,246
2011		1,322
Thereafter		68,666
Total principal payments	$	254,521

During the first quarter of 2004, we prepaid $467,000 in long-term FHLB fixed rate advances with an average yield of 6.16% and a remaining average life of about 4 years. We also entered into $294,000 of new long-term advances during the first quarter of 2004 as part of the balance sheet restructuring, with an average life of 2.6 years. As a result of the prepayment of long-term FHLB advances, we incurred debt prepayment expenses of $56,998 in 2004.

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Included in long-term borrowings is $75,000 of national market repurchase agreements with original maturity dates of greater than one year. We borrow these funds under a master repurchase agreement. We must maintain collateral with a value equal to 105% of the repurchase price of the securities transferred. As originally issued, our repurchase agreement counterparty had an option to put the collateral back to us at the repurchase price on a specified date.

Also included in long-term borrowings are $105,579 in FHLB advances to fund investments in mortgage-backed securities, loan programs and to satisfy certain other funding needs. We must pledge collateral in the form of mortgage-backed securities and mortgage loans to secure these advances. At December 31, 2006, we had an adequate amount of mortgage-backed securities and mortgage loans to satisfy the collateral requirements associated with these borrowings. At December 31, 2006, the amount of the mortgage loans pledged as collateral totaled $310,817.

In June 2003, we issued $34,500 of floating rate capital securities with a variable interest rate of 3.10% plus 3-month LIBOR. Issuance costs of $1,045 were paid by us and are being amortized over the life of the securities. The securities mature in 2033. We have the right to call these securities at par effective June 25, 2008.

In July 2001, we issued $18,000 of floating rate capital securities with a variable per annum rate equal to six-month LIBOR plus 3.75% with interest payable semi-annually. The issue matures on July 25, 2031. Issuance costs of $581 were paid by us and are being amortized over the life of the securities. We have the right to call these securities at par effective July 25, 2011.

The principal assets of each trust subsidiary are our subordinated debentures. The subordinated debentures bear interest at the same rate as the related trust preferred securities and mature on the same dates. Our obligations with respect to the trust preferred securities constitute a full and unconditional guarantee by us of the trusts’ obligations with respect to the securities.

Subject to certain exceptions and limitations, we may, from time to time, defer subordinated debenture interest payments, which would result in a deferral of distribution payments on the related trust preferred securities and, with certain exceptions, prevent us from declaring or paying cash distributions on our common stock or debt securities that rank junior to the subordinated debenture.

At December 31, 2006, we were in compliance with all debt covenants associated with our long-term borrowings.

NOTE 15.   SHAREHOLDERS’ EQUITY

Each share of our common stock has a stock purchase right attached. Each right entitles shareholders to buy one one-hundredth of a share of preferred stock at a purchase price of $75.

The rights generally will be exercisable only if a person or group acquires 15% or more of our common stock or commences a tender or exchange offer which, upon consummation, would result in a person or group owning 15% or more of our common stock. In such event, each right not owned by such person or group will entitle its holder to purchase at the then current purchase price, shares of common stock (or their equivalent) having a value of twice the purchase price. Under certain circumstances, the rights are exchangeable for shares or are redeemable at a price of one cent per right. The rights will expire on July  18, 2011.

On September 15, 2004, we executed an amendment to the rights agreement. The amendment amended the rights agreement to eliminate the continuing director or so-called “dead-hand” provisions. Previously, these provisions prevented us from taking certain actions under the rights agreement (such as amending the rights agreement or, in some cases, redeeming the rights) without approval from a majority of the “continuing directors.” “Continuing director” was defined generally to mean any director of ours who was not an Acquiring Person or an Affiliate or Associate of an Acquiring Person (as those terms are defined in the rights agreement) and who either (1) was a director on July 18, 2001, or (2) subsequently became a director and whose nomination for election or

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election was recommended or approved by a majority of the continuing directors then serving on the Board of Directors. As a result of the amendment, actions which previously required approval by a majority of the continuing directors now instead require approval solely by our Board of Directors.

NOTE 16.   REGULATORY MATTERS

Integra Bank is required by the Board of Governors of the Federal Reserve System to maintain reserve balances in the form of vault cash or deposits with the Federal Reserve Bank of St. Louis based on specified percentages of certain deposit types, subject to various adjustments. At December 31, 2006, the net reserve requirement totaled $7,866. The Bank was in compliance with all cash reserve requirements as of December 31, 2006.

We and Integra Bank are subject to various regulatory capital requirements administered by federal and state banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a materially adverse effect on our financial condition. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, a bank must meet specific capital guidelines that involve quantitative measures of assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. Capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

Quantitative measures established by regulation to ensure capital adequacy require us and Integra Bank to maintain minimum amounts and ratios (set forth in the following table) of total and Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined), and of Tier 1 capital (as defined) to average assets (as defined). As of December 31, 2006, we and Integra Bank met all capital adequacy requirements to which we were subject.

As of December 31, 2006, the most recent notification from the federal and state regulatory agencies categorized Integra Bank as well capitalized. Integra Bank must maintain the minimum total risk-based, Tier 1 risk-based, and Tier 1 leverage ratios as set forth in the table. There are no conditions or events since that notification that management believes has changed the categorization of Integra Bank.

The amount of dividends which our subsidiaries may pay is governed by applicable laws and regulations. For Integra Bank, prior regulatory approval is required if dividends to be declared in any year would exceed net earnings of the current year (as defined under the National Banking Act) plus retained net profits for the preceding two years, subject to the capital requirements discussed above. As of December 31, 2006, Integra Bank has $29,570 of retained earnings available for distribution in the form of dividends to the holding company without prior regulatory approval.

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The following table presents the actual capital amounts and ratios for us, on a consolidated basis, and Integra Bank:

											Minimum
						Minimum Ratios for Capital					Capital Ratios
	Actual					Adequacy Purposes					to be Well Capitalized
	Amount		Ratio			Amount		Ratio			Amount		Ratio
As of December 31, 2006
Total Capital (to Risk Weighted Assets)
Consolidated	$	258,313		12.51	%	$	165,171		8.00	%		N/A		N/A
Integra Bank		245,337		11.91	%		164,755		8.00	%		205,944		10.00	%
Tier 1 Capital (to Risk Weighted Assets)
Consolidated	$	223,053		10.80	%	$	82,586		4.00	%		N/A		N/A
Integra Bank		224,077		10.88	%		82,378		4.00	%		123,567		6.00	%
Tier 1 Capital (to Average Assets)
Consolidated	$	223,053		8.42	%	$	105,901		4.00	%		N/A		N/A
Integra Bank		224,077		8.49	%		105,610		4.00	%		132,012		5.00	%
As of December 31, 2005
Total Capital (to Risk Weighted Assets)
Consolidated	$	261,831		13.15	%	$	159,334		8.00	%		N/A		N/A
Integra Bank		251,636		12.66	%		158,992		8.00	%		198,740		10.00	%
Tier 1 Capital (to Risk Weighted Assets)
Consolidated	$	223,343		11.21	%	$	79,667		4.00	%		N/A		N/A
Integra Bank		227,148		11.43	%		79,496		4.00	%		119,244		6.00	%
Tier 1 Capital (to Average Assets)
Consolidated	$	223,343		8.33	%	$	107,191		4.00	%		N/A		N/A
Integra Bank		227,148		8.56	%		106,104		4.00	%		132,630		5.00	%

NOTE 17.   STOCK OPTION PLAN AND AWARDS

Our 2003 Stock Option and Incentive Plan currently reserves shares of common stock for issuance as incentive awards for our directors and key employees. Awards may be incentive stock options, non-qualified stock options, restricted shares, performance shares and performance units. Our 1999 Stock Option and Incentive Plan provided for incentive stock options and non-qualified stock options. All options granted under the current plans or any predecessor are required to be exercised within ten years of the date granted. The exercise price of options granted under the plans cannot be less than the market value of the common stock on the date of grant. At December 31, 2006, there were 115,779 shares available for the granting of additional awards under these plans.

In 1999, we also granted non-qualified options to purchase 31,500 shares of common stock at an exercise price of $25.83, outside of the plans, in connection with the employment of our Chairman and CEO. Such options are vested and must be exercised within ten years. At December 31, 2006, all 31,500 options remained outstanding.

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A summary of the status of the options granted under the plans as of December 31, 2006, 2005 and 2004, and changes during the years ending on those dates is presented below:

	2006					2005					2004
				Weighted					Weighted					Weighted
				Average					Average					Average
	Shares			Exercise Price		Shares			Exercise Price		Shares			Exercise Price
Options outstanding, beginning of year		1,320,553		$	21.44		1,227,652		$	21.10		1,086,377		$	21.20
Options granted		259,106			23.17		300,154			21.67		304,772			20.45
Options exercised		(291,999	)		20.57		(71,723	)		18.10		(38,648	)		18.82
Options forfeited or expired		(21,149	)		26.34		(135,530	)		20.70		(124,849	)		21.07
Options outstanding, end of year		1,266,511		$	21.91		1,320,553		$	21.44		1,227,652		$	21.10
Options exercisable		1,016,322					1,320,553					584,038

In December 2005, the Compensation Committee of the Board of Directors approved the accelerated vesting of all currently outstanding unvested stock options awarded to recipients under the plans effective December 19, 2005. The decision to accelerate the vesting was made primarily to reduce non-cash compensation expense that we would have recorded in our income statement in future periods upon the adoption of SFAS No. 123(R) in January 2006. These options were previously awarded to executive officers and employees. All other terms and conditions applicable to such options, including the exercise prices and exercise periods, remained unchanged.

As a result of this action, options to purchase up to 541,941 shares of common stock became exercisable immediately. Without the acceleration, the options would have vested on dates ranging from January 21, 2006 to August 17, 2007.

Since we accounted for our stock options prior to 2006 in accordance with APB Opinion No. 25, the eliminated future compensation expense related to the affected options is included as increased compensation expense of $1,222 and is included in Note 1 as a pro-forma disclosure. Under the intrinsic value provision of APB Opinion No. 25, we expensed $20 as a result of this acceleration. Based on our closing stock price on the date the accelerated vesting took place, 47% of the total options immediately vested had prices below the closing market price, resulting in the $20 of compensation expense.

As of December 31, 2006, there was $703 of total unrecognized compensation cost related to nonvested stock options granted under the plans. The cost is expected to be recognized over a weighted-average period of 2.5 years.

During 2006, 291,999 stock options with an intrinsic value of $1,155 were exercised. We received $6,005 for these exercises and approximately $416 of tax benefit was realized.

The following table summarizes information about stock options that were outstanding at December 31, 2006:

							Weighted Average				Weighted
			Weighted Average		Aggregate		Remaining				Average		Aggregate
	Number		Exercise		Intrinsic		Contractual Life		Number		Exercise		Intrinsic
Range of Exercise Price	Outstanding		Price		Value		(In years)		Exercisable		Price		Value
$17.00 - 20.00		283,232	$	18.28	$	2,616		6.1		283,232	$	18.28	$	2,616
20.01 - 23.50		824,383		21.92		4,621		7.4		598,194		21.56		3,563
23.51 - 26.50		117,200		25.72		211		4.2		93,200		25.56		183
26.51 - 38.00		41,696		35.79		N/A		1.3		41,696		35.79		N/A
		1,266,511	$	21.91	$	7,448		6.6		1,016,322	$	21.60	$	6,362

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Notes to Consolidated Financial Statements — (Continued)

The weighted average remaining contractual life on the exercisable options shown in the table above is 5.9 years.

The 2003 plan also permits the award of up to 300,000 shares of restricted stock. Prior to 2003, we made awards of restricted stock outside of any plan. The shares vest equally over a three-year period. Unvested shares are subject to certain restrictions and risk of forfeiture by the participants. A summary of the status of the restricted stock granted by us as of December 31, 2006, 2005 and 2004, and changes during the years ending on those dates is presented below:

	2006			2005			2004
	Shares			Shares			Shares
Restricted shares outstanding, beginning of year		42,061			38,100			23,748
Shares granted		42,162			25,387			27,326
Shares vested		(18,675	)		(14,260	)		(11,222	)
Shares forfeited		(2,683	)		(7,166	)		(1,752	)
Restricted shares outstanding, end of year		62,865			42,061			38,100
Weighted-average fair value per share at date of grant	$	23.18		$	21.39		$	20.35
Compensation expense (in thousands)		377			352			239

We adopted SFAS No. 123(R) on January 1, 2006 using the prospective application method. Consistent with the provisions of SFAS No. 123, we recorded the fair value of restricted stock grants, net of estimated forfeitures, and an offsetting deferred compensation amount within stockholders’ equity for unvested restricted stock. To comply with the provisions of SFAS 123(R), we reclassified the deferred compensation balance for grants issued prior to 2006 under APB 25 to additional paid-in capital on the consolidated balance sheet. As of December 31, 2006, there was $262 of unamortized restricted stock compensation related to nonvested restricted stock grants awarded prior to 2006. Of this unamortized expense, $208, and $54 are expected to be expensed in 2007, and 2008, respectively. For restricted stock awards granted prior to the adoption of SFAS 123(R), we will continue to recognize compensation expense over the full vesting period. As of December 31, 2006, there was $432 of total unrecognized compensation cost related to the nonvested restricted stock granted after the adoption of SFAS 123(R). The cost is expected to be recognized over a weighted-average period of 2.5 years.

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NOTE 18.  DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

The following table reflects a comparison of the carrying amounts and fair values of our financial instruments at December 31:

	2006				2005
	Carrying		Fair		Carrying			Fair
	Amount		Value		Amount			Value
Financial Assets:
Cash and short-term investments	$	69,398	$	69,398	$	62,755		$	62,755
Loans held for sale		1,764		1,764		522			522
Securities available for sale		614,718		614,718		681,030			681,030
Regulatory stock		24,410		24,410		33,102			33,102
Loans-net of allowance		1,769,821		1,853,425		1,725,800			1,790,512
Accrued interest receivable		15,295		15,295		13,376			13,376
Interest rate swap agreements	$	747	$	747	$	147		$	147
Financial Liabilities:
Deposits	$	1,953,852	$	1,956,879	$	1,808,503		$	1,805,446
Short-term borrowings		217,518		217,702		201,663			201,469
Long-term borrowings		254,521		262,280		454,787			459,498
Accrued interest payable		10,176		10,176		7,811			7,811
Interest rate swap agreements	$	396	$	396	$	(571	)	$	(571	)

The above fair value information was derived using the information described below for the groups of instruments listed. It should be noted the fair values disclosed in this table do not represent fair values of all assets and liabilities of ours and, thus, should not be interpreted to represent a market or liquidation value for us.

CASH AND SHORT-TERM INVESTMENTS

Cash and short-term investments include cash and due from banks, interest-bearing deposits in banks, short-term money market investments, and federal funds sold. For cash and other short-term investments, the carrying amount is a reasonable estimate of fair value.

LOANS HELD FOR SALE

The fair values are based on quoted market prices of similar instruments.

SECURITIES

For securities, fair value equals quoted market price, if available. If a quoted market price is not available, fair value is estimated using quoted market prices for similar securities. Fair values for nonmarketable equity securities are equal to cost, as there is no readily determinable fair value. The carrying amount of accrued interest receivable approximates fair value. For regulatory stock, carrying value approximates fair value. The carrying value of accrued interest receivable approximates fair value.

LOANS

The fair value of loans is estimated by discounting expected future cash flows using market rates of like maturity. The carrying value of accrued interest receivable approximates fair value.

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DEPOSITS

The fair value of demand deposits, savings accounts, money market deposits, and variable rate certificates of deposit is the amount payable on demand at the reporting date. The fair value of other time deposits is estimated by discounting future cashflows using market rates currently offered for debt with similar expected maturities. The carrying amount of accrued interest payable approximates fair value.

SHORT-TERM BORROWINGS

The carrying amounts of Federal funds purchased and sweep accounts approximate their fair value. The fair value of other short-term borrowings is estimated by discounting future cash flows using market rates with similar terms and maturities. The carrying amount of accrued interest payable approximates fair value.

LONG-TERM BORROWINGS

The fair value of long-term borrowings is estimated by discounting future cashflows using market rates with similar terms and maturities. The carrying amount of accrued interest payable approximates fair value.

DERIVATIVE INSTRUMENTS

The fair value of interest rate swap agreements is based on the amount expected to be received or paid to terminate such agreements.

COMMITMENTS TO EXTEND CREDIT AND STANDBY LETTERS OF CREDIT

The fair value of commitments is estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the present creditworthiness of the counterparties. For fixed-rate loan commitments, fair value also considers the difference between current levels of interest rates and the committed rates. The fair value of guarantees and letters of credit is based on fees currently charged for similar agreements or on the estimated cost to terminate them or otherwise settle the obligations with the counterparties at the reporting date. All commitments and standby letters of credit reflect current fees and interest rates, making any unrealized gains or losses immaterial.

NOTE 19.   COMMITMENTS, CONTINGENCIES, AND CREDIT RISK

We are committed under various operating leases for premises and equipment. Future minimum rentals for lease commitments having initial or remaining non-cancelable lease terms in excess of one year are as follows:

Year Ending December 31,
2007	$	2,003
2008		1,668
2009		1,515
2010		1,092
2011		998
Thereafter		7,634
Total	$	14,910

Rental expense for these operating leases totaled $1,911, $2,090 and $1,694 in 2006, 2005 and 2004, respectively.

Most of our business activity and that of our subsidiaries is conducted with customers located in the immediate geographic area of their offices. These areas are comprised of Indiana, Illinois, Kentucky, and Ohio. We maintain a

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Notes to Consolidated Financial Statements — (Continued)

diversified loan portfolio which contains no concentration of credit risk from borrowers engaged in the same or similar industries exceeding 10% of total loans.

Integra Bank evaluates each credit request of their customers in accordance with established lending policies. Based on these evaluations and the underlying policies, the amount of required collateral (if any) is established. Collateral held varies but may include negotiable instruments, accounts receivable, inventory, property, plant and equipment, income producing properties, residential real estate and vehicles. Integra Bank’s access to these collateral items is generally established through the maintenance of recorded liens or, in the case of negotiable instruments, possession.

We are a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of our customers. These instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the balance sheet. The contractual or notional amounts of those instruments reflect the extent of involvement we have in particular classes of financial instruments.

Our exposure to credit loss, in the event of nonperformance by the counterparty to the financial instrument for commitments to extend credit and standby letters of credit, is represented by the contractual notional amount of those instruments. We use the same credit policies in making commitments and conditional obligations as we do for other on-balance sheet instruments. Financial instruments whose contract amounts represent credit risk at December 31, 2006, follows:

							Ranges of Rates
	Variable Rate		Fixed Rate		Total		on Fixed Rate
	Commitment		Commitment		Commitment		Commitments
Commitments to extend credit	$	533,688	$	36,733	$	570,421	3.75% - 21.00%
Standby letters of credit		15,259		2,276		17,535	0.00% - 9.00%

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements.

Standby letters of credit, both financial and performance, are written conditional commitments issued by the banks to guarantee the performance of a customer to a third party. Those guarantees are primarily issued to support public and private borrowing arrangements, including commercial paper, bond financing, and similar transactions. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. We also have $2,380 of additional non-reimbursable standby letters of credit.

We and our subsidiaries are parties to legal actions which arise in the normal course of their business activities. In the opinion of management, the ultimate resolution of these matters is not expected to have a materially adverse effect on the financial position or on the results of operations of us and our subsidiaries.

We previously reported that the Internal Revenue Service, or IRS, has been examining our 2002 federal income tax return, and that we filed an appeal with the IRS Office of Appeals. The IRS Office of Appeals completed their review in December, 2006, which was favorable to us with respect to the mark to market issue.

The case is now subject to review by the staff of the Congressional Joint Committee on Taxation. While the staff can not directly modify the proposed results of the IRS examination, they will comment on those results. Based on those comments, the IRS may change their position. Although the IRS examination will not be final until after the Joint Committee staff completes their review, and assurance cannot be given as to the possible outcome, we believe that our position accords with the law and customary practices in the banking industry.

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NOTE 20.   INTEREST RATE CONTRACTS

During the fourth quarter of 2004, we entered into an interest rate swap agreement with a $7,500 notional amount to convert a fixed rate security to a variable rate. The interest rate swap requires us to pay a fixed rate of interest of 4.90% and receive a variable rate based on three-month LIBOR. The variable rate received was 6.075% at December 31, 2006. The swap expires on or prior to January 5, 2016, and had a notional amount of $6,695 at December 31, 2006.

During the first quarter of 2003, we entered into interest rate swap contracts with a $75,000 notional amount to convert a portion of our liabilities from fixed rate to variable rate as part of our balance sheet management strategy. A total of $25,000 of this notional amount matured during the first quarter of 2006, while the remaining $50,000 expired during the second quarter.

During the second quarter of 2006, we initiated an interest rate protection program in which we earn fee income, in order to provide our commercial loan customers the ability to swap from variable to fixed, or fixed to variable interest rates. Under these agreements, we enter into a variable or fixed rate loan agreement with our customer in addition to a swap agreement. The swap agreement effectively swaps the customer’s variable rate to a fixed rate or vice versa. We then enter into a corresponding swap agreement with a third party in order to swap our exposure on the variable to fixed rate swap with our customer. Since the swaps are structured to offset each other, changes in market values, while recorded through the income statement, have no net earnings impact.

During the third quarter of 2006, we purchased a three year interest rate floor with a strike rate of 7.50% and a notional amount of $30,000 to hedge against the risk of falling rates on portions of our variable rate home equity loan portfolio. This floor is designated as a cash flow hedge, with any cumulative gain or loss being deferred and reported as a component of other comprehensive income. The hedge premium is being amortized to interest income based on a schedule that matches the expense with the value of the instrument.

We are exposed to losses if a counterparty fails to make its payments under a contract in which we are in a receiving status. Although collateral or other security is not obtained, we minimize our credit risk by monitoring the credit standing of the counterparties. We anticipate that the counterparty will be able to fully satisfy its obligations under the remaining agreement.

NOTE 21.   EMPLOYEE RETIREMENT PLANS

Substantially all employees are eligible to contribute a portion of their pretax salary to a defined contribution plan. We may make contributions to the plan in varying amounts depending on the level of employee contributions. Our expense related to this plan was $1,046, $995 and $1,045 for 2006, 2005 and 2004, respectively.

We also have a benefit plan offering postretirement medical and life benefits. The medical portion of the plan is contributory to the participants, while the life portion is not. We have no plan assets attributable to the plan and fund the benefits as claims arise. Benefit costs related to this plan are recognized in the periods employees are provided service for such benefits. Certain employees hired before 1978 who are age 55 with 5 years of service and retire directly from our company are eligible for a medical plan premium reimbursement. Additionally, employees hired after 1977 who retire are able to stay in the medical plan until age 65, paying the same premium rates charged to employees. This generates a liability in that actual health insurance costs typically exceed the premiums paid. We reserve the right to terminate or make changes at any time.

The 2006 health care cost trend rate is projected to be 9.0%. The rate is assumed to decrease incrementally each year until it reaches 5.0% in 2014 and remains at that level thereafter. Increasing or decreasing the health care cost trend rates by one percentage point would not have had a material effect on the December 31, 2006, accumulated postretirement benefit obligation or the annual cost of retiree health plans.

The discount rate is used to determine the present value of future benefit obligations and net periodic pension cost and is determined by matching the expected cash flows of the plan to a yield curve based on long-term, high

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INTEGRA BANK CORPORATION and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)

quality corporate bonds as of the measurement date. The discount rate reflected in the financial statements was 5.50% for 2006, 6.00% for 2005 and 6.25% for 2004.

The following summary reflects the plan’s funded status and the amounts reflected on our financial statements.

Actuarial present values of benefit obligations at December 31 are:

	Postretirement Benefits
	2006			2005
Change in Fair Value of Plan Assets:
Balance at beginning of year	$	—		$	—
Actual return on plan assets		—			—
Employer contributions		160			133
Benefits paid, net of retiree contributions		(160	)		(133	)
Balance at end of year	$	—		$	—
Change in Accumulated Projected Benefit Obligation:
Balance at beginning of year	$	1,874		$	1,972
Service cost		99			113
Interest costs		99			112
Actuarial (gains) losses		335			(190	)
Benefits paid, net of retiree contributions		(160	)		(133	)
Balance at end of year	$	2,247		$	1,874
Funded status	$	(2,247	)	$	(1,874	)
Unrecognized prior service cost		—			233
Unrecognized net actuarial loss		—			895
(Accrued) prepaid benefit cost	$	(2,247	)	$	(746	)

Amounts recognized in accumulated other comprehensive income at December 31, 2006, on a pre-tax basis, include prior service cost of $198 and actuarial losses of $1,183.

Components of Net Periodic Pension Cost and Other Amounts Recognized in Net Income:

	Postretirement Benefits
	2006		2005		2004
Service cost — benefits earned during the period	$	99	$	113	$	103
Interest cost on projected benefit obligation		99		113		113
Amortization of prior service costs		34		34		34
Amortization of net (gain) loss		47		63		67
Net periodic cost	$	279	$	323	$	317

The estimated prior service costs and net loss for the plan that will be amortized from accumulated other comprehensive income into net periodic benefit cost over 2007 are $34 and $64, respectively.

81

INTEGRA BANK CORPORATION and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)

The following table shows the future benefit payments, net of retiree contributions, which are expected to be paid during the following years:

Year Ending December 31,
2007	$	177
2008		158
2009		176
2010		184
2011		199
Thereafter		1,051

NOTE 22.   SEGMENT INFORMATION

We operate one reporting line of business: Banking. Banking services include various types of deposit accounts; safe deposit boxes; automated teller machines; consumer, mortgage and commercial loans; mortgage loan sales and servicing; letters of credit; corporate cash management services; brokerage and insurance products and services; and complete personal and corporate trust services. Other includes the operating results of the parent company and its reinsurance subsidiary, as well as eliminations. The reinsurance company does not meet the reporting criteria for a separate segment.

The accounting policies of the Banking segment are the same as those described in the summary of significant accounting policies. The following tables present selected segment information for the banking and other operating units:

For the Year Ended
December 31, 2006	Banking		Other			Total
Interest income	$	158,194	$	199		$	158,393
Interest expense		70,326		5,761			76,087
Net interest income		87,868		(5,562	)		82,306
Provision for loan losses		20,294		—			20,294
Other income		35,553		274			35,827
Other expense		74,662		1,215			75,877
Earnings before income taxes		28,465		(6,503	)		21,962
Income taxes (benefit)		4,878		(2,463	)		2,415
Net income (loss)	$	23,587	$	(4,040	)	$	19,547
Segment assets	$	2,672,217	$	12,262		$	2,684,479

82

INTEGRA BANK CORPORATION and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)

For the Year Ended
December 31, 2005	Banking		Other			Total
Interest income	$	139,997	$	182		$	140,179
Interest expense		53,016		4,542			57,558
Net interest income		86,981		(4,360	)		82,621
Provision for loan losses		5,764		—			5,764
Other income		35,521		357			35,878
Other expense		75,685		1,872			77,557
Earnings before income taxes		41,053		(5,875	)		35,178
Income taxes (benefit)		10,030		(2,151	)		7,879
Net income (loss)	$	31,023	$	(3,724	)	$	27,299
Segment assets	$	2,685,870	$	22,272		$	2,708,142

For the Year Ended
December 31, 2004	Banking			Other			Total
Interest income	$	132,157		$	214		$	132,371
Interest expense		44,630			3,274			47,904
Net interest income		87,527			(3,060	)		84,467
Provision for loan losses		1,305			—			1,305
Other income		33,309			298			33,607
Other expense		136,923			1,257			138,180
Earnings before income taxes		(17,392	)		(4,019	)		(21,411	)
Income taxes (benefit)		(13,120	)		(1,671	)		(14,791	)
Net loss	$	(4,272	)	$	(2,348	)	$	(6,620	)
Segment assets	$	2,732,901		$	24,264		$	2,757,165

83

INTEGRA BANK CORPORATION and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)

NOTE 23.   FINANCIAL INFORMATION OF PARENT COMPANY

Condensed financial data for Integra Bank Corporation (parent holding company only) follows:

CONDENSED BALANCE SHEETS

	December 31,
	2006			2005
ASSETS
Cash and cash equivalents	$	8,036		$	6,581
Investment in banking subsidiaries		288,334			275,888
Investment in other subsidiaries		798			570
Securities available for sale		1,625			1,625
Other assets		9,198			7,944
TOTAL ASSETS	$	307,991		$	292,608
LIABILITIES
Long-term borrowings	$	68,125		$	68,125
Dividends payable		3,025			2,794
Other liabilities		1,367			1,591
Total liabilities		72,517			72,510
SHAREHOLDERS’ EQUITY
Common stock		17,794			17,465
Additional paid-in capital		135,054			127,980
Retained earnings		88,355			80,622
Accumulated other comprehensive income (loss)		(5,729	)		(5,969	)
Total shareholders’ equity		235,474			220,098
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	307,991		$	292,608

84

INTEGRA BANK CORPORATION and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)

CONDENSED STATEMENTS OF INCOME

	Year Ended December 31,
	2006		2005		2004
Dividends from banking subsidiaries	$	12,000	$	12,000	$	14,000
Other income		161		155		182
Total income		12,161		12,155		14,182
Interest expense		5,783		4,558		3,283
Other expenses		1,138		1,736		1,098
Total expenses		6,921		6,294		4,381
Income before income taxes and equity in undistributed earnings of subsidiaries		5,240		5,861		9,801
Income tax benefit		2,506		2,195		1,701
Income before equity in undistributed earnings of subsidiaries		7,746		8,056		11,502
Equity in undistributed earnings of subsidiaries		11,801		19,243		(18,122	)
Net income (loss)	$	19,547	$	27,299	$	(6,620	)

85

INTEGRA BANK CORPORATION and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)

CONDENSED STATEMENTS OF CASH FLOWS

	Year Ended December 31,
	2006			2005			2004
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)	$	19,547		$	27,299		$	(6,620	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Amortization and depreciation		154			160			113
Employee benefit expenses		817			373			239
Excess distributions (undistributed) earnings of subsidiaries		(11,801	)		(19,243	)		18,122
Decrease in deferred taxes		(101	)		(84	)		(79	)
(Increase) decrease in other assets		(1,303	)		928			1,304
(Decrease) increase in other liabilities		(224	)		424			470
Net cash flows provided by operating activities		7,089			9,857			13,549
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from call of securities		—			1,000			—
Net cash flows provided by investing activities		—			1,000			—
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid		(11,583	)		(11,144	)		(13,698	)
Net decrease in short-term borrowed funds		—			—			(4,000	)
Proceeds from long-term borrowings		—			—			4,000
Proceeds from exercise of stock options		5,949			1,298			727
Net cash flows used in financing activities		(5,634	)		(9,846	)		(12,971	)
Net increase in cash and cash equivalents		1,455			1,011			578
Cash and cash equivalents at beginning of year		6,581			5,570			4,992
Cash and cash equivalents at end of year	$	8,036		$	6,581		$	5,570

86

ITEM 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

There are no changes in or disagreements with accountants on accounting and financial disclosures.

ITEM 9A.   CONTROLS AND PROCEDURES

Based on an evaluation of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15c) as of December 31, 2006, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of that date in timely alerting our management to material information required to be included in this Form 10-K and other Exchange Act filings.

Management’s report on internal control over financial reporting is set forth on page 43 of this report.

There have been no changes in our internal control over financial reporting that occurred during the quarter ended December 31, 2006 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B.   OTHER INFORMATION

During the fourth quarter of 2006, the Audit Committee of the Board of Directors did not approve the engagement of Crowe Chizek and Company LLC, our independent registered public accounting firm, to perform any non-audit services. This disclosure is made pursuant to Section 10A(i)(2) of the Securities Exchange Act of 1934, as added by Section 202 of the Sarbanes Oxley Act of 2002.

ITEM 10.   DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information required by this Item concerning our directors, director nominees and corporate governance principles is incorporated herein by reference from the definitive proxy statement for our 2007 Annual Meeting of Shareholders, which will be filed with the Commission pursuant to Regulation 14A within 120 days after the end of our last fiscal year. Information concerning our executive officers is included under the caption “Executive Officers of the Company” at the end of Part I of this Annual Report.

ITEM 11.   EXECUTIVE COMPENSATION

The information under the headings “Nominees and Continuing Directors — Director Compensation” and “Compensation of Executive Officers” in the proxy statement for our 2007 Annual Meeting of Shareholders is hereby incorporated by reference herein.

ITEM 12.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The information under the headings “General Information — Security Ownership of Management and Principal Owners” and “Compensation of Executive Officers — Equity Compensation Plan Information” in the proxy statement for our 2007 Annual Meeting of Shareholders is hereby incorporated by reference herein.

ITEM 13.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The information under the heading “Transactions with Management and Related Persons” in the proxy statement for our 2007 Annual Meeting of Shareholders is hereby incorporated by reference herein.

ITEM 14.   PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information under the heading “Audit-Related Matters — Information Concerning Principal Accounting Firm” and “Audit-Related Matter — Pre-Approval Policies and Procedures” in the proxy statement for our 2007 Annual Meeting of Shareholders is hereby incorporated by reference herein.

87

PART IV

ITEM 15.   EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

Documents Filed as Part of Form 10-K

1. Financial Statements

Report of Independent Registered Public Accounting Firm

Consolidated Balance Sheets at December 31, 2006 and 2005

Consolidated Statements of Income for the years ended December 31, 2006, 2005 and 2004

Consolidated Statements of Comprehensive Income for the years ended December 31, 2006, 2005 and 2004

Consolidated Statements of Changes in Shareholders’ Equity for the years ended December 31, 2006, 2005 and 2004

Consolidated Statements of Cash Flows for the years ended December 31, 2006, 2005 and 2004

Notes to Consolidated Financial Statements

2. Schedules

No schedules are included because they are not applicable or the required information is shown in the financial statements or the notes thereto.

3. Exhibits

Exhibit Index is on page 91.

88

SIGNATURES

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

INTEGRA BANK CORPORATION

/s/  MICHAEL T. VEA

Michael T. Vea

Chairman of the Board, Chief Executive

Officer and President

Date 3/8/2007

/s/  MARTIN M. ZORN

Martin M. Zorn

Chief Financial Officer; Executive Vice

President Finance and Risk

Date 3/8/2007

/s/  MICHAEL B. CARROLL

Michael B. Carroll

Senior Vice-President, Controller

Date 3/8/2007

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

		Date
/s/  SANDRA CLARK BERRY Sandra Clark Berry	Director	3/8/2007
/s/  ROXY M. BAAS Roxy M. Baas	Director	3/8/2007
/s/  H. RAY HOOPS H. Ray Hoops	Director	3/8/2007
/s/  GEORGE D. MARTIN George D. Martin	Director	3/8/2007
/s/  THOMAS W. MILLER Thomas W. Miller	Director	3/8/2007

89

		Date
/s/  RICHARD M. STIVERS Richard M. Stivers	Director	3/8/2007
/s/  ROBERT W. SWAN Robert W. Swan	Director	3/8/2007
/s/  ROBERT D. VANCE Robert D. Vance	Director	3/8/2007
/s/  WILLIAM E. VIETH William E. Vieth	Director	3/8/2007
/s/  DANIEL T. WOLFE Daniel T. Wolfe	Director	3/8/2007

90

EXHIBIT INDEX

Exhibit
Number	Description of Exhibit
3(a)(i)	Restated Articles of Incorporation (incorporated by reference to Exhibit 3.1 to Form 8-A/A dated June 12, 1998)
3(a)(ii)	Articles of Amendment dated May 17, 2000 (incorporated by reference to Exhibit 3(a) to Quarterly Report on Form 10-Q for the period ending September 30, 2000)
3(a)(iii)	Articles of Amendment dated July 18, 2001 (incorporated by reference to Exhibit 4(a))
3(b)	By-Laws (incorporated by reference to Exhibit 3(b) to Annual Report on Form 10-K for the fiscal year ended December 31, 2003 as amended through February 18, 2004)
4(a)	Rights Agreement, dated July 18, 2001, between Integra Bank Corporation and Integra Bank N.A., as Rights Agent. The Rights Agreement includes the form of Articles of Amendment setting forth terms of Series A Junior Participating Preferred Stock as Exhibit A, the form of Right Certificate as Exhibit B and the Summary of Rights to Purchase Preferred Shares as Exhibit C (incorporated by reference to Exhibit 1 to the Current Report on Form 8-K dated July 18, 2001)
4(b)	Amendment to Rights Agreement dated September 15, 2004, between Integra Bank Corporation and Integra Bank N.A., as Rights Agent (incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-A/A dated September 16, 2004)
10(a)*	Integra Bank Corporation Employees’ 401(K) Plan (2003 Restatement)
10(b)*	1999 Stock Option and Incentive Plan (incorporated by reference to Exhibit A to Proxy Statement on Schedule 14A filed April 24, 1999)
10(c)*	Contract of Employment dated August 23, 1999, between National City Bancshares, Inc. and Michael T. Vea (incorporated by reference to Exhibit 10.1 to Quarterly Report on Form 10-Q for the period ending September 30, 1999)
10(d)*	Amendment to Contract of Employment dated September 20, 2000 between Integra Bank Corporation and Michael T. Vea (incorporated by reference to Exhibit 10(h) to Annual Report on Form 10-K for the fiscal year ended December 31, 2000)
10(e)*	Nonqualified Stock Option Agreement (Non Plan) dated September 7, 1999, between National City Bancshares, Inc. and Michael T. Vea (incorporated by reference to Exhibit 10.3 to Quarterly Report on Form 10-Q for the period ending September 30, 1999)
10(f)*	Employment Agreement dated July 28, 2003, between Integra Bank Corporation and Archie M. Brown, Jr. (incorporated by reference to Exhibit 10(a) to Quarterly Report on Form 10-Q for the period ended September 30, 2003)
10(g)*	Employment Agreement dated July 28, 2003, between Integra Bank Corporation and Martin M. Zorn (incorporated by reference to Exhibit 10(c) to Quarterly Report on Form 10-Q for the period ended September 30, 2003)
10(h)*	First Amendment to Integra Bank Corporation Employees’ 401(K) Plan dated January 1, 2003
10(i)*	Second Amendment to Integra Bank Corporation Employees’ 401(K) Plan dated March 28, 2005
10(j)*	Third Amendment to Integra Bank Corporation Employees’ 401(K) Plan dated January 1, 2006
10(k)*	2003 Stock Option and Incentive Plan (incorporated by reference to Exhibit B to Proxy Statement on Schedule 14A filed March 20, 2003)
10(l)*	Executive Annual and Long-Term Incentive Plan (incorporated by reference to Exhibit 10.1 to Quarterly Report on Form 10-Q for the period ended June 30, 2003)
10(m)*	Form of Award Agreement for Nonqualified Stock Option Grant under 2003 Stock Option and Incentive Plan (incorporated by reference to Exhibit 10(m) to Annual Report on Form 10-K for the fiscal year ended December 31, 2005)
10(n)*	Form of Award Agreement for Incentive Stock Option Grant under 2003 Stock Option and Incentive Plan (incorporated by reference to Exhibit 10(n) to Annual Report on Form 10-K for the fiscal year ended December 31, 2005)

91

Exhibit
Number	Description of Exhibit
10(o)*	Form of Award Agreement for Restricted Stock Grant under 2003 Stock Option and Incentive Plan (incorporated by reference to Exhibit 10(o) to Annual Report on Form 10-K for the fiscal year ended December 31, 2005)
10(p)*	Summary Sheet of 2007 Compensation
10(q)*	Employment Agreement dated March 17, 2004, between Integra Bank Corporation and Michael B. Carroll (incorporated by reference to Exhibit 10(q) to Annual Report on Form 10-K for the year ended December 31, 2005)
10(r)*	Employment Agreement dated March 17, 2004, between Integra Bank Corporation and Roger M. Duncan
10(s)	Agreement and Plan of Merger by and among Integra Bank Corporation, PFC Merger Corp and Prairie Financial Corporation dated as of October 5, 2006, as amended (incorporated by reference to Annex A to the Proxy Statement/Prospectus included in the Registration Statement on Form S-4 (Reg. No. 333-140044) filed January 17, 2007)
10(t)	Voting agreement dated as of October 5, 2006 (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed October 5, 2006)
21	Subsidiaries of the Registrant
23(a)	Consent of PricewaterhouseCoopers LLP
23(b)	Consent of Crowe Chizek and Company LLC
31(a)	Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of Chief Executive Officer
31(b)	Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of Chief Financial Officer
32	Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

* The indicated exhibit is a management contract, compensatory plan or arrangement required to be filed by Item 601 of Regulation S-K.

92

EX-10.(A)

                                                                   EXHIBIT 10(a)

                            INTEGRA BANK CORPORATION

                             EMPLOYEES' 401(K) PLAN

                               (2003 RESTATEMENT)


                                                                               .
                                                                               .
                                                                               .

                            INTEGRA BANK CORPORATION
                             EMPLOYEES' 401(K) PLAN

                                TABLE OF CONTENTS



                                                                                                     PAGE
                                                                                                     ----
                                                                                                  
ARTICLE I GENERAL PROVISIONS                                                                           1
     Section 1.01.   Designation and Purpose                                                           1
     Section 1.02.   Trust Agreement                                                                   1

ARTICLE II DEFINITIONS                                                                                 1
     Section 2.01.   Terms Defined                                                                     1
     Section 2.02.   Rules of Construction                                                            11

ARTICLE III ELIGIBILITY AND PARTICIPATION                                                             11
     Section 3.01.   Date of Participation                                                            11
     Section 3.02.   Completion of Forms by Participants and Beneficiaries and Alternate Payees       11
     Section 3.03.   Cessation of Participation                                                       12
     Section 3.04.   Omission of Eligible Employee                                                    12
     Section 3.05.   Inclusion of Ineligible Employee                                                 12

ARTICLE IV CONTRIBUTIONS                                                                              12
     Section 4.01.   TrustFund                                                                        12
     Section 4.02.   Elective Deferrals                                                               12
     Section 4.03.   Limitation on Elective Deferrals                                                 13
     Section 4.04.   Matching Contributions                                                           14
     Section 4.05.   Limitation on Matching Contributions and Voluntary Contributions                 15
     Section 4.06.   Profit Sharing Contributions                                                     18
     Section 4.07.   Rollover Contributions                                                           18
     Section 4.08.   Minimum Contribution Requirement                                                 18
     Section 4.09.   Nondiversion and Exclusive Benefit                                               19

ARTICLE V ACCOUNTING AND INVESTMENTS                                                                  19
     Section 5.01.   Participants' Accounts                                                           19
     Section 5.02.   Separate Investment Funds                                                        20
     Section 5.03.   Valuation Standards                                                              20
     Section 5.04.   General Method of Determining Values of Participants' Accounts                   20
     Section 5.05.   Allocation of Earnings to Accounts                                               20
     Section 5.06.   Crediting of Contributions and Forfeitures to Particular Funds                   21
     Section 5.07.   Transfers Among Funds                                                            21
     Section 5.08.   Investment Discretion of Beneficiaries and Alternate Payees                      21

ARTICLE VI VESTING AND FORFEITURE                                                                     21
     Section 6.01.   Nonforfeitability                                                                21
     Section 6.02.   Vested Interests                                                                 21


                                      -1-



                                                                                                  
     Section 6.03. Vesting of Profit Sharing Account                                                  21
     Section 6.04. Forfeitures                                                                        22

ARTICLE VII BENEFITS                                                                                  22
     Section 7.01.   General                                                                          22
     Section 7.02.   Termination and Disability Benefits                                              23
     Section 7.03.   Death Benefits                                                                   23
     Section 7.04.   Payment of Small Accounts                                                        23
     Section 7.05.   Permitted Withdrawals from Voluntary Account                                     23
     Section 7.06.   Other Distribution Rules Imposed by Federal Law                                  23
     Section 7.07.   Beneficiaries                                                                    25
     Section 7.08.   Effect of Government Regulation on Payment of Benefits                           26
     Section 7.09.   Inalienability of Benefits                                                       26
     Section 7.10.   Payments for Benefit of Incompetents                                             26
     Section 7.11.   Qualified Domestic Relations Orders                                              26
     Section 7.12.   Direct Rollovers                                                                 26

ARTICLE VIII ADMINISTRATION                                                                           26
     Section 8.01.   Administrator                                                                    26
     Section 8.02.   Correction of Defects                                                            26
     Section 8.03.   Reliance upon Legal Counsel                                                      27
     Section 8.04.   Expenses                                                                         27
     Section 8.05.   Powers and Duties of Plan Administrator                                          27
     Section 8.06.   Matters Specifically Excluded from Jurisdiction                                  27
     Section 8.07.   Investment Manager                                                               28

ARTICLE IX CLAIMS PROCEDURES                                                                          28
     Section 9.01.   Presentation of Claims                                                           28
     Section 9.02.   Denial of Claim                                                                  28
     Section 9.03.   Claimant's Right to Appeal Denial of Claim                                       29

ARTICLE X LIMITATIONS ON RIGHTS OF EMPLOYEES AND OTHER PERSONS                                        30
     Section 10.01.  In General                                                                       30
     Section 10.02.  No Increase or Impairment of Other Rights                                        30
     Section 10.03.  Trust Sole Source of Benefits                                                    30
     Section 10.04.  Other Limitations of Liability                                                   30

ARTICLE XI PROVISIONS DESIGNED TO COMPLY WITH LIMITATIONS ON CONTRIBUTIONS AND OTHER ADDITIONS        30
     Section 11.01.  Purpose and Construction of This Article                                         30
     Section 11.02.  General Statement of Limitation                                                  30
     Section 11.03.  Adjustments to Allocation of Contributions                                       30

ARTICLE XII AMENDMENT AND TERMINATION OF PLAN                                                         31
     Section 12.01.  Amendments in General                                                            31
     Section 12.02.  Amendments Necessary to Bring Plan into Compliance with the Code
                     and ERISA                                                                        31



                                      -11-



                                                                                                  
     Section 12.03.  Amendments to Vesting Provisions                                                 32
     Section 12.04.  Termination of Plan                                                              32
     Section 12.05.  Effect of Termination on Trust                                                   32
     Section 12.06.  Payment of Benefits upon Termination                                             32
     Section 12.07.  Post-Termination Powers of Trustees, Plan Administrator,
                     Company, and Employer                                                            33

ARTICLE XIII PROVISIONS RELATING TO TOP-HEAVY PLAN                                                    33
     Section 13.01.  Construction of this Article                                                     33
     Section 13.02.  Top-Heavy Determination                                                          33
     Section 13.03.  Special Rules Relating to Determination of Top-Heavy Status                      34

ARTICLE XIV MISCELLANEOUS PROVISIONS                                                                  34
     Section 14.01.  Merger, Consolidation, or Transfer of Assets or Liabilities                      34
     Section 14.02.  No Duplication of Benefits                                                       35
     Section 14.03.  Named Fiduciaries                                                                35
     Section 14.04.  Bonding                                                                          35
     Section 14.05.  Qualified Military Service                                                       35
     Section 14.06.  Transfer of Benefits                                                             35
     Section 14.07.  Transfers From Merged Plans                                                      35

ARTICLE XV EGTRRA AMENDMENTS                                                                          36
     Section 15.01.  General                                                                          36
     Section 15.02.  Limitations On Contributions                                                     36
     Section 15.03.  Increase In Compensation Limit                                                   37
     Section 15.04.  Modification of Top-Heavy Rules                                                  37
     Section 15.05.  Direct Rollovers of Plan Distributions;                                          38
     Section 15.06.  Rollovers Disregarded In Involuntary Cashouts                                    39
     Section 15.07.  Repeal of Multiple Use Test                                                      39
     Section 15.08.  Elective Deferrals -- Contribution Limitation                                    39
     Section 15.09.  Catch-Up Contributions                                                           39
     Section 15.10.  Distribution Upon Severance of Employment                                        39

ARTICLE XVI SAFE HARBOR PROVISIONS                                                                    40
     Section 16.01.  Safe Harbor Elective Deferrals                                                   40
     Section 16.02.  Safe Harbor Matching Contributions                                               40
     Section 16.03.  Top-Heavy Requirements                                                           40
     Section 16.04.  Notice                                                                           40

ARTICLE XVII MINIMUM DISTRIBUTION REQUIREMENTS EFFECTIVE JANUARY 1, 2002                              40
     Section 17.01.  General Rules                                                                    40
     Section 17.02.  Time and Manner of Distribution                                                  41
     Section 17.03.  Required Minimum Distributions During Participant's Lifetime                     41
     Section 17.04.  Required Minimum Distributions After Participant's Death                         42
     Section 17.05.  Definitions                                                                      43



                                     -111-



                            INTEGRA BANK CORPORATION
                             EMPLOYEES' 401(K) PLAN

                                    ARTICLE I
                               GENERAL PROVISIONS

      Section 1.01. Designation and Purpose. This Plan is a continuation and
complete restatement of the Integra Bank Corporation Employees' 401(k) Plan. The
effective date of the Plan, as restated and amended, is January 1, 2003, except
as otherwise provided in the Plan. For the purpose of Code subparagraph
401(a)(27)(B), the Plan is designated a profit sharing plan. The purposes of the
Plan are to assist Eligible Employees in the accumulation of funds for
retirement, to encourage Eligible Employees to save, and to enhance the interest
of Eligible Employees in the efficient and successful operation of the Employer.
The Plan is designed to meet the requirements of Code subsections 401(a),
401(k), 401(m) and 501(a) and the requirements of ERISA.

      Section 1.02. Trust Agreement. Effective as of the date of its execution,
the Company entered into a Trust Agreement with Integra Bank, N.A. as Trustee,
providing for a trust to support and implement the operation of the Plan. The
Trust Agreement, as restated or amended from time to time, is part of this Plan.

                                   ARTICLE II
                                   DEFINITIONS

      Section 2.01. Terms Defined. As used in the Plan, the following words and
phrases, when capitalized, have the following meanings, except when used in a
context that plainly requires a different meaning:

      "Account" means the record of a Participant's interest in the Trust
Assets.

      "Aggregation Group" means a Required Aggregation Group or a Permissive
Aggregation Group.

      "Alternate Payee" means an "alternate payee" as defined in Code paragraph
414(p)(8) who is entitled to receive benefits under the Plan.

      "Annual Addition" means, with respect to a Participant for a Plan Year,
the sum of the following amounts credited to the Participant's accounts in the
Plan and in any other defined contribution plan maintained by the Employer for
the Plan Year: Employer contributions; Employee contributions (other than
Rollover Contributions); forfeitures; amounts allocated to an individual medical
account, as defined in Code paragraph 415(1)(2), that is part of a pension
annuity plan maintained by the Employer; and amounts derived from contributions
that are attributable to post-retirement medical benefits, allocated to the
separate account of a Key Employee, under a welfare benefit fund, as defined in
Code subsection 4 19(e), maintained by the Employer.



      "Annuity Starting Date" means the first day of the first period for which
an amount is payable as an annuity or, if the benefit is not payable in the form
of an annuity, the first day on which all events have occurred that entitle the
Participant to the benefit.

      "Beneficiary" means the person or persons designated pursuant to Section
7.07 to receive benefits under the Plan after a Participant's death.

      "Board of Directors" means the Company's Board of Directors.

      "Code" means the Internal Revenue Code of 1986, as amended from time to
time, and interpretive rules and regulations.

      "Company" means Integra Bank Corporation.

      "Company Stock" means a qualifying employer security, as defined in ERISA
section 407(d)(5), issued by the Company.

      "Compensation" means, with respect to an Employee for a Plan Year, the
Employee's wages, as defined in Code subsection 340 1(a), and all other payments
of compensation by the Employer in the course of the Employer's trade or
business for a Plan Year for which the Employer is required to furnish the
Employee a written statement under Code sections 604 1(d), 6051 (a)(3) and 6052.
"Compensation" is determined without regard to any rules under Code subsection
3401(a) that limit the remuneration included in wages based on the nature or
location of the employment or the services performed, such as the exception for
agricultural labor in Code paragraph 3401 (a)(2). "Compensation" also includes
Elective Employer Contributions for the Plan Year, amounts contributed or
deferred by the Employer for the Plan Year at the election of the Employee that
are excluded from the Employee's gross income under Code section 125 or 457, and
qualified parking fringe benefits described in Code subsection 132(f).
Notwithstanding the preceding provisions of this paragraph, "Compensation" does
not include, whether or not includable in the Employee's gross income,
reimbursements or expense allowances, fringe benefits (cash or noncash), moving
expenses, deferred compensation or welfare benefits. Notwithstanding the
preceding provisions of this paragraph, compensation received by an Employee
before he becomes a Participant will not be considered "Compensation."

      "Continuous Service~~ means the aggregate period of time during which the
employment relationship exists between an Employee and the Employer, determined
as follows:

            (1) The period of time beginning on the date an Employee first
      performs an Hour of Service and ending on the Employee's Severance from
      Service date.

            (2) Any Period of Severance by reason of a quit, discharge or
      retirement, of less than 12 months; provided, however, that if an Employee
      is absent from service for a reason other than a quit, discharge, or
      retirement and subsequently incurs a Severance from Service as a result of
      a quit, discharge, or retirement, the Period of Severance shall be
      credited only if the Employee returns to the Employer's service on or
      before the first anniversary of the date the Employee was first absent
      from service.

                                      -2-


            (3) Any period of time beginning on the date the Employee first
      performs an Hour of Service after a Period of Severance and ending on the
      date the Employee again incurs a Severance from Service.

            (4) For purposes of aggregating periods of Continuous Service, 12
      months of completed service shall equal one year of Continuous Service,
      and 30 days of completed service shall equal one month of Continuous
      Service.

            (5) For purposes of this Subsection, with respect to a Related
      Employer that adopts the Plan after July 1, 1997, any period of time with
      the Related Employer before it becomes a Related Employer is considered a
      period of time with the Employer.

      "Contribution Percentage" means, with respect to a specified group of
Participants for a Plan Year, the average of the Contribution Ratios for the
Participants in that group, calculated to the nearest one-hundredth of one
percent.

      "Contribution Ratio" means, with respect to a Participant for a Plan Year,
the ratio of (1) to (2), calculated to the nearest one-hundredth of one percent,
where (1) is the sum of (A) Matching Contributions, (B) Voluntary Contributions,
and (C) Elective Deferrals treated as matching contributions pursuant to
paragraph l.401(m)-1(b)(2) of the federal income tax regulations paid to the
Trust on behalf of the Participant for the Plan Year and (2) is the
Participant's Regulatory Compensation for the Plan Year. In determining
Contribution Ratios, the following rules shall apply:

            (1) Matching Contributions that are used to meet the requirements of
      Code subparagraph 401 (k)(3)(A) shall be disregarded;

            (2) A Matching Contribution shall be taken into account for a Plan
      Year only if it is made on account of the Employee's Elective Deferrals
      for the Plan Year, allocated to the Employee's Matching Account as of a
      date within the Plan Year, and paid to the Trust not later than 12 months
      after the Plan Year for which it is made.

            (3) All Matching Contributions made under the Plan and any other
      plan aggregated with it for purposes of Code paragraph 401 (a)(4) and Code
      subsection 410(b) (other than Code clause 41 0(b)(2)(A)(ii)) are treated
      as made under the Plan. If the Plan and any other plan are permissively
      aggregated for purposes of Code subsection 401(m), the aggregated plans
      must separately satisfy Code paragraph 401 (a)(4) and Code subsection 4
      10(b) as though they were a single plan.

            (4) In determining the Contribution Ratio for a Highly Compensated
      Participant, all Retirement Plans to which matching contributions are made
      and in which the Highly Compensated Participant is eligible to participate
      (other than plans that may not be permissively aggregated with this Plan)
      will be considered, together with this Plan, to be a single plan.

      "Deferral Percentage" means, with respect to a specified group of
Participants, the average of the Deferral Ratios for the Participants in that
group, calculated to the nearest one-hundredth of one percent.

                                      -3-


      "Deferral Ratio" means, with respect to a Participant for a Plan Year, the
ratio of(l) to (2), calculated to the nearest one-hundredth of one percent,
where (1) is the Elective Deferrals paid to the Trust on behalf of the
Participant for the Plan Year and (2) is the Participant's Regulatory
Compensation for the Plan Year. In determining Deferral Ratios, the following
rules will apply:

            (1) Elective Deferrals that are used to meet the requirements of
      Code paragraph 401(m)(2) will be disregarded.

            (2) An Elective Deferral will be taken into account for a Plan Year
      only if it relates to Compensation that would have been received by the
      Participant in the Plan Year, but for the election to defer it, is
      allocated to the Participant's Elective Deferral Account as of a date
      within the Plan Year and is paid to the Trust not later than 12 months
      after the Plan Year for which it is made.

            (3) All elective employee pre-tax contributions made under the Plan
      and any other plan aggregated with it for purposes of Code paragraph
      401(a)(4) and Code subsection 410(b) (other than clause 41 0(b)(2)(A)(ii))
      are treated as made under the Plan. If the Plan and any other plan are
      permissively aggregated for purposes of Code subsection 401(k), the
      aggregated plans must separately satisfy Code paragraph 401 (a)(4) and
      Code subsection 4 10(b) as though they were a single plan.

            (4) In determining the Deferral Ratio for a Highly Compensated
      Participant, all cash or deferred arrangements in Retirement Plans in
      which the Highly Compensated Participant is eligible to participate (other
      than arrangements that may not be permissively aggregated with the
      arrangement under this Plan) will be considered, together with the
      arrangement under this Plan, to be a single cash or deferred arrangement.

      "Determination Date" means, for purposes of determining whether a Plan is
a Top-Heavy Plan for a Plan Year, the last day of the preceding Plan Year.

      "Direct Rollover" means a payment by the Plan to the Eligible Retirement
Plan specified by the Distributee.

      "Disabled" means, with respect to an Employee, an Employee who is eligible
to receive disability benefits under the Employer's long-term disability plan.
The term "Disability" means the condition that causes the Employee to become a
Disabled Employee.

          "Distributee" means an Employee or former Employee. In addition, the
Employee's or former Employee~ s surviving Spouse and the Employee's or former
Employee's Spouse or former Spouse who is an Alternate Payee are Distributees
with regard to the interest of the Spouse or former Spouse.

      "Elective Deferral" means a contribution made on behalf of a Participant
pursuant to Section 4.02.

                                      -4-


      "Elective Deferral Account" means a Participant's Account attributable to
Elective Deferrals and Qualified Nonelective Contributions, including Qualified
Nonelective Contributions made under prior versions of the Plan.

      "Elective Employer Contributions" means "elective deferrals" as defined in
Code paragraph 402(g)(3).

      "Eligible Employee" means an Employee who receives compensation from the
Employer that the Employer initially reports on a federal wage and tax statement
(Form W-2), and is not classified as a "temporary" or "on-call" Employee in
accordance with the Employer's written policies. An Employee who, on January 31,
2001, is employed by Webster Bancorp, Inc. or its subsidiaries, is not
considered an Eligible Employee before April 1, 2001.

      "Eligible Retirement Plan" means an individual retirement account
described in Code subsection 408(a), an individual retirement annuity described
in Code subsection 408(b), an annuity plan described in Code subsection 403(a),
or a qualified trust described in Code subsection 401(a), that accepts the
Distributee's Eligible Rollover Distribution. However, in the case of an
Eligible Rollover Distribution to a surviving Spouse, an Eligible Retirement
Plan is an individual retirement account or individual retirement annuity.

      "Eligible Rollover Distribution" means any distribution of all or any
portion of the balance to the credit of the Distributee, except that an Eligible
Rollover Distribution does not include any distribution that is one of a series
of substantially equal periodic payments (not less frequently than annually)
made for the life (or life expectancy) of the Distributee or the joint lives (or
joint life expectancies) of the Distributee and the Distributee's Beneficiary,
or for a specified period of 10 years or more; any distribution to the extent
the distribution is required under Code paragraph 401 (a)(9); the portion of any
distribution that is not includable in gross income (determined without regard
to the exclusion for net unrealized appreciation with respect to Employer
securities); and, effective January 1, 1999, any hardship distribution described
in Code subclause 401 (k)(2)(B)(i)(IV).

      "Employee" means any person employed by the Employer. For purposes of
crediting service for eligibility to participate and, except as otherwise
provided, for purposes of the rules set out in Articles XI and XIII, the term
"Employee" includes a "leased employee"; provided, however, that an individual
will not become a Participant unless he is an Employee without regard to this
sentence. For the purpose of this Subsection, a "leased employee" is any person
who performs services for another person, the "recipient," but who is not an
employee of the recipient, if (I) the services are provided pursuant to an
agreement between the recipient and any other person, (2) the person has
performed the services for the recipient (or for the recipient and related
persons) on a substantially full-time basis for a period of at least one year,
and (3) the services are performed under the primary direction and control of
the recipient. A leased employee will not be considered an employee of the
recipient if:

            (1) the leased employee is covered by a money purchase pension plan
      providing:

                                      -5-


                  (A) a non-integrated employer contribution rate of at least
            compensation, as defined in Code paragraph 415(c)(3), but including
            amounts contributed pursuant to a salary redirection agreement that
            are excludable from the Employee's gross income under Code section
            125, 402(a)(8), 402(h) or 403(b),

                  (B) Immediate participation, and

                  (C) full and immediate vesting; and

            (2) leased employees do not constitute more than 20% of the
      recipient's non-highly compensated workforce.

      "Employer" means the Company, Integra Bank, NA, and any Related Employer
that adopts the Plan. For purposes of crediting service for eligibility to
participate and, except as otherwise provided, for purposes of the rules set out
in Articles Xl and XIII, the term "Employer" includes any Related Employer.

      "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and interpretive rules and regulations.

      "Fund" means a fund described in or established pursuant to Section 5.02.

      "Highly Compensated Participant" means, with respect to a Participant for
a Plan Year, a Participant who is a highly compensated active Employee or highly
compensated former Employee for the Plan Year.

            (1) A highly compensated active Employee for a Plan Year includes an
      Employee who performs services for the Employer during the Plan Year and
      who (A) is a 5% owner for that Plan Year or was a 5% owner for the prior
      Plan Year or (B) for the prior Plan Year received Regulatory Compensation
      in excess of $80,000 (as adjusted pursuant to Code subsection 415(d)).

            (2) A highly compensated former Employee for a Plan Year includes
      any Employee who terminated employment (or was deemed to have terminated
      employment) prior to the Plan Year, performs no service for the Employer
      during the Plan Year, and was a highly compensated active Employee for
      either the Plan Year during which he terminated employment or any Plan
      Year ending on or after the Employee's 55th birthday.

          "Hour of Service" means each hour for which an Employee is entitled to
credit under this Subsection.

            (1) An Employee is entitled to credit for each hour for which he is
      paid, or entitled to payment, for the performance of duties for the
      Employer. Subject to the provisions of Paragraph (5), an Hour of Service
      described in this Paragraph will be credited to an Employee for the
      computation period in which the duties are performed.

                                      -6-


            (2) An Employee is entitled to credit for each hour for which he is
      paid, or entitled to payment, by the Employer for a period during which no
      duties are performed (irrespective of whether the employment relationship
      has terminated) due to vacation, holiday, illness, incapacity (including
      disability), layoff, jury duty, military duty, or leave of absence;
      provided, however, that no Hours of Service will be credited under this
      Paragraph if payment is made or due solely to reimburse an Employee for
      medical or medically related expenses or solely for the purpose of
      complying with applicable workers' compensation, unemployment
      compensation, or disability insurance laws. No more than 501 Hours of
      Service will be credited to an Employee on account of any single
      continuous period during which the Employee performs no duties (whether or
      not this period occurs in a single Plan Year) unless the Hours of Service
      are credited pursuant to Paragraph (4). Subject to the provisions of
      Paragraph (5), an Hour of Service credited to an Employee pursuant to this
      Paragraph will be credited to the computation period or periods during
      which no duties are performed.

            (3) An Employee is entitled to credit for each hour for which back
      pay, irrespective of mitigation of damages, is either awarded or agreed to
      by the Employer. The same Hour of Service will not be credited under
      Paragraph (1) or Paragraph (2), as the case may be, and under this
      Paragraph. An Hour of Service described in this Paragraph will be credited
      to the computation period or periods to which the award or agreement for
      back pay pertains, rather than to the computation period in which the
      award, agreement, or payment is made.

            (4) For eligibility and vesting purposes only, "Hours of Service"
      will be credited to an Employee for military leave for training or
      service, or both, if that Employee is entitled to be credited for his
      period of military leave upon his reemployment with the Employer under
      applicable federal law. An Employee will be credited with 190 Hours of
      Service for each month of military leave.

            (5) All regulations promulgated by the U.S. Secretary of Labor or
      his delegate applicable to the computation and crediting of Hours of
      Service under ERISA, including 29 C.F.R. Section 2530.200b-2, are
      incorporated as part of the Plan. The provisions of the Plan are intended
      to comply with the regulations and will be construed and applied to effect
      compliance.

      "Key Employee" means the following:

            (1) Any Employee or former Employee (including a Beneficiary of the
      Employee or former Employee) who at any time during the Plan Year or any
      of the 4 preceding Plan Years is included in a classification described in
      Paragraph (2), determined in accordance with the rules of Code paragraph
      41 6(i)(1).

            (2) The following are Key Employee classifications:

                  (A) an officer of the Employer having an annual Regulatory
            Compensation greater than 50% of the amount in effect under Code
            subparagraph 41 5(b)(l)(A) for the Plan Year;

                                      -7-


                  (B) one of the 10 Employees having an annual Regulatory
            Compensation from the Employer of more than the limitation in effect
            under Code subparagraph 415(c)(1)(A) and owning (or considered as
            owning within the meaning of Code section 318) the largest interests
            of the Employer;

                  (C) a person owning (or considered as owning within the
            meaning of Code section 318) more than 5% of the outstanding stock
            of the Employer or stock possessing more than 5% of the total
            combined voting power of all stock of the Employer; or

                  (D) a person who has an annual Regulatory Compensation from
            the Employer of more than $150,000 and who would be described in
            Subparagraph (C) if 1% were substituted for 5%.

      "Matching Account" means a Participant's Account attributable to Matching
Contributions.

      "Matching Contribution" means a contribution made on behalf of a
Participant pursuant to Section 4.04.

      "Non-Highly Compensated Participant" means an active Participant who is
not a Highly Compensated Participant.

      "Non-Key Employee" means any Employee (including a Beneficiary of the
Employee) who is not a Key Employee.

      "Participant" means an Employee or former Employee who has satisfied the
participation requirements of Section 3.01 and has not ceased to be a
Participant pursuant to Section 3.03.

      "Period of Severance" means a period of time that begins on the Severance
from Service date and ends on the date on which an Employee again performs an
Hour of Service.

      "Permissive Aggregation Group" is any group of Retirement Plans selected
by the Employer that includes those Retirement Plans in the Required Aggregation
Group, if the group meets the requirements of Code sections 401 (a)(4) and 410.

      "Plan" means this instrument, as amended from time to time, and the
employee benefit plan so established.

      "Plan Administrator" means the entity designated in Section 8.01. The
"Plan Administrator" is the administrator of the Plan within the meaning of
ERISA paragraph 3(1 6)(A).

      "Plan Year" means the period beginning on each January 1 and ending on the
following December 31.

      "Profit Sharing Account" means a Participant's Account attributable to
profit sharing contributions made prior to 1994 and Profit Sharing
Contributions.

                                      -8-


      "Profit Sharing Contribution" means a profit sharing contribution made
pursuant to Section 4.06.

      "Qualified Domestic Relations Order" means a "qualified domestic relations
order" as defined in Code subsection 414(p).

      "Qualified Nonelective Contribution" means a discretionary Employer
contribution made on behalf of a Participant pursuant to Subsection 4.03(b) that
satisfies the requirements imposed by Treasury regulation section 1.401(k)- 1
(b)(5).

      "Regulatory Compensation" means, with respect to an Employee for a Plan
Year, the Employee's wages, as defined in Code subsection 340 1(a), and all
other payments of compensation by the Employer in the course of the Employer's
trade or business for a Plan Year for which the Employer is required to furnish
the Employee a written statement under Code sections 6041(d), 6051 (a)(3) and
6052. "Regulatory Compensation" is determined without regard to any rules under
Code subsection 3401(a) that limit the remuneration included in wages based on
the nature or location of the employment or the services performed, such as the
exception for agricultural labor in Code paragraph 340 1(a)(2). "Regulatory
Compensation" also includes Elective Employer Contributions for the Plan Year
and amounts contributed or deferred by the Employer for the Plan Year at the
election of the Employee that are excluded from the Employee's gross income
under Code section 125 or 457. For limitation years beginning on or after
January 1, 2001, Regulatory Compensation paid or made available during such
limitation years shall include elective amounts that are not includable in the
gross income of the Participant by reason of Code section 132(f)(4).

      "Related Employer" means any employer that, together with the Employer, is
a member of a controlled group of corporations, a trade or business under common
control, or a member of an affiliated service group, as determined under Code
subsections 414(b), (c), (IN), and (o). In determining whether an Employer is a
member of a controlled group for purposes of Article XI, the rules of Code
subsections 4 14(b) and (c) will be applied as modified by Code subsection
415(h).

      "Required Aggregation Group" means a group of Retirement Plans comprising:

            (1) each Retirement Plan of the Employer, including any terminated
      Retirement Plan, in which a Key Employee has been a Participant in the
      Plan Year containing the Determination Date or any of the 4 preceding Plan
      Years;

            (2) each other Retirement Plan of the Employer that has enabled a
      Retirement Plan described in Paragraph (1) to meet the requirements of
      Code section 401 (a)(4) or 410 during the period described in Paragraph
      (1).

      "Retirement Plan" means a retirement program of the Employer intended to
qualify under Code subsection 40 1(a).

      "Rollover Account" means a Participant's Account attributable to Rollover
Contributions.

                                      -9-


      "Rollover Contribution" means a contribution made by an Eligible Employee
pursuant to Section 4.07.

      "Secretary" means the U.S. Secretary of Treasury or his delegate.

      "Severance from Service" occurs on the earlier of the following two dates:

            (1) The date the Employee quits, is discharged, retires or dies; or

            (2) The later of:

                  (A) the first anniversary of the first day the Employee is
            absent from the service of the Employer for a reason not enumerated
            in Paragraph (1);

                  (B) the expiration of an authorized leave of absence, provided
            the Employee does not return to the service of the Employer within
            10 days following the expiration of the leave of absence;

                  (C) in the case of an absence due to maternity or paternity
            leave for reason of the birth of a child of the Employee, the
            placement of a child with the Employee in connection with the
            adoption of the child by the Employee, or the caring for a child for
            a period immediately following birth or placement, the second
            anniversary of the date the absence commences; or

                  (D) any period of military service in the Armed Forces of the
            United States required to be credited by law; provided, however,
            that the Employee does not return to the service of the Employer
            within the period the Employee's reemployment rights are protected
            by law.

      "Spouse" means a person legally married to a Participant. Except as
otherwise required by ERISA or the Code, neither common law marriage nor any
similar relationship will be recognized as marriage for purposes of the Plan. A
former Spouse will also be considered a Spouse to the extent provided under a
Qualified Domestic Relations Order.

      "Top-Heavy Group" means an Aggregation Group described in Subsection
13.02(b).

      "Top-Heavy Plan" means a Retirement Plan described in Subsection 13.02(a).

      "Trust" means the trust established by the Company under the Plan.

      "Trust Agreement" means the agreement between the Company and the Trustee
establishing the Trust to implement and support the operation of the Plan.

      "Trust Assets" means the assets of the Trust regardless of the Fund in
which those assets are invested.

      "Trustee" means the original trustee of the Trust and any person becoming
successor trustee of the Trust.

                                      -10-


      "Valuation Date" means each business day.

      "Voluntary Account" means a Participant's Account attributable to
Voluntary Contributions.

      "Voluntary Contribution" means a voluntary, non-deductible contribution
made by a Participant prior to July 1, 2000.

      Section 2.02. Rules of Construction. The following rules of construction
will govern in interpreting the Plan:

      (a) In resolving any conflict between provisions of this Plan and in
resolving any other uncertainty as to the meaning or intention of any provision
of this Plan, the interpretation that will prevail is the interpretation that
(1) causes the Plan to constitute a qualified plan under the provisions of Code
section 401, with the contributions of the Employer to the Trust as items
deductible by the Employer from net income for federal income tax purposes, (2)
causes the Plan to contain a qualified cash or deferred arrangement described in
Code subsection 40 1(k), and (3) causes the Plan to comply with all applicable
requirements of ERISA.

      (b) Other than as specified in Subsection (a), the provisions of this Plan
will be construed and governed in all respects under and by the internal laws of
the State of Indiana.

      (c) Words used in the masculine gender will be construed to include the
feminine gender, where appropriate.

      (d) Words used in the singular will be construed to include the plural,
where appropriate, and vice versa.

      (e) The headings and subheadings in the Plan are inserted for convenience
of reference only and are not to be considered in the construction of any
provision of the Plan.

      (f) If any provision of this Plan is held to violate the Code or ERISA or
to be illegal or invalid for any other reason, that provision will be deemed to
be null and void, but the invalidation of that provision will not otherwise
impair or affect the Plan.

                                   ARTICLE III
                          ELIGIBILITY AND PARTICIPATION

      Section 3.01. Date of Participation. An Employee will begin participation
in the Plan immediately upon becoming an Eligible Employee.

      Section 3.02. Completion of Forms by Participants and Beneficiaries and
Alternate Payees. Each Participant, Beneficiary and Alternate Payee will
complete any forms and furnish any proofs or information required by the Plan
Administrator.

                                      -11-


      Section 3.03. Cessation of Participation. A Participant will cease to be a
Participant on the date as of which (a) he is no longer an Eligible Employee and
(b) all of his vested Accounts have been distributed.

      Section 3.04. Omission of Eligible Employee. If, in any Plan Year, any
Eligible Employee who should be included as a Participant in the Plan is
erroneously omitted, and discovery of the omission is not made until after a
contribution by the Employer for the Plan Year has been made, the Employer will
make a contribution with respect to the omitted Eligible Employee in the amount
that the Employer would have contributed on his behalf had he not been omitted.
The contribution will be made whether or not it is deductible in whole or in
part in any taxable year. For this purpose, the amount of Elective Deferrals
that the Employer would have contributed on behalf of an Eligible Employee for a
Plan Year had he not been omitted will be equal to the Deferral Percentage for
the group of Highly Compensated Participants or Nonhighly Compensated
Participants to which the Participant belongs for the Plan Year.

      Section 3.05. Inclusion of Ineligible Employee. If, in any Plan Year, any
Employee who should not have been included as a Participant in the Plan is
erroneously included, and discovery of the inclusion is not made until after a
contribution by the Employer for the Plan Year has been made, the Employer will
not be entitled to recover the contribution made with respect to the ineligible
Employee whether or not a deduction is allowable with respect to the
contribution. The amount contributed with respect to the ineligible Employee
will be treated as though it were an excess Annual Addition and either returned
to the ineligible Employee or reallocated among the Accounts of Participants
entitled to a contribution for the Plan Year in which the erroneous error is
discovered, in the manner described at Section 11.03.

                                   ARTICLE IV
                                  CONTRIBUTIONS

      Section 4.01. Trust Fund. All contributions under the Plan will be paid or
transferred to the Trustee to be held, managed, invested, and distributed in
accordance with the provisions of the Plan and Trust Agreement. All benefits
under the Plan will be distributed solely from the Trust Assets, and the
Employer will have no liability for those benefits.

      Section 4.02. Elective Deferrals. An active Participant may elect to have
Elective Deferrals made to the Plan as follows:

      (a) Pursuant to Section 15.08 of the Plan, a Participant may elect to have
Elective Deferrals made on his behalf by entering into a written salary
redirection agreement with the Employer that authorizes payroll deductions;
provided, however, that any election will be subject to reduction by the Plan
Administrator in accordance with Section 4.03.

      (b) A Participant's election to make or change the rate of Elective
Deferrals will become effective as soon as administratively feasible after the
date on which a completed salary redirection agreement is received by the Plan
Administrator. A Participant may discontinue his Elective Deferrals any time by
giving written notice to the Plan Administrator. No election to make,
discontinue, or change the rate of Elective Deferrals will be given retroactive
effect.

                                      -12-


      (c) A Participant who discontinues his Elective Deferrals during a Plan
Year may not enter into a new salary redirection agreement with the Employer
that will become effective before the first day of the next Plan Year. A
Participant who receives a hardship distribution as described in Treasury
regulation section 1.401(k)-i (d)(2)(iv)(B) from any other Retirement Plan may
not have Elective Deferrals made to the Plan for twelve months following receipt
of the hardship distribution.

      (d) A former Eligible Employee who again becomes an Eligible Employee and
who is or becomes a Participant upon reemployment may elect to have Elective
Deferrals made on his behalf by signing and delivering to the Plan Administrator
a salary redirection agreement, in which case the election will be given effect
as soon as administratively feasible.

      (e) Elective Deferrals will be paid in cash to the Trustee by the Employer
within a reasonable period after they are withheld from a Participant's pay and
in no event later than the 15~ business day of the month following the month in
which they were withheld.

      (f) Elective Deferrals made on behalf of a Participant with respect to a
Plan Year will be allocated to the Participant's Elective Deferral Account as of
the earlier of the date on which they are contributed to the Trust or the last
day of the Plan Year.

      (g) The Plan Administrator may establish additional nondiscriminatory
rules and procedures governing the manner and timing of a Participant's
elections to make, change, or discontinue Elective Deferrals, provided that the
rules and procedures are consistent with the Plan.

      Section 4.03. Limitation on Elective Deferrals. Except as otherwise
provided in Article XVI of the Plan, the amount of Elective Deferrals made on
behalf of Participants will be subject to the following limitations:

      (a) Elective Deferrals made on behalf of Highly Compensated Participants
for a Plan Year will not result in a Deferral Percentage for Highly Compensated
Participants that exceeds both:

            (1) 1.25 times the Deferral Percentage for Non-Highly Compensated
      Participants for the prior Plan Year; and

            (2) the lesser of (A) two times the Deferral Percentage for
      Non-Highly Compensated Participants for the prior Plan Year or (B) two
      percentage points more than the Deferral Percentage for Non-Highly
      Compensated Participants for the prior Plan Year.

In determining the Deferral Percentage for a group for a Plan Year, all
"eligible employees" will be taken into account. For this purpose, an "eligible
employee" for a Plan Year is any Employee who is directly or indirectly eligible
to make an Elective Deferral for all or a portion of the Plan Year and includes
an Employee who would be eligible to make an Elective Deferral but for his
failure to make an election pursuant to Section 4.02 or his hardship withdrawal
under another Retirement Plan, or because the Elective Deferral would cause the
limitation of Article XI to be exceeded.

                                      -13-


(b) At such times as it deems advisable, the Plan Administrator will
evaluate the Plan's operation to assure that Elective Deferrals elected by
Highly Compensated Participants do not cause the limitations of Subsection (a)
to be exceeded. The Employer, in its sole discretion, may make a Qualified
Nonelective Contribution to the Elective Deferral Accounts of active
Participants who are Non-Highly Compensated Participants, allocated among those
Accounts in proportion to those Participants' relative Compensation for the Plan
Year that is paid on or after the date they become Participants, to assist the
Plan in satisfying the limitations of Subsection (a). Any Qualified Nonelective
Contribution made shall satisfy the conditions set forth in 26 C.F.R. Section
1.40 1(k)-1(b)(5). To the extent that Highly Compensated Participants' Elective
Deferrals would, if carried out, cause the limitations of Subsection (a) to be
exceeded, the following provisions will apply:

            (1) The Deferral Ratio of the Highly Compensated Participant with
      the highest Deferral Ratio will be reduced to the higher of (A) the
      Deferral Ratio necessary to enable the Plan to satisfy the limitations of
      Subsection (a) or (B) the Deferral Ratio of the Highly Compensated
      Participant with the next highest Deferral Ratio. The foregoing process
      will be repeated until the limitations of Subsection (a) are satisfied.
      The portion of any Elective Deferral that has been contributed to the Plan
      and is attributable to a reduction in a Participant's Deferral Ratio
      pursuant to this Paragraph will be regarded as an excess Elective
      Deferral.

            (2) The total dollar amount of excess Elective Deferrals will be
      allocated to one or more Highly Compensated Participants by reducing the
      Elective Deferrals of the Highly Compensated Participant with the highest
      dollar amount of Elective Deferrals by the lesser of (A) the amount
      required to cause that Participant's Elective Deferrals to equal the
      Elective Deferrals of the Highly Compensated Participant with the next
      highest dollar amount or (B) an amount equal to the total amount of excess
      Elective Deferrals. This process will be repeated until all excess
      Elective Deferrals are allocated.

            (3) The Trustee will distribute any excess Elective Deferrals,
      together with all income allocable thereto, to the Highly Compensated
      Participants to whom they were allocated pursuant to Paragraph (2) within
      one year after the end of the Plan Year for which they were made.

      (c) If Elective Employer Contributions with respect to a Participant for a
calendar year exceed the limitation of Code paragraph 402(g)(l) (as adjusted
from time to time pursuant to Code paragraph 402(g)(5)), the Participant will
notify the Plan Administrator not later than March 1 of the following year of
the portion of the excess Elective Employer Contributions allocable to the Plan.
If the Plan Administrator receives notice from a Participant pursuant to the
preceding sentence, the Plan Administrator will cause the Trustee to distribute
to the Participant not later than the following April 15 the portion of the
excess Elective Employer Contributions allocable to the Plan and any income
allocable to that portion.

      Section 4.04. Matching Contributions. The Employer shall make Matching
Contributions to the Plan as follows:

                                      -14-


      (a) Except as otherwise specifically provided in Subsection (b), for each
Plan Year, the Employer shall contribute to the Plan on behalf of each
Participant a Matching Contribution equal to 100% of the Participant's Elective
Deferrals not in excess of 3% of the Participant's Compensation for that Plan
Year, plus 50% of the Participant's Elective Deferrals in excess of 3%, but not
in excess of 5%, of the Participant's Compensation for that Plan Year.

      If the Participant's Elective Deferrals stop before the end of a Plan Year
because they reach the limitation in Code subsection 402(g), then the Employer
shall make a catch-up Matching Contribution for that Plan Year. The catch-up
Matching Contribution will be equal to the difference between (a) and (b), where
(a) is 100% of the Participant's Elective Deferrals for the Plan Year not in
excess of 3% of the Participant's Compensation for that Plan Year, plus 50% of
the Participant's Elective Deferrals for the Plan Year in excess of 3%, but not
in excess of 5%, of the Participant's Compensation for that Plan Year, and (b)
is the amount of the Matching Contributions previously made for the Participant
for the Plan Year.

      (b) For the Plan Year beginning January 1, 2000, the Employer shall make
Matching Contributions based on the Participant's Elective Deferrals and
Compensation after June 30, 2000.

      (c) Notwithstanding the foregoing provisions of this Section, the Employer
shall not make a Matching Contribution on behalf of a Highly Compensated
Participant for a Plan Year to the extent that it would cause the limitations of
Subsection 4.05(a) or (b) to be exceeded for the Plan Year. Matching
Contributions for a Plan Year shall be paid to the Trustee as soon as
practicable after the end of the pay period for which they are made and shall be
allocated to the Account of the Participant on whose behalf they were made as of
the end of the pay period.

      Section 4.05. Limitation on Matching Contributions and Voluntary
Contributions. Except as otherwise provided in Article XVI, the amount of
Matching Contributions and Voluntary Contributions that may be allocated to the
Accounts of Highly Compensated Participants will be subject to the following
limitations:

      (a) Matching Contributions and Voluntary Contributions made on behalf of
Highly Compensated Participants for a Plan Year will not result in a
Contribution Percentage for Highly Compensated Participants that exceeds both:

            (1) 1.25 times the Contribution Percentage for Non-Highly
      Compensated Participants for the prior Plan Year; and

            (2) the lesser of (A) two times the Contribution Percentage for
      Non-Highly Compensated Participants for the prior Plan Year or (B) two
      percentage points more than the Contribution Percentage for Non-Highly
      Compensated Participants for the prior Plan Year.

      (b) Matching Contributions and Voluntary Contributions made on behalf of
Highly Compensated Participants will not cause the sum of the Deferral
Percentage and the Contribution Percentage for Highly Compensated Participants
to exceed the sum of the following:

                                      -15-


            (1) 1.25 times the lesser of (A) the Deferral Percentage for
      Non-Highly Compensated Participants for the prior Plan Year or (B) the
      Contribution Percentage for Non-Highly Compensated Participants for the
      prior Plan Year; and

            (2) the lesser of (A) two times the greater of (i) the Deferral
      Percentage for Non-Highly Compensated Participants for the prior Plan Year
      or (ii) the Contribution Percentage for Non-Highly Compensated
      Participants for the prior Plan Year or (B) two percentage points more
      than the greater of (i) the Deferral Percentage for Non-Highly Compensated
      Participants for the prior Plan Year or (B) the Contribution Percentage
      for Non-Highly Compensated Participants for the prior Plan Year.

The provisions of this Subsection (b) will apply only if the
Deferral Percentage for Highly Compensated Participants for the Plan Year
exceeds 1.25 times the Deferral Percentage for Non-Highly Compensated
Participants for the prior Plan Year and the Contribution Percentage for
Highly Compensated Participants for the Plan Year exceeds 1.25 times the
Contribution Percentage for Non-Highly Compensated Participants for the
prior Plan Year.

      (c) To the extent that, due to an error, the limitations of Subsection (a)
are exceeded for a Plan Year, the following provisions will apply:

            (1) To reduce the Contribution Ratio of Highly Compensated
      Participants, Voluntary Contributions shall be reduced as provided in this
      paragraph. If necessary, Matching Contributions shall then be reduced. The
      Contribution Ratio of the Highly Compensated Participant with the highest
      Contribution Ratio will be reduced to the higher of (A) the Contribution
      Ratio necessary to enable the Plan to satisfy the limitations of
      Subsection (a) or (B) the Contribution Ratio of the Highly Compensated
      Participant with the next highest Contribution Ratio. The foregoing
      process will be repeated until the limitations of Subsection (a) are
      satisfied. The portion of any Matching Contributions and Voluntary
      Contributions attributable to a reduction in a Participant's Contribution
      Ratio pursuant to this Paragraph will be regarded as an excess Voluntary
      Contribution and an excess Matching Contribution.

            (2) The total dollar amount of any excess Matching Contributions and
      any excess Voluntary Contributions will be allocated to one or more Highly
      Compensated Participants by reducing the Matching Contributions and
      Voluntary Contributions of the Highly Compensated Participant with the
      highest dollar amount of Matching Contributions and Voluntary
      Contributions by the lesser of (A) the amount required to cause that
      Participant's Matching Contributions and Voluntary Contributions to equal
      the Matching Contributions and Voluntary Contributions of the Highly
      Compensated Participant with the next highest dollar amount or (B) the
      total amount of excess Matching Contributions and excess Voluntary
      Contributions. This process will be repeated until all excess Matching
      Contributions and excess Voluntary Contributions are allocated.

            (3) The Trustee will distribute any vested excess Matching
      Contributions and excess Voluntary Contributions, together with all income
      allocable thereto, to the Highly Compensated Participants to whom they
      were allocated pursuant to Paragraph (2) within

                                      -16-


one year after the end of the Plan Year for which they were made. Any
nonvested excess Matching Contributions allocated to a Highly
Compensated Participant for a Plan Year pursuant to Paragraph (2),
together with all income allocable to them, shall be forfeited as of
the last day of the Plan Year for which the contributions were made
and treated as provided in Subsection 6.04(c).

      (d) To the extent that, after the application of Subsection (c), the
limitations of Subsection (b) are exceeded for a Plan Year, the following
provisions will apply:

            (1) To reduce the Contribution Ratio of Highly Compensated
      Participants, Voluntary Contributions shall be reduced as provided in this
      paragraph. If necessary, Matching Contributions shall then be reduced. The
      Contribution Ratio of the Highly Compensated Participant with the highest
      Contribution Ratio will be reduced to the higher of (A) the Contribution
      Ratio necessary to enable the Plan to satisfy the limitations of
      Subsection (b) or (B) the Contribution Ratio of the Highly Compensated
      Participant with the next highest Contribution Ratio. The foregoing
      process will be repeated until the limitations of Subsection (b) are
      satisfied. The portion of any Matching Contribution and any Voluntary
      Contribution attributable to a reduction in a participant's Contribution
      Ratio pursuant to this paragraph will be regarded as an excess Matching
      Contribution and an excess Voluntary Contribution.

            (2) The total dollar amount of any excess Matching Contributions and
      any excess Voluntary Contributions will be allocated to one or more Highly
      Compensated Participants by reducing the Matching Contributions and
      Voluntary Contributions of the Highly Compensated Participant with the
      highest dollar amount of Matching Contributions and Voluntary
      Contributions by the lesser of (A) the amount required to cause that
      Participant's Matching Contributions and Voluntary Contributions to equal
      the Matching Contributions and Voluntary Contributions of the Highly
      Compensated Participant with the next highest dollar amount or (B) the
      total amount of excess Matching Contributions and Voluntary Contributions.
      This process will be repeated until all excess Matching Contributions and
      Voluntary Contributions are allocated.

            (3) The Trustee will distribute any vested excess Matching
      Contributions and excess Voluntary Contributions, together with all income
      allocable thereto, to the Highly Compensated Participants to whom they
      were allocated pursuant to Paragraph (2) within one year after the end of
      the Plan Year for which they were made. Any nonvested excess Matching
      Contributions allocated to a Highly Compensated Participant for a Plan
      Year pursuant to Paragraph (2), together with all income allocable to
      them, shall be forfeited as of the last day of the Plan Year for which the
      contributions were made and treated as provided in Subsection 6.04(c).

      (e) In determining the Contribution Percentage for a group for a Plan
Year, all "eligible employers" will be taken into account. For this purpose, an
"eligible employee" for a Plan Year is any Employee who is directly or
indirectly eligible to receive a Matching Contribution or make a Voluntary
Contribution for all or a portion of the Plan Year and includes an Employee who
would be eligible to receive a Matching Contribution and make a Voluntary
Contribution but for his failure to make an election pursuant to the Plan or his
hardship

                                      -17-


withdrawal under another Retirement Plan, or because the Matching Contribution
and Voluntary Contribution would cause the limitation of Article XI to be
exceeded.

      Section 4.06. Profit Sharing Contributions. The Employer will contribute
to the Trust for each Plan Year that amount, if any, determined by the Board of
Directors, provided that the amount of the Profit Sharing Contributions, when
added to all Elective Deferrals and Matching Contributions for the Plan Year,
does not exceed the amount allowable as a deduction from the Employer's income
for federal income tax purposes. Profit Sharing Contributions for a Plan Year
will be paid to the Trustee not later than the tax return due date for the
Employer's tax year ending with or during the Plan Year and will be allocated as
of the last day of the Plan Year among the Profit Sharing Accounts of
Participants on that date, in proportion to their relative Compensation for the
Plan Year. Notwithstanding the foregoing provisions, an Employer shall not make
a Profit Sharing Contribution on behalf of a Participant to the extent that it
would cause the limitations of Section 11.02 to be exceeded with respect to that
Participant for the Plan Year.

      Section 4.07. Rollover Contributions. At any time during a Plan Year, an
Eligible Employee may make a Rollover Contribution to the Trust (a) in cash; or
(b) in Company Stock that, immediately before the Rollover Contribution is made,
is held in the Eligible Employee's account in a qualified retirement plan
maintained by a Related Employer or in an individual retirement account that
holds only amounts rolled into it from the Eligible Employee's account in a
qualified retirement plan maintained by a Related Employer. The Eligible
Employee must establish to the satisfaction of the Plan Administrator that the
contribution satisfies all applicable requirements of Code sections 402 and 408
and any other criteria that the Plan Administrator may establish from time to
time to ensure that the contribution will not adversely affect the Plan's
qualified status. A Rollover Contribution will be allocated to the Rollover
Account of the Eligible Employee who made it as of the date it is received by
the Trustee.

      Section 4.08. Minimum Contribution Requirement. Except as otherwise
provided in Section 16.03 of the Plan, if the Plan is a Top-Heavy Plan for a
Plan Year, the minimum contribution requirements of Code subsection 416(c) will
be satisfied by the Employer as follows:

      (a) the Employer will contribute on behalf of each Non-Key Employee who is
both a Participant and an Employee on the last day of the Plan Year (regardless
of the Participant's Hours of Service during the Plan Year) a contribution that,
together with any contribution otherwise made on behalf of the Employee to the
Plan or another defined contribution plan of the Employer, is not less than the
lesser of (1) 3% of the Employee's Regulatory Compensation for the Plan Year or
(2) the percentage at which contributions are made (or required to be made)
under the Plan and under any other defined contribution plan for the Plan Year
for the Key Employee for whom the percentage is the highest for the Plan Year.
That percentage will be determined for each Key Employee by dividing the
contributions for that Employee by his Regulatory Compensation for the Plan
Year.

      (b) A Non-Key Employee who is a Participant at the end of the Plan Year
and who has at least 1,000 Hours of Service (or equivalent service as determined
pursuant to 29 C.F.R. Section 2530.200b-3) for the Plan Year under a top-heavy
defined benefit plan of the Employer will receive, instead of the minimum
contribution provided in Subsection (a), an accrued benefit

                                      -18-


under the defined benefit plan that is at least as large as the defined benefit
provided for in the following sentence. The minimum accrued benefit required by
the preceding sentence, together with the balance of the Employee's Accounts
attributable to Employer contributions under this Plan and the balance, if any,
of the Employee's accounts attributable to Employer contributions under any
defined contribution plan of the Employer, must equal at all times at least the
product of the Employee's average Regulatory Compensation for the 5 consecutive
years when the Employee had the highest aggregate Regulatory Compensation from
the Employer and the lesser of 2% per Year of Continuous Service (excluding
years when neither plan was top-heavy and years completed before January 1,
1984) or 20%.

      Section 4.09. Nondiversion and Exclusive Benefit. Except as expressly
provided in this Section, the Trust Assets will not revert to the Employer and
will be devoted exclusively to the payment of benefits to Participants,
Beneficiaries, and other persons and for the payment of reasonable
administration expenses as provided in the Plan and the Trust Agreement. The
Trustee will, however, return to the Employer a contribution to the Plan under
the following circumstances:

      (a) If any contribution is made to the Plan by mistake of fact and the
Employer requests in writing that the contribution be returned, the Trustee will
comply with the Employer's request; provided, however, that no contribution may
be returned to the Employer pursuant to this Subsection more than one year after
the date on which the contribution is made; or

      (b) To the extent that the deduction for a contribution made by the
Employer is disallowed, the contribution will be returned to the Employer (to
the extent disallowed) within one year after the disallowance of the deduction,
if the Employer so requests in writing.

If an Elective Deferral or Voluntary Contribution is returned to the Employer
pursuant to this Section, the Employer will return the contribution to the
Participant on whose behalf the contribution was made.

                                    ARTICLE V
                           ACCOUNTING AND INVESTMENTS

      Section 5.01. Participants' Accounts. The Plan Administrator will create
and maintain adequate records to disclose the interest in the Trust of each
Participant, Beneficiary and Alternate Payee. Records will be in the form of
individual bookkeeping accounts, and credits and charges will be made to those
Accounts pursuant to Article IV and the following provisions of this Article V.
Each Participant will have a separate Elective Deferral Account, Matching
Account, Profit Sharing Account, and Voluntary Account. Each Eligible Employee
who makes a Rollover Contribution will have a separate Rollover Account. Each
Beneficiary, and to the extent required by a Qualified Domestic Relations Order,
each Alternate Payee, will have the same separate accounts maintained for the
Participant from whom their Plan benefits derived. The maintenance of individual
Accounts is for accounting purposes only, and a segregation of Trust Assets to
each Account will not be required. The Plan Administrator will also maintain
records to indicate the amount of each Participant's Accounts in each Fund.

                                      -19-


      Section 5.02. Separate Investment Funds. The Trust Assets will be kept in
the common Funds that the Company may designate from time to time, and may
include a Fund primarily invested in Company Stock. The respective assets of
each Fund will be accounted for separately from those of each other Fund and
will be invested in accordance with the investment guidelines established for
the Fund by the Company. The Trustee's discretion in investing the assets of the
Funds will be subject only to the foregoing provisions of this Section, the
Trust Agreement, and EMS A. The Trustee may invest the assets of any Fund and
commingle funds to the extent that the investment is consistent with the
purposes of the Fund.

      Section 5.03. Valuation Standards. If the value of the Trust Assets is not
readily ascertainable from the transactions of a securities exchange, the Trust
Assets will be valued in accordance with the Trustee's best judgment. In
determining the value of the Trust Assets, the Trustee will exercise its best
judgment, using generally accepted trust and accounting principles, and all such
determinations of value will be binding upon all persons claiming benefits under
the provisions of the Plan.

      Section 5.04. General Method of Determining Values of Participants'
Accounts. The value of each Account of a Participant will be the value of the
Account as of the preceding Valuation Date, increased by the dollar amount of
any contributions allocated to the Account after the preceding Valuation Date
and decreased by the amount of any payments made from the Account after the
preceding Valuation Date. On each Valuation Date, each Account will be adjusted
by the dollar amount of any earnings or losses allocated to that Account as of
that Valuation Date.

      Section 5.05. Allocation of Earnings to Accounts. On each Valuation Date,
earnings will be allocated as follows:

      (a) The earnings of a Fund, whether positive or negative, will be
allocated among all Accounts in proportion to the relative value of those
Accounts invested in the Fund as of the end of the preceding Valuation Date (as
adjusted pursuant to Subsection (b)). Accounts terminated since the end of the
preceding Valuation Date will be disregarded for purposes of this Subsection.

      (b) For purposes of determining the allocation of investment earnings
pursuant to Subsection (a), the value of a Participant's Accounts, as of the
preceding Valuation Date will be adjusted as follows:

            (1) The value of a Participant's Accounts invested in a Fund as of
      the preceding Valuation Date will be decreased by any amounts distributed
      from the Participant's Accounts invested in that Fund since the preceding
      Valuation Date (excluding any amounts distributed as of the date on which
      the investment earnings are allocated).

            (2) The value of a Participant's Accounts invested in a Fund as of
      the preceding Valuation Date will be increased by the amount of any
      Elective Deferrals, Rollover Contributions or Voluntary Contributions
      allocated to the Participant's Accounts invested in that Fund since the
      preceding Valuation Date.

                                      -20-


      (c) The investment earnings of each Fund between Valuation Dates will be
equal to the difference between the fair market value of the Fund as of the
preceding Valuation Date and the current Valuation Date; plus (1) the amount of
benefits paid from the Fund and (2) amounts transferred from the Fund to another
Fund since the preceding Valuation Date; and less (I) any contributions made to
the Fund and (2) any amounts transferred to the Fund from another Fund since the
preceding Valuation Date.

      Section 5.06. Crediting of Contributions and Forfeitures to Particular
Funds. A Participant's Accounts will be invested in a particular Fund or Funds
according to his written designation. Subject to any rules the Plan
Administrator may reasonably establish, a Participant may invest in more than
one Fund. If the Participant does not designate a particular Fund, contributions
allocated to his Accounts will be invested in a Fund designated by the Plan
Administrator as the Fund to receive such allocations.

      Section 5.07. Transfers Among Funds. To the extent permitted by the Plan
Administrator, a Participant may cause a transfer of all or a part of his
Accounts invested in one Fund to be transferred to another Fund. A Participant
who desires such a transfer will execute a written form provided by the Plan
Administrator and will file it with the Plan Administrator within the time
limits specified by the Plan Administrator. Every transfer election will be
irrevocable and will specify the Fund from which the transfer is to be made and
the Fund into which the transfer is to be made.

      Section 5.08. Investment Discretion of Beneficiaries and Alternate Payees.
A Participant's Beneficiary and Alternate Payee will be entitled to exercise
investment discretion with respect to his Accounts pursuant to the foregoing
provisions.

                                   ARTICLE VI
                             VESTING AND FORFEITURE

     Section 6.01. Nonforfeitability. For all purposes of the Plan, a "vested"
interest is an interest that is nonforfeitable in that it constitutes a claim
that is unconditional and legally enforceable against the Plan.

      Section 6.02. Vested Interests. A Participant's interest in his or her
Elective Deferral Account, Voluntary Account, Matching Account, Rollover
Account, and that portion of his or her Profit Sharing Account attributable to
profit sharing contributions made prior to 1994 shall be 100% vested at all
times.

      Section 6.03. Vesting of Profit Sharing Account. A Participant's interest
in that portion of the Participant's Profit Sharing Account attributable to
Profit Sharing Contributions shall be forfeitable, except as that interest
becomes vested under the following provisions:

      (a) A Participant's interest in his or her Profit Sharing Account
attributable to Profit Sharing Contributions shall be 100% vested upon the
occurrence of any of the following events:

            (1) attainment of the normal retirement age of 65 while an Employee;

                                      -21-


            (2) death or Disability while an Employee;

            (3) a complete discontinuance of contributions under the Plan;

            (4) partial termination of the Plan (within the meaning of the Code)
      with respect to the Participant; or

            (5) termination of the Plan.

      (b) Except as otherwise provided in this Section, a Participant's interest
in that portion of his or her Profit Sharing Account attributable to Profit
Sharing Contributions shall become 100% vested upon completion of one year of
Continuous Service.

      Section 6.04. Forfeitures.

      (a) Except as provided in Subsection (b), no amount credited to a
Participant shall be forfeited upon Severance from Service until he incurs five
consecutive one year Periods of Severance or dies while not an Employee. When a
Participant incurs five consecutive one year Periods of Severance or dies while
not an Employee, the nonvested portion of his Profit Sharing Account shall be
forfeited.

      (b) Notwithstanding Subsection (a), if a Participant's entire vested
Accounts are distributed (or deemed distributed pursuant to Section 7.05) before
the end of the Plan Year following the Plan Year in which the Participant incurs
a Severance from Service, the nonvested portion of the Participant's Accounts
shall be forfeited immediately upon the distribution. If a former Participant is
reemployed by the Employer, the amount forfeited pursuant to the preceding
sentence shall be restored if the Participant repays to the Trust the full
amount distributed to him before the date on which he incurs S consecutive one
year Periods of Severance after the date of the distribution. Amounts restored
shall come from Trust income and, to the extent necessary, forfeitures. If Trust
income and forfeitures are insufficient to restore the forfeited amounts, the
Employer shall make an additional contribution sufficient to restore the
forfeited amount. The additional Employer contribution shall not constitute an
Annual Addition.

      (c) The total dollar amount of all interests forfeited during a Plan Year
shall be held in a separate suspense account until the last day of the Plan
Year. The forfeited amounts shall be allocated as of the last day of the Plan
Year among the Profit Sharing Accounts of Participants on that date, as provided
in Section 4.06 for the allocation of Profit Sharing Contributions.

                                   ARTICLE VII
                                    BENEFITS

      Section 7.01. General. Except as provided in Section 7.05, the
Participant's Accounts invested in Company Stock will be
distributed in the form of cash or Company Stock, as elected by the Participant
or Beneficiary, except that the value of any fractional shares of Company Stock
will be distributed in cash.

                                      -22-


      Section 7.02. Termination and Disability Benefits. If a Participant incurs
a Disability or terminates employment for any reason other than death, his
vested Accounts will be distributed as provided in this Section. If the value of
a Participant's vested Accounts exceeds $5,000, the Participant may elect at any
time after incurring a Disability or terminating employment to receive the
vested portion of his Accounts in a lump sum. If a Participant files a written
election with the Plan Administrator pursuant to the preceding sentence, the
Plan Administrator will cause his vested Accounts to be distributed to him as
soon as administratively feasible after it receives his election.

      Section 7.03. Death Benefits. If a Participant dies, his remaining vested
Accounts will be distributed in a lump sum to his Beneficiary as soon as
administratively feasible after his death. Notwithstanding the preceding
sentence, if the Participant's Beneficiary is his Spouse, payment of the lump
sum to the Spouse will be made as of the date elected in writing by the Spouse.

      Section 7.04. Payment of Small Accounts. Notwithstanding any other
provision of the Plan, if the value of any benefit payable under the Plan does
not exceed $5,000, the benefit will be paid to the Participant (or the
Participant's Beneficiary) in a lump sum payment as soon as administratively
feasible after the Participant is determined to be Disabled, terminates
employment or dies, whichever is applicable. For purposes of this Section, if
the present value of a Participant's vested benefit is zero, the Participant
will be deemed to have received a distribution.

      Section 7.05. Permitted Withdrawals from Voluntary Account. A Participant
may elect. at any time to withdraw the entire amount allocated to his Voluntary
Account in a lump sum cash payment. The Plan Administrator will distribute the
Participant's Voluntary Account in accordance with the Participant's election.

      Section 7.06. Other Distribution Rules Imposed by Federal Law. This
Section has been included in the Plan to comply with the limitations imposed by
Code paragraphs 401(a)(9) and 401(a)(14), and it will not be construed as
providing for a form of benefit not otherwise provided for under the Plan. Any
distribution under the Plan will be made in accordance with regulations under
Code paragraph 401(a)(9) and, except to the extent otherwise provided in Article
XVII, will comply with the following rules:

      (a) Unless a Participant elects otherwise, the payment of his benefits
under the Plan must begin not later than the 60th day after the end of the Plan
Year in which occurs the latest of (1) the Participant's 65th birthday, (2) the
10th anniversary of the Plan Year in which the Participant began participation
in the Plan, or (3) termination of the Participant's employment with the
Employer.

      (b) For purposes of this Section, "required beginning date" means, with
respect to a Participant who is not a 5% owner as described in Code section 416,
April 1 of the calendar year following the later of (1) the calendar year in
which the Participant reaches age 70-1/2 or (2) the calendar year in which the
Participant retires. With respect to a Participant who is a 5% owner as
described in Code section 416, "required beginning date" means April 1 of the
calendar year following the calendar year in which the Participant reaches age
70-1/2.

                                      -23-


      (c) Notwithstanding any other provision of this Plan, the entire interest
of each Participant will be distributed either (1) in a single lump sum payment
not later than the required beginning date, or (2) in a series of payments
beginning not later than the required beginning date over the life of the
Participant or over the lives of the Participant and a designated Beneficiary
(or over a period not extending beyond the life expectancy of the Participant or
the life expectancy of the Participant and a designated Beneficiary). If a
Participant's entire interest is to be distributed in other than a lump sum,
then the amount to be distributed each year must be at least an amount equal to
the quotient obtained by dividing the Participant's entire interest by the life
expectancy of the Participant or joint and last survivor expectancy of the
Participant and designated Beneficiary. Life expectancy and joint and last
survivor expectancy are computed by the use of the expected return multiples
contained in Tables V and VI of 26 C.F.R. Section 1.72-9. For purposes of this
computation, life expectancies will not be recalculated.

      (d) If (1) the distribution of a Participant's interest has begun in
accordance with Subsection (c) and (2) the Participant dies before his entire
interest has been distributed to him, the remaining portion of his interest will
be distributed at least as rapidly as under the method of distribution being
used under Subsection (c) as of the date of his death.

      (e) Except as provided in Subsection (f), if a Participant dies before the
distribution of his interest has begun in accordance with Subsection (c), the
entire interest of the Participant will be distributed within 5 years after his
death.

      (f) For purposes of Subsection (e), any portion of a distribution that is
payable to (or for the benefit of) a designated Beneficiary will be treated as
completely distributed on the date the distributions begin if:

            (1) that portion is to be distributed (in accordance with
      regulations prescribed by the Secretary) over the life of the designated
      Beneficiary (or over a period not extending beyond the life expectancy of
      the Beneficiary), and

            (2) those distributions begin by the latest of (i) one year after
      the date of the Participant's death, (ii) any later date that the
      Secretary may establish by regulations, or (iii) if the Beneficiary is the
      Participant's surviving Spouse, the date that the Participant would have
      reached age 70-1/2.

      (g) If the designated Beneficiary is the surviving Spouse of the
Participant, and if the surviving Spouse dies before the distributions to the
Spouse begin, Subsections (d), (e), and (f) will be applied as if the surviving
Spouse were the Participant.

      (h) For purposes of Subsection (f), payments will be calculated by use of
the expected return multiples specified in Tables V and VI of 26 C.F.R. Section
1.72-9. Life expectancies of Beneficiaries will be calculated at the time
payment first commences without further recalculation.

      (i) For purposes of Subsection (c), (d), (e), and (f), if any amount paid
to a child of the Participant becomes payable to the surviving Spouse when the
child reaches the age of majority, that amount will be treated as if it had been
paid to the surviving Spouse.

                                      -24-



      (j) The method of distribution selected must assure that at least 50% of
the present value of the amount available for distribution is paid within the
life expectancy of the Participant.

      (k) With respect to distributions under the Plan made -for calendar years
beginning on or after January 1, 2001, the Plan will apply the minimum
distribution requirements of Code section 401 (a)(9) in accordance with the
regulations under Code section 401 (a)(9) that were proposed on January 17,
2001, notwithstanding any provision of the Plan to the contrary. This provision
shall continue in effect until the end of the last calendar year beginning
before the effective date of final regulations under Code section 401 (a)(9) or
such other date as may be specified in guidance issued by the Internal Revenue
Service.

      Section 7.07. Beneficiaries. A Participant's Beneficiary shall be
determined pursuant to this Section.

      (a) A Participant's Spouse shall be his Beneficiary, unless the Spouse has
consented to the appointment of another Beneficiary in accordance with
Subsection (c). Except as provided in the preceding sentence, "Beneficiary"
means the person or persons, including a trustee, designated in writing by a
Participant pursuant to practices of, or rules prescribed by, the Plan
Administrator, as the recipient of a benefit payable under the Plan following
the Participant's death. To be effective, a Beneficiary designation must be
filed with the Plan Administrator during the Participant's life and acknowledged
by the Plan Administrator in writing.

      (b) If no person has been designated as the Beneficiary of a Participant,
or if no person so designated survives the Participant, then the Beneficiary
shall be determined as follows:

            (I) If the Participant is survived by a Spouse, the Spouse shall be
      the Participant's Beneficiary.

            (2) If the Participant is not survived by a Spouse, the
      Participant's estate shall be the Participant's Beneficiary.

If any amount becomes payable under the Plan to a Beneficiary who survives the
Participant but dies before receiving the benefit due him, and if the
Participant has not named a contingent Beneficiary who survives the Participant,
the Participant's remaining vested Accounts will be paid in a lump sum as soon
as administratively feasible following the Beneficiary's death to the
Beneficiary's estate.

      (c) A Participant's designation of someone other than his Spouse as his
Beneficiary will not be given effect unless the Participant's Spouse consents to
the designation in writing, her consent acknowledges the effect of the
Participant's designation and her consent, and the consent is witnessed by a
Plan representative or a notary public. Notwithstanding this consent
requirement, if the Participant establishes to the Plan Administrator's
satisfaction that the written consent cannot be obtained because there is no
Spouse or the Spouse cannot be located, the designation will be deemed to have
the Spouse's consent. If a Participant is legally separated from his Spouse or
has been abandoned by his Spouse (within the meaning of local law) and the
Participant has a court order to that effect, the Spouse's consent will not be
required unless a Qualified Domestic Relations Order provides otherwise. Any
spousal consent will be valid only

                                      -25-


with respect to the Spouse who signs the consent, or in the case of a deemed
consent, the designated Spouse. If a Participant's Spouse is legally incompetent
to give consent, the Spouse's legal guardian (even if the guardian is the
Participant) may give consent. A Participant may revoke a prior designation of a
non-Spouse Beneficiary without his Spouse's consent at any time before the
distribution of his Accounts begins.

      Section 7.08. Effect of Government Regulation on Payment of Benefits. If
any regulation of the federal government or a federal agency prohibits or
prevents the payment or distribution of benefits in the manner provided in the
Plan, the Plan Administrator will conform to the regulation without amendment of
the Plan.

      Section 7.09. Inalienability of Benefits. Except as provided in this
Section, no Plan benefit will be subject in any manner to anticipation,
alienation, sale, transfer, assignment, pledge, encumbrance, or charge, whether
voluntary or involuntary, and any attempt to anticipate, alienate, sell,
transfer, assign, pledge, encumber, or charge a Plan benefit will be void. The
prohibition set out in the preceding sentence will not apply to the creation,
assignment, or recognition of a right to any benefit payable with respect to a
Participant pursuant to a Qualified Domestic Relations Order, or to any offset
of a Participant's Accounts against an amount that the Participant is ordered or
required to pay to the Plan pursuant to Code subparagraph 40 l(a)(l 3)(c).

      Section 7.10. Payments for Benefit of Incompetents. If any benefit is
payable to a minor or other person legally incompetent and the Plan
Administrator is aware of that person's status, the Plan Administrator will
direct that payments be made to the legal guardian of that person or to such
other person or organization as a court of competent jurisdiction may direct.

      Section 7.11. Qualified Domestic Relations Orders. If a Qualified Domestic
Relations Order provides for the payment of all or a portion of a Participant's
Accounts to an Alternate Payee, distribution to the Alternate Payee will be made
at any time specified in the Qualified Domestic Relations Order, irrespective of
whether the Participant has reached the "earliest retirement age," as defined in
Code subsection 414(p).

      Section 7.12. Direct Rollovers. Notwithstanding any provision of the Plan
to the contrary that would otherwise limit a Distributee's election under this
Section, a Distributee may elect, at the time and in the manner prescribed by
the Plan Administrator, to have any portion of an Eligible Rollover Distribution
paid directly to an Eligible Retirement Plan specified by the Distributee in a
Direct Rollover.

                                  ARTICLE VIII
                                 ADMINISTRATION

      Section 8.01. Administrator. The Company is the Plan Administrator.

      Section 8.02. Correction of Defects. The Plan Administrator may correct
any defect or supply any omission or reconcile any error or inconsistency in its
previous proceedings, decisions, orders, directions, or other actions in the
manner and to the extent it deems advisable to carry out the purposes of the
Plan.

                                      -26-


      Section 8.03. Reliance upon Legal Counsel. The Employer and the Plan
Administrator are entitled to rely upon all opinions given by legal counsel
selected by the Plan Administrator.

      Section 8.04. Expenses. In the performance of its duties, the Plan
Administrator is authorized to incur reasonable expenses, including counsel
fees, that will, to the extent permitted by ERISA, be chargeable against the
Trust Assets if the expenses are not paid by the Employer.

      Section 8.05. Powers and Duties of Plan Administrator. Subject to the
specific limitations stated in this Plan, the Plan Administrator will have the
following powers, duties, and responsibilities:

      (a) To carry out the general administration of the Plan;

      (b) To cause to be prepared all forms necessary or appropriate for the
administration of the Plan;

      (c) To keep appropriate books and records;

      (d) To determine, consistent with the provisions of this Plan, the manner
in which the Trust Assets will be allocated and disbursed;

      (e) To give directions to the Trustee as to the amounts to be disbursed to
Participants and others under the provisions of the Plan;

      (f) To establish written procedures for determining, and to determine in
accordance with those procedures, whether a domestic relations order is a
Qualified Domestic Relations Order;

      (g) To exercise all other powers and duties specifically conferred upon
the Plan Administrator elsewhere in this Plan and the Trust Agreement;

      (h) To exercise all duties and responsibilities imposed by ERISA upon the
Plan Administrator as administrator of the Plan;

      (i) To interpret, with discretionary authority, the provisions of the Plan
and to resolve, with discretionary authority, all disputed questions of Plan
interpretation including eligibility, rights, and status of Participants and
others under the Plan; and

      (j) To employ agents to assist it in performing its administrative duties.

The Plan Administrator will at all times make similar decisions on similar
questions involving similar circumstances. Subject to the provisions of ERISA
and Article IX, all decisions of the Plan Administrator made in good faith on
all matters within the scope of its authority under the provisions of this Plan
will be final and binding upon all persons.

      Section 8.06. Matters Specifically Excluded from Jurisdiction.
Notwithstanding any other provision of this Plan, the Plan Administrator will
have no power, duty, or authority with respect to determination of the amounts
to be contributed by the Employer to the Trust.

                                      -27-


      Section 8.07. Investment Manager. The Company may appoint an investment
manager or managers to manage (including the power to acquire and dispose of any
Trust Assets) those Trust Assets specified by the Company, subject to the
conditions of this Section.

      (a) An appointed investment manager must (1) be registered as an
investment adviser under the Investment Advisers Act of 1940; (2) be a bank as
defined in that Act; or (3) be an insurance company qualified to perform
investment management services in more than one state.

      (b) An appointed investment manager must, prior to acting with respect to
the Trust Assets, acknowledge in writing that it accepts the duties given it
under the Plan and that it is a fiduciary with respect to the Plan.

      (c) Upon the appointment of an investment manager, the Company will notify
the Trustee of the appointment in writing, and will deliver to the Trustee a
copy of the instruments evidencing the appointment, copies of the written
acknowledgment referred to in Subsection (b), and written directions concerning
the proper segregation of the Trust Assets into separate investment accounts, if
appropriate. The Company' written notification will constitute a warranty as to
the investment manager's qualifications under ERISA subsection 3(3 8), and the
Trustee will be fully protected in relying on the investment manager's continued
qualification and authority until otherwise notified in writing by the Company.
The Trustee will follow the directions of an appointed investment manager
regarding investment and reinvestment of Trust Assets. The Trustee will be under
no obligation to review or give advice with respect to the investment manager's
directions.

      (d) The Trustee will not be liable for the acts or omissions of the
investment manager or be under an obligation to invest or otherwise manage any
Trust Assets that are subject to management by the investment manager. The
Trustee will have no liability arising out of following the directions of the
investment manager.

      (e) The Company may remove an investment manager upon written notice to
the Trustee, in which case the Trustee will, until notified of the appointment
of a successor investment manager, accept and manage the Trust Assets previously
managed by the investment manager.

                                   ARTICLE IX
                                CLAIMS PROCEDURES

      Section 9.01. Presentation of Claims. Any person believing himself to be
entitled to a benefit under the Plan may file an application or claim for the
benefit with the Plan Administrator. The Plan Administrator may adopt and supply
forms for benefit applications, but no claim will be adversely affected because
the claimant has not used the form adopted by the Plan Administrator. A claim
for a benefit will be deemed to have been made upon receipt by the Plan
Administrator of a written request for the benefit, signed by the claimant or
his representative.

      Section 9.02. Denial of Claim. Failure of the Plan Administrator to allow
a claim or any part of it within 90 days after its receipt of the claim will be
considered to be a denial of the

                                      -28-


claim or the part of the claim not allowed. If a claim is denied in whole or in
part, the Plan Administrator, within 90 days after receipt of the claim, will
give the claimant written notice of the denial. If special circumstances require
extension of the 90-day response period, the Plan Administrator may extend the
period for up to 90 additional days by notifying the claimant, within the
original 90-day period, of the extension, the reason for it, and when a decision
can be expected. The notice of a claim denial will state, in a manner calculated
to be understood by the claimant, the following:

      (a) The specific reason or reasons for the denial;

      (b) Specific reference to the Plan provision or provisions on which the
denial is based;

      (c) A description of any additional material or information that the
claimant may need to perfect the claim, with an explanation of why the material
or information is necessary; and

      (d) An explanation of the appeal right and procedure described in the next
Section.

      Section 9.03. Claimant's Right to Appeal Denial of Claim. A claimant whose
claim is denied, in whole or in part, will have the right of an appeal to the
Plan Administrator for review of the denial. The following provisions will apply
to the right of appeal:

      (a) The request for review must be filed with the Plan Administrator
within 60 days after written notice of denial of the claim.

      (b) The request will be in writing signed by the claimant or his
authorized representative.

      (c) The claimant will have the right, upon request, to review records and
documents relating to the claim and to a hearing that are in the possession of
the Plan Administrator.

      (d) The claimant may submit issues, arguments, and other comments in
writing to the Plan Administrator, with any documentary evidence in support of
his claim.

      (e) The decision by the Plan Administrator will be given to the claimant
in writing within 60 days after receipt by the Plan Administrator of the
claimant's request for review. If special circumstances require extension of the
60-day period, the Plan Administrator may extend the 60-day period for up to 60
additional days by notifying the claimant, within the original 60-day period, of
the extension, the reason for it, and when a decision can be expected. If the
decision denies the claim, in whole or in part, the decision will state the
specific reasons for the denial, including specific references to the Plan
provision or provisions on which the denial is based, all stated in language
calculated to be understood by the claimant.

                                      -29-


                                    ARTICLE X
              LIMITATIONS ON RIGHTS OF EMPLOYEES AND OTHER PERSONS

      Section 10.01. In General. The Plan is strictly a voluntary obligation on
the part of the Employer and will not be deemed to constitute a contract between
the Employer and any Employee or to be a consideration for, an inducement to, or
a condition of the employment of any Employee. Neither the Employer, the Plan
Administrator, nor the Trustee in any way guarantees against loss or
depreciation of any Trust Assets or guarantees the payment of any benefit or
amount that may become due under the Plan to any Participant, his Beneficiaries,
or to any creditor of the Trust. Except as may be otherwise provided by ERISA,
neither the Employer nor the Plan Administrator will be liable to any person for
any act or omission of the Trustee, nor will the Trustee be liable to any person
for any act or omission of the Employer or the Plan Administrator.

      Section 10.02. No Increase or Impairment of Other Rights. Nothing
contained in the Plan will be deemed to give any Employee the right to be
retained in the Employer's service or will interfere with the Employer's right
to discharge or otherwise terminate any Employee's employment.

      Section 10.03. Trust Sole Source of Benefits. Except as may be otherwise
provided by ERISA, no person will be entitled to any right or claim to benefits
except to the extent that the right is specifically fixed under the terms of the
Plan and there are Trust Assets available for payment of the benefits.

      Section 10.04. Other Limitations of Liability. Except as may be otherwise
provided by ERISA, neither the Employer, the Plan Administrator, nor the Trustee
will be under any liability or responsibility for the validity or effectiveness
of the Plan or the Trust Agreement, or for any failure of this Plan or the Trust
to qualify at any time or for any period as a tax-exempt plan or trust under the
provisions of the Code or any applicable law or for any tax or increase in tax
on a Participant or Beneficiary because of any benefits.

                                   ARTICLE XI
                PROVISIONS DESIGNED TO COMPLY WITH LIMITATIONS ON
                        CONTRIBUTIONS AND OTHER ADDITIONS

      Section 11.01. Purpose and Construction of This Article. This Article is
included in the Plan to comply with limitations imposed by Code section 415, and
all provisions of this Article will be construed and applied accordingly.

      Section 11.02. General Statement of Limitation. Notwithstanding any other
provision of the Plan, a Participant's Annual Addition will not exceed the
lesser of(a) $30,000 or (b) 25% of the Participant's Regulatory Compensation for
that Plan Year.

      Section 11.03. Adjustments to Allocation of Contributions. If a
Participant's Annual Addition would exceed the limitations of this Article to be
exceeded for a Plan Year as a result of the allocation of forfeitures, a
reasonable error in estimating a Participant's Regulatory Compensation, or under
other limited facts and circumstances that the Commissioner of Internal

                                      -30-


Revenue finds justify the availability of the rules set forth in this Section,
then the Participant's Annual Addition will be adjusted to the extent necessary
to comply with the applicable limitation. Any adjustment to components of the
Annual Addition pursuant to the preceding sentence will be made in the following
order: Voluntary Contributions, Elective Deferrals, Matching Contributions,
Profit Sharing Contributions, and forfeitures. Any Elective Deferrals or
Voluntary Contributions adjusted pursuant to this Section, and the gains
attributable to them, will be distributed to the Participants on whose behalf
they were made not later than the last day of the Plan Year following the Plan
Year for which the limitation was exceeded. Any other excess contribution
adjusted pursuant to this Section will be reallocated as provided in the Section
of the Plan relating to the allocation of the particular type of contribution
being reallocated. If the reallocation required by the preceding sentence would
cause the amounts allocated to the Accounts of all Participants to exceed the
limitation set out in Section 11.02 for a Plan Year, then the excess amounts
will be held unallocated in a suspense account in the Trust and allocated in
succeeding Plan Years, in order of time, to the maximum extent permitted by
Section 11.02, until the account is exhausted. If a suspense account is in
existence at any time during a Plan Year, other than the Plan Year described in
the preceding sentence, all amounts in the suspense account must be allocated
and reallocated to Participants' Accounts (subject to the limitations of this
Article) before any contributions that would constitute Annual Additions may be
made for the Plan Year.

                                   ARTICLE XII
                        AMENDMENT AND TERMINATION OF PLAN

      Section 12.01. Amendments in General. The Company reserves the right to
modify or amend the Plan in whole or in part at any time or from time to time by
action of its Board of Directors. The Company may not, however, make any
modification or amendment that materially affects the rights, duties, or
responsibilities of the Trustee, unless the Trustee consents in writing to the
modification or amendment. Moreover, except as otherwise permitted by the Code
and ERISA, the Company may not make a modification or amendment that:

      (a) will reduce the Accounts of any Participant;

      (b) will eliminate an optional form of distribution with respect to
benefits accrued before the amendment;

      (c) will make it possible for any part of the principal or income of the
Trust to be used for, or diverted to, purposes other than the exclusive benefit
of Participants, Beneficiaries, and other persons entitled to benefits under the
Plan; or

      (d) will permit any part of the principal or income of the Trust to revert
to the Employer.

      Section 12.02. Amendments Necessary to Bring Plan into Compliance with the
Code and ERISA. Notwithstanding any other provision of the Plan, any
modification or amendment of the Plan may be made, retroactively if necessary,
that may be required (a) to cause the Trust to constitute a qualified trust
under the provisions of Code section 401, (b) to cause the Plan to

                                      -31-


contain a qualified cash or deferred arrangement under Code subsection 401(k),
or (c) to comply in every respect with ERISA.

      Section 12.03. Amendments to Vesting Provisions. No amendment to the
vesting provisions of the Plan will deprive a Participant of his nonforfeitable
rights to benefits accrued before the date of the amendment. Further, if the
Plan's vesting provisions are amended, each Participant with at least 3 years of
Continuous Service may elect, within the period specified in the following
sentence, to have his nonforfeitable percentage computed under the Plan without
regard to the amendment. The period during which the election may be made will
begin with the date the amendment is adopted and will end 60 days after the
latest of the following events occurs: (1) the amendment is adopted, (2) the
amendment becomes effective, or (3) the Participant is issued written notice of
the amendment by the Employer.

      Section 12.04. Termination of Plan. The Plan is intended to be permanent,
and the Trust created in support of the Plan is intended to be irrevocable,
except in the manner and to the extent otherwise provided in this instrument or
in the Trust Agreement. The Company hopes to maintain the Plan indefinitely and
to continue contributions to the Trust under the Plan, but neither the Company
nor any Employer has any obligation or liability whatsoever to maintain the Plan
or to continue contributions to the Trust for any given length of time. The Plan
and Trust will terminate upon the occurrence of any of the following
circumstances:

      (a) termination of the business of the Company without provision for
continuing the Plan, except that provision may be made by which the Plan will be
continued by the successor to the Company or any transferee of all or
substantially all of its assets and business, and, in the event that an election
is made to continue the Plan, the successor or purchaser will automatically
become substituted for the Company;

      (b) legal adjudication of the Company as a bankrupt; a general assignment
by the Company to or for the benefit of its creditors; or the voluntary or
involuntary dissolution of the Company; or

      (c) termination of the Plan by the Company upon notice delivered to the
Trustee as provided in the following Section.

      Section 12.05. Effect of Termination on Trust. Upon termination of the
Plan, no further contributions to the Trust will be made, except that the
Employer will thereupon promptly pay to the Trust the unpaid balance, if any, of
any contribution required of the Employer with respect to the last completed
Plan Year preceding the date of termination. If the Plan is terminated by fewer
than all Employers, it will continue in effect for Participants employed by the
remaining Employers.

      Section 12.06. Payment of Benefits upon Termination. Upon termination of
the Plan, the Trust will continue in existence for the purpose of administering
the Trust Assets and the payment in full of all benefits pursuant to the
provisions of Article VII. A Participant's Elective Deferral Account and
Matching Account will not be distributed earlier than upon one of the following
events:

                                      -32-


      (a) The Participant's retirement, death, disability, attainment of age
59-1/2, or separation from service.

      (b) The termination of the Plan without establishment of a successor plan.

      (c) The date of the sale or other disposition by the Employer to an
unrelated corporation, which does not maintain the Plan, of substantially all of
the assets (within the meaning of Code paragraph 409(d)(2)) used by the Employer
in its trade or business. The preceding sentence will apply only with respect to
a Participant who continues employment with the corporation acquiring the
Employer's assets.

      Section 12.07. Post-Termination Powers of Trustees, Plan Administrator.
Company, and Employer. Notwithstanding the termination of the Plan and the
Trust, the Trustee, the Plan Administrator, the Company, and the Employer will
have and retain thereafter all requisite power and authority to take every step
and to do all acts and things necessary, requisite, or appropriate to complete
distribution of the Trust Assets as provided in this Plan, including, but not
limited to, the power of the Trustee to sell or transfer the Trust Assets in the
process of liquidation.

                                  ARTICLE XIII
                      PROVISIONS RELATING TO TOP-HEAVY PLAN

      Section 13.01. Construction of this Article. This Article will be
construed in accordance with Code section 416 and the regulations thereunder.

      Section 13.02. Top-Heavy Determination. For each Plan Year, the Plan
Administrator will determine whether the Plan is a Top- Heavy Plan.

      (a) The Plan will be determined to be a Top-Heavy Plan if it satisfies
either Paragraph (1) or Paragraph (2).

            (1) Except as provided in Paragraph (3), the Plan will be a
      Top-Heavy Plan for a Plan Year if, as of the Determination Date, the
      aggregate of the Accounts of Key Employees exceeds 60% of the aggregate of
      all the Accounts of all Employees.

            (2) Except as provided in Paragraph (3), the Plan will be a
      Top-Heavy Plan for a Plan Year if it is included in a Required Aggregation
      Group that is a Top-Heavy Group for the Plan Year.

            (3) The Plan will not be a Top-Heavy Plan for a Plan Year if it is
      included in an Aggregation Group (whether a Required Aggregation Group or
      a Permissive Aggregation Group) that is not a Top-Heavy Group for the Plan
      Year.

      (b) An Aggregation Group will be a Top-Heavy Group for the Plan Year if
(as of the respective Determination Dates that occur in the same calendar year
for each of the plans in the Aggregation Group) the sum of:

                                      -33-


            (1) the present value of the cumulative accrued benefits for Key
      Employees under all defined benefit Retirement Plans included in the
      Aggregation Group, and

            (2) the aggregate balances of the accounts of Key Employees under
      all defined contribution Retirement Plans included in the Aggregation
      Group,

exceeds 60% of a similar sum determined for all Employees.

      (c) In making the determinations required by this Section, the rules of
Section 13.03 will apply.

      Section 13.03. Special Rules Relating to Determination of Top-Heavy
Status. In making the determinations required by this Article, the following
rules will apply:

      (a) In determining the present value of an Employee's accrued benefits
under any defined benefit Retirement Plan, the mortality table and interest rate
set out in that Retirement Plan will be used.

      (b) For purposes of determining the present value of an Employee's accrued
benefit and accounts under this Article, distributions made with respect to the
Employee during the 5-year period ending on the Determination Date will be taken
into account. The preceding sentence will also apply to distributions under a
terminated Retirement Plan that would have been required to be included in the
Aggregation Group if the Retirement Plan had not been terminated.

      (c) All Retirement Plans included in the Required Aggregation Group must
be aggregated to determine whether they constitute a Top-Heavy Group.

      (d) If an individual is a Non-Key Employee with respect to any Retirement
Plan for a Plan Year, but the individual was a Key Employee with respect to the
Retirement Plan for any prior Plan Year, no accrued benefit or account of the
Employee will be taken into account in determining top-heavy status.

      (e) If an individual has not performed any service for the Employer at any
time during the 5-year period ending on the Determination Date, the accrued
benefits and accounts of that individual will not be taken into account.

      (f) For purposes of determining the present value of the accrued benefit
of an Employee other than a Key Employee, the accrued benefit will be determined
(I) under the method used for accrual purposes for all Retirement Plans of the
Employer, or (2) if there is no method described in Clause (1), as if the
benefit accrued not more rapidly than the slowest accrual rate permitted under
Code subparagraph 41 1(b)(l)(C).

                                   ARTICLE XIV
                            MISCELLANEOUS PROVISIONS

      Section 14.01. Merger, Consolidation, or Transfer of Assets or
Liabilities. The Plan will not merge with, consolidate with, or transfer any of
its assets or liabilities to any other plan

                                      -34-


unless each Participant in the Plan would (if the Plan then terminated) receive
a benefit immediately after the merger, consolidation, or transfer that is equal
to or greater than the benefit he would have been entitled to receive
immediately before the merger, consolidation, or transfer (if the Plan had then
terminated). Any assets or liabilities merged or consolidated with, or
transferred to, the Plan from another plan on behalf of an Eligible Employee
will be credited to one or more of the Employee's Accounts in the Plan so that
any options and restrictions applicable to the merged, consolidated or
transferred amounts will be preserved as required by law.

      Section 14.02. No Duplication of Benefits. Nothing in this Plan will be
construed to permit any duplication of the benefits of a former Participant upon
his re-entry into the Plan as a Participant after retirement or other
termination of employment. Any such duplication of benefits is specifically
prohibited.

      Section 14.03. Named Fiduciaries. The Company, the Plan Administrator and
the Trustee are hereby designated as named fiduciaries with respect to the Plan.
Each named fiduciary will have only such authority as to the control and
management of the operation and administration of the Plan as is specifically
given to it by the provisions of the Plan. No named fiduciary will be subject to
the direction or control of another named fiduciary except to the extent, and in
the manner, specifically provided in the Plan or in the Trust Agreement. Each
named fiduciary will discharge its duties with respect to the Plan in accordance
with the applicable provisions of ERISA.

      Section 14.04. Bonding. Each fiduciary of the Plan and Trust and each
person who handles funds of the Plan and Trust will be bonded, except a
corporate Trustee who is exempt from the ERISA bonding requirements.

      Section 14.05. Qualified Military Service. Notwithstanding any provision
of the Plan to the contrary, contributions, benefits, and service credit with
respect to qualified military service will be provided in accordance with Code
subsection 414(u).

      Section 14.06. Transfer of Benefits. An Eligible Employee may elect to
transfer his benefits under a Retirement Plan to this Plan in accordance with
Treasury regulation section 1.41 1(d)-4, A-3(b). If the Plan Administrator
determines that the Plan will accept the benefits, it will cause the benefits to
be transferred to the Plan in accordance with the Eligible Employee's election.

      Section 14.07. Transfers From Merged Plans. Upon the merger of the
following -named plans (the "Merged Plans") into the Plan, the Trust shall
accept all assets of the Merged Plans from the trusts of the Merged Plans:

      Bank of Illinois in Mt. Vernon 401(k) Plan (the "Bank of Illinois Plan")
      Community First Financial, Inc. 40 1(k) Plan (the "Community First Plan")
      First State Bank of Vienna 401(k) Profit Sharing Plan (the "Vienna Plan")
      PBI 401(k) Plan (the "PBI Plan")
      Illinois One Bancorp, Inc., 40 1(k) Profit Sharing Plan (the "Illinois One
      Plan").

                                      -35-


Except as otherwise provided in Section 14.01 and this Section, the assets
transferred to the Plan from the Merged Plans shall be administered in
accordance with the provisions of this Plan. Notwithstanding the preceding
sentence, the following benefits shall be preserved with respect to the
transferred assets:

      (a) Bank of Illinois. At any time upon reaching age 59'/2, Participants
may withdraw from their Accounts any amounts attributable to assets transferred
from the Bank of Illinois Plan.

      (b) Community First Plan. At any time upon reaching age 59%, Participants
may withdraw from their Accounts any amounts attributable to their elective
deferral contributions to the Community First Plan; and at any time upon
reaching age 65, or upon reaching age 55 with 6 years of service, Participants
may withdraw from their Accounts any amounts attributable to the assets
transferred from the Community First Plan.

      (c) PBI Plan. At any time upon reaching age 59'/2, Participants may
withdraw from their Accounts any amounts attributable to assets transferred from
the PBI Plan.

      (d) Illinois One Plan. At any time, Participants may withdraw from their
Accounts any amounts attributable to their rollover contributions to the
Illinois One Plan.

                                   ARTICLE XV

                                EGTRRA AMENDMENTS

      Section 15.01. General.

      (a) Adoption and Effective Date of Article. This Article of the Plan
reflects certain provisions of the Economic Growth and Tax Relief Reconciliation
Act of 2001("EGTRRA"). This Article is intended as good faith compliance with
the requirements of EGTRRA and is to be construed in accordance with EGTRRA and
guidance issued thereunder. Except as otherwise provided, the provisions of this
Article shall be effective as of January 1, 2002.

      (b) Supersession of Inconsistent Provisions. The provisions of this
Article shall supersede any other provisions of the Plan to the extent those
provisions are inconsistent with the provisions of this Article.

      Section 15.02. Limitations On Contributions.

      (a) Effective Date. This Section shall be effective for limitation years
beginning after December 31, 2001.

      (b) Maximum Annual Addition. Except to the extent permitted under Section
15.09 of the Plan and Code section 414(v), if applicable, the Annual Addition
that may be contributed or allocated to a Participant's Accounts under the Plan
for any limitation year shall not exceed the lesser of:

            (1) $40,000, as adjusted for increases in the cost-of-living under
      Code section 415(d), or

                                      -36-


            (2) 100 percent of the Participant's Regulatory Compensation for the
      limitation year.

The Regulatory Compensation limit referred to in (b) shall not apply to any
contribution for medical benefits after Severance from Service (within the
meaning of Code section 401(h) or Code section 419A(f)(2) which is otherwise
treated as an Annual Addition.

      Section 15.03. Increase In Compensation Limit. The Compensation of each
Participant taken into account in determining allocations for any Plan Year
beginning after December 31, 2001, shall not exceed $200,000, as adjusted for
cost-of-living increases in accordance with Code section 401(a)(17)(B). Annual
Compensation means Compensation during the Plan Year or such other consecutive
12-month period over which Compensation is otherwise determined under the Plan
(the determination period). The cost-of-living adjustment in effect for a
calendar year applies to Compensation for the determination period that begins
with or within such calendar year.

      Section 15.04. Modification of Top-Heavy Rules.

      (a) Effective Date. Notwithstanding any other provisions of the Plan to
the contrary, this Section shall apply for purposes of determining whether the
Plan is a Top-Heavy Plan under Code section 416(g) for Plan Years beginning
after December 31, 2001, and whether the Plan satisfies the minimum benefits
requirements of Code section 416(c) for such years.

      (b) Determination of Top-Heavy Status.

            (1) Key Employee. Key Employee means any Employee or former Employee
      (including any deceased Employee) who at any time during the Plan Year
      that includes the Determination Date was an officer of the Employer having
      annual compensation greater than $130,000 (as adjusted under Code section
      416(i)(l) for Plan Years beginning after December 31, 2002), a 5-percent
      owner of the Employer, or a 1-percent owner of the Employer having annual
      compensation of more than $150,000. For this purpose, annual compensation
      means compensation within the meaning of Code section 415(c)(3). The
      determination of who is a Key Employee will be made in accordance with
      Code section 416(i)(l) and the applicable regulations and other guidance
      of general applicability issued thereunder.

            (2) Determination of Present Values and Amounts. This Section (2)
      shall apply for purposes of determining the present values of accrued
      benefits and the amounts of Account balances of Employees as of the
      Determination Date.

                  (A) Distributions During Year Ending on the Determination
            Date. The present values of accrued benefits and the amounts of
            Account balances of an Employee as of the Determination Date shall
            be increased by the distributions made with respect to the Employee
            under the Plan and any plan aggregated with the Plan under Code
            Section 416(g)(2) during the 1-year period ending on the
            Determination Date. The preceding sentence shall also apply to
            distributions under a terminated plan which, had it not been
            terminated, would have been aggregated with the Plan under Code
            section 416(g)(2)(A)(i). In the case of a

                                      -37-


            distribution made for a reason other than separation from service,
            death, or disability, this provision shall be applied by
            substituting "5-year period" for "1-year period."

                  (B) Employees Not Performing Services During Year Ending on
            the Determination Date. The accrued benefits and Accounts of any
            individual who has not performed services for the Employer during
            the 1-year period ending on the Determination Date shall not be
            taken into account.

            (3) Minimum Benefits.

                  (A) Matching Contributions. Employer Matching Contributions
            shall be taken into account for purposes of satisfying the minimum
            contribution requirements of Code section 41 6(c)(2) and the Plan.
            The preceding sentence shall apply with respect to Matching
            Contributions under the Plan or, if the Plan provides that the
            minimum contribution requirement shall be met in another plan, such
            other plan. Employer Matching Contributions that are used to satisfy
            the minimum contribution requirements shall be treated as Matching
            Contributions for purposes of the actual contribution percentage
            test and other requirements of Code section 40 1(m).

                  (B) Contributions Under Other Plans. The Employer may provide
            that the minimum benefit requirement shall be met in another plan
            (including another plan that consists solely of a cash or deferred
            arrangement which meets the requirements of Code section 401(k)(12)
            and matching contributions with respect to which the requirements of
            Code section 401(m)(1 1) of the Code are met).

      Section 15.05. Direct Rollovers of Plan Distributions.

      (a) Effective Date. This Section shall apply to distributions made after
December 31, 2001.

      (b) Modification of Definition of Eligible Retirement Plan. For purposes
of the direct rollover provisions in Section 7.12 of the Plan, an Eligible
Retirement Plan shall also mean an annuity contract described in Code section
403(b) and an eligible plan under Code section 457(b) which is maintained by a
state, political subdivision of a state, or any agency or instrumentality of a
state or political subdivision of a state and which agrees to separately account
for amounts transferred into such plan from this Plan. The definition of
Eligible Retirement Plan shall also apply in the case of a distribution to a
surviving Spouse, or to a Spouse or former Spouse who is the alternate payee
under a Qualified Domestic Relations Order.

      (c) Modification of Definition of Eligible Rollover Distribution To
Exclude Hardship Distributions. For purposes of the direct rollover provisions
in Section 7.12 of the Plan, any amount that is distributed on account of
hardship shall not be an Eligible Rollover Distribution and the distributee may
not elect to have any portion of such a distribution paid directly to an
Eligible Retirement Plan.

                                      -38-


      (d) Modification of Definition of Eligible Rollover Distribution to
Include After-Tax Employee Contributions. For purposes of the Direct Rollover
provisions in Section 7.12 of the Plan, a portion of a distribution shall not
fail to be an Eligible Rollover Distribution merely because the portion consists
of after-tax Employee contributions which are not includable in gross income.
However, such portion may be transferred only to an individual retirement
account or annuity described in Code section 408(a) or (b), or to a qualified
defined contribution plan described in Code section 401(a) or 403(a) that agrees
to separately account for amounts so transferred, including separately
accounting for the portion .of such distribution which is includable in gross
income and the portion of such distribution which is not so includable.

      Section 15.06. Rollovers Disregarded In Involuntary Cashouts.

      (a) Applicability and Effective Date. This Section shall apply with
respect to distributions made after December 31, 2001.

      (b) Rollovers Disregarded in Determining Value of Accounts for Involuntary
Distributions. For purposes of Section 7.04 of the Plan, the value of a
Participant's nonforfeitable Accounts shall be determined without regard to that
portion of the Accounts that is attributable to Rollover Contributions (and
earnings allocable thereto) within the meaning of Code sections 402(c),
403(a)(4), 403(b)(8), 408(d)(3)(A)(ii), and 457(e)(16). If the value of the
Participant's nonforfeitable Accounts as so determined is $5,000 or less, the
Plan shall immediately distribute the balance of the Participant's entire
nonforfeitable Accounts.

      Section 15.07. Repeal of Multiple Use Test. The multiple use test
described in Treasury Regulation section l.401(m)-2 and Section 4.05 of the Plan
shall not apply for Plan Years beginning after December 31, 2001.

      Section 15.08. Elective Deferrals -- Contribution Limitation. No
Participant shall be permitted to have Elective Deferrals made under this Plan,
or any other qualified plan maintained by the Employer during any taxable year,
in excess of the dollar limitation contained in Code section 402(g) in effect
for such taxable year, except to the extent permitted under Section 15.09 of
this Plan and Code section 4 14(v), if applicable.

      Section 15.09. Catch-Up Contributions. All Participants who are eligible
to make Elective Deferrals under this Plan and who have attained age 50 before
the close of the Plan Year shall be eligible to make catch-up contributions in
accordance with, and subject to the limitations of, Code section 4 14(v). Such
catch-up contributions shall not be taken into account for purposes of the
provisions of the Plan implementing the required limitations of Code sections
402(g) and 415. The Plan shall not be treated as failing to satisfy the
provisions of the Plan implementing the requirements of Code section 401 (k)(3),
401 (k)(I 1), 401 (k)(1 2), 410(b), or 416, as applicable, by reason of the
making of such catch-up contributions.

      Section 15.10. Distribution Upon Severance of Employment.

      (a) Effective Date. This Section shall apply for distributions and
severances from employment occurring after December 31, 2001.

                                      -39-


      (b) New Distributable Event. Notwithstanding the provisions of Section
12.06 (a) of the Plan, a participant's Elective Deferrals, Qualified Nonelective
Contributions, qualified matching contributions, and earnings attributable to
these contributions shall be distributed on account of the Participant's
severance from employment. However, such a distribution shall be subject to the
other provisions of the Plan regarding distributions, other than provisions that
require a separation from service before such amounts may be distributed.

                                   ARTICLE XVI
                             SAFE HARBOR PROVISIONS

      Section 16.01. Safe Harbor Elective Deferrals. To the extent the Plan
meets the requirements of Code section 401(k)(12) for a Plan Year, Sections
4.03(a) and (b) of the Plan shall not apply.

      Section 16.02. Safe Harbor Matching Contributions. To the extent the Plan
meets the requirements of Code section 401(m)(l 1) for a Plan Year, Section 4.05
of the Plan shall not apply with respect to Matching Contributions.

      Section 16.03. Top-Heavy Requirements. The top-heavy requirements of Code
section 416 and Article XIII of the Plan shall not apply in any Plan Year in
which the Plan consists solely of a cash or deferred arrangement which meets the
requirements of Code section 401 (k)( 12) and matching contributions with
respect to which the requirements of Code section 401(m)(1l) are met.

      Section 16.04. Notice. The Plan Administrator shall provide each
Participant with the notice, as required under Code section 401 (k)( 12).

                                  ARTICLE XVII
                        MINIMUM DISTRIBUTION REQUIREMENTS
                            EFFECTIVE JANUARY 1, 2002

      Section 17.01. General Rules.

      (a) Effective Date. The provisions of this Article will apply for purposes
of determining required minimum distributions for calendar years beginning with
the 2002 calendar year.

      (b) Precedence. The requirements of this Article will take precedence over
any inconsistent provisions of the Plan.

      (c) Requirements of Treasury Regulations Incorporated. All distributions
required under this Article will be determined and made in accordance with the
Treasury regulations under Code section 401(a)(9).

      (d) TEFRA Section 242(b)(2) Elections. Notwithstanding the other
provisions of this Article, distributions may be made under a designation made
before January 1, 1984, in accordance with section 242(b)(2) of the Tax Equity
and Fiscal Responsibility Act (TEFRA) and the provisions of the Plan that relate
to section 242(b)(2) of TEFRA.

                                      -40-


      Section 17.02. Time and Manner of Distribution.

      (a) Required Beginning Date. The Participant's entire interest will be
distributed, or begin to be distributed, to the Participant no later than the
Participant's required beginning date.

      (b) Death of Participant Before Distributions Begin. If the Participant
dies before distributions begin, the Participant's entire interest will be
distributed, or begin to be distributed, no later than as follows:

            (1) If the Participant's surviving Spouse is the Participant's sole
      designated Beneficiary, then, distributions to the surviving Spouse will
      begin by December 31 of the calendar year immediately following the
      calendar year in which the Participant died, or by December 31 of the
      calendar year in which the Participant would have attained age 70-1/2, if
      later.

            (2) If the Participant's surviving Spouse is not the Participant's
      sole designated Beneficiary, then distributions to the Beneficiary will
      begin by December 31 of the calendar year immediately following the
      calendar year in which the Participant died.

            (3) If there is no designated Beneficiary as of September 30 of the
      year following the year of the Participant's death, the Participant's
      entire interest will be distributed by December 31 of the calendar year
      containing the fifth anniversary of the Participant's death.

            (4) If the Participant's surviving Spouse is the Participant's sole
      designated Beneficiary and the surviving Spouse dies after the Participant
      but before distributions to the surviving Spouse begin, this Subsection
      (b), other than Paragraph (b)(l), will apply as if the surviving Spouse
      were the Participant.

      For purposes of this Subsection 17.02(b) and Section 17.04, unless
Paragraph 17.02(b)(4) applies, distributions are considered to begin on the
Participant's required beginning date. If Paragraph 17.02(b)(4) applies,
distributions are considered to begin on the date distributions are required to
begin to the surviving Spouse under Paragraph 17.02(b)(1). If distributions
under an annuity purchased from an insurance company irrevocably commence to the
Participant before the Participant's required beginning date (or to the
Participant's surviving Spouse before the date distributions are required to
begin to the surviving Spouse under Paragraph 17.02(b)(l)), the date
distributions are considered to begin is the date distributions actually
commence.

      (c) Forms of Distribution. Unless the Participant's interest is
distributed in the form of an annuity purchased from an insurance company or in
a single sum on or before the required beginning date, as of the first
distribution calendar year, distributions will be made in accordance with
Sections 17.03 and 17.04. If the Participant's interest is distributed in the
form of an annuity purchased from an insurance company, distributions thereunder
will be made in accordance with the requirements of Code section 401 (a)(9) and
the Treasury regulations.

      Section 17.03. Required Minimum Distributions During Participant's
Lifetime.

                                      -41-


      (a) Amount of Required Minimum Distribution For Each Distribution Calendar
Year. During the Participant's lifetime, the minimum amount that will be
distributed for each distribution calendar year is the lesser of:

            (1) the quotient obtained by dividing the Participant's Account
      balance by the distribution period in the Uniform Lifetime Table set forth
      in section 1 .401(a)(9)-9 of the Treasury regulations, using the
      Participant's age as of the Participant's birthday in the distribution
      calendar year; or

            (2) if the Participant's sole designated Beneficiary for the
      distribution calendar year is the Participant's Spouse, the quotient
      obtained by dividing the Participant's Account balance by the number in
      the Joint and Last Survivor Table set forth in section 1.401 (a)(9)-9 of
      the Treasury regulations, using the Participant's and Spouse's attained
      ages as of the Participant's and Spouse's birthdays in the distribution
      calendar year.

      (b) Lifetime Required Minimum Distributions Continue Through Year of
Participant's Death. Required minimum distributions will be determined under
this Section 17.03 beginning with the first distribution calendar year and up to
and including the distribution calendar year that includes the Participant's
date of death

      Section 17.04. Required Minimum Distributions After Participant's Death.

      (a) Death On or After Date Distributions Begin.

            (1) Participant Survived by Designated Beneficiary. If the
      Participant dies on or after the date distributions begin and there is a
      designated Beneficiary, the minimum amount that will be distributed for
      each distribution calendar year after the year of the Participant's death
      is the quotient obtained by dividing the Participant's account balance by
      the longer of the remaining life expectancy of the Participant or the
      remaining life expectancy of the Participant's designated Beneficiary,
      determined as follows:

                  (A) The Participant's remaining life expectancy is calculated
            using the age of the Participant in the year of death, reduced by
            one for each subsequent year.

                  (B) If the Participant's surviving Spouse is the Participant's
            designated sole Beneficiary, the remaining life expectancy of the
            surviving Spouse is calculated for each distribution calendar year
            after the year of the Participant's death using the surviving
            Spouse's age as of the Spouse's birthday in that year. For
            distribution calendar years after the year of the surviving Spouse's
            death, the remaining life expectancy of the surviving Spouse is
            calculated using the age of the surviving Spouse as of the Spouse's
            birthday in the calendar year of the Spouse's death, reduced by one
            for each subsequent calendar year.

                  (C) If the Participant's surviving Spouse is not the
            Participant's sole designated Beneficiary, the Beneficiary's
            remaining life expectancy is calculated

                                      -42-


             using the age of the Beneficiary in the year following the year of
            the Participant's death, reduced by one for each subsequent year.

            (2) No Designated Beneficiary. If the Participant dies on or after
      the date distributions begin and there is no designated Beneficiary as of
      September 30 of the year after the year of the Participant's death, the
      minimum amount that will be distributed for each distribution calendar
      year after the year of the Participant's death is the quotient obtained by
      dividing the Participant's account balance by the Participant's remaining
      life expectancy calculated using the age of the Participant in the year of
      death, reduced by one for each subsequent year.

      (b) Death Before Date Distributions Begin.

            (I) Participant Survived by Beneficiary. If the Participant dies
      before the date distributions begin and there is a designated Beneficiary,
      the minimum amount that will be distributed for each distribution calendar
      year after the year of the Participant's death is the quotient obtained by
      dividing the Participant's Account balance by the remaining life
      expectancy of the Participant's designated Beneficiary, determined as
      provided in Subsection (a).

            (2) No Designated Beneficiary. If the Participant dies before the
      date distributions begin and there is no designated Beneficiary as of
      September 30 of the year following the year of the Participant's death,
      distribution of the Participant's entire interest will be completed by
      December 31 of the calendar year containing the fifth anniversary of the
      Participant's death.

            (3) Death of Surviving Spouse Before Distributions to Surviving
      Spouse Are Required to Begin. If the Participant dies before the date
      distributions begin, the Participant's surviving Spouse is the
      Participant's sole designated Beneficiary, and the surviving Spouse dies
      before distributions are required to begin to the surviving Spouse under
      Paragraph 17.02(b)(1), this Subsection (b) will apply as if the surviving
      Spouse were the Participant.

      Section 17.05. Definitions.

      (a) Designated Beneficiary. A "designated beneficiary" is an individual
who is designated as the Beneficiary under section 7.07 of the Plan and is the
designated beneficiary under Code section 401(a)(9) and section 1.40 l(a)(9)-1,
Q&A-4, of the Treasury regulations.

      (b) Distribution Calendar Year. A "distribution calendar year" is the
calendar year for which a minimum distribution is required. For distributions
beginning before the Participant's death, the first distribution calendar year
is the calendar year immediately preceding the calendar year which contains the
Participant's required beginning date. For distributions beginning after the
Participant's death, the first distribution calendar year is the calendar year
in which distributions are required to begin under Subsection 17.02(b). The
required minimum distribution for the Participant's first distribution calendar
year will be made on or before the Participant's required beginning date. The
required minimum distribution for other distribution calendar years, including
the required minimum distribution for the distribution calendar year in

                                      -43-


which the Participant's required beginning date occurs, will be made on or
before December 31 of that distribution calendar year.

      (c) Life Expectancy. "Life expectancy" is the life expectancy computed by
use of the Single Life Table in section l.401(a)(9)-9 of the Treasury
regulations.

      (d) Participant's Account Balance. A Participant's Account balance is the
Account balance as of the last valuation date in the calendar year immediately
preceding the distribution calendar year (valuation calendar year) increased by
the amount of any contributions made and allocated or forfeitures allocated to
the Account balance as of dates in the valuation calendar year after the
valuation date and decreased by distributions made in the valuation calendar
year after the valuation date. The Account balance for the valuation calendar
year includes any amounts rolled over or transferred to the Plan either in the
valuation calendar year or in the distribution calendar year if distributed or
transferred in the valuation calendar year.

      (e) Required Beginning Date. The date specified in Section 7.06(b) of the
Plan.

      Integra Bank Corporation has caused this Integra Bank Corporation
Employees' 40 1(k) Plan to be signed by its duly authorized representative this
17th day of October, 2002. 2002.

                                                  INTEGRA BANK CORPORATION

                                                  By: /s/ D. Michael Kramer
                                                           Secretary

ATTEST:
/s/ Nancy G. Epperson
   SVP, Director of H.R.

                                      -44-

EX-10.(H)

                                                                   EXHIBIT 10(h)

                               FIRST AMENDMENT TO
                INTEGRA BANK CORPORATION EMPLOYEES' 401(k) PLAN

            This First Amendment to Integra Bank Corporation Employees' 40 1(k)
Plan is adopted by Integra Bank Corporation.

                                   BACKGROUND

            1. Effective January 1, 2003, Integra Bank Corporation ("Employer")
amended and completely restated the Integra Bank Corporation Employees' 40 1(k)
Plan ("Plan").

            2. The Employer wishes to amend the Plan further.

                                   AMENDMENT

            THEREFORE, effective January 1, 2003, the Plan is amended as
follows:

            1. The definition of "Compensation" set forth in Section 2.01 of the
Plan is amended to read as follows:

            "Compensation" means, with respect to an Employee for a Plan Year,
      the Employee's wages, as defined in Code subsection 3401(a), and all other
      payments of compensation by the Employer in the course of the Employer's
      trade or business for a Plan Year for which the Employer is required to
      furnish the Employee a written statement under Code sections 6041(d), 605
      1(a)(3) and 6052. "Compensation" is determined without regard to any rules
      under Code subsection 3401(a) that limit the remuneration included in
      wages based on the nature or location of the employment or the services
      performed, such as the exception for agricultural labor in Code paragraph



      340 1(a)(2).. "Compensation" also includes Elective Employer Contributions
      for the Plan Year, amounts contributed or deferred by the Employer for the
      Plan Year at the election of the Employee that are excluded from the
      Employee's gross income under Code section 125 or 457, and qualified
      transportation fringe benefits described in Code subsection 132(0(4).
      Notwithstanding the preceding provisions of this paragraph, "Compensation"
      does not include, whether or not includable in the Employee's gross
      income, reimbursements or expense allowances, fringe benefits (cash or
      noncash), moving expenses, deferred compensation or welfare benefits.
      Notwithstanding the preceding provisions of this paragraph, compensation
      received by an Employee before he becomes a Participant will not be
      considered "Compensation."

            2. The definition of "Highly Compensated Participant" set forth in
Section

2.01 of the Plan is amended by adding the following:

      (3) The determination of who is a Highly Compensated Participant and the
compensation that is considered will be made in accordance with Code section
414(q)(7).

EX-10.(I)

                                                                   EXHIBIT 10(i)

                               SECOND AMENDMENT TO
                 INTEGRA BANK CORPORATION EMPLOYEES' 401(k) PLAN

            This Second Amendment to Integra Bank Corporation Employees' 401(k)
Plan is adopted by Integra Bank Corporation.

                                   BACKGROUND

            1. Effective January 1, 2003, Integra Bank Corporation ("Employer")
amended and completely restated the Integra Bank Corporation Employees' 401(k)
Plan ("Plan").

            2. The Plan has been amended by a First Amendment. 3. The Employer
wishes to amend the Plan further.

                                    AMENDMENT

            THEREFORE, effective March 28, 2005, the Plan is amended as follows:

            1. Section 7.02 is amended to read as follows:

            Section 7.02. Termination and Disability Benefits. If a Participant
      incurs a Disability or terminates employment for any reason other than
      death, his vested Accounts will be distributed as provided in this
      Section. If the Participant has attained age 65 and the value of his
      vested Accounts exceeds $5,000, or if the Participant has not attained age
      65 and the value of his vested Accounts exceeds $1,000, the Participant
      may elect at any time after incurring a Disability or terminating
      employment to receive the vested portion of his Accounts in a lump sum. If
      a Participant files a written election with the Plan Administrator
      pursuant to the preceding sentence, the Plan Administrator will cause his
      vested Accounts to be distributed to him as soon as administratively
      feasible after it receives his election.

            2. Section 7.04 is amended to read as follows:



            Section 7.04. Payment of Small Accounts. Notwithstanding any other
      provision of the Plan, if the value of any benefit payable under the Plan
      to a Participant who has not attained age 65 does not exceed $1,000, or if
      the value of any benefit payable under the Plan to a Participant who has
      attained age 65 or to a Participant's Beneficiary does not exceed $5,000,
      the benefit will be paid to the Participant or the Participant's
      Beneficiary in a lump sum payment as soon as administratively feasible
      after the Participant is determined to be Disabled, terminates employment
      or dies, whichever is applicable. For purposes of this Section, if the
      present value of a Participant's vested benefit is zero, the Participant
      will be deemed to have received a distribution.

            3. Section 15.06(b) is amended to read as follows:

            (b) Rollovers Disregarded in Determining Value of Accounts for
      Involuntary Distributions. For purposes of Sections 7.02 and 7.04 of the
      Plan, the determination of whether the value of a Participant's
      nonforfeitable Accounts exceeds $5,000 shall be made without regard to
      that portion of the Accounts that is attributable to Rollover
      Contributions (and earnings allocable thereto) within the meaning of Code
      sections 402(c), 403(a)(4), 403(b)(8), 408(d)(3)(A)(ii), and 457(e)(16).
      However, the determination of whether the value of the Participant's
      nonforfeitable Accounts exceeds $1,000 shall be made with regard to that
      portion of the Accounts that is attributable to Rollover Contributions
      (and earnings allocable thereto) within the meaning of Code sections
      402(c), 403(a)(4), 403(b)(8), 408(d)(3)(A)(ii), and 457(e)(16).

EX-10.(J)

                                                                   EXHIBIT 10(j)

                               THIRD AMENDMENT TO
                 INTEGRA BANK CORPORATION EMPLOYEES' 401(k) PLAN

            This Third Amendment to Integra Bank Corporation Employees' 401(k)
Plan is adopted by Integra Bank Corporation.

                                   BACKGROUND

            1. Effective January 1, 2003, Integra Bank Corporation ("Employer")
amended and completely restated the Integra Bank Corporation Employees' 401(k)
Plan ("Plan").

            2. The Plan has been amended by First and Second Amendments.

            3. The Employer wishes to amend the Plan further.

                                    AMENDMENT

            THEREFORE, effective January 1, 2006, the Plan is amended as
follows:

            1. Subsection 12.06(c) is deleted in its entirety.

            2. Section 16.01 is amended to read as follows:

            Section 16.01. ADP and ACP Safe Harbors. The Plan is intended to
      satisfy the safe harbor provisions of Code paragraphs 401(k)(12) and
      401(m)(11) each Plan Year. Notwithstanding any other provision of the Plan
      to the contrary, the limitations of Subsections 4.03(a) and (b) and
      Section 4.05 shall not apply.

            3. Section 16.02 is deleted in its entirety.



            This Third Amendment to Integra Bank Corporation Employees' 401(k)
Plan is executed on behalf of Integra Bank Corporation by its duly authorized
officer this _______ day of ____________________, 2006.

                                        INTEGRA BANK CORPORATION

                                        By: ____________________________________
                                                       (Signature)

                                            ____________________________________
                                                        (Printed)

                                            ____________________________________
                                                         (Title)

ATTEST:

____________________________________
            (Signature)

____________________________________
             (Printed)

____________________________________
              (Title)

                                      -2-

EX-10.(P)

                                                                   EXHIBIT 10(p)


                                  SUMMARY SHEET
                                       OF
                                2007 COMPENSATION


DIRECTOR COMPENSATION

Employee Directors

Directors who are employees of the Company receive no separate compensation for
Board service. Mr. Vea is the only director who is also an employee of the
Company, and he does not receive any additional compensation for such service.

Non-Employee Directors

Non-employee directors currently receive the following compensation:

Annual Retainer:

     -    $12,000 restricted stock retainer, which vests over a three year
          period, issued under the Company's 2003 Stock Option and Incentive
          Plan. A copy of the 2003 Stock Option and Incentive Plan is filed as
          an exhibit to the Company's Annual Report on Form 10-K for the year
          ended December 31, 2006 (the "2006 10-K").

     -    $12,000 cash retainer payable in four quarterly payments.

Meeting Fees:

     -    $900 cash fee for each Board of Directors meeting of the Company
          attended.

     -    $600 cash fee for each committee meeting attended.

Presiding Independent Director/Committee Chair Fees:

     -    $2,000 fee payable in four quarterly payments to Presiding Independent
          Director.

     -    $2,000 fee payable in four quarterly payments to Committee Chairs.

Other:

     -    $900 additional fee for each full day spent in training at seminars or
          other training sessions approved in advance by the Chairman of the
          Board.

     -    Reimbursement for travel and other expenses incurred for attending
          seminars or other training sessions.

     -    Reimbursement for accommodations, travel or meals in connection with
          attending corporate, board or other authorized functions, which
          includes Board of Directors meetings, committee meetings, and Board
          retreats.


Under the Corporate Governance Principles, non-employee directors are expected
to own shares with an aggregate value equal to $100,000 within five years of
being elected a director. Each non-employee director meets this requirement,
with the exception of Ms. Roxy Baas.



COMPENSATION OF NAMED EXECUTIVE OFFICERS

         The executive officers of the Company serve at the discretion of the
Board of Directors. The following are the current base salaries for the
Company's Chief Executive Officer, Chief Financial Officer and its other most
highly compensated current executive officers based upon total compensation for
2006 who will be identified in the Company's proxy statement for the 2007 annual
meeting (the "Named Executive Officers"):


                                          
- ---------------------------------------------------------------------

Michael T. Vea, Chairman, President          $433,500
and Chief Executive Officer

- ---------------------------------------------------------------------
Martin M. Zorn, Executive                    $252,500
Vice-President, Chief Risk Officer
and Secretary

- ---------------------------------------------------------------------
Archie M. Brown, Executive                   $263,000
Vice-President, Commercial and
Consumer Banking

- ---------------------------------------------------------------------
Roger M. Watson, Executive                   $197,500
Vice-President, Division Manager,
Commercial Real Estate

- ---------------------------------------------------------------------
Roger W. Duncan, Executive                   $203,500
Vice-President, Evansville and
Community Banking Division President
- ---------------------------------------------------------------------



         The Compensation Committee of the Board of Directors determines and
approves the compensation payable to the executive officers. Mr. Vea, Mr. Zorn
and Mr. Brown are parties to employment agreements with the Company. Copies of
their employment agreements are filed as exhibits to the 2006 10-K. Their
current salaries are currently based on the terms of their employment agreement
and may be increased by action of the Compensation Committee. Mr. Duncan is
party to a Senior Officer Change in Control Agreement. A copy of his Change in
Control Agreement is filed as an exhibit to the 2006 10-K. Mr. Watson is not
party to an employment or severance agreement.

Cash Incentives.

         Messrs. Vea, Zorn and Brown participated in the Incentive Plan, a four
year plan that ended in 2006. In February 2006, the committee set "minimum,"
"target" and "maximum" levels for the 2006 award under the Incentive Plan for
two performance measures: adjusted earnings per share (weighted at 66%) and
credit quality (weighted at 34%). The range of potential cash incentive payout
was based on earnings per share of $1.65 to $1.79 excluding stock option
expensing. The adjustment to exclude the effect of complying with FASB Statement
123(R), Share Based Payments, ("FAS 123R") from earnings per share allowed the
committee to establish growth goals that were comparable on a year over year
basis. The objectives for credit quality were divided equally between net
charge-offs and non-performing loans


                                       -2-



to total loans. We consider the objectives set for credit quality as
confidential information. However, the committee set the objectives for the
credit quality performance measures at levels the committee believed were
achievable, but which would represent continuing improvement in the quality of
our loan portfolio.

         In February 2007, the committee determined that the "minimum" level for
the adjusted earnings per share measure had not been met, the "minimum" level
for net charge-offs had not been met, but the "maximum" level for non-performing
loans to total loans had been met. The amounts represented sixty percent of the
2006 award. The remaining forty percent of the 2006 award and forty percent of
the awards earned for 2003 through 2005 under the Incentive Plan had been
deferred until after December 31, 2006, subject to the achievement of long-term
targets tied to earnings per share growth and credit quality. The long-term
targets were not met and the deferred portion of the Incentive Plan awards will
not be paid. The total deferred portion of the Incentive Plan awards that were
forfeited was $631,570.

         The other two named executive officers did not participate in the
Incentive Plan. The amount of the cash incentives paid to those officers for
2006 is shown in the Summary Compensation Table.

Equity-Based Incentives.

         The committee established equity-based incentive award opportunities
for Messrs. Vea, Zorn, and Brown as a percentage of base salary subject to the
achievement of "threshold", "target", and "maximum" levels. For 2006, the equity
award grant as a percentage of salary was based on achievement of 2005 goals and
was as follows: Mr. Vea: 50% at threshold, 80% at target and 160% at maximum;
Mr. Zorn: 20% at threshold, 35% at target, and 70% at maximum; and Mr. Brown:
20% at threshold, 35% at target, and 70% at maximum. The form of the award
opportunity was allocated between stock options (66%) and restricted stock (34%)
valued using their grant date fair value, vesting equally over three years. In
addition, the committee considered other factors in its determination of the
appropriate equity awards including quality of results, retention of management,
progress against strategic plan goals, and total compensation. Based on those
factors, the committee approved equity awards (expressed at a percentage of base
salary) as follows: Mr. Vea - 72%, Mr. Zorn - 46%, and Mr. Brown - 45%.

         For Mr. Watson and Mr. Duncan, who were not executive officers at the
time of the 2006 equity grants, and the other executive officers, the awards
were made by the committee based upon recommendations of management and the
comparative compensation information provided by Clark Consulting. The blend of
options and restricted stock differed from the other named executive officers.

         The stock option and restricted stock awards to the named executive
officers for 2006 will be shown in the Grants of Plan-Based Awards Table.

2007 Executive Compensation Decisions.

         The committee has established 2007 award opportunities, which are
similar to 2006, for the executive officers under the Annual Cash Incentive
Plan, or Cash Plan. These awards are contingent upon the shareholders approving
the Cash Plan at the 2007 annual meeting of shareholders. The following award
opportunities, as a percentage of base salary, apply to the named executive
officers:



                               Threshold      Target        Maximum
                               ---------      ------        -------
                                                   
   Michael T. Vea                  0%           60%          100%
   Martin M. Zorn                  0%           45%           80%
   Archie M. Brown                 0%           45%           80%
   Roger D. Watson                 0%           35%           60%
   Roger M. Duncan                 0%           35%           60%



                                      -3-


         The committee established two performance measures: earnings per share
(weighted at 66%) and credit quality (weighted at 34%). The earnings per share
levels have not been set at the time of printing the proxy statement. The
objectives for credit quality are divided equally between net charge-offs, and
non-performing loans to total loans. As we indicated earlier, we consider the
objectives set for credit quality as confidential information; however, the
credit quality goals were established to achieve performance at median or better
of our peer group. Mr. Watson's award opportunity may have a more equal
weighting between these goals and the performance of his business unit.

         If the Cash Plan is not approved by shareholders, we expect that the
committee will provide cash incentives to executive officers in amounts similar
to those that would have been paid under the Cash Plan.

         The committee has established 2007 equity award opportunities for the
executive officers under the 2007 Equity Incentive Plan, or Equity Plan, subject
to shareholder approval of the Equity Plan. The equity award opportunities are
subject to the same performance measures as under the Cash Plan, as well as the
other factors discussed earlier under Equity-Based Incentives. The following
award opportunities, as a percentage of base salary, apply to the named
executive officers:



                               Threshold      Target        Maximum
                               ---------      ------        -------
                                                   
   Michael T. Vea                 50%           80%          160%
   Martin M. Zorn                 20%           35%           70%
   Archie M. Brown                20%           35%           70%
   Roger D. Watson                20%           35%           60%
   Roger M. Duncan                20%           35%           60%



OTHER COMPENSATION

         The Summary Compensation Table in the Company's proxy statement will
identify the aggregate perquisites and other personal benefits received by each
of the Named Executive Officers which equal or exceed $10,000. The primary
perquisites for Messrs. Vea, Brown and Zorn include an automobile allowance and
social club membership dues.

         The Company also provides matching contributions to the accounts of the
Named Executive Officers under its Employees 401(k) Plan and pays for term life
insurance for each of the Named Executive Officers.


                                       -4-

EX-10.(R)

                                                                   Exhibit 10(r)

              SENIOR OFFICER CHANGE IN CONTROL BENEFITS AGREEMENT

            This Senior Officer Change in Control Benefits Agreement
("Agreement") is made and entered into as of March 17, 2004, by and between
Integra Bank Corporation, an Indiana corporation (hereinafter referred to as the
"Company"), and Roger M. Duncan (hereinafter referred to as "Employee").

                               W I T N E S S E T H

            WHEREAS, Employee is a senior officer of the Company; and

            WHEREAS, the Company believes that Employee will make valuable
contributions to the productivity and profitability of the Company; and

            WHEREAS, the Company desires to encourage Employee to continue to
make such contributions and not to seek or accept employment elsewhere; and

            WHEREAS, the Company, therefore, desires to assure Employee of
certain benefits in case of any termination or significant redefinition of the
terms of his employment with the Company subsequent to any Change in Control of
the Company;

            NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants herein contained and the mutual benefits herein provided, the Company
and Employee hereby agree as follows:

            1. The term of this Agreement shall be from the date hereof through
December 31, 2005; provided, however, that such term shall be automatically
extended for an additional year each year thereafter unless either party hereto
gives written notice to the other party not to so extend prior to November 30 of
the year for which notice is given, in which case no further automatic extension
shall occur.

            2. As used in this Agreement, "Change in Control" of the Company
means:

            (A) The acquisition by any individual, entity or group (within the
      meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
      1934, as amended (the "Exchange Act") (a "Person"), beneficial ownership
      (within the meaning of Rule 13d-3 promulgated under the Exchange Act as in
      effect from time to time) of twenty-five percent (25%) or more of either
      (i) the then outstanding shares of common stock of the Company or (ii) the
      combined voting power of the then outstanding voting securities of the
      Company entitled to vote generally in the election of directors; provided,
      however, that the following acquisitions shall not constitute an
      acquisition of control: (a) any acquisition directly from the Company
      (excluding an acquisition by virtue of the exercise of a conversion
      privilege), (b) any acquisition by the Company, (c) any acquisition by any
      employee benefit plan (or related trust) sponsored or maintained by the
      Company or

                                      -1-



      any corporation controlled by the Company, or (d) any acquisition by any
      corporation pursuant to a reorganization, merger or consolidation, if,
      following such reorganization, merger or consolidation, the conditions
      described in clauses (i), (ii) and (iii) of subsection (C) of this
      definition are satisfied;

            (B) Individuals who, as of the date hereof, constitute the Board of
      Directors of the Company (the "Incumbent Board") cease for any reason to
      constitute at least a majority of the Board; provided, however, that any
      individual becoming a director subsequent to the date hereof whose
      election, or nomination for election by the Company's shareholders, was
      approved by a vote of at least a majority of the directors then comprising
      the Incumbent Board shall be considered as though such individual were a
      member of the Incumbent Board, but excluding, for this purpose, any such
      individual whose initial assumption of office occurs as a result of either
      an actual or threatened election contest (as such terms are used in Rule
      14a-11 of Regulation 14A promulgated under the Exchange Act) or other
      actual or threatened solicitation of proxies or consents by or on behalf
      of a Person other than the Board;

            (C) Approval by the shareholders of the Company of a reorganization,
      merger or consolidation, in each case, unless, following such
      reorganization, merger or consolidation, (i) more than sixty percent (60%)
      of, respectively, the then outstanding shares of common stock of the
      corporation resulting from such reorganization, merger or consolidation
      and the combined voting power of the then outstanding voting securities of
      such corporation entitled to vote generally in the election of directors
      is then beneficially owned, directly or indirectly, by all or
      substantially all of the individuals and entities who were the beneficial
      owners, respectively, of the outstanding Company common stock and
      outstanding Company voting securities immediately prior to such
      reorganization, merger or consolidation in substantially the same
      proportions as their ownership, immediately prior to such reorganization,
      merger or consolidation, of the outstanding Company stock and outstanding
      Company voting securities, as the case may be, (ii) no Person (excluding
      the Company, any employee benefit plan or related trust of the Company or
      such corporation resulting from such reorganization, merger or
      consolidation and any Person beneficially owning, immediately prior to
      such reorganization, merger or consolidation, directly or indirectly,
      twenty-five percent (25%) or more of the outstanding Company common stock
      or outstanding voting securities, as the case may be) beneficially owns,
      directly or indirectly, twenty-five percent (25%) or more of,
      respectively, the then outstanding shares of common stock of the
      corporation resulting from such reorganization, merger or consolidation or
      the combined voting power of the then outstanding voting securities of
      such corporation entitled to vote generally in the election of directors
      and (iii) at least a majority of the members of the board of directors of
      the corporation resulting from such reorganization, merger or
      consolidation were members of the Incumbent Board at the time of the
      execution of the initial agreement providing for such reorganization,
      merger or consolidation; or

            (D) Approval by the shareholders of the Company of (i) a complete
      liquidation or dissolution of the Company or (ii) the sale or other
      disposition of all or substantially all of the assets of the Company,
      other than to a corporation with respect to which following such sale or
      other disposition (a) more than sixty percent (60%) of, respectively, the
      then

                                      -2-



      outstanding shares of common stock of such corporation and the combined
      voting power of the then outstanding voting securities of such corporation
      entitled to vote generally in the election of directors is then
      beneficially owned, directly or indirectly, by all or substantially all of
      the individuals and entities who were the beneficial owners, respectively,
      of the outstanding Company common stock and outstanding Company voting
      securities immediately prior to such sale or other disposition in
      substantially the same proportion as their ownership, immediately prior to
      such sale or other disposition, of the outstanding Company common stock
      and outstanding Company voting securities, as the case may be, (b) no
      Person (excluding the Company and any employee benefit plan or related
      trust of the Company or such corporation and any Person beneficially
      owning, immediately prior to such sale or other disposition, directly or
      indirectly, twenty-five percent (25%) or more of the outstanding Company
      common stock or outstanding Company voting securities, as the case may be)
      beneficially owns, directly or indirectly, twenty-five percent (25%) or
      more of, respectively, the then outstanding shares of common stock of such
      corporation and the combined voting power of the then outstanding voting
      securities of such corporation entitled to vote generally in the election
      of directors and (c) at least a majority of the members of the board of
      directors of such corporation were members of the Incumbent Board at the
      time of the execution of the initial agreement or action of the Board
      providing for such sale or other disposition of assets of the Company.

            3. The Company shall provide Employee with the benefits set forth in
Section 6 of this Agreement upon any termination of Employee's employment by the
Company within twelve (12) months following a Change in Control for any reason
except the following:

            (A) Termination by reason of Employee's death.

            (B) Termination by reason of Employee's "disability." For purposes
      hereof, "disability" mean either (i) when Employee is deemed disabled in
      accordance with the long-term disability insurance policy or plan of the
      Company in effect at the time of the illness or injury causing the
      disability or (ii) the inability of Employee, because of injury, illness,
      disease or bodily or mental infirmity, to perform the essential functions
      of his or her job (with or without reasonable accommodation) for more than
      one hundred twenty (120) days during any period of twelve (12) consecutive
      months.

            (C) Termination upon Employee reaching his or her normal retirement
      date, which for purposes of this Agreement shall be deemed to be the end
      of the month during which Employee reaches sixty-five (65) years of age.

            (D) Termination for "cause." As used in this Agreement, the term
      "cause" mean the occurrence of one or more of the following events: (i)
      Employee's conviction for a felony or of any crime involving moral
      turpitude; (ii) Employee's engaging in any illegal conduct or willful
      misconduct in the performance of his employment duties for the Company (or
      its affiliates); (iii) Employee's engaging in any fraudulent or dishonest
      conduct in his dealings with, or on behalf of, the Company (or its
      affiliates); (iv) Employee's failure or

                                      -3-



      refusal to follow the lawful instructions of the Company, if such failure
      or refusal continues for a period of five (5) calendar days after the
      Company delivers to Employee a written notice stating the instructions
      which Employee has failed or refused to follow; (v) Employee's breach of
      any of Employee's obligations under this Agreement; (vi) Employee's gross
      or habitual negligence in the performance of his employment duties for the
      Company (or its affiliates); (vii) Employee's engaging in any conduct
      tending to bring the Company into public disgrace or disrepute or to
      injure the reputation or goodwill of the Company; (viii) Employee's
      material violation of the Company's business ethics or
      conflict-of-interest policies, as such policies currently exist or as they
      may be amended or implemented during Employee's employment with the
      Company; (ix) Employee's misuse of alcohol or illegal drugs which
      interferes with the performance of Employee's employment duties for the
      Company or which compromises the reputation or goodwill of the Company;
      (x) Employee's intentional violation of any applicable banking law or
      regulation in the performance of Employee's employment duties for the
      Company; or (xi) Employee's failure to abide by any employment rules or
      policies applicable to the Company's employees generally that Company
      currently has or may adopt, amend or implement from time to time during
      Employee's employment with the Company.

            4. The Company shall also provide Employee with the benefits set
forth in Section 6 of this Agreement upon any voluntary resignation of Employee
if any one of the following events occurs within twelve (12) months following a
Change in Control:

            (A) Without Employee's express written consent, the assignment of
      Employee to any duties which are fundamentally and significantly
      inconsistent with his duties with the Company immediately prior to the
      Change in Control or a fundamental and substantial reduction of his duties
      or responsibilities from his duties or responsibilities immediately prior
      to the Change in Control.

            (B) A reduction by the Company in Employee's base salary from the
      level of such salary immediately prior to the Change in Control.

            (C) The failure by the Company to continue to provide Employee with
      benefits substantially similar to those enjoyed by Employee or to which
      Employee was entitled under any of the Company's incentive compensation or
      bonus plan, principal pension, profit sharing, life insurance, medical,
      dental, health and accident, or disability plans in which Employee was
      participating prior to the Change in Control.

            (D) The Company's requiring Employee to relocate other than any of
      the metropolitan areas where the Company or its subsidiaries maintained
      offices prior to the Change in Control.

            5. Any termination by Company of Employee's employment as
contemplated by Section 3 hereof (except subsection 3(A)) or any resignation by
Employee as contemplated by

                                      -4-



Section 4 hereof shall be communicated by a written notice to the other party
hereto. Any notice given by Employee pursuant to Section 4 or given by the
Company in connection with a termination as to which the Company believes it is
not obligated to provide Employee with benefits set forth in Section 6 hereof
shall indicate the specific provisions of this Agreement relied upon and shall
set forth in reasonable detail the facts and circumstances claimed to provide a
basis for such termination.

            6. Subject to the conditions and exceptions set forth in Section 3
and Section 4 hereof, the following benefits, less any amounts required to be
withheld therefrom under any applicable federal, state or local income tax,
other tax, or social security laws or similar statutes, shall be paid to
Employee:

            (A) Within thirty (30) days following such a termination, Employee
      shall be paid, at his then-effective salary, for services performed
      through the date of his termination. In addition, any earned but unpaid
      amount of any bonus or incentive payment (which, for purposes of this
      Agreement, shall mean that amount computed in a fashion consistent with
      the manner in which Employee's bonus or incentive plan for the year
      preceding the year of termination was computed, if Employee received a
      bonus or incentive payment during such preceding year in accordance with a
      plan or program of the Company, or, if not, then the total bonus or
      incentive payment received by the Employee during such preceding year, in
      either case prorated through the date of termination) shall be paid to
      Employee within thirty (30) days following the termination of his
      employment.

            (B) Within thirty (30) days following such a termination, Employee
      shall be paid a lump sum payment of an amount equal to two (2) times
      Employee's "Base Amount." For purposes hereof, Base Amount is defined as
      Employee's average includable salary, bonus, incentive payments and
      similar compensation paid by the Company for the five (5) most recent
      taxable years ending before the date on which the Change in Control occurs
      (or such shorter period of time that the Employee has been employed by the
      Company). The definition, interpretation and calculation of the dollar
      amount of Base Amount shall be in a manner consistent with and as required
      by the provisions of Section 280G of the Internal Revenue Code of 1986, as
      amended ("Code"), and the regulations and rulings of the Internal Revenue
      Service promulgated thereunder. The payments to the Employee under this
      Section 6(B) shall be reduced by the full amount that such payment, when
      added to all other payments or benefits of any kind to the Employee by
      reason of the Change in Control, constitutes an "excess parachute payment"
      within the meaning of Section 280G of the Code.

            (C) Employee acknowledges and agrees that payment in accordance with
      subsections 6(A), 6(B) and 6(C) shall be deemed to constitute a full
      settlement and discharge of any and all obligations of the Company to
      Employee arising out of his employment with the Company and the
      termination thereof, except for any vested rights Employee may then have
      under any insurance,

                                      -5-



      pension, supplemental pension, thrift, employee stock ownership, or stock
      option plans sponsored or made available by the Company.

            7. In the event of a termination of Employee's employment by the
Company for any reason except those set forth in subsections 3(A) through 3(D)
prior to a Change in Control, the following benefits, less any amounts required
to be withheld therefrom under any applicable federal, state or local income
tax, or other social security laws or similar statutes, shall be paid to
Employee:

            (A) For twelve (12) months following such a termination, Employee
      shall be paid a monthly severance benefit equal to his or her salary for
      the preceding year divided by 12.

            (B) Employee acknowledges and agrees that payment in accordance with
      subsection 7(A) shall be deemed to constitute a full settlement and
      discharge of any and all obligations of the Company to Employee arising
      out of his employment with the Company and the termination thereof, except
      for any vested rights Employee may then have under any insurance, pension,
      supplemental pension, thrift, employee stock ownership, or stock option
      plans sponsored or made available by the Company/

            8. Employee is not required to mitigate the amount of benefit
payments to be made by the Company pursuant to this Agreement by seeking other
employment or otherwise, nor shall the amount of any benefit payments provided
for in this Agreement be reduced by any compensation earned by Employee as a
result of employment by another employer or which might have been earned by
Employee had Employee sought such employment, after the date of termination of
his employment with the Company or otherwise.

            9. Employee acknowledges that in connection with his employment with
the Company he has provided and will continue to provide services that are of a
unique and special value and that he has been and will continue to be entrusted
with confidential and proprietary information concerning the Company and its
affiliates. Employee further acknowledges that the Company and its affiliates
are engaged in highly competitive businesses and that the Company and its
affiliates expend substantial amounts of time, money and effort to develop trade
secrets, business strategies, customer relationships, employee relationships and
goodwill, and Employee has benefited and will continue to benefit from these
efforts. Therefore, as an essential part of this Agreement, Employee agrees and
covenants to comply with the following:

            (A) During Employee's employment with the Company and during the
      Restrictive Period, Employee will not, in the Restricted Geographic Area,
      engage in any Competitive Business (i) in the same or similar capacity or
      function to that in which Employee worked for the Company, (ii) in any
      Employee level or senior management capacity, or (iii) in any other
      capacity in which Employee's knowledge of the Company's confidential
      information or the customer goodwill Employee helped to develop on behalf
      of the Company would facilitate or support Employee's work for such
      competitor or competitive enterprise. For purposes of this Agreement, the
      term "Restrictive Period" shall mean 24 months from the date of
      termination of employment if Employee is entitled

                                      -6-



      to receive benefits under Section 6 or 12 months from the date of
      termination of employment in all other cases. For purposes of this
      Agreement, the term "Restricted Geographic Area" means and includes: (w)
      Vanderburgh County, Indiana; (x) all counties contiguous to Vanderburgh
      County; (y) any county in which the Company or any of its subsidiaries has
      an office or branch location; and (z) all counties contiguous to the
      counties referred to in subpart (y) above. For purposes of this Agreement,
      the term "Competitive Business" means any business that is traditionally
      engaged in by a bank, a bank holding company or a financial holding
      company, or that provides products and services similar to and competitive
      with the products and services provided by the Company or any of its
      subsidiaries. Notwithstanding the foregoing, Employee may make and retain
      investments in less than one percent of the equity of any entity engaged
      in a Competitive Business, if such equity is listed on a national
      securities exchange or regularly traded in an over-the-counter market.

            (B) During Employee's employment with the Company and during the
      Restrictive Period, Employee will not provide, sell, market or endeavor to
      provide, sell or market any Competing Products/Services to any of the
      Company's Customers, or otherwise solicit or communicate with any of the
      Company's Customers for the purpose of selling or providing any Competing
      Products/Services. For purposes of this Agreement, the term "Competing
      Products/Services" means any products or services similar to or
      competitive with the products or services offered by the Company or any of
      its subsidiaries. For purposes of this Agreement, the term "Company's
      Customers" means any person or entity that has engaged in any banking
      services with, or has purchased any products or services from, the Company
      or any of its subsidiaries at any time during the Restrictive Period.

            (C) During Employee's employment with the Company and during the
      Restrictive Period, Employee will not urge, induce or seek to induce any
      of the Company's Customers to terminate their business with the Company or
      to cancel, reduce, limit or in any manner interfere with the Company's
      Customers' business with the Company.

            (D) During the term of Employee's employment with the Company and
      during the Restrictive Period, Employee will not urge, induce or seek to
      induce any of the Company's independent contractors, subcontractors,
      consultants, vendors or suppliers to terminate their relationship with, or
      representation of, the Company or to cancel, withdraw, reduce, limit, or
      in any manner modify any of such person's or entity's business with, or
      representation of, the Company.

            (E) During the term of Employee's employment with the Company and
      during the Restrictive Period, Employee will not solicit, recruit, hire,
      employ or attempt to hire or employ, or assist anyone in the recruitment
      or hiring of, any person who is then an employee of the Company, or urge,
      influence, induce or seek to induce any employee of the Company to
      terminate his/her relationship with the Company.

            (F) Employee acknowledges and agrees that the covenants contained in
      this Section 9 prohibit Employee from engaging in certain activities
      directly or indirectly, whether on Employee's own behalf or on behalf of
      any other person or entity, and

                                      -7-



      regardless of the capacity in which Employee is acting, including without
      limitation as an employee, independent contractor, owner, partner,
      officer, agent, consultant, or advisor.

            (G) Employee acknowledges and agrees that his obligations under this
      Section 9 shall survive the expiration or termination of this Agreement
      and the cessation of his employment with the Company for whatever reason.

            (H) In the event Employee violates any of the restrictive covenants
      contained in this Section 9, the duration of such restrictive covenant
      shall automatically be extended by the length of time during which
      Employee was in violation of such restriction.

            (I) Although Employee and the Company consider the restrictions
      contained in this Section 9 to be reasonable, particularly given the
      competitive nature of the Company's business and Employee's position with
      the Company, Employee and the Company acknowledge and agree that: (i) if
      any covenant, subsection, portion or clause of this Section 9 is
      determined to be unenforceable or invalid for any reason, such
      unenforceability or invalidity shall not affect the enforceability or
      validity of the remainder of the Agreement; and (ii) if any particular
      covenant, subsection, provision or clause of this Section 9 is determined
      to be unreasonable or unenforceable for any reason, including, without
      limitation, the time period, geographic area, and/or scope of activity
      covered by any restrictive covenant, such covenant, subsection, provision
      or clause shall automatically be deemed reformed such that the contested
      covenant, subsection, provision or clause shall have the closest effect
      permitted by applicable law to the original form and shall be given effect
      and enforced as so reformed to whatever extent would be reasonable and
      enforceable under applicable law.

            (J) Employee recognizes that a breach or threatened breach by
      Employee of Section 9 of this Agreement will give rise to irreparable
      injury to the Company and that money damages will not be adequate relief
      for such injury. Employee agrees that the Company shall be entitled to
      obtain injunctive relief, including, but not limited to, temporary
      restraining orders, preliminary injunctions and/or permanent injunctions,
      without having to post any bond or other security, to restrain or prohibit
      such breach or threatened breach, in addition to any other legal remedies
      which may be available, including the recovery of money damages.

            10. Should Employee die while any amounts are payable to him
hereunder, this Agreement shall inure to the benefit of and be enforceable by
Employee's executors, administrators, heirs, distributees, devisees and legatees
and all amounts payable hereunder shall be paid in accordance with the terms of
this Agreement to Employee's devisee, legatee or other designee or if there be
no such designee, to his estate.

            11. For purposes of this Agreement, notices and all other
communications provided for herein shall be in writing and shall be deemed to
have been given when delivered or mailed by United States registered or
certified mail, return receipt requested, postage prepaid, addressed as follows:

                                      -8-



            If to Employee:

                 Roger M. Duncan
                 701 South Meadow Road
                 Evansville, Indiana 47714

            If to the Company:

                 Integra Bank Corporation
                 21 Southeast Third Street
                 P. O. Box 868
                 Evansville, Indiana 47705-0868
                 Attention: Chief Executive Officer

or to such other address as any party may have furnished to the other party in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.

            12. The validity, interpretation, and performance of this Agreement
shall be governed by the laws of the State of Indiana. The parties agree that
all legal disputes regarding this Agreement will be resolved in Evansville,
Indiana, and irrevocably consent to service of process in such City for such
purpose.

            13. No provision of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is agreed to in writing
signed by Employee and the Company. No waiver by any party hereto at any time of
any breach by any other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provisions or conditions at the same or any
prior or subsequent time. No agreements or representation, oral or otherwise,
express or implied, with respect to the subject matter hereof have been made by
any party which are not set forth expressly in this Agreement.

            14. The invalidity or unenforceability of any provisions of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, which shall remain in full force and effect.

            15. This Agreement may be executed in two counterparts, each of
which shall be deemed an original, but which together will constitute one and
the same Agreement.

            16. This Agreement is personal in nature and neither of the parties
hereto shall, without the consent of the other, assign or transfer this
Agreement or any rights or obligations hereunder, except as provided in Section
10 above. Without limiting the foregoing, Employee's right to receive payments
hereunder shall not be assignable or transferable, whether by pledge, creation
of a security interest or otherwise, other than a transfer by his Will or by the
laws of descent and distribution as set forth in Section 10 hereof, and in the
event of any

                                      -9-



attempted assignment or transfer contrary to this Section 16, the Company shall
have no liability to pay any amount so attempted to be assigned or transferred.

            17. Any benefits payable under this Agreement shall be paid solely
from the general assets of the Company. Neither Employee nor Employee's
beneficiary shall have interest in any specific assets of the Company under the
terms of this Agreement. This Agreement shall not be considered to create an
escrow account, trust fund or other funding arrangement of any kind or a
fiduciary relationship between Employee and the Company.

            18. This Agreement supersedes any prior agreements or
understandings, written or oral, between the parties hereto with respect to the
subject matter hereof, and constitutes the entire agreement of the parties with
respect thereto.

            IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered as of the day and year first above set forth.

                                    INTEGRA BANK CORPORATION

                                    By: ________________________________________

                                        Michael T. Vea, Chairman of the Board
                                        and Chief Executive Officer
                                        ("Company")

                                    ____________________________________________
                                        Roger M. Duncan
                                        ("Employee")

                                      -10-

EX-21

                                                                               .
                                                                               .
                                                                               .

                                                                      EXHIBIT 21

SUBSIDIARIES OF THE REGISTRANT



NAME                                       JURISDICTION OF INCORPORATION
- --------------------------------------     -----------------------------
                                        
Integra Bank NA                            United States
* IBNK Leasing Corp.                       State of Indiana
* Integra Illinois Investment Co., LLC     State of Delaware
** Integra Loan Company, LLC               State of Delaware
*** Total Title Services, LLC              State of Indiana
Integra Capital Trust II                   State of Delaware
Integra Capital Statutory Trust III        State of Connecticut
Integra Reinsurance Company, LTD           Turks and Caicos Islands


- ----------

*     - Wholly owned subsidiary of Integra Bank NA

**    - Ninety-nine percent owned by Integra Illinois Investment Co., LLC and
        one percent owned by Integra Bank NA

***   - Sixty percent ownership by Integra Bank NA

EX-23.(A)

                                                                   EXHIBIT 23(a)

            CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (File No. 333-75093, 333-10739, 333-79163 and 333-104745)
of Integra Bank Corporation of our report dated March 10, 2006 relating to the
consolidated financial statements, which appears in this Form 10-K.

/s/ PricewaterhouseCoopers LLP

Columbus, Ohio
March 12, 2007

EX-23.(B)

                                                                   EXHIBIT 23(b)

            CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (File No. 333-75093, 333-10739, 333-79163 and 333-104745)
of Integra Bank Corporation of our report dated March 12, 2007 relating to the
consolidated financial statements, management's assessment of the effectiveness
of internal control over financial reporting and the effectiveness of internal
control over financial reporting, which appears in this Form 10-K.

/s/ Crowe Chizek and Company LLC

Louisville, Kentucky
March 12, 2007

EX-31.(A)

                                                                  EXHIBIT 31 (a)

 CERTIFICATION PURSUANT TO RULE 13a-14(a)/15d-14(a) OF THE SECURITIES EXCHANGE
  ACT OF 1934, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF
                                      2002

      I, Michael T. Vea, certify that:

            1. I have reviewed this annual report on Form 10-K of Integra Bank
      Corporation;

            2. Based on my knowledge, this report does not contain any untrue
      statement of a material fact or omit to state a material fact necessary to
      make the statements made, in light of the circumstances under which such
      statements were made, not misleading with respect to the period covered by
      this report;

            3. Based on my knowledge, the financial statements, and other
      financial information included in this report, fairly present in all
      material respects the financial condition, results of operations and cash
      flows of the company as of, and for, the periods presented in this report;

            4. The company's other certifying officer and I are responsible for
      establishing and maintaining disclosure controls and procedures (as
      defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
      control over financial reporting (as defined in Exchange Act Rules
      13a-15(f) and 15d-15(f)) for the company and have:

            (a) Designed such disclosure controls and procedures, or caused such
      disclosure controls and procedures to be designed under our supervision,
      to ensure that material information relating to the company, including its
      consolidated subsidiaries, is made known to us by others within those
      entities, particularly during the period in which this report is being
      prepared;

            (b) Designed such internal control over financial reporting, or
      caused such internal control over financial reporting to be designed under
      our supervision, to provide reasonable assurance regarding the reliability
      of financial reporting and the preparation of financial statements for
      external purposes in accordance with generally accepted accounting
      principles;

            (c) Evaluated the effectiveness of the company's disclosure controls
      and procedures and presented in this report our conclusions about the
      effectiveness of the disclosure controls and procedures, as of the end of
      the period covered by this report based on such evaluation; and

            (d) Disclosed in this report any change in the company's internal
      control over financial reporting that occurred during the company's most
      recent fiscal quarter (the registrant's fourth fiscal quarter in the case
      of an annual report) that has materially affected, or is reasonably likely
      to materially affect, the company's internal control over financial
      reporting; and

            5. The company's other certifying officer and I have disclosed,
      based on our most recent evaluation of internal control over financial
      reporting, to the company's auditors and the audit committee of the
      company's board of directors (or persons performing the equivalent
      functions):

            (a) All significant deficiencies and material weaknesses in the
      design or operation of internal control over financial reporting which are
      reasonably likely to adversely affect the company's ability to record,
      process, summarize and report financial information; and

            (b) Any fraud, whether or not material, that involves management or
      other employees who have a significant role in the registrant's internal
      control over financial reporting.

            Date: March 8, 2007

                                    /s/ Michael T. Vea
                                    -----------------------
                                    Michael T. Vea, Chairman of the Board, Chief
                                    Executive Officer and President

EX-31.(B)

                                                                   EXHIBIT 31(b)

  CERTIFICATION PURSUANT TO RULE 13a-14(a)/15d-14(a) OF THE SECURITIES EXCHANGE
  ACT OF 1934, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF
                                      2002

      I, Martin M. Zorn, certify that:

            1. I have reviewed this annual report on Form 10-K of Integra Bank
      Corporation;

            2. Based on my knowledge, this report does not contain any untrue
      statement of a material fact or omit to state a material fact necessary to
      make the statements made, in light of the circumstances under which such
      statements were made, not misleading with respect to the period covered by
      this report;

            3. Based on my knowledge, the financial statements, and other
      financial information included in this report, fairly present in all
      material respects the financial condition, results of operations and cash
      flows of the company as of, and for, the periods presented in this report;

            4. The company's other certifying officer and I are responsible for
      establishing and maintaining disclosure controls and procedures (as
      defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
      control over financial reporting (as defined in Exchange Act Rules
      13a-15(f) and 15d-15(f)) for the company and have:

            (a) Designed such disclosure controls and procedures, or caused such
      disclosure controls and procedures to be designed under our supervision,
      to ensure that material information relating to the company, including its
      consolidated subsidiaries, is made known to us by others within those
      entities, particularly during the period in which this report is being
      prepared;

            (b) Designed such internal control over financial reporting, or
      caused such internal control over financial reporting to be designed under
      our supervision, to provide reasonable assurance regarding the reliability
      of financial reporting and the preparation of financial statements for
      external purposes in accordance with generally accepted accounting
      principles;

            (c) Evaluated the effectiveness of the company's disclosure controls
      and procedures and presented in this report our conclusions about the
      effectiveness of the disclosure controls and procedures, as of the end of
      the period covered by this report based on such evaluation; and

            (d) Disclosed in this report any change in the company's internal
      control over financial reporting that occurred during the company's most
      recent fiscal quarter (the registrant's fourth fiscal quarter in the case
      of an annual report) that has materially affected, or is reasonably likely
      to materially affect, the company's internal control over financial
      reporting; and

            5. The company's other certifying officer and I have disclosed,
      based on our most recent evaluation of internal control over financial
      reporting, to the company's auditors and the audit committee of company's
      board of directors (or persons performing the equivalent functions):

            (a) All significant deficiencies and material weaknesses in the
      design or operation of internal control over financial reporting which are
      reasonably likely to adversely affect the company's ability to record,
      process, summarize and report financial information; and

            (b) Any fraud, whether or not material, that involves management or
      other employees who have a significant role in the registrant's internal
      control over financial reporting.

            Date: March 8, 2007

                                      /s/ Martin M. Zorn
                                      --------------------------
                                      Martin M. Zorn,
                                      Executive Vice President And
                                      Chief Financial Officer

EX-32

                                                                      EXHIBIT 32

                            CERTIFICATION PURSUANT TO
                             18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Integra Bank Corporation (the "Company")
on Form 10-K for the period ending December 31, 2005 as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), each of
the undersigned certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002, that:

            (1)   The Report fully complies with the requirements of section
                  13(a) or 15(d) of the Securities Exchange Act of 1934; and

            (2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of the
Company.

/s/ Michael T. Vea
- --------------------------
Chief Executive Officer
March 8, 2007

/s/ Martin M. Zorn
- --------------------------
Chief Financial Officer
March 8, 2007