INTEGRA BANK CORP - 10-Q Quarterly Report

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

FORM 10-Q

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

For the quarterly period ended June 30, 2003.

or

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

For the transition period from _____________________ to _______________________.

Commission file number: 0-13585

INTEGRA BANK CORPORATION
(Exact name of registrant as specified in its charter)

INDIANA 35-1632155
(State or other jurisdiction of incorporation or organization) (IRS Employee Identification No.)

PO BOX 868, EVANSVILLE, INDIANA 47705-0868
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: (812) 464-9677

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

Yes [X] No [ ]

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Securities Exchange Act of 1934).

Yes [X] No [ ]

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.

CLASS OUTSTANDING AT AUGUST 1, 2003
(Common stock, $1.00 Stated Value) 17,309,782

INTEGRA BANK CORPORATION

INDEX

PART I - FINANCIAL INFORMATION

2

PART I - FINANCIAL INFORMATION

ITEM 1. UNAUDITED FINANCIAL STATEMENTS

INTEGRA BANK CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED BALANCE SHEETS
(In thousands, except for per share data)

The accompanying notes are an integral part of the consolidated financial
statements.

3

INTEGRA BANK CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except for per share data)

Unaudited Consolidated Statements of Income are continued on next page.

4

INTEGRA BANK CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME (CONTINUED)
(In thousands, except for per share data)

The accompanying notes are an integral part of the consolidated financial
statements.

5

INTEGRA BANK CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)

The accompanying notes are an integral part of the consolidated financial
statements.

6

INTEGRA BANK CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(In thousands, except for per share data)

The accompanying notes are an integral part of the consolidated financial
statements.

7

INTEGRA BANK CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOW
(In thousands)

Unaudited Consolidated Statements of Cash Flow are continued on next page.

8

INTEGRA BANK CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOW (CONTINUED)
(In thousands)

The accompanying notes are an integral part of the consolidated financial
statements.

9

INTEGRA BANK CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except for per share data)

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements include
the accounts of Integra Bank Corporation and its subsidiaries (the "Company").
At June 30, 2003, the Company's subsidiaries consisted of a commercial bank,
Integra Bank N.A. (the "Bank"), a reinsurance company and statutory business
trusts that have issued mandatorily redeemable preferred capital securities
(trust preferred securities) which are unconditionally guaranteed by the
Company. In May 2003, the Company merged its property management company into
the parent company and formed a reinsurance company. In June 2003, the Company
created a statutory business trust that issued trust preferred securities in
that month. All significant intercompany transactions are eliminated in
consolidation.

The financial statements have been prepared pursuant to the rules and
regulations of the Securities and Exchange Commission ("SEC"). While the
financial statements are unaudited, they do reflect all adjustments which, in
the opinion of management, are necessary for a fair presentation of the
financial position, results of operations, and cash flows for the interim
periods. All such adjustments are of a normal recurring nature. Pursuant to SEC
rules, certain information and note disclosures normally included in financial
statements prepared in accordance with accounting principles generally accepted
in the United States of America have been condensed or omitted from these
financial statements unless significant changes have taken place since the end
of the most recent fiscal year. The accompanying financial statements and notes
thereto should be read in conjunction with the Company's financial statements
and notes for the year ended December 31, 2002 included in the Company's Annual
Report on Form 10-K filed with the SEC.

Because the results from commercial banking operations are so closely related
and responsive to changes in economic conditions, the results for any interim
period are not necessarily indicative of the results that can be expected for
the entire year.

RECENT ACCOUNTING PRONOUNCEMENTS:

In December 2002, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 148, Accounting for
Stock-Based Compensation - Transition and Disclosure, an amendment of SFAS No.
123, Accounting for Stock-Based Compensation. SFAS No. 148 provides alternative
methods of transition for a change to the fair value based method of accounting
for stock-based employee compensation. SFAS No. 148 also provides for
disclosures in interim financial statements as well as compensation and the
effect of the method used on reported net income. SFAS No. 148 is effective for
fiscal years ending after December 15, 2002. The Company is currently assessing
the possible adoption.

Stock options are accounted for following Accounting Principles Board Opinion
No. 25, Accounting for Stock Issued to Employees and related interpretations.
Had compensation costs been determined based on fair values of awards on the
grant date (the method described in SFAS No. 123) reported net income and
earnings per common share would have been reduced to the pro forma amounts shown
below.

10

In January 2003, the FASB issued Interpretation ("FIN") No. 46, Consolidation of
Variable Interest Entities ("VIEs"). FIN 46 provides that business enterprises
that represent the primary beneficiary of another entity by retaining a
controlling financial interest in that entity's assets, liabilities, and results
of operating activities must consolidate the entity in their financial
statements. Prior to the issuance of FIN 46, consolidation generally occurred
when an enterprise controlled another entity through voting interest. Certain
VIEs that are qualifying special purpose entities subject to the reporting
requirements of SFAS No. 140, Accounting for Transfers and Servicing of
Financial Assets and Extinguishment of Liabilities, will not be required to be
consolidated under the provisions of FIN 46. The consolidation provisions of FIN
46 apply to VIEs created or entered into after January 31, 2003, and for
pre-existing VIEs of the Company beginning July 1, 2003. Management is currently
assessing the impact of FIN 46 and does not expect that it will have a material
effect on the Company's consolidated results of operations, financial position
or cash flows.

SFAS No. 149, Amendment of Statement 133 on Derivative Instruments and Hedging
Activities, was issued in April 2003. This Statement amends and clarifies
financial accounting and reporting for derivative instruments, including certain
derivative instruments embedded in other contracts and for hedging activities
under FASB Statement No. 133, Accounting for Derivative Instruments and Hedging
Activities. This Statement is effective for contracts entered into or modified
after June 30, 2003.

SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics
of both Liabilities and Equity, was issued in May 2003. This Statement
establishes standards for how an issuer classifies and measures certain
financial instruments with characteristics of both liabilities and equity. This
Statement is effective for financial instruments entered into or modified after
May 31, 2003, and is effective for the Company beginning July 1, 2003.
Management is currently assessing the impact of SFAS No. 150 and does not expect
that it will have a material effect on the Company's consolidated results of
operations, financial position or cash flows.

NOTE 2. EARNINGS PER SHARE

The calculation of earnings per share as of June 30 is summarized as follows:

On June 30, 2003, there were vested options outstanding to purchase up to 568
shares of the Company's common stock. The exercise price of all the vested
options exceeded the stock's closing price as of June 30, 2003.

NOTE 3. SECURITIES

All investment securities are held as available for sale.
Amortized cost and fair value of securities classified as available for sale as
of June 30, 2003 and December 31, 2002 are as follows:

The amortized cost and fair value of the securities as of June 30, 2003, by
contractual maturity, except for mortgaged-backed securities 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:

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

At June 30, 2003 and December 31, 2002, the carrying value of securities pledged
to secure public deposits, trust funds, securities sold under repurchase
agreements and other borrowings was $647,373 and $539,775, respectively.

NOTE 4. INTANGIBLE ASSETS

Intangible assets at June 30, 2003 were:

All of the intangible assets relate to the banking operating segment.

NOTE 5. SHORT-TERM BORROWINGS

Short-term borrowings include Federal funds purchased, Federal Home Loan Bank
advances, and securities sold under repurchase agreements with remaining
maturities of less than one year.

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NOTE 6. LONG-TERM BORROWINGS

Included in long-term borrowings are $498,121 in advances from Federal Home Loan
Banks, with remaining maturities of over one year, to fund investments in
mortgage-backed securities, loan programs and to satisfy certain other funding
needs. The Bank at June 30, 2003 had pledged collateral in the form of
mortgage-backed securities and mortgage loans to secure these advances and
satisfy collateral requirements. The following table summarizes the FHLB
advances with remaining maturities of over one year:

An aggregate of $427,000 of these are advances that may be converted at the
option of the FHLB from fixed rate advances to 3-month LIBOR based floating rate
advances starting on the first conversion date and quarterly thereafter. While
the maturity date of these advances will not change, if any of these advances
are converted into floating rate advances, the Bank has the option to prepay
such converted advances at par value. The following table summarizes key
information relating to these advances, including amount outstanding, maturity
date, interest rate and conversion date:

Also included in long-term borrowings are $85,000 in repurchase agreements with
remaining maturities of longer than one year. The Bank borrows these funds under
a master repurchase agreement. The following table summarizes information on
these repurchase agreements, including amount outstanding, maturity date and
interest rate:

13

Subordinated debt of $10,000 is also included in long-term borrowings at June
30, 2003.

NOTE 7. COMMITMENTS AND CONTINGENCIES

The Company is party to legal actions that 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 the Company.

In the normal course of business, there are additional outstanding commitments
and contingent liabilities that are not reflected in the accompanying
consolidated financial statements. The Company uses the same credit policies in
making commitments and conditional obligations as it does for other instruments.

The commitments and contingent liabilities not reflected in the consolidated
financial statements were $292,884 and $379,207 at June 30, 2003 and December
31, 2002, respectively.

NOTE 8. INTEREST RATE CONTRACTS

During 2001, the Corporation entered into $75,000 notional amount of interest
rate swap agreements to convert a portion of its liabilities from variable rate
to fixed rate to assist in managing its interest rate sensitivity. The interest
rate swaps required the Corporation to pay fixed rates of interest ranging from
4.56% to 4.92% and receive a variable rate based on one-month LIBOR. The swaps
were scheduled to mature on or prior to September 10, 2004. The Corporation
terminated these swaps in the period of June and July 2002. The cost, net of
tax, to terminate these transactions was $1,121. This cost is recorded as a
component of accumulated other comprehensive income and will be amortized over
the remaining original term of the agreement. As of June 30, 2003, the remaining
balance in accumulated other comprehensive income was $424.

During the second quarter of 2002, the Corporation purchased a $200,000 notional
interest rate floor contract for $195. The interest rate floor was indexed to
one-month LIBOR with a contract strike rate of 2.00% and had a termination date
of May 17, 2004. This transaction was accounted for as a free-standing
derivative with cash flows and changes in market value recorded in current
period earnings. The floor was terminated on October 25, 2002 with a market
value of $920.

During the first quarter of 2003, the Corporation entered into $75,000 notional
amount of interest rate swap contracts to convert a portion of its long term
repurchase agreements from fixed rate to variable rate as part of its balance
sheet management strategy. The interest rate swaps require the Corporation to
pay a variable rate based on three-month LIBOR and receive a fixed rate of
interest ranging from 2.60% to 2.72%. The interest rate swaps expire on or prior
to May 22, 2006.

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NOTE 9. SEGMENT INFORMATION

The Company operates one reporting line of business: Banking. Banking services
include various types of deposit accounts; safe deposit boxes; safekeeping of
securities; automated teller machines; consumer, mortgage and commercial loans;
mortgage loan sales and servicing; letters of credit; corporate cash management
services; brokerage and annuity products and services; and complete personal and
corporate trust services. Other includes the operating results of the Parent
Company and its non-bank subsidiaries, including Integra Capital Trust I,
Integra Capital Trust II, Integra Capital Statutory Trust III (formed in June
2003), Integra Reinsurance Company LTD (formed in May 2003), and its property
management company, Twenty-One Southeast Third Corporation (merged into the
parent company in May 2003). The Company evaluates performance based on profit
or loss from operations before income taxes excluding nonrecurring gains and
losses. The following tables present selected segment information for Banking
and other operating units.

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
(Dollar amounts in thousands except for share data)

INTRODUCTION

The discussion and analysis which follows is presented to assist in the
understanding and evaluation of the financial condition and results of
operations of Integra Bank Corporation and its subsidiaries (the "Company") as
presented in the preceding condensed consolidated financial statements and
related notes. The text of this review is supplemented with various financial
data and statistics.

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," "predict," "potential,"
"intend," and similar expressions are intended to 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, among others, the following: management's ability to reduce and
effectively manage interest rate risk; fluctuations in the value of the
Company's investment securities; general, regional and local economic conditions
which may affect interest rates and net interest income; credit risks and risks
from concentrations (geographic and by industry) within the loan portfolio;
changes in regulations affecting financial institutions; and competition. The
Company undertakes no obligation to release revisions to these forward-looking
statements or to reflect events or conditions occurring after the date of this
report.

As discussed in our 2002 annual report, Integra Bank Corporation continuously
strives to build a better company. There are four primary strategies currently
employed in this endeavor. The first strategy focuses on continuous improvement
of our banking operations or our "core bank". Execution of this strategy will be
evidenced by achieving an acceptable risk adjusted rate of return within the
loan portfolio, acceptable loan and deposit growth trends and pricing,
refinement and enhancement of existing products, the development of new products
to meet our customers evolving needs, and disciplined expense management. The
second strategy focuses on continuous improvement of our balance sheet
management and other financial management functions. Progress will be
demonstrated through net interest margin stability and predictability, and
strong liquidity and capital management. The third strategy focuses on expanding
our product and service distribution into higher growth and/or more diversified
markets. Progress may occur through some combination of de novo banking center
building, selective acquisitions or sales, and through developing and enhancing
delivery channels that transcend physical limitations. The fourth strategy
focuses on identifying and developing new lines of businesses or services that
provide superior growth or profitability characteristics. This strategy would
also include optimizing existing or potential synergies that exist within our
current or potential customer base.

Management monitors and modifies these strategies depending on evolving market
conditions, customer needs or preferences and other considerations.

OVERVIEW

Net income for the quarter ended June 30, 2003 was $4,313 compared to $6,137 for
the same period of 2002. Earnings per share, on a diluted basis, were $0.25 for
the second quarter of 2003 compared to $0.36 in 2002.

Net income for the six months ended June 30, 2003 was $8,242 compared to $11,444
for the same period of 2002. Earnings per share, on a diluted basis, were $0.48
for the first half of 2003 compared to $0.67 in 2002.

Net interest income was $17,491 during the three months ended June 30, 2003
compared to $19,881 for the three months ended June 30, 2002. The net interest
margin decreased 40 basis points to 2.77% during the second quarter of 2003 from
3.17% during the second quarter of 2002. Provision for loan losses was $1,600
for the three months ended June 30, 2003 compared to $180 for the same period
one year ago. Non-interest income increased $2,265 to $8,915 compared to the
second quarter of 2002. Non-interest expense increased $2,362 to $21,006 from
the same period in 2002.

Annualized returns on average assets and equity for the three months ended June
30, 2003 were 0.59% and 7.25%, respectively, compared with 0.85% and 10.93% in
the same period of 2002.

On a year-to-date basis, net interest income was $34,981 for the six-month
period ending June 30, 2003, a decrease of $3,902, or 10.0%, compared to $38,883
for the first six months of 2002. The net interest margin was 2.80% during the
first half of 2003 compared to 3.07% during the first half of 2002. Provision
for loan losses was $2,835 for the six months ended June 30, 2003 compared to
$830 for the same period one year ago. Non-interest income increased $3,134, or
23.5%, to $16,445 compared to the first six months of 2002. Non-interest
expenses increased $4,014 to $41,377 for the same period.

16

Annualized returns on average assets and equity for the first half of 2003 were
0.57% and 7.02%, respectively, compared with 0.78% and 10.25%, respectively in
the same period of 2002.

During the second quarter, the Company issued $10,000 of subordinated debt and
refinanced $34,500 of trust preferred securities.

Total assets at June 30, 2003 grew $67,810 to $2,993,642 from $2,925,832 at June
30, 2002.

CRITICAL ACCOUNTING POLICIES

The accounting and reporting policies of the Company conform with accounting
principles generally accepted in the United States of America ("GAAP") and
general practices within the financial services industry. The preparation of
financial statements in conformity with GAAP requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. These estimates, assumptions, and judgements
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 judgements. Certain policies inherently
have a greater reliance on the use of estimates, assumptions, and judgements and
as such have a greater possibility of producing results that could be materially
different than originally reported. The Company considers its critical
accounting policies to include the following:

Allowance for Loan Losses: The allowance for loan losses represents management's
best estimate of probable losses inherent in the existing loan portfolio. The
allowance for loan losses is increased by the provision for losses, on losses
charged to expense and reduced by loans charged off, net of recoveries. The
provision for loan losses is determined based on management's 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.

Loans are considered impaired when, based on current information and events, it
is probable the Company 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
fair value of the collateral, less estimated cost to liquidate. In measuring the
fair value of the collateral, management uses 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 affect the required level of the allowance for
loan losses and the associated provision for loan losses.

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

Fair values for securities available for sale are based on quoted market prices,
when available. If a quoted market price is not available, fair values are
estimated using quoted market prices for similar securities provided by third
parties. The fair values for loans held for sale are based upon quoted market
values, when available, or values were provided by a third party. The fair
values of mortgage servicing rights are based on discounted cash flow analysis
utilizing dealer consensus prepayment speeds and market discount rates. The fair
values of other real estate owned are typically determined based on appraisals
by third parties, less estimated costs to sell. The fair values of derivative
financial instruments are estimated based on current market quotes. The fair
value of goodwill is estimated based on the reporting assets or the combined
entity. Goodwill is tested annually for impairment. Intangible assets that have
finite useful lives continue to be amortized over the useful lives.

NET INTEREST INCOME

Net interest income was $17,491 for the three months ended June 30, 2003
compared with $19,881 for the same period in 2002. On a year-to-date basis, net
interest income was $34,981 for the six months ended June 30, 2003 compared with
$38,883 for the same period in 2002. The net interest margin for the three
months ended June 30, 2003 was 2.77% compared to 3.17% for the same period one
year ago. The net interest margin for the six months ended June 30, 2003 was
2.80% compared to 3.07% for the same period one year ago. The majority of the
decline in margin is attributable to assets repricing or prepaying at a rate
faster than liabilities repriced in a lower rate environment. In addition,
during the second quarter of 2002, $255 in interest income was recovered on a
non-performing loan that had been sold.

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Average earning assets were $2,706,152 for the second quarter of 2003 compared
to $2,667,107 for the second quarter of 2002 an increase of $39,045. Larger loan
balances offset reductions in portfolio and short-term investments. Yields on
earning assets decreased from 6.67% to 5.54% for the same period. Interest rates
have fallen steadily throughout the time period. Average earning assets
decreased $36,377 from $2,708,616 for the first six months of 2002 to $2,672,239
for the first six months of 2003.

Average loan balances were $1,673,775 during the second quarter of 2003 compared
to $1,582,728 during the second quarter of 2002. All loan categories had
increases for the second quarter of 2003 compared to the same period for 2002:
Commercial loans increased $17,743 to $925,345, Consumer loans increased $38,971
to $343,551, and Mortgage loans increased $34,333 to $404,879. Total interest
income on loans decreased $2,307 during the second quarter of 2003 compared to
2002 as the decline in loan yields more than offset the impact of greater
volume. The yield on loans was 6.11% for the second quarter of 2003 compared to
7.15% for the same period of 2002. This was a result of customers refinancing
higher yielding loans to obtain lower rates, loan yields tied to floating rate
indices fell, and maturing loans repriced at lower rates. Average loans were
$1,648,328 during the first six months of 2003 compared to $1,580,655 during the
first six months of 2002, an increase of $67,673 or 4.3%. Consumer loans and
mortgage loans, on an average basis, experienced growth of $42,876 and $32,070,
respectively, for the six months of 2003 compared to the same period of 2002,
while commercial loans, on an average basis, decreased $7,273 for the same
periods. The yield on loans was 6.21% for the first six months of 2003 compared
to 7.21% for the same period of 2002.

Average investment securities were $1,020,431 during the second quarter of 2003
compared to $1,022,947 during the second quarter of 2002. This includes a market
value adjustment of $22,087 and $6,606, respectively for each quarter. The yield
on securities declined to 4.60% during the second quarter of 2003 from 6.08%
during the same period in 2002. The Company sold $70 million in mortgage-backed
securities during the second quarter of 2003, which generated a gain of $957.
These proceeds were reinvested in structured mortgage-backed securities with
more predictable cashflows and yields. Average investment securities decreased
$3,012, or 0.3%, to $1,010,571 during the first half of 2003 compared to
$1,013,583 during the first half of 2002. The yield on securities declined to
4.71% during the first half of 2003 from 6.04% during the first half of 2002.
Due to steadily falling rates through the period and a reduced risk tolerance,
the Company has generally replaced maturing, called or sold securities with
investments with lower yields.

Other earning assets decreased $49,486 during the second quarter of 2003
compared to the same period of 2002. The decline in other earning assets
resulted primarily from a decrease of $25,284 and $24,202 in short term
investments and loans held for sale, respectively. Other earning assets
decreased $101,038 during the first half of 2003 compared to the same period of
2002. The decline in other earning assets resulted primarily from a decrease of
$67,260 and $33,778 in short term investments and loans held for sale,
respectively.

Average interest-bearing liabilities were $2,486,554 and $2,462,741 for the
three months ended June 30, 2003 and 2002, respectively, an increase of $23,813;
while the cost of these funds decreased from 3.79% to 2.99% for the same period.
Average interest-bearing liabilities were $2,455,187 and $2,506,834 for the six
months ended June 30, 2003 and 2002, respectively.

Average interest bearing deposits decreased $1,185 from $1,602,833 to $1,601,648
while average non-interest-bearing demand deposits increased $11,957, or 6.0%,
from $200,721 to $212,678 for the second quarter of 2003 compared to the same
period in 2002. As a higher rate promotional certificate of deposit matured in
2002, the Company offered many single service CD customers an opportunity to
move their deposits into money market, interest checking and savings accounts
along with various annuity products. The declining rate environment and change
in deposit product mix resulted in the cost of deposits decreasing from 2.84% to
1.99% for the second quarter of 2003 compared to the second quarter of 2002.
Average interest bearing deposits were $1,598,622 during the first six months of
2003 compared to $1,643,780 during the first six months of 2002.
Non-interest-bearing deposits increased $5,631, or 2.8%, while interest-bearing
deposits decreased $45,158, or 2.8%, during this period. The cost of deposits
decreased to 2.06% during the first half of 2003 from 2.97% during the first
half of 2002.

Average short-term borrowings increased $125,821 from $96,113 to $221,935 for
the second quarter of 2003 compared to the same period in 2002. The cost of
short-term borrowings declined 131 basis points during this period, to 0.81% for
the second quarter of 2003. For the six months of 2003 average short-term
borrowings increased $100,812 from $94,328 for the six months of 2002 to
$195,140. For the six-month period of 2003 and 2002, the cost of short-term
borrowings was 0.87% and 2.12%, respectively. The decline in short-term
borrowing yields was the result of repricing of federal funds purchased and
short-term repurchase agreements to lower market rates throughout 2003.

Average long-term borrowings decreased $100,825 from $763,795 to $662,970 for
the second quarter of 2003 compared to the same period in 2002. The cost of
long-term borrowings increased 12 basis points from 6.00% during the second
quarter of 2002 to 6.12% for the same period of 2003. For the six months period
of 2003 average long-term borrowings decreased $107,302 from $768,727 in 2002 to
$661,425 and long-term borrowing costs were 5.97% and 6.14% for the same time
periods. The higher yield was primarily the result of extinguishing $90,000 in
long-term debt in the second half of 2002 prior to scheduled maturity which had
yields lower than the average rate for long-term borrowings. In April 2003 the
Company issued $10,000 of subordinated debt with a floating rate of 4.49% for
the second quarter of 2003. In late June 2003 the Company called $34,500 of
Trust Preferred securities at par which had a

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fixed rate of 8.25%. The company financed the call by issuing $34,500 of new,
floating rate Trust Preferred securities which had an initial yield of 4.16%.

NON-INTEREST INCOME

Non-interest income for the three months ended June 30, 2003, was $8,915
compared to $6,650 from the same period in 2002. The increase of $2,265 is
primarily attributable to three second quarter 2003 events. First, the Company
sold the Owingsville, Kentucky banking center, which no longer met the strategic
objectives of the Company. This resulted in a gain of $1,056. This was partially
offset by $131 loss from a writedown of certain fixed assets. Second, due to the
continuing low interest rate environment many consumers have refinanced mortgage
loans into fixed and adjustable rate mortgages. The Company, which sells the
majority of its fixed rate residential mortgage loans, reported a $494 increase
in gain on sale of loans for the second quarter of 2003. Mortgage servicing
income increased $21 in the second quarter of 2003, net of a $220 impairment
charge due to consumers refinancing and prepayment activity. Finally, the
Company sold $70,000 of mortgage-backed securities. This resulted in a gain of
$957 during the second quarter of 2003, which was an increase in security gains
of $743 compared with the same period of 2002.

Non-interest income for the six months ended June 30, 2003 was $16,445 compared
to $13,311 from the same period in 2002. In addition to the above mentioned
items, the Company experienced an increase in service charges on deposits and
other service charges which offset a decrease in trust, investment services, and
other income.

Service charges on deposit accounts increased $705, or 14.2% during the first
six months of 2003 compared to the same period one year ago. This was caused by,
new fee sources, including an enhanced overdraft protection service which was
initiated in the second quarter of 2002, greater product and service usage, and
reduced deposit fee waivers.

19

Other service charges and fees increased $430, from $2,745 for the six months of
2002 to $3,175 for the six months of 2003. Mortgage servicing fees for the six
months ended June 30, 2003 were $561 compared to $335 for the comparable period
of 2002 due to demand for new and refinanced residential mortgages.

Revenues from the sale of investment services, brokerage and annuity products,
decreased $173 during the first six months of 2003 compared to 2002. In the
first six months of 2002, higher rate promotional certificates of deposit
matured. The declining rate environment shifted some depositors' preferences to
annuities.

Other non-interest income decreased $495 from $1,456 for the six months of 2002
to $961 for the period ending June 30, 2003. In 2002 the Company wrote covered
call option contracts and recorded fee income for the six months of 2002 of
$402. Effective April 30, 2002, the Company ceased writing covered call option
contracts.

NON-INTEREST EXPENSE

Non-interest expense increased $2,362 in the second quarter of 2003 compared to
the same period in 2002. On a year-to-date basis, non-interest expense increased
$4,014 in the first six months of 2003 compared to the first six months of 2002.

Salaries and employee benefits increased $665 for the three months ended June
30, 2003 and $2,125 for six months ended June 30, 2003 compared to the same
periods of 2002. This increase was comprised of higher performance-based
commissions and incentives, which rose $179 and $754 for the second quarter and
six months of 2003, respectively, compared to the same periods of 2002. These
performance-based awards are tied to sales of fee-based services and origination
of loan and deposit products. Employee benefits expense increased $481 for three
months and $1,148 for six months comparing 2003 to 2002. This was primarily due
to additional health care expense, greater employee participation in deferred
contribution retirement plans and the additional taxes on the increase in the
commissions and incentives. Health insurance rose $530 for the second quarter
and $1,194 for the six months ended June 30, 2003 compared to the same periods
in 2002.

Occupancy expense increased $276 for the second quarter of 2003 and $493 for the
first six months of 2003 compared to the same periods of 2002. The Company
sublet a portion of the headquarters building to a third party in 2002. This
rental income offset occupancy expense. In the second quarter of 2002 the third
party moved and Integra Bank N.A. (the "Bank") occupied the floor.

Low Income Housing Project ("LIHP") operating losses increased $525 to $712 for
the second quarter of 2003 compared to $187 for the same period of 2002. For the
six months ended June 30 2003 LIHP was $1,433 compared to $323 for the same
period in 2002. In the fourth quarter of 2002 the Company increased its
investment in a LIHP. Currently, the Company has $18,942 in LIHP investments. An
investment grade third party guarantees the investment's overall return. This
operating loss is more than offset by a tax credit, thus lowering the Company's
tax liability and effective tax rate.

In the fourth quarter of 2001, the Company wrote down and designated $58,571 in
loans as available for sale. In the second quarter of 2002, the Company recorded
$496 of expenses related to the sale of some of these loans and $1,439 for the
six months of 2002. In the second quarter of 2003, there was no expense recorded
relating to the loan sale project and only $1 for the first six months of 2003.

In the second quarter of 2003, one of the Company's subsidiaries issued $34,500
of floating rate trust preferred securities. The Company used the proceeds to
redeem $34,500 of fixed rate trust preferred securities. The expenses associated
with this redemption were $1,400.

Goodwill and certain other intangible assets having indefinite lives are no
longer amortized to earnings, but rather are subject to testing for impairment.
For the first six months of 2003 the Company experienced no impairment. The
Company continues to amortize core deposit intangibles.

20

INCOME TAX EXPENSE

Income tax benefit was $513 and $1,028 for the three months and six months ended
June 30, 2003, respectively compared with a $1,570 and $2,557 expense for the
same period in 2002. The effective tax rates were (14.3%) and 18.3% for the six
months ended June 30, 2003 and 2002, respectively. Income from tax exempt or
tax-preferred sources, including interest on municipal loans and investments,
bank-owned life insurance and dividends on tax-preferred securities increased in
terms of percent of total pretax income to 80.7% in the first six months of 2003
compared to 47.7% in the first six months of 2002. The Company increased its
investment in LIHP near the end of 2002 which has generated a credit of $1,638
for the period ending June 30, 2003 compared to $587 for first six months of
2002.

FINANCIAL POSITION

Total assets at June 30, 2003 were $2,993,642, an increase of $135,904 compared
to $2,857,738 at December 31, 2002.

SECURITIES

Total investment securities available for sale were $1,054,155 on June 30, 2003
and $982,263 at December 31, 2002. These securities represent the second largest
earning asset component after loans. The Company currently has no investment
securities classified as held to maturity. The portfolio's balances were $14,718
higher at December 31, 2002. The market value of the investment securities
available for sale on June 30, 2003 was $25,747 higher than the amortized cost.
During the quarter, the portfolio composition has been managed to reduce
prepayment and extension risks. The majority of portfolio holdings are in
adjustable rate mortgage ("ARM"s) passthrough securities and collateralized
mortgage obligations ("CMO"s). Inherent these products are prepayment risk,
which occurs when borrowers prepay their obligations. Changes in interest rates
contribute to the borrower's decision to prepay the mortgage. Prepayment rates
generally can be expected to increase during periods of lower interest rates as
underlying mortgages are refinanced at lower rates. The Company's management
constantly reviews the composition of the securities portfolio, taking into
account market risks and the interest rate environment. In the second quarter of
2003, the Company sold $70 million of mortgage-backed securities and reinvested
the proceeds in more structured mortgage-backed securities with more predictable
cashflows and yields.

LOANS

Total loans at June 30, 2003, were $1,684,353 compared to $1,606,155 at December
31, 2002. On June 19, 2003, the Company sold the Owingsville banking center with
approximately $5,383 in loans. Loans secured by real estate have increased
$3,816 since year-end 2002 as customers continue to take advantage of lower
mortgage rates and refinancing opportunities. Commercial and industrial loans
increased $29,966, or 9.6%, since year-end. Management believes that the
Company's improved underwriting process has resulted in the origination of
higher quality commercial loans. Consumer loans increased $21,172, or 14.3%
since December 31, 2002.

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LOAN PORTFOLIO

ASSET QUALITY

The allowance for loan losses is the amount which, in management's opinion, is
adequate to absorb probable inherent loan losses as determined by management's
ongoing evaluation of the loan portfolio. The evaluation by management 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 current economic conditions. 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
losses based on management's ongoing evaluation of the loan portfolio.

The allowance for loan losses was $24,862 at June 30, 2003, representing 1.48%
of total loans compared with $24,438 at June 30, 2002 which represented 1.53% of
total loans. Annualized net charge-offs to average loans was 0.30% during the
second quarter of 2003 compared to 0.02% for the same period of 2002. On a
year-to-date basis, annualized net charge-offs to average loans was 0.32% during
the first six months of 2003 compared to 0.03% for the same period of 2002. In
late 2001, the Company identified $78,312 of performing and non-performing loans
which it intended to sell. These loans were recorded at the lower of cost or
market resulting in a write down in 2001. The sale was culminated in 2002. Net
recoveries exceeded the carrying value of the loans held for sale by $950 in the
second quarter of 2002. In addition, the Company recorded a $400 recovery on one
specific commercial credit that resulted in the significantly lower net
charge-off rate for the first quarter of 2002. Excluding these items, the net
charge-off ratio would have been 0.26% and 0.20% for the three months and for
the six months ended June 30, 2002, respectively. The provision for the first
six months of 2003 was $2,835, which was an increase compared to 2002 and
exceeded net charge-offs by $230. The provision for loan losses totaled $830 for
the first half of 2002, exceeding net charge-offs by $570. The allowance for
loan losses to non-performing loans was 121.4% at June 30, 2003 compared to
110.1% at December 31, 2002 and 117.9% at June 30, 2002.

SUMMARY OF ALLOWANCE FOR LOAN LOSSES

As of June 30, 2003, total non-performing assets decreased $2,557 from December
31, 2002. Non-performing loans, consisting of nonaccrual, restructured and 90
days or more past due loans, were 1.22% and 1.39% of total loans at June 30,
2003 and December 31, 2002, respectively. A municipal obligation with an
approximate value of $3,000 is in default. Management expects to realize a full
recovery after legal resolution of a utility rate issue.

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Listed below is a comparison of non-performing assets.

DEPOSITS

Total deposits were $1,813,334, at June 30, 2003, compared to $1,781,948 at
December 31, 2002. The banking center sold during the second quarter of 2003 had
total deposits of $17,430. Total non-interest-bearing deposits increased $9,749,
or 4.6% to $223,154 since year-end. Savings, interest checking and money market
accounts increased by $7,385, or 1.0% during this same period to $729,871. Other
interest-bearing deposits, which includes time deposits less than $100 and IRA
certificate of deposits, declined $34,614, or 5.7%, from December 31, 2002 to
$572,200 at June 30, 2003. However, time deposits greater than $100 rose $48,866
or 20.4%, to $288,109 during this period.

BORROWINGS

Federal funds purchased and securities sold under repurchase agreements totaled
$340,954 at June 30, 2003 compared to $161,784 at December 31, 2002. Of these,
$255,954 have remaining maturities of less than one year, while $85,000 have
maturities greater than one year. Securities sold under repurchase agreements
are collateralized transactions acquired in national markets as well as from the
Company's commercial customers as part of a cash management service. The
long-term repurchase agreements have a weighted average interest rate of 4.79%.

Other borrowings totaled $525,842 at June 30, 2003 compared to $536,042 at
December 31, 2002. Other borrowings generally provide longer term funding and
include FHLB advances and term notes from other financial institutions. Included
in other borrowings is $506,097 of FHLB advances to fund investments, loans and
to satisfy other funding needs. The Company must pledge collateral in the form
of mortgage-backed securities and mortgage loans to secure these advances and at
June 30, 2003, was in compliance with those requirements. An aggregate of
$427,000 of the FHLB advances may be converted at the sole option of the FHLB,
from fixed rate advances to 3-month LIBOR based floating rate advances starting
on the first conversion date and quarterly thereafter. Any conversion would not
change the maturity date of these advances. If any of these advances are
converted into floating rate advances, the Company has the option to prepay any
of such converted advances at par value. These advances carry a weighted average
interest rate of 6.15% with final maturities occurring from 2005 through 2010.

The Corporation has an unsecured line of credit available which permits it to
borrow up to $7,500. At June 30, 2003 the Company had $6,500 available for
future use. In July 2003 the Company increased the line to $15,000 for the same
terms. The line will mature July 29, 2004.

23

On April 10, 2003, the Company issued $10,000 of subordinated debt with a
variable rate equal to 3-month LIBOR plus 3.25% payable quarterly which will
mature on April 10, 2013. Issuance costs of $331 were paid by the Company and
are being amortized over the life of the securities.

Management continuously reviews the Company's liability composition. Any
modifications could adversely affect the profitability and capital levels of the
Company over the near term, but would be undertaken if management determines
that restructuring the balance sheet will improve the Company's interest rate
risk and liquidity risk profile on a longer-term basis.

TRUST PREFERRED SECURITIES

During the second quarter of 2003, the Company issued Floating Rate Capital
Securities of $34,500 as a participant in a Pooled Trust Preferred Fund through
a subsidiary, Integra Capital Statutory Trust III with a floating interest rate,
which was 4.16% on June 30, 2003. The issue matures on June 26, 2033. Issuance
costs of $1,025 were paid by the Company and are being amortized over the life
of the securities. The Company has the right to call these securities at par
effective June 25, 2008. The funds were used to redeem $34,500 of trust
preferred securities which had a fixed rate of 8.25%. The costs of redemption,
which included the unamortized issuance fees and costs related to the call, were
expensed in the second quarter of 2003.

On July 16, 2001, the Company issued $18,000 of Floating Rate Capital Securities
as a participant in a Pooled Trust Preferred Fund through a subsidiary, Integra
Capital Trust II, with a floating rate, which was 5.10% on June 30, 2003. The
issue matures on July 25, 2031. Issuance costs of $581 were paid by the Company
and are being amortized over the life of the securities. The Company has the
right to call these securities at par effective July 16, 2011.

On March 30, 1998, the Company issued through a subsidiary, Integra Capital
Trust I, $34,500 of 8.25% Cumulative Trust Preferred Securities which were
scheduled to mature on March 31, 2028. As noted above the Company called these
securities at par on June 25, 2003 and redeemed them on June 30, 2003.

CAPITAL EXPENDITURES

The Company is currently planning to build four new banking centers over the
next six to 12 months. The banking centers will be located in Evansville,
Indiana and in Bowling Green, Florence and Georgetown, Kentucky. Capital
expenditures for the new banking centers were $540 in the second quarter of 2003
and are expected to total between $6,000 and $8,000 over the next twelve months.

OFF-BALANCE SHEET ARRANGEMENTS AND AGGREGATE CONTRACTUAL OBLIGATIONS

There have been no material changes in off-balance sheet arrangements and
contractual obligations since the first quarter of 2003.

CAPITAL RESOURCES AND LIQUIDITY

The Company and the Bank have capital ratios that substantially exceed all
regulatory requirements, including the regulatory guidelines for
"well-capitalized" that apply to the Bank. It is management's intent for the
Bank to remain well capitalized at all times. The regulatory capital ratios for
Integra Bank Corporation and the Bank are shown below.

Liquidity of a banking institution reflects the ability to provide funds to meet
loan requests, accommodate possible outflows in deposits and other borrowings,
and take advantage of interest rate market opportunities. The Company
continuously analyzes its 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.

24

For the Bank, the primary sources of short-term liquidity are federal funds
sold, commercial paper, interest-bearing deposits and readily marketable and
unencumbered investment securities that can be sold or pledged to a repurchase
agreement. In addition liquidity is provided by loan and investment cash flows.
The balance between these sources and demands on liquidity is monitored under
the Company's asset/liability management program. When these sources are not
adequate, the Bank may purchase federal funds, solicit brokered deposits, access
the capital markets, or use its FHLB lines as alternative sources of liquidity.

Liquidity for the Company is provided by dividends from the Bank, cash balances,
credit line availability, liquid assets and proceeds from capital market
transactions. Applicable laws and regulations limit the dividend amount which
commercial banks may pay. The dividend amount that could be paid is further
restricted by management to maintain prudent capital levels. As of June 30,
2003, the Bank could not pay any dividends to the Company without prior
regulatory approval. Based upon its current analysis, management believes that
prior regulatory approval of dividends will be required until the third quarter
of 2003. The Company has an unsecured line of credit available which permits it
to borrow up to $7,500. As discussed above, this line has increased to $15,000
in July 2003. At June 30, 2003 the Company had $6,500 available for future use.
Management believes that the Company has adequate liquidity to meet its
foreseeable needs.

ITEM 3. 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 capital by altering the underlying value of assets, liabilities
and off balance sheet instruments. The interest rate risk management program for
the Company is comprised of several components. The components include (1) Board
of Directors' oversight, (2) executive management's oversight, (3) risk limits
and control, (4) risk identification and measurement, (5) risk monitoring and
reporting and (6) independent review. It is the objective of the interest rate
risk management processes to manage the impact of interest rate volatility on
earnings and capital.

At the Company, interest rate risk is managed by executive management through
the Corporate Asset and Liability Committee ("Corporate ALCO") with oversight by
the Board ALCO and Finance Committee ("Board ALCO"). Board ALCO meets monthly
and is responsible for the establishment of policies, risk limits and
authorization levels. Corporate ALCO meets each month and is responsible for
implementing policies and procedures that translate these goals, objectives, and
risk limits into operating standards, 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. The Company uses several key methodologies to measure interest
rate risk.

EARNINGS AT RISK (EAR). Management considers EAR to be the best method of
measuring 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. The Company uses a simulation model to run immediate
and parallel changes in interest rates from a "Base" scenario using implied
forward interest rates. The standard simulation analysis assesses the impact on
net interest income over a 24-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. 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 June 30, 2003,
the Company would experience a negative 4.44% change in EAR, if interest rates
moved downward 200 basis points. A parallel upward 200 basis points should
result in a negative 0.42% change in net interest income. Both simulation
results are within the policy limits established by Board ALCO.

Trends in Earnings at Risk

ECONOMIC VALUE OF EQUITY (EVE). Management considers EVE at risk to be its 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. The Company uses a

25

simulation model to run immediate and parallel changes in interest rates ranging
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. Additional yield curve scenarios are
tested from time to time to assess the EVE risk to changes in the slope of the
yield curve. 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 equity. The simulation model calculates the percentage
change from the "Base" interest rate scenario. Board ALCO has approved policy
limits for changes in EVE. The variance limit for EVE is measured in an
environment in which the "Base" interest rate scenario is shocked up or down 200
basis points. The Company uses a graduated monitoring system in determining the
appropriate course of action for a given level of risk.

The current EVE at risk policy allows Corporate ALCO to manage EVE risk to a 200
basis point rate shock within a range of plus or minus 15%. At June 30, 2003,
the Company would experience a negative 8.13% change in EVE if interest rates
moved downward 200 basis points. If interest rates moved upward 200 basis
points, the Company would experience a negative 13.80% change in EVE. Both of
these measures are within Board approved policy limits. The increase from March
31 is driven primarily by a proportionate increase in floating rate debt and the
absolute low level of interest rates.

Trends in Economic Value of Equity

The assumptions in any of these simulation runs are inherently uncertain, and
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.

ITEM 4: CONTROLS AND PROCEDURES

Based on an evaluation of the Company's disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of June 30, 2003, the
Company's principal executive officer and principal financial officer have
concluded that such disclosure controls and procedures were effective as of that
date.

There have been no changes in our internal controls over financial reporting
that occurred during the quarter ended June 30, 2003 that has materially
affected, or is reasonably likely to materially affect, the Company's internal
control over financial reporting.

26

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The Company and its subsidiaries are parties to legal actions that 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 the
Company and its subsidiaries.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
Not applicable

ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable

ITEM 4. SUBMISSIONS OF MATTERS TO A VOTE OF SECURITY HOLDERS
On April 16, 2003, the Company held its annual meeting of shareholders. There
were 17,291,368 shares of common stock outstanding on the February 21, 2003
record date that were entitled to vote at the meeting.

The following directors received votes as noted and were elected to terms to
expire in 2006:

Continuing directors and the date of the expiration of their term in office are
as follows:

The shareholders also approved the appointment of Pricewaterhouse Coopers LLP as
the Company's independent auditors for 2003. The following represents the
results of the vote:

Additionally, the shareholders voted to adopt the Integra Bank Corporation 2003
Stock Option and Incentive Plan. The following represents the results of the
vote:

ITEM 5. OTHER INFORMATION

Not Applicable

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits. The following documents are filed as exhibits to this report:

10* Executive Annual and Long-term Incentive Plan

31.1 Certification pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002 of Chief Executive Officer

31.2 Certification pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002 of Chief Financial Officer

27

32 Certification of Chief Executive Officer and Chief Financial
Officer

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

(b) Reports on Form 8-K.

On April 16, 2003, under Item 9, the Company issued a press release containing
information on the period ending March 31, 2003 and also included the
presentation of management at the 2003 annual meeting of shareholders.

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SIGNATURES

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

INTEGRA BANK CORPORATION

By /s/ Michael T. Vea
--------------------------------
Chairman of the Board, Chief
Executive Officer and President
August 14, 2003

/s/ Charles A. Caswell
--------------------------------
Chief Financial Officer and
Executive Vice President
August 14, 2003

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