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 ~~September~~March 3031, ~~2010~~2011.

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)	(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 o¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes o¨ No o¨

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

Large accelerated filer o ¨ Accelerated filer o ¨ Non-accelerated filer o ¨ Smaller reporting company x (Do not check if a smaller reporting company)

(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act of 1934).

Yes o¨ No x

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 ~~OCTOBER~~APRIL 2926, ~~2010~~2011
(Common stock, $1.00 Stated Value)	21,~~062~~016,~~464~~685

INTEGRA BANK CORPORATION

INDEX

PART I - FINANCIAL INFORMATION

		PAGE NO.
PART I - FINANCIAL INFORMATION

Item 1. Unaudited Financial Statements		3

Consolidated balance sheets-
March 31, 2011 and December 31, 2010		3

Consolidated statements of operations-
Three months ended March 31, 2011 and 2010		4

Consolidated statements of comprehensive income/(loss)-
Three months ended March 31, 2011 and 2010		6

Consolidated statements of changes in shareholders’ equity-
Three months ended March 31, 2011		7

Consolidated statements of cash flow-
Three months ended March 31, 2011 and 2010		8

Notes to unaudited consolidated financial statements		9

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations		42

Item 3. Quantitative and Qualitative Disclosures about Market Risk		54

Item 4. Controls and Procedures		55

PART II - OTHER INFORMATION

Item 1. Legal Proceedings		55

Item 1A. Risk Factors		55

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		55

Item 3. Defaults Upon Senior Securities		56

Item 4. Reserved		56

Item 5. Other Information		56

Item 6. Exhibits		56

Signatures		57

	PAGE NO.
Item 1. Unaudited Financial Statements
Consolidated balance sheets-
September 30, 2010 and December 31, 2009		3
Consolidated statements of income-
Three months and nine months ended September 30, 2010 and 2009		4
Consolidated statements of comprehensive income-
Three months and nine months ended September 30, 2010 and 2009		6
Consolidated statements of changes in shareholders’ equity-
Nine months ended September 30, 2010		7
Consolidated statements of cash flow-
Nine months ended September 30, 2010 and 2009		8
Notes to unaudited consolidated financial statements		10
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations		32
Item 3. Quantitative and Qualitative Disclosures about Market Risk		50
Item 4. Controls and Procedures		51
PART II - OTHER INFORMATION
Item 1. Legal Proceedings		52
Item1A. Risk Factors		52
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		52
Item 3. Defaults Upon Senior Securities		52
Item 4. Reserved		52
Item 5. Other Information		52
Item 6. Exhibits		53
Signatures		54

PART I - FINANCIAL INFORMATION

~~ITEM~~ Item 1. Unaudited Financial Statements

INTEGRA BANK CORPORATION and Subsidiaries

Unaudited Consolidated Balance Sheets

(In thousands, except for share data)

	September 30,			December 31,
	March 31,			December 31,
	2010			2009
	2011			2010
ASSETS
Cash and due from banks	$	~~500~~288,~~600~~248		$	~~304~~430,~~921~~253
Federal funds sold and other short-term investments		50,031			49,653
Short-term investments		56,559			56,559
Total cash and cash equivalents		~~550~~344,~~631~~807			~~354~~486,~~574~~812
Loans held for sale (at lower of cost or fair value)		~~4,148~~989			931,~~572~~899
Securities available for sale		~~544~~514,~~559~~467			~~361~~528,~~719~~904
Securities held for trading		~~148~~421			36329
Regulatory stock		2420,~~713~~337			2922,~~124~~172
Loans, net of unearned income		1,~~456~~283,~~967~~615			21,~~019~~349,~~732~~504
Less: Allowance for loan losses		(95112,~~539~~487	)		(8895,~~670~~801	)
Net loans		1,~~361~~171,~~428~~128			1,~~931~~253,~~062~~703
Premises and equipment		32,~~768~~980			3734,~~814~~019
Premises and equipment held for sale		31,~~134~~387			41,~~249~~387
Other intangible assets		4,173			8,242
Other real estate owned		48,701			49,238
Other real estate owned		34,814			31,982
Other intangible assets		3,737			3,950
Other assets		6641,~~629~~006			6938,~~567~~372
TOTAL ASSETS	$	2,~~627~~179,~~145~~960		$	2,~~921~~420,~~941~~785
LIABILITIES
Deposits:
Non-interest-bearing demand	$	~~227~~220,~~106~~300		$	~~263~~224,~~530~~184
Non-interest-bearing held for sale		-			7,319
Interest-bearing		1,629,139			1,765,695
Interest-bearing		1,925,464			2,004,369
Total deposits		1,849,439			1,989,879
Interest-bearing held for sale		-			89,888
Short-term borrowings		21,526			59,893
Total deposits		2,152,570			2,365,106
Long-term borrowings		335,528			347,847
Short-term borrowings		55,841			62,114
Other liabilities		38,545			42,005
Long-term borrowings		348,161			361,071
TOTAL LIABILITIES		2,245,038			2,439,624
Other liabilities		38,667			31,304
Commitments and contingent liabilities (Note 12)		-			-
TOTAL LIABILITIES		2,595,239			2,819,595
Commitments and contingent liabilities (Note 11)		-			-
SHAREHOLDERS' EQUITY
Preferred stock - no par, $1,000 per share liquidation preference:
Shares authorized: 1,000,000
Shares outstanding: 83,586		82,447			82,359
Liquidation preference of $88,288 at September 30, 2010		82,271			82,011
Common stock - $1.00 stated value:
Shares authorized: 129,000,000
Shares outstanding: 21,066,130 and 20,847,589 respectively		21,066			20,848
Shares outstanding: 21,045,052 and 21,052,697 respectively		21,045			21,053
Additional paid-in capital		217,~~068~~279			~~216~~217,~~939~~174
Retained earnings (Accumulated deficit)		(291,742	)		(210,371	)
Retained earnings (deficit)		(381,932	)		(334,593	)
Accumulated other comprehensive income (loss)		(3,~~243~~917	)		(74,~~081~~832	)
TOTAL SHAREHOLDERS' EQUITY		31(65,~~906~~078	)		~~102~~(18,~~346~~839	)
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	2,~~627~~179,~~145~~960		$	2,~~921~~420,~~941~~785

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

INTEGRA BANK CORPORATION and Subsidiaries

Unaudited Consolidated Statements of ~~Income~~Operations

(In thousands, except for per share data)

	Three Months Ended						~~Nine Months Ended~~
	September 30,						September 30,
	March 31,
	2010			2009			2010			2009
	2011			2010
INTEREST INCOME
Interest and fees on loans:
Taxable	$	1713,~~857~~561		$	2421,~~374~~517		$	~~60,246~~		$	~~75,410~~
Tax-exempt		77107			~~192~~101			~~277~~			~~597~~
Interest and dividends on securities:
Taxable		3,~~493~~293			3,~~265~~322			~~10,310~~			~~13,736~~
Tax-exempt		~~198~~193			~~592~~222			~~640~~			~~2,425~~
Interest on securities held for trading		-			81			-			103
Dividends on regulatory stock		195			221
Dividends on regulatory stock		135			337			542			1,015
Interest on loans held for sale		16			26
Interest on loans held for sale		29			89			87			319
Interest on federal funds sold and other short-term investments		219			219
Interest on federal funds sold and other short-term investments		395			272			941			539
Total interest income		17,584			25,628
Total interest income		22,184			29,202			73,043			94,144
INTEREST EXPENSE
INTEREST EXPENSE
Interest on deposits		5,492			8,102
Interest on deposits		7,674			10,356			24,259			34,302
Interest on short-term borrowings		28			45
Interest on short-term borrowings		54			268			151			1,614
Interest on long-term borrowings		2,877			2,621
Interest on long-term borrowings		2,995			2,528			8,401			7,921
Total interest expense		8,397			10,768
Total interest expense		10,723			13,152			32,811			43,837
NET INTEREST INCOME		9,187			14,860
NET INTEREST INCOME		11,461			16,050			40,232			50,307
Provision for loan losses		36,790			52,700
Provision for loan losses		26,240			18,913			98,220			82,843
Net interest income after provision for loan losses		(27,603	)		(37,840	)
Net interest income after provision for loan losses		(14,779	)		(2,863	)		(57,988	)		(32,536	)
NON-INTEREST INCOME
NON-INTEREST INCOME
Service charges on deposit accounts		2,517			3,985
Service charges on deposit accounts		3,685			5,335			12,229			14,783
Other service charges and fees		595			717
Other service charges and fees		976			1,098			3,066			3,142
ATM income		295			362
Debit card income-interchange		1,~~207~~131			1,~~368~~310			~~3,931~~			~~3,998~~
Trust income		~~440~~464			~~630~~495			~~1,391~~			~~1,652~~
Gain (Loss) on sale of other assets		(329	)		(219	)		(93	)		(294	)
Net securities gains		-			(2	)
Net premiums on sales of deposits		11,241			-			15,612			2,549
Other than temporary impairment loss:
Net gains on sale of divested loans		9,498			676			11,840			676
Total impairment losses recognized on securities		-			(1,631	)
Net securities gains (losses)		-			6,578			3,349			8,057
Loss or reclassification recognized in other comprehensive income		-			1,421
Other than temporary impairment loss:
Net impairment loss recognized in earnings		-			(210	)
Total impairment losses recognized on securities		(585	)		-			(864	)		(22,634	)
Gain (loss) on sale of OREO		(373	)		66
Loss or reclassification recognized in other comprehensive income		-			-			(69	)		(1,150	)
Other		785			867
Net impairment loss recognized in earnings		(585	)		-			(795	)		(21,484	)
Total non-interest income		5,414			7,590
Warrant fair value adjustment		-			-			-			(6,145	)
NON-INTEREST EXPENSE
Other		1,246			(639	)		2,906			2,401
Salaries and employee benefits		7,216			9,198
Total non-interest income		27,379			14,827			53,436			9,335
Occupancy		1,770			2,118
NON-INTEREST EXPENSE
Equipment		516			750
Salaries and employee benefits		8,909			10,187			27,007			33,823
Professional fees		3,202			1,693
Occupancy		1,929			2,348			6,047			7,307
Communication and transportation		706			997
Equipment		638			749			2,075			2,406
Processing		474			715
Professional fees		4,315			1,699			8,784			5,486
Software		459			597
Communication and transportation		873			1,126			2,761			3,378
Marketing		195			224
Processing		513			647			1,747			2,138
Loan collection and OREO expense		4,412			1,597
Software		503			654			1,641			1,901
FDIC assessment		3,705			2,043
Marketing		149			312			638			1,152
Low income housing project losses		295			424
Loan and OREO expense		5,813			2,545			8,814			9,881
Amortization of intangible assets		214			412
FDIC assessment		2,753			1,721			7,134			5,676
State and local franchise tax		210			402
Low income housing project losses		642			161			1,490			1,324
Other		1,128			1,323
Debt prepayment penalties		-			27			-			1,538
Total non-interest expense		24,502			22,493
Amortization of intangible assets		286			421			1,110			1,264
Income (Loss) before income taxes		(46,691	)		(52,743	)
State and local franchise tax		269			324			693			1,112
Income taxes (benefit)		(485	)		8
Other		1,204			1,448			3,834			4,625
NET INCOME (LOSS)	$	(46,206	)	$	(52,751	)
Total non-interest expense		28,796			24,369			73,775			83,011
Preferred stock dividends and discount accretion		1,133			1,128
Income (Loss) before income taxes		(16,196	)		(12,405	)		(78,327	)		(106,212	)
Net income (loss) available to common shareholders	$	(47,339	)	$	(53,879	)
Income tax expense (benefit)		(42	)		7,330			(350	)		(9,952	)
Net income (loss)		(16,154	)		(19,735	)		(77,977	)		(96,260	)
Preferred stock dividends and discount accretion		1,133			1,117			3,394			2,669
Net income (loss) available to common shareholders	$	(17,287	)	$	(20,852	)	$	(81,371	)	$	(98,929	)

~~Unaudited~~ Consolidated Statements of Income are continued on ~~next~~the following page.

INTEGRA BANK CORPORATION and Subsidiaries

Unaudited Consolidated Statements of ~~Income~~Operations (Continued)

(In thousands, except for per share data)

	Three Months Ended	~~Three Months Ended~~						~~Nine Months Ended~~
		September 30,						September 30,
	March 31,
		2010			2009			2010			2009
	2011			2010
Earnings (Loss) per common share:
Earnings (Loss) per share:
Basic	$	(02.8429	)	$	(12.0161	)	$	~~(3.94~~	)	$	~~(4.78~~	)
Diluted		(02.8429	)		(12.0161	)	$	~~(3.94~~	)	$	~~(4.78~~	)
Weighted average common shares outstanding:
Weighted average shares outstanding:
Basic		20,~~686~~688			20,~~707~~666			~~20,672~~			~~20,713~~
Diluted		20,~~686~~688			20,~~707~~666			~~20,672~~			~~20,713~~
Dividends per common share	$	-		$	-		$	-		$	0.03

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

INTEGRA BANK CORPORATION and Subsidiaries

Unaudited Consolidated Statements of Comprehensive Income/(Loss)

(In thousands)

	Three Months Ended						~~Nine Months Ended~~
	September 30,						September 30,
	March 31,
	2010			2009			2010			2009
	2011			2010
Net income (loss)	$	(1646,~~154~~206	)	$	(1952,~~735~~751	)	$	~~(77,977~~	)	$	~~(96,260~~	)
Other comprehensive income (loss), net of tax:
Unrealized gain (loss) on securities:
Unrealized gain on securities:
Unrealized gain (loss) arising in period
Unrealized gain arising in period
(net of tax of $1,342, $2,246, $6,929 and $(1,395), respectively)		2,257			3,695			11,653			(2,295	)
(net of tax of $532 and $2,151, respectively)		894			3,617
Reclassification of amounts realized through impairment charges
and sales (net of tax of $218, $(2,487) $(952) and $5,076, respectively)		367			(4,091	)		(1,602	)		8,351
and sales (net of tax of $79 for 2010)		-			133
Net unrealized gain (loss) on securities		2,624			(396	)		10,051			6,056
Net unrealized gain on securities		894			3,750
Change in net pension plan liability
(net of tax of $30, $9, $162 and $28, respectively)		51			15			273			46
(net of tax of $12 and $101, respectively)		21			170
Unrealized gain (loss) on derivative hedging instruments arising in period
Net unrealized gain, recognized in other comprehensive income (loss)		915			3,920
(net of tax of $(13) and $(233) for 2009)		-			(22	)		-			(384	)
Comprehensive income (loss)	$	(45,291	)	$	(48,831	)
Net unrealized gain (loss), recognized in other comprehensive income (loss)		2,675			(403	)		10,324			5,718
Comprehensive income (loss)	$	(13,479	)	$	(20,138	)	$	(67,653	)	$	(90,542	)

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

INTEGRA BANK CORPORATION and Subsidiaries

Unaudited Consolidated Statements of Changes In Shareholders’ Equity

(In thousands, except for share and per share data)

															Accumulated
			Shares of						Additional			Retained			Other			Total
	Preferred		Common			Common			Paid-inIn			~~Retained~~Earnings			Comprehensive			Shareholders'
	Stock		Stock			Stock			Capital			~~Earnings~~(Deficit)			Income (Loss)			~~Total~~Equity
BALANCE AT DECEMBER 31, 2009	$	82,011		20,847,589		$	20,848		$	216,939		$	(210,371	)	$	(7,081	)	$	102,346
BALANCE AT DECEMBER 31, 2010	$	82,359		21,052,697		$	21,053		$	217,174		$	(334,593	)	$	(4,832	)	$	(18,839	)
Net income (loss)		-		-			-			-			(7746,~~977~~206	)		-			(7746,~~977~~206	)
Net change, net of tax, in accumulated
other comprehensive income		-		-			-			-			-			~~10,324~~915			~~10,324~~915
Preferred stock dividend and discount accretion		~~260~~88		-			-			-			(31,~~394~~133	)		-			(31,~~134~~045	)
Vesting of restricted shares, net		-		(1,398	)		(1	)		-			-			-			(1	)
Restricted stock forfeitures		-		(7,645	)		(8	)		8			-			-			-
Grant of restricted stock, net of forfeitures		-		219,939			219			(219	)		-			-			-
Stock-based compensation expense		-		-			-			97			-			-			97
Stock-based compensation expense		-		-			-			348			-			-			348
BALANCE AT MARCH 31, 2011	$	82,447		21,045,052		$	21,045		$	217,279		$	(381,932	)	$	(3,917	)	$	(65,078	)
BALANCE AT SEPTEMBER 30, 2010	$	82,271		21,066,130		$	21,066		$	217,068		$	(291,742	)	$	3,243		$	31,906

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

INTEGRA BANK CORPORATION and Subsidiaries

Unaudited Consolidated Statements of Cash Flow

(In thousands)

	Nine Months Ended
	Three Months Ended
	September 30,
	March 31,
	2010			2009
	2011			2010
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)	$	(7746,~~977~~206	)	$	(9652,~~260~~751	)
Adjustments to reconcile net income to
net cash provided by operating activities:
Amortization and depreciation		52,~~865~~629			51,~~214~~884
Provision for loan losses		9836,~~220~~790			8252,~~843~~700
Income tax valuation allowance		29,608			25,357
Impairment charge on available for sale securities		-			210
Net securities (gains) losses		(3,349	)		(8,057	)
Net held for trading (gains) losses		(92	)		(179	)
Impairment charge on available for sale securities		795			21,484
(Gain) loss on sale of other real estate owned		373			(66	)
Net held for trading (gains) losses		(112	)		1,002
Loss on low-income housing investments		295			424
(Gain) loss on sale of premises and equipment		(459	)		68
Net (gain) on sale of loans held for sale		(159	)		(144	)
(Gain) loss on sale of other real estate owned		552			227
Proceeds from sale of loans held for sale		12,329			13,652
Net premiums on sale of deposits		(15,612	)		(2,549	)
Origination of loans held for sale		(11,260	)		(14,515	)
Loss on low-income housing investments		1,490			1,324
Change in other operating		(5,461	)		1,856
Proceeds from sale of held for trading securities		-			7,100
Net cash flows provided by (used in) operating activities	$	(10,762	)	$	3,071
Purchase of held for trading securities		-			(19,745	)
Increase (decrease) in deferred taxes		(29,608	)		(3,461	)
Net gain on sale of loans held for sale		(12,465	)		(1,277	)
Proceeds from sale of loans held for sale		62,476			148,833
Origination of loans held for sale		(51,204	)		(102,352	)
Debt prepayment fees		-			1,538
Proceeds from sale of federal reserve stock		4,411			(9	)
Change in other operating		15,711			(13,375	)
Net cash flows provided by operating activities		28,342			47,905
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from maturities of securities available for sale		5020,~~042~~760			9816,~~580~~229
Proceeds from sales of securities available for sale		~~124,653~~-			~~296,671~~100
Purchase of securities available for sale		(~~346~~6,~~373~~647	)		(~~180~~10,~~189~~829	)
Decrease in loans made to customers		212,611			89,658
Proceeds from redemption of regulatory stock		1,835			2,825
Purchase of premises and equipment		(2,193	)		(977	)
Decrease in loans made to customers		41,192			52,741
Proceeds from sale of premises and equipment		(507	)		17
Purchase of premises and equipment		(134	)		(1,240	)
Proceeds from sale of other real estate owned		6,652			5,830
Proceeds from sale of premises and equipment		17			404
Increase (decrease) from sale of branches, net of cash acquired		(66,359	)		(22,708	)
Proceeds from sale of other real estate owned		2,860			1,068
Net cash flows provided by (used in) investing activities		(21,474	)		286,882
Net cash flows provided by investing activities	$	59,883		$	61,298
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in deposits	$	~~211~~(140,~~764~~440	)	$	~~183~~52,~~260~~446
Net increase (decrease) in short-term borrowed funds		(638,~~273~~367	)		~~(226,995~~20	)
Proceeds from long-term borrowings		-			50,000
Repayment of long-term borrowings		(12,319	)		(12,297	)
Repayment of long-term borrowings		(12,907	)		(49,550	)
Net cash flows provided by (used in) financing activities	$	(191,126	)	$	40,169
Proceeds from issuance of TARP preferred stock		-			89,927
Net increase (decrease) in cash and cash equivalents		(142,005	)		104,538
Accretion of discount on TARP preferred stock		(3,394	)		(197	)
Cash and cash equivalents at beginning of period		486,812			354,574
Dividends paid on TARP preferred stock		-			(1,950	)
Cash and cash equivalents at end of period	$	344,807		$	459,112
Dividends paid on common stock		-			(622	)
SUPPLEMENTAL DISCLOSURE OF NONCASH TRANSACTIONS
Proceeds from exercise of stock options and restricted shares, net		(1	)		(316	)
Other real estate acquired in settlement of loans		4,729			6,012
Net cash flows provided by financing activities		189,189			43,557
Dividends accrued not paid on preferred stock		1,045			1,045
Net increase in cash and cash equivalents		196,057			378,344
Accretion of discount on TARP preferred stock		(88	)		(83	)
Cash and cash equivalents at beginning of period		354,574			62,773
Cash and cash equivalents at end of period	$	550,631		$	441,117

~~Unaudited Consolidated~~The ~~Statements~~accompanying ofnotes ~~Cash~~are ~~Flow~~an ~~are~~integral ~~continued~~part onof ~~next~~the ~~page~~consolidated financial statements.

INTEGRA BANK CORPORATION and Subsidiaries

Unaudited Consolidated Statements of Cash Flow (Continued)

(In thousands)

	Nine Months Ended
	September 30,
	2010		2009
SUPPLEMENTAL DISCLOSURE OF NONCASH TRANSACTIONS
Other real estate acquired in settlement of loans		16,745		19,387
Dividends accrued not paid on preferred stock		4,702		522

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

INTEGRA BANK CORPORATION and Subsidiaries

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except for share and per share data)

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION:

~~References to~~The ~~the~~accompanying ~~terms~~unaudited ~~“we”,~~consolidated ~~“us”,~~financial ~~“our”,~~statements include the ~~“Company”~~accounts ~~and~~of “Integra” ~~used throughout this report refer to Integra~~ Bank Corporation and, ~~unless~~our ~~the context indicates otherwise, its~~ subsidiaries. At ~~September~~March 3031, ~~2010~~2011, our subsidiaries consisted of Integra Bank N.A. (~~the “~~Bank~~” or “Integra Bank”~~), a reinsurance company and four statutory business trusts, which are not consolidated under applicable accounting guidance. 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 (“GAAP”) 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 our financial statements and notes for the year ended December 31, ~~2009~~2010, included in our 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.

ACCOUNTING ESTIMATES:

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 losses, the valuation of real estate and other properties acquired in connection with foreclosures or in satisfaction of amounts due from borrowers on loans, and the valuation of our deferred tax asset. The ~~decline~~deterioration in ~~the value of~~ residential and commercial real estate ~~(CRE)~~values, ~~other~~the ~~impacts~~impact of the recession on the Bank and other banks, and our overall financial performance have all had a meaningful influence on the application of certain of our critical accounting policies and development of these significant estimates. In applying those policies, and making our best estimates, during the current quarter, we recorded provisions for loan losses, ~~write-downs on other real estate owned (OREO), other-than-temporary securities impairment~~ and ana ~~additional~~ valuation allowance on our deferred tax asset.

Our customers’ abilities to make scheduled loan payments ~~depend~~are in part dependent on the performance of their businesses and future economic conditions. In the event our loan customers’ ~~businesses~~ perform worse than expected, we could incur substantial additional provisions for loan losses in future periods.

There are ~~trust~~ ~~preferred~~ securities in our trust preferred securities portfolio and loans in our loan portfolio as to which we have estimated losses in part based on the assumption that the plans ~~being~~of ~~executed by~~ the issuers or our borrowers will be implemented as planned and have the effect of improving their financial positions. We have evaluated these plans for reasonableness before using them to calculate estimates. Should these plans not be executed, or have unintended consequences, our losses ~~would~~could increase.

On a quarterly basis, we determine whether a valuation allowance is necessary for our deferred tax asset. In performing this analysis, we consider all evidence currently available, both positive and negative, in determining whether, based on the weight of the evidence, the deferred tax asset will be realized. We establish a valuation allowance when it is more likely than not that a recorded tax benefit is not expected to be realized. The expense to create a valuation allowance is recorded as additional income tax expense in the period the tax valuation allowance is established. To the extent that we generate taxable income in a given quarter, the valuation allowance may be reduced to fully or partially offset the corresponding income tax expense. Any remaining deferred tax asset valuation allowance may be reversed through income tax expense once we can demonstrate a sustainable return to profitability and conclude that it is more likely than not the deferred tax asset will be utilized prior to expiration.

RECENT ACCOUNTING PRONOUNCEMENTS:

~~Effective~~ In January 12011, ~~2010, we adopted~~ the ~~new~~FASB ~~accounting~~issued ~~guidance~~ASU ~~under~~No. ~~Accounting Standards~~2011-01, ~~Codification~~“Deferral ~~(ASC)~~of ~~860~~the ~~that~~Effective ~~requires~~Date ~~more~~of ~~information~~Disclosures about ~~transfers of~~Troubled ~~financial~~Debt ~~assets,~~Restructurings ~~including~~in ~~securitization~~Update ~~transactions,~~No. ~~and~~2010-20.” ~~where~~The ~~entities have~~provisions ~~continuing~~of ~~exposure~~ASU toNo. ~~the~~2010-20 ~~risks~~required ~~related~~the todisclosure ~~transferred~~of ~~financial assets. The~~more ~~guidance~~granular ~~eliminates~~information on the ~~concept~~nature and extent of atroubled ~~“qualifying special-purpose~~debt ~~entity,”~~restructurings ~~changes~~and their effect on the ~~requirements~~allowance for ~~derecognizing~~loan ~~financial assets,~~ and ~~requires~~lease ~~additional~~losses ~~disclosures~~effective ~~about~~for ~~continuing~~the ~~involvement~~Company’s ~~with transferred~~reporting ~~financial~~period ~~assets~~ended ~~including~~March ~~information~~31, ~~about~~2011. ~~gains~~The ~~and~~amendments ~~losses resulting~~in ~~from~~ASU ~~transfers~~No. ~~during~~2011-01 deferred the ~~period. The~~effective ~~adoption~~date ofrelated ~~this accounting~~to ~~guidance~~these ~~did~~disclosures, ~~not~~until ~~have~~after athe ~~material~~FASB ~~impact~~completes ontheir ~~our~~project ~~consolidated~~clarifying ~~financial position~~the orguidance ~~results~~for ofdetermining ~~operations~~what constitutes a troubled debt restructuring.

109

~~ASC~~In ~~Topic 810~~April ~~provides~~2011, ~~guidance~~the ~~for~~FASB ~~consolidation~~issued ASU No. 2011-02, “A Creditor’s Determination of ~~variable~~Whether ~~interest~~a ~~entities~~Restructuring ~~by focusing~~is ona ~~identifying~~Troubled ~~which~~Debt ~~enterprise~~Restructuring.” The provisions of ASU No. 2011-02 provide additional guidance related to determining whether a creditor has ~~the~~granted ~~power~~a concession, include factors and examples for creditors to ~~direct~~consider ~~the~~in ~~activities of~~evaluating whether a ~~variable~~restructuring ~~interest~~results ~~entity~~in a delay in payment that ~~most~~is ~~significantly~~insignificant, ~~impacts~~prohibits creditors from using the ~~entity~~borrower’s ~~economic~~ ~~performance~~effective ~~and~~rate ~~(1)~~test ~~the~~to ~~obligation~~evaluate towhether ~~absorb~~a ~~losses~~concession ofhas ~~the~~been ~~entity~~granted ~~or (2)~~ to the ~~right~~borrower, and add factors for creditors to ~~receive~~use ~~benefits~~in ~~from~~determining ~~the~~whether ~~entity~~a borrower is experiencing financial difficulties. ~~This~~A ~~guidance~~provision in ASU No. 2011-02 also ~~requires~~ ends the FASB’s deferral of the additional disclosures about ~~our~~troubled ~~involvement~~debt inrestructurings ~~variable~~as ~~interest entities~~required by ASU No. ~~This~~2010-20. ~~guidance~~The ~~was~~provisions of ASU No. 2011-02 will be effective for usthe onCompany’s ~~January~~reporting 1,period ~~2010~~ending September 30, ~~and~~2011. ~~did~~The adoption of ASU No. 2011-02 is not expected to have a ~~significant~~material impact on our ~~results~~consolidated offinancial ~~operations~~position or ~~financial position~~results of operations.

FAIR VALUE MEASUREMENT:

ASC ~~Topic~~ 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. We use various valuation techniques to determine fair value, including market, income and cost approaches. ASC 820 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 describes three levels of inputs that may be used to measure fair value:

Level 1: Quoted prices (unadjusted) of identical assets or liabilities in active markets that an entity has the ability to access as of the measurement date, or observable inputs.

Level 2: Significant other observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, and other inputs that are observable or can be corroborated by observable market data.

Level 3: Significant unobservable inputs that reflect an entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. When that occurs, we classify the fair value hierarchy on the lowest level of input that is significant to the fair value measurement. We used the following methods and significant assumptions to estimate fair value.

Securities: We determine the fair values of trading securities and securities available for sale in our investment portfolio by obtaining quoted prices on nationally recognized securities exchanges (Level 1) or matrix pricing, which is a mathematical technique used widely in the industry to value debt securities without relying exclusively on quoted prices for the specific securities, but rather by relying on the securities’ relationship to other benchmark quoted securities. Matrix pricing relies on the securities’ relationship to similarly traded securities, benchmark curves, and the benchmarking of like securities. Matrix pricing utilizes observable market inputs such as benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers, reference data, and industry and economic events and is considered Level 2. In instances where broker quotes are used, these quotes are obtained from market makers or broker-dealers recognized to be market participants. This valuation method is classified as Level 2 in the fair value hierarchy.

The markets for pooled collateralized debt obligations (CDOs) continue to reflect an overall lack of activity and observable transactions in the secondary and new issue markets for these securities. Those conditions are indicative of an illiquid market and transactions that do occur are not considered orderly. This led us to value our CDOs using both Level 2 and Level 3 inputs. The valuations for the single name issues continue to come from the brokers and are considered Level 2 ~~valuations~~. The ~~marks~~valuations for the pooled issues classified as available for sale were derived from a financial model and are considered Level 3 ~~valuations~~. The pricing for the pooled CDOs held for trading were derived from a broker and are considered Level 2 inputs.

When determining fair value, ASC 820 indicates that the ~~observable~~lowest ~~market~~available ~~data~~level should be used ~~to determine the lowest available level~~. It also provides guidance on determining fair value when a transaction is not considered orderly because the volume and level of activity have significantly decreased. In evaluating the fair value of our two PreTSL pooled CDOs, we determined that the market transactions for similar securities were disorderly. Therefore we priced our PreTSL pooled CDOs using the fair value generated from the cash flow analysis used as part of our review for other-than-temporary impairment. The cash flows include the deferrals and defaults associated with each security, along with anticipated deferrals, defaults and projected recoveries. This price is considered Level 3 pricing.

The effective discount rates are highly dependent upon the credit quality of the collateral, the relative position of the tranche in the capital structure of the CDO and the prepayment assumptions.

11The remaining four pooled CDOs are classified as trading. We utilized pricing from a broker that was considered to be Level 2. The broker provided us with actual prices if they had executed a trade for the same deal or if they had knowledge that another trader had traded the same deal. Otherwise they compared the structure of the pooled CDO with other CDOs exhibiting the same characteristics that had experienced recent trades.

~~The remaining~~Loans ~~four~~held ~~pooled~~for ~~CDOs~~sale: The ~~were~~fair ~~classified~~value asof ~~trading. We~~residential ~~utilized pricing~~mortgage ~~from~~loans aheld ~~broker~~for ~~that~~sale ~~was~~is ~~considered~~determined tousing bequoted ~~Level~~secondary-market 2prices. The ~~broker~~purchaser ~~provided~~provides us with ~~actual~~a ~~prices~~commitment ifto ~~they~~purchase ~~had~~the ~~executed~~loan aat ~~trade~~the ~~for~~origination ~~the~~price. ~~same~~Under ~~deal~~ASC or820, ifthis ~~they~~commitment ~~had knowledge~~is ~~that~~classified ~~another~~as ~~trader~~a ~~had~~Level ~~traded~~2 in the ~~same~~fair ~~deal~~value hierarchy. ~~Otherwise they~~ ~~compared~~If no such quoted price exists, the ~~structure~~fair value of these loans would be determined using quoted prices for a similar asset or assets, adjusted for the ~~pooled~~specific ~~CDO~~attributes of that loan. Loans held for sale associated with ~~other~~branch ~~CDOs~~transactions ~~exhibiting~~are presented at face value, which is substantially the same ~~characteristics~~as the value in the transaction. Loans held for sale at March 31, 2010, included $106,704 of loans that we had ~~experienced~~expected ~~recent~~to ~~trades~~sell in branch divestiture transactions during 2010.

~~Loans~~Derivatives: ~~held~~Our ~~for~~derivative ~~sale: The~~instruments ~~fair value~~consist of ~~residential~~over-the-counter ~~mortgage~~interest ~~loans~~rate ~~held~~swaps, ~~for~~interest ~~sale~~rate isfloors, ~~determined~~and ~~using~~mortgage ~~quoted secondary-market~~loan ~~prices~~interest locks that trade in liquid markets. The ~~purchaser~~fair ~~provides~~value usof ~~with~~our aderivative ~~commitment~~instruments tois ~~purchase the~~primarily ~~loan~~measured atby ~~the~~obtaining ~~origination~~pricing ~~price~~from broker-dealers recognized to be market participants. ~~Under~~ ~~ASC~~On ~~820,~~those ~~this~~occasions ~~commitment~~that broker-dealer pricing is ~~classified~~ asnot aavailable, ~~Level~~pricing 2is inobtained using the ~~fair~~Bloomberg ~~value hierarchy~~system. If noThe ~~such quoted~~pricing ~~price~~is ~~exists,~~derived ~~the~~from ~~fair~~market ~~value~~observable ofinputs ~~these~~that ~~loans~~can ~~would~~generally be ~~determined~~verified ~~using quoted~~and ~~prices~~do ~~for~~not atypically ~~similar~~involve ~~asset~~significant orjudgment ~~assets,~~by ~~adjusted~~us. ~~for~~This ~~the~~valuation ~~specific attributes~~method ofis ~~that~~classified ~~loan~~as Level 2 in the fair value hierarchy.

Derivatives: Our derivative instruments consist of over-the-counter interest rate swaps and mortgage loan interest locks that trade in liquid markets. The fair value of our derivative instruments is primarily measured by obtaining pricing from broker-dealers recognized to be market participants. On those occasions when broker-dealer pricing is not available, pricing is obtained using the Bloomberg system. The pricing is derived from market observable inputs that can generally be verified and do not typically involve significant judgment by us. This valuation method is classified as Level 2 in the fair value hierarchy.

Impaired Loans: Impaired loans are evaluated at the time full payment under the loan terms is not expected. If a loan is impaired, a portion of the allowance for loan losses is allocated so that the loan is reported, net, at the present value of estimated cash flows using the loan’s existing rate or at the fair value of the collateral, if the loan is collateral dependent. Fair value is measured based on the value of the collateral securing these loans, is classified as Level 3 in the fair value hierarchy and is determined using several methods. Generally, the fair value of real estate is determined based on appraisals by qualified licensed appraisers. If an appraisal is not available, the fair value may be determined by using a cash flow analysis, a broker’s opinion of value, the net present value of future cash flows, or an observable market price from an active market. Fair value on non-real estate loans is determined using similar methods. In addition, business equipment may be valued by using the net book value from the business’s financial statements. Impaired loans are evaluated quarterly for additional impairment.

Other Real Estate Owned: Other real estate owned is evaluated at the time a property is acquired through foreclosure or shortly thereafter. Fair value is based on appraisals by qualified licensed appraisers and is classified as Level 3.

Premises and equipment held for sale: Premises and equipment held for sale are evaluated at the time the property is deemed as held for sale. Fair value is based on appraisals by qualified licensed appraisers and is classified as Level 3 input. On occasion, when an appraisal is not performed, fair value is based on sales offers received from potential buyers. Premises and equipment held for sale at March 31, 2010, included $4,554 of premises and equipment that were expected to be sold in probable branch divestitures.

Deposits held for sale: The fair value of deposits held for sale is based on the actual purchase price as agreed upon between Integra Bank and the purchaser. Because this transaction occurs in an orderly transaction between market participants, the fair value qualifies as a Level 2 fair value. Deposits held for sale at March 31, 2010, included $100,047 of deposits that we had expected to be transferred in branch divestiture transactions during 2010.

Assets and liabilities measured at fair value on a recurring basis are summarized below.

March 31, 2011
	Quoted Prices
	in Active
	Markets for		Significant
	Identical		Other		Significant
	Assets and		Observable		Unobservable
	Liabilities		Inputs		Inputs		Balance as of
	(Level 1)		(Level 2)		(Level 3)		March 31, 2011
Assets
Securities, available for sale
U.S. Treasuries	$	-	$	18,637	$	-	$	18,637
U.S. Government agencies		-		105		-		105
Collateralized mortgage obligations:
Agency		-		238,190		-		238,190
Private Label		-		15,142		-		15,142
Mortgage backed securities: residential		-		201,151		-		201,151
Trust Preferred		-		10,599		1,042		11,641
State & political subdivisions		-		20,945		-		20,945
Other securities		-		8,656		-		8,656
Total securities, available for sale	$	-	$	513,425	$	1,042	$	514,467

Securities, held for trading
Trust Preferred	$	-	$	421	$	-	$	421

Derivatives		-		5,895		-		5,895

Liabilities
Derivatives	$	-	$	6,145	$	-	$	6,145

Fair Value Measurements at September 30, 2010

December 31, 2010

Quoted Prices

in Active

Markets for

Significant

Identical

Other

Significant

Assets and

Observable

Unobservable

~~Balance as of~~

Liabilities

Inputs

~~September~~Balance ~~30,~~as of

(Level 1)

(Level 2)

(Level 3)

December 31, 2010

Assets

Securities, available for sale

U.S. Treasuries

18,~~439~~739

U.S. Government agencies

~~131~~106

Collateralized mortgage obligations:

Agency

~~249~~250,~~259~~057

Private Label

1816,~~104~~155

Mortgage backed securities: residential

~~216~~202,~~367~~752

Trust Preferred

9,~~451~~776

~~968~~973

10,~~419~~749

State & political subdivisions

2321,~~110~~679

Other securities

8,~~730~~667

Total securities, available for sale

~~543~~527,~~591~~931

~~968~~973

~~544~~528,~~559~~904

Securities, held for trading

Trust Preferred

~~148~~329

Derivatives

97,~~074~~018

Liabilities

Derivatives

97,~~088~~008

	Fair Value Measurements at December 31, 2009
	Quoted Prices
	in Active
	Markets for		Significant
	Identical		Other		Significant
	Assets and		Observable		Unobservable		Balance as of
	Liabilities		Inputs		Inputs		December 31,
	(Level 1)		(Level 2)		(Level 3)		2009
Assets
Securities, available for sale
U.S. Treasuries	$	-	$	8,833	$	-	$	8,833
U.S. Government agencies		-		279		-		279
Collateralized mortgage obligations:
Agency				118,431				118,431
Private Label		-		23,229		-		23,229
Mortgage backed securities: residential				167,232				167,232
Trust Preferred		-		8,450		1,588		10,038
State & political subdivisions		-		25,040		-		25,040
Other securities		-		8,637				8,637
Total securities, available for sale	$	-	$	360,131	$	1,588	$	361,719
Securities, held for trading
Trust Preferred	$	-	$	36	$	-	$	36
Derivatives		-		5,945		-		5,945
Liabilities
Derivatives	$	-	$	6,307	$	-	$	6,307

Assets and Liabilities Measured on a Non-Recurring Basis:

Assets and liabilities measured at fair value on a non-recurring basis are summarized below.

	Fair Value Measurements at September 30, 2010
	Fair Value Measurements at March 31, 2011
	Quoted Prices
	in Active
	Markets for		Significant
	Identical		Other		Significant
	Assets and		Observable		Unobservable		~~Balance as of~~
	Liabilities		Inputs		Inputs		~~September~~Balance ~~30,~~as of
	(Level 1)		(Level 2)		(Level 3)		~~2010~~March 31, 2011
Assets
Impaired loans	$	-	$	-	$	~~184,026~~	$	~~184,026~~
Loans held for sale		-		4,148		-		4,148
Commercial	$	-	$	-	$	21,306	$	21,306
Other real estate owned		-		-		34,814		34,814
Commercial real estate		-		-		131,867		131,867
Premises and equipment held for sale		-		-		3,134		3,134
Residential mortgage		-		-		430		430
Liabilities
Home equity		-		-		691		691
Deposits held for sale	$	-	$	-	$	-	$	-
Consumer		-		-		252		252
Total impaired loans		-		-		154,546		154,546
Loans held for sale		-		989		-		989
Other real estate owned
Commercial		-		-		1,224		1,224
Commercial real estate		-		-		46,685		46,685
Residential mortgage		-		-		777		777
Home equity		-		-		15		15
Consumer		-		-		-		-
Total other real estate owned		-		-		48,701		48,701
Premises and equipment held for sale		-		-		1,387		1,387

	Fair Value Measurements at December 31, 2010
	Quoted Prices
	in Active
	Markets for		Significant
	Identical		Other		Significant
	Assets and		Observable		Unobservable
	Liabilities		Inputs		Inputs		Balance as of
	(Level 1)		(Level 2)		(Level 3)		December 31, 2010
Assets
Impaired loans
Commercial	$	-	$	-	$	22,113	$	22,113
Commercial real estate		-		-		140,262		140,262
Residential mortgage		-		-		410		410
Home equity		-		-		989		989
Consumer		-		-		249		249
Total impaired loans		-		-		164,023		164,023
Loans held for sale		-		1,899		-		1,899
Other real estate owned
Commercial		-		-		973		973
Commercial real estate		-		-		47,470		47,470
Residential mortgage		-		-		765		765
Home equity		-		-		30		30
Consumer		-		-		-		-
Total other real estate owned		-		-		49,238		49,238
Premises and equipment held for sale		-		-		1,387		1,387

At March 31, 2011, impaired loans with specific reserves, which are measured for impairment using the fair value of the collateral for collateral dependent loans, had a carrying amount of $193,737, with a valuation allowance of $39,191, resulting in an additional provision for loan losses of $13,380 for the period. At December 31, 2010, impaired loans with a specific reserve had a carrying amount of $199,008, with a valuation allowance of $34,985. For those properties held in other real estate owned and carried at fair value, writedowns of $1,871 were charged to earnings in the first quarter of 2011 compared to $396 in the first quarter of 2010.

The following tables present a reconciliation of all assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the quarters ending March 31, 2011, and 2010.

	Fair Value Measurements Using Significant
	Unobservable Inputs (Level 3)
	Securities
	Available for sale		Total

Beginning Balance at January 1, 2011	$	973	$	973
Transfers in and/or out of Level 3		-		-
Gains (Losses) included in other comprehensive income		69		69
Gains (Losses) included in earnings		-		-
Ending Balance at March 31, 2011	$	1,042	$	1,042

	Fair Value Measurements at December 31, 2009
	Fair Value Measurements Using Significant
	Quoted Prices
	Unobservable Inputs (Level 3)
	in Active
	Securities
	Markets for			Significant
	Available for sale			Total
	Identical			Other			Significant
Beginning Balance at January 1, 2010	$	1,588		$	1,588
	Assets and			Observable			Unobservable		Balance as of
Transfers in and/or out of Level 3		-			-
	Liabilities			Inputs			Inputs		December 31,
Gains (Losses) included in other comprehensive income		138			138
	(Level 1)			(Level 2)			(Level 3)		2009
Gains (Losses) included in earnings		(210	)		(210	)
Assets
Ending Balance at March 31, 2010	$	1,516		$	1,516
Impaired loans	$	-		$	-		$	92,715	$	92,715
Loans held for sale		-			93,572			-		93,572
Other real estate owned		-			-			29,317		29,317
Premises and equipment held for sale		-			-			4,249		4,249
Liabilities
Deposits held for sale	$	-		$	97,207		$	-	$	97,207

~~At September~~Unrealized ~~30,~~gains ~~2010,~~and ~~impaired~~losses ~~loans~~for ~~with~~securities ~~specific~~classified ~~reserves,~~as ~~which~~available ~~are measured~~ for ~~impairment~~sale ~~using~~are ~~the~~generally ~~fair~~not ~~value~~recorded ofin ~~the~~earnings. ~~collateral for collateral dependent loans~~However, ~~had~~during athe ~~carrying~~first ~~amount~~quarter of ~~$223~~2010,~~462,~~ ~~with~~impairment acharges ~~valuation allowance~~ of $~~39,436, resulting~~210 inwere ancharged ~~additional~~against ~~provision~~some ~~for loan losses~~ of ~~$13,559~~our ~~for~~pooled ~~the~~trust ~~three month~~preferred ~~period and $43,356 for the nine month period ended September 30, 2010~~CDOs.

~~For~~The ~~those properties~~carrying ~~held~~amounts ~~in other real estate owned~~ and ~~carried~~estimated at fair ~~value,~~values ~~writedowns~~ of ~~$4,537~~financial ~~and~~instruments ~~$5,015~~not ~~were~~previously ~~charged~~presented, toat ~~earnings~~March ~~for~~31, ~~the~~2011, ~~three~~ and ~~nine~~December ~~months ended September 30~~31, 2010, ~~compared~~are toas ~~$2,148 and $2,630 for both the three and nine months ended September 30, 2009.~~follows:

The following table presents a reconciliation of all assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three and nine month periods ending September 30, 2010.

	March 31, 2011				December 31, 2010
	Carrying		Fair		Carrying		Fair
	Amount		Value		Amount		Value

Financial Assets:
Cash and short-term investments	$	344,807	$	344,807	$	486,812	$	486,812
Loans-net of allowance		1,016,582		1,013,482		1,089,680		1,090,884
Accrued interest receivable		7,061		7,061		7,561		7,561

Financial Liabilities:
Deposits	$	1,849,439	$	1,865,403	$	1,989,879	$	2,009,837
Short-term borrowings		21,526		21,526		59,893		59,893
Long-term borrowings		335,528		336,447		347,847		352,149
Accrued interest payable		8,280		8,280		8,710		8,710

	Fair Value Measurements Using Significant
	Unobservable Inputs (Level 3)
	Securities
	Available for sale			Total
Three months ended September 30, 2010
Beginning Balance at July 1, 2010	$	1,523		$	1,523
Transfers in and/or out of Level 3		-			-
Gains (Losses) included in other comprehensive income		30			30
Gains (Losses) included in earnings		(585	)		(585	)
Ending Balance	$	968		$	968

	Fair Value Measurements Using Significant
	Unobservable Inputs (Level 3)
	Securities
	Available for sale			Total
Nine months ended September 30, 2010
Beginning Balance at January 1, 2010	$	1,588		$	1,588
Transfers in and/or out of Level 3		-			-
Gains (Losses) included in other comprehensive income		175			175
Gains (Losses) included in earnings		(795	)		(795	)
Ending Balance	$	968		$	968

Unrealized gains and losses for securities classified as available for sale are generally not recorded in earnings. However, during the three and nine months ended September 30, 2010, impairment charges of $585 and $795 were charged to earnings for two of our trust preferred securities.

The carrying amounts and estimated fair values of financial instruments, at September 30, 2010 and December 31, 2009 are as follows:

	September 30, 2010				December 31, 2009
	Carrying		Fair		Carrying		Fair
	Amount		Value		Amount		Value
Financial Assets:
Cash and short-term investments	$	550,631	$	550,631	$	354,574	$	354,574
Loans-net of allowance		1,177,402		1,190,249		1,838,347		1,840,053
Accrued interest receivable		8,041		8,041		9,336		9,336
Financial Liabilities:
Deposits	$	2,152,570	$	2,180,997	$	2,267,899	$	2,288,866
Short-term borrowings		55,841		55,841		62,114		62,114
Long-term borrowings		348,161		353,441		361,071		362,271
Accrued interest payable		8,114		8,114		8,200		8,200

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 of our assets and liabilities and should not be interpreted to represent our market or liquidation value.

Carrying amount is the estimated fair value for cash and short-term investments, accrued interest receivable and payable, deposits without defined maturities and short-term debt. The fair value of loans is estimated in accordance with ASC Topic 825, “Financial Instruments”, by discounting expected future cash flows using market rates of like maturity. For time deposits, fair value is based on discounted cash flows using current market rates applied to the estimated life. Fair value of debt is based on current rates for similar financing. It ~~was~~is not practicable to determine the fair value of regulatory stock due to restrictions placed on its transferability. The fair value of off-balance-sheet items is not considered material.

STOCK OPTION PLAN AND AWARDS

InThe ~~April 2007, our shareholders approved the~~ Integra Bank Corporation 2007 Equity Incentive Plan (the “2007 Plan”) ~~which~~reserves ~~reserved~~ 600,000 shares of common stock for issuance as incentive awards to directors and key employees. Awards may include incentive stock options, non-qualified stock options, restricted shares, performance shares, performance units or stock appreciation rights (SARs). All options granted under the 2007 Plan, or any predecessor stock-based incentive plans (the “Prior Plans”), have a termination period of ten years from 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. Upon the adoption of the 2007 Plan, no additional awards ~~were~~could have been granted under the Prior Plans. In April 2009, our shareholders approved an amendment to the 2007 Plan that increased the number of shares available under the plan to 1,000,000 shares. At ~~September~~March 3031, ~~2010~~2011, there were ~~416~~442,~~857~~585 shares available for the granting of additional awards under the 2007 Plan.

A summary of the status of the options or SARs granted under the 2007 Plan and Prior Plans as of ~~September~~March 3031, ~~2010~~2011, and changes during the year is presented below:

	September 30, 2010
						Weighted Average
				Weighted Average		Remaining Term
	Shares			Exercise Price		(In years)
Options/SARs outstanding at December 31, 2009		1,099,536		$	20.52
Options/SARs granted		-			-
Options/SARs exercised		-			-
Options/SARs forfeited/expired		(617,893	)		20.45
Options/SARs outstanding at September 30, 2010		481,643		$	20.60		4.5
Options/SARs exercisable at September 30, 2010		471,250		$	20.66		4.5

	March 31, 2011
						Weighted Average
				Weighted Average		Remaining Term
	Shares			Exercise Price		(In years)

Options/SARs outstanding at December 31, 2010		375,993		$	20.58
Options/SARs granted		-			-
Options/SARs exercised		-			-
Options/SARs forfeited/expired		(11,000	)		24.52

Options/SARs outstanding at March 31, 2011		364,993		$	20.46		4.1

Options/SARs exercisable at March 31, 2011		355,225		$	20.52		4.0

The options and SARs outstanding at March 31, 2011, had a weighted average remaining term of 4.1 years with no aggregate intrinsic value, while the options and SARs that were exercisable at March 31, 2010, had a weighted average remaining term of 4.0 years and no aggregate intrinsic value. As of March 31, 2011, there was $4 of total unrecognized compensation cost related to the stock options and SARs. The cost is expected to be recognized over a weighted-average period of less than one year. Compensation expense for options and SARs for the three months ended March 31, 2011, and 2010 was $6, and $10, respectively.

A summary of the status of the restricted stock awards outstanding as of March 31, 2011 and changes during the first three months of 2011 is presented below:

				Weighted-Average
				Grant-Date
	Shares			Fair Value

Restricted shares outstanding, December 31, 2010		377,737		$	1.46
Shares granted		-
Shares vested		(500	)
Shares forfeited		(7,645	)

Restricted shares outstanding, March 31, 2011		369,592			1.41

We record the fair value of restricted stock awards, net of estimated forfeitures, and an offsetting deferred compensation amount within stockholders’ equity for unvested restricted stock. As of March 31, 2011, there was $198 of total unrecognized compensation cost related to the nonvested restricted stock. The cost is expected to be recognized over a weighted-average period of 2.2 years. Compensation expense for restricted stock for the three months ended March 31, 2011, and 2010 was $91, and $94, respectively.

We have not paid any cash dividends on restricted stock awards since we began participating in the Capital Purchase Program of the U.S. Department of the Treasury (CPP). Our participation in this program imposes additional vesting restrictions on shares held by any of our five most-highly compensated employees. These restricted shares vest over time; however, they are also subject to restrictions on transferability under the CPP.

NOTE 2. GOING CONCERN

These consolidated financial statements have been prepared assuming the Company will continue as a going concern. We reported total losses attributable to common shareholders of $430,078 for 2008 through 2010 and a loss of $47,339 in the first quarter of 2011. Since May 2009, we and the Bank have been subject to a number of enforcement actions and other requirements imposed by federal banking regulators.

The Bank is subject to a formal agreement with the OCC that requires the Bank to reduce its non-performing assets and improve earnings. The Bank also is subject to a Capital Directive from the OCC directing it to increase and maintain its Total Risk-Based Capital Ratio to at least 11.5% and its Tier 1 Leverage Ratio to at least 8%. We are subject to a written agreement with the Federal Reserve Bank of St. Louis which requires us to use our financial and managerial resources to assist the Bank in complying with its regulatory obligations and prohibits us from paying dividends on our stock or interest on our debt securities.

As of December 31, 2010, the Bank’s regulatory capital declined below the levels required to remain in the “adequately capitalized” category for purposes of the Prompt Corrective Actions (“PCA”) regulations of the OCC and so was considered to be in the "undercapitalized" capital category of such regulations, subjecting it to restrictions on payment of capital distributions and management fees, asset growth and on certain expansionary activities, including acquisitions, new branches and new lines of business. The Bank also could no longer accept certain types of employee benefit plan deposits. The Bank was also required to submit an acceptable capital restoration plan (“CRP”) to the OCC describing, among other things, how the Bank would become “adequately capitalized” for purposes of the PCA regulations of the OCC.

~~The options~~In ~~and~~April, ~~SARs~~the ~~outstanding~~Bank atwas ~~September~~notified ~~30,~~that ~~2010,~~the ~~had~~CRP ait ~~weighted~~had ~~average remaining~~filed ~~term~~was ofnot ~~4.5~~accepted ~~years~~by ~~with~~the noOCC. ~~aggregate~~As ~~intrinsic~~a ~~value~~result, ~~and~~under the ~~options and~~PCA ~~SARs~~regulations, ~~that~~the ~~were~~Bank ~~exercisable~~was atthen ~~September~~considered ~~30,~~as ~~2010,~~being ~~had~~within athe ~~weighted~~“significantly ~~average remaining~~undercapitalized” ~~term~~capital ofcategory ~~4.5~~under ~~years~~the ~~and~~PCA noregulations ~~aggregate~~of ~~intrinsic~~the ~~value~~OCC. As ~~of September 30~~such, ~~2010,~~the ~~there~~Bank ~~was~~became ~~$24~~subject ofto ~~total~~additional ~~unrecognized~~restrictions ~~compensation~~and ~~cost related~~requirements tounder the ~~stock~~federal ~~options~~banking ~~and~~laws, ~~SARs. The~~including ~~cost~~restrictions ison ~~expected~~bonuses toand ~~be recognized~~compensation ~~over~~paid ato ~~weighted-average~~senior ~~period~~executive ofofficers ~~less~~and ~~than~~restrictions ~~one year. Compensation~~on ~~expense~~the ~~for~~payment ~~options~~of capital distributions and ~~SARs~~management ~~for~~fees. ~~the~~The ~~three~~Bank ~~and nine~~can ~~months~~submit ~~ended~~a ~~September~~revised ~~30,~~CRP ~~2010,~~if ~~was~~it ~~$19~~can ~~and~~produce ~~$38,~~a ~~compared~~specific torecapitalization ~~$51~~plan ~~and~~that ~~$289 for~~includes ~~the~~binding ~~three~~commitments ~~and~~or ~~nine~~definitive ~~months~~agreements ~~ended~~for ~~September~~the ~~30,~~needed ~~2009~~capital.

AOn ~~summary~~ April 30, 2011, the Bank filed its call report as of March 31, 2011, indicating that its regulatory capital fell below the ~~status~~levels required for it to remain in the “significantly undercapitalized” capital category under the PCA regulations of the ~~restricted~~OCC. ~~stock~~The ~~granted~~Bank now expects it will be notified by usthe asOCC that it is considered to be in the “critically undercapitalized” capital category for purposes of ~~September~~the 30PCA regulations. Banks that are in the “critically undercapitalized” capital category are subject to additional restrictions on their activities by the Federal Deposit Insurance Corporation (“FDIC”). At a minimum, ~~2010~~the FDIC is required to prohibit critically undercapitalized banks from entering into any material transaction outside the normal course of business, ~~and~~ ~~changes~~extending ~~during~~credit for any highly leveraged transaction, amending the ~~first~~bank’s charter or bylaws, ~~second~~making any material change in accounting methods, engaging in any covered transaction, paying excessive compensation or bonuses and ~~third~~paying ~~quarters~~interest on new and renewed liabilities at a rate that would increase the institution’s weighted average cost of ~~2010~~funds isto ~~presented below:~~a rate significantly exceeding the prevailing market rate on insured deposits. In addition, the Federal Deposit Insurance Corporation Improvement Act of 1991 (“FDICIA”) requires the primary federal banking regulator of a critically undercapitalized institution to act within 90 days by either appointing a receiver for the institution or taking such other action that the regulator determines would better achieve the purposes of FDICIA.

				Weighted-Average
				Grant-Date
	Shares			Fair Value
Restricted shares outstanding, December 31, 2009		226,113		$	4.94
Shares granted		288,000		$	0.76
Shares vested		(54,632	)
Shares forfeited		(68,061	)
Restricted shares outstanding, September 30, 2010		391,420		$	1.54

We have been pursuing numerous alternatives to recapitalize the Bank since the third quarter of 2009. We engaged an investment banking firm with expertise in the financial services sector to assist with a review of all strategic opportunities available to us. During the past year, we have held discussions with, and due diligence has been undertaken by, numerous prospective investors; however, we have not achieved our goal of reaching a definitive agreement to recapitalize the Bank.

WeOur ~~record the~~efforts ~~fair~~to ~~value~~raise capital have been adversely impacted by our capital structure which includes subordinated debt obligations of ~~restricted~~$99,054 and the Treasury preferred stock ~~grants,~~with ~~net~~a liquidation preference of ~~estimated~~$83,586 ~~forfeitures~~at March 31, ~~and~~2011. ~~an offsetting~~These ~~deferred~~obligations ~~compensation~~rank ~~amount~~senior ~~within~~to ~~stockholders’~~the ~~equity~~right ~~for~~of ~~unvested restricted~~holders of our common stock. As Any investor in or purchaser of ~~September~~the ~~30,~~Company ~~2010,~~would ~~there~~effectively ~~was~~assume ~~$459~~the ofoutstanding ~~total unrecognized~~liability ~~compensation~~on ~~cost~~the ~~related~~debt and be required to repay or restructure the ~~nonvested~~Treasury ~~restricted~~ preferred stock~~. The~~ ~~cost~~in isaddition ~~expected~~ to bethe ~~recognized~~amount ~~over~~of afunds ~~weighted-average period~~such ofinvestors ~~1.8~~or ~~years. Compensation~~purchaser ~~expense~~would ~~for~~need ~~restricted~~to ~~stock~~recapitalize ~~for~~ the ~~three~~Bank. ~~and~~We ~~nine~~intend ~~months~~to ~~ended~~continue ~~September~~to ~~30,~~pursue ~~2010,~~all ~~was~~available ~~$131~~alternatives ~~and~~to ~~$311~~effect a recapitalization of the Bank. As of March 31, ~~compared to~~2011, ~~$190~~the ~~and~~additional ~~$689~~amount ~~for~~of capital required to bring the ~~three~~Bank ~~and~~into ~~nine~~compliance ~~months~~with ~~ended~~the ~~September~~Capital 30Directive was $144, ~~2009~~347.

InWe ~~April 2009,~~believe ~~our~~that ~~shareholders~~the ~~approved~~Bank anretains ~~increase~~substantial infranchise ~~authorized~~value. ~~shares~~Despite ofthe ~~common~~restrictions ~~stock of~~under ~~100~~which the Bank has been operating,~~000~~ it has maintained adequate liquidity,~~000~~ ~~shares~~even while transitioning Indiana public fund deposits to other banks. If we do not enter into a definitive agreement to effect a recapitalization satisfactory to the OCC within the very near future, ~~bringing~~the ~~total~~OCC ~~authorized~~will ~~common~~be ~~shares~~required under FDICIA to ~~129~~ appoint the FDIC as receiver for the Bank,~~000~~ unless such action would not achieve the purpose of the PCA regulations. In such event,~~000~~ we expect that the Company would file for bankruptcy.

~~NOTE 2~~On April 11, 2011, we announced that the Bank had entered into definitive agreements with Old National Trust Company (ONTC) whereby ONTC will acquire the Bank’s Wealth Management and Trust business. ~~EARNINGS~~ONTC ~~PER~~will ~~SHARE~~acquire the business for $1,250 in cash. Pending the sale, ONTC also agreed to provide operational assistance to Integra Bank in its wealth management and trust activities.

~~Basic earnings~~Our ~~per~~plans ~~share is computed by dividing net income (loss)~~ for the ~~year~~second byquarter ~~the weighted average number~~ of ~~shares~~2011 ~~outstanding.~~include ~~Diluted earnings per share is computed as above, adjusted for~~ the ~~dilutive effects of stock options, SARs, and restricted stock.~~following:

~~The following~~· ~~provides~~Pursue aall ~~reconciliation~~available ofstrategies ~~basic~~to ~~and~~obtain ~~diluted~~an ~~earnings~~acceptable ~~per share:~~commitment to recapitalize the Bank;

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2010			2009			2010			2009
Net income (loss)	$	(16,154	)	$	(19,735	)	$	(77,977	)	$	(96,260	)
Preferred dividends and discount accretion		(1,133	)		(1,117	)		(3,394	)		(2,669	)
Net income (loss) available to common shareholders	$	(17,287	)	$	(20,852	)	$	(81,371	)	$	(98,929	)
Weighted average common shares outstanding - Basic		20,685,578			20,706,560			20,671,885			20,713,301
Incremental shares related to stock compensation		-			-			-			-
Average common shares outstanding - Diluted		20,685,578			20,706,560			20,671,885			20,713,301
Earnings (Loss) per common share - Basic	$	(0.84	)	$	(1.01	)	$	(3.94	)	$	(4.78	)
Effect of incremental shares related to stock compensation		-			-			-			-
Earnings (Loss) per common share - Diluted	$	(0.84	)	$	(1.01	)	$	(3.94	)	$	(4.78	)

Continue to serve our community banking customers in our core market area and take all available actions necessary to ensure the safety of their deposits;

~~Options to~~· ~~purchase~~Continue ~~481,643~~to ~~shares~~reduce ~~and~~non-performing ~~1,246,466~~assets ~~shares were outstanding at September 30, 2010~~ and ~~2009,~~our ~~respectively,~~overall ~~and~~credit were not included in the computation of net income per diluted share in both periods because the exercise price of these options was greater than the average market price of the common shares, and therefore antidilutive and also because of the net loss in both years.exposure;

Continue to reduce our concentration in CRE credit exposure by obtaining paydowns and payoffs; and

Make continual adjustments to increase profitability.

~~On February 27,~~These ~~2009,~~events ~~the~~and ~~Treasury~~uncertainties ~~Department~~raise ~~invested~~substantial ~~$83,586~~doubt inabout ~~us as part of~~ the ~~Capital~~Company’s ~~Purchase~~ability ~~Plan (CPP). We issued~~ to ~~the~~continue ~~Treasury Department~~as ~~83,586 shares of Fixed Rate Cumulative Perpetual Preferred Stock, Series B, or Treasury Preferred Stock, having~~ a ~~liquidation~~going ~~amount~~concern. ~~per share~~The ofconsolidated ~~$1,000,~~financial ~~and~~statements ado ~~warrant, or Warrant, to purchase up to 7,418,876 shares, or Warrant Shares, of our common stock, at an initial per share exercise price of $1.69. The Warrant was~~ not ~~included~~include inany ~~the~~adjustments ~~computation~~that ofmight ~~net income~~result ~~per~~from ~~diluted share in both periods because~~ the ~~exercise~~outcome ~~price~~ of these ~~shares~~ ~~was greater than the average market price of the common shares, and therefore antidilutive and also because of the net loss~~uncertainties.

NOTE 3. ~~SECURITIES~~EARNINGS/(LOSS) PER SHARE

~~At September~~Basic 30earnings 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, ~~2010~~adjusted for the dilutive effects of stock options, SARs, and restricted stock. Weighted average shares of common stock have been increased for the ~~majority~~assumed exercise of ~~securities~~stock inoptions ~~our~~and ~~investment~~SARs ~~portfolio~~with ~~were classified~~proceeds asused ~~available~~to purchase treasury stock at the average market price for ~~sale~~the period.

~~Trading securities~~The atfollowing ~~September~~provides ~~30,~~a ~~2010,~~reconciliation ~~consisted~~ of ~~four~~basic ~~trust~~and ~~preferred~~diluted securities valued at $148, compared to $36 at December 31, 2009. During the third quarter of 2010, we recorded trading gains of $87, compared to trading loss of $1,237 during the third quarter of 2009. The net gain on trading activities included in earnings ~~for~~per ~~2010 was $111.~~share:

	Three Months Ended
	March 31,
	2011			2010

Net income (loss)	$	(46,206	)	$	(52,751	)
Preferred dividends and discount accretion		(1,133	)		(1,128	)
Net income (loss) available to common shareholders	$	(47,339	)	$	(53,879	)

Weighted average common shares outstanding - Basic		20,688,483			20,666,237
Incremental shares related to stock compensation		-			-
Average common shares outstanding - Diluted		20,688,483			20,666,237

Earnings (Loss) per common share - Basic	$	(2.29	)	$	(2.61	)
Effect of incremental shares related to stock compensation		-			-
Earnings (Loss) per common share - Diluted	$	(2.29	)	$	(2.61	)

Options to purchase 364,993 shares and 578,193 shares were outstanding at March 31, 2011, and 2010, respectively, and were not included in the computation of net income per diluted share in both periods because the exercise price of these options was greater than the average market price of the common shares, and therefore antidilutive and also, for the first quarter of 2011 and 2010, because of the net loss.

On February 27, 2009, the Treasury Department invested $83,586 in us as part of the Capital Purchase Plan (CPP). We issued to the Treasury Department 83,586 shares of Fixed Rate Cumulative Perpetual Preferred Stock, Series B (Treasury Preferred Stock), having a liquidation amount per share of $1,000, and a warrant (Treasury Warrant), to purchase up to 7,418,876 shares, or Warrant Shares, of our common stock, at an initial per share exercise price of $1.69. The Warrant was not included in the computation of net income per diluted share in both periods because the exercise price of these warrants was greater than the average market price of the common shares, and therefore, antidilutive and also because of the net loss.

NOTE 4. SECURITIES

At March 31, 2011, the majority of securities in our investment portfolio were classified as available for sale.

Trading securities at March 31, 2011, consist of four trust preferred securities valued at $421. During the first quarter of 2011, we recorded trading gains of $92, compared to $179 during the first quarter of 2010.

Amortized cost, fair value and the related gross unrealized gains and losses recognized in accumulated other comprehensive income (loss) of available for sale securities were as follows:

	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
September 30, 2010
U.S. Treasuries	$	17,928	$	511	$	-	$	18,439
U.S. Government agencies		126		5		-		131
Collateralized mortgage obligations:
Agency		246,142		3,383		266		249,259
Private label		18,627		6		529		18,104
Mortgage-backed securities - residential		212,592		4,071		296		216,367
Trust preferred		16,484		60		6,125		10,419
States & political subdivisions		21,359		1,751		-		23,110
Other securities		8,641		91		2		8,730
Total	$	541,899	$	9,878	$	7,218	$	544,559

			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
December 31, 2009
U.S. Treasuries	$	8,856	$	-	$	23	$	8,833
U.S. Government agencies		277		5		3		279
Collateralized mortgage obligations:
Agency		117,930		1,624		1,123		118,431
Private label		25,164		-		1,935		23,229
Mortgage-backed securities - residential		167,533		537		838		167,232
Trust preferred		17,238		10		7,210		10,038
States & political subdivisions		23,529		1,589		78		25,040
Other securities		8,640		-		3		8,637
Total	$	369,167	$	3,765	$	11,213	$	361,719

The amortized cost and fair value of the securities available for sale portfolio are shown by expected maturity. Expected maturities may differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties.

	September 30, 2010
			Gross		Gross
	Amortized		~~Fair~~Unrealized		Unrealized		Fair
	Cost		~~Value~~Gains		Losses		Value
Maturity
March 31, 2011
Available-for-sale
U.S. Treasuries	$	18,616	$	70	$	49	$	18,637
Within one year	$	3,860	$	3,884
U.S. Government agencies		100		5		-		105
One to five years		160,342		161,619
Collateralized mortgage obligations:
Five to ten years		265,630		270,783
Agency		238,388		744		942		238,190
Beyond ten years		112,067		108,273
Private label		15,591		-		449		15,142
Total	$	541,899	$	544,559
Mortgage-backed securities - residential		201,433		850		1,132		201,151
Trust preferred		16,207		108		4,674		11,641
States & political subdivisions		19,587		1,358		-		20,945
Other securities		8,641		17		2		8,656
Total	$	518,563	$	3,152	$	7,248	$	514,467

Available for sale securities with unrealized losses at September 30, 2010, aggregated by investment category and length of time the individual securities have been in a continuous unrealized loss position, are as follows:

			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
December 31, 2010
U.S. Treasuries	$	18,607	$	132	$	-	$	18,739
U.S. Government agencies		100		6		-		106
Collateralized mortgage obligations:
Agency		250,097		798		838		250,057
Private label		16,760		-		605		16,155
Mortgage-backed securities - residential		203,438		725		1,411		202,752
Trust preferred		16,193		59		5,503		10,749
States & political subdivisions		20,438		1,242		1		21,679
Other securities		8,641		28		2		8,667
Total	$	534,274	$	2,990	$	8,360	$	528,904

	Less than 12 Months				12 Months or More				Total
September 30, 2010	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Collateralized mortgage obligations:
Agency	$	58,575	$	266	$	-	$	-	$	58,575	$	266
Private Label		-		-		12,882		529		12,882		529
Mortgage-backed securities - residential		50,875		296		-		-		50,875		296
Trust Preferred		-		-		6,368		6,125		6,368		6,125
State & political subdivisions		-		-		-		-		-		-
Other securities		25		1		24		1		49		2
Total	$	109,475	$	563	$	19,274	$	6,655	$	128,749	$	7,218

	Less than 12 Months				12 Months or More				Total
	March 31, 2011
December 31, 2009	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
	Amortized		Fair
U.S. Treasuries	$	8,833	$	23	$	-	$	-	$	8,833	$	23
	Cost		Value
U.S. Government agencies		149		3		-		-		149		3
Maturity
Collateralized mortgage obligations:
Available-for-sale
Agency		59,198		1,123		-		-		59,198		1,123
Within one year	$	8,157	$	8,176
Private Label		-		-		23,229		1,935		23,229		1,935
One to five years		181,657		181,974
Mortgage-backed securities - residential		105,719		838		-		-		105,719		838
Five to ten years		191,236		191,493
Trust Preferred		602		123		5,436		7,087		6,038		7,210
Beyond ten years		137,513		132,824
State & political subdivisions		1,806		22		1,066		56		2,872		78
Total	$	518,563	$	514,467
Other securities		-		-		21		3		21		3
Total	$	176,307	$	2,132	$	29,752	$	9,081	$	206,059	$	11,213

~~Proceeds from~~Available ~~sales and calls of securities available~~ for sale ~~were~~securities ~~$125,248~~with ~~and~~unrealized ~~$308,258 for~~losses ~~the~~at ~~nine~~March ~~months ended September 30~~31, ~~2010 and 2009~~2011, ~~respectively.~~aggregated ~~Gross~~by ~~gains of~~investment ~~$3,351~~category and ~~$8,072~~length ~~and gross losses~~ of $2time ~~and~~the ~~$15~~individual ~~were~~securities ~~realized~~have onbeen ~~these~~in ~~sales and~~a ~~calls~~continuous ~~during~~unrealized ~~2010~~loss ~~and 2009~~position, ~~respectively.~~are as follows:

Proceeds from sales and calls of securities available for sale were $165 and $238,869 for the three months ended September 30, 2010 and 2009, respectively. Gross gains of $6,592 and gross losses of $15 were realized on these sales and calls during 2009.

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.

On a quarterly basis, we evaluate each security in our portfolio with an individual unrealized loss to determine if that loss represents other-than-temporary impairment. The factors we consider in evaluating the securities include whether the securities were guaranteed by the U.S. government or its agencies and the securities’ public ratings, if available, and how those two factors affect 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. We also review the payment performance, delinquency history and credit support of the underlying collateral for certain securities in our portfolio as part of our impairment analysis and review.

When other-than-temporary impairment occurs for debt securities, the amount of the other-than-temporary impairment recognized in earnings depends on whether an entity intends to sell the security or it is more likely than not it will be required to sell the security before recovery of its amortized cost basis, less any current-period credit loss. If we intend to sell or it is more likely than not we will be required to sell the security before recovery of its amortized cost basis, less any current-period credit loss, the other-than-temporary impairment shall be recognized in earnings equal to the entire difference between the investment’s amortized cost basis and its fair value at the balance sheet date. If we do not intend to sell the security, and it is not more likely than not that we would be required to sell the security before recovery of its amortized cost basis, less any current-period loss, the other-than-temporary impairment shall be separated into the amount representing the credit loss and the amount related to all other factors. The amount of the total other-than-temporary impairment related to other factors is recognized in other comprehensive income, net of applicable taxes. The previous amortized cost basis less the other-than-temporary impairment recognized in earnings becomes the new amortized cost basis of the investment.

	Less than 12 Months				12 Months or More				Total
March 31, 2011	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
U.S. Treasury securities	$	9,528	$	49	$	-	$	-	$	9,528	$	49
Collateralized mortgage obligations:
Agency		85,666		942		-		-		85,666		942
Private Label		3,925		41		11,217		408		15,142		449
Mortgage-backed securities - residential		115,515		1,132		-		-		115,515		1,132
Trust Preferred		-		-		7,542		4,674		7,542		4,674
State & political subdivisions		-		-		-		-		-		-
Other securities		-		-		24		2		24		2
Total	$	214,634	$	2,164	$	18,783	$	5,084	$	233,417	$	7,248

The ratings of our available for sale pooled trust preferred CDOs that have incurred other-than-temporary impairment are listed below. The ratings of our four single issue trust preferred securities and private label CMOs as of September 30, 2010 and June 30, 2010 are also listed below. The private label CMOs consist of six issues of which five were originated in 2003-2004 while one was originated in 2006.

	Less than 12 Months				12 Months or More				Total
December 31, 2010	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Collateralized mortgage obligations:
Agency	$	110,593	$	838	$	-	$	-	$	110,593	$	838
Private Label		4,509		17		11,646		588		16,155		605
Mortgage-backed securities - residential		126,749		1,411		-		-		126,749		1,411
Trust Preferred		-		-		6,699		5,503		6,699		5,503
State & political subdivisions		1,754		1		-		-		1,754		1
Other securities		-		-		24		2		24		2
Total	$	243,605	$	2,267	$	18,369	$	6,093	$	261,974	$	8,360

	Gross				Gross
	Amortized		Fair		Unrealized			Ratings as of
Issuer	Cost		Value		Gains/(Losses)			September 30, 2010	June 30, 2010
Pooled Trust Preferred CDOs
PreTSL VI		728		536		(192	)	Ca** (Moodys) / D (Fitch)*	Caa1 (Moodys) / CC (Fitch)
PreTSL XIV		1,757		432		(1,325	)	Ca (Moodys) /C (Fitch)	Ca (Moodys) /C (Fitch)
Total	$	2,485	$	968	$	(1,517	)
Single Issue Trust Preferred
Bank One Cap Tr VI (JP Morgan)		1,000		1,028		28		A2(Moodys)/A+(Fitch)*	A2(Moodys)
First Citizen Bancshares		5,008		2,000		(3,008	)	Non-Rated	Non-Rated
First Union Instit Cap I (Wells Fargo)		2,991		3,023		32		Baa2(Moodys)/A-(S&P)/A(Fitch)	Baa2(Moodys)/A-(S&P)/A(Fitch)
Sky Financial Cap Trust III (Huntington)		5,000		3,400		(1,600	)	B(S&P)	B(S&P)
Total	$	13,999	$	9,451	$	(4,548	)
Private Label CMOs
CWHL 2003-58 2A1		2,588		2,467		(121	)	Aaa/*-(Moodys)/AAA(S&P)	Aaa/-(Moodys)/AAA(S&P)
CMSI 2004-4 A2		207		255		48		AAA(S&P)/AAA(Fitch)	AAA(S&P)/AAA(Fitch)
GSR 2003-10 2A1		5,216		5,222		6		Aaa/*-(Moodys)/AAA(S&P)	Aaa/-(Moodys)/AAA(S&P)
RAST 2003-A15 1A1		4,044		3,931		(113	)	AAA(S&P)/AAA(Fitch)	AAA(S&P)/AAA(Fitch)
SASC 2003-31A 3A		4,962		4,712		(250	)	A1/*-(Moodys)/AAA(S&P)	A1/-(Moodys)/AAA(S&P)
WFMBS 2006-8 A13		1,610		1,517		(93	)	B2(Moodys)/B(Fitch)	B2(Moodys)*/B(Fitch)
Total	$	18,627	$	18,104	$	(523	)

Proceeds from sales and calls of securities available for sale were $509 and $540 for the three months ended March 31, 2011 and 2010, respectively. Gross losses of $2 were realized on the 2010 sales and calls.

~~The ratings~~We ~~above~~regularly ~~range~~review ~~from~~the ~~highly~~composition ~~speculative,~~of ~~defined~~our assecurities ~~equal~~portfolio, totaking orinto ~~below~~account ~~“Ca” per~~market ~~Moody’s and “CC” per Fitch and S&P~~risks, to the ~~highest~~current ~~credit~~and ~~quality defined~~expected asinterest ~~“Aaa”~~rate orenvironment, ~~“AAA”~~liquidity ~~per the aforementioned rating agencies~~needs, ~~respectively. Changes~~ toand ~~the~~our ~~ratings~~overall ~~that~~interest ~~occurred~~rate ~~during~~risk ~~the~~profile quarter are denoted with an * and ~~subsequent~~strategic changes are denoted with a **goals. ~~The *- indicates a negative watch.~~

~~Pooled~~On ~~Trust~~a ~~Preferred CDOs~~quarterly basis, we evaluate each security in our portfolio with an individual unrealized loss to determine if that loss represents other-than-temporary impairment. The factors we consider in evaluating the securities include whether the securities were guaranteed by the U.S. government or its agencies, the securities’ public ratings, if available, how those two factors affect 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. We also review the payment performance, delinquency history and credit support of the underlying collateral for certain securities in our portfolio as part of our impairment analysis and review.

~~We incorporated~~When ~~several~~other-than-temporary ~~factors~~impairment ~~into~~occurs, ~~our~~for ~~determination~~debt ofsecurities ~~whether~~ the ~~CDOs~~amount inof ~~our portfolio~~the ~~had incurred~~ other-than-temporary impairment, ~~including~~recognized ~~review~~in ~~of current~~earnings ~~defaults~~depends ~~and~~on ~~deferrals,~~whether an entity intends to sell the ~~likelihood~~security ~~that~~or ait ~~deferring~~is ~~issuer~~more likely than not it will ~~reinstate,~~ be required to sell the security before recovery ~~assumptions~~of onits ~~defaulted~~amortized ~~issuers~~cost basis, ~~expectations~~less ~~for~~any ~~future defaults~~current-period ~~and~~credit ~~deferrals~~loss. ~~and~~If we intend to sell or it is more likely than not we will be required to sell the ~~coupon~~security ~~rate~~before atrecovery of its amortized cost basis, less any current-period credit loss, the ~~issuer~~other-than-temporary ~~level~~impairment ~~compared~~shall be recognized in earnings equal to the ~~coupon~~ onentire difference between the ~~tranche. We~~investment’s ~~examined~~amortized cost basis and its fair value at the ~~trustee~~balance ~~reports~~sheet date. If we do not intend to ~~determine current~~sell ~~payment~~the ~~history~~security and ~~the~~it ~~structural~~is ~~support~~not more likely than not that ~~existed~~we ~~within~~would ~~the~~be ~~CDOs. We~~required ~~also~~to ~~reviewed~~sell ~~key~~the ~~financial~~security ~~characteristics~~before recovery of ~~each~~its ~~individual~~amortized ~~issuer~~cost inbasis ~~the pooled~~less ~~CDOs. Additionally~~any current-period loss, wethe ~~utilized~~other-than-temporary animpairment ~~internal~~shall ~~watch~~be ~~list~~separated ~~and near~~into ~~watch~~the ~~list~~amount ~~which~~representing isthe ~~updated~~credit loss and ~~reviewed~~the ~~quarterly. Changes~~amount ~~are compared~~related to all other factors. The amount of the ~~prior~~total ~~quarter~~other-than-temporary impairment related to ~~determine~~other ~~migration~~factors ~~patterns~~is ~~and direction. Our~~recognized ~~review~~in ~~analyzed~~other ~~capital~~comprehensive ~~ratios~~income, ~~leverage~~net ~~ratios, non-performing~~of ~~loan~~applicable ~~and~~taxes. ~~non~~The previous amortized cost basis less the other-~~performing~~than-temporary ~~asset~~impairment ~~ratios~~recognized in earnings becomes the new amortized cost basis of the investment.

WeThe ~~also utilize~~ratings aof ~~third~~our ~~party~~pooled ~~cash~~trust ~~flow~~preferred ~~analysis~~collateralized ~~that~~debt ~~compares~~obligations ~~the~~(CDOs), ~~present~~single ~~value~~issue ~~of expected~~trust ~~cash~~preferred ~~flows~~securities, toand ~~the~~private ~~previous~~label ~~estimate~~collateralized tomortgage ~~ensure~~obligations ~~there~~(CMOs) are nolisted ~~adverse changes~~below inas ~~cash~~of ~~flows~~March ~~during~~31, ~~the~~2011 ~~quarter. This analysis considers the structure~~ and ~~term~~at ofDecember ~~the~~31, ~~CDO and the financial condition of the underlying issuers~~2010. The ~~review~~trust ~~details~~preferred ~~the~~securities ~~interest~~consist ~~rates, principal balances~~ of ~~note~~ ~~classes~~two ~~and~~pooled ~~underlying~~trust ~~issuers,~~preferred ~~the~~CDOs ~~timing~~classified ~~and~~as ~~amount~~available offor ~~interest~~sale and ~~principal~~ ~~payments~~four ofpooled ~~the~~CDOs ~~underlying~~classified ~~issuers,~~as ~~and~~held ~~the~~for ~~allocation~~trading ofand ~~the~~four ~~payments to~~single ~~the~~name ~~note~~issues ~~classes~~listed below. The ~~current~~private ~~estimate~~label ofCMOs ~~expected~~consist ~~cash flows is based on the most recent trustee reports and any other relevant market information including subsequent announcements~~ of ~~interest~~five ~~payment~~remaining ~~deferrals~~issues ~~or defaults~~ of ~~underlying~~which ~~trust~~four ~~preferred~~were ~~securities. Assumptions~~originated ~~used~~ in ~~the~~2003-2004, ~~review~~while ~~include~~one ~~expected~~was ~~future~~originated ~~default~~in ~~rates and prepayments~~2006.

During the third quarter 2010, our review indicated additional other-than-temporary impairment had occurred on one of our available for sale pooled trust preferred securities. The PreTSL XIV security experienced additional credit deterioration during the third quarter 2010. The cash flow analysis for PreTSL XIV assumes a zero recoveries for those accounts in default and a 10 percent recovery, lagged for two years on deferrals. The report also assumes that an additional account totaling $6,000 has a 50 percent probability of defaulting prior to the next payment date. This report shows the present value of cash flows declined quarter over quarter. The cash flow analysis shows both the credit component and the non credit component declined during the third quarter of 2010. As part of the other-than-temporary impairment review for PreTSL VI, the cash flow analysis assumed a 10% recovery, lagged for two years for all issuers except for Bank Atlantic, which incorporates a 20% recovery lagged for two years. Based on the review of the third quarter 2010 cash flows for PreTSL VI, it shows the cash flow improved quarter-over-quarter, thus no additional impairment is required. The additional credit component of other-than-temporary impairment recorded in the third quarter 2010 is $585.

Ratings

Issuer	Ratings as of March 31, 2011	Ratings as of December 31, 2010
Pooled Trust Preferred CDOs (Amortized cost $2,213, fair value $1,042)
PreTSL VI	Ca (Moodys) / D (Fitch)	Ca (Moodys) / D (Fitch)
PreTSL XIV	Ca (Moodys) /C (Fitch)	Ca (Moodys) /C (Fitch)

Pooled Trust Preferred CDOs (Held For Trading)-Carried at fair value, $421
Alesco 10A C1	Ca (Moodys) / C (Fitch)	Ca (Moodys) / C (Fitch)
Trapeza 11A D1	C (Fitch)	C (Fitch)
Trapeza 12A D1	C (Fitch)	C (Fitch)
US Capital Funding	C (Moodys) / C (Fitch)	C (Moodys) / C (Fitch)

Single Issue Trust Preferred (Amortized cost $13,994, fair value $10,599)
Bank One Cap Tr VI (JP Morgan)	A2(Moodys) / A (Fitch)	A2(Moodys) / A (Fitch)
First Citizen Bancshare	Non-Rated	Non-Rated
First Union Instit Cap I (Wells Fargo)	Baa1(Moodys)/A-(S&P)/A(Fitch)	Baa1(Moodys)/A-(S&P)/A(Fitch)
Sky Financial Cap Trust III (Huntington)	BB-(S&P)	BB-(S&P)

Private Label CMOs (Amortized cost $15,591 fair value $15,142)
CWHL 2003-58 2A1	Aaa/*-(Moodys)/AAA(S&P)	Aaa/*-(Moodys)/AAA(S&P)
GSR 2003-10 2A1	Aaa/*-(Moodys)/AAA(S&P)	Aaa/*-(Moodys)/AAA(S&P)
RAST 2003-A15 1A1	AAA(S&P)/AAA(Fitch)	AAA(S&P)/AAA(Fitch)
SASC 2003-31A 3A	A3/(Moodys)/AAA(S&P)	A1/*-(Moodys)/AAA(S&P)
WFMBS 2006-8 A13	B2(Moodys)/B(Fitch)	B2(Moodys)/B(Fitch)

WeThe ~~did not~~ratings ~~recognize~~above ~~any~~range ~~impairment~~from ~~charges~~highly ~~during~~speculative, defined as equal to or below “Ca” per Moody’s and “CC” per Fitch and S&P, to the ~~third~~highest ~~quarter~~credit ~~of 2009~~quality defined as “Aaa” or “AAA” per the aforementioned rating agencies, respectively. The *- indicates a negative watch.

Pooled Trust Preferred CDOs

We incorporated several factors into our determination of whether the CDOs in our portfolio had incurred other-than-temporary impairment, including review of current defaults and deferrals, the likelihood that a deferring issuer will reinstate, recovery assumptions on defaulted issuers, expectations for future defaults and deferrals and the coupon rate at the issuer level compared to the coupon on the tranche. We examined the trustee reports to determine current payment history and the structural support that existed within the CDOs. We also reviewed key financial characteristics of each individual issuer in the pooled CDOs. Additionally, we utilized an internal watch list and near watch list which is updated and reviewed quarterly. Changes are compared to the prior quarter to determine migration patterns and direction. This review analyzed capital ratios, leverage ratios, non-performing loan and non-performing asset ratios. The overall credit review on PreTSL VI showed improvement as one of the issuers that was deferring cured their position. There were no additional deferrals reported for PreTSL XIV during the first quarter 2011.

We utilize a third party cash flow analysis that compares the present value of expected cash flows to the previous estimate to ensure there are no adverse changes in cash flows during the quarter. This analysis considers the structure and term of the CDO and the financial condition of the underlying issuers. The review details the interest rates, principal balances of note classes and underlying issuers, the timing and amount of interest and principal payments of the underlying issuers, and the allocation of the payments to the note classes. The current estimate of expected cash flows is based on the most recent trustee reports and any other relevant market information including announcements of interest payment deferrals or defaults of underlying trust preferred securities along with new capital raises that may indicate the potential to cure a financial institution’s deferral status. Assumptions used in the review include expected future default rates and prepayments. This review also incorporated the impact of the Dodd-Frank Act, which will prevent banks with total assets greater then $15 billion from using TRUPs as a component of regulatory capital. The cash flow analysis also incorporates future growth and consolidation in the financial service sector. The analysis of PreTSL VI assumed a 10 to 20% recovery lagged for two years on the remaining issuers. PreTSL XIV assumed a 10% recovery lagged for two years on defaults and treats all interest payment deferrals as defaults. We also used a model to stress these two pooled CDOs based on various degrees of severity to determine the degree to which assumptions could deteriorate before the CDO could no longer fully support repayment of our note class. Based on the March 31, 2011 analysis, the overall review indicates no additional other-than-temporary impairment has occurred for either PreTSL VI or PreTSL XIV.

During the first quarter of 2010, we experienced additional deferrals on both PreTSL VI and on PreTSL XIV. Based on the review of the first quarter 2010 cash flows, PreTSL VI incurred $9 of impairment that was attributed to credit while the remaining $35 was related to the non credit component. We concluded that for the first time other-than-temporary impairment had occurred for PreTSL XIV in the first quarter of 2010. The impairment amount included $201 that was attributed to credit while the remaining $1,385 was attributed to other factors and was considered the non credit component.

Single Issue Trust Preferred

With respect to our remaining single issuer trust preferred securities, we look at rating agency actions, payment history, the capital levels of the banks, and the financial performance as filed in regulatory reports. ~~Based on our third quarter 2010 review, we determined that all four securities were still performing and, as such, the $4,548 unrealized loss is temporary.~~

Based on the overall review of the single issuers, Sky Financial Cap Trust III (Huntington Bancshares “HBAN”) remains on our watch list given their recent past financial performance and ratings. These ratings continue to show improvement. Overall HBAN’s regulatory capital ratios continue to improve reducing their overall risk profile. We will continue to monitor this issuer but expect to see improvement in the price of this security.

The Dodd-Frank Act may have a positive impact on the default risk associated with our single issue Trust Preferred securities. Banks having assets greater than $15 billion will have an opportunity to redeem their Trust Preferred securities at face value as they will no longer qualify as tier 1 capital. TRUP CDOs may benefit from the reduction of default risk in their collateral portfolios; however, there is always the risk that the banks may not be able to obtain favorable refinancing terms.

As of March 31, 2011, our review indicates that all of these securities are still performing, and as we expect to receive all principal and interest in accordance with contractual terms and we have the ability to hold these securities to maturity, we concluded the $3,395 unrealized loss is temporary.

Private Label CMOs

Factors utilized in the analysis of the private label CMOs in our portfolio ~~included~~include a review of underlying collateral performance, the length of time and extent that fair value has been less than cost, changes in market valuation and rating changes to determine if other-than-temporary impairment has occurred. As of ~~September~~March 3031, ~~2010~~2011, ~~five~~four of the ~~six~~ private label CMOs in our portfolio had experienced unrealized losses for 12 consecutive months, while GSR 2003-10 2A1 experienced unrealized gains in January 2011 along with April, September, October and November of 2010. One security (SASC 2003-31A 3A) incurred a rating change during the first quarter 2011. It was downgraded from A1 to A3 by Moody’s effective March 7, 2011, while the Standard & Poor’s rating remained AAA.

The issuers within the portfolio continue to perform according to their contractual terms. The underlying collateral performance for each of the private label CMOs has been reviewed. The collateral has seen delinquencies ~~greater~~ ~~than~~over 90 days continue to move higher in the ~~third~~first quarter of ~~2010~~2011. ~~with the~~The ~~exception~~reported ofcumulative ~~two~~loss ~~securities~~for ~~(CWHL~~WFMBS ~~2003~~2006-588 ~~2A1~~A13 &shows ~~GSR 2003-10 2A1), where~~ the ~~delinquencies~~highest ~~greater~~cumulative ~~than~~loss 90at ~~days~~1.52% ~~experienced~~while ~~declines~~the ~~quarter~~remaining ~~over quarter.~~securities ~~The reported~~ cumulative loss ~~for~~remains ~~all six securities remained~~ low with ~~1.092%~~ ~~being~~little change over the ~~highest~~prior period. The exposure to the high risk geographies (CA, AZ, NV, and FL) has experienced little change since our last review as all five securities have exposure in at least one of these states. The credit support for ~~five~~three of the private label CMOs increased during the ~~third~~ first quarter of ~~2010~~2011, while the support onfor the ~~sixth~~remaining ~~security~~two ~~didn’t change~~experienced a slight decline. All ~~six~~five securities continue to maintain a credit support level that isremains higher than their original ~~credit support percentages~~level.

We also received a third party review of our private label CMOs. This review contains a stress test for each security that models multiple scenarios projecting various levels of delinquencies, loss severity rates and different liquidation time frames. The purpose of the stress test is to account for increasingly stressful macroeconomic scenarios that take into consideration various economic stresses, including but not limited to, home ~~prices,~~price and employment data including impact of changes to the gross domestic product ~~index~~(GDP). The three scenarios we reviewed included the Liq scenario which liquidates all 60+ delinquent loans and realized losses at current 3-month trailing severities; the Liq Sev 85 scenario, which is similar to the Liq scenario but uses 85% of the severity rate used in the Liq scenario and ~~employment~~is ~~data~~considered the least stressful of the three scenarios. ~~Only~~The ~~one~~Liq Def 125 scenario is the most severe of the ~~securities,~~ three and is similar to Liq however it includes liquidation of an additional 25% of the current 60 day bucket. WFMBS 2006-8 A13, ~~projected~~continues ato ~~minimal~~be the only private label CMO in the portfolio that projects any type of loss in the ~~extreme~~ three scenarios. The Liq Def 125 scenario continues to project a minimal loss of $21 and is not targeted to occur until January 2012. This projected loss continues to decline and the targeted date has moved two months into the future as compared to the prior quarter. The findings in this report continue to support our analysis that there is adequate structural support even under stressed scenarios. The overall review of the underlying mortgage collateral for the tranches we own demonstrates that it is unlikely that the contractual cash flows will be disrupted. Therefore, given the performance of these securities at ~~September~~March 3031, ~~2010~~2011, and that it is not our intent to sell these securities and it is likely that we will not be required to sell the securities before their anticipated recovery, we concluded that ~~there~~the ~~is no other-than-temporary impairment. The~~ $~~523~~449 in unrealized loss was temporary.

As noted in the above discussion related to CDOs, including both pooled and single issue CDOs and the private label CMOs, we determined that an additional other-than-temporary impairment charge of $585 was required for the third quarter of 2010. The remainder of the securities portfolio continues to perform as expected.

The table below presents a roll forward of the credit losses recognized in earnings for the period ended September 30, 2010:

Ending balance December 31, 2009	$	315
Additions for amounts related to credit loss for which an other-
than-temporary impairment was not previously recognized		795
Reductions for amounts related to securities for which the company intends
to sell or that it will be more likely than not that the company will be
required to sell prior to recovery of amortized cost basis		-
Ending balance September 30, 2010	$	1,110

NOTE 4. LOANS

A summary of our loans follows:

	September 30,		December 31,
	2010		2009
Commercial, industrial and
agricultural loans	$	419,309	$	602,606
Economic development loans and
other obligations of state and
political subdivisions		9,164		14,773
Lease financing		1,877		5,579
Commercial mortgages		423,875		583,123
Construction and development		266,023		382,068
Residential mortgages		151,086		232,799
Home equity lines of credit		121,719		162,934
Consumer loans		63,914		126,466
Loans, net of unearned income	$	1,456,967	$	2,110,348

NOTE 5. ALLOWANCE FOR LOAN LOSSES

Changes in the allowance for loan losses were as follows for the three and nine months ended September 30, 2010 and 2009:

SUMMARY OF ALLOWANCE FOR LOAN LOSSES
	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2010			2009			2010			2009
Beginning Balance	$	96,221		$	82,309		$	88,670		$	64,437
Loans charged off		(27,359	)		(22,396	)		(80,806	)		(69,226	)
Recoveries		437			538			2,321			1,310
Provision for loan losses		26,240			18,913			98,220			82,843
Allowance related to divested loans sold		-			-			(12,866	)		-
Ending Balance	$	95,539		$	79,364		$	95,539		$	79,364
Percent of total loans		6.56	%		3.60	%		6.56	%		3.60	%
Annualized % of average loans:
Net charge-offs		6.43	%		3.74	%		5.52	%		3.80	%
Provision for loan losses		6.26	%		3.24	%		6.91	%		4.63	%

The allowance for loan losses was $95,539 at September 30, 2010, representing 6.56% of total loans, compared with $88,670 at December 31, 2009, or 4.20% of total loans and $79,364 at September 30, 2009, or 3.60% of total loans. The allowance for loan losses to non-performing loans ratio was 44.9%, compared to 41.3% at December 31, 2009 and 41.8% at September 30, 2009. At September 30, 2010, we believe that our allowance appropriately considers incurred losses in our loan portfolio. The allowance for divested loans sold represents the allowance that was transferred to loans held for sale for loans included in 2010 branch sales. The beginning balance of the allowance for loan losses for the three months ended September 30, 2010 of $96,221, differs from the amount shown as the ending balance of $106,745 in our second quarter 2010 financial statements. In our second quarter 2010 financial statements, we did not include the allowance related to divested loans sold in the loans held for sale balance and recorded the impact of the release of the allowance for loan losses associated with the loans sold in the second quarter of 2010 of $2,342 as a reduction of the provision for loan losses. During this quarter we reclassified the second and third quarter loan sale gains of $2,342 and $10,524 from the provision for loan losses to gain on sale of loans.

~~Total non-performing~~Summary ~~loans at September 30, 2010, consisting~~ of ~~nonaccrual loans and loans 90 days or more past due, were $212,666, a decrease of $2,214 from December 31, 2009. Non~~Other-~~performing loans were 14.60% of total loans, compared to 10.18% at December 31, 2009, and 8.61% at September 30, 2009. Non~~Than-~~performing~~Temporary assets were 16.60% of total loans and other real estate owned at September 30, 2010, compared to 11.52% at December 31, 2009 and 9.69% at September 30, 2009. Both non-performing loans and non-performing assets declined, but their ratios increased during the third quarter primarily as a result of the sale of performing loans in the branch and loan sale transactions.Impairment

~~Occasionally, we~~As ~~may~~noted ~~agree~~in tothe ~~modify~~above ~~contractual~~discussion ~~terms~~for ofthe aquarter ~~borrower’s~~ended ~~loan.~~March ~~In such cases~~31, ~~where~~ ~~modifications~~2011 ~~represent~~related ~~a concession~~ to acollateralized ~~borrower~~debt ~~experiencing financial difficulty~~obligations, ~~the~~including ~~modification~~both ispooled ~~considered a troubled debt restructure (TDR). Loans modified in a TDR are generally placed on nonaccrual status until we determine that the future collection of principal~~ and ~~interest~~single isissue ~~reasonably assured~~CDOs, ~~which~~and ~~requires that~~ the ~~borrower~~private ~~demonstrate~~label aCMOs, ~~period~~there ofwere ~~performance~~no ~~in accordance~~other-than-temporary toimpairment ~~the restructured terms of six months or more~~charges. All Atunrealized ~~September~~losses ~~30, 2010,~~were ~~loans~~considered ~~fitting this description totaled $17,387 compared~~ to ~~$4,266~~be ~~at December 31, 2009~~temporary.

~~While~~As ~~we currently~~noted ~~have~~in the ~~ability~~above ~~and~~discussion ~~intent~~related to ~~hold for the foreseeable future loans that are not classified as held for sale~~CDOs, ~~our~~including ~~problem~~both ~~asset~~pooled ~~disposition~~and ~~strategy now~~single ~~contemplates~~issue aCDOs ~~more rapid disposition of our non-performing assets if~~ and ~~when~~ ~~opportunities~~the ~~arise. We~~private ~~may~~label ~~take advantage of opportunities to sell~~CMOs, ~~exchange for other assets or accept discounted payoffs where appropriate, particularly in situations in which~~ we ~~expect~~determined itthat ~~would~~the ~~take~~only ~~several~~other-than-temporary ~~quarters~~impairment charge for ~~values~~ tothe ~~recover.~~first Wequarter ~~believe~~of ~~this~~2010 ~~more~~was ~~rapid~~$210 ~~disposition~~related ~~policy for troubled assets will accelerate our return~~ to ~~profitability~~PreTSL ~~and~~VI ~~credit quality norms by providing increased liquidity for redeployment, reduce real estate taxes, legal fees,~~ and ~~other~~PreTSL ~~asset~~XIV. The ~~carrying~~remainder ~~costs, allow for more effective utilization~~ of ~~our~~ ~~workout~~the ~~team,~~securities ~~and~~portfolio ~~reduce~~continued ~~our~~to ~~overall~~perform ~~staffing~~as ~~costs~~expected.

The ~~following~~ istables below present a ~~comparison~~roll forward of ~~non-performing~~the ~~assets.~~credit losses recognized in earnings for the period ended March 31, 2011 and 2010:

	September 30,			December 31,
Ending balance December 31, 2010	$	1,417
	2010			2009
Additions for amounts related to credit loss for which an other- than-temporary impairment was not previously recognized		-
Nonaccrual loans	$	212,345		$	210,753
Reductions for amounts related to securities for which the company intends to sell or that it will be more likely than not that the company will be required to sell prior to recovery of amortized cost basis		-
90 days or more past due loans		321			4,127
Ending balance, March 31, 2011	$	1,417
Total non-performing loans	$	212,666			214,880
Ending balance December 31, 2009	$	315
Trust preferred held for trading		148			36
Additions for amounts related to credit loss for which an other- than-temporary impairment was not previously recognized		210
Other real estate owned		34,814			31,982
Reductions for amounts related to securities for which the company intends to sell or that it will be more likely than not that the company will be required to sell prior to recovery of amortized cost basis		-
Total non-performing assets	$	247,628		$	246,898
Ending balance, March 31, 2010	$	525
Ratios:
Non-performing Loans to Loans		14.60	%		10.18	%
Non-performing Assets to Loans and Other Real Estate Owned		16.60	%		11.52	%
Allowance for Loan Losses to Non-performing Loans		44.92	%		41.26	%

Changes in other real estate owned were as follows for the three and nine months ended September 30, 2010:

SUMMARY OF OTHER REAL ESTATE OWNED
	Three Months Ended			Nine Months Ended
	September 30, 2010			September 30, 2010
Beginning Balance	$	33,706		$	31,982
Additions		8,450			15,137
Sales		(2,770	)		(7,204	)
Write-downs		(4,538	)		(5,015	)
Other changes		(34	)		(86	)
Ending Balance	$	34,814		$	34,814

The third quarter of 2010 included $3,539 in writedowns on two specific real estate parcels following receipt of updated appraisals.

NOTE 6 5. ~~STRATEGIC PLAN~~LOANS

~~During the~~A ~~third~~summary ~~quarter, we successfully executed several additional components~~ of ~~the strategic plan we outlined in the fourth quarter of 2009 to reduce credit risk and improve~~ our ~~capital~~loans ~~ratios. The key components of that plan, and our progress during the quarter towards executing them, are as~~ follows:

· We continued our exit from the commercial real estate (CRE) lending line of business. During the third quarter, we completed the sale of three branch clusters which included the sale of CRE and other non-branch generated loans. We also obtained early repayment of several CRE loans and pursued additional loan paydowns and payoffs through a modest discount program. As a result of these initiatives, we reduced outstanding CRE loan balances by $139,570, or 16.8%, from June 30, 2010. This follows a 9.9% decrease in the second quarter. We continue to evaluate multiple alternatives to sell or exchange our performing and nonperforming CRE loans and are working with a number of parties interested in purchasing these assets. We also increased pricing on $36,656 of commercial credits, from low LIBOR based variable rates, to minimum floor rates of at least 4%, during the quarter. We will continue existing initiatives to reduce CRE balances and increase pricing on credits we cannot exit throughout 2010.

	March 31,		December 31,
	2011		2010
Commercial
Commercial, industrial and agricultural loans:
Commercial real estate	$	52,947	$	68,910
Chicago		31,313		35,090
Community		287,950		297,936
Economic development loans and other obligations of state and political subdivisions:
Community		14,799		8,992
Lease financing:
Community		-		424
Total commercial		387,009		411,352
Commercial real estate
Commercial mortgages:
Commercial real estate		306,089		318,902
Chicago		80,202		87,099
Community		42,021		44,291
Construction and development:
Commercial real estate		100,056		106,855
Chicago		47,799		51,944
Community		3,912		3,438
Total commercial real estate		580,079		612,529

Residential mortgages:
Chicago		4,800		4,101
Community		133,260		139,142
Home equity:
Chicago		8,092		8,541
Community		109,183		109,865
Consumer loans:
Commercial real estate		2		2
Chicago		1,058		1,150
Community		60,132		62,822
Total loans	$	1,283,615	$	1,349,504

· We continued to narrow our geographic operating footprint through the sale of multiple branch clusters. During the third quarter of 2010, Integra Bank completed the sale of twelve banking centers, along with groups of non-branch originated commercial and consumer loans, in three transactions with First Security Bank, FNB Bank, Inc., and Citizens Deposit Bank and Trust. These transactions included approximately $238,157 in loans and $307,724 in deposits, while generating deposit premiums of $11,241, after consideration of a write-off of $2,959 of core deposit intangible assets associated with the deposits sold. These three transactions increased Integra Bank’s Tier 1 and Total Risk-Based Capital Ratios by approximately 216 basis points, and its Tier 1 Leverage Ratio by approximately 87 basis points. The transactions also increased the Company’s Tangible Common Equity to Tangible Assets Ratio by approximately 58 basis points. Integra Bank’s Total Risk-Based Capital Ratio was 9.34% at September 30, 2010, an increase of 101 basis points from June 30, 2010 and an increase of 134 basis points from March 31, 2010. During the second quarter of 2010, we completed branch and loan sales to United Community Bank and Cecilian Bank, selling five branches, $98,057 in deposits and $86,646 in loans, generating deposit premiums of $4,371. We have nearly achieved our planned reduced geographic operating footprint, although we continue to work with interested buyers for our four branches in the Chicago market. Excluding that market, our pro-forma operating footprint includes forty-eight branches within a one-hundred mile radius of Evansville with a genuine focus on community banking.

· During the third quarter of 2010, we experienced higher levels of provision and charge-offs than anticipated, as we continued our practice of updating appraisals on non-performing assets and adjusted the carrying value of these assets, increasing our loan loss provision and OREO expense and increasing our loan loss reserves. We continue to pursue aggressive disposition strategies for all of these assets which further contributed to our significant loan loss provision and increased level of net charge-offs during the quarter. We did report the first decrease in non-performing assets since the third quarter of 2006 and executed our disposition strategies on several of our non-performing assets. We also experienced improvement in our delinquencies, which were 1.30% at September 30, 2010. Our efforts continue to be focused on reducing our level of non-performing assets, improving our capital and liquidity and increasing the operating income of our core community banking franchise.

· Integra Bank’s Total Risk-Based Capital Ratio was 9.34%, an increase of 101 basis points from June 30, 2010 and an increase of 134 basis points from March 31, 2010, which maintains Integra Bank’s classification as adequately capitalized under the Prompt Corrective Action framework at September 30, 2010. The increase resulted from the branch and loan sales and loan paydowns, partially offset by the quarter’s net loss. On August 12, 2010, Integra Bank received a Capital Directive from the OCC. Under the terms of the Capital Directive, the Bank is required, within 90 days, to achieve and maintain a Total Risk-Based Capital Ratio of at least 11.5% of risk-weighted assets and a Tier 1 Leverage Ratio of at least 8% of adjusted total assets. We were also required to submit to the OCC within 30 days an acceptable Capital Plan covering at least a three-year period that describes the means and time schedule by which the Bank will achieve the required minimum capital ratios, which we provided. The OCC is completing its review of that plan and we continue to review our capital raising initiatives with them. We do not expect that Integra Bank will achieve the required capital ratios within the 90 days specified in the Capital Directive. We are keeping the OCC fully informed of our efforts to raise capital and we hope to announce more definitive information later this year.

· We are pursuing multiple initiatives to raise new capital. Working with our financial advisor, Keefe, Bruyette & Woods (KBW), we are having ongoing discussions with private investors, private equity firms and others about investing in our Company. We engaged an independent consultant to evaluate our loan portfolio and to independently affirm the valuation and integrity of its administration and are taking multiple steps necessary in the capital raising process. It is important that we are able to raise the capital we need and return to profitability. For a discussion of the potential implications if we cannot raise the additional capital or return to profitability, please see the “Risk Factors” section of this document. We look forward to announcing the results of our capital raising efforts at the appropriate time.

·A Wesummary ~~executed multiple cost reduction initiatives during the second and early third quarters~~ of ~~2010. Those initiatives included a reduction in workforce of personnel not included in~~ the ~~branch~~unpaid ~~sale~~principal ~~transactions,~~balances ~~along with normal attrition, that is expected to result in lower annualized personnel costs~~ of ~~approximately~~nonaccrual ~~$4,000,~~and asloans ~~well~~past asdue ~~other~~over ~~expense~~90 ~~reductions.~~days ~~Expense~~still ~~reduction~~on ofaccrual ~~our~~by ~~back-office~~class ~~operations is one~~ of ~~the~~loans ~~primary components of offsetting the net income lost~~ as ~~a result~~ of ~~the~~March ~~divested~~31, ~~branches. We continue reducing our costs where possible while taking into consideration the resources necessary to execute our strategies~~2011, ~~evaluating remaining terms on existing contracts~~ and ~~identifying~~December ~~expenses we cannot reduce currently~~31, ~~but expect to be able to in 2011 and 2012~~2010, ~~such~~are as ~~FDIC insurance, examination fees and loan workout and OREO expenses. These efforts will remain ongoing.~~follows:

The July 2010 transaction with First Security included five branches located in Bowling Green and Franklin, Kentucky, as well as a pool of indirect consumer, commercial and CRE loans. First Security assumed the deposit liabilities of the five branches and purchased certain branch-related assets, including loans. There were $104,929 in loans and $115,110 in deposits sold. The sale generated a deposit premium of $5,758, less the write-off of a core deposit intangible for those branches of $2,959, as well as a gain on the sale of the loans included in the transaction of $4,959. First Security had also agreed, in a second phase, to purchase single offices located in Paoli, Mitchell and Bedford, Indiana; however, they were unable to raise the capital necessary to complete this transaction and paid us a $175 termination fee. The agreement was terminated in August 2010. We will retain these three branches in our core community banking franchise.

	March 31, 2011				December 31, 2010
	Nonaccrual		Loans Past Due Over 90 Days Still Accruing		Nonaccrual		Loans Past Due Over 90 Days Still Accruing

Commercial
Commercial, industrial and agricultural loans:
Commercial real estate	$	6,111	$	391	$	6,673	$	-
Chicago		14,304		-		14,078		-
Community		5,116		-		3,589		7
Economic development loans and other obligations of state and political subdivisions		-		-		-		-
Lease financing		-		-		424		-
Total commercial		25,531		391		24,764		7
Commercial real estate
Commercial mortgages:
Commercial real estate		36,830		5,275		32,462		-
Chicago		39,061		-		43,184		-
Community		3,534		-		4,507		-
Construction and development:
Commercial real estate		32,316		-		41,433		-
Chicago		42,210		-		45,092		-
Community		271		-		271		-
Total commercial real estate		154,222		5,275		166,949		-

Residential mortgages:
Chicago		487		-		494		-
Community		2,057		-		2,637		8
Home equity:
Chicago		670		-		896		-
Community		607		-		606		30
Consumer loans:
Community		438		-		596		28
Total loans	$	184,012	$	5,666	$	196,942	$	73

The September 2010 transaction with FNB included three branches located in Cadiz and Mayfield, Kentucky, along with a pool of commercial, agricultural, consumer and CRE loans. FNB assumed deposit liabilities of $118,928 of the three branches and purchased certain branch-related assets, including loans. There were $71,855 in loans sold. The sale generated a deposit premium of $6,010, as well as a gain on the sale of the loans included in the transaction of $2,078.

The September 2010 transaction with Citizens included four branches located in Maysville and Mt. Olivet, Kentucky and Ripley and Aberdeen, Ohio, as well as a pool of commercial and CRE loans. Citizens assumed the deposit liabilities of the four branches and purchased certain branch-related assets, including loans. There were $61,374 in loans and $73,686 in deposits sold. The sale generated a deposit premium of $2,432, as well as a gain on the sale of the loans included in the transaction of $2,461.

We also had a separate loan purchase agreement with Citizens under which we sold $8,297 in commercial loans on June 24, 2010.

NOTE 7. DEPOSITS

The following table shows deposits by category at September 30, 2010, and December 31, 2009, which included those held for probable branch sales.

	September 30, 2010		December 31, 2009
Deposits:
Non-interest-bearing	$	227,106	$	270,849
Interest checking		283,115		416,635
Money market accounts		218,535		249,490
Savings		243,444		342,453
Time deposits of $100 or more		797,423		623,670
Other interest-bearing		382,947		462,009
	$	2,152,570	$	2,365,106

AsThe following table presents the aging of ~~September~~ ~~30,~~the ~~2010~~unpaid principal in past due loans, ~~the~~not ~~scheduled~~including ~~maturities~~nonaccrual loans, as of ~~time~~March ~~deposits~~31, ~~are~~2011, ~~as follows~~and December 31, 2010:

Time Deposit Maturities
	March 31, 2011						December 31, 2010
2010	$	216,657
	30-89 Days Past Due		Greater than 90 Days Past Due		Total Past Due		30-89 Days Past Due		Greater than 90 Days Past Due		Total Past Due
2011		508,461
Commercial
2012		265,608
Commercial, industrial and agricultural loans:
2013		97,749
Commercial real estate	$	495	$	391	$	886	$	536	$	-	$	536
2014 and thereafter		91,895
Chicago		215		-		215		276				276
Total	$	1,180,370
Community		2,143		-		2,143		1,477		7		1,484
Economic development loans and other obligations of state and political subdivisions		-		-		-		-		-		-
Lease financing		-		-		-		-		-		-
Total commercial		2,853		391		3,244		2,289		7		2,296
Commercial real estate
Commercial mortgages:
Commercial real estate		17,102		5,275		22,377		5,735		-		5,735
Chicago		1,085		-		1,085		695		-		695
Community		2,051		-		2,051		611		-		611
Construction and development:
Commercial real estate		2,939		-		2,939		3,529		-		3,529
Chicago		31		-		31		-		-		-
Community		-		-		-		-		-		-
Total commercial real estate		23,208		5,275		28,483		10,570		-		10,570
Residential mortgages:
Chicago		416		-		416		314		-		314
Community		4,762		-		4,762		4,632		8		4,640
Home equity:
Chicago		558		-		558		507		-		507
Community		419		-		419		336		30		366
Consumer loans:
Commercial real estate		-		-		-		-		-		-
Chicago		51		-		51		35		-		35
Community		540		-		540		940		28		968
Total loans	$	32,807	$	5,666	$	38,473	$	19,623	$	73	$	19,696

We had $393,570 in brokered deposits at September 30, 2010 and $353,050 at December 31, 2009.

NOTE 8. INCOME TAXES

The income tax benefit for the first nine months of 2010 was $350, which equates to an effective tax rate of 0%. The zero effective tax rate is a result of the increase in our income tax valuation allowance on our net deferred tax asset of $5,970, with $6,959 being recorded to income tax expense. This brings our total valuation allowance at September 30, 2010, to $129,842 and represents a continuation of the full valuation allowance established at December 31, 2009.

NOTE 9. SHORT-TERM BORROWINGS

Short-term borrowings consist of securities sold under agreements to repurchase and totaled $55,841 at September 30, 2010 and $62,114 at December 31, 2009.

We must pledge collateral in the form of mortgage-backed securities or mortgage loans to secure Federal Home Loan Bank (FHLB) advances. At September 30, 2010, we had sufficient collateral pledged to satisfy the collateral requirements.

~~NOTE 10.~~The ~~LONG-TERM~~following ~~BORROWINGS~~tables present the balance in unpaid principal of loans by class and based on impairment method as of March 31, 2011 and December 31, 2010.

Long-term borrowings consist of the following:

	Loans evaluated for impairment:				Allowance based on impairment method:
At March 31, 2011	Individually		Collectively		Individually		Collectively

Commercial
Commercial, industrial and agricultural loans:
Commercial real estate	$	6,111	$	46,836	$	1,498	$	2,728
Chicago		14,304		17,009		1,423		1,237
Community		5,116		282,834		1,304		19,228
Economic development loans and other obligations of state and political subdivisions:
Community		-		14,799		-		18
Total commercial		25,531		361,478		4,225		23,211
Commercial real estate
Commercial mortgages:
Commercial real estate		43,667		262,422		12,359		22,783
Chicago		39,061		41,141		5,891		2,731
Community		3,534		38,487		576		861
Construction and development:
Commercial real estate		37,703		62,353		5,606		5,788
Chicago		42,297		5,502		10,234		517
Community		271		3,641		-		52
Total commercial real estate		166,533		413,546		34,666		32,732
Residential mortgages:
Chicago		59		4,741		18		214
Community		547		132,713		158		6,226
Home equity:
Chicago		719		7,373		75		155
Community		68		109,115		21		2,292
Consumer loans:
Commercial real estate		-		2		-		-
Chicago		-		1,058		-		52
Community		280		59,852		28		3,718
Unallocated:		-		-		-		4,696
Total loans	$	193,737	$	1,089,878	$	39,191	$	73,296

	September 30,		December 31,
	2010		2009
Federal Home Loan Bank (FHLB) Advances
Fixed maturity advances (weighted average rate of 2.77% and 2.53%	$	114,000	$	126,004
as of September 30, 2010 and December 31, 2009, respectively)
Securities sold under repurchase agreements with maturities		80,000		80,000
at various dates through 2013 (weighted average rate of 4.60%
and 3.29% as of September 30, 2010 and December 31, 2009, respectively)
Note payable, secured by equipment, with a fixed interest rate of 7.26%,		1,739		2,645
due at various dates through 2012
Subordinated debt, unsecured, with a floating interest rate equal to three-		10,000		10,000
month LIBOR plus 3.20%, with a maturity date of April 24, 2013
Subordinated debt, unsecured, with a floating interest rate equal to three-		4,000		4,000
month LIBOR plus 2.85%, with a maturity date of April 7, 2014
Floating Rate Capital Securities, with an interest rate equal to six-month		18,557		18,557
LIBOR plus 3.75%, with a maturity date of July 25, 2031, and callable
effective July 25, 2011, at par *
Floating Rate Capital Securities, with an interest rate equal to three-month		35,568		35,568
LIBOR plus 3.10%, with a maturity date of June 26, 2033, and callable
quarterly, at par *
Floating Rate Capital Securities, with an interest rate equal to three-month		20,619		20,619
LIBOR plus 1.57%, with a maturity date of June 30, 2037, and callable
effective June 30, 2012, at par *
Floating Rate Capital Securities, with an interest rate equal to three-month		10,310		10,310
LIBOR plus 1.70%, with a maturity date of December 15, 2036, and callable
effective December 15, 2011, at par *
Senior unsecured debt guaranteed by FDIC under the TLGP, with a fixed		50,000		50,000
rate of 2.625%, with a maturity date of March 30, 2012
Other		3,368		3,368
Total long-term borrowings	$	348,161	$	361,071

* Payment of interest has been deferred since September 2009.

Securities sold under agreements to repurchase consist of $80,000 in fixed rate national market repurchase agreements. A $25,000 variable rate agreement converted to a 4.565% fixed rate instrument on April 30, 2010. These repurchase agreements have an average rate of 4.60%, with $30,000 maturing in 2012, and $50,000 maturing in 2013. We borrowed these funds under a master repurchase agreement. The counterparty to our repurchase agreements is exposed to credit risk. We are required to pledge collateral for the repurchase agreement. The amount of collateral pledged September 30, 2010, included $48,011 in cash and $42,763 in securities.

Also included in long-term borrowings are $114,000 in FHLB advances to fund investments in mortgage-backed securities, loan programs and to satisfy certain other funding needs. Included in the long-term FHLB borrowings are $40,000 of putable advances. Each advance is payable at its maturity date, with a prepayment penalty for fixed rate advances. Total FHLB advances were collateralized by $214,556 of mortgage loans and securities under collateral agreements at September 30, 2010. Based on this collateral and our holdings of FHLB stock, we were eligible to borrow additional amounts of $90,349 at September 30, 2010.

The floating rate capital securities with a maturity date of July 25, 2031, are callable at par on July 25, 2011. Unamortized organizational costs for these securities were $402 at September 30, 2010.

The floating rate capital securities with a maturity date of June 26, 2033, are callable at par quarterly. Unamortized organizational costs for these securities were $792 at September 30, 2010.

The floating rate capital securities callable at par on December 15, 2011, and quarterly thereafter, may be called prior to that date but only upon payment of a premium based on a percentage of the outstanding principal balance. The call is effective at a premium of 0.785% at December 15, 2010.

	Loans evaluated for impairment:				Allowance based on impairment method:
At December 31, 2010	Individually		Collectively		Individually		Collectively

Commercial
Commercial, industrial and
agricultural loans:
Commercial real estate	$	9,187	$	59,723	$	1,218	$	2,684
Chicago		14,078		21,012		3,417		883
Community		3,596		294,340		537		8,612
Economic development loans and
other obligations of state and
political subdivisions:
Community		-		8,992		-		11
Lease financing:
Community		424		-		-		-
Total commercial		27,285		384,067		5,172		12,190
Commercial real estate
Commercial mortgages:
Commercial real estate		35,210		283,692		6,198		17,654
Chicago		43,184		43,915		5,921		3,190
Community		4,507		39,784		645		675
Construction and development:
Commercial real estate		41,433		65,422		7,843		6,097
Chicago		45,179		6,765		8,915		557
Community		271		3,167				50
Total commercial real estate		169,784		442,745		29,522		28,223
Residential mortgages:
Chicago		60		4,041		17		182
Community		516		138,626		149		6,577
Home equity:
Chicago		1,021		7,520		80		147
Community		68		109,797		20		2,145
Consumer loans:
Commercial real estate		-		2		-		-
Chicago		-		1,150		-		49
Community		274		62,548		25		3,949
Unallocated:		-		-		-		7,354
Total loans	$	199,008	$	1,150,496	$	34,985	$	60,816

~~The floating~~Loans, ~~rate~~for ~~capital~~which ~~securities~~the ~~callable~~terms athave ~~par~~been onmodified, ~~June~~and ~~30,~~for ~~2012,~~which ~~and~~the ~~quarterly thereafter,~~borrower ~~may~~is beexperiencing ~~called~~financial ~~prior~~difficulties, toare ~~that~~considered ~~date~~troubled ~~with~~debt arestructurings, ~~payment~~or TDRs. There were $4,044 of aTDRs ~~call~~at ~~premium~~March 31, ~~which~~ is2011, ~~based~~compared onto a$6,522 ~~percentage~~at ofDecember ~~the~~31, ~~outstanding principal balance~~2010. ~~The~~We ~~call~~have atallocated a$256 ~~premium~~and $241 of ~~0.70%~~specific isreserves ~~effective~~to atTDRs ~~June~~as 30of March 31, 2011 and December 31, 2010, respectively.

NOTE 6. ALLOWANCE FOR LOAN LOSSES

Changes in the allowance for loan losses were as follows for the three months ended March 31, 2011 and 2010:

SUMMARY OF ALLOWANCE FOR LOAN LOSSES

	Three Months Ended
	March 31, 2011

				Commercial			Residential			Home
	Commercial			Real Estate			Mortgages			Equity			Consumer			Unallocated			Total
Beginning Balance	$	17,362		$	57,745		$	6,925		$	2,392		$	4,023		$	7,354		$	95,801
Loans charged off		(4,043	)		(15,773	)		(274	)		(376	)		(558	)		-			(21,024	)
Recoveries		116			288			31			6			717			-			1,158
Provision for loan losses		14,001			25,376			(66	)		521			(384	)		(2,658	)		36,790
Allowance related to divested loans sold		-			(238	)		-			-			-			-			(238	)
Ending Balance	$	27,436		$	67,398		$	6,616		$	2,543		$	3,798		$	4,696		$	112,487

	Three Months Ended March 31, 2010
Beginning Balance	$	88,670
Loans charged off		(40,113	)
Recoveries		724
Provision for loan losses		52,700
Allowance related to divested loans sold		-
Ending Balance	$	101,981

The following tables present, by class, information related to the Company’s impaired loans as of March 31, 2011:

	Recorded Investment		Related Allowance for Loan Losses		Average Recorded Investment		Interest Income Recognized		Cash Basis Interest Income Recognized

Impaired loans with no allocated allowance:
Commercial
Commercial, industrial and agricultural loans:
Commercial real estate	$	1,111	$	-	$	1,111	$	-	$	-
Chicago		2,800		-		2,809		-		-
Community		667		-		674		-		-
Economic development loans and other obligations of state and political subdivisions		-		-		-		-		-
Total commercial		4,578		-		4,594		-		-
Commercial real estate
Commercial mortgages:
Commercial real estate		4,117		-		4,258		3		-
Chicago		9,616		-		9,633		3		-
Community		1,451		-		1,832		-		-
Construction and development:
Commercial real estate		11,794		-		11,973		13		-
Chicago		683		-		1,006		-		-
Community		271		-		271		-		-
Total commercial real estate		27,932		-		28,973		19		-

Residential mortgages:
Community		37		-		37		-		-
Home equity		-		-		-		-		-
Consumer loans		-		-		-		-		-
Total impaired loans with no allocated allowance	$	32,547	$	-	$	33,604	$	19	$	-

	Recorded Investment		Related Allowance for Loan Losses		Average Recorded Investment		Interest Income Recognized		Cash Basis Interest Income Recognized
Impaired loans with allocated allowance:
Commercial
Commercial, industrial and agricultural loans:
Commercial real estate	$	5,000	$	1,498	$	5,003	$	1	$	-
Chicago		11,504		1,423		12,917		1		-
Community		4,449		1,304		4,860		-		-
Economic development loans and other obligations of state and political subdivisions		-		-		-		-		-
Total commercial		20,953		4,225		22,780		2		-
Commercial real estate
Commercial mortgages:
Commercial real estate		39,550		12,359		41,886		2		-
Chicago		29,445		5,891		31,047		1		-
Community		2,083		576		2,259		-		-
Construction and development:
Commercial real estate		25,909		5,606		27,770		6		-
Chicago		41,614		10,234		43,925		11		-
Total commercial real estate		138,601		34,666		146,887		20		-

Residential mortgages:
Chicago		59		18		59		-		-
Community		510		158		512		-		-
Home equity:
Chicago		719		75		721		-		-
Community		68		21		68		-		-
Consumer loans:
Community		280		28		281		-		-
Total impaired loans with allocated allowance	$	161,190	$	39,191	$	171,308	$	22	$	-

The allowance for loan losses was $112,487 at March 31, 2011, representing 8.76% of total loans, compared with $95,801 at December 31, 2010, or 7.10% of total loans and $101,981 at March 31, 2010, or 5.07% of total loans. The allowance for loan losses to non-performing loans ratio was 59.3%, compared to 48.6% at December 31, 2010 and 45.9% at March 31, 2010. We do not target specific allowance to total loans or allowance to non-performing loan percentages when determining the adequacy of the allowance, but we do consider and evaluate the factors that go into making the determination. At March 31, 2011, we believe that our allowance appropriately considers incurred losses in our loan portfolio.

Total non-performing loans at March 31, 2011, consisting of nonaccrual loans and loans 90 days or more past due, were $189,678, a decrease of $7,337 from December 31, 2010. Non-performing loans were 14.78% of total loans, compared to 14.60% at December 31, 2010, and 11.04% at March 31, 2010. Non-performing assets were 17.92% of total loans and other real estate owned at March 31, 2011, compared to 17.63% at December 31, 2010 and 12.62% at March 31, 2010.

We categorize loans into risk categories based on relevant information about the ability of borrowers to service their debts such as current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. We analyze loans individually by classifying the loans as to credit risk. This analysis is performed on a monthly basis. We use the following definitions for risk ratings:

Special Mention. Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of our credit position at some future date.

Substandard. Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that we will sustain some loss if the deficiencies are not corrected.

Doubtful. Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values highly questionable and improbable.

Loss. Loans classified as loss are considered to be non-collectible and of such little value that their continuance as bankable assets is not warranted. This does not mean that loan has absolutely no recovery value, but rather it is neither practical nor desirable to defer writing off the loan, even though partial recovery may be obtained in the future. Losses are taken in the period in which they surface as uncollectible.

Loans not meeting the criteria above as part of the above described process are considered to be pass rated loans. Loans listed as not rated are included in groups of homogeneous loans. As of March 31, 2011, and December 31, 2010, and based on the most recent analysis performed, the risk category of loans is as follows:

	March 31, 2011
	Special Mention		Substandard		Doubtful		Loss		Pass		Not Rated		Total Loans

Commercial
Commercial, industrial and agricultural loans:
Commercial real estate	$	15,867	$	26,994	$	1,498	$	-	$	8,588	$	-	$	52,947
Chicago		1,860		16,474		1,423		-		11,556		-		31,313
Community		10,601		29,428		1,304		-		246,617		-		287,950
Economic development loans and other obligations of state and political subdivisions:

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