UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period ended March 31, 2012

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

Commission file number: 000-21671

THE NATIONAL BANK OF INDIANAPOLIS CORPORATION

(Exact name of registrant as specified in its charter)


Indiana		35-1887991
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

107 North Pennsylvania Street Indianapolis, Indiana		46204
(Address of principal executive offices)		(Zip Code)

(317) 261-9000

(Registrant’s telephone number, including area code)

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, 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 such shorter period that the registrant was required to submit and post such files). Yes x No ¨

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

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

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


Common Stock		Outstanding at May 4, 2012
Common Stock, no par value per share		2,327,887

Table of Contents

The National Bank of Indianapolis Corporation

Report on Form 10-Q

for Quarter Ended

March 31, 2012


PART I -	FINANCIAL INFORMATION

Item 1.	Consolidated Financial Statements (Unaudited)
	Consolidated Balance Sheets – March 31, 2012 and December 31, 2011	1
	Consolidated Statements of Income and Comprehensive Income – Three Months ended March 31, 2012 and 2011	2
	Consolidated Statements of Cash Flows – Three Months ended March 31, 2012 and 2011.	4
	Consolidated Statements of Shareholders’ Equity – Three Months ended March 31, 2012 and 2011	5
	Notes to Consolidated Financial Statements	6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	34

Item 4.	Controls and Procedures	35

PART II -	OTHER INFORMATION

Item 1.	Legal Proceedings	36
Item 1A.	Risk Factors	36
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	36
Item 3.	Defaults Upon Senior Securities	37
Item 4.	Mine Safety Disclosures	37
Item 5.	Other Information	37
Item 6.	Exhibits	38
	Signatures	40

Part I—Financial Information

Item 1. Financial Statements

The National Bank of Indianapolis Corporation

Consolidated Balance Sheets

(Unaudited, Dollars in thousands except share data)


	March 31, 2012			December 31, 2011
Assets
Cash and cash equivalents
Cash and due from banks	$	25,927		$	33,134
Interest bearing due from banks		208,123			159,290
Reverse repurchase agreements		1,000			1,000
Federal funds sold		5,877			2,911

Total cash and cash equivalents		240,927			196,335
Investment securities
Available-for-sale securities		146,242			140,484
Held-to-maturity securities (Fair value of $105,070 at March 31, 2012 and $115,003 at December 31, 2011)		103,636			113,799

Total investment securities		249,878			254,283
Loans held for sale		1,725			—
Loans		975,780			953,612
Less: Allowance for loan losses		(13,440	)		(14,242	)

Net loans		962,340			939,370
Bank owned life insurance		20,370			12,278
Other real estate owned		7,846			7,575
Premises and equipment		27,209			26,432
Deferred tax asset		6,870			6,642
Federal Reserve and FHLB stock at cost		2,990			2,990
Accrued interest		4,715			4,403
Other assets		8,562			9,288

Total assets	$	1,533,432		$	1,459,596

Liabilities and shareholders’ equity
Deposits:
Noninterest-bearing demand deposits	$	316,370		$	258,874
Money market and savings deposits		857,898			817,081
Time deposits		163,598			166,864

Total deposits		1,337,866			1,242,819
Repurchase agreements and other secured short term borrowings		76,036			95,585
Short term debt		2,375			2,438
Subordinated debt		5,000			5,000
Junior subordinated debentures owed to unconsolidated subsidiary trust		13,918			13,918
Other liabilities		6,464			9,717

Total liabilities		1,441,659			1,369,477
Shareholders’ equity:
Preferred stock, no par value—authorized 5,000,000 shares	$	—		$	—
Common stock, no par value—authorized 15,000,000 shares issued 2,924,558 shares at March 31, 2012 and 2,920,458 shares at December 31, 2011		37,279			37,028
Treasury stock, at cost; 597,474 shares at March 31, 2012 and 590,074 shares at December 31, 2011		(23,120	)		(22,771	)
Additional paid in capital		15,482			15,089
Retained earnings		58,950			57,209
Accumulated other comprehensive income		3,182			3,564

Total shareholders’ equity		91,773			90,119

Total liabilities and shareholders’ equity	$	1,533,432		$	1,459,596

See notes to consolidated financial statements.

The National Bank of Indianapolis Corporation

Consolidated Statements of Income and Comprehensive Income

(Unaudited, Dollars in thousands except per share data)


	Three months ended March 31,
	2012			2011
Interest income:
Interest and fees on loans	$	10,474		$	10,571
Interest on investment securities taxable		684			706
Interest on investment securities nontaxable		580			524
Interest on federal funds sold		8			11
Interest on due from banks		110			132

Total interest income		11,856			11,944
Interest expense:
Interest on deposits		1,034			1,516
Interest on other short term borrowings		36			72
Interest on short term debt		28			31
Interest on long term debt		392			388

Total interest expense		1,490			2,007

Net interest income		10,366			9,937
Provision for loan losses		908			1,689

Net interest income after provision for loan losses		9,458			8,248
Other operating income:
Wealth management fees		1,378			1,380
Service charges and fees on deposit accounts		771			747
Rental income		211			219
Mortgage banking income		836			219
Interchange income		375			340
Net loss on sale of securities		(13	)		—
Other		544			369

Total other operating income		4,102			3,274
Other operating expenses:
Salaries, wages and employee benefits		6,650			6,427
Occupancy		617			644
Furniture and equipment		309			299
Professional services		527			513
Data processing		854			793
Business development		470			428
FDIC Insurance		320			539
Non performing assets		508			261
Other		1,038			(461	)

Total other operating expenses		11,293			9,443

Income before tax		2,267			2,079
Federal and state income tax		526			462

Net income	$	1,741		$	1,617

Basic earnings per share	$	0.75		$	0.70

Diluted earnings per share	$	0.70		$	0.67

The National Bank of Indianapolis Corporation

Consolidated Statements of Income and Comprehensive Income (Continued)

(Unaudited, Dollars in thousands except per share data)


	Three months ended March 31,
	2012			2011
Net income	$	1,741		$	1,617
Other comprehensive income:
Change in securities available for sale:
Net unrealized gain during the period		(632	)		(81	)
Tax effect		250			32

Total other comprehensive loss		(382	)		(49	)

Comprehensive income	$	1,359		$	1,568

See notes to consolidated financial statements.

The National Bank of Indianapolis Corporation

Consolidated Statements of Cash Flows

(Unaudited, Dollars in thousands)


	Three months ended March 31,
	2012			2011
Operating Activities
Net Income	$	1,741		$	1,617
Adjustments to reconcile net income to net cash provided (used) by operating activities:
Provision for loan losses		908			1,689
Proceeds from sale of residential mortgage loans		20,059			15,354
Origination of loans held for sale		(20,059	)		(12,506	)
Depreciation and amortization		398			383
Fair value adjustment on mortgage servicing rights		42			33
Loss on sales of investment securities		13			—
Gain on sale of loans		(741	)		(136	)
Net (gain) loss on sales and writedowns of other real estate and repossessions		104			(105	)
Net (increase) decrease in deferred income taxes		23			(32	)
Change in bank owned life insurance		(92	)		(87	)
Income tax effect from deferred stock compensation		22			(3	)
Net accretion of discounts and amortization of premiums on investments		701			478
Compensation expense related to restricted stock and options		488			608
Changes in assets and liabilities:
Accrued interest receivable		(312	)		(533	)
Other assets		682			92
Other liabilities		(3,275	)		718

Net cash provided (used) by operating activities		702			7,570
Investing Activities
Proceeds from maturities of investment securities held to maturity		9,789			13,155
Proceeds from maturities of investment securities available for sale		22,225			10,202
Proceeds from sales of investment securities available for sale		450			—
Purchases of investment securities held to maturity		—			(50,684	)
Purchases of investment securities available for sale		(29,404	)		(15,900	)
Purchase of bank owned life insurance		(8,000	)		—
Net increase in loans		(26,979	)		(29,195	)
Proceeds from sale of loans		1,415			3,401
Proceeds from sales of other real estate and repossessions		327			358
Purchases of bank premises and equipment		(1,175	)		(236	)

Net cash used by investing activities		(31,352	)		(68,899	)
Financing Activities
Net increase in deposits		95,047			24,514
Net increase (decrease) in short term borrowings		(19,549	)		2,388
Net change in revolving line of credit		(63	)		(63	)
Income tax effect from deferred stock compensation		(22	)		3
Proceeds from issuance of stock		178			23
Repurchase of stock		(349	)		(33	)

Net cash provided by financing activities		75,242			26,832

Increase (decrease) in cash and cash equivalents		44,592			(34,497	)
Cash and cash equivalents at beginning of year		196,335			293,518

Cash and cash equivalents at end of year	$	240,927		$	259,021

Supplemental cash flow information
Interest paid	$	1,932		$	2,409
Income taxes paid		23			—
Supplemental non cash disclosure
Loan balances transferred to foreclosed real estate		702			88
Loan balances transferred to loans held for sale		1,415			4,825

See notes to consolidated financial statements.

The National Bank of Indianapolis Corporation

Consolidated Statement of Shareholders’ Equity

(Unaudited, Dollars in thousands except share data)


	Common Stock		Treasury Stock			Additional Paid In Capital			Retained Earnings		Accumulated Other Comprehensive Income			TOTAL
Balance at January 1, 2011	$	35,269	$	(20,953	)	$	12,866		$	51,853	$	322		$	79,357
Net income		—		—			—			1,617		—			1,617
Net loss on available-for-sale securities		—		—			—			—		(49	)		(49	)
Income tax effect from deferred stock compensation		—		—			3			—		—			3
Issuance of stock 800 shares of common stock under stock-based compensation plans		25		—			(2	)		—		—			23
Repurchase of stock 800 shares of common stock		—		(33	)		—			—		—			(33	)
Stock based compensation earned		—		—			608			—		—			608

Balance at March 31, 2011	$	35,294	$	(20,986	)	$	13,475		$	53,470	$	273		$	81,526

Balance at January 1, 2012	$	37,028	$	(22,771	)	$	15,089		$	57,209	$	3,564		$	90,119
Net income		—		—			—			1,741		—			1,741
Net loss on available-for-sale securities		—		—			—			—		(382	)		(382	)
Income tax effect from deferred stock compensation		—		—			(22	)		—		—			(22	)
Issuance of 4,100 shares of common stock under stock-based compensation plans		251		—			(73	)		—		—			178
Repurchase of 7,400 shares of common stock		—		(349	)		—			—		—			(349	)
Stock based compensation earned		—		—			488			—		—			488

Balance at March 31, 2012	$	37,279	$	(23,120	)	$	15,482		$	58,950	$	3,182		$	91,773

See notes to consolidated financial statements.

The National Bank of Indianapolis Corporation

Notes to Consolidated Financial Statements

($ in thousands, except share and per share data)

Note 1: Basis of Presentation

The accompanying unaudited condensed consolidated financial statements include the accounts of The National Bank of Indianapolis Corporation (“Corporation”) and its wholly-owned subsidiary, The National Bank of Indianapolis (“Bank”). All intercompany transactions between the Corporation and its subsidiary have been properly eliminated. The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three month period ended March 31, 2012, are not necessarily indicative of the results that may be expected for the year ended December 31, 2012. For further information, refer to the consolidated financial statements and footnotes thereto included in the Corporation’s Form 10-K for the year ended December 31, 2011.

Note 2: Investment Securities

The following is a summary of available-for-sale and held-to-maturity securities:


	Amortized Cost		Gross Unrealized Gain		Gross Unrealized (Loss)			Estimated Fair Value
March 31, 2012
Available-for-sale
U.S. Treasury securities	$	500	$	—	$	—		$	500
U.S. Government agencies		77,852		241		(87	)		78,006
Municipal securities		62,620		5,116		—			67,736

Total available-for-sale	$	140,972	$	5,357	$	(87	)	$	146,242


	Amortized Cost		Gross Unrecognized Gain		Gross Unrecognized (Loss)			Estimated Fair Value
Held-to-maturity
Collateralized mortgage obligations, residential	$	102,827	$	1,501	$	(79	)	$	104,249
Mortgage backed securities, residential		684		12		—			696
Other securities		125		—		—			125

Total Held-to-maturity	$	103,636	$	1,513	$	(79	)	$	105,070


	Amortized Cost		Gross Unrealized Gain		Gross Unrealized (Loss)			Estimated Fair Value
December 31, 2011
Available-for-sale
U.S. Treasury securities	$	500	$	—	$	—		$	500
U.S. Government agencies		70,967		334		(35	)		71,266
Municipal securities		63,115		5,603		—			68,718

Total available-for-sale	$	134,582	$	5,937	$	(35	)	$	140,484


	Amortized Cost		Gross Unrecognized Gain		Gross Unrecognized (Loss)			Estimated Fair Value
Held-to-maturity
Collateralized mortgage obligations, residential	$	112,842	$	1,308	$	(119	)	$	114,031
Mortgage backed securities, residential		832		15		—			847
Other securities		125		—		—			125

Total Held-to-maturity	$	113,799	$	1,323	$	(119	)	$	115,003

Notes to Consolidated Financial Statements

($ in thousands, except share and per share data)

During the three month period ending March 31, 2012, the Corporation sold one available-for-sale municipal security with a net carrying amount of $463 resulting in a loss of $13. The municipality had been downgraded and appeared to have increased credit risk. There were no sales of securities during the three month period ending March 31, 2011.

The fair value of debt securities and carrying amount, if different, at March 31, 2012, by contractual maturity were as follows. Securities not due at a single maturity date, primarily mortgage-backed securities, are shown separately.


	March 31, 2012
	Amortized Cost		Fair Value
Available-for-sale
Due in one year or less	$	25,801	$	25,985
Due from one to five years		70,236		71,518
Due from five to ten years		31,435		34,038
Due after ten years		13,500		14,701

Total	$	140,972	$	146,242

Held-to-maturity
Due in one year or less	$	25	$	25
Due from one to five years		100		100
CMO/Mortgage-backed, residential		103,511		104,945

Total	$	103,636	$	105,070

Investment securities with a carrying value of approximately $77,000 and $97,000 were pledged as collateral for Wealth Management accounts and securities sold under agreements to repurchase at March 31, 2012, and December 31, 2011, respectively.

Securities with unrealized losses at March 31, 2012, and December 31, 2011, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, are as follows:


	Less Than 12 Months					12 Months or Longer					Total
	Fair Value		Unrealized (Loss)			Fair Value		Unrealized (Loss)			Fair Value		Unrealized (Loss)
March 31, 2012
Available-for-sale
U.S. Government agencies	$	42,254	$	(87	)	$	—	$	—		$	42,254	$	(87	)

Total available-for-sale	$	42,254	$	(87	)	$	—	$	—		$	42,254	$	(87	)

Held-to-maturity
Collateralized mortgage obligations, residential	$	4,957	$	(51	)	$	4,133	$	(28	)	$	9,090	$	(79	)

Total Held-to-maturity	$	4,957	$	(51	)	$	4,133	$	(28	)	$	9,090	$	(79	)

December 31, 2011
Available-for-sale
U.S. Government agencies	$	12,990	$	(35	)	$	—	$	—		$	12,990	$	(35	)

Total available-for-sale	$	12,990	$	(35	)	$	—	$	—		$	12,990	$	(35	)

Held-to-maturity
Collateralized mortgage obligations, residential	$	19,208	$	(119	)	$	—	$	—		$	19,208	$	(119	)

Total Held-to-maturity	$	19,208	$	(119	)	$	—	$	—		$	19,208	$	(119	)

Notes to Consolidated Financial Statements

($ in thousands, except share and per share data)

In determining other-than-temporary-impairment (“OTTI”) for debt securities, management considers many factors, including: (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, (3) whether the market decline was affected by macroeconomic conditions, and (4) whether the Corporation has the intent to sell the debt security or more likely than not will be required to sell the debt security before its anticipated recovery. The assessment of whether an other-than-temporary decline exists involves a high degree of subjectivity and judgment and is based on the information available to management at a point in time.

When OTTI occurs, the amount of the OTTI 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 an entity intends to sell 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, the OTTI 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 an entity does not intend to sell the security and it is not more likely than not that the entity will be required to sell the security before recovery of its amortized cost basis less any current-period loss, the OTTI shall be separated into the amount representing the credit loss and the amount related to all other factors. The amount of the total OTTI related to the credit loss is determined based on the present value of cash flows expected to be collected and is recognized in earnings. The amount of the total OTTI related to other factors is recognized in other comprehensive income, net of applicable taxes. The previous amortized cost basis less the OTTI recognized in earnings becomes the new amortized cost basis of the investment.

As of March 31, 2012, the Corporation held nine investments of which the amortized cost was greater than fair value. The Corporation has no securities in which OTTI has been recorded.

The unrealized losses for investments classified as available-for-sale are attributable to changes in interest rates and/or economic environment and individually were 0.33% or less of their respective amortized costs. The largest unrealized loss related to a Federal Farm Credit Bank Agency that was purchased in January 2012. Given this investment is backed by the U.S. Government and its agencies; there is minimal credit risk at this time.

Although there were no unrealized losses on the municipals at March 31, 2012, the credit rating of the individual municipalities was assessed. As of March 31, 2012, all but two of the municipal debt securities were rated BBB or better (as a result of insurance of the underlying rating on the bond). The two municipal debt securities have no underlying rating. Credit reviews of the municipalities have been conducted. As a result, management has determined that all of the non-rated debt securities would be rated a “pass” asset and thus classified as an investment grade security. All interest payments are current for all municipal securities and management expects all to be collected in accordance with contractual terms.

The unrealized losses for investments classified as held-to-maturity are attributable to changes in interest rates and/or economic environment and individually were 1.05% or less of their respective amortized costs. The unrealized losses relate primarily to residential collateralized mortgage obligations. The residential collateralized mortgage obligations were purchased between October 2010 and August 2011. There has been a decrease in long-term interest rates from the time of the investment purchase and March 31, 2012, which affects the fair value of residential collateralized mortgage obligations and prepayment speeds. All residential collateralized mortgage obligations are backed by the U.S. Government and its agencies and represent minimal credit risk at this time.

Note 3: Loans and Allowance for Loan Losses

Loans, which are principally to borrowers in central Indiana, including unamortized deferred costs net of fees, consist of the following:


	March 31, 2012			December 31, 2011
Residential loans secured by real estate	$	268,501		$	262,092
Commercial loans secured by real estate		304,886			301,425
Construction loans		51,570			44,603
Other commercial and industrial loans		321,331			312,766
Consumer loans		28,985			32,166

Total loans		975,273			953,052
Net deferred loan costs		507			560
Allowance for loan losses		(13,440	)		(14,242	)

Total loans, net	$	962,340		$	939,370

Notes to Consolidated Financial Statements

($ in thousands, except share and per share data)

The Corporation periodically sells residential mortgage loans it originates based on the overall loan demand of the Corporation and outstanding balances of the residential mortgage portfolio.

As of March 31, 2012, and December 31, 2011, there was $90,011 and $81,838, of 1-4 family residential mortgage loans, respectively, pledged as collateral for FHLB advances. There were no borrowings at March 31, 2012, and December 31, 2011.

There was an aggregate of $249,148 and $236,993 of commercial loans, commercial real estate, and construction loans pledged as collateral at the Federal Reserve Bank Discount Window at March 31, 2012, and December 31, 2011, respectively. There were no borrowings at March 31, 2012, and December 31, 2011.

The following table presents the activity in the allowance for loan losses by portfolio segment:


	Three months ended March 31, 2012
	Commercial & industrial			Commercial real estate			Residential			Consumer			Unallocated			Total
Beginning balance	$	5,377		$	6,279		$	1,644		$	228		$	714		$	14,242
Loan charge offs		(1,424	)		(29	)		(321	)		(15	)		—			(1,789	)
Recoveries		12			—			54			13			—			79
Provision		(267	)		517			673			23			(38	)		908

Ending balance	$	3,698		$	6,767		$	2,050		$	249		$	676		$	13,440


	Three months ended March 31, 2011
	Commercial & industrial			Commercial real estate			Residential			Consumer			Unallocated			Total
Beginning balance	$	3,870		$	7,845		$	2,400		$	200		$	819		$	15,134
Loan charge offs		(402	)		(409	)		(122	)		(7	)		—			(940	)
Recoveries		113			36			8			2			—			159
Provision		192			2,023			128			148			(802	)		1,689

Ending balance	$	3,773		$	9,495		$	2,414		$	343		$	17		$	16,042

The following table presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method:


	March 31, 2012
	Commercial & industrial			Commercial real estate			Residential			Consumer			Unallocated		Total
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	544		$	1,286		$	752		$	11		$	—	$	2,593
Collectively evaluated for impairment		3,154			5,481			1,298			238			676		10,847
Total ending allowance balance	$	3,698		$	6,767		$	2,050		$	249		$	676	$	13,440

Allowance as a % of loans		1.15	%		1.90	%		0.76	%		0.86	%		N/A		1.38	%

Loans:
Loans individually evaluated for impairment	$	4,159			17,423		$	3,998		$	11			N/A	$	25,591
Loans collectively evaluated for impairment		317,433			338,721			265,033			29,002			N/A		950,189
Accrued interest receivable		823			881			1,250			57			N/A		3,011

Total recorded investment	$	322,415		$	357,025		$	270,281		$	29,070		$	N/A	$	978,791

Notes to Consolidated Financial Statements

($ in thousands, except share and per share data)


	December 31, 2011
	Commercial & industrial			Commercial real estate			Residential			Consumer			Unallocated		Total
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	2,702			897		$	720		$	20		$	—	$	4,339
Collectively evaluated for impairment		2,675			5,382			924			208			714		9,903

Total ending allowance balance	$	5,377		$	6,279		$	1,644		$	228		$	714	$	14,242

Allowance as a % of loans		1.72	%		1.82	%		0.63	%		0.71	%		N/A		1.49	%
Loans:
Loans individually evaluated for impairment	$	7,872			14,409		$	4,480		$	20			N/A	$	26,781
Loans collectively evaluated for impairment		305,147			331,380			258,131			32,173			N/A		926,831
Accrued interest receivable		877			885			1,296			80			N/A		3,138

Total recorded investment	$	313,896		$	346,674		$	263,907		$	32,273		$	N/A	$	956,750

The above disclosure is required to be presented using the recorded investment of loans, which includes accrued interest receivable and net loan origination fees. Although accrued interest receivable balances have been presented separately, all accrued interest receivable balances are related to the loans collectively evaluated for impairment as practically all loans individually evaluated for impairment are on nonaccrual.

Loans are considered to be impaired when it is determined that the obligor will not pay all contractual principal and interest when due. The following table presents loans individually evaluated for impairment by class. For purposes of this disclosure, the unpaid principal is not reduced for net charge-offs.


	March 31, 2012
	Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated
With no related allowance recorded:
Commercial & industrial	$	5,182	$	3,121	$	—
Commercial real estate		4,803		2,487		—
Residential
1-4 family		1,682		1,226		—
Home equity		501		433		—
Consumer
Personal LOC		—		—		—
Personal Term		—		—		—
DDA Overdraft Protection		—		—		—
Credit cards		—		—		—
With an allowance recorded:
Commercial & industrial		1,038		1,038		544
Commercial real estate		14,936		14,936		1,286
Residential
1-4 family		373		363		64
Home equity		1,976		1,976		688
Consumer
Personal LOC		—		—		—
Personal Term		—		—		—
DDA Overdraft Protection		—		—		—
Credit cards		11		11		11

Total	$	30,502	$	25,591	$	2,593

Notes to Consolidated Financial Statements

($ in thousands, except share and per share data)


	December 31, 2011
	Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated
With no related allowance recorded:
Commercial & industrial	$	2,471	$	1,812	$	—
Commercial real estate		4,811		2,523		—
Residential
1-4 family		1,371		920		—
Home equity		1,399		1,245		—
Consumer
Personal LOC		—		—		—
Personal Term		—		—		—
DDA Overdraft Protection		—		—		—
Credit cards		—		—		—
With an allowance recorded:
Commercial & industrial		6,060		6,060		2,702
Commercial real estate		11,886		11,886		897
Residential
1-4 family		391		387		80
Home equity		1,928		1,928		640
Consumer
Personal LOC		—		—		—
Personal Term		—		—		—
DDA Overdraft Protection		11		11		11
Credit cards		9		9		9

Total	$	30,337	$	26,781	$	4,339

The following table presents the average balance of loans individually evaluated for impairment by class:


	Three months ended March 31, 2012		Three months ended March 31, 2011
Commercial & industrial	$	6,109	$	3,868
Commercial real estate		15,391		4,355
Residential
1-4 family		1,611		826
Home equity		2,979		3,492
Consumer
Personal LOC		—		106
Personal Term		—		—
DDA Overdraft Protection		—		—
Credit cards		9		3

Total	$	26,099	$	12,650

There was $46 and $0 in interest income recorded on a cash or accrual basis for the three month period ending March 31, 2012, and March 31, 2011, respectively.

Notes to Consolidated Financial Statements

($ in thousands, except share and per share data)

The following table presents the recorded investment in nonaccrual and loans past due over 90 days still on accrual by class of loans:


	Nonaccrual				Loans Past Due Over 90 Days Still Accruing
	March 31, 2012		December 31, 2011		March 31, 2012		December 31, 2011
Commercial & industrial	$	3,915	$	7,384	$	—	$	—
Commercial real estate		15,144		12,130		—		—
Residential
1-4 family		1,421		1,061		—		—
Home equity		2,376		3,139		—		—
Consumer
Personal LOC		—		—		—		—
Personal Term		—		—		—		—
DDA Overdraft Protection		—		—		—		11
Credit cards		—		—		11		9

Total	$	22,856	$	23,714	$	11	$	20

The following table presents the aging of the recorded investment in past due loans by class of loans:


	March 31, 2012
	30 - 89 Days Past Due			Greater than 90 Days Past Due			Total Past Due
Commercial & industrial	$	3,917		$	1,240		$	5,157
Commercial real estate		3,459			2,449			5,908
Residential
1-4 family		565			587			1,152
Home equity		—			262			262
Consumer
Personal LOC		—			—			—
Personal Term		60			—			60
DDA Overdraft Protection		—			—			—
Credit cards		31			11			42

Total	$	8,032		$	4,549		$	12,581

Past due as a % of loans		0.82	%		0.47	%		1.29	%

	December 31, 2011
	30 - 89 Days Past Due			Greater than 90 Days Past Due			Total Past Due
Commercial & industrial	$	1,090		$	128		$	1,218
Commercial real estate		4,346			1,931			6,277
Residential
1-4 family		899			677			1,576
Home equity		32			1,070			1,102
Consumer
Personal LOC		—			—			—
Personal Term		8			—			8
DDA Overdraft Protection		1			11			12
Credit cards		78			9			87

Total	$	6,454		$	3,826		$	10,280

Past due as a % of loans		0.68	%		0.40	%		1.08	%

As of March 31, 2012, nonaccrual loans that were 0-29 days past due totaled $13,667. As of December 31, 2011, nonaccrual loans that were 0-29 days past due totaled $14,418.

Notes to Consolidated Financial Statements

($ in thousands, except share and per share data)

Troubled Debt Restructurings:

As of March 31, 2012, the Corporation had $16,111 in outstanding balances and had allocated $1,597 of specific reserves to customers whose loan terms have been modified in troubled debt restructurings. Of the total $16,111 in outstanding balances of troubled debt restructurings, $13,386 are non-accrual and have a specific reserve of $1,076 and those balances have been reported as such. As of December 31, 2011, the Corporation had $20,226 in outstanding balances and had allocated $4,160 of specific reserves to customers whose loan terms have been modified in troubled debt restructurings. The Corporation has committed to lend an additional $774 and $2,695 to customers with outstanding loans that are classified as troubled debt restructurings as of March 31, 2012, and December 31, 2011, respectively.

During the three month period ending March 31, 2012, the terms of certain loans were modified as troubled debt restructurings. The modification of the terms of such loans included one or a combination of the following: a reduction of the stated interest rate of the loan; an extension of the maturity date at a stated rate of interest lower than the current market rate for new debt with similar risk; or a permanent reduction of the recorded investment in the loan.

For the three month period ending March 31, 2012, there was a modification for an extension of the maturity date for 3.5 years.

The following table presents loans by class modified as troubled debt restructurings that occurred during the three month period ending March 31, 2012:


	Number of Loans	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Troubled Debt Restructurings:
Commercial & industrial	—	$	—	$	—
Commercial real estate	—		—		—
Residential
1-4 family	1		46		46
Home equity	—		—		—
Consumer
Personal LOC	—		—		—
Personal Term	—		—		—
DDA Overdraft Protection	—		—		—
Credit cards	—		—		—

Total	1	$	46	$	46

The troubled debt restructurings described above decreased the allowance for loan losses by $0 and resulted in charge offs of $0 during the three month period ending March 31, 2012.

The following table presents loans by class modified as troubled debt restructurings for which there was a payment default within twelve months following the modification:


	Number of Loans	Recorded Investment
Troubled Debt Restructurings that subsequently defaulted:
Commercial & industrial	7	$	1,772
Commercial real estate	3		4,907
Residential
1-4 family	3		177
Home equity	1		133
Consumer
Personal LOC	—		—
Personal Term	—		—
DDA Overdraft Protection	—		—
Credit cards	—		—

Total	14	$	6,989

A loan is considered to be in payment default once it is 30 days contractually past due under the modified terms.

Notes to Consolidated Financial Statements

($ in thousands, except share and per share data)

The troubled debt restructurings that subsequently defaulted described above increased the allowance for loan losses by $0 and resulted in charge offs of $22 during the period ending March 31, 2012.

The terms of certain other loans were modified during the period ending March 31, 2012, that did not meet the definition of a troubled debt restructuring. These loans have a total recorded investment as of March 31, 2012, of $3,457. The modification of these loans involved either a modification of the terms of a loan to borrowers who were not experiencing financial difficulties or a delay in a payment that was considered to be insignificant.

In order to determine whether a borrower is experiencing financial difficulty, an evaluation is performed of the probability that the borrower will be in payment default on any of its debt in the foreseeable future without the modification.

Certain loans which were modified during the period ending March 31, 2012, and did not meet the definition of a troubled debt restructuring as the modification was a delay in a payment that was considered to be insignificant did not have any delay in payments.

Credit Quality Indicators:

The Corporation categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Corporation analyzes certain loans individually by classifying the loans as to credit risk. This analysis includes non-homogeneous loans, such as commercial, commercial real estate, and loans for personal or consumer purpose as warranted. This analysis is performed on a monthly basis. The Corporation uses 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 the Corporation’s 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 the institution 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.

Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be pass rated loans. Based on the most recent analysis performed, the risk rating of the loans by class of loans is as follows:


	Not Rated		Pass		Special Mention		Substandard		Doubtful
March 31, 2012
Commercial & industrial	$	—	$	293,805	$	12,653	$	15,134	$	—
Commercial real estate		—		309,565		17,580		28,999		—

Total	$	—	$	603,370	$	30,233	$	44,133	$	—


	Not Rated		Pass		Special Mention		Substandard		Doubtful
December 31, 2011
Commercial & industrial	$	—	$	291,453	$	3,566	$	18,000	$	—
Commercial real estate		—		307,170		11,622		26,997		—

Total	$	—	$	598,623	$	15,188	$	44,997	$	—

Notes to Consolidated Financial Statements

($ in thousands, except share and per share data)

The Corporation considers the performance of the loan portfolio and its impact on the allowance for loan losses. For residential and consumer loan classes, the Corporation also evaluates credit quality based on the aging status of the loan, which are previously presented, and by payment activity. A loan is considered to be nonperforming when one or more of the following conditions exist: past due 90 days or greater, non accruing status, or troubled debt restructurings. The following table presents the recorded investment in residential and consumer loans based on payment activity:


	Consumer								Residential
March 31, 2012	Personal LOC		Personal Term		DDA Overdraft Protection		Credit cards		1-4 family		Home equity
Performing	$	14,368	$	8,992	$	858	$	4,784	$	119,138	$	145,895
Nonperforming		—		—		—		11		1,589		2,409

Total	$	14,368	$	8,992	$	858	$	4,795	$	120,727	$	148,304


	Consumer								Residential
December 31, 2011	Personal LOC		Personal Term		DDA Overdraft Protection		Credit cards		1-4 family		Home equity
Performing	$	17,541	$	9,223	$	460	$	4,949	$	112,791	$	145,340
Nonperforming		—		—		11		9		1,307		3,173

Total	$	17,541	$	9,223	$	471	$	4,958	$	114,098	$	148,513

Note 4: Other Real Estate Owned

The following table presents the activity in other real estate owned:


	Three months ended March 31,
	2012			2011
Balance at beginning of period	$	7,575		$	9,574
Additions		702			88
Net write downs		(174	)		(202	)
Sales		(257	)		(51	)

Balance at end of period	$	7,846		$	9,409

The following table presents expenses related to other real estate owned:


	Three months ended March 31,
	2012			2011
Net gain on sales	$	(70	)	$	(307	)
Net write downs		174			202
Operating expenses, net of rental income		198			172

	$	302		$	67

Expenses related to real estate owned are included in non performing assets expenses. Other real estate rental income is included in rental income.

Notes to Consolidated Financial Statements

($ in thousands, except share and per share data)

Note 5: Mortgage Servicing

Mortgage loans serviced for others are not reported as assets. The principal balances of these loans are as follows:


	March 31, 2012		December 31, 2011
Mortgage loan portfolios serviced for:
FNMA	$	194,219	$	188,332
Private		17,664		21,583
FHLBI		9,314		8,800

Balance at end of period	$	221,197	$	218,715

Custodial escrow balances maintained in connection with serviced loans were $1,783 and $876 at March 31, 2012, and December 31, 2011, respectively.

The following table includes activity for mortgage servicing rights:


	Three months ended March 31,
	2012			2011
Balance at beginning of period	$	1,455		$	1,624
Plus additions		177			160
Fair value adjustments		(42	)		(33	)

Balance at end of period	$	1,590		$	1,751

Mortgage servicing rights are carried at fair value at March 31, 2012, and December 31, 2011. Fair value at March 31, 2012, was determined using discount rates ranging from 10.5% to 15.0%, prepayment speeds ranging from 6.60% to 29.45%, depending on the stratification of the specific right, and a weighted average default rate of 0.37%. Fair value at December 31, 2011, was determined using discount rates ranging from 10.5% to 15.0%, prepayment speeds ranging from 6.77% to 31.62%, depending on the stratification of the specific right, and a weighted average default rate of 0.35%.

Note 6: Stock Based Compensation

During the first quarter of 2012, two officers of the Corporation exercised options to purchase 4,100 common shares in the aggregate. The weighted average exercise price was $43.38 and the weighted average fair market value of the stock was $47.17.

Due to the exercise of these options for the three months ended March 31, 2012, the Corporation will not receive a deduction for tax purposes. The compensation expense related to the options exercised was greater than the difference between the strike price of the stock at the date of grant and the fair market value of the stock at the date of exercise. Therefore, the Corporation recorded additional income tax payable of $22 thousand and reduced additional paid in capital for the three months ended March 31, 2012, as per guidance issued by the Financial Accounting Standards Board (FASB) on stock compensation.

Notes to Consolidated Financial Statements

($ in thousands, except share and per share data)

Note 7: Earnings per Share

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


	Three months ended March 31,
	2012		2011
Basic average shares outstanding		2,330,009		2,317,751

Net income	$	1,741	$	1,617

Basic net income per common share	$	0.75	$	0.70

Diluted
Average shares outstanding		2,330,009		2,317,751
Nonvested restricted stock		129,499		82,967
Net effect of the assumed exercise of stock options		20,170		21,742

Diluted average shares		2,479,678		2,422,460

Net income	$	1,741	$	1,617

Diluted net income per common share	$	0.70	$	0.67

For the three month period ending March 31, 2012 and 2011, options to purchase 14,600 and 183,800 shares, respectively, were outstanding but not included in the computation of diluted earnings per share because they were antidilutive.

There were no antidilutive restricted shares for the three month period ending March 31, 2012 and March 31, 2011, respectively.

Note 8: Commitments and Contingencies

Some financial instruments, such as loan commitments, credit lines, letters of credit, and overdraft protection are issued to meet customer financing needs. These are agreements to provide credit or to support the credit of others, as long as conditions established in the contract are met, and usually have expiration dates. Commitments may expire without being used. Off-balance sheet risk to credit loss exists up to the face amount of these instruments, although material losses are not anticipated.

The contractual amount of financial instruments with off-balance sheet risk was as follows:


	March 31, 2012		December 31, 2011
Committed, not funded, commercial loans	$	1,500	$	2,500
Committed, not funded, residential loans		22,087		17,753
Unused commercial credit lines		239,240		232,578
Unused revolving home equity and credit card lines		122,096		119,459
Standby letters of credit		10,286		9,066
Demand deposit account lines of credit		2,622		2,583

	$	397,831	$	383,939

The majority of commitments to fund loans are variable rate. The demand deposit account lines of credit are a fixed rate at 18% with no maturity.

Notes to Consolidated Financial Statements

($ in thousands, except share and per share data)

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

A reserve for unfunded standby letters of credit and commercial credit lines in the amount of $15 was established for the three month period ending March 31, 2012, for one commercial relationship that is currently classified as an impaired loan.

Other than routine litigation incidental to business and based on the information presently available, the Corporation believes that the total amounts, if any, that will ultimately be paid arising from these claims and legal actions are reflected in the consolidated results of operations and financial position.

Note 9: Fair Value

Fair value is the exchange price that would be received for an asset or paid to transfer a liability (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. There are three levels of inputs that may be used to measure fair values:

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

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; or other inputs that are observable or can be corroborated by observable market data.

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

The Corporation used the following methods and significant assumptions to estimate the fair value of each type of asset or liability carried at fair value:

Available for Sale Securities: The fair value of available-for-sale securities is determined by obtaining quoted prices on nationally recognized securities exchanges (Level 1 inputs) or matrix pricing, which is a mathematical technique widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on securities’ relationship to other benchmark quoted securities (Level 2 inputs).

Mortgage Servicing Rights: On a quarterly basis, loan servicing rights are evaluated for impairment based upon the fair value of the rights as compared to carrying amount. If the carrying amount of an individual tranche exceeds fair value, impairment is recorded on that tranche so that the servicing asset is carried at fair value. Fair value is determined at a tranche level based on a valuation model that calculates the present value of estimated future net servicing income. The valuation model utilizes assumptions that market participants would use in estimating future net servicing income and that can be validated against available market data (Level 2).

Impaired Loans: At the time a loan is considered impaired, it is valued at the lower of cost or fair value. Impaired loans carried at fair value generally receive specific allocations of the allowance for loan losses. For collateral dependent loans, fair value is commonly based on recent real estate appraisals, less costs to sell. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value. Non-real estate collateral may be valued using an appraisal, net book value per the borrower’s financial statements, or aging reports, adjusted or discounted based on management’s historical knowledge, changes in market conditions from the time of the valuation, and management’s expertise and knowledge of the client and client’s business, which are considered unobservable inputs, resulting in a Level 3 fair value classification. None of the unobservable inputs are considered material for additional disclosure. Impaired loans are evaluated on a quarterly basis for additional impairment and adjusted accordingly.

Notes to Consolidated Financial Statements

($ in thousands, except share and per share data)

Other Real Estate Owned: Assets acquired through or instead of loan foreclosure are initially recorded at fair value less costs to sell when acquired, establishing a new cost basis. These assets are subsequently accounted for at lower of cost or fair value less estimated costs to sell. Fair value is commonly based on recent real estate appraisals. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value.

Appraisals for both collateral-dependent impaired loans and other real estate owned are performed by certified general appraisers (for commercial properties) or certified residential appraisers (for residential properties) whose qualifications and licenses have been reviewed and verified by the Corporation. Once received, a member of the Real Estate Due Diligence Department reviews the assumptions and approaches utilized in the appraisal as well as the overall resulting fair value in comparison with via independent data sources such as recent market data or industry-wide statistics.

Appraisals are obtained on an annual basis for other real estate owned and collateral dependent residential impaired loans. For collateral dependent commercial impaired loans, an annual appraisal is obtained for all impaired loans with a balance greater than $400 and for impaired loans with balances less than $400 and a loan to value equal or greater than 60%. An appraisal is obtained every two years for commercial impaired loans with balances less than $400 and a loan to value less than 60%.

A discount is applied to the appraisal to adjust for the costs to sell, which is considered an unobservable input and results in a Level 3 classification for determining fair value. A discount of 20% is applied to properties with values equal to or less than $100 and a discount of 15% is applied to properties with values greater than $100. Selling costs from actual OREO sales are used to validate these discounts on an annual basis.

Assets and Liabilities Measured on a Recurring Basis

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


			Fair Value Measurements Using:
	Carrying Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
March 31, 2012
Assets:
Available-for-sale securities:
U.S. Treasury securities	$	500	$	500	$	—	$	—
U.S. Government agencies		78,006		—		78,006		—
Municipal securities		67,736		—		67,736		—
Mortgage servicing rights		1,590		—		1,590		—

December 31, 2011
Assets:
Available-for-sale securities:
U.S. Treasury securities	$	500	$	500	$	—	$	—
U.S. Government agencies		71,266		—		71,266		—
Municipal securities		68,718		—		68,718		—
Mortgage servicing rights		1,455		—		1,455		—

A detailed breakdown of the fair value for the available-for-sale investment securities is provided in the Investment Securities note.

There were no transfers between Level 1 and Level 2 during the three month period ending March 31, 2012.

Notes to Consolidated Financial Statements

($ in thousands, except share and per share data)

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 Using:
	Carrying Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
March 31, 2012
Assets:
Impaired loans
Commercial
Commercial & industrial	$	452	$	—	$	—	$	452
Commercial real estate		11,654		—		—		11,654
Residential
1-4 family		156		—		—		156
Home equity		1,266		—		—		1,266
Other real estate
Commercial
Commercial real estate		3,350		—		—		3,350
Residential
1-4 family		29		—		—		29

December 31, 2011
Assets:
Impaired loans
Commercial
Commercial & industrial	$	2,987	$	—	$	—	$	2,987
Commercial real estate		8,991		—		—		8,991
Residential
1-4 family		104		—		—		104
Home equity		1,266		—		—		1,266
Other real estate
Commercial
Commercial real estate		3,547		—		—		3,547
Residential
1-4 family		115		—		—		115

The following represent impairment charges recognized during the period:

Impaired loans, which are measured for impairment using the fair value of the collateral for collateral dependent loans, had a gross carrying amount of $15,600, with a valuation allowance of $2,072, at March 31, 2012. There was no additional provision for loan losses for the three month period ending March 31, 2012. At December 31, 2011, impaired loans had a gross carrying amount of $17,234, with a valuation allowance of $3,886. There was an additional provision for loan losses of $925 for the three month period ending March 31, 2011.

Other real estate owned measured at fair value less costs to sell subsequent to being transferred to other real estate, had a net carrying amount of $3,379, which is made up of the outstanding balance of $5,570, net of a valuation allowance of $2,191 at March 31, 2012. There was a charge to earnings through non performing asset expense of $174 for the three month period ending March 31, 2012. At December 31, 2011, other real estate owned measured at fair value less costs to sell subsequent to being transferred to other real estate, had a net carrying amount of $3,662, which is made up of the outstanding balance of $5,719, net of a valuation allowance of $2,057. There was a charge to earnings through non performing asset expense of $202 for the three month period ending March 31, 2011.

Notes to Consolidated Financial Statements

($ in thousands, except share and per share data)

The estimated fair value of the Corporation’s financial instruments is as follows:


			Fair Value Measurements at March 31, 2012 using
	Carrying Value		Level 1		Level 2		Level 3		No level assigned		Total
Assets
Cash and due from banks	$	25,927	$	25,927	$	—	$	—	$	—	$	25,927
Interest bearing due from banks		208,123		208,123		—		—		—		208,123
Federal funds sold		5,877		5,877		—		—		—		5,877
Reverse repurchase agreements		1,000		1,000		—		—		—		1,000
Investment securities available-for-sale		146,242		500		145,742		—		—		146,242
Investment securities held-to-maturity		103,636		—		105,070		—		—		105,070
Loans held for sale		1,725		—		1,725		—		—		1,725
Net loans		962,340		—		—		—		976,080		976,080
Accrued interest receivable		4,681		—		1,670		—		3,011		4,681
Liabilities
Deposits		1,337,866		1,174,268		164,873		—		—		1,339,141
Repurchase agreements and other secured short-term borrowings		76,036		—		76,046		—		—		76,046
Short-term debt		2,375		—		2,375		—		—		2,375
Subordinated debt		5,000		—		5,000		—		—		5,000
Junior subordinated debentures		13,918		—		—		10,425		—		10,425
Accrued interest payable		974		32		115		94		733		974


	December 31, 2011
	Carrying Amount		Fair Value
Assets
Cash and due from banks	$	192,424	$	192,424
Federal funds sold		2,911		2,911
Reverse repurchase agreements		1,000		1,000
Investment securities available-for-sale		140,484		140,484
Investment securities held-to-maturity		113,799		115,003
Net loans		939,370		948,559
Federal Reserve and FHLB stock		2,990		N/A
Accrued interest receivable		4,403		4,403

Liabilities
Deposits		1,242,819		1,244,367
Repurchase agreements and other secured short-term borrowings		95,585		95,596
Short-term debt		2,438		2,438
Subordinated debt		5,000		5,000
Junior subordinated debentures		13,918		10,389
Accrued interest payable		1,416		1,416

The following methods and assumptions, not previously presented, were used by the Corporation in estimating its fair value disclosures for financial instruments not recorded at fair value.

Cash and Cash Equivalents: The carrying amounts of cash and due from banks, interest bearing due from banks, federal funds sold, and reverse repurchase agreements approximate fair values and are classified as Level 1.

Notes to Consolidated Financial Statements

($ in thousands, except share and per share data)

Federal Reserve and FHLB Stock: It is not practical to determine the fair value of FHLB stock due to restrictions placed on its transferability.

Loans: Fair values of loans, excluding loans held for sale, are estimated as follows: For variable rate loans that reprice frequently and with no significant change in credit risk, fair values are based on carrying values. Fair values for other loans are estimated using discounted cash flow analyses, using interest rates currently being offered for loans with similar terms to borrowers of similar credit quality. Impaired loans are valued at the lower of cost or fair value, less cost to sell as described previously. The methods utilized to estimate the fair value of loans do not necessarily represent an exit price.

The fair value of loans held for sale is estimated based upon binding contracts and quotes from third party investors resulting in a Level 2 classification.

Deposits: The fair values disclosed for demand deposits (e.g., interest and non-interest checking, savings, and money market accounts) are, by definition, equal to the amount payable on demand at the reporting date (i.e., their carrying amount) resulting in a Level 1 classification. The carrying amount of certificates of deposit approximates their fair value at the reporting date. Fair value for certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits resulting in a Level 2 classification.

Short-Term Borrowing: The carrying amounts of borrowings under repurchase agreements and other secured short-term borrowings, generally maturing within thirty days, approximate their fair values resulting in a Level 2 classification.

Other Borrowing: The fair values of the short-term and subordinated debt are estimated using discounted cash flow analyses based on the current borrowing rates for similar types of borrowing arrangements resulting in a Level 2 classification.

The fair values of the junior subordinated debentures are estimated using discounted cash flow analyses based on the current borrowing rates for similar types of borrowing arrangements resulting in a Level 3 classification.

Accrued Interest Receivable/Payable: The carrying amounts of accrued interest approximate fair value resulting in a Level 1, Level 2 or Level 3 classification which is consistent with its associated asset/liability.

Off-balance Sheet Instruments: The fair value of commitments is not material.

Note 10: Adoption of New Accounting Standards

At the date of this filing, the FASB had not issued any accounting pronouncements that were applicable to the Corporation.

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

Corporation Overview

The National Bank of Indianapolis Corporation (the “Corporation”) is a one-bank holding company formed in 1993 which owns all of the outstanding stock of The National Bank of Indianapolis (the “Bank”). The Bank, a national banking association, was formed in 1993 and is headquartered in Indianapolis, Indiana. The primary business activity of the Corporation is providing financial services through the Bank’s twelve banking offices in Marion, Johnson, and Hamilton County, Indiana.

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

The Corporation recorded net income of $1.7 million or $0.70 per diluted share for the three month period ending March 31, 2012, as compared to $1.6 million or $0.67 per diluted share for the three month period ending March 31, 2011. The increase in net income for the three month period ending March 31, 2012, as compared to the three month period ending March 31, 2011, is primarily due to an increase in net interest income and mortgage banking income and a decrease in FDIC insurance premiums and the provision for loan losses. The increase is partially offset by an increase in salary expense, non performing assets expense, and other expense.

The risks and challenges that management believes will be important for the remainder of 2012 are price competition for loans and deposits by competitors, marketplace credit effects, continued spread compression, a slow recovery of the local economy that could adversely impact the ability of borrowers to repay outstanding loans or the value of the collateral securing these loans, and the lingering effects from the financial crisis in the U.S. market and foreign markets.

The Corporation has determined that it has one reportable segment, banking services. The Bank provides a full range of deposit, credit, and money management services to its target markets, which are small to medium size businesses, affluent executive and professional individuals, and not-for-profit organizations in the Indianapolis Metropolitan Statistical Area of Indiana.

Forward-Looking Information

This section contains forward-looking statements. Forward-looking statements give current expectations or forecasts of future events and are not guarantees of future performance. The forward-looking statements are based on management’s expectations and are subject to a number of risks and uncertainties. Although management believes the expectations reflected in such forward-looking statements are reasonable, actual results may differ materially from those expressed or implied in such statements. Risks and uncertainties that could cause actual results to differ materially include, without limitation, the Corporation’s ability to execute its business plans; changes in general economic and financial market conditions; changes in interest rates; changes in competitive conditions; continuing consolidation in the financial services industry; new litigation or changes in existing litigation; losses, customer bankruptcy, claims and assessments; changes in banking regulations or other regulatory or legislative requirements that impact the Corporation’s business; and changes in accounting policies and procedures as may be required by the Financial Accounting Standards Board or other regulatory agencies. Additional information concerning factors that could cause actual results to differ materially from those expressed or implied in the forward-looking statements is available in the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2011.

Critical Accounting Policies

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

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

Investment Securities Valuation

When the Corporation classifies debt securities as held-to-maturity, it has the positive intent and ability to hold the securities to maturity. Held-to-maturity securities are stated at amortized cost. Debt securities not classified as held-to-maturity are classified as available-for-sale. Available-for-sale securities are stated at fair value, with the unrealized gains and losses, net of tax, reported as a component of other comprehensive income. Interest income includes amortization of purchase premium or discount. Premiums and discounts on securities are amortized on the level-yield method without anticipating prepayments, except for mortgage backed securities where prepayments are anticipated. Gains and losses on sales are recorded on the trade date and determined using the specific identification method.

The Corporation obtains fair values from a third party on a monthly basis in order to adjust the available-for-sale securities to fair value. Equity securities that do not have readily determinable fair values are carried at cost. When OTTI occurs, the amount of the OTTI 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 an entity intends to sell 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, the OTTI 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 an entity does not intend to sell the security and it is not more likely than not that the entity will be required to sell the security before recovery of its amortized cost basis less any current-period loss, the OTTI shall be separated into the amount representing the credit loss and the amount related to all other factors. The amount of the total OTTI related to the credit loss is determined based on the present value of cash flows expected to be collected and is recognized in earnings. The amount of the total OTTI related to other factors is recognized in other comprehensive income, net of applicable taxes. The previous amortized cost basis less the OTTI recognized in earnings becomes the new amortized cost basis of the investment. In determining whether a market value decline is other-than-temporary, management considers the reason for the decline, the extent of the decline and the duration of the decline. Management evaluates securities for OTTI at least on a quarterly basis, and more frequently when economic or market conditions warrant such an evaluation. In addition to a review of the investment portfolio for OTTI, a review of the reasonableness of the market values provided by the third party is performed at least on a quarterly basis.

Allowance for Loan Losses

The allowance for loan losses is a valuation allowance for probable incurred credit losses. The allowance for loan losses is established through provisions for loan losses charged against income. Loans deemed to be uncollectible are charged against the allowance for loan losses, and subsequent recoveries, if any, are credited to the allowance for loan losses.

Management estimates the allowance balance required for each loan portfolio segment by using past loan loss experience, the nature and volume of the portfolio, information about specific borrower situations and estimated collateral values, economic conditions, and other factors. Allocations of the allowance may be made for specific loans, but the entire allowance is available for any loan that, in management’s judgment, should be charged off.

Within the allowance, there are specific and general loss components. The specific loss component is assessed for loans that management believes to be impaired. All loan classes are considered to be impaired when it is determined that the obligor will not pay all contractual principal and interest due or they become 90 days past due. For loans determined to be impaired, the loan’s carrying value is compared to its fair value using one of the following fair value measurement techniques: present value of expected future cash flows, observable market price, or fair value of the associated collateral less costs to sell. An allowance is established when the fair value is lower than the carrying value of that loan. The general component covers non-impaired loans and is based on a three-year historical loss experience supplemented with other economic factors based on the risks present for each portfolio segment. These economic factors include consideration of the following: changes in lending policies and procedures; effects of changes in risk selection and underwriting standards; national and local economic trends and conditions; trends in nature, volume, and growth rate of loans; experience, ability, and depth of lending management and other relevant staff; levels of and trends in past due and classified loans; collateral valuations in the market for collateral dependent loans; effects of changes in credit concentrations; and competition, legal, and regulatory factors. These loans are segregated by loan class and/or risk grade with an estimated loss ratio applied against each loan class and/or risk grade.

Loans for which the terms have been modified resulting in concessions and for which the borrower is experiencing financial difficulties are considered troubled debt restructuring and are classified as impaired. Troubled debt restructurings are separately identified for impairment disclosures and are measured at the present value of estimated future cash flows using the loan’s effective rate at inception. If a troubled debt restructuring is considered to be a collateral dependent loan, the loan is reported, at the carrying value and a specific reserve is established if the fair value of the collateral is less than the carrying value. For troubled debt restructurings that subsequently default, the Corporation determines the amount of the reserve in accordance with the accounting policy for the allowance for loan losses.

The following portfolio segments have been identified: commercial and industrial, commercial real estate, residential, and consumer. Commercial credits and personal lines of credit are subject to the assignment of individual risk grades in accordance with the Corporation’s Loan Risk Rating Guidelines. These loans are individually graded as Pass, Special Mention, Substandard or Doubtful, with the “Pass” rating further subdivided into risk gradients. Residential loans (including home equity lines of credit) and consumer loans (excluding aforementioned personal lines of credit) are not generally individually graded; rather, these loans are treated as homogenous pools within each category. When included in these pools, these loans are assigned a “Pass” Risk Rating. These loans may become individually graded based on a pledge of liquid collateral, delinquency status, identified changes in the borrower’s repayment capacity, or as a result of legal action.

It is the policy of the Corporation to promptly charge off any loan, or portion thereof, which is deemed to be uncollectible. This includes, but is not limited to, any loan rated “Loss” by the regulatory authorities. All impaired loan classes are considered on a case-by-case basis.

An assessment of the adequacy of the allowance is performed on a quarterly basis. Management believes the allowance for loan losses is maintained at a level that is adequate to absorb probable losses inherent in the loan portfolio.

Other Real Estate Owned

Assets acquired through or instead of loan foreclosure are initially recorded at fair value less costs to sell when acquired, establishing a new cost basis. Any excess recorded investment over the fair value of the property received is charged to the allowance for loan losses. The fair value of foreclosed assets is subject to fluctuations in appraised values which are affected by the local and national economy. If fair value declines subsequent to foreclosure, a valuation allowance is recorded through non performing assets expense.

When the Corporation owns and operates these assets, it is exposed to risks inherent in the ownership of real estate. In addition to declines in the value of the property, there are expenditures associated with the ownership of real estate which are expensed after the Corporation acquires the property. These expenditures primarily include real estate taxes, insurance, and maintenance costs. These expenses may adversely affect the income since they may exceed the amount of rental income collected.

Mortgage Servicing Assets

Mortgage servicing rights are recognized separately when they are acquired through sales of loans. When mortgage loans are sold, servicing rights are initially recorded at fair value with the income statement effect recorded in gains on sales of loans. Fair value is based on a valuation model that calculates the present value of estimated future net servicing income. The Corporation obtains fair value estimates from an independent third party. The valuation model incorporates assumptions that market participants would use in estimating future net servicing income, such as the cost to service, the discount rate, the custodial earnings rate, an inflation rate, ancillary income, prepayment speeds and default rates and losses.

Under the fair value measurement method, the Corporation measures servicing rights at fair value at each reporting date and reports changes in fair value of servicing assets in earnings in the period in which the changes occur, and these changes are included in mortgage banking income on the income statement. The fair values of servicing rights are subject to significant fluctuations as a result of changes in estimated and actual prepayment speeds and default rates and losses.

Results of Operations

Net Interest Income

The Corporation’s results of operations depend primarily on the level of its net interest income, its non-interest income and its operating expenses. Net interest income depends on the volume of and rates associated with interest earning assets and interest bearing liabilities which results in the net interest spread. The Corporation had net interest income fully taxable equivalent (“FTE”) of $11.1 million for the three month period ending March 31, 2012, as compared to net interest income FTE of $10.4 million for the three month period ending March 31, 2011. The increase in net interest income FTE is due to an increase in total earning assets of $55.5 million for the three month period ending March 31, 2012, as compared to the three month period ending March 31, 2011. Total interest bearing liabilities decreased $41.4 million for the three month period ending March 31, 2012, as compared to the three month period ending March 31, 2011. The net interest income spread FTE increased 0.09% to 3.02% for the three month period ending March 31, 2012, from 2.93% for the three month period ending March 31, 2011. The contribution of non-interest bearing funds increased 0.01% to 0.12% from 0.11% for the three month period ending March 31, 2012 and 2011, respectively. Due to the increase in net interest income spread FTE and the contribution of non-interest bearing funds, there was an increase to the net interest margin FTE to 3.14% from 3.04% for the three month period ending March 31, 2012 and 2011, respectively.

The following table details average balances, interest income/expense and average rates/yields for the Corporation’s earning assets and interest bearing liabilities at the dates indicated (tax equivalent basis, dollars in thousands):


	Three months ended March 31,
	2012							2011
	Average Balance		Interest Income/ Expense		Average Rate/ Yield			Average Balance		Interest Income/ Expense		Average Rate/ Yield
Assets:
Interest bearing due from banks	$	174,481	$	110		0.25	%	$	213,117	$	132		0.25	%
Reverse repurchase agreements		1,000		—		0.01	%		1,000		—		0.01	%
Federal funds		15,565		8		0.21	%		17,971		11		0.24	%
Non taxable investment securities—FTE		63,051		832		5.28	%		56,629		811		5.73	%
Taxable investment securities		195,279		684		1.40	%		167,012		706		1.69	%
Loans (gross)—FTE		971,941		11,002		4.53	%		910,101		10,718		4.71	%

Total earning assets—FTE	$	1,421,317	$	12,636		3.56	%	$	1,365,830	$	12,378		3.63	%
Non-earning assets		89,601							90,460

Total assets	$	1,510,918						$	1,456,290

Liabilities:
Interest bearing DDA	$	221,550	$	57		0.10	%	$	210,208	$	88		0.17	%
Savings		614,390		460		0.30	%		634,681		732		0.46	%
CD’s under $100		46,016		137		1.19	%		70,787		240		1.36	%
CD’s over $100		97,317		300		1.23	%		97,382		360		1.48	%
Individual retirement accounts		22,179		80		1.44	%		22,119		96		1.74	%
Repurchase agreements and other secured short term borrowings		90,725		36		0.16	%		98,161		72		0.29	%
Short-term debt		2,436		28		4.60	%		2,686		31		4.62	%
Subordinated debt		5,000		23		1.84	%		5,000		19		1.52	%
Long term debt		13,918		369		10.60	%		13,918		369		10.60	%

Total interest bearing liabilities	$	1,113,531	$	1,490		0.54	%	$	1,154,942	$	2,007		0.70	%
Non-interest bearing liabilities		298,832							213,958
Other liabilities		6,996							6,693

Total liabilities	$	1,419,359						$	1,375,593
Equity		91,559							80,697

Total liabilities & equity	$	1,510,918						$	1,456,290

Recap:
Interest income—FTE			$	12,636		3.56	%			$	12,378		3.63	%
Interest expense				1,490		0.54	%			$	2,007		0.70	%

Net interest income/spread—FTE			$	11,146		3.02	%			$	10,371		2.93	%

Contribution of non-interest bearing funds						0.12	%						0.11	%
Net interest margin—FTE						3.14	%						3.04	%

Notes to the average balance and interest rate tables:

•

Average balances are computed using daily actual balances.

•

The average loan balance includes loans held for sale, as well as non-accrual loans and the interest recognized prior to becoming non-accrual is reflected in the interest income for loans.

•

Interest income on loans includes loan costs net of loan fees, of $204 thousand and $185 thousand, for the three month period ending March 31, 2012 and 2011, respectively.

•

Net interest income on a fully taxable equivalent basis, the most significant component of the Corporation’s earnings, is total interest income on a fully taxable equivalent basis less total interest expense. The level of net interest income on a fully taxable equivalent basis is determined by the mix and volume of interest earning assets, interest bearing deposits and borrowed funds, and changes in interest rates.

•

Net interest spread is the difference between the fully taxable equivalent rate earned on interest earning assets less the rate expensed on interest bearing liabilities.

•

Net interest margin represents net interest income on a fully taxable equivalent basis as a percentage of average interest earning assets. Net interest margin is affected by both the interest rate spread and the level of non-interest bearing sources of funds, primarily consisting of demand deposits and shareholders’ equity.

•

Interest income on a fully taxable equivalent basis includes the additional amount of interest income that would have been earned on tax exempt loans and if investments in certain tax-exempt interest earning assets had been made in assets subject to federal taxes yielding the same after-tax income. Interest income on tax exempt loans and municipal securities has been calculated on a fully taxable equivalent basis using a federal and state income tax blended rate of 40%. The appropriate tax equivalent adjustments to interest income on loans were $528 thousand and $147 thousand for the three month period ending March 31, 2012 and 2011, respectively. The appropriate tax equivalent adjustments to interest income on municipal securities were $252 thousand and $287 thousand for the three month period ending March 31, 2012 and 2011, respectively.

•

Management believes the disclosure of the fully taxable equivalent net interest income information improves the clarity of financial analysis, and is particularly useful to investors in understanding and evaluating the changes and trends in the Corporation’s results of operations. This adjustment is considered helpful in the comparison of one financial institution’s net interest income to that of another institution, as each will have a different proportion of tax-exempt interest from their earning asset portfolios.

Provision for Loan Losses

The amount charged to the provision for loan losses by the Bank is based on management’s evaluation as to the amounts required to maintain an allowance adequate to provide for probable incurred losses inherent in the loan portfolio. The provision for loan losses was at a level deemed necessary by management to absorb estimated, probable incurred losses in the loan portfolio. A detailed evaluation of the adequacy of the allowance for loan losses is completed quarterly by management, the results of which are used to determine the provision for loan losses. The level of this allowance is dependent upon the total amount of past due and non-performing loans, general economic conditions and management’s assessment of probable incurred losses based upon internal credit evaluations of loan portfolios and particular loans. Loans are principally to borrowers in central Indiana.

Due to the imprecise nature of estimating the allowance for loan losses, the allowance for loan losses includes a minor unallocated component. The unallocated component of the allowance for loan losses incorporates management’s judgmental determination of inherent losses that may not be fully reflected in other allocations, including factors such as economic uncertainties, industry trends impacting specific portfolio segments, and broad portfolio quality trends. Therefore, the ratio of allocated to unallocated components within the total allowance may fluctuate from period to period.

The provision for loan losses was $908 thousand and $1.7 million, for the three month periods ending March 31, 2012, and March 31, 2011, respectively. Provision expense is affected by the level of net chargeoffs as well as changes in specific and general loss components of the allowance for loan losses. Net chargeoffs were $1.7 million and $781 thousand, for the three month period ending March 31, 2012, and March 31, 2011, respectively.

Non-performing loans decreased $1.2 million to $25.6 million as of March 31, 2012, from $26.8 million as of December 31, 2011. The specific allowance attributable to non-performing loans decreased $1.7 million to $2.6 million, or 10.1% of total non-performing loans, as of March 31, 2012, from $4.3 million, or 16.2% of total non-performing loans as of December 31, 2011. Contributing to the decrease in the specific allowance was a chargeoff of $1.4 million which had been reserved for in a prior period.

Offsetting this decrease to the specific loss component of the allowance for loans losses was an increase in the general loss component of the allowance for loan losses. This is due to an overall increase in the balances of loans collectively evaluated for impairment as well as an increase in the three-year historical loss experience as a percentage of outstanding loans, which increased the general loss component of the allowance for loan losses. The allowance for loan losses allocation for loans collectively evaluated for impairment increased $944 thousand to $10.8 million, or 1.2% of total loans collectively evaluated for impairment, as of March 31, 2012, from $9.9 million, or 1.1% of total loans collectively evaluated for impairment, as of December 31, 2011.

Loans collectively evaluated for impairment are comprised of two components: loans with a defined weakness and the remaining loan portfolio. Both components of loans collectively evaluated for impairment increased as of March 31, 2012, compared to December 31, 2011. The outstanding balances of loans collectively evaluated for impairment increased $23.4 million to $950.2 million as of March 31, 2012, from $926.8 million as of December 31, 2011.

Other Operating Income

The following table details the components of other operating income (dollars in thousands):


	Three months ended March 31,					$			%
	2012			2011		Change			Change
Wealth management fees	$	1,378		$	1,380	$	(2	)		-0.1	%
Service charges and fees on deposit accounts		771			747		24			3.2	%
Rental income		211			219		(8	)		-3.7	%
Mortgage banking income		836			219		617			281.7	%
Interchange income		375			340		35			10.3	%
Net loss on sale of securities		(13	)		—		(13	)		-100.0	%
Other		544			369		175			47.4	%

Total other operating income	$	4,102		$	3,274	$	828			25.3	%

Total other operating income for the three month period ending March 31, 2012, increased as compared to the three month period ending March 31, 2011.

Wealth Management fees decreased for the three month period ending March 31, 2012, as compared to the three month period ending March 31, 2011. The decrease in wealth management fees is attributable to a decrease in Irrevocable Life Insurance Trust (“ILIT”) fees, estate fees, and Dreyfus money market funds. Partially offsetting the decrease is an overall increase in the stock market and assets under management.

Service charges and fees on deposit accounts increased for the three month period ending March 31, 2012, as compared to the three month period ending March 31, 2011. The increase is primarily attributable to an increase in service charges collected for checking accounts, overdraft and non sufficient fund fees, wire transfer fees and ATM fees.

Rental income decreased for the three month period ending March 31, 2012, as compared to the three month period ending March 31, 2011. The decrease was primarily a decrease in other real estate rental income and the Bank occupying more space at the 107 North Pennsylvania Street location thus reducing the space available for tenants. The decrease is partially offset by the annual true up of the tenant’s operating costs.

Mortgage banking income increased for the three month period ending March 31, 2012, as compared to the three month period ending March 31, 2011. The increase for the three month period ending March 31, 2012, as compared to the three month period ending March 31, 2011, is due to an increase in the net gain on the sale of mortgage loans. A net gain on the sale of mortgage loans of $741 thousand was recorded for the three month period ending March 31, 2012, as compared to a net gain on the sale of mortgage loans of $136 thousand for the three month period ending March 31, 2011. Partially offsetting this increase was an increase in the write down of the fair value of mortgage servicing rights (“MSRs”) of $42 thousand for the three month period ending March 31, 2012, as compared to a write down of $33 thousand for the three month period ending March 31, 2011.

When mortgage loans are sold and the MSRs are retained, the MSRs are recorded as an asset on the balance sheet. The value of the MSRs is sensitive to changes in interest rates. In a declining interest rate environment, mortgage loan refinancings generally increase, causing actual and expected loan prepayments to increase, which decreases the value of existing MSRs. Conversely, as interest rates rise, mortgage loan refinancings generally decline, causing actual and expected loan prepayments to decrease, which increases the value of the MSRs.

Interchange income increased for the three month period ending March 31, 2012, as compared to the three month period ending March 31, 2011. The increase is attributable to higher transaction volumes for debit cards and credit cards during the three month period ending March 31, 2012, as compared to the three month period ending March 31, 2011. The increase is partially offset by an increase in cash back rewards expense for the three month period ending March 31, 2012, as compared to the three month period ending March 31, 2011.

Net loss on sale of securities increased for the three month period ending March 31, 2012, as compared to the three month period ending March 31, 2011. One available-for-sale municipal security was sold during the three month period ending March 31, 2012. The municipality had been downgraded and appeared to have increased credit risk.

Other income increased for the three month period ending March 31, 2012, as compared to the three month period ending March 31, 2011. The increase is primarily due to an increase in prepayment penalties collected, Mastercard/VISA merchant fees, fees collected for loan covenant waivers, bank owned life insurance income, and loan extension fees.

The following table details the components of other operating expense (dollars in thousands):


	Three months ended March 31,					$			%
	2012		2011			Change			Change
Salaries, wages and employee benefits	$	6,650	$	6,427		$	223			3.5	%
Occupancy		617		644			(27	)		-4.2	%
Furniture and equipment		309		299			10			3.3	%
Professional services		527		513			14			2.7	%
Data processing		854		793			61			7.7	%
Business development		470		428			42			9.8	%
FDIC Insurance		320		539			(219	)		-40.6	%
Non performing assets		508		261			247			94.6	%
Other		1,038		(461	)		1,499			325.2	%

Total other operating expenses	$	11,293	$	9,443		$	1,850			19.6	%

Total other operating expenses for the three month period ending March 31, 2012, increased as compared to the three month period ending March 31, 2011.

Salaries, wages, and employee benefits increased for the three month period ending March 31, 2012, as compared to the three month period ending March 31, 2011. The increase is the result of increased salary expense, employer FICA expense, 401K expense, employee relations, and performance bonus expense. There was an increase in the number of employees to 269 full time-equivalents at March 31, 2012, from 262 full-time equivalents at March 31, 2011. The percentage accrued for the performance bonus is higher in 2012 as compared to the percentage in 2011. The increase is partially offset by an increase in direct loan origination costs capitalized and a decrease in contract labor, deferred compensation, and group medical insurance.

Occupancy expense decreased for the three month period ending March 31, 2012, as compared to the three month period ending March 31, 2011. The decrease is due to a decrease in building utilities and snow removal. The decrease is partially offset by an increase in real estate taxes and building and improvements depreciation expense due to the relocation of the Carmel banking center from a leased location to an owned freestanding building.

Furniture and equipment expense increased for the three month period ending March 31, 2012, as compared to the three month period ending March 31, 2011. This increase is due to an increase in furniture, fixture, and equipment depreciation expense due to the relocation of the Carmel banking center and furniture, fixture, and equipment repair expense. The increase is partially offset by a decrease in computer equipment depreciation expense and maintenance contracts.

Professional services expense increased for the three month period ending March 31, 2012, as compared to the three month period ending March 31, 2011. The increase is due to an increase in consulting fees, outsourced internal audit fees, accounting fees, and design services. The increase is partially offset by a decrease in courier service, advertising agency fees, and attorney fees.

Data processing expenses increased for the three month period ending March 31, 2012, as compared to the three month period ending March 31, 2011. The increase is due to an increase in bill payment services, ATM/debit cards, credit cards, software maintenance, and service bureau fees of the Bank.

Business development expenses increased for the three month period ending March 31, 2012, as compared to the three period ending March 31, 2011. The increase is due to an increase in customer entertainment, public relations, customer promotions, advertising, market research, direct mail campaign, and grand opening expense. The increase is partially offset by a decrease in customer relations and sales and product literature.

FDIC insurance expense decreased for the three month period ending March 31, 2012, as compared to the three month period ending March 31, 2011. The decrease is due to the new rate schedule adopted by the FDIC effective April 1, 2011.

Nonperforming assets expenses increased for the three month period ending March 31, 2012, as compared to the three month period ending March 31, 2011. This increase is due to an increase in real estate taxes, lawn maintenance, and appraisal fees related to other real estate owned by the Corporation and classified loan expense. Additionally, there was a decrease in the net gain on the sale of the other real estate. The increase is partially offset by a decrease in the write down of the carrying value of other real estate owned period over period.

Other expenses increased for the three month period ending March 31, 2012, as compared to the three period ending March 31, 2011. The increase is due to a reversal of a $1.0 million accrual in 2011 established by the Corporation in 2008 relating to a certain deposit account. In addition, the Corporation recovered $395 thousand during the three month period ending March 31, 2011, relating to a wire transfer inadvertently sent to the wrong beneficiary in 2010. Also contributing to the increase was an increase in check losses, a fraudulent wire transfer, and a liability recorded for pending litigation related to a trust administered by the Wealth Management division.

Federal and State Income Tax

The following table presents the statutory rate reconciliation (dollars in thousands):


	Three months ended March 31,
	2012			2011
Income before federal and state income tax	$	2,267		$	2,079

Tax expense at federal statutory rate		771			707
Increase (decrease) in taxes resulting from:
State income tax		113			58
Tax exempt interest		(354	)		(278	)
Bank owned life insurance		(31	)		(29	)
Customer entertainment		16			18
Other		11			(14	)

Customer entertainment	$	526		$	462

Financial Condition

Total assets increased $73.0 million from $1,460 million at December 31, 2011, to $1,533 million at March 31, 2012. The increase is the result of an increase of $22.2 million in loans and an increase in cash and cash equivalents of $44.6 million from $196.3 million at December 31, 2011, to $240.9 million at March 31, 2012. Deposits increased $95.0 million from $1,243 million at December 31, 2011, to $1,338 million at March 31, 2012, due to new deposit relationships. The increase in deposits funded the increase in loans.

Liquidity and Interest Rate Sensitivity

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

The Corporation has many sources of funds available, they include: cash and due from Federal Reserve, overnight federal funds sold, investments classified as available for sale, maturity of investments classified as held to maturity, deposits, Federal Home Loan Bank (“FHLB”) advances, and issuance of debt. Deposits were the most significant funding source and purchases of investment securities available for sale were the most significant use of funds during the three month period ending March 31, 2012. Deposits were the most significant funding source and purchases of investment securities held to maturity and available for sale were the most significant use of funds during the three month period ending March 31, 2011.

The Corporation entered into a $2.0 million revolving line of credit with U.S. Bank which matured on August 31, 2011. On September 1, 2011, the Corporation renewed the revolving loan agreement which will mature on August 31, 2012. As part of the renewal of the revolving loan agreement, the revolving loan amount was reduced from $2.0 million to $1.0 million. Under the terms of the revolving line of credit, the Corporation paid prime plus 1.25% which equated to 4.50% at March 31, 2012. In addition, the Corporation paid a 0.25% fee on the unused portion of the revolving line of credit. As of March 31, 2012, the outstanding balance of the revolving line of credit was $0.

The Corporation also has a $3.0 million one-year term facility with U.S. Bank which matured on August 31, 2011. The one-year term facility was renewed and will now mature on August 31, 2012. Under the terms of the one-year term facility, the Corporation pays prime plus 1.25% which equated to 4.50% at March 31, 2012. In addition to quarterly interest payments, the Corporation makes quarterly principal payments of $62.5 thousand. As of March 31, 2012, the outstanding balance of the term facility was $2.4 million.

All of the U.S. Bank agreements contain various financial and non-financial covenants. As of March 31, 2012, the Corporation was in compliance with all covenants.

Primary liquid assets of the Corporation are cash and due from banks, federal funds sold, investments held as available for sale, and maturing loans. Interest bearing due from banks represented the Corporation’s primary source of immediate liquidity and averaged $174.5 million and $213.1 million for the three month period ending March 31, 2012, and March 31, 2011, respectively. The Corporation believes these balances are maintained at a level adequate to meet immediate needs. Reverse repurchase agreements may serve as a source of liquidity, but are primarily used as collateral for customer balances in overnight repurchase agreements. Maturities in the Corporation’s loan and investment portfolios are monitored regularly to avoid matching short-term deposits with long-term loans and investments. Other assets and liabilities are also monitored to provide the proper balance between liquidity, safety, and profitability. This monitoring process must be continuous due to the constant flow of cash which is inherent in a financial institution.

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

The Corporation actively manages its interest rate sensitive assets and liabilities to reduce the impact of interest rate fluctuations. At March 31, 2012, the Corporation’s rate sensitive liabilities exceeded rate sensitive assets due within one year by $103.1 million.

As part of managing liquidity, the Corporation monitors its loan to deposit ratio on a monthly basis. At March 31, 2012, the ratio was 72.9%. This is well within the board approved policy.

The Corporation experienced an increase in cash and cash equivalents, another primary source of liquidity, of $44.6 million during the three month period ending March 31, 2012. Proceeds from the maturity of investment securities held to maturity and available for sale provided cash of $32.0 million and deposit growth provided cash of $95.0 million. Lending activities used cash of $27.0 million and purchases of investment securities available for sale used cash of $29.4 million.

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

Capital Resources

The Corporation has a $1.0 million revolving line of credit and a $2.4 million one-year term loan with U.S. Bank. See “Liquidity and Interest Rate Sensitivity” section of this report for further discussion.

On June 29, 2007, the Bank entered into a Subordinated Debenture Purchase Agreement with U.S. Bank in the amount of $5.0 million, which will mature on June 28, 2017. Under the terms of the Subordinated Debenture Purchase Agreement, the Bank pays 3-month London Interbank Offered Rate (LIBOR) plus 1.20% which equated to 1.70% at March 31, 2012. Interest payments are due quarterly.

In September 2000, the Trust, which is wholly owned by the Corporation, issued $13.5 million of company obligated mandatorily redeemable capital securities and $418 thousand of common securities. The proceeds from the issuance of the capital securities and the common securities were used by the Trust to purchase from the Corporation $13.9 million fixed rate junior subordinated debentures. The capital securities mature September 7, 2030, or upon earlier redemption as provided by the Indenture. The Corporation has the right to redeem the capital securities, in whole or in part, but in all cases in a principal amount with integral multiples of a thousand dollars on any March 7 or September 7 on or after September 7, 2010, at a premium of 104.8%, declining ratably to par on September 7, 2020. The capital securities and the debentures have a fixed interest rate of 10.60% and are guaranteed by the Bank. The net proceeds received by the Corporation from the sale of capital securities were used for general corporate purposes.

There were no FHLB advances outstanding as of March 31, 2012, or 2011.

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

Capital for the Bank is at or above the well capitalized regulatory requirements at March 31, 2012. Pertinent capital ratios for the Bank as of March 31, 2012, are as follows:


	Actual			Well Capitalized			Adequately Capitalized
Tier 1 risk-based capital ratio		9.4	%		6.0	%		4.0	%
Total risk-based capital ratio		11.1	%		10.0	%		8.0	%
Leverage ratio		6.5	%		5.0	%		4.0	%

Dividends from the Bank to the Corporation may not exceed the net undivided profits of the Bank (included in consolidated retained earnings) for the current calendar year and the two previous calendar years without prior approval from the Office of the Comptroller of the Currency. In addition, Federal banking laws limit the amount of loans the Bank may make to the Corporation, subject to certain collateral requirements. No loans were made by the Bank to the Corporation during the three month period ending March 31, 2012 or 2011. A dividend of $353 thousand and $356 thousand was declared and paid by the Bank to the Corporation during the three month period ending March 31, 2012 and 2011, respectively.

During February 2012, the Board of Directors approved a new stock repurchase plan. Under the terms of this stock repurchase plan, the Corporation can repurchase of up to $3.8 million in net costs from employees, directors, and outside shareholders. The Corporation anticipates that it will fund the purchases under the repurchase program from working capital.

Under the new repurchase plan, the Corporation purchased $349 thousand in net costs during the three month period ending March 31, 2012, and $3.4 million is still available under the new repurchase plan as of March 31, 2012. The stock repurchase program does not require the Corporation to acquire any specific number of shares and may be modified, suspended, extended or terminated by Corporation at any time without prior notice. This stock repurchase program will expire on December 31, 2012.

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

Recent Accounting Pronouncements and Developments

Note 10 to the Consolidated Financial Statements under Item 1 discusses new accounting policies adopted by the Corporation during the first quarter of 2012 and the expected impact of the adoption of the new accounting policies.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

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

The Corporation’s profitability is affected by fluctuations in interest rates. A sudden and substantial increase in interest rates may adversely impact the Corporation’s earnings to the extent that the interest rates earned by assets and paid on liabilities do not change at the same speed, to the same extent, or on the same basis. The Corporation monitors the impact of changes in interest rates on its net interest income. The Corporation attempts to maintain a relatively neutral gap between earning assets and liabilities at various time intervals to minimize the effects of interest rate risk.

One of the primary goals of asset/liability management is to maximize net interest income and the net value of future cash flows within authorized risk limits. Net interest income is affected by changes in the absolute level of interest rates. Net interest income is also subject to changes in the shape of the yield curve. In general, a flattening of the yield curve would result in a decline in earnings due to the compression of earning asset yields and funding rates, while a steepening would result in increased earnings as investment margins widen. Earnings are also affected by changes in spread relationships between certain rate indices, such as prime rate.

At March 31, 2012, the interest rate risk position of the Corporation was liability sensitive, meaning net income should decrease as rates rise and increase as rates fall. The Corporation performs a 200 basis point upward and downward interest rate shock to determine whether there would be an adverse impact on its annual net income and that it is within the established policy limits. A downward interest rate shock scenario was not performed due to the low level of current interest rates. The earnings simulation model as of March 31, 2012, projects an approximate decrease of 0.4% in net income in a 200 basis point upward interest rate shock. The Corporation was well within the policy limits established by the ALCO policy at March 31, 2012.

See “Liquidity and Interest Rate Sensitivity” section of this report for further discussion.

There have been no material changes in the quantitative analysis used by the Corporation since filing the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2011, (the “2011 Form 10-K”); for further discussion of the quantitative analysis used by the Corporation refer to page 49 of the 2011 Form 10-K filed with the U.S. Securities and Exchange Commission on March 9, 2012.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The Corporation’s management is responsible for establishing and maintaining effective disclosure controls and procedures, as defined under Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934. As of March 31, 2012, an evaluation was performed under the supervision and with the participation of management, including the principal executive officer and principal financial officer, of the effectiveness of the design and operation of the Corporation’s disclosure controls and procedures. Based on that evaluation, the principal executive officer and principal financial officer concluded that the Corporation’s disclosure controls and procedures as of March 31, 2012, were effective in ensuring information required to be disclosed in this Quarterly Report on Form 10-Q was recorded, processed, summarized, and reported on a timely basis.

Changes in Internal Control Over Financial Reporting

There have been no changes in internal control over financial reporting that occurred during the quarter ended March 31, 2012, that have materially affected, or are reasonably likely to materially affect, the Corporation’s internal control over financial reporting.

Limitations on the Effectiveness of Controls

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

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

Part II – Other Information.

Item 1.

Legal Proceedings

Neither the Corporation nor its subsidiaries are involved in any pending material legal proceedings at this time, other than routine litigation incidental to their business.

Item 1A.

Risk Factors

There have been no material changes to the risk factors disclosed in the Corporation’s Form 10-K for the year ended December 31, 2011, as filed with the SEC on March 9, 2012.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

(a)

On March 14, 2012, the Corporation sold a total of 2,800 shares of common stock for proceeds of $121,464 to one officer of the Corporation pursuant to the exercise of stock options by the officer.

On March 15, 2012, the Corporation sold a total of 1,300 shares of common stock for proceeds of $56,394 to one officer of the Corporation pursuant to the exercise of stock options by the officer.

These sales were made pursuant to an exemption from registration under Sections 3(a)(11) and 4(2) of the Securities Act of 1933, as amended.

(b)

Not applicable.

(c)

The following table sets forth the issuer repurchases of equity securities that are registered by the Corporation pursuant to Section 12 of the Securities Exchange Act of 1934 during the first quarter of 2012.


Period	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs**		Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs (Dollars in thousands)
January 1 -
February 1 -
February 29, 2012		—	$	—		—	$	3,764
March 1 -
March 31, 2012		7,400	$	47.15		7,400	$	3,415

Total		7,400		*		7,400

The weighted average price per share for the period January 2012 through March 2012 was $47.15.

All shares repurchased by the Corporation during 2012 were completed pursuant to the repurchase program.

Item 3.

Defaults on Senior Securities

Not applicable.

Item 4.

Mine Safety Disclosures

Not applicable.

Item 5.

Other Information

Not applicable.

Item 6.

Exhibits



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

3.02		Bylaws of the Corporation, filed as Exhibit 3(ii) to the Corporation’s Form 8-K filed July 30, 2011, are incorporated by reference.

10.01*		1993 Key Employees’ Stock Option Plan of the Corporation, as amended, filed as Exhibit 10(a) to the Form 10-K for the fiscal year ended December 31, 2004, is incorporated by reference.

10.02*		1993 Directors’ Stock Option Plan of the Corporation, as amended, filed as Exhibit 10(b) to the Corporation’s Form 10-Q as of June 30, 2001, is incorporated by reference.

10.03*		1993 Restricted Stock Plan of the Corporation, as amended, filed as Exhibit 10(c) to the Form 10-K for the fiscal year ended December 31, 2004, is incorporated by reference.

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

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

10.06*		Schedule of Directors Compensation Arrangements, filed as Exhibit 10.6 to the Corporation’s Form 10-K dated December 31, 2011, is incorporated by reference.

10.07*		Schedule of Named Executive Officers Compensation Arrangements, filed as Exhibit 10.07 to the Corporation’s Form 8-K dated May 18, 2006, is incorporated by reference, as amended by the Corporation’s Form 8-K filed January 25, 2012.

10.08*		The National Bank of Indianapolis Corporation Amended and Restated 2005 Equity Incentive Plan, filed as Exhibit 10.01 to the Corporation’s Form 8-K dated June 23, 2010, is incorporated by reference.

10.09*		Form of Restricted Stock Award Agreement for The National Bank of Indianapolis Corporation 2005 Equity Incentive Plan, filed as Exhibit 10.02 to the Corporation’s Form 8-K dated June 22, 2005, is incorporated by reference.

10.10*		Form of Stock Option Award Agreement for The National Bank of Indianapolis Corporation 2005 Equity Incentive Plan, filed as Exhibit 10.03 to the Corporation’s Form 8-K dated June 22, 2005, is incorporated by reference.

10.11*		Employment Agreement dated December 15, 2005, between Morris L. Maurer and the Corporation, filed as Exhibit 10.06 to the Corporation’s Form 8-K dated December 21, 2005, and as amended by Exhibit 10.06 to the Corporation’s Form 8-K dated November 26, 2008, is incorporated by reference.



10.13*		The National Bank of Indianapolis Corporation Executive’s Deferred Compensation Plan, filed as Exhibit 10.08 to the Corporation’s Form 8-K dated December 21, 2005, and as amended by Exhibit 10.08 to the Corporation’s Form 8-K dated November 26, 2008, is incorporated by reference.

10.14*		The National Bank of Indianapolis Corporation 401(k) Savings Plan (as amended and restated generally effective January 1, 2006), filed as Exhibit 10.14 to the Corporation’s Form 10-K dated December 31, 2005, is incorporated by reference.

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

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

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

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

101.		The following material from The National Bank of Indianapolis Corporation’s Form 10-Q Report for the quarterly period ended March 31, 2012, formatted in XBRL pursuant to Rule 405 of Regulation S-T: (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Income, (iii) the Consolidated Statements of Cash Flows, (iv) the Consolidated Statements of Shareholders’ Equity, and (v) the Notes to Consolidated Financial Statements.**

*	Management contract or compensatory plan or arrangement.

**	Furnished, not filed, for purposes of Sections 11 and 12 of the Securities Act of 1933 and Section 18 of the Securities Exchange Act of 1934.

SIGNATURES

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

Date: May 4, 2012

THE NATIONAL BANK OF INDIANAPOLIS CORPORATION

/s/ Debra L. Ross

Debra L. Ross

Chief Financial Officer

(Principal Financial Officer)

EXHIBIT INDEX



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

3.02		Bylaws of the Corporation, filed as Exhibit 3(ii) to the Corporation’s Form 8-K filed July 30, 2011, are incorporated by reference.

10.01*		1993 Key Employees’ Stock Option Plan of the Corporation, as amended, filed as Exhibit 10(a) to the Form 10-K for the fiscal year ended December 31, 2004, is incorporated by reference.

10.02*		1993 Directors’ Stock Option Plan of the Corporation, as amended, filed as Exhibit 10(b) to the Corporation’s Form 10-Q as of June 30, 2001, is incorporated by reference.

10.03*		1993 Restricted Stock Plan of the Corporation, as amended, filed as Exhibit 10(c) to the Form 10-K for the fiscal year ended December 31, 2004, is incorporated by reference.

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

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

10.06*		Schedule of Directors Compensation Arrangements, filed as Exhibit 10.6 to the Corporation’s Form 10-K dated December 31, 2011, is incorporated by reference.

10.07*		Schedule of Named Executive Officers Compensation Arrangements, filed as Exhibit 10.07 to the Corporation’s Form 8-K dated May 18, 2006, is incorporated by reference, as amended by the Corporation’s Form 8-K filed January 25, 2012.

10.08*		The National Bank of Indianapolis Corporation Amended and Restated 2005 Equity Incentive Plan, filed as Exhibit 10.01 to the Corporation’s Form 8-K dated June 23, 2010, is incorporated by reference.

10.09*		Form of Restricted Stock Award Agreement for The National Bank of Indianapolis Corporation 2005 Equity Incentive Plan, filed as Exhibit 10.02 to the Corporation’s Form 8-K dated June 22, 2005, is incorporated by reference.

10.10*		Form of Stock Option Award Agreement for The National Bank of Indianapolis Corporation 2005 Equity Incentive Plan, filed as Exhibit 10.03 to the Corporation’s Form 8-K dated June 22, 2005, is incorporated by reference.

10.11*		Employment Agreement dated December 15, 2005, between Morris L. Maurer and the Corporation, filed as Exhibit 10.06 to the Corporation’s Form 8-K dated December 21, 2005, and as amended by Exhibit 10.06 to the Corporation’s Form 8-K dated November 26, 2008, is incorporated by reference.



10.13*		The National Bank of Indianapolis Corporation Executive’s Deferred Compensation Plan, filed as Exhibit 10.08 to the Corporation’s Form 8-K dated December 21, 2005, and as amended by Exhibit 10.08 to the Corporation’s Form 8-K dated November 26, 2008, is incorporated by reference.

10.14*		The National Bank of Indianapolis Corporation 401(k) Savings Plan (as amended and restated generally effective January 1, 2006), filed as Exhibit 10.14 to the Corporation’s Form 10-K dated December 31, 2005, is incorporated by reference.

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

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

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

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

101.		The following material from The National Bank of Indianapolis Corporation’s Form 10-Q Report for the quarterly period ended March 31, 2012, formatted in XBRL pursuant to Rule 405 of Regulation S-T: (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Income, (iii) the Consolidated Statements of Cash Flows, (iv) the Consolidated Statements of Shareholders’ Equity, and (v) the Notes to Consolidated Financial Statements.**

*	Management contract or compensatory plan or arrangement.

**	Furnished, not filed, for purposes of Sections 11 and 12 of the Securities Act of 1933 and Section 18 of the Securities Exchange Act of 1934.

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NATIONAL BANK OF INDIANAPOLIS CORP 10-Q