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 ~~September~~March 3031, ~~2011~~2012

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

Commission file number: 0-18847

INDIANA COMMUNITY BANCORP

(Exact name of registrant as specified in its charter)

Indiana 35-1807839

(State or other Jurisdiction (I.R.S. Employer

of Incorporation or Organization) Identification No.)

501 Washington Street, Columbus, Indiana 47201

(Address of Principal Executive Offices) (Zip Code)

Registrant's telephone number including area code: (812) 522-1592

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 to its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for 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 definitions of “large accelerated filer”, “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [ ] (Do not check if a smaller reporting company) Smaller reporting company [X]

Non-accelerated filer [ ] (Do not check if a smaller reporting company) Smaller reporting company [X]

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 May 7, 2012.

asCommon ofStock, ~~October~~no 31par value – 3,420,879 ~~2011.~~shares outstanding

Common Stock, no par value – 3,422,379 shares outstanding

INDIANA COMMUNITY BANCORP

FORM 10-Q

INDEX

	Page No.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Condensed Consolidated Balance Sheets	3
Condensed Consolidated Statements of Operations	4
Condensed Consolidated Statements of Other Comprehensive Income	5
Condensed Consolidated Statements of Shareholders’ Equity	5
Condensed Consolidated Statements of Cash Flows	6
Notes to Condensed Consolidated Financial Statements	7
Item 2. Management's Discussion and Analysis of
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	17
Financial Condition and Results of Operations	17
Item 3. Quantitative and Qualitative Disclosures About Market Risk	21
Item 3. Quantitative and Qualitative Disclosures About
Item 4. Controls and Procedures	21
Market Risk	23
Item 4. Controls and Procedures	23
PART II. OTHER INFORMATION
Item 1. Legal Proceedings	2321
Item 1A Risk Factors	2321
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	2422
Item 3. Defaults Upon Senior Securities	2422
Item 4. Removed and Reserved	24
Item 4. Mine Safety Disclosures	22
Item 5. Other Information	2422
Item 6. Exhibits	2422
Signatures	2523
Exhibit Index	2624

- 2 -

INDIANA COMMUNITY BANCORP
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
	September 30,			December 31,
	March 31,			December 31,
	2011			2010
	2012			2011
Assets:	(unaudited)
Cash and due from banks	$	1214,~~283~~875		$	1220,~~927~~683
Interest bearing demand deposits		~~110~~857			~~136~~278
Cash and cash equivalents		12,393			13,063
Federal funds sold		36,644			19,634
Securities available for sale at fair value (amortized cost $183,060 and $227,331)		185,636			226,465
Cash and cash equivalents		52,376			40,595
Loans held for sale (fair value $6,010 and $7,827)		5,850			7,666
Securities available for sale at fair value (amortized cost $170,846 and $178,300)		173,678			180,770
Loans held for sale (fair value $10,676 and $6,617)		10,544			6,464
Portfolio loans:
Commercial and commercial mortgage loans		~~516~~498,~~884~~548			~~550~~517,~~686~~970
Residential mortgage loans		9291,~~487~~502			9293,~~796~~757
Second and home equity loans		8882,~~448~~457			9286,~~557~~059
Other consumer loans		109,~~223~~057			119,~~614~~533
Total portfolio loans		~~708~~681,~~042~~564			~~747~~707,~~653~~319
Unearned income		(~~238~~218	)		(~~252~~233	)
Allowance for loan losses		(1418,~~760~~137	)		(14,~~606~~984	)
Portfolio loans, net		~~693~~663,~~044~~209			~~732~~692,~~795~~102
Premises and equipment		16,~~769~~364			16,~~228~~617
Accrued interest receivable		3,~~297~~205			3,~~785~~085
Other assets		4749,~~688~~422			4344,~~316~~974
TOTAL ASSETS	$	~~964~~968,~~677~~798		$	1984,~~043,318~~607
Liabilities and Shareholders’ Equity:
Liabilities:
Deposits:
Demand	$	~~107~~116,~~731~~981		$	86103,~~425~~864
Interest checking		~~166~~196,~~889~~283			~~177~~222,~~613~~314
Savings		5258,~~269~~139			4552,~~764~~181
Money market		~~236~~227,~~134~~289			~~224~~222,~~382~~229
Certificates of deposits		~~277~~251,~~971~~305			~~313~~262,~~854~~653
Retail deposits		~~840~~849,~~994~~997			~~848~~863,~~038~~241
Public fund certificates		~~215~~107			~~5,305~~102
Wholesale deposits		~~215~~107			~~5,305~~102
Total deposits		~~841~~850,~~209~~104			~~853~~863,343
FHLB advances		0			53,284
Short term borrowing		7,020			12,088
Junior subordinated debt		15,464			15,464
Other liabilities		1417,~~294~~751			2017,~~490~~666
Total liabilities		~~877~~883,~~987~~319			~~954~~896,~~669~~473
Commitments and Contingencies
Shareholders' equity:
No par preferred stock; Authorized: 2,000,000 shares
Issued and outstanding: 21,500 and 21,500 shares; Liquidation preference $1,000 per share		21,~~237~~293			21,~~156~~265
No par common stock; Authorized: 15,000,000 shares
Issued and outstanding: 3,422,379 and 3,385,079 shares		21,602			21,230
Issued and outstanding: 3,420,879 and 3,422,379 shares		21,796			21,735
Retained earnings, restricted		4241,~~620~~154			4744,~~192~~127
Accumulated other comprehensive income (loss), net		1,231			(929	)
Accumulated other comprehensive income, net		1,236			1,007
Total shareholders' equity		8685,~~690~~479			88,~~649~~134
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	~~964~~968,~~677~~798		$	1984,~~043,318~~607
See notes to condensed consolidated financial statements

- 3 -

INDIANA COMMUNITY BANCORP
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share data)
(unaudited)	Three Months Ended						~~Nine Months Ended~~
	September 30,						September 30,
	March 31,
	2011			2010			2011			2010
	2012			2011
Interest Income:
Short term investments	$	35		$	135		$	22		$	41
Securities		~~1,147~~986			1,~~438~~309			~~3,937~~			~~3,949~~
Commercial and commercial mortgage loans		6,~~944~~790			7,~~724~~625			~~21,833~~			~~22,512~~
Residential mortgage loans		1,~~013~~003			1,~~134~~057			~~3,111~~			~~3,505~~
Second and home equity loans		~~1,024~~947			1,~~142~~072			~~3,146~~			~~3,450~~
Other consumer loans		~~203~~169			~~263~~219			~~630~~			~~837~~
Total interest income		109,~~334~~900			11,~~714~~287			~~32,679~~			~~34,294~~
Interest Expense:
Checking and savings accounts		~~313~~298			~~480~~396			~~1,146~~			~~1,455~~
Money market accounts		~~324~~245			~~388~~353			~~1,039~~			~~1,329~~
Certificates of deposit		1,~~292~~030			21,~~103~~580			~~4,326~~			~~6,820~~
Total interest on retail deposits		1,~~929~~573			2,~~971~~329			~~6,511~~			~~9,604~~
Public funds		1			27			12			6
Total interest on wholesale deposits		1			27			12			6
Total interest on deposits		1,~~930~~574			2,~~973~~336			~~6,523~~			~~9,610~~
FHLB advances		~~171~~2			~~298~~260			~~692~~			~~823~~
Other borrowings		437			03			8			0
Junior subordinated debt		7585			8576			~~227~~			~~235~~
Total interest expense		21,~~180~~698			32,~~356~~675			~~7,450~~			~~10,668~~
Net interest income		8,~~154~~202			8,~~358~~612			~~25,229~~			~~23,626~~
Provision for loan losses		147,~~080~~739			1,~~638~~558			~~18,327~~			~~5,229~~
Net interest income (loss )after provision for loan losses		(5,926	)		6,720			6,902			18,397
Net interest income after provision for loan losses		463			7,054
Non Interest Income:
Gain on sale of loans		~~502~~599			~~560~~396			~~1,248~~			~~1,346~~
Gain on securities		~~2,201~~0			~~485~~184			~~2,395~~			~~497~~
Other than temporary impairment losses		(97	)		(139	)		(104	)		(194	)
Service fees on deposit accounts		1,416			1,368
Service fees on deposit accounts		1,593			1,638			4,504			4,820
Loan servicing income, net of impairment		107			111
Loan servicing income, net of impairment		111			126			357			362
Net gain\(loss) on real estate owned		8			(387	)
Net loss on real estate owned		(125	)		(215	)		(536	)		(576	)
Trust and asset management fees		333			292
Trust and asset management fees		306			258			904			840
Increase in cash surrender value of life insurance		126			132
Increase in cash surrender value of life insurance		136			139			400			425
Miscellaneous		279			245
Miscellaneous		229			162			725			589
Total non interest income		2,868			2,341
Total non interest income		4,856			3,014			9,893			8,109
Non Interest Expenses:
Non Interest Expenses:
Compensation and employee benefits		4,025			4,027
Compensation and employee benefits		4,078			3,728			11,970			10,787
Occupancy and equipment		966			1,022
Occupancy and equipment		958			958			2,938			2,872
Service bureau expense		542			485
Service bureau expense		506			493			1,490			1,461
FDIC premium		315			546
FDIC premium		330			513			1,206			1,548
Marketing		143			221
Marketing		307			172			793			561
Professional fees		186			196
Professional fees		215			185			619			571
Loan expenses		185			215
Loan expenses		314			247			835			705
Real estate owned expenses		72			123
Real estate owned expenses		92			83			387			397
Communication expenses		123			128
Communication expenses		149			168			431			465
Merger expenses		502			0
FHLB advances prepayment fee		1,353			0			1,353			0
Miscellaneous		589			606
Miscellaneous		577			679			1,776			1,875
Total non interest expenses		7,648			7,569
Total non interest expenses		8,879			7,226			23,798			21,242
Income (loss) before income taxes		(4,317	)		1,826
Income (loss) before income taxes		(9,949	)		2,508			(7,003	)		5,264
Income tax provision (credit)		(1,675	)		490
Income tax provision (credit)		(4,186	)		489			(3,421	)		1,142
Net Income (Loss)	$	(2,642	)	$	1,336
Net Income (Loss)	$	(5,763	)	$	2,019		$	(3,582	)	$	4,122
Basic earnings (loss) per common share	$	(0.87	)	$	0.31
Basic earnings (loss) per common share	$	(1.80	)	$	0.51		$	(1.33	)	$	0.96
Diluted earnings (loss) per common share	$	(0.87	)	$	0.31
Diluted earnings (loss) per common share	$	(1.80	)	$	0.51		$	(1.33	)	$	0.96
Basic weighted average number of common shares		3,383,379			3,364,079
Basic weighted average number of common shares		3,364,079			3,358,079			3,364,079			3,358,079
Dilutive weighted average number of common shares		3,383,379			3,367,105
Dilutive weighted average number of common shares		3,364,079			3,358,543			3,364,079			3,358,235
Dividends per common share	$	0.010		$	0.010
Dividends per common share	$	0.010		$	0.010		$	0.030		$	0.030
See notes to condensed consolidated financial statements
See notes to condensed consolidated financial statements

- 4 -

INDIANA COMMUNITY BANCORP
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(dollars in thousands except share data)
(in thousands)
(unaudited)	Three Months Ended
	Common Shares Outstanding			Preferred Stock		Common Stock		Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total Shareholders' Equity
	March 31,
Balance at December 31, 2010		3,385,079		$	21,156	$	21,230	$	47,192		$	(929	)	$	88,649
	2012			2011
Comprehensive loss:
Net Income (Loss)	$	(2,642	)	$	1,336
Net loss									(3,582	)					(3,582	)
Other Comprehensive Income (Loss) Unrealized appreciation (depreciation) on available-for-sale securities, net of tax expense of $133 and $410		229			668
Change in unrealized gain on securities available for sale, net of reclassification adjustment for realized gains of $1,447 and tax effect of $1,282												2,160			2,160
Less: reclassification adjustment for realized gaines (losses) included in net income, net of taxes of $0 and $73		0			111
Total comprehensive loss															(1,422	)
Total Other Comprehensive Income		229			557
Common stock compensation expense							3								3
Comprehensive Income (Loss)	$	(2,413	)	$	1,893
Restricted stock compensation expense							369								369
See notes to consolidated financial statements
Restricted stock non vested shares issued		39,300
Restricted stock forfeited		(2,000	)
Amortization of discount on preferred stock					81				(81	)					0
Common stock cash dividends									(103	)					(103	)
Preferred stock cash dividends									(806	)					(806	)
Balance at September 30, 2011		3,422,379		$	21,237	$	21,602	$	42,620		$	1,231		$	86,690

INDIANA COMMUNITY BANCORP
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(dollars in thousands except share data)
(unaudited)
	Common Shares Outstanding			Preferred Stock		Common Stock		Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total Shareholders' Equity
Balance at December 31, 2009		3,358,079		$	21,054	$	21,060	$	42,862		$	(52	)	$	84,924
Balance at December 31, 2011		3,422,379		$	21,265	$	21,735	$	44,127		$	1,007		$	88,134
Comprehensive income:
Net loss									(2,642	)					(2,642	)
Net income									4,122						4,122
Change in unrealized gain on securities available for sale												229			229
Change in unrealized gain on securities available for sale, net of reclassification adjustment for realized gains of $300 and tax effect of $986												1,912			1,912
Restricted stock compensation expense							61								61
Total comprehensive income															6,034
Restricted stock forfeited		(1,500	)
Common stock compensation expense							21								21
Amortization of discount on preferred stock					28				(28	)					0
Restricted stock compensation expense							83								83
Common stock cash dividends									(34	)					(34	)
Restricted stock non vested shares issued		27,000
Preferred stock cash dividends									(269	)					(269	)
Amortization of discount on preferred stock					76				(76	)					0
Balance at March 31, 2012		3,420,879		$	21,293	$	21,796	$	41,154		$	1,236		$	85,479
Common stock cash dividends									(101	)					(101	)
Preferred stock cash dividends									(806	)					(806	)
Balance at September 30, 2010		3,385,079		$	21,130	$	21,164	$	46,001		$	1,860		$	90,155
See notes to condensed consolidated financial statements


	Common Shares Outstanding			Preferred Stock		Common Stock		Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total Shareholders' Equity

Balance at December 31, 2010		3,385,079		$	21,156	$	21,230	$	47,192		$	(929	)	$	88,649

Net income									1,336						1,336
Change in unrealized gain on securities available for sale												557			557

Common stock compensation expense							1								1
Restricted stock compensation expense							110								110
Restricted stock non vested shares issued		36,300
Restricted stock forfeited		(2,000	)
Amortization of discount on preferred stock					27				(27	)					0
Common stock cash dividends									(34	)					(34	)
Preferred stock cash dividends									(269	)					(269	)
Balance at March 31, 2011		3,419,379		$	21,183	$	21,341	$	48,198		$	(372	)	$	90,350

See notes to condensed consolidated financial statements

- 5 -

INDIANA COMMUNITY BANCORP
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)	~~Nine~~Three Months Ended
(unaudited)	~~September~~March 3031,
	2011			2010
	2012			2011
Cash Flows From Operating Activities:
Net income (loss)	$	(32,~~582~~642	)	$	41,~~122~~336
Adjustments to reconcile net income (loss) to net cash from operating activities:
Accretion of discounts, amortization and depreciation		51,~~594~~042			31,~~502~~497
Provision for loan losses		187,~~327~~739			51,~~229~~558
Stock based compensation expense		~~372~~61			~~104~~111
Benefit for deferred income taxes		(~~912~~1,322	)		(~~724~~241	)
Net gain from sale of loans		(~~1,248~~599	)		(~~1,346~~396	)
Gain on securities		~~(2,395~~0	)		(~~497~~184	)
Other than temporary impairment losses		104			194
Net (gain)/loss from real estate owned		(8	)		387
Net loss from real estate owned		536			575
Loan fees recognized, net		(15	)		(52	)
Loan fees deferred (recognized), net		(37	)		118
Proceeds from sale of loans held for sale		26,144			18,789
Proceeds from sale of loans held for sale		54,024			59,169
Origination of loans held for sale		(23,422	)		(12,347	)
Origination of loans held for sale		(50,960	)		(57,104	)
(Increase) decrease in accrued interest and other assets		(685	)		808
(Increase) decrease in accrued interest and other assets		(2,018	)		3,072
Increase (decrease) in other liabilities		1,125			(1,628	)
Increase (decrease) in other liabilities		(2,292	)		551
Net Cash From Operating Activities		7,418			9,638
Net Cash From Operating Activities		15,513			16,965
Cash Flows From / (Used In) Investing Activities:
Net principal received (disbursed) on loans		1412,~~547~~405			(~~19,~~210	)
Net change in interest bearing deposits		0			260
Proceeds from:
Maturities/repayments of securities held to maturity		0			415
Maturities/repayments of securities available for sale		15,549			20,712
Maturities/repayments of securities available for sale		51,742			100,497
Sale of securities available for sale		816			15,179
Sale of securities available for sale		114,532			125,417
Real estate owned and other assets		1,221			601
Real estate owned and other asset sales		3,412			1,581
Federal Home Loan Bank stock		944			0
Purchases of:
Loans		(~~212~~817	)		(~~582~~121	)
Securities held to maturity		0			(50	)
Securities available for sale		(10,686	)		(42,392	)
Securities available for sale		(126,514	)		(315,375	)
Federal Home Loan Bank stock		(529	)		0
Acquisition of property and equipment		(~~1,523~~56	)		(~~2,509~~84	)
Disposal of property and equipment		02			~~114~~0
Net Cash From (Used In) Investing Activities		5617,~~928~~905			(~~109~~6,~~442~~315	)
Cash Flows From / (Used In) Financing Activities:
Net increase/(decrease) in deposits		(1213,~~134~~239	)		5718,~~127~~985
Proceeds from advances from FHLB		010,000			~~67,012~~0
Repayment of advances from FHLB		(5510,000	)		~~(67,012~~0	)
Deferred prepayment penalty on modification of FHLB advances		0			(2,456	)
Net repayments of overnight borrowings		0			(12,088	)
Net repayments of overnight borrowings		(5,068	)		0
Payment of dividends on preferred stock		(269	)		(269	)
Payment of dividends on preferred stock		(806	)		(806	)
Payment of dividends on common stock		(34	)		(34	)
Payment of dividends on common stock		(103	)		(101	)
Net Cash From (Used In) Financing Activities		(13,542	)		6,594
Net Cash From (Used In) Financing Activities		(73,111	)		53,764
NET INCREASE / (DECREASE) IN CASH AND CASH EQUIVALENTS		11,781			9,917
NET DECREASE IN CASH AND CASH EQUIVALENTS		(670	)		(38,713	)
Cash and cash equivalents, beginning of period		40,595			13,063
Cash and cash equivalents, beginning of period		13,063			52,061
Cash and Cash Equivalents, End of Period	$	52,376		$	22,980
Cash and Cash Equivalents, End of Period	$	12,393		$	13,348
Supplemental Information:
Cash paid for interest	$	71,~~476~~695		$	102,~~761~~669
Cash paid for income taxes	$	~~1,075~~564		$	~~1,200~~0
Non cash items:
Assets acquired through foreclosure	$	73,~~126~~378		$	1,~~448~~523
Transfer to securities available for sale from held to maturity	$	0		$	3,273
Securities trades not settled	$	0		$	(194	)
Securities trades not settled	$	0		$	2,964
Transfer from loans receivable to loans held for sale	$	6,218		$	0
See notes to condensed consolidated financial statements

- 6 -

Notes to Condensed Consolidated Financial Statements (unaudited)

1. Basis of Presentation

The consolidated financial statements include the accounts of Indiana Community Bancorp (the "Company") and its wholly-owned subsidiary, Indiana Bank and Trust Company (the "Bank") and the Bank’s wholly-owned subsidiaries. These condensed consolidated interim financial statements at ~~September~~March 3031, ~~2011~~ 2012, and for the three ~~and nine~~ month ~~periods~~period ended ~~September~~March 3031, ~~2011~~2012 and ~~2010~~2011, have not been audited by an independent registered public accounting firm, but reflect, in the opinion of the Company’s management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position and results of operations for such periods, including elimination of all significant intercompany balances and transactions. The Company does not consolidate Home Federal Statutory Trust I (“Trust”), a wholly-owned subsidiary, that issues Trust preferred securities, as the Company is not the primary beneficiary of the Trust. The results of operations for the three ~~and nine~~ month ~~periods~~period ended ~~September~~March 3031, ~~2011~~ 2012, are not necessarily indicative of the results which may be expected for the entire year. The condensed consolidated balance sheet of the Company as of December 31, ~~2010~~2011 has been derived from the audited consolidated balance sheet of the Company as of that date.

These statements should be read in conjunction with the consolidated financial statements and related notes, which are included in the Company’s ~~Annual Report on~~ Form 10-K for the year ended December 31, ~~2010~~2011.

2. Earnings Per Share

The following is a reconciliation of the weighted average common shares for the basic and diluted earnings per share (“EPS”) computations:

Three Months Ended

~~Nine Months Ended~~

September 30

March 31

2011

2010

2011

2010

2012

2011

Basic EPS:

Weighted average common shares

3,~~364~~383,~~079~~379

3,~~358~~364,079

~~3,364,079~~

~~3,358,079~~

Diluted EPS:

Weighted average common shares

3,~~364~~383,~~079~~379

3,~~358~~364,079

~~3,364,079~~

~~3,358,079~~

Dilutive effect of restricted stock

464

156

Dilutive effect of restricted stock/stock options

3,026

Weighted average common and incremental shares

3,~~364~~383,~~079~~379

3,~~358~~367,~~543~~105

~~3,364,079~~

~~3,358,235~~

Anti-dilutive options

~~280~~205,~~422~~948

~~300~~280,~~965~~422

~~280,422~~

~~300,965~~

The following is a computation of earnings (loss) per common share. (dollars in thousands, except per share amounts)

	Three Months Ended					~~Nine Months Ended~~
	September 30,					September 30,
	March 31,
	2011			2010		2011			2010
	2012			2011
Net income (loss)	$	(52,~~763~~642	)	$	21,~~019~~336	$	~~(3,582~~	)	$	~~4,122~~
Less preferred stock dividend		~~268~~269			~~275~~269		~~806~~			~~815~~
Less restricted stock dividend		10			01		2			0
Less amortization of preferred stock discount		2728			26		81			76
Net income (loss) available to common shareholders	$	(62,~~059~~939	)	$	1,~~718~~040	$	~~(4,471~~	)	$	~~3,231~~
Basic Earnings (Loss) per Common Share	$	(10.8087	)	$	0.5131	$	~~(1.33~~	)	$	~~0.96~~
Diluted Earnings (Loss) per Common Share	$	(10.8087	)	$	0.5131	$	~~(1.33~~	)	$	~~0.96~~

Unearned restricted and nonvested shares have been excluded from the computation of average shares outstanding.

3. ~~Comprehensive~~Segment ~~Income (loss)~~Reporting

The following is a summary of the Company’s reclassification adjustments, related tax effects allocated to other comprehensive income (loss) as of and for the nine month period ended September 30, 2011 and 2010. (In thousands)

	Current Period Activity							Accumulated Balance
	Pretax		Tax Effect			Net		Pretax			Tax Effect			Net
Nine months ended Sept 30, 2011
Unrealized gains from securities available for sale	$	3,442	$	(1,282	)	$	2,160	$	2,576		$	(903	)	$	1,673
Supplemental Retirement Plan Obligations		0		0			0		(731	)		289			(442	)
Total accumulated other Comprehensive income (loss)	$	3,442	$	(1,282	)	$	2,160	$	1,845		$	(614	)	$	1,231
Nine months ended Sept 30, 2010
Unrealized gains from securities available for sale	$	2,898	$	(986	)	$	1,912	$	3,500		$	(1,194	)	$	2,306
Supplemental Retirement Plan Obligations		0		0			0		(738	)		292			(446	)
Total accumulated other Comprehensive income (loss)	$	2,898	$	(986	)	$	1,912	$	2,762		$	(902	)	$	1,860

4. Segment Reporting

Management has concluded that the Company is comprised of a single operating segment, community banking activities, and has disclosed all required information relating to its one reportable segment. Management considers parent company activity to represent an overhead function rather than an operating segment. The Company operates in one geographical area and does not have a single customer from which it derives 10 percent or more of its revenue.

54. Pension and Other Retirement Benefit Plans

~~The~~Prior to April 1, 2008, the Company ~~participates~~participated in athe ~~noncontributory~~Pentegra ~~multi-employer~~Defined ~~pension~~Benefit ~~plan,~~Plan ~~which~~for ~~prior~~Financial toInstitutions ~~April~~(the 1,“Pentegra ~~2008~~Plan”), ~~covered~~a noncontributory multi-employer pension plan covering all qualified employees. The Company ~~froze~~chose to freeze its defined benefit pension plan effective April 1, 2008. The trustees of the Financial Institutions Retirement Fund administer the ~~plan. There~~Pentegra isPlan, noemployer ~~separate~~identification ~~valuation~~number of13-5645888 ~~the~~and plan ~~benefits~~number or333. The ~~segregation~~Pentegra ofPlan ~~plan~~operates ~~assets~~as ~~specifically for the Company, because the plan is~~ a multi-employer plan ~~and~~for ~~separate~~accounting ~~actuarial~~purposes ~~valuations~~and ~~are~~as ~~not~~a ~~made~~multiple-employer ~~with~~plan ~~respect~~under tothe ~~each~~Employee ~~employer. The~~Retirement ~~Company~~Income ~~recorded~~Security ~~pension~~Act ~~expenses~~ of ~~$636,000~~1974 and ~~$414,000~~the ~~for~~Internal ~~the~~Revenue ~~nine~~Code. There ~~months~~are ~~ended~~no ~~September~~collective ~~30,~~bargaining ~~2011~~agreements ~~and~~in ~~2010,~~place ~~respectively. No~~that ~~cash~~require contributions ~~were made~~ to the ~~multi-employer~~Pentegra ~~pension plan for the nine months ended September 30, 2011 and 2010, respectively~~Plan.

The Company recorded pension expenses of $275,000 and $212,000 for the three months ended March 31, 2012 and 2011, respectively. Company cash contributions to the multi-employer pension plan for the three months ended March 31, 2012 were $842,000. No cash contributions were made to the multi-employer pension plan for the three months ended March 31, 2011.

- 7 -

The Company has entered into supplemental retirement agreements for certain officers. The net periodic pension cost, including the detail of its components for the three ~~and nine~~ months ended ~~September~~March 3031, ~~2011~~2012 and ~~2010~~2011, is estimated as follows: (dollars in thousands)

	Three Months Ended				~~Nine Months Ended~~
	September 30,				September 30,
	March 31,
Components of Net Periodic Benefit Cost	~~2011~~2012		~~2010~~2011		~~2011~~		~~2010~~
Service cost	$	2822	$	2628	$	84	$	78
Interest cost		5453		54		~~161~~		~~162~~
Amortization of prior service cost		13		13		40		40
Amortization of actuarial losses		110		01		2		0
Net periodic benefit cost	$	9698	$	9396	$	~~287~~	$	~~280~~

The ~~Bank~~Company previously disclosed in its financial statements for the year ended December 31, ~~2010~~2011, that it expected to pay benefits of $~~262~~246,000 in ~~2011~~2012. As of ~~September 30~~March 31, ~~2011~~2012, the Bank has paid $~~196~~61,000 in benefits and presently anticipates paying an additional $66185,000 in fiscal ~~2011~~2012, provided however that under the Company's merger agreement with Old National Bancorp, these agreements are to be terminated and cashed out at the merger closing.

65. Repurchases of Company Common Stock

During the three ~~nine~~ months ended ~~September 30~~March 31, ~~2011~~2012 and ~~2010~~2011, the Company had no repurchases of Company common stock. On January 22, 2008, the Board of Directors approved a stock repurchase program to repurchase on the open market up to 5% of the Company’s outstanding shares of common stock or 168,498 such shares. Such purchases will be made in block or open market transactions, subject to market conditions. The program has no expiration date. As of ~~September~~March 3031, ~~2011~~2012, there are 156,612 common shares remaining to be repurchased under this program. The Company may not repurchase any such shares without the consent of the U. S. Department of Treasury while it holds the TARP Series A Preferred Stock until December 12, 2011.

76. Legal Proceedings

The Company and the Bank are involved from time to time as plaintiff or defendant in various legal actions arising in the normal course of business. While the ultimate outcome of these proceedings cannot be predicted with certainty, it is the opinion of management that the resolution of these proceedings should not have a material effect on the Company’s consolidated financial position or results of operations.

87. Mortgage Banking Activities

The Bank is obligated to repurchase certain loans sold to and serviced by others if they become delinquent as defined by various agreements. At ~~September~~March 3031, ~~2011~~2012 and December 31, ~~2010~~2011, these contingent obligations were approximately $1824.02 million and $2730.62 million, respectively. Management believes it is remote that, as of ~~September~~March 3031, ~~2011,~~ 2012 the Company would have to repurchase these obligations and therefore no reserve has been established for this purpose.

98. Fair Value of Financial Instruments

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. GAAP established a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value and describes three levels of inputs that may be used to measure fair value:

Level 1		Quoted prices in active markets for identical assets or liabilities.
		Observable inputs other than Level 1 prices; such as quoted prices for similar assets or liabilities; quoted
Level 2		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
Level 2		prices in markets that are not active; or other inputs that are observable or can be corroborated by
		observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
		observable market data for substantially the full term of the assets or liabilities.
Level 3		Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
Level 3		Unobservable inputs that are supported by little or no market activity and that are significant to the fair
		value of the assets or liabilities.

Following is a description of the valuation methodologies used for instruments measured at fair value on a recurring basis and recognized in the accompanying consolidated balance sheets, as well as the general classification of such instruments pursuant to the valuation hierarchy.

Securities Available for Sale

When quoted market prices are available in an active market, securities are classified within Level 1 of the valuation hierarchy. ~~Bond money market funds are included in Level 1.~~ If quoted market prices are not available, then fair values are estimated by using pricing models and quoted prices of securities with similar characteristics. The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information and the bond’s terms and conditions. Level 2 securities include collateralized mortgage obligations, mortgage backed securities, corporate debt, ~~agency~~ and municipal bonds. In certain cases where Level 1 and Level 2 inputs are not available, securities are classified within Level 3 of the hierarchy and consist of equity securities.

The following table presents the fair value measurements of assets recognized in the accompanying consolidated balance sheets measured at fair value on a recurring basis and the level within the fair value hierarchy in which the fair value measurements fall at ~~September~~March 3031, ~~2011~~2012 and December 31, ~~2010~~2011. (dollars in thousands)

	Fair Value Measurements Using
	Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
	Level 1		Level 2		Level 3		Fair Value
September 30, 2011
March 31, 2012
Municipal bonds	$	0	$	3745,~~209~~607	$	0	$	3745,~~209~~607
Collateralized mortgage obligations issued by:
Agencies		0		31,637		0		31,637
GSE agencies		0		24,666		0		24,666
Private label		0		5742,~~029~~496		0		5742,~~029~~496
Mortgage backed securities issued by agencies		0		4859,~~758~~380		0		4859,~~758~~380
Corporate debt		0		1,~~500~~454		0		1,~~500~~454
Bond money market funds		9,428		0		0		9,428
Equity securities		0		0		75		75
Securities available for sale	$	~~9,428~~0	$	~~176~~173,~~133~~603	$	75	$	~~185~~173,~~636~~678
December 31, 2010
December 31, 2011
Municipal bonds	$	0	$	6346,~~854~~313	$	0	$	6346,~~854~~313
Asset backed securities		0		42		0		42
Collateralized mortgage obligations issued by:
Agencies		0		50,599		0		50,599
GSE agencies		0		27,766		0		27,766
Private label		0		9649,~~407~~399		0		9649,~~407~~399
Mortgage backed securities issued by agencies		0		1355,~~261~~817		0		1355,~~261~~817
Corporate debt		0		1,~~459~~400		0		1,~~459~~400
Bond money market funds		768		0		0		768
Equity securities		0		0		75		75
Securities available for sale	$	~~768~~0	$	~~225~~180,~~622~~695	$	75	$	~~226~~180,~~465~~770

- 8 -

The following table presents a reconciliation of the beginning and ending balances of recurring securities available for sale fair value measurements recognized in the accompanying consolidated balance sheets using significant unobservable (Level 3) inputs for the three months ended ~~September 30~~March 31, ~~2011~~2012 and ~~2010~~2011. (dollars in thousands)

Total Fair Value Measurements	Available for Sale Debt Securities
	Three Months Ended				~~Three Months Ended~~
	September 30,				September 30,
	March 31,
Level 3 Instruments Only	~~2011~~2012		~~2010~~2011		~~2011~~		~~2010~~
Beginning Balance	$	75	$	75	$	75	$	75
Purchases		0		0		0		~~88,978~~
Settlements		0		0		0		~~(88,978~~	)
Ending Balance	$	75	$	75	$	75	$	75

There were no realized and unrealized gains and losses recognized in the accompanying consolidated statement of operations using significant unobservable (Level 3) inputs for the three ~~and nine~~ months ended ~~September~~March 3031, ~~2011~~2012 and ~~2010~~2011.

The following table presents the fair value measurements of assets recognized in the accompanying consolidated balance sheets measured at fair value on a non recurring basis and the level within the fair value hierarchy in which the fair value measurements fall at ~~September~~March 3031, ~~2011~~2012 and December 31, ~~2010~~2011. (dollars in thousands)

	Fair Value Measurements Using
	Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
	Level 1		Level 2		Level 3		Fair Value
September 30, 2011
March 31, 2012
Impaired loans		0		0		26,901		26,901
Impaired loans (collateral dependent)		0		0		16,838		16,838
Other real estate owned		0		0		178		178
December 31, 2011
December 31, 2010
Impaired loans (collateral dependent)		0		0		24,879		24,879
Impaired loans		0		0		33,170		33,170
Other real estate owned		0		0		295		295
Other real estate owned		0		0		1,602		1,602

At ~~September~~March 3031, ~~2011~~2012, collateral dependent impaired loans which had an evaluation adjustment during ~~2011~~2012 had an aggregate cost of $2720.30 million and had been written down to a fair value of $2616.98 million measured using Level 3 inputs within the fair value hierarchy. At December 31, ~~2010~~2011, collateral dependent impaired loans which had an evaluation adjustment during ~~2010~~2011 had an aggregate cost of $3625.34 million and had been written down to a fair value of $3324.29 million measured using Level 3 inputs within the fair value hierarchy. Level 3 inputs for impaired loans included current and prior appraisals and discounting factors.

AtThe ~~September~~significant ~~30,~~unobservable ~~2011,~~inputs ~~other~~(Level ~~real~~3) ~~estate~~used ~~owned~~in ~~was~~the ~~reported at~~ fair value ~~less~~measurement ~~cost~~for tocollateral ~~sell~~dependent ofimpaired ~~$178,000~~loans ~~measured~~included ~~using~~in ~~Level~~the 3table ~~inputs~~above ~~within~~relate ~~the~~primarily ~~fair~~to ~~value~~customized ~~hierarchy~~discounting criteria applied to the customer’s collateral. At ~~December~~The ~~31,~~amount ~~2010,~~of ~~other~~the ~~real~~collateral ~~estate~~discount ~~owned~~depends ~~was~~upon ~~reported~~the atmarketability ~~fair~~of ~~value~~the ~~less~~underlying ~~cost~~collateral toand ~~sell~~the age of ~~$1.6~~the ~~million~~last ~~measured~~independent ~~using~~evaluation. ~~Level~~Less 3marketable ~~inputs~~collateral ~~within~~would ~~the~~receive ~~fair~~a ~~value~~larger ~~hierarchy~~discount. ~~Level~~As 3of ~~inputs~~March ~~for~~31, ~~other~~2012, collateral discounts ranged from zero to 31% for real estate ~~owned~~collateral, ~~included~~20% ~~third~~for ~~party~~accounts ~~appraisals~~receivable ~~adjusted~~and 50% for ~~cost~~inventory toand ~~sell~~equipment.

At December 31, 2011, other real estate owned was reported at fair value less cost to sell of $295,000 measured using Level 3 inputs within the fair value hierarchy. Level 3 inputs for other real estate owned included third party appraisals adjusted for cost to sell.

The disclosure of the estimated fair value of financial instruments is as follows: (dollars in thousands)

	September 30, 2011				December 31, 2010
	March 31, 2012										December 31, 2011
	Carrying Value		Fair Value		~~Carrying Value~~	Level 1	~~Fair Value~~	Level 2		Level 3	Carrying Value		Fair Value
Assets:
Cash and cash equivalents	$	1252,~~393~~376	$	1252,~~393~~376	$	1352,~~063~~376	$	~~13,063~~0	$	0	$	40,595	$	40,595
Securities available for sale		~~185~~173,~~636~~678		~~185~~173,~~636~~678		~~226,465~~		~~226~~173,~~465~~603		75		180,770		180,770
Loans held for sale		510,~~850~~544		610,~~010~~676		~~7,666~~		710,~~827~~676		0		6,464		6,617
Loans, net		~~693~~663,~~044~~209		~~701~~670,~~039~~855		~~732,795~~		~~761,838~~		670,855		692,102		699,191
Accrued interest receivable		3,~~297~~205		3,~~297~~205		~~3,785~~		3,~~785~~205				3,085		3,085
Federal Home Loan Bank stock		67,~~563~~092		67,~~563~~092		~~7,507~~		7,~~507~~092				6,563		6,563
Liabilities:
Deposits		~~841~~850,~~209~~104		~~846~~854,~~897~~519		~~853,343~~		~~861~~854,~~739~~519				863,343		863,322
FHLB advances		0		0		53,284		55,028
Junior subordinated debt		15,464		11,615						11,615		15,464		10,628
Junior subordinated debt		15,464		11,061		15,464		9,281
Advance payments by borrowers for taxes and insurance		562		562				562				325		325
Short-term borrowings		7,020		7,020		12,088		12,088
Accrued interest payable		63		63				63				61		61
Advance payments by borrowers for taxes and insurance		197		197		272		272
Accrued interest payable		58		58		84		84

Cash, Accrued Interest Receivable, Advance Payments by Borrowers for Taxes and Insurance, and Accrued Interest Payable ~~and Short-term Borrowings~~

The carrying amount as reported in the Condensed Consolidated Balance Sheets is a reasonable estimate of fair value.

Securities Available for Sale

Fair values are based on quoted market prices and dealer quotes. If quoted market prices or dealer quotes are not available, fair value is determined based on quoted prices of similar instruments.

Loans Held for Sale and Loans, net

The fair value of loans is estimated by discounting the future cash flows using the current rates for loans of similar credit risk and maturities. The estimate of credit losses is equal to the allowance for loan losses. Loans held for sale are based on current market prices.

Federal Home Loan Bank Stock

The fair value is estimated to be the carrying value, which is par.

Deposits

The fair value of demand deposits, savings accounts and money market deposit accounts is the amount payable on demand at the reporting date. The fair value of fixed-maturity certificates of deposit is estimated, by discounting future cash flows, using rates currently offered for deposits of similar remaining maturities.

FHLB Advances

The fair value is estimated by discounting future cash flows using rates currently available to the Company for advances of similar maturities.

Junior Subordinated Debt and Long Term Debt

Rates currently available to the Company for debt with similar terms and remaining maturities are used to estimate fair value of existing debt. Fair value of Junior Subordinated Debt is based on quoted market prices for similar liabilities when traded as an asset in an active market.

The fair value estimates presented herein are based on information available to management at ~~September~~March 3031, ~~2011~~2012. Although management is not aware of any factors that would significantly affect the estimated fair value amounts, such amounts have not been comprehensively revalued for purposes of these financial statements since that date, and, therefore, current estimates of fair value may differ significantly from the amounts presented herein.

- 9 -

109. Securities

Securities are summarized as follows: (in thousands)

	September 30, 2011									December 31, 2010
	March 31, 2012									December 31, 2011
	Amortized		Gross Unrealized					Fair		Amortized		Gross Unrealized					Fair
	Cost		Gains		(Losses)			Value		Cost		Gains		(Losses)			Value
Available for Sale:
Municipal bonds	$	3543,~~321~~477	$	12,~~901~~174	$	(1344	)		3745,~~209~~607	$	6244,~~925~~094	$	12,~~509~~255	$	(~~580~~36	)	$	6346,~~854~~313
Asset backed securities		0		0		0			0		100		0		(58	)		42
Collateralized mortgage obligations issued by:
Agencies		31,116		525		(4	)		31,637		50,714		364		(479	)		50,599
GSE agencies		24,157		509		0			24,666		27,354		422		(10	)		27,766
Private label		5642,~~886~~167		~~279~~361		(~~136~~32	)		5742,~~029~~496		9749,~~396~~156		~~138~~319		(~~1,127~~76	)		9649,~~407~~399
Mortgage backed securities
issued by agencies		4859,~~265~~000		~~504~~434		(1154	)		4859,~~758~~380		1355,~~386~~652		~~107~~277		(~~232~~112	)		1355,~~261~~817
Corporate debt		1,~~969~~970		0		(~~469~~516	)		1,~~500~~454		1,~~967~~969		0		(~~508~~569	)		1,~~459~~400
Bond money market funds		9,428		0		0			9,428		768		0		0			768
Equity securities		75		0		0			75		75		0		0			75
Total Available for Sale	$	~~183~~170,~~060~~846	$	3,~~209~~478	$	(~~633~~646	)	$	~~185~~173,~~636~~678	$	~~227~~178,~~331~~300	$	23,~~118~~273	$	(~~2,984~~803	)	$	~~226~~180,~~465~~770

~~Certain~~No securities, ~~with amortized cost of $379,000 and fair value of $408,000 at December 31, 2010,~~ were pledged ~~as collateral for the Bank's treasury, tax and loan account~~ at the Federal Reserve~~. No~~ ~~securities~~as ~~were~~of ~~pledged~~March at31, ~~the~~2012 ~~Federal~~and ~~Reserve~~December ~~as of September 30~~31, 2011. Certain securities, with amortized cost of $1914.23 million and fair value of $1914.67 million at ~~September~~March 3031, ~~2011~~2012 and amortized cost of $116.36 million and fair value of $116.49 million at December 31, ~~2010~~2011, were pledged as collateral for borrowing purposes at the Federal Home Loan Bank of Indianapolis.

The amortized cost and fair value of securities at ~~September~~March 3031, ~~2011~~2012 by contractual maturity are summarized as follows: (dollars in thousands)

	Available for Sale
	Amortized Cost		Fair Value		Yield
Municipal bonds:
Due in one year or less	$	1,~~810~~645	$	1,~~836~~660		5.30	%
Due after 1 year through 5 years		1113,~~774~~972		1214,~~380~~666		5.18	%
Due after 5 years through 10 years		1926,~~893~~264		2127,~~091~~606		3.99	%
Due after 10 years		1,~~844~~596		1,~~902~~675		4.16	%
Asset back securities		0		0
Collateralized mortgage obligations issued by:
Collateralized mortgage obligations issued by:
GSE agencies		24,157		24,666		2.55	%
Agencies		31,116		31,637
Private label		42,167		42,496		3.79	%
Private label		56,886		57,029
Mortgage backed securities issued by agencies		59,000		59,380		2.15	%
Mortgage backed securities issued by agencies		48,265		48,758
Corporate debt:
Corporate debt:
Due after 10 years		1,970		1,454		1.29	%
Due after 10 years		1,969		1,500
Equity securities		75		75		0	%
Bond money market funds		9,428		9,428
Total	$	170,846	$	173,678		3.20	%
Equity securities		75		75
Total	$	183,060	$	185,636

Activities related to the sales of securities available for sale and other realized losses are summarized as follows: (dollars in thousands)

	Three months ended				~~Nine months ended~~
	September 30,				September 30,
	March 31,
	2011		2010		2011		2010
	2012		2011
Proceeds from sales	$	~~82,135~~816	$	5115,~~626~~179	$	~~114,532~~	$	~~125,417~~
Gross gains on securities		~~2,558~~0		~~490~~295		~~2,956~~		~~502~~
Gross losses on securities		~~357~~0		5111		~~561~~		5
Other than temporary impairment losses		97		139		104		194
Tax expense on realized security gains/losses		0		73
Tax expense on realized security gains/losses		871		192		948		197

~~During 2011 and 2010 other than temporary impairment was recorded on certain available for sale securities~~10. ~~The~~ ~~entire~~Impairment ~~unrealized loss on these securities was considered to be related to credit and the cost basis~~ of ~~these investments was reduced to zero based on the Company’s analysis of expected cash flows. Therefore, no amounts were recognized in other comprehensive income.~~Investments

11Management reviews its investment portfolio for other than temporary impairment on a quarterly basis. The ~~Impairment~~review includes an analysis of ~~Investments~~the facts and circumstances of each individual investment such as the severity of loss, the length of time the fair value has been below cost, the expectation for that security’s performance, the creditworthiness of the issuer, and the timely receipt of contractual payments. Additional consideration is given to the fact that it is not more-likely-than-not the Company will be required to sell the investments before recovery of their amortized cost basis, which may be maturity,

~~Management~~In ~~reviews~~reviewing its ~~investment~~available ~~portfolio~~ for ~~other~~sale ~~than~~securities ~~temporary~~at ~~impairment~~March on31, a2012, ~~quarterly~~for ~~basis. The~~other ~~review~~than ~~includes~~temporary animpairment, ~~analysis~~management ofconsidered the ~~facts~~change ~~and~~in ~~circumstances~~market ofvalue ~~each individual investment such as the severity~~ of ~~loss,~~ the ~~length~~securities ofin ~~time~~ the ~~fair~~first ~~value~~three months ~~has~~of ~~been below cost~~2012, the expectation for ~~that~~the security’s future performance, ~~the~~based ~~creditworthiness~~on of the ~~issuer~~receipt, ~~and~~or ~~the~~non ~~timely~~ receipt, of ~~contractual~~required ~~payments. Additional~~cash ~~consideration~~flows isand ~~given~~Moody’s toand ~~the~~S&P ~~fact~~ratings ~~the~~where ~~Company~~available. Additionally, ~~does~~management ~~not~~considered ~~intend to sell these investments and~~ that it is not more-likely-than-not that the Company ~~will~~would be required to sell ~~the~~a ~~investments~~security before the recovery of ~~their~~its amortized cost basis,. Any ~~which~~unrealized ~~may~~losses beare largely due to increases in market interest rates over the yields available at the time the underlying securities were purchased. The fair value is expected to recover as the securities approach their maturity, date or repricing date or if the market yields for such investments decline. Based on this criteria management concluded that no additional other than temporary impairment (“OTTI”) charge was required.

InAt ~~reviewing~~March ~~its available for sale securities at September 30~~31, ~~2011~~2012, ~~for~~the ~~other~~Company ~~than~~had ~~temporary~~two ~~impairment,~~corporate ~~management~~debt ~~considered~~securities ~~the~~with ~~change~~a inface ~~market~~amount ~~value~~ of ~~the~~$2.0 ~~securities~~million inand ~~the~~an ~~first~~unrealized ~~three~~loss ~~quarters~~ of ~~2011~~$516,000, ~~the~~which ~~expectation~~was ~~for~~an ~~the~~improvement ~~security’s~~of ~~future~~$53,000 ~~performance~~over ~~based on~~ the ~~receipt,~~December ~~or non receipt~~31, of2011 ~~required~~unrealized ~~cash flows and Moody’s and S&P ratings where available~~loss. ~~Additionally,~~These ~~management~~two ~~considered~~securities ~~that~~are ~~the~~rated ~~Company~~A2 ~~does~~and ~~not~~BA1 ~~intend~~by toMoodys ~~sell~~indicating these ~~investments~~securities ~~and~~are itconsidered of islow ~~not more-likely-than-not that the Company would be required~~ to ~~sell~~moderate acredit ~~security~~risk. The ~~before~~issuers of the ~~recovery~~two ofsecurities ~~its~~are ~~amortized~~two ~~cost~~well ~~basis~~capitalized banks. ~~Any~~Management ~~unrealized~~believes ~~losses~~that ~~are~~the ~~largely~~decline ~~due to increases~~ in market ~~interest rates over the yields available at the time the underlying securities were purchased. The fair~~ value is ~~expected~~due primarily to ~~recover as~~ the ~~securities~~interest ~~approach~~rate ~~their~~and maturity ~~date~~as orthese ~~repricing~~securities ~~date~~carry oran ifinterest ~~the~~rate ~~market~~of ~~yields~~LIBOR ~~for~~plus ~~such~~55 ~~investments~~basis ~~decline. Based~~points onwith ~~this~~maturities ~~criteria~~beyond ~~management~~ten ~~concluded that no additional other than temporary impairment (“OTTI”) charge was required~~years.

At September 30, 2011, the Company had two corporate debt securities with a face amount of $2.0 million and an unrealized loss of $469,000, which was an improvement of $39,000 over the December 31, 2010 unrealized loss. These two securities are rated A2 and BAA3 by Moodys indicating these securities are considered to represent low to moderate credit risk. The issuers of the two securities are two well capitalized banks. Management believes that the decline in market value is due primarily to the interest rate and maturity as these securities carry an interest rate of LIBOR plus 55 basis points with maturities beyond ten years.

- 10 -

Investments that have been in a continuous unrealized loss position as of ~~September~~March 3031, ~~2011~~2012 and December 31, ~~2010~~2011 are summarized as follows: (dollars in thousands)

As of September 30, 2011	Less than Twelve Months					Twelve Months Or Longer					Total
As of March 31, 2012	Less than Twelve Months					Twelve Months Or Longer					Total
Description of Securities	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
Collateralized mortgage obligations issued by:
Agencies	$	1,710	$	(4	)	$	0	$	0		$	1,710	$	(4	)
Private Label	$	2,532	$	(13	)	$	3,281	$	(19	)	$	5,813	$	(32	)
Private Label		18,971		(122	)		4,179		(14	)		23,150		(136	)
Mortgage backed securities issued by agencies		16,911		(54	)		0		0			16,911		(54	)
Mortgage backed securities issued by agencies		4,251		(11	)		0		0			4,251		(11	)
Corporate debt		0		0			1,454		(516	)		1,454		(516	)
Corporate debt		0		0			1,500		(469	)		1,500		(469	)
Municipal bonds		4,501		(44	)		0		0			4,501		(44	)
Municipal bonds		460		(11	)		815		(2	)		1,275		(13	)
Total Temporarily Impaired Securities	$	23,944	$	(111	)	$	4,735	$	(535	)	$	28,679	$	(646	)
Total Temporarily Impaired Securities	$	25,392	$	(148	)	$	6,494	$	(485	)	$	31,886	$	(633	)

As of December 31, 2010	Less than Twelve Months					Twelve Months Or Longer					Total
As of December 31, 2011	Less than Twelve Months					Twelve Months Or Longer					Total
Description of Securities	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
Asset backed securities	$	15	$	(3	)	$	27	$	(55	)	$	42	$	(58	)
Collateralized mortgage obligations issued by:
Agencies		20,969		(479	)		0		0			20,969		(479	)
GSE agencies	$	1,637	$	(10	)	$	0	$	0		$	1,637	$	(10	)
Private Label		696,~~290~~079		(~~967~~59	)		~~468~~3,911		(~~160~~17	)		699,~~758~~990		(~~1,127~~76	)
Mortgage backed securities issued by agencies		927,~~914~~956		(~~232~~112	)		0		0			927,~~914~~956		(~~232~~112	)
Corporate debt		0		0			1,~~459~~400		(~~508~~569	)		1,~~459~~400		(~~508~~569	)
Municipal bonds		~~12,841~~983		(~~543~~32	)		~~855~~397		(374	)		131,~~696~~380		(~~580~~36	)
Total Temporarily Impaired Securities	$	~~113~~36,~~029~~655	$	(~~2,224~~213	)	$	25,~~809~~708	$	(~~760~~590	)	$	~~115~~42,~~838~~363	$	(~~2,984~~803	)

1211. Portfolio Loans and Allowance for Loan Losses

The Company originates both adjustable and fixed rate loans. The adjustable rate loans have interest rate adjustment limitations and are indexed to various indices. Adjustable residential mortgages are generally indexed to the one year Treasury constant maturity rate; adjustable consumer loans are generally indexed to the prime rate; adjustable commercial loans are generally indexed to either the prime rate or the one, three or five year Treasury constant maturity rate. Future market factors may affect the correlation of the interest rates the Company pays on the short-term deposits that have been primarily utilized to fund these loans.

AtLate ~~September~~in 30March 2012, ~~2011~~the ~~and~~Company ~~December~~made ~~31,~~the ~~2010,~~decision ~~deposit~~to ~~overdrafts~~pursue the sale of ~~$125,000~~certain ~~and~~loans with balances totaling $~~145,000,~~9.0 ~~respectively,~~million. The loans that were ~~included~~identified infor ~~portfolio~~sale were written down to fair value upon transfer to loans held for sale. A charge off of $2.7 million was recorded in connection with the transfer..

~~The~~At ~~following~~March ~~table~~31, ~~presents~~2012 byand ~~portfolio~~December ~~segment~~31, ~~the~~2011, ~~activity~~deposit inoverdrafts ~~the~~of ~~allowance~~$105,000 ~~for~~and ~~loan~~$134,000, ~~losses~~respectively, ~~for~~were ~~the~~included ~~three~~in ~~months~~portfolio ~~ended September 30, 2011~~loans. ~~(dollars in thousands)~~

	Commercial and commercial mortgage loans			Residential mortgage loans			Second and home equity loans			Other consumer loans			Total
Three months ended Sept 30, 2011
Allowance for loan losses:
Balance at beginning of period	$	12,508		$	645		$	600		$	270		$	14,023
Provision for loan losses		14,119			(79	)		5			35			14,080
Loan charge-offs		(13,284	)		0			(52	)		(96	)		(13,432	)
Recoveries		24			12			10			43			89
Balance at End of Period	$	13,367		$	578		$	563		$	252		$	14,760

The following tables present by portfolio segment, the activity in the allowance for loan losses for the nine months ended September 30, 2011 and balance in the allowance for loan losses and the recorded investment in loans based on the Company’s loan portfolio and impairment method as of September 30, 2011 and December 31, 2010. (dollars in thousands)

	Commercial and commercial mortgage loans			Residential mortgage loans			Second and home equity loans			Other consumer loans			Total
Nine months ended Sept 30, 2011
Allowance for loan losses:
Balance at beginning of period	$	12,640		$	799		$	858		$	309		$	14,606
Provision for loan losses		18,419			(95	)		(68	)		71			18,327
Loan charge-offs		(17,901	)		(139	)		(254	)		(255	)		(18,549	)
Recoveries		209			13			27			127			376
Balance at End of Period	$	13,367		$	578		$	563		$	252		$	14,760
Ending balance: individually evaluated for impairment	$	352		$	0		$	0		$	0		$	352
Ending balance: collectively evaluated for impairment	$	13,015		$	578		$	563		$	252		$	14,408
Loans:
Balance at End of Period	$	516,884		$	92,487		$	88,448		$	10,223		$	708,042
Ending balance: individually evaluated for impairment	$	44,473		$	0		$	0		$	0		$	44,473
Ending balance: collectively evaluated for impairment	$	472,411		$	92,487		$	88,448		$	10,223		$	663,569

- 11 -

	Commercial and commercial mortgage loans		Residential mortgage loans		Second and home equity loans		Other consumer loans		Total
As of December 31, 2010
Allowance for loan losses:
Balance at End of Period	$	12,640	$	799	$	858	$	309	$	14,606
Ending balance: individually evaluated for impairment	$	3,455	$	0	$	0	$	0	$	3,455
Ending balance: collectively evaluated for impairment	$	9,185	$	799	$	858	$	309	$	11,151
Loans:
Balance at End of Period	$	550,686	$	92,796	$	92,557	$	11,614	$	747,653
Ending balance: individually evaluated for impairment	$	54,450	$	0	$	0	$	0	$	54,450
Ending balance: collectively evaluated for impairment	$	496,236	$	92,796	$	92,557	$	11,614	$	693,203

The following tables present, by portfolio segment, the activity in the allowance for loan losses for the three months ended March 31, 2012 and 2011 and balance in the allowance for loan losses and the recorded investment in loans based on the Company’s loan portfolio and impairment method as of March 31, 2012, March 31, 2011 and December 31, 2011. (dollars in thousands)

	Commercial and commercial mortgage loans			Residential mortgage loans			Second and home equity loans			Other consumer loans			Total
Three months ended March 31, 2012
Allowance for loan losses:
Balance at beginning of period	$	13,691		$	504		$	556		$	233		$	14,984
Provision for loan losses		7,900			(20	)		(82	)		(59	)		7,739
Loan charge-offs		(4,959	)		0			(7	)		(56	)		(5,022	)
Recoveries		365			0			12			59			436
Balance at End of Period	$	16,997		$	484		$	479		$	177		$	18,137
Ending balance: individually evaluated for impairment	$	3,244		$	0		$	0		$	0		$	3,244
Ending balance: collectively evaluated for impairment	$	13,753		$	484		$	479		$	177		$	14,893
Loans:
Balance at End of Period	$	498,548		$	91,502		$	82,457		$	9,057		$	681,564
Ending balance: individually evaluated for impairment	$	48,117		$	0		$	0		$	0		$	48,117
Ending balance: collectively evaluated for impairment	$	450,431		$	91,502		$	82,457		$	9,057		$	633,447

	Commercial and commercial mortgage loans			Residential mortgage loans			Second and home equity loans			Other consumer loans			Total
Three months ended March 31, 2011
Allowance for loan losses:
Balance at beginning of period	$	12,640		$	799		$	858		$	309		$	14,606
Provision for loan losses		1,596			(5	)		(49	)		16			1,558
Loan charge-offs		(1,549	)		(40	)		(39	)		(81	)		(1,709	)
Recoveries		71			0			7			45			123
Balance at End of Period	$	12,758		$	754		$	777		$	289		$	14,578
Ending balance: individually evaluated for impairment	$	4,010		$	0		$	0		$	0		$	4,010
Ending balance: collectively evaluated for impairment	$	8,748		$	754		$	777		$	289		$	10,568
Loans:
Balance at End of Period	$	550,586		$	92,413		$	90,937		$	10,933		$	744,869
Ending balance: individually evaluated for impairment	$	63,129		$	0		$	0		$	0		$	63,129
Ending balance: collectively evaluated for impairment	$	487,457		$	92,413		$	90,937		$	10,933		$	681,740

	Commercial and commercial mortgage loans		Residential mortgage loans		Second and home equity loans		Other consumer loans		Total
As of December 31, 2011
Allowance for loan losses:
Balance at End of Period	$	13,691	$	504	$	556	$	233	$	14,984
Ending balance: individually evaluated for impairment	$	545	$	0	$	0	$	0	$	545
Ending balance: collectively evaluated for impairment	$	13,146	$	504	$	556	$	233	$	14,439
Loans:
Balance at End of Period	$	517,970	$	93,757	$	86,059	$	9,533	$	707,319
Ending balance: individually evaluated for impairment	$	41,075	$	0	$	0	$	0	$	41,075
Ending balance: collectively evaluated for impairment	$	476,895	$	93,757	$	86,059	$	9,533	$	666,244

The risk characteristics of each loan portfolio segment are as follows:

Commercial and Commercial Mortgage (including commercial construction loans)

Commercial loans are primarily based on the identified cash flows of the borrower and secondarily on the underlying collateral provided by the borrower. The cash flows of borrowers, however, may not be as expected and the collateral securing these loans may fluctuate in value. Most commercial loans are secured by the assets being financed or other business assets such as accounts receivable or inventory and may incorporate a personal guarantee; however, some short-term loans may be made on an unsecured basis. In the case of loans secured by accounts receivable, the availability of funds for the repayment of these loans may be substantially dependent on the ability of the borrower to collect amounts due from its customers.

Commercial mortgage loans are viewed primarily as cash flow loans and secondarily as loans secured by real estate. Commercial mortgage lending typically involves higher loan principal amounts and the repayment of these loans is generally dependent on the successful operation of the property securing the loan or the business conducted on the property securing the loan. Commercial mortgage loans may be more adversely affected by conditions in the real estate markets or in the general economy. The properties securing the Company’s nonresidential and multi-family real estate portfolio are diverse in terms of type and geographic location. Management monitors and evaluates these loans based on collateral, geography and risk grade criteria. As a general rule, the Company avoids financing single purpose projects unless other underwriting factors are present to help mitigate risk. In addition, management tracks the level of owner-occupied real estate loans versus non-owner occupied loans.

Commercial mortgage construction loans are underwritten utilizing feasibility studies, independent appraisal reviews, sensitivity analysis of absorption and lease rates and financial analysis of the developers and property owners. Construction loans are generally based on estimates of costs and value associated with the complete project. These estimates may be inaccurate. Construction loans often involve the disbursement of substantial funds with repayment substantially dependent on the success of the ultimate project. Sources of repayment for these types of loans may be pre-committed permanent loans from approved long-term lenders, sales of developed property or an interim loan commitment from the Company until permanent financing is obtained. These loans are closely monitored by on-site inspections and are considered to have higher risks than other real estate loans due to their ultimate repayment being sensitive to interest rate changes, governmental regulation of real property, general economic conditions and the availability of long-term financing.

- 12 -

Residential mortgage, Seconds, Home Equity and Consumer

With respect to residential loans that are secured by one-to-four family residences and are generally owner occupied, the Company generally establishes a maximum loan-to-value ratio and requires private mortgage insurance (“PMI”) if that ratio is exceeded. Second and home equity loans are typically secured by a subordinate interest in one-to-four family residences, and consumer loans are secured by consumer assets such as automobiles or recreational vehicles. Some consumer loans are unsecured such as small installment loans and certain lines of credit. Repayment of these loans is primarily dependent on the personal income of the borrowers, which can be impacted by economic conditions in their market areas such as unemployment levels. Repayment can also be impacted by changes in property values on residential properties. Risk is mitigated by the fact that the loans are of smaller individual amounts and spread over a large number of borrowers.

The Company 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 Company analyzes non-homogeneous loans, such as commercial and commercial mortgage loans, with an outstanding balance greater than $750,000 individually by classifying the loans as to credit risk. Loans less than $750,000 in homogeneous categories that are 90 days past due are classified into risk categories. This analysis is performed on a quarterly basis. The Company 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 Company’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.

Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be pass rated loans along with homogeneous loans that have not exhibited any delinquency. As of ~~September~~March 3031, 2012 ~~2011~~ and December 31, ~~2010~~2011, and based on the most recent analysis performed, the risk category of loans by class of loans is as follows: (dollars in thousands)

As of September, 2011

Commercial and commercial mortgage loans

Construction loans

Residential mortgage loans

Second and home equity loans

Other consumer loans

Total

As of March 31, 2012

Commercial and commercial mortgage loans

Construction loans

Residential mortgage loans

Second and home equity loans

Other consumer loans

Total

Rating:

Pass

~~425~~406,~~786~~849

3334,~~476~~221

86,~~940~~329

8882,~~117~~156

108,~~026~~978

~~644~~618,~~345~~533

Special mention

128,~~358~~735

~~182~~96

9799

128,~~637~~930

Substandard

4447,~~250~~756

5,~~193~~285

~~1,186~~779

~~234~~202

~~197~~79

5154,~~060~~101

Balance at End of Period

~~482~~463,~~394~~340

3839,~~669~~506

8887,~~308~~204

8882,~~448~~457

109,~~223~~057

~~708~~681,~~042~~564

As of December 31, 2010

Commercial and commercial mortgage loans

Construction loans

Residential mortgage loans

Second and home equity loans

Other consumer loans

Total

As of December 31, 2011

Commercial and commercial mortgage loans

Construction loans

Residential mortgage loans

Second and home equity loans

Other consumer loans

Total

Rating:

Pass

435,~~503~~266

4232,~~921~~825

8587,~~045~~278

9185,~~790~~751

119,~~342~~462

~~666~~650,~~601~~582

Special mention

159,~~682~~521

~~2,134~~0

~~372~~313

7844

189,~~266~~878

Substandard

5137,~~750~~856

87,~~745~~951

~~1,330~~717

~~689~~264

~~272~~71

6246,~~786~~859

Balance at End of Period

~~502~~482,~~935~~643

5340,~~800~~776

8688,~~747~~308

9286,~~557~~059

119,~~614~~533

~~747~~707,~~653~~319

-The 12following -tables present the Company’s loan portfolio aging analysis as of March 31, 2012 and December 31, 2011: (dollars in thousands)

The following tables present the Company’s loan portfolio aging analysis as of September 30, 2011 and December 31, 2010: (dollars in thousands)

As of March 31, 2012	Commercial and commercial mortgage loans		Construction loans		Residential mortgage loans		Second and home equity loans		Other consumer loans		Total
Loans:
30 to 59 days past due	$	1,140	$	0	$	547	$	318	$	32	$	2,037
60 to 89 days past due		165		0		0		64		9		238
Past due 90 days or more, still accuring		0		0		87		0		0		87
Nonaccrual		21,741		5,285		756		237		69		28,088
Total Past Due and Nonaccrual		23,046		5,285		1,390		619		110		30,450
Current		440,294		34,221		85,814		81,838		8,947		651,114
Total Loans	$	463,340	$	39,506	$	87,204	$	82,457	$	9,057	$	681,564

As of September 30,2011	Commercial and commercial mortgage loans		Construction loans		Residential mortgage loans		Second and home equity loans		Other consumer loans		Total
As of December 31, 2011	Commercial and commercial mortgage loans		Construction loans		Residential mortgage loans		Second and home equity loans		Other consumer loans		Total
Loans:
30-59 days past due	$	1,807	$	0	$	827	$	408	$	71	$	3,113
30 to 59 days past due	$	479	$	0	$	874	$	526	$	109	$	1,988
60-89 days past due		0		0		0		51		9		60
60 to 89 days past due		0		0		0		44		1		45
Past due 90 days or more		0		0		87		0		0		87
Past due 90 days or more, still accuring		0		0		87		0		0		87
Nonaccrual		2925,~~706~~962		26,~~537~~826		~~1,248~~849		~~279~~264		6470		33,~~834~~971
Total Past Due		31,513		2,537		2,162		738		144		37,094
Total Past Due and Nonaccrual		26,441		6,826		1,810		834		180		36,091
Current		~~450~~456,~~881~~202		3633,~~132~~950		86,~~146~~498		8785,~~710~~225		109,~~079~~353		~~670~~671,~~948~~228
Total Loans	$	482,~~394~~643	$	3840,~~669~~776	$	88,308	$	8886,~~448~~059	$	109,~~223~~533	$	~~708~~707,~~042~~319

As of Dec. 31, 2010	Commercial and commercial mortgage loans		Construction loans		Residential mortgage loans		Second and home equity loans		Other consumer loans		Total
Loans:
30-59 days past due	$	2,770	$	0	$	1,447	$	687	$	68	$	4,972
60-89 days past due		0		0		0		78		21		99
Past due 90 days or more		0		0		92		0		0		92
Nonaccrual		12,893		5,189		1,412		678		106		20,278
Total Past Due		15,663		5,189		2,951		1,443		195		25,441
Current		487,272		48,611		83,796		91,114		11,419		722,212
Total Loans	$	502,935	$	53,800	$	86,747	$	92,557	$	11,614	$	747,653

A loan is considered impaired, in accordance with the impairment accounting guidance (ASC 310-10-35-16), when based on current information and events, it is probable the Company will be unable to collect all amounts due from the borrower in accordance with the contractual terms of the loan. Impaired loans include nonperforming commercial and commercial mortgage loans (including construction loans) but also include loans modified in troubled debt restructurings where concessions have been granted to borrowers experiencing financial difficulties. These concessions could include a reduction in the interest rate on the loan, payment extensions, forgiveness of principal, forbearance or other actions intended to maximize collection.

The following is a summary by class of information pertaining to impaired loans as of September 30, 2011 and December 31, 2010: (dollars in thousands)

As of September 30, 2011	Recorded Investment		Unpaid Principal Balance		Related Allowance for Loan Losses
Impaired Loans with No Related Allowance Recorded (1):
Commercial and commercial mortgage loans	$	38,107	$	50,323	$	0
Construction loans		4,069		6,518		0
Total Impaired Loans with No Related Allowance Recorded	$	42,176	$	56,841	$	0
1) Residential mortgages of $519,000 and consumer loans of $26,000 all individually less than $250,000 are not individually reviewed and are excluded from the table as they were deemed not significant to the financial statements.
Impaired Loans with an Allowance Recorded:
Commercial and commercial mortgage loans	$	1,172	$	1,172	$	254
Construction loans		1,125		1,125		98
Total Impaired Loans with an Allowance Recorded	$	2,297	$	2,297	$	352
Impaired Loans:
Commercial and commercial mortgage loans	$	39,279	$	51,495	$	254
Construction loans		5,194		7,643		98
Total Impaired Loans	$	44,473	$	59,138	$	352

As of December 31, 2010	Recorded Investment		Unpaid Principal Balance		Related Allowance for Loan Losses
Impaired Loans with No Related Allowance Recorded:
Commercial and commercial mortgage loans	$	18,141	$	18,478	$	0
Construction loans		3,984		5,810		0
Total Impaired Loans with No Related Allowance Recorded	$	22,125	$	24,288	$	0
Impaired Loans with an Allowance Recorded:
Commercial and commercial mortgage loans	$	27,593	$	30,435	$	2,325
Construction loans		4,732		4,732		1,130
Total Impaired Loans with an Allowance Recorded	$	32,325	$	35,167	$	3,455
Impaired Loans:
Commercial and commercial mortgage loans	$	45,734	$	48,913	$	2,325
Construction loans		8,716		10,542		1,130
Total Impaired Loans	$	54,450	$	59,455	$	3,455

- 13 -

The following is a summary by class of information ~~related~~pertaining to ~~the average recorded investment and interest income recognized on~~ impaired loans ~~for~~as ~~the~~of ~~three~~March ~~and~~31, ~~nine~~2012 ~~months~~and ~~ended~~December ~~September 30~~31, 2011: (dollars in thousands)

	Three Months Ended				Nine Months Ended
As of March 31, 2012	Recorded Investment		Unpaid Principal Balance		Related Allowance for Loan Losses
	Sept 30, 2011				Sept 30, 2011
Impaired Loans with No Related Allowance Recorded (1):
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
Commercial and commercial mortgage loans	$	27,256	$	39,182	$	0
Impaired Loans:
Construction loans		5,285		5,970		0
Commercial and commercial mortgage loans	$	42,546	$	398	$	46,122	$	1,408
Total Impaired Loans with No Related Allowance Recorded	$	32,541	$	45,152	$	0
Construction loans		7,156		42		8,124		171
Impaired Loans with an Allowance Recorded:
Total Impaired Loans	$	49,702	$	440	$	54,246	$	1,579
Commercial and commercial mortgage loans	$	14,451	$	14,451	$	3,146
Commercial and commercial mortgage loans cash basis interest included above			$	0			$	40
Construction loans		1,125		1,125		98
Total Impaired Loans with an Allowance Recorded	$	15,576	$	15,576	$	3,244
Impaired Loans:
Commercial and commercial mortgage loans	$	41,707	$	53,633	$	3,146
Construction loans		6,410		7,095		98
Total Impaired Loans	$	48,117	$	60,728	$	3.244
1) Residential mortgages of $127,000 and consumer loans of $141,000 all individually less than $130,000 are not individually reviewed and are excluded from the table as they were deemed not significant to the financial statements.

As of December 31, 2011	Recorded Investment		Unpaid Principal Balance		Related Allowance for Loan Losses
Impaired Loans with No Related Allowance Recorded(1):
Commercial and commercial mortgage loans	$	29,829	$	41,381	$	0
Construction loans		6,826		9,276		0
Total Impaired Loans with No Related Allowance Recorded	$	36,655	$	50,657	$	0


Impaired Loans with an Allowance Recorded:
Commercial and commercial mortgage loans	$	3,295	$	3,295	$	447
Construction loans		1,125		1,125		98
Total Impaired Loans with an Allowance Recorded	$	4,420	$	4,420	$	545


Impaired Loans:
Commercial and commercial mortgage loans	$	33,124	$	44,676	$	447
Construction loans		7,951		10,401		98
Total Impaired Loans	$	41,075	$	55,077	$	545
1) Residential mortgages of $128,000 and consumer loans of $145,000 all individually less than $130,000 are not individually reviewed and are excluded from the table as they were deemed not significant to the financial statements.

The following is a summary by class of information related to the average recorded investment and interest income recognized on impaired loans for the three months ended March 31, 2012 and 2011: (dollars in thousands)

	Three Months Ended				Three Months Ended
	March 31, 2012				March 31, 2011
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
Impaired Loans:
Commercial and commercial mortgage loans	$	37,416	$	112	$	49,697	$	561
Construction loans		7,180		14		9,092		55
Total Impaired Loans	$	44,596	$	126	$	58,789	$	616
Commercial and commercial mortgage loans cash basis interest included above			$	87			$	38

- 14 -

Troubled Debt Restructurings

In the course of working with borrowers, the Company may choose to restructure the contractual terms of certain loans. In restructuring the loan, the Company attempts to work-out an alternative payment schedule with the borrower in order to optimize collectability of the loan. For all loan classes, any loans that are modified are reviewed by the Company to identify if a troubled debt restructuring (“TDR”) has occurred, which is when, for reasons related to a borrower’s financial difficulties, the Company grants a concession to the borrower that it would not otherwise consider. Terms may be modified to fit the ability of the borrower to repay based on their current financial status and the restructuring of the loan may include the transfer of assets from the borrower to satisfy the debt, a modification of loan terms, or a combination of the two. Also, additional collateral, a co-borrower, or a guarantor is often requested. If such efforts by the Company do not result in a satisfactory arrangement, foreclosure proceedings are initiated. At any time prior to a sale of the property at foreclosure, the Company may terminate foreclosure proceedings if the borrower is able to work-out a satisfactory payment plan.

AsIt ais ~~result of adopting~~ the ~~amendments~~Company’s inpractice ~~Accounting~~to ~~Standards~~have ~~Update~~any ~~No.~~restructured ~~2011-02~~loans ~~(the~~which ~~ASU),~~are ~~the~~on ~~Company~~nonaccrual ~~reassessed~~status ~~all~~prior ~~restructurings~~to ~~that~~being ~~occurred~~restructured remain on ornonaccrual ~~after~~status ~~the~~until three ~~beginning~~months of satisfactory borrower performance at which time management would consider its ~~current~~return ~~fiscal~~to ~~year~~accrual status. The balance of nonaccrual restructured loans, ~~January~~which 1is included in nonaccrual loans, ~~2011~~was $1.9 million and $1.2 million at March 31, ~~for~~2012 ~~identification~~and asDecember ~~troubled~~31, ~~debt~~2011, ~~restructurings~~respectively. ~~The~~If ~~Company~~the ~~did~~restructured ~~not~~loan ~~identify~~is ason ~~troubled~~accrual ~~debt~~status ~~restructurings~~prior ~~any~~to ~~additional~~being ~~receivables~~restructured, ~~for~~it ~~which~~is reviewed to determine if the ~~allowance~~restructured ~~for~~loan ~~credit~~should ~~losses~~remain ~~had~~on ~~previously~~accrual ~~been~~status. The ~~measured~~balance ~~under~~of aaccruing ~~general~~restructured ~~allowance~~loans ~~for~~was ~~credit~~$3.1 ~~losses~~million ~~methodology~~and as$3.1 amillion ~~result~~at ofMarch ~~this~~31, ~~assessment~~2012 and December 31, 2011, respectively.

ItLoans isthat ~~the~~are ~~Company’s~~considered ~~practice~~TDRs toare ~~have~~classified ~~any~~as ~~restructured~~performing, ~~loans~~unless ~~which~~they are on nonaccrual status ~~prior~~or togreater ~~being~~than ~~restructured~~90 days ~~remain~~delinquent onas ~~nonaccrual~~of ~~status~~the ~~until~~end ~~six~~of ~~months~~the ofmost ~~satisfactory~~recent ~~borrower~~quarter. ~~performance~~All atTDRs ~~which~~are ~~time~~considered ~~management~~impaired ~~would~~by ~~consider~~the ~~its~~Company, ~~return~~unless toit ~~accrual~~is ~~status. The~~determined ~~balance~~that ofthe ~~nonaccrual~~borrower ~~restructured~~has ~~loans,~~met ~~which~~the three ismonth ~~included~~satisfactory inperformance ~~nonaccrual~~period ~~loans,~~under ~~was~~modified $1terms.4 ~~million~~On ata ~~September~~quarterly 30basis, ~~2011. If~~ the ~~restructured~~Company ~~loan~~individually isreviews onall ~~accrual~~TDR ~~status~~loans ~~prior~~ to ~~being restructured, it is reviewed to~~ determine if ~~the~~a ~~restructured~~ loan ~~should~~meets ~~remain~~this ~~on accrual status~~criterion. ~~The balance of accruing restructured loans was $5.9 million at September 30, 2011.~~

~~Loans~~Performing ~~that~~commercial ~~are~~TDR ~~considered~~loans ~~TDRs~~at ~~are~~March ~~classified~~31, as2012 ~~performing,~~consist ~~unless~~of ~~they~~three commercial real estate loans totaling $2.6 million that are oninterest ~~nonaccrual~~only ~~status~~and orone ~~greater~~commercial ~~than~~real 90estate loan totaling $199,000 that is amortizing. ~~days~~The ~~delinquent~~Company asdoes ofnot ~~the~~generally ~~end~~forgive ofprincipal ~~the~~or ~~most~~interest ~~recent~~on ~~quarter~~restructured loans. However, ~~All~~when ~~TDRs~~a loan is restructured, income and principal are ~~considered~~generally ~~impaired~~received byon a delayed basis as compared to the original repayment schedule. The Company, ~~unless~~generally itreceives ismore ~~determined~~interest ~~that~~than originally scheduled, as the ~~borrower~~loan ~~has~~remains ~~met~~outstanding ~~the~~for ~~six~~longer ~~month~~periods ~~satisfactory~~of ~~performance~~time, ~~period~~sometimes ~~under~~with ~~modified~~higher ~~terms.~~average Onbalances athan ~~quarterly~~originally ~~basis,~~scheduled. ~~the~~The ~~Company~~average ~~individually~~yield ~~reviews~~on ~~all~~modified ~~TDR~~commercial loans was 4.6%, compared to ~~determine~~5.8% ifearned aon the entire commercial loan ~~meets~~portfolio ~~this~~in ~~criterion~~the first quarter of 2012.

Performing ~~commercial~~consumer TDR loans at ~~September~~March 3031, ~~2011~~2012 consist of ~~two~~six ~~commercial~~retail ~~real estate~~ loans ~~totaling~~including ~~$2.3~~one ~~million~~residential ~~that~~and ~~are~~two ~~interest~~second ~~only;~~mortgages ~~three~~which ~~commercial~~comprise ~~real estate loans totaling~~ $~~489~~248,000 ~~that~~of ~~are~~the ~~amortizing~~total ~~and~~retail ~~one~~TDR ~~$2.6~~balance ~~million~~of ~~amortizing commercial installment loan~~$269,000. The ~~Company~~consumer ~~does~~TDR ~~not~~loans ~~generally~~have ~~forgive~~been ~~principal or interest on~~ restructured ~~loans. However,~~at ~~when~~less athan ~~loan~~market isterms ~~restructured, income~~ and ~~principal~~include ~~are~~rate ~~generally received on a delayed basis as compared to the original repayment schedule. The Company generally receives more interest than originally scheduled~~modifications, asextension ~~the loan remains outstanding for longer periods~~ of ~~time~~maturity, ~~sometimes~~and ~~with higher average balances than originally scheduled~~forbearance. The average yield on modified ~~commercial~~residential mortgage and second mortgage loans was 65.438%, compared to 54.487% earned on the entire ~~commercial~~residential mortgage loan and ~~portfolio~~second mortgage portfolios in the ~~third~~first quarter of ~~2011~~2012.

Performing consumer TDR loans at September 30, 2011 consist of fourteen retail loans including two residential and seven second mortgages which comprise $519,000 of the total retail TDR balance of $545,000. The consumer TDR loans have been restructured at less than market terms and include rate modifications, extension of maturity, and forbearance. The average yield on modified residential mortgage and home equity loans was 6.57%, compared to 4.40% earned on the entire residential mortgage loan portfolio in the third quarter of 2011.

With regard to determination of the amount of the allowance for credit losses, all accruing restructured loans are considered to be impaired. As a result, the determination of the amount of impaired loans for each portfolio segment within troubled debt restructurings is the same as detailed above.

~~The~~There ~~following~~were ~~tables~~no ~~present~~newly ~~information~~classified ~~regarding~~ troubled debt restructurings ~~by class~~ for the three months ended March 31, 2012 and ~~nine~~2011. No troubled debt restructurings subsequently defaulted in the three months ended ~~September~~March 3031, ~~2011.~~2012 ~~(In~~and ~~thousands)~~2011.

	Three month ended						Nine months ended
	September 30, 2011						September 30, 2011
Newly classified troubled debt restructurings (1)	Number of Loans		Pre Modification Recorded Balance		Post Modification Recorded Balance		Number of Loans		Pre Modification Recorded Balance		Post Modification Recorded Balance
Commercial and commercial mortgages		1	$	1,046	$	1,046		2	$	2,428	$	2,428
Construction loans
Residential mortgage loans
Second and home equity loans
Other consumer loans
Total		1	$	1,046	$	1,046		2	$	2,428	$	2,428

(1) The troubled debt restructuring did not have a material impact on the financial statements.

Three month ended

Nine months ended

September 30, 2011

Troubled debt restructurings in the previous nine months that subsequently defaulted

Number of Loans

Pre Modification Recorded Balance

Post Modification Recorded Balance

Number of Loans

Pre Modification Recorded Balance

Post Modification Recorded Balance

Commercial and commercial mortgages

112

Construction loans

Residential mortgage loans

Second and home equity loans

Other consumer loans

Total

112

Commercial and consumer loans modified in a TDR are closely monitored for delinquency as an early indicator of possible future default. If loans modified in a TDR subsequently default, the Company evaluates the loan for possible further impairment. The allowance may be increased, adjustments may be made in the allocation of the allowance, or partial charge-offs may be taken to further write-down the carrying value of the loan. The Company defines default for the above disclosure as generally greater than ninety days past due. In certain circumstances the Company may consider default to have occurred prior to being ninety days past due, if the Company believes payments in the near term are uncertain.

-Allowance 14for -Loan Losses Methodology and Related Policies

Allowance for Loan Losses Methodology and Related Polices

A loan is considered impaired when it is probable the Company will be unable to collect all contractual principal and interest payments due in accordance with the terms of the loan agreement. Factors considered by management in determining impairment include the probability of collecting scheduled principal and interest payments when due based on the loan’s current payment status and the borrower’s financial condition including source of cash flows. All commercial and commercial real estate impaired loans, as well as impaired residential mortgages and consumer loans over $250,000, are measured based on the loan’s discounted cash flow or the estimated fair value of the collateral if the loan is collateral dependent. The amount of impairment, if any and any subsequent changes are included in the allowance for loan losses.

Currently the Company’s loans individually evaluated for impairment are all in the commercial and commercial real estate segment. In general the Company acquires updated appraisals on an annual basis for commercial and commercial real estate impaired loans, exclusive of performing TDRs. Based on historical experience these appraisals are discounted ten percent to estimate the cost to sell the property. If the most recent appraisal is over a year old, and a new appraisal is not performed, due to lack of comparable values or other reasons, a 20% discount, based on historical experience is applied to the appraised value. The discount may be increased due to area economic factors, such as vacancy rates, lack of sales, and condition of property.

The Company promptly charges off commercial loans, or portion thereof, when available information confirms that specific loans are uncollectible based on information that includes, but is not limited to: a) the deteriorating financial condition of the borrower; b) declining collateral values, and/or c) legal action, including bankruptcy that impairs the borrower’s ability to adequately meet its obligations. For impaired loans that are considered to be solely collateral dependent, a partial charge off is recorded when a loss has been confirmed by an updated appraisal or other appropriate valuation of the collateral.

For all loan classes, when cash payments are received on impaired loans, the Company records the payment as interest income unless collection of the remaining recorded principal amount is doubtful, at which time payments are used to reduce the principal balance of the loan. Troubled debt restructured loans recognize interest income on an accrual basis at the renegotiated rate if the loan is in compliance with the modified terms. For impaired loans where the Company utilizes the present value of expected future cash flows to determine the level of impairment, the Company reports the entire change in present value as bad-debt expense. The Company does not record any increase in the present value of cash flows as interest income.

Consistent with regulatory guidance, charge-offs for all loan segments are taken when specific loans, or portions thereof, are considered uncollectible and of such little value that their continuance as assets is not warranted. The Company promptly charges these loans off in the period the uncollectible loss amount is reasonably determined. The Company charges off consumer related loans which include 1-4 family first mortgages, second and home equity loans and other consumer loans or portions thereof when the Company reasonably determines the amount of the loss. However, the charge offs generally are not made earlier than the applicable regulatory timeframes. Such regulatory timeframes provide for the charge down of 1-4 family first and junior lien mortgages to the net realizable value less costs to sell when the loan is 180 days past due, charge off of unsecured open end loans when the loan is 180 days past due and charge down to the net realizable value when other secured loans are 120 days past due. For all loan classes, the entire balance of the loan is considered delinquent if the minimum payment contractually required to be paid is not received by the contractual due date.

- 15 -

A reversal of accrued interest, which has not been collected, is generally provided on loans which are more than 90 days past due. The only loans which are 90 days past due and are still accruing interest are loans where the Company is guaranteed reimbursement of interest by either a mortgage insurance contract or by a government agency. If neither of these criteria is met, a charge to interest income equal to all interest previously accrued and unpaid is made, and income is subsequently recognized only to the extent that cash payments are received in excess of principal due. Loans are returned to accrual status when, in management's judgment, the borrower's ability to make periodic interest and principal payments returns to normal and future payments are reasonably assured.

For all loan segments, the allowance for loan losses is established through a provision for loan losses. Loan losses are charged against the allowance when management believes the loans are uncollectible. Subsequent recoveries, if any, are credited to the allowance. The allowance for loan losses is maintained at a level management considers to be adequate to absorb estimated incurred loan losses inherent in the portfolio, based on evaluations of the collectability and historical loss experience of loans. The allowance is based on ongoing assessments of the estimated incurred losses inherent in the loan portfolio. The Company’s methodology for assessing the appropriate allowance level consists of several key elements, as described below.

All delinquent loans that are 90 days past due are included on the Asset Watch List. The Asset Watch List is reviewed quarterly by the Asset Watch Committee for any classification beyond the regulatory rating based on a loan’s delinquency. Commercial and commercial real estate loans are individually risk rated pursuant to the loan policy. Specific reserves are assigned on impaired loans based on the measurement criteria noted above. Homogeneous loans such as consumer and residential mortgage loans are not individually risk rated by management. They are pooled based on historical portfolio data that management believes will provide a reasonable basis for the loans’ quality. For all loans not listed individually on the Asset Watch List, and those loans included on the Asset Watch List but not deemed impaired, historical loss rates are the basis for developing expected charge-offs for each pool of loans. In December 2010, management determined to increase the timeframe of the historical loss rates from the last two years by one quarter, each quarter, until a rolling three years is reached. This was done to accurately reflect the risk inherent in the portfolio. Management continually monitors portfolio conditions to determine if the appropriate charge off percentages in the allowance calculation reflect the expected losses in the portfolio. As disclosed in the prior quarter, the allowance increased by approximatley $1.9 million for the three month period ended June 30, 2011 and $500,000 for the six months ended June 30, 2011, as compared to the calculated allowance levels had the previous historical loss periods been utilized. As of ~~September~~March 3031, ~~2011~~2012, the time frame used to determine charge off percentages was ~~October~~April 1, ~~2008~~2009 through ~~September~~March 3031, ~~2011~~2012.

In addition to the specific reserves and the allocations based on historical loss rates, qualitative/environmental factors are used to recognize estimated incurred losses inherit in the portfolio not reflected in the historical loss allocations utilized. The qualitative/environmental factors include considerations such as the effects of the local economy, trends in the nature and volume of loans (delinquencies, charge-offs, nonaccrual and problem loans), changes in the internal lending policies and credit standards, collection practices, examination results from bank regulatory agencies and the Company’s credit review function. The qualitative/environmental portion of the allowance is assigned to the various loan categories based on management’s perception of estimated incurred risk in the different loan categories and the principal balance of the loan categories.

12. Acquisition Update

In a press release dated January 25, 2012, Old National Bancorp announced its intent to acquire the Company in an all stock transaction. Under the terms of the merger agreement, which was approved by the boards of both companies, Company shareholders will receive 1.90 shares of Old National Bancorp common stock for each share of Company common stock held by them. As provided in the merger agreement, the exchange ratio is subject to certain adjustments (calculated prior to closing) under circumstances where the consolidated shareholders’ equity of the Company is below a specified amount, the loan delinquencies of Indiana Community Bancorp exceed a specified amount or the credit mark for certain “Special Loans” of the Company (as defined in the merger agreement) falls outside a specified range. Based upon current estimates, no adjustments to the 1.90 exchange ratio would be required as a result of the shareholders’ equity or delinquent loan levels. However, the credit mark for the Special Loans as determined under the merger agreement (and as adjusted for net charge-offs on those loans after December 31, 2011), was $36.792 million as of March 31, 2012. If the exchange ratio adjustment were measured as of March 31, 2012, this would have resulted in a reduction in the exchange ratio from 1.90 shares of Old National Bancorp common stock for each share of Indiana Community Bancorp common stock, to 1.8241 shares. It is important to note, however, that the exchange ratio may be adjusted up or down between March 31, 2012, and 10 days before the closing of the merger based on further changes in the credit mark for the Special Loans. The transaction is expected to close in the third quarter of 2012, subject to approval by federal and state regulatory authorities and the Company's shareholders and the satisfaction of the closing conditions provided in the merger agreement. In connection with the Merger, executive officers covered by Supplemental Executive Retirement Agreements will receive payment for amounts previously earned. Additionally, outstanding employee options and restricted shares will be vested and converted to Old National Bancorp shares. As a result of the merger, two employees will have their change in control agreements assumed and paid by Old National Bank.

13. New Accounting Pronouncements

In ~~April~~May 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2011-0204, “AAmendments ~~Creditor’s~~to ~~Determination~~Achieve ofCommon ~~Whether~~Fair aValue ~~Restructuring~~Measurement Isand aDisclosure ~~Troubled~~Requirements ~~Debt~~in ~~Restructuring~~U.S. GAAP and International Financial Reporting Standards (“~~TDR~~IFRSs”)," which ~~provides~~results ~~additional~~in ~~guidance~~common tofair ~~assist~~value ~~creditors~~measurement inand ~~determining~~disclosure ~~whether~~requirements ain ~~restructuring~~U.S. ofGAAP aand ~~receivable~~IFRSs. Consequently, ~~meets~~the amendments change the ~~criteria~~wording used to bedescribe ~~considered~~many aof ~~troubled~~the ~~debt~~requirements ~~restructuring~~in U. ~~The~~S. ~~amendments~~GAAP infor ~~this~~measuring ~~ASU~~fair ~~are~~value ~~effective~~and for ~~the~~disclosing ~~first~~information ~~interim~~about orfair ~~annual~~value ~~period~~measurements. The ~~beginning~~application onof orfair ~~after~~value ~~June~~measurements ~~15,~~is ~~2011,~~not ~~and~~changed ~~are~~as toa beresult ~~applied~~of ~~retrospectively~~this toamendment. Some of the ~~beginning~~amendments provide clarification of ~~the~~existing ~~annual~~fair ~~period~~value ofmeasurement ~~adoption. As~~requirements while other amendments change a ~~result~~particular ofprincipal ~~applying~~or ~~these~~requirement ~~amendments,~~for anmeasuring ~~entity~~fair ~~may~~value ~~identify~~or ~~receivables~~disclosing ~~that~~information about fair value measurements. The amendments in this ASU are ~~newly~~effective ~~considered~~during ~~impaired~~interim and annual periods beginning after December 15, 2011. Management ~~has~~had determined the adoption of this guidance did not have a material effect on the Company’s financial position or results of operations.

In ~~May~~June 2011, the FASB issued ASU No. 2011-4.5, “~~Amendments~~Presentation toof ~~Achieve~~Comprehensive ~~Common~~Income,” ~~Fair~~which ~~Value~~improves ~~Measurement~~comparability, consistency, and ~~Disclosure~~transparency ~~Requirements~~of infinancial ~~U.S.~~reporting ~~GAAP~~ and ~~International~~increases ~~Financial~~the ~~Reporting~~prominence ~~Standards~~of ~~(“IFRSs”)~~items ~~which~~reported ~~results~~ in ~~common~~other ~~fair~~comprehensive ~~value~~income. The ~~measurement~~option ~~and~~to ~~disclosure~~present ~~requirements~~components inof ~~U.S.~~other ~~GAAP~~comprehensive ~~and~~income ~~IFRSs. Consequently,~~as ~~the~~part ~~amendments~~of ~~change~~ the ~~wording~~statement ~~used~~of tochanges ~~describe~~in ~~many~~stockholders’ ofequity ~~the~~has ~~requirements~~been ~~in U~~eliminated.S. The ~~GAAP~~amendments ~~for~~require ~~measuring~~that ~~fair~~all ~~value~~nonowner ~~and~~changes ~~for~~in ~~disclosing~~stockholders’ ~~information~~equity ~~about~~be ~~fair~~presented ~~value~~either ~~measurements. The~~in ~~application~~a ofsingle ~~fair~~continuous ~~value~~statement ~~measurements~~of ~~are~~comprehensive ~~not~~income ~~changed~~or asin atwo ~~result~~separate ofbut ~~this~~consecutive ~~amendment~~statements. ~~Some~~In ofthe two-statement approach, the ~~amendments~~first ~~provide~~statement ~~clarification~~will ofpresent ~~existing~~total ~~fair~~net ~~value~~income ~~measurement~~and ~~requirements~~its ~~while~~components ~~other~~followed ~~amendments~~consecutively ~~change~~by a ~~particular~~second ~~principal~~statement orthat ~~requirement~~will ~~for~~present ~~measuring~~total ~~fair~~other ~~value~~comprehensive orincome, ~~disclosing~~the ~~information~~components ~~about~~of ~~fair~~other ~~value~~comprehensive ~~measurements~~income, and the total of comprehensive income. The amendments in this ASU are effective ~~during~~for ~~interim~~fiscal years, and ~~annual~~interim periods within those years, beginning after December 15, 2011~~. Early~~; ~~application~~however, iscertain ~~not~~provisions ~~permitted. Management~~related isto ~~currently~~the inpresentation of reclassification adjustments have been deferred by ASU 2011-12 “Comprehensive Income - Deferral of the ~~process~~Effective Date for Amendments to the Presentation of ~~determining~~Reclassifications ~~what~~of ~~effect~~Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05,” as further discussed below. Management had determined the ~~provisions~~adoption of this ~~update~~guidance ~~will~~did not have a material effect on the Company’s financial position or results of operations.

In ~~June~~December 2011, the FASB issued ASU ~~No.~~ 2011-5.12, “~~Presentation of~~ Comprehensive Income” ~~which~~- ~~improves~~Deferral ~~comparability, consistency, and transparency~~ of ~~financial reporting and increases~~ the ~~prominence~~Effective ofDate ~~items~~for ~~reported~~Amendments ~~in other comprehensive income. The option~~ to ~~present~~the ~~components~~Presentation of ~~other~~Reclassifications ~~comprehensive~~of ~~income~~Items asOut ~~part~~ of ~~the~~Accumulated ~~statement~~Other ofComprehensive ~~changes~~Income in ~~stockholders’~~Accounting ~~equity~~Standards ~~has~~Update ~~been~~No. ~~eliminated~~2011-05.” ~~The~~ASU ~~amendments~~2011-12 ~~require~~defers ~~that all nonowner~~ changes in ~~stockholders’~~ASU ~~equity~~No. be2011-05 ~~presented~~that ~~either~~relate into athe ~~single~~presentation ~~continuous statement~~ of ~~comprehensive~~reclassification ~~income~~adjustments orto inallow ~~two~~the ~~separate~~FASB ~~but~~time ~~consecutive~~to ~~statements. In~~redeliberate ~~the~~whether ~~two-statement~~to ~~approach,~~require ~~the~~presentation ~~first~~of ~~statement~~such ~~will~~adjustments ~~present~~on ~~total~~the ~~net~~face ~~income~~of ~~and~~the ~~its~~financial ~~components~~statements ~~followed~~to ~~consecutively~~show bythe aeffects ~~second~~of ~~statement~~reclassifications ~~that~~out ~~will~~of ~~present~~accumulated ~~total~~ other comprehensive income, on the components of ~~other~~net ~~comprehensive~~ income, and ~~the~~other ~~total of~~ comprehensive income. ~~The amendments in this~~ ASU ~~are~~2011-12 ~~effective~~allows ~~for~~entities ~~fiscal~~to ~~years,~~continue ~~and~~to ~~interim~~report ~~periods~~reclassifications ~~within~~out ~~those~~of ~~years,~~accumulated ~~beginning~~other ~~after~~comprehensive ~~December~~income ~~15,~~consistent ~~2011. Early~~with ~~adoption~~the ispresentation ~~permitted,~~requirements ~~because~~in ~~compliance~~effect ~~with~~before ~~the~~ASU ~~amendments~~No. ~~is already permitted~~2011-05. ~~The~~All ~~FASB~~other ~~decided~~requirements onin ~~October~~ASU ~~21,~~No. 2011-05 ~~that the specific requirement to present items that~~ are ~~reclassified~~not ~~from~~affected ~~other~~by ~~comprehensive~~ASU ~~income~~No. to2011-12. ASU ~~net~~2011-12 ~~income~~is ~~alongside~~effective ~~their~~for ~~respective~~annual ~~components of net income~~ and ~~other~~interim ~~comprehensive~~periods ~~income~~beginning ~~will~~after beDecember ~~deferred~~15, 2011. Management ishad ~~currently~~determined in the ~~process~~adoption of ~~determining~~this ~~what~~guidance ~~effect~~did ~~the~~not ~~provisions~~have ofa ~~this~~material ~~update~~effect ~~will have~~ on the Company’s financial position or results of operations.

In September 2011, the FASB issued ASU No. 2011-9. “Compensation – Retirement Benefits-Multiemployer Plans: Disclosures about an Employer’s Participation in a Multiemployer Plan,” which improves employer disclosures for multiple-employer pension plans. Previously, disclosures were limited primarily to the historical contributions made to the plans. In developing the new guidance, the FASB’s goal was to help users of financial statements assess the potential future cash flow implications relating to an employer’s participation in multiemployer pension plans. The disclosures also will indicate the financial health of all of the significant plans in which the employer participates and assist a financial statement user to access additional information that is available outside of the financial statements. The amendments in this ASU are effective for fiscal years ending after December 15, 2011, with early adoption permitted. Management is currently in the process of determining what effect the provisions of this update will have on the Company’s financial position or results of operations.

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Recent Legislation

On July 21, 2010, President Obama signed into law the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), which significantly changes the regulation of financial institutions and the financial services industry. The Dodd-Frank Act includes provisions affecting large and small financial institutions alike, including several provisions that will profoundly affect how community banks, thrifts, and small and regional bank and thrift holding companies will be regulated in the future. Among other things, these provisions abolish the Office of Thrift Supervision and transfer its functions to the other federal banking agencies, relax rules regarding interstate branching, allow financial institutions to pay interest on business checking accounts, change the scope of federal deposit insurance coverage, and impose new capital requirements on bank and thrift holding companies. The Dodd-Frank Act also establishes the Bureau of Consumer Financial Protection as an independent entity within the Federal Reserve, which will be given the authority to promulgate consumer protection regulations applicable to all entities offering consumer financial services or products, including banks. Additionally, the Dodd-Frank Act includes a series of provisions covering mortgage loan origination standards affecting, among other things, originator compensation, minimum repayment standards, and pre-payments. The Dodd-Frank Act contains numerous other provisions affecting financial institutions of all types, many of which may have an impact on the operating environment of the Company in substantial and unpredictable ways. Consequently, the Dodd-Frank Act is likely to affect the Company’s cost of doing business, it may limit or expand the Company’s permissible activities, and it may affect the competitive balance within the Company’s industry and market areas. The nature and extent of future legislative and regulatory changes affecting financial institutions, including as a result of the Dodd-Frank Act, are very unpredictable at this time. The Company’s management is actively reviewing the provisions of the Dodd-Frank Act and assessing its probable impact on the business, financial condition, and results of operations of the Company. However, the ultimate effect of the Dodd-Frank Act on the financial services industry in general, and the Company in particular, is uncertain at this time.

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Part I, Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations

FORWARD LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (“Form 10-Q”) contains statements that constitute forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements appear in a number of places in this Form 10-Q and include statements regarding the intent, belief, outlook, estimate or expectations of the Company (as defined below), its directors or its officers primarily with respect to future events and the future financial performance of the Company. Readers of this Form 10-Q are cautioned that any such forward looking statements are not guarantees of future events or performance and involve risks and uncertainties, and that actual results may differ materially from those in the forward looking statements as a result of various factors. The accompanying information contained in this Form 10-Q identifies important factors that could cause such differences. These factors include changes in interest rates, charge-offs and loan loss provisions, loss of deposits and loan demand to other financial institutions, substantial changes in financial markets, changes in real estate values and the real estate market, regulatory changes, turmoil and governmental intervention in the financial services industry, changes in the financial condition of issuers of the Company’s investments and borrowers, changes in economic condition of the Company’s market area, increases in compensation and employee expenses, or unanticipated results in pending legal proceedings or regulatory proceedings.

Indiana Community Bancorp (the “Company”) is organized as a bank holding company and owns all the outstanding capital stock of Indiana Bank and Trust Company (the “Bank”). The business of the Bank and, therefore, the Company, is to provide consumer and business banking services to certain markets in the south-central portions of the State of Indiana. The Bank does business through 19 full service banking branches.

The Company filed an application under the Troubled Asset Relief Program Capital Purchase Program with the U. S. Department of Treasury seeking approval to sell $21.5 million in preferred stock to the Treasury, and issued 21,500 shares of Fixed Rate Cumulative Preferred Stock, Series A on December 12, 2008 pursuant to that program. The Company also issued a ten year warrant to purchase 188,707 shares of the Company’s common stock for an exercise price of $17.09 per share to the Treasury Department.

CRITICAL ACCOUNTING POLICIES

The notes to the consolidated financial statements contain a summary of the Company’s significant accounting policies presented on pages 2732 through 5348 of the Company’s annual report on Form 10-K for the year ended December 31, ~~2010~~2011. Certain of these policies are important to the portrayal of the Company’s financial condition, since they require management to make difficult, complex or subjective judgments, some of which may relate to matters that are inherently uncertain. Management believes that its critical accounting policies include determining the allowance for loan losses, and the valuation of securities.

Allowance for Loan Losses Methodology and Related Policies

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Valuation of Securities

Securities are classified as available-for-sale on the date of purchase. Available-for-sale securities are reported at fair value with unrealized gains and losses included in accumulated other comprehensive income, net of related deferred income taxes, on the consolidated balance sheets. The fair value of a security is determined based on quoted market prices. If quoted market prices are not available, fair value is determined based on quoted prices of similar instruments. Realized securities gains or losses are reported within non interest income in the condensed consolidated statements of operations. The cost of securities sold is based on the specific identification method. Available-for-sale securities are reviewed quarterly for possible other-than-temporary impairment. The review includes an analysis of the facts and circumstances of each individual investment such as the severity of loss, the length of time the fair value has been below cost, the expectation for that security’s performance, the present value of expected future cash flows, and the creditworthiness of the issuer. Based on the results of these considerations and because the Company does not intend to sell investments and it is not more-likely-than-not that the Company will be required to sell the investments before recovery of their amortized cost basis, which may be maturity, the Company does not consider these investments to be other than temporarily impaired. When a decline in value is considered to be other-than-temporary, the cost basis of the security will be reduced and the credit portion of the loss is recorded within non interest income in the consolidated statements of operations.

- 17 -

RESULTS OF OPERATIONS:

Quarter Ended ~~September~~March 3031, ~~2011~~2012 Compared to Quarter Ended ~~September~~March 3031, ~~2010~~2011

General

The Company reported a net loss of $52.86 million for the quarter ended ~~September~~March 3031, ~~2011~~2012 compared to net income of $21.03 million for the quarter ended ~~September~~March 3031, ~~2010~~2011. Basic and diluted earnings / (loss) per common share were $(10.8087) and $0.5131, for the quarters ended ~~September~~March 3031, ~~2011~~2012 and ~~2010~~2011, respectively. The primary reason for the net loss in the quarter ended ~~September~~March 3031, ~~2011~~2012, was the $147.17 million provision for loan losses.

Net Interest Income

Net interest income before provision for loan losses decreased $~~204~~410,000 or 2.4.8% to $8.2 million for the quarter ended ~~September~~March 3031, ~~2011~~2012, as compared to $8.46 million for the quarter ended ~~September~~March 3031, ~~2010~~2011. ~~This~~The ~~decrease~~primary ~~was~~reason ~~primarily~~for ~~due to~~ the ~~addition~~decrease ofin ~~$8.4~~net ~~million~~interest ofincome ~~non~~was ~~accrual~~a ~~loans~~net decrease in ~~the~~interest ~~third~~earning ~~quarter~~assets ofless ~~2011~~interest ~~from~~bearing ~~the~~liabilities ~~second quarter~~ of ~~2011~~$15.2 ~~The~~million ~~reversal~~for ~~of interest accrued on these loans in~~ the ~~third~~ quarter ofended ~~2011~~March ~~accounted~~31, ~~for a decrease of approximately $152~~2012,~~000~~ inas ~~net~~compared ~~interest~~to ~~income. In~~ the ~~third~~ quarter ofended ~~2010,~~March ~~net interest income increased approximately $33~~31,~~000~~ ~~from cash payments received on non accrual loans~~2011. ~~The~~A ~~balance~~factor ofoffsetting ~~non~~the ~~accrual~~impact ~~loans was $33.8 million and $18.8 million, as~~ of the ~~September~~net ~~2011~~decrease ~~and~~in ~~2010,~~interest ~~respectively. A~~earning ~~factor~~assets ~~offsetting~~less ~~the~~interest ~~negative~~bearing ~~impact~~liabilities ~~of nonaccrual loans~~ on net interest income is the 17 basis points increase in the net interest margin ~~which increased 16 basis points from~~ of 3.3663% for the quarter ended ~~September~~March 3031, ~~2010~~2011 to 3.5280% for the quarter ended ~~September~~March 3031, ~~2011~~2012. The increase in the net interest margin was due to the rates paid on interest bearing liabilities declining more rapidly, by 4136 basis points, than the rates earned on interest bearing assets, which declined 2517 basis points, for the two comparative quarters.

Provision for Loan Losses

The provision for loan losses increased $126.42 million to $147.17 million for the quarter ended ~~September~~March 3031, ~~2011~~2012, compared to $1.6 million for the quarter ended ~~September~~March 3031, ~~2010~~2011. Net charge offs were $134.36 million for the current quarter compared to $1.36 million for the first ~~third~~ quarter of ~~2010~~2011. ~~The~~Late ~~charge~~in ~~offs~~March ~~related~~2012, the ~~primarily~~Company made the decision to ~~nine~~pursue ~~commercial~~the ~~customers~~sale ~~with~~of ~~total~~certain ~~balances~~Special ~~prior~~Loans to,being ~~the~~monitored ~~charge~~for ~~offs~~purposes of ~~approximately~~determining ~~$32.7~~adjustments ~~million~~to ~~and~~the ~~which~~exchange ~~accounted~~ratio ~~for~~in ~~$11.9~~the ~~million~~merger of the ~~$13.3~~Company ~~million~~with ofOld ~~charge~~National ~~offs~~Bancorp in (the ~~third~~“Special ~~quarter~~Loans”), with ofbalances ~~2011~~totaling $9.0 million. ~~Among~~The ~~those~~Special ~~nine~~Loans ~~relationships,~~that ~~the~~were ~~Company~~identified ~~experienced~~for ~~deterioration~~sale ~~related~~were written down to ~~three~~fair ~~large~~value ~~investment~~upon ~~real~~transfer ~~estate~~to ~~customers~~loans ~~during~~held for sale. The charge to the ~~third~~allowance ~~quarter. These~~balance ~~three~~upon ~~customers~~transfer ~~accounted~~to the held for sale category was $182.57 million. In addition, at the end of the ~~loan~~quarter, ~~balances~~the ~~and~~Company ~~$8.1~~was ~~million~~informed by one of ~~the~~its ~~charge~~largest ~~offs~~customers ~~for~~that ~~the~~fraudulent ~~quarter. The~~financial ~~Company~~information ~~recorded~~and anborrowing ~~additional~~base ~~charge~~certificates ~~off~~had ~~related~~been provided to ~~one~~the ~~investment~~Company ~~real~~throughout ~~estate~~2011. While ~~customer~~the ~~totaling~~investigation ~~$1.3~~is ~~million~~still onongoing, ~~balances~~the ofCompany ~~$5.6~~was ~~million~~able ~~based~~to onobtain ~~recently~~updated ~~negotiated~~information ~~sales~~regarding the collateral securing this loan prepared by a third party. InBased ~~addition~~on this information, the Company ~~charged~~recorded ~~off~~a ~~previously recognized~~ specific ~~reserves~~reserve ~~totaling~~of $23.51 million ~~related~~ to ~~five~~recognize ~~commercial~~the ~~customers~~collateral ~~with~~shortfall ~~balances~~on ~~totaling~~this $8loan.~~6 million.~~ ~~Substantially~~In ~~all~~addition, ~~charge~~two ~~offs~~commercial ~~for~~real ~~the~~estate ~~quarter~~properties ~~related~~were charged down $1.0 million due to ~~loans~~receiving updated appraisals values in the ~~Indianapolis~~first ~~area~~quarter of 2012.

The Company’s allowance for loan losses increased $~~737,000~~3.2 million to $1418.81 million at ~~September~~March 3031, ~~2011~~2012. The ratio of allowance for loan losses to nonperforming loans was relatively unchanged at 3758.10% at ~~September~~March 3031, ~~2011 compared to 38~~2012.6% ~~at June 30, 2011.~~ The ratio of the allowance for loan losses to total loans increased to 2.0866% at ~~September~~March 3031, ~~2011~~2012, from 12.9112% at December ~~June 30~~31, 2011. See ~~While~~ the ~~allowance~~Critical ~~for~~Accounting ~~loan losses increased by $737~~Policies,~~000,~~ ~~the~~Allowance ~~specific~~for ~~reserves~~Loan onLosses ~~individual~~section ~~loans~~for ~~decreased~~a bydescription ~~$2.7~~of ~~million~~the assystematic ~~substantially~~analysis ~~all~~the ~~specific~~Bank ~~reserves~~uses atto ~~June~~determine ~~30,~~its ~~2011~~allowance ~~were~~for ~~charged~~loan ~~off during the third quarter~~losses.

~~See~~The ~~the~~change ~~Critical~~to ~~Accounting~~the ~~Policies,~~allowance ~~Allowance~~ for ~~Loan~~loan ~~Losses~~loss ~~section~~ for ~~a description of~~ the ~~systematic~~three ~~analysis~~months ended March ~~the~~31, ~~Bank~~2012 ~~uses~~and to2011 ~~determine~~is ~~its~~as ~~allowance for loan losses.~~follows:

The change to the allowance for loan loss for the three month periods ended September 30, 2011 and 2010 is as follows:

Quarter ended March 31: (in thousands)	2012			2011

Allowance beginning balance	$	14,984		$	14,606
Provision for loan losses		7,739			1,558
Charge-offs		(5,022	)		(1,709	)
Recoveries		436			123
Allowance ending balance	$	18,137		$	14,578

Quarter ended September 30: (in thousands)	2011			2010
Allowance beginning balance	$	14,023		$	14,339
Provision for loan losses		14,080			1,638
Charge-offs		(13,432	)		(1,455	)
Recoveries		89			182
Allowance ending balance	$	14,760		$	14,704

See “Asset Quality” section for further discussion including specific discussion of the coverage ratio (allowance to non-performing loans).

Net interest income ~~loss~~ after provision for loan losses was $~~5.9~~463,000 ~~million~~ for the three month period ended ~~September~~March 3031, ~~2011~~2012; a decrease of $126.6 million as compared to net interest income after provision for loan losses of $6.7.1 million for the three month period ended ~~September~~March 3031, ~~2010~~2011.

Interest Income

Total interest income for the three ~~month~~months ~~period~~ ended ~~September~~March 3031, ~~2011~~2012 decreased $1.4 million or 1112.83% from $11.73 million for the quarter ending ~~September~~March 3031, ~~2010~~2011 to $109.39 million for the quarter ending ~~September~~March 3031, ~~2011~~2012. Three ~~primary~~ factors impacting the decrease in interest income are; 1) the ~~increase~~$94.7 inmillion ~~non~~decrease ~~accrual loans previously discussed~~ in ~~the~~average ~~net~~ interest ~~income~~earning ~~section;~~assets. The ~~2) a 25 basis point~~ decrease in ~~the rates earned on~~ average ~~balances of~~ interest ~~bearing~~earning assets was due to ~~the~~a ~~declining rate environment; and 3) the~~ $6743.50 million decrease in the average ~~interest~~balance ~~earning~~of ~~assets. The~~available ~~decrease~~for insale ~~average~~securities ~~interest~~in ~~earning~~Q1 ~~assets~~of ~~was~~2012 ~~mainly~~compared ~~due~~ to ~~the~~Q1 ~~repositioning transaction the Company completed in the third quarter~~ of 2011. The Company ~~prepaid~~sold approximately $5571.0 million ofinvestment ~~FHLB~~securities ~~advances~~in the third quarter of 2011 using ~~proceeds~~the ~~from~~funds ~~approximately~~to prepay $7155.0 million of ~~security~~FHLB ~~sales~~advances. In addition the average balances of loans decreased $2743.98 million for the quarter ended ~~September~~March 3031, ~~2011~~2012, as compared to the quarter ended ~~September~~March 3031, ~~2010~~2011; 2) the average balance of nonaccrual loans for the first quarter 2012 was $31.0 million as compared to the average balance of nonaccrual loans for the first quarter 2011 of $18.5 million and 3.) a 17 basis point decline in the interest earned on average interest earning assets for the two comparative quarters.

Interest Expense

Total interest expense for the three ~~month~~months ~~period~~ ended ~~September~~March 3031, ~~2011~~2012 decreased $~~1.2~~977,000 ~~million~~ or 3536.05% as compared to the same period a year ago. The weighted average interest rates paid on average interest bearing liabilities decreased 4136 basis points, from the three month period ended ~~September~~March 3031, ~~2011~~2012 compared to the three month period ended ~~September~~March 3031, ~~2010~~2011. The decrease in rates paid on interest bearing liabilities resulted primarily from the changing mix of demand and interest bearing liabilities. The average balances of demand accounts, which currently do not earn interest increased $16.74 million. Average consumer interest checking balances increased $1027.90 million, while public fund interest checking balances decreased $5316.51 million. The ~~increase~~decrease in average balance of money market accounts was $125.0 million. The decrease in average balances of higher costing certificates of deposit was $4458.02 million for the first ~~third~~ quarter of ~~2011~~2012 as compared to the first ~~third~~ quarter of ~~2010~~2011. The average rate paid on all retail deposits decreased approximately 4236 basis points over the ~~same~~ comparative periods. In addition, the prepayment of $55.0 million of FHLB advances during the third quarter of 2011 accounted for $~~127~~258,000 of the decrease in interest expense.

Non Interest Income

Total non interest income increased $~~1.8 million~~ 527,000 or 6122.15% to $42.9 million for the quarter. This increase was ~~primarily~~ due primarily to three net factors; a) an $203,000 increase on the gain on sale of loans; b) a $395,000 increase in net gain/(loss) on ~~the~~real ~~sale~~estate ofowned; ~~securities~~and ofc) a $~~1.7~~184,000 ~~million~~decrease in gain on securities. The increase in gain on ~~the~~ sale of ~~securities~~loans resulted from an increase of $6.6 million in loans sold and a 22 basis point increase in the ~~repositioning~~return ~~transaction~~on loan sales for the ~~Company~~first ~~completed~~quarter inof 2012 as compared to the ~~third~~first quarter of 2011. ~~The~~ A ~~repositioning~~$482,000 ~~strategy~~write ~~involved~~down ~~selling~~on ~~$71.0~~real ~~million~~estate ofowned ~~securities~~(REO), ~~and~~due ~~prepaying~~to sales negotiations, resulted in a net loss on REO of $55387,000 ~~million~~in the first quarter of ~~advances~~2011. ~~The~~In ~~securities~~comparison ~~sales~~there ~~resulted~~was very minimal activity in REO sales in the ~~recognition~~first quarter of $22012.1 Non ~~million~~interest inincome ~~gain~~decreased $184,000 for gains on the sale of securities that occurred in the first quarter of 2011 while no gains were reported for the first quarter of 2012. Various other categories of non interest income posted small increases and decreases which netted to a $~~126~~113,000 increase in non interest income.

Non Interest Expenses

Non interest expenses increased $1.7 million or 22.9% to $8.9 million for the quarter. The primary increase in non interest expenses resulted from the repositioning strategy whereby $55 million of FHLB advances were prepaid, resulting in a prepayment fee of $1.4 million. Compensation and employee benefits accounted for $350,000 or 9.4% of the increase in non interest expense. The compensation and employee benefits increase was due to several factors including $159,000 for expenses associated with an early retirement package offer made to employees 62 years of age or older. Additionally, expenses related to the Company’s health insurance and frozen pension increased $48,000 and $74,000, respectively. The remaining increases in compensation and employee benefits resulted from additional personnel added in the retail banking, commercial and investment advisory departments. Marketing expenses increased $135,000 as the Company increased the marketing budget to support growth opportunities for core deposits within its market. Offsetting these increases in non interest expense were decreases in FDIC insurance expense of $183,000. Effective April 1, 2011, the Federal Deposit Insurance Corporation, (FDIC) changed to an asset based assessment from a deposit based assessment for the calculation of FDIC insurance premiums. The Company benefitted from the change in the assessment base, which reduced its deposit premiums. Miscellaneous expenses decreased $102,000 partially due to the $67,000 write down of a former bank branch that the Company was negotiating to sell in the third quarter of 2010, as well as cost cutting measures which have reduced office supplies and communication expenses in the quarter ended September 30, 2011 by a total of $30,000.

Taxes

Pretax loss for the quarter ended September 30, 2011 was $9.9 million compared to pretax income of $2.5 million for the quarter ended September 30, 2010. In the quarter ended September 30, 2011, the Company’s pretax loss of $9.9 million resulted in a tax credit of $4.2 million after considering permanent federal and state tax differences of approximately $217,000 and $2.9 million, respectively. In the quarter ended September 30, 2010, the Company recorded pretax income of $2.5 million that resulting in a tax expense of $489,000 after considering federal and state permanent tax differences of approximately $259,000 and $1.4 million, respectively, as well as one time TEFRA tax refunds.

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RESULTS OF OPERATIONS:

Nine Months Ended September 30, 2011 Compared to Nine Months Ended September 30, 2010

General

The Company reported a net loss of $3.6 million for the nine months ended September 30, 2011 compared to net income of $4.1 million for the nine months ended September 30, 2010. Basic and diluted earnings / (loss) per common share were $(1.33) and $.96, for the nine months ended September 30, 2011 and 2010, respectively. The primary reason for the net loss in the nine months ended September 30, 2011, was the $18.3 million provision for loan losses.

Net Interest Income

Net interest income before provision for loan losses increased $1.6 million or 6.8% to $25.2 million for the nine months ended September 30, 2011, as compared to $23.6 million for the nine months ended September 30, 2010. The net interest margin increased 25 basis points from 3.30% for the nine months ended September 30, 2010 to 3.55% for the nine months ended September 30, 2011. The increase in the net interest margin was due to the rates paid on interest bearing liabilities declining more rapidly, by 44 basis points, than the rates earned on interest bearing assets, which declined 19 basis points, for the two comparative nine month periods. The largest contributor to the decrease in the interest bearing liability rate was a 78 basis point decrease in rates paid for certificates of deposits for the nine months ended September 2011, as compared to the nine months ended September 2010.

Provision for Loan Losses

The provision for loan losses increased $13.1 million to $18.3 million for the nine months ended September 30, 2011, compared to $5.2 million for the nine months ended September 30, 2010. Net charge offs were $18.2 million for the nine months ended September 30, 2011 compared to $3.6 million for the nine months ended September 30, 2010. In addition to the charge offs previously discussed in the September 30 quarterly comparison the Company charged off $3.2 million in the second quarter of 2011. These second quarter charge offs were primarily due to three commercial relationships. One of the relationships is approximately $8.4 million and is collateralized by three residential land development loans, one of which is a developed subdivision and two of which are raw land. Although these loans were being monitored by the Company, and classified as impaired prior to the second quarter of 2011, the loans were performing as agreed until the second quarter of 2011. The borrower declared bankruptcy in the second quarter of 2011 and loans were placed on non-accrual status. Based on the changes in the borrower’s financial position and the Company’s workout strategy, an updated appraisal and other fair value data were obtained. (Prior fair value assessments were based on 2010 appraisals.) Based on updated information, the Company charged off $2.3 million on these land development loans, of which $725,000 had been reserved in a prior year. These charge off amounts were determined on the two raw land loans based on appraisal value less cost to sell. A discounted cash flow analysis was used to determine the charge off required on the developed subdivision based on a letter of intent the customer has received related to negotiations for take down on lots and eventual purchase of the property. The second commercial relationship is approximately $1.3 million and is primarily collateralized by two condominium projects. The Company had a purchase contract on these properties which closed in the third quarter of 2011. A charge off of $416,000 was required to bring the balance on this relationship down to the contract amount which was determined in the second quarter of 2011. The Company did not provide the financing for the new owner. The third relationship is collateralized by a golf course. The customer has a purchase contract on this property, which is expected to close in the fourth quarter of 2011. A $271,000 charge off was recorded on this property to bring the outstanding balance down to the contract amount which was determined in the second quarter of 2011. The Company anticipates providing short term financing on the remaining purchase contract, however there can be no guarantee that the sale will occur. With the exception of the $725,000 which was reserved for in a previous year, the amounts charged off in the second quarter of 2011 were also expensed during the second quarter of 2011. In the first quarter of 2011 the Company charged off $1.6 million dollars which represented two commercial relationships. One was a $640,000 charge off related to a commercial real estate loan collateralized by a shopping center and a commercial office building. This loan was performing as agreed when the customer contacted the Company in the first quarter of 2011 and indicated that there were no longer funds available to cover cash flow shortfalls and that the customer planned to surrender the collateral to the Company. The charge off was based on updated appraisal values for the shopping center and commercial office building. The other charge off was $540,000 related to a commercial loan to a leasing company that is currently in the process of liquidation. Liquidation of remaining collateral is expected to be completed by the end of 2011.

The change to the allowance for loan loss for the nine month periods ended September 30, 2011 and 2010 is as follows:

Nine months ended Sept 30: (in thousands)	2011			2010
Allowance beginning balance	$	14,606		$	13,113
Provision for loan losses		18,327			5,229
Charge-offs		(18,549	)		(3,943	)
Recoveries		376			305
Allowance ending balance	$	14,760		$	14,704

See “Asset Quality” section for further discussion including specific discussion of the coverage ratio (allowance to non-performing loans).

Net interest income after provision for loan losses was $6.9 million for the nine month period ended September 30, 2011; a decrease of $11.5 million, as compared to net interest income of $18.4 million for the nine month period ended September 30, 2010.

See the Critical Accounting Policies, Allowance for Loan Losses section for a description of the systematic analysis the Bank uses to determine its allowance for loan losses.

Interest Income

Total interest income for the nine month period ended September 30, 2011 decreased $1.6 million or 4.7% from $34.3 million for the nine month period ended September 30, 2010 to $32.7 million for the nine month period ended September 30, 2011. This decrease in interest income was partially due to the 19 basis point decrease in weighted average rates earned on interest earning assets in 2011, due to the low rate environment. Similar to the quarterly decrease in interest income, the $6.5 million year to date average increase in non accrual loans negatively impacted interest income. Additionally, while average balances of non accrual loans were increasing, the average balance of the total loan portfolio decreased $7.8 million.

Average year to date balances of lower yielding securities increased $20.3 million, even with the repositioning strategy executed in August 2011 which resulted in the sale of approximately $71.0 million of securities.

Interest Expense

Total interest expense for the nine month period ended September 30, 2011 decreased $3.2 million or 30.2% as compared to the same period a year ago. The weighted average interest rates paid on average interest bearing liabilities decreased 44 basis points, from the nine month period ended September 30, 2010 compared to the nine month period ended September 30, 2011. Similarly to the previous quarterly discussion, the decrease in rates paid on interest bearing liabilities resulted from the changing mix of demand and interest bearing liabilities, as well as the 78 basis point year to date decline in the average rate paid on certificates of deposit. The average balances of certificates of deposit have declined by $37.0 million in 2011 to an average balance of $299.1 million. Average public fund checking balances declined $20.5 million over the same period. Other deposit mix shifts have also reduced interest expense as average demand accounts which currently do not earn interest increased $14.7 million. Additionally, lower rate retail interest checking and money market account year to date average balances increased $11.8 million and $13.6 million, respectively.

Non Interest Income

Total non interest income increased $1.8 million or 22.0% to $9.9 million for the nine months ended September 30, 2011. As noted in the quarterly discussion the primary reason for the increase in non interest income is the $2.1 million gain on securities sales recorded as part of the repositioning strategy involving the sale of approximately $71.0 million of securities. The securities sale resulted in a $1.9 million increase year over year in gain on securities. Miscellaneous income increased $136,000 due to small increases in fee income of $33,000 and dividend income on FHLB stock of $28,000, as well as a $44,000 loss on sale of assets that occurred in 2010. Categories that experienced decreases in fees include service fees on deposit accounts of $316,000 or 6.6% and a decrease in gain of the sale of loans of $98,000 or 7.3%. The decrease in service fees on deposits was driven by a net reduction in overdraft privilege fees of $397,000 or 14.5%. In the current challenging economy customers have developed more conservative spending habits, thereby avoiding overdraft fees. The decrease in gain on sale of loans reflects the $6.1 million decrease in loan originations for sale in the two comparative year to date periods. While residential mortgage rates remain at historically low levels, the past two years have seen multiple refinancing periods when customers who were qualified to refinance their homes did so. This past refinancing activity has reduced the potential number of customers interested in refinancing their homes.

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Non Interest Expenses

Non interest expenses increased $~~2.6~~79,000 ~~million~~ or 121.0% to $237.86 million for the ~~nine months~~quarter. AsThe ~~mentioned~~primary ~~in the quarterly discussion the largest contributor to the~~ increase in non interest ~~expense~~expenses ~~was~~resulted ~~the~~from ~~$1.4~~merger ~~million~~expenses ~~FHLB advance prepayment fee incurred as a result~~ of ~~the repositioning strategy~~$502,000. ~~The~~Offsetting ~~second~~this ~~largest contributor to the~~ increase in non interest expense was a ~~$1.2~~decrease ~~million or 11.0% increase~~ in ~~compensation~~FDIC ~~and~~insurance ~~employee~~expense ~~benefits. This increase is the result~~ of ~~several factors including: 1) a~~ $~~197~~231,000. Effective ~~net~~April increase in restricted stock expense and directors compensation as directors and key management personnel compensation was restructured to include equity incentive plans; 2) in 2010 the restructure resulted in a $3271,~~000~~ ~~credit for previously accrued expenses under a long term incentive plan which was terminated; 3) a $222~~2011,~~000~~ ~~increase related to funding requirements for~~ the ~~Company’s~~Federal ~~frozen~~Deposit ~~pension~~Insurance ~~plan; 4) early retirement plan expenses of $159~~Corporation,~~000;~~ 5(FDIC) achanged ~~$95,000 increase related~~ to ~~employee~~an ~~health~~asset ~~insurance~~based ~~plan;~~assessment ~~and~~from 6)a ~~increases~~deposit inbased ~~personnel~~assessment infor the ~~retail~~calculation ~~banking, commercial and investment advisory services areas. Other expenses which increased were marketing and loan expenses~~ of ~~$232,000~~FDIC orinsurance 41premiums.~~4% and $130,000 or 18.4%, respectively.~~ The ~~marketing budget was increased to attract core deposits in the~~ Company’s ~~market. The~~benefitted ~~increase~~from ~~in loan expenses is~~ the ~~result~~change ~~of attorney fees, property taxes and insurance premiums associated with challenged loans. Offsetting this increase to non interest expenses was a $342,000 or 22.1% decrease~~ in ~~FDIC premiums due to~~ the ~~previously mentioned~~ assessment base, ~~change~~which ~~from~~reduced its deposit ~~based to asset based~~premiums.

Taxes

InPretax loss for the ~~nine~~quarter ~~months~~ended March 31, 2012 was $4.3 million compared to pretax income of $1.8 million for the quarter ended ~~September~~March 3031, 2011,. In the ~~Company~~quarter ~~recorded~~ended aMarch 31, 2012, the Company’s pretax loss of $74.03 million ~~resulting~~resulted in a tax credit of $31.47 million after considering permanent federal and state tax differences of approximately $~~668~~229,000 and $~~5.2 million~~407,000, respectively. In the ~~nine~~quarter ~~months~~ ended ~~September~~March 3031, ~~2010~~2012, the Company recorded pretax income of $51.38 million that ~~resulted~~resulting in a tax expense of $~~1.1~~490,000 ~~million~~ after considering federal and state permanent tax differences of approximately $~~842~~243,000 and $31.62 million, respectively. As of March 31, as2012, ~~well~~the asCompany ~~one~~had ~~time~~a ~~TEFRA~~deferred tax ~~refunds~~asset of $9.4 million. Based on proforma core earnings of the Company in combination with anticipated charge offs, management anticipates generating sufficient pretax income over the next four years which would result in the realization of the deferred tax asset. Therefore, no valuation allowance was established for the deferred tax asset. Additionally, current expectations are that the combined income of the merged companies will generate sufficient income in future years to realize the deferred tax asset.

Asset Quality

The following table sets forth information concerning non-performing assets of the Company. Real estate owned includes property acquired in settlement of foreclosed loans that is carried at net realizable value. (dollars in thousands)

As of	~~September~~March 3031, ~~2011~~2012			December 31, ~~2010~~2011
Non-accruing loans
Residential mortgage loans	$	~~1,248~~756		$	~~1,412~~849
Commercial and commercial real estate loans		3227,~~243~~026			1832,~~082~~788
Second and home equity loans		~~279~~237			~~678~~264
Other consumer loans		6469			~~106~~70
Total		3328,~~834~~088			2033,~~278~~971
90 days past due and still accruing loans
Residential mortgage loans		87			9287
Total		87			92
Commercial and commercial mortgage loans		0			0
Troubled debt restructured loans		5,900			9,684
Total		87			87
Total non performing loans		39,821			30,054
Troubled debt restructured loans		3,095			3,082
Real estate owned		7,567			4,389
Total non performing loans		31,270			37,140
Total non-performing assets	$	47,388		$	34,443
Real estate owned		7,901			5,736
Non-performing assets to total assets		4.91	%		3.30	%
Total non-performing assets	$	39,171		$	42,876
Non-performing loans to total loans		5.62	%		4.02	%
Non-performing assets to total assets		4.04	%		4.35	%
Allowance for loan losses to non-performing loans		37.1	%		48.60	%
Non-performing loans to total loans		4.59	%		5.25	%
Allowance for loan losses to non-performing loans		58.00	%		40.34	%

Nonperforming assets totaled $4739.42 million at ~~September~~March 3031, ~~2011~~2012 compared to $4142.49 million at ~~June~~December 3031, 2011. ~~During~~The ~~the~~decrease ~~third~~in ~~quarter,~~nonperforming ~~the~~loans ~~Company~~is ~~had~~related ~~eight~~to; ~~commercial~~a) ~~customers with balances totaling~~ $271.29 million ~~migrate~~of tocharge ~~nonperforming~~offs ~~status~~due ~~which~~to ~~accounted~~new ~~for~~appraisals received in the ~~majority~~first quarter of ~~the~~2012; ~~increase~~and b) transfers inof $3.0 million of nonperforming ~~assets~~loans to the real estate owned category. ~~This~~REO ~~increase~~increased in ~~nonperforming~~the ~~assets~~first ~~was~~quarter ~~partially~~of ~~offset~~2012. This byincrease was the ~~transfer~~net result of the $3.90 million transfer from ~~troubled~~non ~~debt~~accrual ~~restructuring~~loans to ~~performing~~REO ~~status~~offset ~~along~~in ~~with~~part ~~the~~by ~~$13.3~~subsequent ~~million~~sales of ~~charge~~REO ~~offs~~ in the ~~third~~first quarter ~~of 2011~~. The ratio of nonperforming assets to total assets was 4.9104% at ~~September~~March 3031, ~~2011~~2012 compared to 34.9835% at ~~June~~December 3031, 2011. The increase in the nonperforming asset ratio was partially due to the decrease in total assets during the third quarter. The Company announced a balance sheet restructuring strategy on September 1, 2011 in which the Bank paid off $55 million of Federal Home Loan Bank advances through the liquidation of securities.

The ~~Company~~total ~~experienced~~amount aof ~~migration~~TDR loans was $5.0 million as of ~~commercial~~the ~~loans~~March ~~(primarily~~31, ~~commercial~~2012. ~~mortgage~~Of these loans), ~~into~~$1.9 ~~nonperforming~~million ~~status~~were ~~during~~on ~~the~~non ~~second~~accrual status and ~~third~~were ~~quarter~~classified ofas non accrual loans within non performing loans. The remaining TDR loans total $3.1 million. TDRs at March 31, 2011 included two commercial loans which totaled $2.3 million, or 74.0%, of total TDRs. ~~Many~~Both of these loans represent the ~~Company’s~~smaller ~~investment~~portion ~~real~~or ~~estate~~“B” ~~customers~~note ~~have~~of ~~investor~~larger ~~groups~~relationships. In ~~that~~both ~~provided~~relationships, anthe ~~equity~~larger ~~investment~~or in“A” note requires both principal and interest payments while the ~~projects~~“B” note receives interest only payments. ~~Historically,~~ One ~~these~~other ~~investor~~TDR ~~groups~~loan ~~continued~~totaling $328,000 has been modified to ~~provide~~interest only loan as the current cash toflow ~~protect~~position of the ~~original~~borrower ~~equity~~does ~~investment~~not support amortizing payments. The ~~investor~~remaining ~~groups~~TDR ~~have~~loans ~~been~~of a$466,000 were ~~source~~accruing ofinterest ~~cash~~in ~~for~~accordance ~~investment~~with ~~real~~their ~~estate~~modified ~~customers~~terms. toThe ~~carry~~accruing ~~projects~~TDR ~~through~~loans ~~the~~were ~~challenging~~classified ~~economic~~as ~~times~~TDR loans within non performing loans. ~~However~~Comparatively, inthe ~~response~~total toamount ~~current~~of ~~market~~TDR ~~conditions,~~loans ~~the~~was ~~investor~~$4.2 ~~groups~~million ~~have~~as ~~generally~~of ~~been~~the ~~reluctant~~December to31, ~~continue~~2011. toOf ~~provide~~these ~~cash~~loans ~~for~~$1.2 ~~existing~~million ~~investment~~were ~~properties~~on non accrual status and ~~are~~were ~~generally~~classified ~~unwilling~~as tonon ~~invest~~accrual inloans ~~projects~~within ~~that~~non ~~would~~performing beloans. ~~new~~The toremaining TDR loans totaled $3.1 million represent the ~~investor~~same ~~group~~relationships described above.

The ~~strategy of the~~ Company ~~related~~does tonot ~~nonperforming~~generally ~~commercial~~forgive ~~loans~~principal isor tointerest ~~divest~~on ofrestructured ~~the~~ loans ~~and the underlying assets in an orderly process~~. ~~In doing so~~However, ~~the~~when ~~Company~~a loan is ~~striving~~restructured, toincome ~~provide more clarity related to the risk profile of the commercial~~ and ~~commercial~~principal ~~mortgage~~are ~~loan~~generally ~~portfolio~~received ~~and the impact of the risk profile~~ on ~~the~~a ~~Company’s~~delayed ~~earnings~~basis ~~and~~as ~~capital. Until~~compared ~~the most recent quarter, management found it challenging~~ to ~~execute~~ the ~~divestiture~~original ~~strategy~~repayment ~~due to delays in the foreclosure process and the lack of buyers of the underlying assets~~schedule. The Company ~~has~~generally ~~determined~~receives ~~that~~more ~~based~~interest onthan ~~current~~originally ~~market conditions~~scheduled, ~~the~~as ~~best course of action is to aggressively pursue divestiture of~~ the ~~underlying~~loan ~~assets~~remains ~~given~~outstanding ~~that~~for ~~management~~longer ~~does~~periods ~~not foresee a near term recovery in the value~~ of the underlying assets and in consideration of the significant ongoing costs associated with carrying and servicing nonperforming/classified assets. As a result of management’s divestiture strategytime, ~~the~~sometimes ~~Company is charging the carrying value of the loans down to levels consistent~~ with ~~recently~~higher ~~negotiated~~average ~~letters~~balances ofthan ~~intent~~originally ~~or purchase agreements~~scheduled. ~~For~~ ~~loans~~The ~~and~~average ~~underlying~~yield ~~assets as to which the Company does not have current negotiations underway, management has determined the carrying value in most cases based~~ on ~~current~~modified ~~appraisals. Management~~commercial ~~normally~~loans ~~applies~~was ~~a 10~~4.6%, ~~discount~~compared to ~~current appraised values to determine the carrying value of the underlying assets~~5. ~~However, the discount percentage used for certain assets was greater than management’s normal discount percentage of 10~~8% ifearned ~~the~~on ~~underlying assets are similar to~~ the ~~underlying~~entire ~~assets~~commercial ~~involved~~loan inportfolio ~~current negotiations and where management intends to pursue a divestiture strategy~~ in the ~~near~~third ~~term~~quarter of 2011.

~~The~~Performing ~~Company~~consumer ~~has~~TDR ~~noted~~loans anat ~~increase~~March in31, ~~the~~2012 ~~number~~consist of ~~interested~~six ~~buyers~~retail ~~for commercial~~loans ~~and~~including one residential ~~land~~and ~~development~~two assecond ~~well~~mortgages aswhich ~~commercial~~comprise ~~investment real estate in the Indianapolis market during the third quarter. As buyers have emerged in the market~~$248,000 ~~management has aggressively pursued opportunities to execute its divestiture strategy and has been successful in negotiating several letters~~ of ~~intent~~the ~~and~~total ~~purchase~~retail ~~agreements. Although~~TDR ~~there~~balance ~~can be no guarantee that any~~ of ~~the transactions negotiated by management will close as agreed, management currently has agreements that would result in pay downs on nonperforming assets totaling~~ $8269,000.~~3 million.~~ ~~Management~~The isconsumer ~~also~~TDR ~~currently~~loans ~~negotiating~~have ~~revised~~been ~~structures~~restructured at less than market terms ~~that~~and ~~would~~include ~~result~~rate inmodifications, aextension ~~decrease in nonperforming assets~~ of ~~$4.2 million. In addition~~maturity, ~~based on current payment~~ and ~~financial performance, management expects a loan for $2~~forbearance.6 ~~million~~The toaverage beyield ~~moved~~on ~~from~~modified ~~troubled~~residential ~~debt~~mortgage ~~restructuring~~and tosecond ~~performing~~mortgage ~~status~~loans inwas ~~the fourth quarter~~5. ~~These activities, if completed, would reduce nonperforming assets by $15.1 million or approximately 32~~8% ~~from September 30~~, ~~2011~~compared ~~levels. In addition, management is anticipating an additional pay down of $900,000 related~~ to ~~a classified asset not included in the total above~~4. ~~All of the foregoing transactions, if completed as anticipated, would reduce classified assets by $16.0 million or approximately 27~~7% ~~from~~earned ~~September~~on ~~30, 2011 levels. Management anticipates that~~ the ~~transactions~~entire ~~described~~residential ~~above,~~mortgage ifloan ~~completed,~~and ~~will~~second ~~close~~mortgage ~~during~~portfolios in the ~~fourth quarter of 2011 or~~ first quarter of 2012~~, although there can be no guarantee that this will occur in those time frames or that those transactions will close pursuant to the negotiated terms~~.

~~The~~When ~~Company~~considering ~~continues~~the torestructuring ~~reduce~~of a loan, when the ~~total~~borrower ~~balances~~is ofhaving ~~commercial~~financial ~~mortgage~~difficulty, ~~loans~~the ~~secured~~Company byperforms ~~commercial~~a complete analysis and ~~residential~~underwrites ~~land~~the loan as it would any new origination. ~~Loans~~The ~~secured~~analysis byand ~~commercial~~underwriting ~~and~~considers ~~residential~~the ~~land~~most ~~have~~recent ~~decreased~~debt byservice ~~$23.7~~coverage ~~million~~analysis, orpro ~~28%~~forma tofinancial ~~$61.6~~projections ~~million~~prepared atby ~~September~~the 30borrower, ~~2011~~evaluation of cash flow and liquidity available from ~~$85.3~~other ~~million~~sources attied ~~December~~to ~~31,~~the ~~2010~~credit and updated collateral valuations. OfUpon completion of the ~~total~~detailed ~~loans~~analysis and ~~other~~underwriting ~~real~~of ~~estate~~the ~~owned~~credit, ~~secured~~the Company determines whether there is a loan structure that can be supported by ~~commercial~~the current and ~~residential~~projected ~~land,~~operations ~~$25~~of the borrower.8 The ~~million~~Company ~~are~~also ~~included~~considers inwhether the ~~nonperforming~~changes ~~asset~~necessary ~~totals~~to ~~above~~accomplish the pro forma financial projections appear reasonable and achievable. AtThis ~~September~~determination ~~30,~~is ~~2011,~~based ~~loans~~on ~~secured~~discussions bywith ~~commercial~~the ~~and~~borrower ~~residential~~to ~~land~~review ~~accounted~~the ~~for~~plan ~~only~~and 8to understand the financial projections.7% Additionally, the Company considers and reviews those portions of the plan that may already have been implemented. The Company’s ~~total~~will modify the original terms of the loan ~~portfolio~~agreement ~~while~~only ~~accounting~~when there is evidence that the plan and financial projections are achievable and that these improvements will allow for ~~54%~~repayment of the ~~nonperforming~~debt ~~assets~~in ~~balances~~the future. ~~Commercial~~Such ~~and~~loans ~~residential~~are ~~land~~then accounted for ~~$10~~as TDRs.2 The ~~million~~key factor the Company considers when determining whether a loan is classified as an accruing TDR or should be included as a nonaccrual loan is whether the loan is expected to be able to perform according to the restructured terms. The primary factor for determining if a loan will perform under the restructured terms is an analysis of the ~~charge~~borrower’s ~~offs~~current incash flow projections and current financial position to verify the ~~third~~borrower ~~quarter~~can generate adequate cash flow to support the restructured debt service requirements. ~~Remaining~~The ~~nonperforming~~Company ~~asset~~sometimes ~~balances~~restructures ~~were~~non ~~$21~~accrual loans to improve its collateral position.6 A ~~million~~non ~~representing~~accrual 2loan that is restructured would continue to be classified as non accrual until such time that there is no longer any doubt as to the collection of all principal and interest owed under the contractual terms of the restructured agreement.4% The Company generally requires all non-accrual loans to perform under the terms of the restructured agreement for a period of not less than three months before returning to accrual status. All loans the Company’s ~~total~~classifies ~~assets~~as ~~excluding~~TDR are performing according to their restructured terms. TDR loans ~~and~~are analyzed for non accrual status using the same criteria as other ~~real~~loans ~~estate~~in ~~owned~~the ~~secured~~Company’s byportfolio. ~~commercial~~No loans modified and ~~residential~~classified ~~land~~as TDR loans have had any charge offs. Prior to being classified as TDR loans an immaterial amount was charged off. There is currently no specific allowance allocated to TDR loans. For additional information regarding TDR loans see note 12 to the financial statements.

The ~~Company~~allowance ~~expects~~for aloan ~~significant~~losses ~~reduction~~increased in$3.1 ~~charge~~million ~~off~~to ~~levels~~$18.1 inmillion ~~future~~as ~~periods~~of ~~due~~March to31, ~~the~~2012, ~~divestiture~~from ~~strategy~~$14.9 ~~and~~million ~~corresponding~~as ~~charge~~of ~~offs~~December ~~recorded~~31, ~~in the third quarter~~2011. ~~Management~~The ~~anticipates~~ratio ~~that~~of the ~~provision~~allowance for loan losses into ~~future~~total ~~quarters~~loans ~~will~~was ~~approximate~~2.66% ~~net~~at ~~charge~~March ~~offs~~31, ~~for~~2012 compared ~~each~~to ~~future~~2.12% ~~quarter,~~at ~~although~~December ~~changes~~31, in2011. See ~~market~~further ~~conditions~~discussion ~~could~~in ~~adversely~~the ~~affect~~Critical ~~those~~Accounting ~~projected results~~Policies.

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The total amount of TDR loans was $7.3 million as of the September 30, 2011. Of these loans, $1.4 million were on non accrual status and were classified as non accrual loans within non performing loans. The remaining TDR loans total $5.9 million and were accruing interest in accordance with their modified terms. The accruing TDR loans were classified as TDR loans within non performing loans. Comparatively, the total amount of TDR loans was $12.9 million as of the December 31, 2010. Of these loans $3.2 million were on non accrual status and were classified as non accrual loans within non performing loans. The remaining TDR loans totaled $9.7 million and were accruing interest in accordance with their modified terms. The accruing TDR loans were classified as TDR loans within non performing loans.

Performing commercial TDR loans at September 30, 2011 consist of two commercial real estate loans totaling $2.3 million that are interest only; three commercial real estate loans totaling $489,000 that are amortizing and one $2.6 million amortizing commercial installment loan. One of the interest only TDRs is a note for $1.3 million. Current cash flow projections for this borrower do not support an amortizing payment on this note. The note was restructured to allow the borrower to improve performance in what is an improving environment for the industry. This note is collateralized by a hotel property and matures December 31, 2011, at which time the global cash flow and financial position of the borrower will be reevaluated. The second interest only is a TDR note for $935,000. This note is cross collateralized with other notes to the same borrower and is secured by six commercial properties. These properties consist of four retail strip centers as well as single tenant retail buildings and office complex. Appraisals were obtained on four of the six properties in September of 2009. The four appraisals obtained were discounted 20% to provide for estimated selling costs of the properties and to reflect the age of the appraisals. As part of the restructuring process two additional properties were obtained as collateral that had appraisals performed in February 2008. Comparing the 2008 appraisals to updated appraisals for similar properties the Company determined a 25% discount was appropriate due to the age of the appraisals. Based on this information the Company completed an analysis which showed excess collateral value of approximately $1.1 million and a loan to value ratio of 63%. Therefore no reserve was established for this borrower. The $2.6 million TDR consists of an amortizing commercial installment loan. This TDR loan is secured by hospital equipment which is necessary for the operations of the business. An independent evaluation of the equipment was not obtained. Due to the highly specialized purpose of the equipment, the value of the equipment utilized for the valuation of collateral for this loan was 50% of cost. In addition, a cash deposit account in the amount of $750,000 is pledged and also secures the credit. The borrower’s operating losses have been funded by a real estate investment trust (REIT) specializing in providing capital to hospitals. The REIT has invested in excess of $30 million to cover the operating losses of the hospital. The REIT recently signed on a large doctor group with the hospital. With the addition of the doctor group it is anticipated that the hospital will reach a profitable status and positive cash flow position, although there can be no guarantee as to that. In addition, there is a personal guarantor of the credit with a strong liquidity position, historically strong cash flow and personal net worth of approximately $13 million. Based on payment performance and a discounted cash flow analysis the Company was able to release a previously established $280,000 specific reserve. The Company anticipates this credit will migrate to performing status in the fourth quarter, although there can be no guarantee of this. The Company does not generally forgive principal or interest on restructured loans. However, when a loan is restructured, income and principal are generally received on a delayed basis as compared to the original repayment schedule. The Company generally receives more interest than originally scheduled, as the loan remains outstanding for longer periods of time, sometimes with higher average balances than originally scheduled. The average yield on modified commercial loans was 6.43%, compared to 5.48% earned on the entire commercial loan portfolio in the third quarter of 2011.

When considering the restructuring of a loan, when the borrower is having financial difficulty, the Company performs a complete analysis and underwrites the loan as it would any new origination. The analysis and underwriting considers the most recent debt service coverage analysis, pro forma financial projections prepared by the borrower, evaluation of cash flow and liquidity available from other sources tied to the credit and updated collateral valuations. Upon completion of the detailed analysis and underwriting of the credit, the Company determines whether there is a loan structure that can be supported by the current and projected operations of the borrower. The Company also considers whether the changes necessary to accomplish the pro forma financial projections appear reasonable and achievable. This determination is based on discussions with the borrower to review the plan and to understand the financial projections. Additionally, the Company considers and reviews those portions of the plan that may already have been implemented. The Company will modify the original terms of the loan agreement only when there is evidence that the plan and financial projections are achievable and that these improvements will allow for repayment of the debt in the future. Such loans are then accounted for as TDRs. The key factor the Company considers when determining whether a loan is classified as an accruing TDR or should be included as a nonaccrual loan is whether the loan is expected to be able to perform according to the restructured terms. The primary factor for determining if a loan will perform under the restructured terms is an analysis of the borrower’s current cash flow projections and current financial position to verify the borrower can generate adequate cash flow to support the restructured debt service requirements. The Company sometimes restructures non accrual loans to improve its collateral position. A non accrual loan that is restructured would continue to be classified as non accrual until such time that there is no longer any doubt as to the collection of all principal and interest owed under the contractual terms of the restructured agreement. The Company generally requires all non-accrual loans to perform under the terms of the restructured agreement for a period of not less than six months before returning to accrual status. All loans the Company classifies as TDR are performing according to their restructured terms. TDR loans are analyzed for non accrual status using the same criteria as other loans in the Company’s portfolio. No loans modified and classified as TDR loans have had any charge offs. Prior to being classified as TDR loans an immaterial amount was charged off. There is currently no specific allowance allocated to TDR loans. For additional information regarding TDR loans see note 12 to the financial statements.

Annually, in the fourth quarter of the year, the Company reviews its allowance methodology as part of the annual budget and forecasting process. In 2009, the Company shortened the timeframe of the charge-off history from a rolling 5 years to a rolling 2 years to more accurately reflect the current economic conditions and the risk inherent in the portfolio. The oldest 3 three years in the pre 2009 methodology had very little charge off history, averaging $1.3 million per year, demonstrating the five year time frame was no longer reflective of the then current industry conditions and level of risk. During the fourth quarter of 2010, as part of the Company’s annual budgeting and forecasting process for 2011, it became apparent that if the rolling 2 year time frame was maintained throughout 2011, the allowance calculation projected the Company would significantly reduce the allowance during 2011. In particular, the second quarter of 2011 forecasted a reduction in the allowance of approximately $2 million. As management believes this did not forecast the economic reality of the projected risk in the portfolio, management decided to extend the timeframe of the charge off history by adding one quarter, each quarter, until a rolling 3 years is reached. This process will continue to be assessed at least on an annual basis to determine the methodology utilized is reflective of the current economic conditions and inherent risk in the portfolio.

The allowance for loan losses increased slightly to $14.8 million as of September 30, 2011, from $14.6 million as of December 31, 2010. The ratio of the allowance for loan losses to total loans was 2.08% at September 30, 2011 compared to 1.95% at December 31, 2010. See further discussion in the Critical Accounting Policies. The Company expects a significant reduction in charge off levels in future periods due to the divestiture strategy and corresponding charge offs recorded in the third quarter. Management anticipates that the provision for loan losses in future quarters will approximate net charge offs for each future quarter, although changes in market conditions could adversely affect those projected results.

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The allowance for loan losses consists of three components. The amount of reserves assigned based on historical loss rates, specific reserves assigned to individual loans and the qualitative/environmental allocation. Please see note 12 to the financial statements for a discussion of each of these components. The following table indicates the portion of the allowance for loan loss management has allocated, by component, to each loan type. (dollars in thousands)

As of	~~September~~March 3031, 2011		December 31, ~~2010~~2011
Residential mortgage loans
Allowance based on historical loss rates	$	~~573~~482	$	~~668~~496
Specific allowance assigned to individual loans		0		0
Qualitative/environmental allowance		52		~~131~~8
Total allowance for residential mortgages		~~578~~484		~~799~~504
Commercial and commercial mortgage loans
Allowance based on historical loss rates		1011,~~306~~135		610,~~630~~507
Specific allowance assigned to individual loans		~~352~~3,244		~~3,455~~545
Qualitative/environmental allowance		2,~~709~~618		2,~~555~~639
Total allowance for commercial and commercial mortgage loans		1316,~~367~~997		1213,~~640~~691
Second and home equity loans
Allowance based on historical loss rates		~~561~~477		~~724~~555
Specific allowance assigned to individual loans		0		0
Qualitative/environmental allowance		2		~~134~~1
Total allowance for second and home equity loans		~~563~~479		~~858~~556
Other consumer loans
Allowance based on historical loss rates		~~252~~124		~~273~~136
Specific allowance assigned to individual loans		0		0
Qualitative/environmental allowance		053		3697
Total allowance for other consumer loans		~~252~~177		~~309~~233
Total allowance for Loan Losses	$	14,760	$	14,606
Total Allowance for Loan Losses	$	18,137	$	14,984

Management reassigned all of the qualitative/environmental allowance to the commercial and commercial mortgage loan category based on a review of the past two years and current year to date net charge off history. This review indicated that the allowance based on historical loss rates for the residential mortgage loans, second and home equity loans and other consumer loans categories should be adequate. Net ~~charge~~recoveries ~~offs~~ for residential mortgages, second and home equity loans and other consumer loans are $~~126~~0,~~000,~~ $~~227~~5,000 and $~~127~~3,000, respectively, for the ~~nine~~three ~~month~~months ~~period~~ ended ~~September~~March 3031, ~~2011~~2012. Net charge offs for commercial and commercial real estate loans are $154.56 million for the same period.

The ~~increase~~decrease in non performing assets did not result in a corresponding ~~increase~~decrease in the allowance for loan losses asdue ~~appropriate~~to ~~charge~~the ~~offs~~specific ~~were~~reserve ~~taken~~of on$3.1 ~~new~~million ~~non~~for ~~performing~~the ~~credits~~customer who experienced fraudulent activity as ~~described~~discussed ~~above~~in the provision for loan losses section.

The Company has 5351.65% of its assets in commercial installment and commercial real estate loans. The following table segregates the commercial installment and commercial real estate portfolio by property type, where the total of the property type exceeds 1% of Bank assets as of March ~~September 30~~31, ~~2011~~2012. (dollars in thousands)

Property Description	BALANCE		PERCENTAGE OF BANK ASSETS
Accounts Receivable, Inventory, and Equipment		6966,~~200~~918		76.1892	%
Shopping Center		5150,~~176~~416		5.3121	%
Land Only (Raw Land)		40,915		4.25	%
Office Building		43,358		4.48	%
Manufacturing Business/Industrial		39,~~470~~453		4.1008	%
Officer Building		38,861		4.03	%
Land Only		39,225		4.05	%
Medical Building		32,~~035~~518		3.3236	%
Retail Business Store		29,691		3.08	%
Warehouse		29,884		3.09	%
Warehouse		29,176		3.03	%
Retail Business Store		28,903		2.99	%
Apartment Building		26,761		2.78	%
Motel		25,472		2.63	%
Motel		22,248		2.31	%
Apartment Building		22,937		2.37	%
Athletic/Recreational/School		14,~~212~~034		1.4745	%
Restaurant		12,746		1.32	%
Other		11,867		1.23	%
Other		12,311		1.28	%
Restaurant		11,865		1.23	%
Developed Land		12,095		1.26	%
Non-Margin Stock		9,912		1.02	%

FINANCIAL CONDITION:

Total assets as of ~~September~~March 3031, ~~2011~~2012, were $~~964~~968.78 million, a decrease of $7815.68 million or 71.56% from December 31, ~~2010~~2011, total assets of $1984.046 ~~billion. As mentioned previously, the Company completed a repositioning strategy prepaying $55.0~~ million in FHLB advances with funds from security sales. The decision to execute the balance sheet repositioning strategies was triggered by the extreme movements in the market over the last several months and most notably during the early part of August. As a result of the market volatility, the Company had a large unrealized gain in the securities portfolio. As growth and preservation of capital is a key strategy for the Company, it was determined that realizing a portion of the security gains thereby converting these amounts to permanent capital was prudent. In conjunction with the securities transactions, the Company reviewed its remaining wholesale funding. The currently structured variable rate Federal Home Loan Bank advances had a total cost of approximately 2.05%, which in many cases was equal to or higher than the reinvestment rate on many of the security classes utilized by the Company. Portfolio loans decreased $3925.68 million from December 31, 2011. Commercial and commercial real estate loans have decreased $3319.84 million in ~~2011~~2012. ~~Net~~Commercial ~~commercial~~ and commercial mortgage loan charge offs of $155.40 million, driven partially by ~~the~~activities ~~problem~~designed ~~asset~~to ~~divestiture~~reduce ~~strategy~~balances of Special Loans identified in the merger agreement, accounted for 4525.7% of the decreased balance in this loan segment. Additionally ~~commercial~~transfers ~~lending~~of ~~activity~~certain ~~has~~Special ~~been~~Loans ~~slow~~to ~~during~~the ~~2011~~held ~~driven~~for ~~primarily~~sale bycategory ~~limited~~totaled ~~new~~$9.0 ~~business~~million ~~expansion~~for ~~combined~~the ~~with~~quarter. Of ~~intense~~this ~~competition~~$9.0 ~~for~~million, ~~high~~$1.2 ~~quality~~million ~~commercial~~was ~~relationships~~sold during the first quarter of 2012. Seconds and home equity loan balances have declined $43.16 million partially due to customers taking advantage of ~~the~~ low rates and refinancing these loans into first mortgages. The Company currently sells the vast majority of residential first mortgages it originates in the secondary market. Certificates of deposits decreased $3511.93 million year to date as the Company does not negotiate rates for single service certificate of deposit customers. Higher rate public fund and commercial interest checking decreased $1935.41 million while retail interest checking increased $89.41 million resulting in a net decrease in interest checking of $1026.70 million. Demand deposits and savings and money market accounts have increased $2113.31 million, $6.50 million and $115.71 million, respectively. This increase in transaction account balances is a reflection of the Company’s current marketing and sales activities focus on transaction accounts aimed at attracting new customers and expanding relationships with existing customers.

Shareholders' equity decreased $2.07 million during the first ~~nine~~three months of ~~2011~~2012. Retained earnings decreased $32.6 million from net loss, ~~and~~ decreased $~~909~~303,000 for dividend payments on common and preferred stock, and $8128,000 for the amortization of the discount on preferred stock. Common stock increased $~~372~~61,000 from recognition of compensation expense associated with restricted stock issued ~~and the vesting of stock options~~. Additionally, the Company had other comprehensive income from unrealized gains in its securities available for sale portfolio, net of tax, of $~~2.2~~229,000 ~~million~~ for the ~~first~~three ~~nine~~ months ended ~~September~~March 3031, ~~2011~~2012.

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At ~~September~~March 3031, ~~2011~~2012, the Company and the Bank exceeded all current applicable regulatory capital requirements as follows:

	Actual					For Capital Adequacy Purposes					To Be Categorized As “Well Capitalized” Under Prompt Corrective Action Provisions
	Amount		Ratio			Amount		Ratio			Amount		Ratio
As of September 30 2011
As of March 31, 2012
Total risk-based capital
(to risk-weighted assets)
Indiana Bank and Trust Company	$	~~106~~105,~~424~~621		13.0641	%	$	6562,~~166~~993		8.0	%	$	8178,~~458~~741		10.0	%
Indiana Community Bancorp Consolidated	$	~~108~~106,~~685~~520		13.3351	%	$	6563,~~240~~080		8.0	%	$	8178,~~551~~850		10.0	%
Tier 1 risk-based capital
(to risk-weighted assets)
Indiana Bank and Trust Company	$	9695,~~185~~676		1112.8115	%	$	3231,~~583~~496		4.0	%	$	4847,~~875~~245		6.0	%
Indiana Community Bancorp Consolidated	$	9896,~~435~~562		12.0725	%	$	3231,~~620~~540		4.0	%	$	4847,~~930~~310		6.0	%
Tier 1 leverage capital
(to average assets)
Indiana Bank and Trust Company	$	9695,~~185~~676		910.5703	%	$	4038,~~183~~156		4.0	%	$	5047,~~229~~695		5.0	%
Indiana Community Bancorp Consolidated	$	9896,~~435~~562		910.7911	%	$	4038,~~219~~188		4.0	%	$	5047,~~274~~735		5.0	%

Capital Resources

Tier I capital consists principally of shareholders’ equity including Tier I qualifying junior subordinated debt, but excluding unrealized gains and losses on securities available-for-sale, less goodwill and certain other intangibles. Tier II capital consists of general allowances for loan losses, subject to limitations. Assets are adjusted under the risk-based guidelines to take into account different risk characteristics. Average assets for this purpose does not include goodwill and any other intangible assets that the Federal Reserve Board determines should be deducted from Tier I capital.

Liquidity Resources

Historically, the Company has maintained its liquid assets at a level believed adequate to meet requirements of normal daily activities, repayment of maturing debt and potential deposit outflows. Cash flow projections are regularly reviewed and updated to assure that adequate liquidity is maintained. Cash for these purposes is generated through the sale or maturity of investment securities and loan sales and repayments, and may be generated through increases in deposits. Loan payments are a relatively stable source of funds, while deposit flows are influenced significantly by the level of interest rates and general money market conditions. The Company’s primary source of funding is its base of core customer deposits. Core deposits consist of non-interest bearing, checking, savings and money market deposits and certificate accounts of $100,000 or less. Other sources of funds are certificate accounts greater than $100,000 and public funds certificates. Borrowings may be used to compensate for reductions in other sources of funds such as deposits. As a member of the Federal Home Loan Bank (“FHLB”) system, the Company may borrow from the FHLB of Indianapolis. At ~~September~~March 3031, ~~2011~~2012, the Company had no FHLB advances outstanding. The Company does have a $15.0 million overdraft line of credit with the FHLB which had ano balance ~~of $7.0 million~~ as of ~~September~~March 3031, 2011. The Company was eligible to borrow from the FHLB additional amounts up to $~~133~~22.65 million at ~~September~~March 3031, ~~2011~~2012. Certificates of deposit represent an important source of funds for the Company. Historically, the Company has been able to retain certificate balances by providing competitive pricing in line with rates offered by other institutions in the Company’s market area. During periods of low interest rates, customer preferences shift from certificates to interest bearing transaction accounts. Of the $~~172~~156.24 million in certificate accounts maturing in ~~2011~~2012, $6425.46 million are at rates of 2.0% or greater which is higher than rates currently available. As a result the Company anticipates that the ~~roll~~rollover ~~over~~ of certificates will be lower than historical levels. The expected result is a continued downward trend in certificate balances. However, the Company expects that a portion of these balances will be converted to or deposited in existing interest bearing transaction accounts with the Company. The Company’s total transaction accounts ~~increased~~decreased 50.43 % during the three ~~nine~~ months ended ~~September~~March 3031, ~~2011~~ 2012 following a 619.79% increase during ~~2010~~2011. Certificate accounts decreased 124.83% for the ~~nine~~three months ended ~~September~~March 3031, ~~2011~~2012 after decreasing 622.06% in ~~2010~~2011. The certificates maturing in the next twelve months as a percentage of total certificates were 5362.16% for the ~~nine~~three months ended ~~September~~March 3031, ~~2011~~2012 compared to 5359.95% at December 31, ~~2010~~2011. The Company continually monitors balance trends along with customer preferences and competitive pricing within the Company’s market footprint to manage this critical liquidity component.

In addition at ~~September~~March 3031, ~~2011~~2012, the Company had commitments to purchase loans of $105.70 million, as well as commitments to fund loan originations of $3121.20 million, unused home equity lines of credit of $3938.06 million and unused commercial lines of credit of $6155.1 million, as well as commitments to sell loans of $2113.90 million. Generally, a significant portion of amounts available in lines of credit will not be drawn. Commitments to borrow or extend credit do not necessarily represent future cash requirements in that these commitments often expire without being drawn upon. Commitments to fund lines of credit and undisbursed portions of loan in process have remained relatively steady at ~~34.1% and~~ 31.38% of the total credit at ~~September~~March 3031, ~~2011~~ 2012 and December 31, ~~2010, respectively~~2011. In the opinion of management, the Company has sufficient cash flow and borrowing capacity to meet current and anticipated funding commitments.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

InNot the opinion of management, the interest rate sensitivity results for the nine months ended September 30, 2011 are not materially different from the results presented on page 14 of the Company’s annual report for the twelve month period ended December 31, 2010applicable.

Item 4. Controls and Procedures

(a)

Evaluation of disclosure controls and procedures. The Company’s chief executive officer and chief financial officer, after evaluating the effectiveness of the Company’s disclosure controls and procedures (as defined in Sections 13a-15(e) and 15d-15(e) of the regulations promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), as of the end of the most recent fiscal quarter covered by this quarterly report (the “Evaluation Date”), have concluded that as of the Evaluation Date, the Company’s disclosure controls and procedures were effective in ensuring that information required to be disclosed by the Company in reports it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and are designed to ensure that information required to be disclosed in those reports is accumulated and communicated to management as appropriate to allow timely decisions regarding required disclosure.

(b)

Changes in internal controls over financial reporting. There were no changes in the Company’s internal control over financial reporting identified in connection with the Company’s evaluation of controls that occurred during the Company’s last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

N/A

Item 1A. Risk Factors

There were no material changes in the Company’s risk factors from the risks disclosed in the Company’s Form 10-K for the year ended December 31, ~~2010~~2011.

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

The following table provides information on the Company’s repurchases of shares of its common stock during the three months ended ~~September~~March 3031, ~~2011~~2012.

	(a)		(b)		(c)		(d)
Period	Total number of shares purchased		Average price paid per share		Total number of shares purchased as part of publicly announced plans or programs (1)		Maximum number of shares that may yet be purchased under the plans or programs (1)
July 2011		0	$	00.00		0		156,612
January 2012		0	$	00.00		0		156,612
August 2011		0	$	00.00		0		156,612
February 2012		0	$	00.00		0		156,612
September 2011		0	$	00.00		0		156,612
March 2012		0	$	00.00		0		156,612
Third Quarter		0	$	00.00		0		156,612
First Quarter		0	$	00.00		0		156,612

(1)	On January 22, 2008, the Company announced a stock repurchase program to repurchase on the open market up to 5%

of the Company’s outstanding shares of common stock or 168,498 such shares. Such purchases will be made in block

or open market transactions, subject to market conditions. The program has no expiration date. ~~Any future stock~~

repurchases will require the consent of the Treasury Department for a period of three years ended December 11, 2011,

while the Treasury holds the Series A Preferred Stock.

Item 3. Defaults Upon Senior Securities

N/A

Item 4. ~~Removed~~Mind ~~and~~Safety ~~Reserved~~Disclosures

N/A

Item 5. Other information

N/A

Item 6. Exhibits

31(1) Certification required by 12 C.F.R. 240.13a-14(a)

31(2) Certification required by 12 C.F.R. 240.13a-14(a)

32 - Certification pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Act of 2002

101.INS - XBRL Taxonomy Instance Document

101.SCH - XBRL Taxonomy Extension Schema

101.CAL - XBRL Taxonomy Extension Calculation Linkbase

101.DEF - XBRL Taxonomy Extension Definition Linkbase

101.LAB - XBRL Taxonomy Extension Label Linkbase

101.PRE - XBRL Taxonomy Extension Presentation Linkbase

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on behalf of the undersigned thereto duly authorized.

		Indiana Community Bancorp
Date:	~~November~~May 814, ~~2011~~2012
		/s/ Mark T. Gorski
		Mark T. Gorski, Executive Vice President,
		Treasurer, and Chief Financial Officer

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EXHIBIT INDEX

Exhibit No.	Description	Location
31(1)	Certification required by 12 C.F.R. 240.13a-14(a)	Attached

31(2)	Certification required by 12 C.F.R. 240.13a-14(a)	Attached

32	Certification pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	Attached

101.INS	XBRL Instance Document	Attached

101.SCH	XBRL Taxonomy Extension Schema	Attached

101.CAL	XBRL Taxonomy Extension Calculation Linkbase	Attached

101.DEF	XBRL Taxonomy Extension Definition Linkbase	Attached

101.LAB	XBRL Taxonomy Extension Label Linkbase	Attached

101.PRE	XBRL Taxonomy Extension Presentation Linkbase	Attached

*Users of the XBRL related information in Exhibit 101 of this Quarterly Report on Form 10-Q are advised, in accordance with Regulation S-T Rule 406T, that this Interactive Data File is deemed not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections. The financial information contained in the XBRL related documents is unaudited and unreviewed.

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